Merck & Co. Inc. v. Brantford Chemicals Inc., 2004 FC 516

Date: 20040402

Docket: T-1893-02

Citation: 2004 FC 516

Ottawa, Ontario, this 2^nd day of April, 2004

Present:           THE HONOURABLE MR. JUSTICE von FINCKENSTEIN                   

BETWEEN:

                                        MERCK and COMPANY INCORPORATED                         Appellant

                                                                           and

                                    BRANTFORD CHEMICALS INCORPORATED

                                                                                                                                        Respondent

                                            REASONS FOR ORDER AND ORDER

BACKGROUND

[1]                The appellant, Merck & Co. (Merck), has been the owner of the Canada Patent Number 1,275,349 (349 Patent) for a period of 17 years.

[2]                In April 1995, the Federal Court of Appeal affirmed the judgment of this Court that Apotex Incorporated (Apotex) had infringed the 349 Patent. A permanent injunction was granted against Apotex from manufacturing, using and selling its Apo-enalapril tablets in Canada save as to a limited quantity of pre-patent enalapril maleate acquired before the 349 Patent was issued.

[3]                Brantford, a manufacturer of bulk fine chemicals used in the manufacture of pharmaceutical products, is a 100% subsidiary of Apotex. In September 1998, it submitted an application (first application) to the Commissioner of Patents (Commissioner) for a compulsory licence for the manufacture and sale of sodium enalapril-sodium iodide (SECIC) and sodium enalapril (SE) which is derived from SECIC. The application was based upon the arguments that (1) the demand for enalapril was not being adequately and reasonably met in Canada and (2) Merck had refused to grant a license to any Canadian manufacturer for this product in a manner which prejudiced the interest of the pharmaceutical industry and the public interest.

[4]                On January 29^th, 1999, the Commission refused Brandtford's first application on the basis:

-            that Brandtford had failed to provide sufficient evidence that the demand for the patented materials were not being met by Merck pursuant to section 65(2)(c) of the Act, and

-            that the application was premature in that the respondent had failed to provide sufficient evidence that the applicant had refused to grant a license on reasonable terms pursuant to section 65(2)(d) of the Act.

[5]                On February 11^th, 1999, Brandtford requested reconsideration of this decision with additional evidence which was denied on February 23^rd, 1999, by the Commissioner on the basis that he lacked authority under the Act to consider further evidence in the context of this first application.

[6]                On April 28^th, 1999, Brantford filed a new application (second application) for a compulsory licence for the 349 Patent. On June 21^st, 1999, the Commissioner this time concluded that Brantford had made out a case for relief with this application and directed Brantford to serve the application on Merck in accordance with the Act.

[7]                Before the hearing before the Patent Appeal Board (Board) in respect of Brantford's claim for a compulsory license, Merck filed a motion seeking a declaration that Brantford was barred from proceeding on the twin grounds of a) res judicata by way of issue estoppel and b) functus officio.

[8]                   In a decision dated October 18^th, 2002, the Board found that the doctrine of res judicata did not apply because (1) Merck, having only been formally informed of the first application when the Commissioner sent it a copy of his decision, had not been a party to the first proceedings and (2) the facts and allegations made in the second application were materially different from those made in the first application. It also concluded that the doctrine of functus officio did not apply to the second proceedings. Merck is now appealing this decision.       

ISSUES

[9]         This appeal raises the following issues:

-            What is the appropriate standard of review?

-            Does the doctrine of res judicata apply to the decisions of the Commissioner under s.68 (2) of the Patent Act, R.S.C. 1985, c. I?

-            Does the doctrine of functus officio apply to the Commissioner when making his second decision under s. 68 (2) of the Patent Act?

RELEVANT LEGISLATION

[10]            Patent Act, R.S.C. 1985, c. I-2

STANDARD OF REVIEW

[11]            As there are no cases directly on point one must giving full consideration to the factors which form part of the pragmatic and functional test as set out in Baker v. MCI [1999] 2 S.C.R. 817 and Dr. Q v. College of Physicians and Surgeons of B.C. [2003]S.C.J/ No. 18 . In this case, the Patent Act contains no privative clause and allows appellants a broad statutory right of appeal. In addition, the Board has no greater relative expertise than the Courts with regards to a legal issue such as whether or not the common law principles of res judicata and functus officio apply in a given set of circumstances. Nonetheless, the Act provides the Board with a wide discretion with regards to procedural issues. Balancing these factors, it appears to me that the appropriate standard of review is reasonableness simplictir.

Res judicata by way of issue estoppel

[12]            In [1975] 2 S.C.R. 248">Angle v. Minister of National Revenue, [1975] 2 S.C.R. 248 at p. 254, Dickson J. (as he then was) outlined the following three preconditions to a finding of issue estoppel:

1.          that the same issue had been decided;

2.          that the judicial decision which is said to create the estoppel was final; and

3.          that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

[13]            Clearly the same issue has to be decided here on the first application and the second application, namely, has Brantford made out a case under s. 65 (2) (c) and (d).

[14]            However the decision made by the Commissioner is far from final. This is a threshold decision as to whether the application shall proceed to the second stage. There is no lis here, this is akin to an ex parte application.

[15]          The rationale for issue estoppel was set out by Binnie J. in Danyluk v. Ainsworth Technologies Inc. (2001) D.L.R. (4^th) 193 at 204:                        

The law rightly seeks a finality to litigation. To advance that objective, it requires litigants to put their best foot forward to establish the truth of their allegations when first called upon to do so. A litigant, to use the vernacular, is only entitled to one bite at the cherry. The appellant chose the ESA as her forum. She lost. An issue, once decided, should not generally be relitigated to the benefit of the losing party and the harassment of the winner. A person should only be vexed once in the same cause. Duplicative litigation, potential inconsistent results, undue costs, and inconclusive proceedings are to be avoided.

.......

Issue estoppel was more particularly defined by Middleton J.A. of the Ontario Court of Appeal in McIntosh v. Parent, (1924) 4D L R 420 at 422

When a question is litigated, the judgment of the Court is a final determination as between the parties and their privies. Any right, question, or fact distinctly put in issue and directly determined by a Court of competent jurisdiction as a ground of recovery, or as an answer to a claim set up, cannot be re-tried in a subsequent suit between the same parties or their privies, though for a different cause of action. The right, question, or fact, once determined, must, as between them, be taken to be conclusively established so long as the judgment remains.

[16]            Given that there was no lis here, no determination, I cannot see how the whole theory or rationale for issue estoppel would apply to a decision by the Commissioner under s. 68(2) .

[17]            Additionally Merck was not a party to the first application. It claims to be a privy as it is the owner of the patent. Privy has been defined in the Shorter Oxford Dictionary as, "A person who has a part or interest in any matter action or thing." (Shorter Oxford English Dictionary, 5^th Edition, 2002). In this instance Merck has no interest in the application until a determination is made under s. 68 (2). Then it will be served. The former compulsory license provisions under s. 41 of the Patent Act had a similar two step procedure as the current section 67 does. They were more particularly set out in s. 120 of the Patent Rules. Heald J. in Upjohn v. Commissioner of Patents and Novopharm (1985) 63N.R. 136 at para 8 held:                

Furthermore this court has held that under this legislative scheme the patentee has no interest in the application under s. 41(4) until the Commissioner forms the threshold opinion.

[18]            In my view the same can be set in respect of the compulsory licensing scheme set out in s. 65 to 67 of the present Act. The patentee has no interest until the threshold decision under s. 67(2) is made.    Not having an interest, Merck can't claim to be a privy to the first application.

[19]            Given that Merck here fails two of the three legs of the [1975] 2 S.C.R. 248">Angle test, and given that this is conjunctive test, there is no room for application of the doctrine of re judicata in this case.

[20]            Merck also alleges that the Commissioner was functus officio after having rendered the decision on the first application. Whatever the merits of this allegation may be, and in my view there are none, Merck is precluded from making this aguement at this time. By bringing the motion for declaration of res judicata before the Commissioner Merck has effectively attorned to the jurisdiction of the Commissioner. Any claim of functus officio , i.e. arguing that the Commissioner no longer had jurisdiction over this matter, should have either been brought before this court by way of prohibition application or should have been argued by way of a conditional appearance made solely for the purpose of objecting to the jurisdiction of the Commissioner. Neither avenue was followed. Accordingly Merck is now precluded from advancing this rather dubious agreement.

[21]            Finally I would like to observe that it is obvious that the original motion and this appeal were brought for delay purposes and that Merck never had a realistic chance to succeed on either of its agreements. The law is quite settled on these issues and the facts here did not lend themselves at all to an aguement based on res judicata or functus officio . Brantford did not ask for cost on a solicitor and his own client basis, had they done so, I would have had no hesitation to make an award on that basis. This court's time is too valuable to be wasted on unmeritorious motions and appeals of this nature.

[22]            This motion will therefore be dismissed with costs to Brantford.

                                               ORDER

THIS COURT ORDERS that this appeal be dismissed with costs being awarded in favour of the respondent.

"K. von Finckenstein"

                                                                                                JUDGE                       

FEDERAL COURT OF CANADA

                                       TRIAL DIVISION

NAMES OF SOLICITORS AND SOLICITORS ON THE RECORD

COURT FILE NO.:    T-1893-02

STYLE OF CAUSE:             MERCK AND COMPANY INCORPORATED

v.

BRANTFORD CHEMICALS INC., et al

PLACE OF HEARING:        Ottawa, Ontario

DATE OF HEARING:           March 31, 2004

REASONS FOR ORDER

AND ORDER :                       The Honourable Mr. Justice von Finckenstein        

DATED:          April 2, 2004

APPEARANCES:

Mr. Alexander Macklin          FOR THE APPELLANT

Ms. Connie Too

Mr. Harry Radomski FOR THE RESPONDENT

Brantford Chemicals Incorporated

SOLICITORS ON THE RECORD:

Gowling Lafleur Henderston LLP FOR THE APPELLANT

Ottawa, Ontario

Goodmans LLPFOR THE RESPONDENT

Toronto, Ontario        

Mr. Mosrris RosenbergFOR THE RESPONDENT

Deputy Attorney General of Canada

Ottawa, Ontario