[1] By Judgment dated March 7, 2000, this Court found contempt had been committed by the defendant Apotex Inc. and by Dr. Bernard Sherman, Chairman of Apotex Inc. In the conclusion of Reasons for Judgment dated March 7, 2000, a conclusion spelled out with somewhat greater precision in the Judgment issued on that date, the Court noted (at paragraphs 60 and 61):
I find that Apotex Inc., by selling on December 15 and 16, 1994, and Dr. Bernard Sherman, then President and Chief Executive Officer of Apotex, by authorizing those sales, of Apo-Enalapril product, which was determined to infringe upon Merck's patent interests, as set out by Reasons for Judgment dated December 14, 1994, after Dr. Sherman had read those Reasons, both acted in a manner that interfered with the orderly administration of justice and impaired the authority and dignity of this Court in a manner constituting contempt.
Further, I find that Apotex Inc. by the action of its Vice-President Sales and Marketing, Mr. Richard Barbeau, and his staff, in facilitating sales among third party vendors and purchasers of Apo-Enalapril after January 9, 1995, by authorizing distribution and other allowances, acted in [a] manner that interfered with the orderly administration of justice and impaired the authority and dignity of the Court, subverting the Court's process and constituting contempt.
[2] In February, 2001, submissions of the parties were heard in relation to appropriate penalties and costs in the circumstances of this case. The Court acknowledges the assistance of all counsel, for the plaintiffs, for the defendant Apotex, and for Dr. Bernard Sherman. Their submissions, then made, were helpful in assessing appropriate penalties, particularly their review of general principles and the evidence in this case.
[3] A Supplementary Judgment now issues, which provides for the following penalties.
In the case of Apotex Inc. this Court imposes a fine in the amount of $250,000.00 dollars to be paid forthwith by the defendant corporation, for contempt in two respects:
(a) by interfering with the orderly administration of justice by sales of product found to infringe upon the plaintiffs' patent, after the Court's Reasons for Judgment were released on December 14, 1994; and
(b) and by authorizing distribution and other allowances to facilitate sales among third party vendors and purchasers of Apotex' product after January 9, 1995, when the injunction order and judgment dated December 22, 1994 became fully applicable, in a manner that intefered with the orderly administration of justice and impaired the authority and dignity of the Court, subverting the Court's process and constituting contempt.
In the case of Dr. Bernard Sherman, Chairman of Apotex Inc., this Court imposes a fine, in the amount of $4,500.00 dollars, to be paid forthwith by Dr. Sherman who, as President and Chief Executive Officer of Apotex, on December 15 and 16, 1994, authorized sales by Apotex of infringing product, after Reasons for Judgment dated December 14th were filed and had been read by Dr. Sherman and after consultation with counsel for Apotex, thus interfering with the orderly administration of justice and impairing the authority and dignity of the Court.
[4] When the acts found to constitute contempt were committed, then Rule 355 of the Federal Court Rules provided penalties for contempt. In the case of a corporation a fine without limitation was permitted, and in the case of an individual a fine not to exceed $5,000.00 or imprisonment not to exceed one year. While the limits in the case of an individual have been changed to a fine without limitation and to imprisonment for a term less than five years by Rule 472 of the Federal Court Rules, 1998, the penalties under the rules prevailing when the offending acts were committed are here applicable (Coca-Cola Ltd. v. Pardhan (c.o.b. Universal Exporters) (2000), 181 FTR 80 (F.C.T.D.)).
[5] The submissions of the parties concerning appropriate penalties are these.
a) The plaintiffs submit that a fine in the amount of fifteen million dollars be assessed against Apotex Inc. and that Dr. Sherman should be committed to a term of imprisonment of at least 60 days, and if the Court should decide to suspend a sentence for imprisonment then Dr. Sherman and any company he controls should be required to demonstrate by quarterly certification to the Court and to the plaintiffs that the outstanding injunction is being obeyed, until expiry of the plaintiffs' patent No. 1,275,349.
b) The defendant Apotex Inc. submits that in the circumstances of this case no penalty should be imposed, but if the Court determines a penalty is warranted then no more than a nominal or small fine is warranted.
c) Dr. Sherman, having submitted a letter of formal apology, on behalf of Apotex Inc., and for himself, at the hearing in regard to penalties, submits that a custodial sentence is inappropriate and unwarranted.
[6] Dr. Sherman's letter of apology, submitted at the hearing in regard to penalty, is as follows:
On behalf of Apotex Inc. and in my personal capacity, I wish to extend to you and the Court our apology that the conduct in which we engaged following the delivery of your Reasons for Judgment on December 14, 1994, in the matter of Merck & Co. Inc. v. Apotex Inc., was found to have interfered with the orderly administration of justice or to have impaired the authority and dignity of the Court.
Both in a corporate and personal capacity, I wish to assure you and the Court that no disrespect was intended and that we at all times have wished to conduct our affairs in accordance with the directives of the Court. It has never been, nor will it ever be, my personal desire nor the policy of any entity with which I am involved to act in a manner contrary to the directives of any Court or to intentionally fail to comply with any requirement of law.
I firmly believe that we are to be governed by the rule of the law and I pledge our commitment to that principle.
[7] For the Court, I accept the apology in the terms it is given, recognizing at this stage that the finding of contempt may yet be subject to review. Further, I note that the assurances and the statement of belief in the second and third paragraphs of the letter imply undertakings to fully respect the directives of this and of any other Court. These undertakings are significant not only for our judicial system, but for Apotex itself in its reliance upon the legal process and the courts in delineation of its rights and obligations, and those of its competitors.
[8] That formal apology is a factor to be considered in assessing the appropriate penalties. So too are the activities of the contemnors. While the finding of contempt against Apotex for activities December 15 and 16, 1994, after the Court's Reasons for Judgment were filed and provided to Apotex related primarily to sales of infringing product, the activities established at trial included efforts of Apotex' sales staff to contact all customers on December 15 and by various measures to encourage sales. In the result, on December 15 until late in the afternoon and on the afternoon of December 16 when sales were continued after a brief hiatus, more than $9 million, i.e., more than the average sales for a month, were made. Deliveries resulting from those sales were made in the late evening of December 15 and on December 16 and succeeding days.
[9] Formal Judgment was entered on December 22, 1994, and then stayed until January 9, 1995, by Order of the Court. From December 22 there was no uncertainty about the terms of the Judgment, in regard to the permanent injunction, an order for delivery up of infringing product and the entitlement of Merck to damages or profits. That injunction extended to the officers and employees of Apotex, yet in the months after January 9, the sales staff of Apotex, under arrangements supervised by Mr. Barbeau, the company's Vice President for sales, facilitated and encouraged sales of Apo-Enalapril with distribution and other allowances provided by Apotex. This Court found the latter activity interfered with the administration of justice and impaired the authority and dignity of the Court, subverting its process and constituting contempt. In my opinion, these activities in the period after January 9, 1995, come close to deliberate flaunting of the Court's Judgment, in spirit at least, for that Judgment was based principally on recognition of Merck's exclusive right to its patented invention, for protection of which certain remedies were ordered.
[10] Whatever is said in mitigation of Apotex' actions on December 15 and 16 it cannot be said of its activities after January 9. Lest it be said this Court's Order on January 9, that sales in the market place among third parties would not be deemed infringing activity, is a mitigating factor to consider in assessing Apotex' penalty, I reject that. I have no doubt it was clear to counsel for both parties that the Order was intended to protect third parties from suit for infringement. It was not to protect Apotex from any claim.
[11] It is urged that the nature and severity of the contempt in this case is extraordinary and without parallel. Even if that is so, as I believe it is, at least when measured by the volume and value of infringing product involved as a result of activities found to be in contempt, that is but one other factor to be considered. Any concern of the plaintiffs about injury to them caused by those activities ought to be recoverable in damages or profits claimed. The concern of the Court, in a case of civil contempt such as this is, must be the failure to respect the Court's process.
[12] There is no record of any such failure on the part of Apotex or Dr. Sherman before this. There is no reason to expect that this failure will re-occur. There is Dr. Sherman's assurance to that effect, and he and Apotex will know that it cannot be said hereafter they have not previously been found to be in contempt. In my view, deterrence of Apotex or others, from future similar acts of contempt, is to be considered, but it is not a factor to be given great weight in penalties assessed in this case.
[13] I have carefully considered the various factors referred to by counsel for the parties, both those supporting major penalties and those proposed in mitigation. I am persuaded that a factor of significance, for both Apotex and Dr. Sherman, in regard to their activities on December 15 and 16, is that Dr. Sherman decided to continue sales, after consulting counsel about action that might be taken following reading of the Reasons for Judgment on December 14, 1994. On the following day, December 15, late in the afternoon, he directed sales be stopped after receiving further advice from counsel. Sales were then resumed on December 16 on advice from counsel and finally stopped later that day on further advice from counsel. While that advice was not in evidence, except as to its effect as understood by others, I conclude that Dr. Sherman did not act in a manner demonstrating an intent to ignore the reasons of the Court as he understood those at the time. Yet, Apotex' actions and Dr. Sherman's directions were not mere technical contempts, for I believe the law was clear after the 1983 decision of the Supreme Court in [1983] 2 S.C.R. 388">Baxter Travenol Laboratories of Canada Ltd. v. Cutter (Canada) Ltd., [1983] 2 S.C.R. 388, but I am not persuaded their activities demonstrate a complete lack of regard for the Court's findings and directions that would warrant extraordinary penalties.
[14] The station or circumstances of the corporate defendant and of Dr. Sherman are relevant, but only marginally so in considering penalties. In my view, any reports of comment about them, even from reported cases, are of no relevance in considering penalties for contempt in this case. Nor is the fact of later variation by the Court of Appeal of the Judgment following the Reasons of December 14, 1994.
[15] In considering the appropriate penalty in this case I believe that the fact of a fine for contempt of Court is more significant than the amount of the fine, particularly for contempt in interfering with the orderly administration of justice and impairing the authority and dignity of the Court.
[16] In the case of Apotex I assess the fine of $250,000.00 for both contemptuous activities, for selling infringing product on December 15 and 16, after encouraging sales, and for continuing after January 9, 1995, to facilitate sales among third parties, with allowances from Apotex. The latter activity, in my view, demonstrated disrespect of the Court's ruling and lack of appreciation that the ruling was based on recognition of the plaintiffs' exclusive right to use or sell the product of its patented invention.
[17] In the case of Dr. Sherman, a fine somewhat less than the maximum of $5,000.00 is appropriate in my opinion. His actions on December 15 and 16 were undertaken after consultation with counsel, demonstrating a measure of concern to respect the Court's directions even if counsel was in error in the advice. The circumstances do not warrant a term of incarceration, a penalty to be imposed only in the most egregious cases as a course of last resort, and particularly to assure future compliance with the Court's orders and judgments. That assurance the Court has from Dr. Sherman's letter. Thus, in my opinion, the fine appropriate for Dr. Sherman is $4,500.00, payable forthwith.
Costs
[18] I turn to the matter of costs. The plaintiffs ask that costs be fixed in amount by the Court, on a solicitor-client basis. In support of this they submit a bill of costs as invoiced by their counsel, for professional fees and disbursements that total $1,824,391.10. These were incurred in the contempt proceedings concerned with the show cause motion heard on April 23, 1995, and thereafter, to the date of judgment finding contempt, March 7, 2000. The plaintiffs also request costs on the same basis, solicitor-client, for counsel fees and disbursements, including those paid for services of forensic accountants, for proceedings concerning penalties and costs.
[19] The defendant Apotex resists that request for costs, proposing as an alternative that if costs are awarded to Merck that be on a party and party basis in accord with Tariff B, column IV of the Federal Court Rules, 1998, reduced by 50%, the quantum to be determined upon assessment following production of supporting documentation. For Dr. Sherman, it is urged there be no award of costs against him.
[20] I conclude that the plaintiffs shall have costs on a solicitor-client basis, for which costs the defendant Apotex Inc. and Dr. Sherman shall be jointly and severally liable for payment. I do so despite argument for Apotex that there was divided success in the contempt proceeding in the sense that not all the allegations in the show cause order were established, that order was overly broad in its allegations and initially included as a cited person Mr. Kay, against whom allegations were subsequently withdrawn, and that there were no "contumacious" findings. None of those arguments warrants an award of costs on a basis other than solicitor-client in my opinion. Unless the plaintiffs assumed responsibility to insist upon compliance with the Court's Orders, and directives as in this case included in the Reasons of December 14, 1994, there was no assurance that determinations made in this civil judicial proceeding, or any other, would be respected and observed. The party who assumes that responsibility ought not to be left to bear costs incurred to establish contempt where contempt is found.
[21] The defendant Apotex Inc. urges that the costs here are not established, for the plaintiffs have not produced the background documentation, the invoices detailing services provided and their purposes, and similarly for disbursements claimed. But there is evidence: the plaintiffs produce a statement of costs billed by counsel, supported and explained by affidavits. Counsel for the plaintiffs offered some months ago to provide opportunity for counsel for the defendant to examine, at plaintiffs' counsel's office in Ottawa, the background documents supporting the bill of costs. Counsel for the defendant declined that opportunity and asked that the documentation be copied and sent to them for examination, but they declined to pay reproduction costs at that stage. Counsel for the plaintiffs further offered the opportunity, to their counterparts for the defendant, to examine the documentation in Toronto at the time that submissions on penalties and costs were to be made, an opportunity passed up by counsel for the defendant. This Court has no interest in encouraging this game. In my opinion, counsel for the plaintiffs met requirements of the Court's Rules and have provided reasonable opportunity for inspecting, or even for copying at the defendant's expense, the background documentation.
[22] I am not persuaded the Court may not fix damages in the absence of documentation supporting in detail the costs claimed. Rule 400 of the Court's Rules provides in part:
400 (1). The Court shall have full discretionary power over the amount and allocation of costs and the determination of by whom they are to be paid.
...
(4) The Court may fix all or part of any costs by reference to Tariff B and may award a lump sum in lieu of, or in addition to any assessed costs.
[23] In my opinion Rule 400 provides discretion for the Court in an appropriate case to fix costs in a lump sum in lieu of any assessed costs. This is an appropriate case to do so. By rough calculation more than 40 days of judicial proceedings have already taken place in this Court, and in appeals to the Court of Appeal and to the Supreme Court of Canada. Enough.
[24] The only issue to be resolved is the amount of an award of costs. For Apotex it is urged that the costs billed by counsel for Merck are unreasonable for a variety of reasons that need not here be repeated. That argument is mainly based in principle since no specifics of the claim for costs are said to be understood by Apotex' solicitors. As for argument that Merck's counsel spent unwarranted time in producing evidence irrelevant to the Court's findings, I simply am not persuaded this was done. Nor am I persuaded by general argument that too many counsel were involved on behalf of Merck. One unusual feature of the case, in my opinion, was that the documentary evidence essential to establish actions by Apotex was in the possession of Apotex or third parties, it was provided by subpoena duces tecum, mainly at the commencement of trial, and it was provided in volume in the form of invoices and shipping documents, requiring substantial work in assessing its possible use for trial. Not all of the time committed to the proceedings resulted from initiatives of the plaintiffs. I am not persuaded that counsel for Merck were employed on an extravagant basis.
[25] Before fixing costs to be awarded in an amount, in lieu of assessment, I urge counsel for both parties to consult on possibilities of agreement on a fixed amount for costs to be settled by the Court. If no agreement is reached on or before June 15, 2001, counsel for the plaintiffs shall so advise the Court. Thereafter, each counsel may submit to the Court on or before June 25, 2001, his submission of an amount to be fixed. The plaintiffs may include in any figure a claim for costs on a solicitor-client basis for services and disbursements incurred in relation to the penalty and cost phase of the contempt proceeding. Since costs will be awarded against Apotex and Dr. Sherman jointly and severally, any submissions from them on an amount to be fixed for costs may be a joint submission.
Conclusion
[26] A Supplementary Judgment issues assessing penalties against Apotex Inc. and Dr. Bernard Sherman, as herein set out, for contempt of court as found in the Judgment of this Court, dated March 7, 2000. That Supplementary Judgment also provides for settlement of costs to the plaintiffs in an amount to be fixed by the Court as herein provided on a solicitor-client basis.
"W. Andrew MacKay"
J.F.C.C.
Toronto, Ontario
June 5, 2001.
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
COURT NO: T-2408-91
STYLE OF CAUSE: MERCK & CO. INC. and
MERCK FROSST CANADA & CO.
Plaintiffs
- and -
APOTEX INC.
Defendant
DATE OF HEARING: TUESDAY, JUNE 5, 2001
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR SUPPLEMENTARY
JUDGMENT BY: MacKAY J.
DATED: TUESDAY, JUNE 5, 2001
APPEARANCES BY: Mr. G. Alexander Macklin, Q.C.
Ms. Constance Too
For the Plaintiffs (Merck & Co. Inc.
and Merck Frosst Canada & Co.)
Mr. Harry Radomski
Ms. Daniela Bassan
For the Defendant (Apotex Inc.)
Mr. Brian H. Greenspan
Ms. Sharon E. Lavine
For the Defendant (Bernard Sherman)
Page: 2
SOLICITORS OF RECORD: Gowlings Lafleur Henderson LLP
Barristers & Solicitors
Suite 2600
160 Elgin Street
Ottawa, Ontario
K1P 1C3
For the Plaintiffs (Merck & Co. Inc.
and Merck Frosst Canada & Co.)
Goodmans LLP
Barristers & Solicitors
Suite 2400, Box 24
250 Yonge Street
Toronto, Ontario
M5B 2M6
For the Defendant (Apotex Inc.)
Greenspan Humphrey Lavine
Barristers
130 Adelaide Street West
Suite 2714
Toronto, Ontario
M5H 3P5
For the Defendant (Bernard Sherman)
FEDERAL COURT OF CANADA
Date: 20010605
Docket: T-2408-91
Between:
MERCK & CO. INC. and
MERCK FROSST CANADA & CO.
Plaintiffs
- and -
APOTEX INC.
Defendant
REASONS FOR SUPPLEMENTARY
JUDGMENT
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