Date: 20040211
Docket: T-1721-03
Citation: 2004 FC 223
Toronto, Ontario, February 11th, 2004
Present: The Honourable Mr. Justice Blais
BETWEEN:
PFIZER IRELAND PHARMACEUTICALS
and PFIZER CANADA INC.
Plaintiffs
and
LILLY ICOS LLC and
ELI LILLY CANADA INC.
Defendants
REASONS FOR ORDER AND ORDER
[1] This is a motion for an interlocutory injunction, pending trial as to the infringement of Canadian patent 2,163,446 entitled Pyrazolopyrimidinones for the Treatment of Impotence (the '446 patent), restraining the defendants from offering, selling, distributing or inducing others to use a pharmaceutical composition called CIALIS for the treatment of male erectile dysfunction (ED).
FACTS
[2] The plaintiffs, Pfizer Ireland Pharmaceuticals and Pfizer Canada Inc. (Pfizer), are, respectively, the owner and Canadian licensee of the patent in issue. The '446 patent was issued July 7, 1998, from an application filed in Canada on May 13, 1994. The patent expires in 2014. The subject of patent '446 is a treatment for ED sold under the trademark VIAGRA.
[3] The defendants, Lilly Icos LLC and Eli Lilly Canada Inc. (Lilly) have produced a new medication for the treatment of ED under the trademark CIALIS. On September 17, 2003, Lilly obtained a Notice of Compliance (NOC) from Health Canada, allowing it to import and sell CIALIS in Canada.
[4] Patent '446 was modified by disclaimer filed on December 11, 2002. Pfizer alleges that CIALIS infringes claims 25 and 26 of the patent.
[5] Claims 25 and 26, as disclaimed, read as follows:
25. The use of an effective amount of a cGMP PDE inhibitor, or a pharmaceutically acceptable salt thereof, or a pharmaceutical composition containing either entity, for the oral treatment of erectile dysfunction in man, wherein the cGMP PDE inhibitor is a selective inhibitor of cGMP-specific PDEv.
26. The use of an effective amount of a cGMP PDE inhibitor, or a pharmaceutically acceptable salt thereof, or a pharmaceutical composition containing either entity, for the manufacture of a medicament for the curative or prophylactic oral treatment of erectile dysfunction in man, wherein the cGMP PDE inhibitor is a selective inhibitor of cGMP-specific PDEv.
[6] There was an earlier motion for an interim injunction in this case which was heard by Mr. Justice Kelen of this Court. The motion for interim injunction was dismissed. (Pfizer Ireland Pharmaceuticals v. Lilly Icos LLC, [2003] F.C.J. No. 1603)
[7] As stated by Mr. Justice Kelen, there are two actions in this Court, an action by Lilly to impeach Pfizer's VIAGRA patent on the grounds of obviousness, and the action for infringement against Lilly by Pfizer, within which the present motion is being heard.
[8] Until November 1, 2003, VIAGRA was the only medication for the treatment of ED sold in Canada. According to the oral arguments of Lilly's counsel at the hearing, CIALIS is now being sold in Canada. Since the NOC had been issued in September 2003, and the interim injunction denied, there was no obstacle to Lilly beginning to sell CIALIS. Lilly had conducted extensive trials for CIALIS to obtain the NOC, and starting after September 17, 2003 (the date the NOC was obtained), it has actively promoted the drug to physicians, as well as insuring extensive media coverage.
[9] VIAGRA and CIALIS are both oral medications for the treatment of ED, a marked improvement on previous treatments that involved injecting medication or using various prostheses. VIAGRA was the first medication of this type to be sold, and is marketed worldwide. CIALIS is now sold in 50 countries. VIAGRA is sold in the U.S.; CIALIS is still awaiting approval from the American Food and Drug Administration. A third company, Bayer, is marketing its own ED medication, called LEVITRA. This latter medication is now being sold in the U.S., but has not yet obtained a NOC for Canada. It is marketed in many European countries.
[10] Lilly Icos LLC challenged the validity of the patent held by Pfizer in the U.K. for VIAGRA, the equivalent of the Canadian '446 patent. The Court of Appeal (Civil Division) of the United Kingdom confirmed the decision of Mr. Justice Laddie (Pfizer Ltd's Patent, [2001] F.S.R. 16) concluding that the patent was invalid as being obvious (Lilly Icos Ltd v. Pfizer Ltd., [2002] E.W.J. No. 77; [2002] EWCA Civ 1, Case No; A3/2000/3811; petition to appeal to the House of Lords denied by the Appeals Committee on May 30, 2002).
[11] On October 12, 2001, the European Patent Office revoked the patent of Pfizer for VIAGRA. The patent was found to be invalid for lack of inventive step. On September 29, 2003, the Director of the United States Patent and Trademark Office ordered a reexamination of United States Patent No. 6,469,012, the equivalent U.S. patent of the Canadian '446 patent.
[12] Both parties presented a number of affidavits in support of their respective claims. Cross-examinations were completed between the time of the interim order and the hearing for the interlocutory injunction. With all due respect, I found much of the evidence of a speculative nature, despite the experts' impressive résumés. In the end, the most useful evidence related to the calculation of losses, and I found Mr. Evans' evidence, based on IMS figures, the most convincing. The graphs derived from IMS data show two things: historical figures do have predictive value, albeit imperfect, and competitive markets are a great deal more unstable and thus lend themselves much less to extrapolation to be applied to another market.
ISSUE
[13] The only issue to be decided at this stage is whether an interlocutory injunction should be granted to prevent Lilly from distributing and selling CIALIS in Canada.
SUBMISSIONS OF THE PARTIES
Plaintiff - Pfizer
[14] The plaintiff argues that the interlocutory injunction should be granted on the basis of the three-pronged test that applies in such cases: there is a serious issue to be tried, Pfizer would suffer irreparable harm if the injunction is not granted, and the balance of convenience favours Pfizer.
[15] As to the serious issue, Pfizer claims that Lilly's product infringes the '446 patent, namely claims 25 and 26, covering the use of a selective inhibitor of cGMP-specific PDEv. Pfizer contends that Lilly has led no evidence to dispute infringement of these claims, and since a patent is presumed valid, there is a serious issue to be tried.
[16] Pfizer further argues that if the injunction is not granted, it will suffer irreparable harm both through the interruption of its exclusive rights and the after effects of the interruption. Money damages will not suffice to compensate Pfizer for its loss of the market share and the fact that it may not be in its best interest, despite winning at trial, to enforce a permanent injunction thereafter, for fear of a consumer backlash.
[17] Pfizer is of the opinion that even if its patent rights are affirmed at trial, physicians and patients may be so dismayed at the thought of losing CIALIS after using it for a while that Pfizer will have difficulty reimposing its exclusivity. This may damage its brand equity, not only in VIAGRA but for Pfizer products in general. Thus the permanent injunction remedy loses its value, in the face of a possible backlash against Pfizer's products.
[18] Moreover, the grant of exclusive rights has an unknown value, but this value depends directly on being able to enforce the right of exclusivity. Continued exclusivity allows the brand equity to build, thus consolidating the market share of the patent holder. If exclusivity, to which the patent holder is entitled, is lost too soon, the ensuing loss of market is an irreparable harm that cannot be quantified.
[19] Pfizer maintains that its losses would be unquantifiable, for a number of reasons: the nature of the ED market, still largely a potential market as opposed to an active one, the difficulty in forecasting the development of the monopoly market given the erratic nature of historical data, and the general unreliability of forecasting.
[20] Finally, on the balance of convenience, Pfizer argues that it will be able to compensate Lilly, should Pfizer lose at trial, on the basis of comparable foreign competitive markets. Whereas, according to Pfizer, there are no comparable monopoly markets, thus making Pfizer's eventual loss difficult to calculate, the fact that CIALIS and VIAGRA already compete in a number of markets allows for relatively easy calculation of what Lilly will have lost if it is enjoined but later wins at trial.
Defendant - Lilly
[21] On the question of serious issue, Lilly argues that Pfizer has no standing to assert irreparable harm based on loss of brand equity, since the registered owner of the Canadian trade-mark registrations for VIAGRA and Pfizer is Pfizer Products Inc., not a party to the proceeding.
[22] More substantively, Lilly contends that Pfizer's patent is of questionable validity, given the declaration of invalidity by the English Court of Appeal, the decision of the European Patent Office to revoke the patent and the reexamination ordered by the Director of the United States Patent and Trademark Office.
[23] Claims 25 and 26 added the word "selective" to the term "inhibitor", but there is no expert evidence, according to Lilly, as to the meaning of claims 25 and 26, as disclaimed, nor as to the infringement of those claims by the use or sale of CIALIS. CIALIS is based on a therapeutic agent, tadafil, which is not of the same chemical composition as sildenafil, the active ingredient in VIAGRA.
[24] Lilly states that Pfizer's arguments on irreparable harm based on resentment or a backlash on the part of physicians or consumers are groundless. Pfizer argues that the interlocutory injunction will cause it harm after trial when a permanent injunction would be imposed; there is no evidence presented by Pfizer of harm during the period preceding trial if the injunction is not granted.
[25] In addition, Lilly argues that Canada is the only country where Pfizer has sought a preliminary injunction, yet CIALIS is sold in 50 countries. (Pfizer disputes this fact, on the basis of preliminary administrative measures which were sought in Mexico but cancelled through an amparo mechanism.). Pfizer, notably, has not sought preliminary injunctions in Australia and New Zealand, despite the fact that their test for granting preliminary injunctions is similar to the Canadian test, following American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (H.L.).
[26] Pfizer has adduced no evidence in the form of research or surveys to demonstrate the probability of a backlash occurring. Lilly contends that consumers or the public may react when the issue is one of public interest; there is no evidence that the reaction would follow simply because a company is asserting its patent rights.
[27] Lilly submits that the balance of convenience favours it, given what the company has expended in developing and marketing the drug. The losses that would be incurred by Pfizer if the injunction is not granted would be a great deal simpler to calculate, from the monopoly market, than the losses Lilly would incur if the injunction is granted, where no figure exists on what the competitive market would yield for each of the players.
[28] Lilly has undertaken to keep an accounting of sales and profits of the CIALIS product in Canada pending the trial of this action and satisfy any damage award that may be given at trial if the interlocutory injunction is not granted.
ANALYSIS
Preliminary Matters
[29] The defendant Lilly raised an objection to receiving into evidence paragraphs 8 to 11 of the second affidavit of one of Pfizer's witnesses, Catherine Buisson, sworn on November 25, 2003. These paragraphs purport to answer directly a point raised by Lilly witnesses in earlier affidavits, where they state they have never heard of a situation where there would have been a backlash against a pharmaceutical company attempting to enforce its patent rights. Ms. Buisson, in paragraphs 8 to 11, gives several examples of what she claims to be an illustration of precisely such an occurrence.
[30] Lilly moved to have those paragraphs struck, because they were not in reply to new matters and the evidence was available at the time Ms. Buisson swore her first affidavit. I believe, without pronouncing on the value of those arguments, that Lilly waived the right to make such an objection by cross-examining Ms. Buisson on those same paragraphs. Lilly saw fit to admit them into the record for the purposes of cross-examination:
Q. 312 In paragraph 9 of your November 25 affidavit is what you are referring to...
Q. 313 Can we look at an example you give on page 4 (paragraph 8) of your second affidavit regarding Myriad Genetic...
Q. 314 In paragraph 8(b) you refer to CIPRO...
Q. 316 Paragraph 10, you make reference to Amazon.com...
(pages 1133-1140 of Pfizer's Motion Record, vol V)
I cannot see how or why I should now exclude them.
Res judicata
[31] The defendant raised the issue of res judicata, arguing that the decision rendered in November 2003 by Justice Kelen for the interim injunction settled the issue between the parties, since essentially the same issue was being decided on the basis of similar evidence. I do not believe, however, that the doctrine of res judicata properly applies in this case, because Justice Kelen's decision was not meant to be final, by definition. The principle is stated quite clearly in Waste Not Wanted Inc. v. Canada, [1988] 1 F.C. 239 (F.C.T.D.), where Mr. Justice Collier writes at paragraphs 41 and 42:
¶ 41 Res judicata can only apply where there has been a final decision in earlier litigation between the same parties. It cannot, as I see it, apply to an interlocutory decision given earlier in the same action.
¶ 42 I find support for this view in Spencer Bower and Turner, The Doctrine of Res Judicata, 2nd ed., London: Butterworths, 1969, at page 132:
164 A judicial decision is deemed final, when it leaves nothing to be judicially determined or ascertained thereafter, in order to render it effective and capable of execution, and is absolute, complete, and certain, and when it is not lawfully subject to subsequent rescission, review, or modification by the tribunal which pronounced it. (...)
165 The simplest and most obvious illustrations of decisions which do not purport on their face to be other than temporary, provisional, or interlocutory are the following: an order made "until the trial of the action or further order", such as an interlocutory injunction, or an interim order for the preservation of property, or of the status quo ... .
[32] In this case, the decision by Justice Kelen was clearly to apply until the interlocutory injunction, and no more, and was not meant to be final. Justice Kelen opens with these words: "This is a motion by the plaintiffs, on an urgent basis, for an interim injunction, until the parties are ready to argue the merits of an interlocutory injunction...." (paragraph 1).
[33] The parties agree on the test for granting interlocutory injunctions, first established in American Cyanamid, supra, and since adopted in Canadian law, most notably in Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd., [1987] 1 S.C.R. 110 and RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311. This test provides a three step analysis: 1) Is there a serious issue to be tried? 2) Can the plaintiff demonstrate that irreparable harm will ensue if the injunction is not granted? and 3) Does the balance of convenience favour the plaintiff or the defendant?
1) Is there a serious issue to be tried?
[34] In the landmark decision American Cyanamid, supra, the House of Lords decided that the granting of an interlocutory injunction did not depend on first establishing a prima facie case, as had been the judicial understanding before. Rather, Lord Diplock stated that is was sufficient that there be "a serious question to be tried":
The court no doubt must be satisfied that the claim is not frivolous or vexatious; in other words, that there is a serious question to be tried.
It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial. (American Cyanamid, supra, at 407)
[35] The threshold has generally held to be rather low (Turbo Resources Ltd. v. Petro Canada Inc., [1989] 2 F.C. 451 (C.A.), because, since American Cyanamid, supra, the granting of an interlocutory injunction, an exceptional equitable remedy, rests rather with determining irreparable harm and the balance of convenience. To quote Mr. Justice Stone, of the Federal Court of Appeal, in Turbo Resources:
Satisfying the threshold test of "a serious question to be tried" does no more, so to speak, than unlatch the door to a plaintiff; it neither opens it nor, less still, permits him to pass on through. That he may do only if the balance of inconvenience is found to lie in his favour. (at para. 19)
[36] In this case, the defendant has raised the issue of the validity of the patent as a defence. The defendant argues that given the declaration of invalidity by the English Court of Appeal, the revocation of the patent by the European Patent Office and the reexamination of patent ordered by the U.S. Patent and Trademark Office, doubt has been cast on the ability of the plaintiff to succeed in his main action.
[37] This, however, does not negate the fact that there is a serious issue to be tried. Under Canadian law, a patent is valid until proven otherwise. Pfizer's patent for the product sold under the brand name VIAGRA is still valid, and Lilly to succeed will have to disprove its validity with scientific evidence and arguments of law. Pfizer's claim is neither frivolous nor vexatious, and thus satisfies the first step of the test. I now turn to the second and third parts of the test.
[38] Again in American Cyanamid, supra, also a pharmaceutical patent dispute between two considerable opponents, Lord Diplock states what is the object of the interlocutory injunction. I find useful to divide the oft-quoted passage, to highlight both aspects of the test that follows once a serious question is found; first, evidence of irreparable harm:
The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not adequately be compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial; (...) (at 406).
2) Can the plaintiff demonstrate that irreparable harm will ensue if the injunction is not granted?
[39] Irreparable harm will be shown when the damage caused by not granting the injunction cannot be compensated by a monetary award. In this case, Lilly has undertaken to account for sales and profits. Thus the loss of sales or market share for Pfizer, going from a monopoly situation to a two-way competition would be compensated. On consent, the historical trend of Pfizer's sales of VIAGRA remain confidential by order of this Court. However, from the statistical analysis presented by Mr. Evans in his affidavit, and from his cross-examination, I can state that I am satisfied by the graphs and calculations presented that determining Pfizer's losses will be reasonably feasible if the injunction is not granted but the patent is held to be valid at trial and infringement is found.
[40] Pfizer argues that there is further damage that cannot be compensated, namely the loss of brand equity and the likelihood of a backlash by physicians and consumers should a permanent injunction force CIALIS off the market after a period of sales.
[41] No convincing evidence was presented to support those arguments. The brand VIAGRA is already well-established in Canadian society, and despite competition, its position as pioneer will remain. As to a possible backlash, Pfizer did not adduce a single case of such an occurrence, nor did it produce any case where the injunction would have been granted for that reason. In American Cyanamid, supra, Lord Diplock refers to such a possibility, that enforcing a permanent injunction may become commercially impracticable despite the right of the patentee to enforce his patent, "owing to the damaging effect which this would have upon its goodwill in this specialised market and thus upon the sale of its other pharmaceutical products" (at 410). However, the contexts of both cases are very different. In American Cyanamid, supra, the patent object was surgical sutures, by definition used and known only by specialists.
[42] VIAGRA, on the other hand, has been directly and aggressively marketed to consumers, as a lifestyle choice rather than a specialized product. There is no evidence to suggest that consumers would give up other Pfizer products or indeed renounce ED medication because one brand ceases to be available.
[43] Pfizer sought to give examples of cases where a company attempting to enforce its patent rights provoked a negative public reaction. However, one can easily distinguish from this case the examples given by Pfizer, whether Myriad (patenting of genes used in breast-cancer screening), Cipro (the anthrax medication) or the example of the amazon.com "one-click" patent for online purchases. One can understand the public outcry where breast-cancer screening is made too expensive by the patent holder, where in the face of public emergency (9/11), Bayer wants to enforce its Cipro patent, or where consumers react to the patenting of what seems to be already in the public domain (to say nothing of its obviousness).
[44] Try as I may, I cannot imagine demonstrations in the street or storming of the barricades because one impotence medicine is made unavailable, forcing consumers to choose the other. If anything, the development of the "potential market" into an "active market" (to borrow the expressions used by Dr. Pearce, Pfizer's marketing expert) could profit Pfizer. Some men may be enticed to try CIALIS (through Lilly's own marketing efforts), and, having tried it, be more susceptible to take another ED medicine if CIALIS becomes unavailable. This is speculation, granted, but no more than the "resentment" scenario proposed by the plaintiff.
[45] As stated in Imperial Chemical Industries PLC v. Apotex, Inc., [1990] 1 F.C. 221 (C.A.) at paragraph 6: "The jurisprudence in this Court establishes that the evidence as to irreparable harm must be clear and not speculative." (See also Baxter Travenol Laboratories of Canada Ltd. v. Cutter Ltd., [1980] F.C.J. No. 203 (C.A.); Syntex Inc. v. Novopharm Ltd., [1991] F.C.J. No. 424 (C.A.)). I am not convinced that the plaintiff will suffer irreparable harm since the losses that Pfizer will incur by sharing the market with Lilly are reasonably calculable, and the other harm claimed by Pfizer is entirely of a speculative nature.
3) Balance of convenience
[46] The third part of the test is the balance of convenience. To continue the quote from Lord Diplock in American Cyanamid, supra,
(...)but the plaintiff's need for such protection must be weighed against the corresponding need for the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated under the plaintiff's undertaking in damages if the uncertainty were resolved in the defendant's favour at the trial. The court must weigh one need against another and determine where "the balance of convenience" lies. (at 406)
[47] It is this part of the test which I believe is fatal to the plaintiff's application for an interlocutory injunction. It is sometimes confusing to distinguish between irreparable harm and balance of convenience in the case law, because the line is not always clearly drawn. In this case however, the analysis is quite different, and I have no difficulty in stating that the balance of convenience clearly favours the defendant.
[48] We have two variables intersecting two other variables: the interlocutory injunction is granted, or not, and the patent is infringed, or not. Obviously, if either party succeeds at both levels, there is no balance of convenience to be considered, since no damages can be demonstrated. Thus, out of four possibilities, two scenarios must be considered: the interlocutory injunction is granted, the monopoly maintained, but there is no patent infringement, or the injunction is denied, competition allowed, but infringement is found in the end.
[49] In the first scenario, Pfizer maintains until the final holding the monopoly it has had so far in the Canadian market. In other words, it is the status quo. In the meantime, Lilly loses several months of income. Damages are difficult to calculate, as we have seen earlier, since the market situation elsewhere is at best an approximation. Pfizer maintains its grip on the market, and further develops its relations with both physicians and consumers. Beyond the loss of revenues, Lilly loses the opportunity to develop and penetrate the market, this in the context of a third competitor (Bayer's LEVITRA) looming.
[50] In the second scenario, competition is allowed for a period of several months, then Lilly is forced to withdraw its product. The loss in profit is somewhat simpler to calculate, given the trend of Pfizer's sales of VIAGRA in Canada. Dr. Pearce tried to show that the loss would be very difficult to evaluate, but I fail to be persuaded by his arguments. Historical figures going back four or five years in the same market would appear a whole lot more reliable to calculate lost profits than extrapolating from other societies' markets, where social, cultural and economic factors differ, and where the competition sometimes includes other products, sometimes not. This was confirmed by the graphs drawn from IMS data, which show that whereas historical figures over a four-year period do have some predictive value, it would seem a great deal more complicated, and a lot less reliable, to try to apply the experience of foreign competitive markets to the Canadian market and draw a conclusion as to losses in sales and market share.
[51] To summarize, if the injunction is granted, Lilly will lose all of its potential revenue selling CIALIS, as well as the opportunity to develop its market; its strategic placement as second competitor may well be lost to another and the development of a relationship with physicians and pharmacists will be made more difficult, given the lag time between its considerable marketing efforts after obtaining the NOC and finally entering the market. If ultimately no infringement is found, damages will have to be calculated without the benefit of a baseline or relevant experience.
[52] By contrast, if the injunction is not granted but infringement ultimately found, Pfizer will lose some of its potential revenue, its market will be temporarily modified but monopoly will be reestablished, and establishing damages will be somewhat facilitated by having at least a baseline stemming from four years of sales in the same market. This being the case, I have no trouble finding that the balance of convenience favours the defendant; Lilly stands to lose a great deal more if the injunction is granted than Pfizer would if it is not.
[53] For these reasons, considering the evidence of irreparable harm or lack thereof and the balance of convenience, the application for an interlocutory injunction should be dismissed.
ORDER
THIS COURT ORDERS:
1. This application for an interlocutory injunction is dismissed.
2. Costs in favour of the defendants.
"Pierre Blais"
Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1721-03
STYLE OF CAUSE: PFIZER IRELAND PHARMACEUTICALS
and PFIZER CANADA INC.
Plaintiffs
and
LILLY ICOS LLC and ELI LILLY CANADA INC.
Defendants
PLACE OF HEARING: OTTAWA, ONTARIO
DATE OF HEARING: FEBRUARY 5, 2004
REASONS FOR ORDER
AND ORDER BY : BLAIS J.
DATED: FEBRUARY 11, 2004
APPEARANCES:
Mr. Robert H.C. MacFarlane
Mr. Michael E. Charles
FOR THE PLAINTIFFS
Mr. Donald M. Cameron
Mr. Scott Mackendrick
Ms. Jane E. Caskey
FOR THE DEFENDANTS
SOLICITORS OF RECORD:
Bereskin & Parr
Toronto, Ontario
FOR THE PLAINTIFFS
Ogilvy Renault
Toronto, Ontario
FOR THE DEFENDANTS
FEDERAL COURT
TRIAL DIVISION
Date: 20040211
Docket: T-1721-03
BETWEEN:
PFIZER IRELAND PHARMACEUTICALS
and PFIZER CANADA INC.
Plaintiffs
and
LILLY ICOS LLC and
ELI LILLY CANADA INC.
Defendants
REASONS FOR ORDER
AND ORDER
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