Janssen Pharmaceutica Inc. v. Apotex Inc., docket T-1542-96

Date: 070200

Docket: T-1542-96

BETWEEN:

     JANSSEN PHARMACEUTICA INC. and

     JANSSEN PHARMACEUTICA naamloze vennootschap

     Applicants

     - and -

     APOTEX INC. and

     THE MINISTER OF NATIONAL HEALTH & WELFARE

     Respondents

     REASONS FOR ORDER

NADON J.

[1]      By originating notice of motion dated July 11, 1996, the Applicants seek an Order prohibiting the Minister of Health (the "Minister") from issuing a Notice of Compliance ("NOC") to the Respondent Apotex Inc. ("Apotex") in respect of the drug cisapride.

[2]      The Applicants" application is brought pursuant to the Patented Medicines (Notice of Compliance) Regulations (the "Regulations"). In accordance with subsection 6(2) of the Regulations, I must prohibit the Minister from issuing a NOC to Apotex if I conclude that the allegations made by Apotex pursuant to section 5 of the Regulations are not justified. Apotex" allegations which are at issue in these proceedings are those which appear in a Notice of Allegation dated May 24, 1996, which reads as follows:

This is further to our Notice of Allegation dated July 4, 1994 given pursuant to paragraph 5(3)(b) of the Patented Medicines (Notice of Compliance) Regulations, in response to which you commenced an application for prohibition as Court File No. T-1970-94. In that application, you have now taken the position that the delivery of our first Notice of Allegation was premature and hence that our allegation is not justified by reason of the fact that the process for the making of cisapride monohydrate which is the subject matter of the allegation must be before the Minister in a New Drug Submission at the date of the Notice of Allegation.

Although we do not accept the correctness of your position, nevertheless, in an effort to expedite the hearing of the matter on its merits, we proposed through our counsel to you that the existing application, Court File No. T-1970-94, be discontinued as you had proposed in open Court and that we provide a fresh Notice of Allegation. That proposal, despite your suggestion of same to the Court, has been rejected.

In the circumstances, therefore, notwithstanding that we do not accept the correctness of your position, we provide you with this further Notice of Allegation out of an abundance of caution should it turn out to be the case that our prior Notice of Allegation was premature.

With respect to patent 1183847, we allege that no claim for the medicine itself and no claim for the use of the medicine, would be infringed by the making, constructing, using or selling by us of tablets containing cisapride monohydrate.

The legal and factual basis for this allegation is as follows.

The patent has no claim of the use of the medicine. It has a claim for the medicine itself, but such claim is limited to the medicine itself when produced by processes described and claimed or by their obvious chemical equivalents. The process that will be used for the production of our cisapride monohydrate does not fall within the scope of patent ll83847.

More particularly, the process used will be that disclosed by us in Court File No. T-1970-94, namely, that disclosed in Exhibits 1 and 2 of the Affidavit of Jan Oudenes sworn April 3, 1996. W enclose herewith further copies of Exhibits 1 and 2 representing the flow sheet for the process used to make the cisapride monohydrate which will be utilized by us in the making of our cisapride monohydrate tablets. These flow sheets are provided subject to confidentiality on the basis that same are not to be filed in any further proceeding that you might commence except pursuant to a Protective Order which we will consent to in the same terms as the Protective Order in Court File No. T-1970-94.

It is our desire to have the issue of infringement determined on the merits as quickly as possible. We have now provided you with our prior allegation, which you allege to be premature, as well as the within allegation which is clearly not, on your reasoning, premature. You now have our position on the merits whether or not our prior Notice of Allegation was premature.

In order to more [sic] forward to a determination on the merits as quickly as possible, we ask that you abandon the position that the process must be before the Minister when the Notice of Allegation is served, in which case we will undertake that we will not rely on this further Notice of Allegation. This will avoid the need for you to serve another Originating Notice of Motion.

Alternatively, if you wish, as we had proposed, the first application could be discontinued and you could proceed with a further application in response to this Notice of Allegation.

If you are not prepared to proceed in one of the two foregoing ways, and if you commence another application for prohibition on the basis of this Notice of Allegation, we will move to have the two proceedings consolidated or otherwise dealt with in a matter [sic] which permits the matter to go forward on its merits without any technical objections not relevant to the question of infringement.

As the process is now before the Minister, the effect of your initiating another proceeding and the consolidation of the applications will be the same as if you abandoned your position that the process must be before the Minister at the date of the Notice of Allegation. Your refusal to abandon the position will thus only serve to cause needless expense to both parties. We again urge you to abandon that position that we may move forward to a determination on the merits.

[3]      It is not disputed that the allegations made by Apotex in its Notice of Allegation dated May 24, 1996, are the same as those made by Apotex in its Notice of Allegation dated July 4, 1994, which are at issue in Court file No. T-1970-94. In the present proceedings and in those commenced in Court file T-1970-94, Apotex alleges that the process that will be used to make its cisapride, i.e. the Torcan Process, does not fall within the scope of Canadian Patent 1183847 (the ""847 Patent").

[4]      By their Originating Notice of Motion, the Applicants also seek an Order declaring that Apotex" Notice of Allegation dated May 24, 1996 is void, of no effect and was not provided in compliance with the Regulations.

[5]      In paragraph 18 of their Memorandum of Fact and Law on Abuse, the Applicants make the following submission:

18.      Given that the process in the Second Notice of Allegation is the same or substantially the same as the process set out in the First Notice of Allegation, if both the First Proceeding and the Second Proceeding are heard on the merits, then in each proceeding the Court will be asked to determine the very same issue, namely whether the revised Torcan Process1 infringes the claim of the Patent. In short, the res is the same in each of the proceedings.

[6]      The Applicants therefore submit that Apotex" Notice of Allegation dated May 24, 1996 constitutes an abuse of the Court"s process. The Applicants submit that the "Court should not be forced to rule on the same issue in different proceedings involving the same parties and the same process for preparing a drug". Consequently, the Applicants seek to have the Notice of Allegation dated May 24, 1996 declared void, of no effect and as not having been provided in compliance with the Regulations. The Applicants also seek an Order for costs on a solicitor and client basis.

[7]      Apotex does not dispute the fact that the subject proceedings and those in Court file No. T-1970-94 raise the same issue and involve the same parties and the same process in regard to the fabrication of the drug cisapride. However, Apotex submits that the service of the Notice of Allegation dated May 24, 1996 "was done in good faith for a bona fide purpose". At paragraph 110 of its Memorandum of Fact and Law, Apotex makes the following submission:

110.      In addition, as is also clear from the foregoing, it was Janssen"s conduct and particularly its refusal to rationalize the two proceedings, which caused there to be two extant proceedings involving, now admittedly, identical processes.

[8]      In Apotex Inc. v. Canada (Minister of National Health and Welfare) (1997), 76 C.P.R. (3d) 1 at 10, the Federal Court of Appeal held that successive allegations could be made. However, the Court of Appeal qualified that statement as follows:

... I agree with the views expressed in the numerous Trial Division decisions referred to by the motions judge to the effect that successive allegations are possible and each one must be treated independently provided it is separate and distinct from the other and its bringing before the Court cannot be seen as an abuse of process.

[9]      In Apotex Inc. v. Canada (Minister of National Health and Welfare) (1997), 72 C.P.R. (3d) 421 at 428, Jerome A.C.J. (as he then was) made the following remark:

In my opinion, the jurisprudence of this Court has recognized that multiple notices of allegation can be filed, provided that a subsequent notice of allegation is not essentially the same as one previously filed.: ...

[10]      In Schering Canada Inc. v. Nu-Pharm Inc. (1994), 58 C.P.R. (3d) 14 at 20, Rothstein J. (as he then was) held that a second notice of allegation was not a valid notice of allegation under the Regulations. In reaching that conclusion, Rothstein J. made the following comments:

There is another reason that I do not think that the Regulations contemplate a second notice of allegations in circumstances such as in the case at bar. A second notice of allegations gives rise to the exact same application for prohibition and evidence by Schering [the first person] as it has already filed as a result of the first notice of allegations. Once the first application for prohibition has been adjudicated, the matter will have been decided on its merits. That Nu-Pharm [the second person] has no evidence filed does not change the fact that the court will have made a decision on the merits, on the basis of the material before it. That decision will render the prohibition application res judicata. There will be no basis for a second proceeding at that point, because the matter will have already been finally determined.

Counsel for Nu-Pharm says that the court could order consolidation to alleviate this difficulty. Perhaps it could, but this would be an extraordinarily unusual consolidation application. The normal consolidation application arises when two or more applications, normally by different parties, are pending in the Court. But here, there are two identical applications by the first person., caused because a second person has allowed time-limits to expire in the first application. It seems to me that to allow a second notice of allegations, conditional upon a consolidation order to preclude the res judicata difficulty, which the second person brings upon itself, could not have been contemplated by the Regulations...

[11]      In view of his conclusion that the issue raised by the first and second Notice of Allegation would be dealt with in the proceedings commenced as a result of the first Notice of Allegation, Rothstein J. was of the view that there was no necessity for him to decide whether the second Notice of Allegation constituted an abuse of the Court"s process.

[12]      I agree with the Applicants, for the reasons given by Rothstein J. in Schering, that I should not be forced to make a decision on the grant of a prohibition order in both proceedings. Like Rothstein J. in Schering, I am of the view that the issue raised in these proceedings and in those commenced in Court file T-1970-94, should be decided on its merits in the proceedings which result from the first Notice of Allegation, namely, the Notice of Allegation dated July 4, 1994. I have this day released my Order and my Reasons for Order in file T-1970-94. I have allowed the Applicants" application and consequently, I have made an Order prohibiting the Minister from issuing a NOC to Apotex in respect of the drug cisapride.

[13]      I will therefore not be making an Order concerning the merits of the substantive issue raised by the subject proceedings.

[14]      However, there remains an issue to be decided. That issue is whether I should make an Order for costs. The Applicants seek an Order for costs on the basis that Apotex" Notice of Allegation dated May 24, 1996 constitutes an abuse of this Court"s process. On the other hand, Apotex seeks an Order for costs on the ground that these proceedings result from the Applicants" abusive conduct.

[15]      Following the commencement of proceedings in Court file T-1970-94, as a result of Apotex" Notice of Allegation dated July 4, 1994, Apotex filed a detailed Statement of Fact and Law in November of 1994. With the filing of its detailed Statement, Apotex filed the affidavits of Dr. Robert McClelland and Dr. Veronica Scherrer-Pangka. By these affidavits and the detailed Statement, Apotex put forward its alleged non-infringing process for preparing cisapride, namely the Torcan Process.

[16]      During her cross-examination, Dr. Scherrer-Pangka, the Director of Chemical Manufacturing of Torcan Chemical Ltd., stated that the Torcan Process was before the Minister in Torcan"s drug master file, filed in support of Apotex" new drug submission ("NDS"). Following their examination of Dr. Scherrer-Pangka, the Applicants sought and obtained an Order from this Court requiring the Minister to file with the Court a certified copy of Apotex" NDS. As a result, the Applicants discovered that the synthetic process contained in Apotex" NDS was not the Torcan Process. There is no dispute that the process before the Minister, at the time that Apotex served its Notice of Allegation dated July 4, 1994 was infringing of the "847 Patent.

[17]      In an affidavit dated September 18, 1996, Bernard Sherman, the Chairman of the Board of Apotex, explained, at paragraph 37 of his affidavit, what happened as follows:

[...]

(a)      When the Apotex New Drug Submission was originally filed, it was based upon the Torcan infringing process. No Notice of Allegation was given at that time as there was no non-infringing process available.

(b)      When the Torcan non-infringing process became available, Apotex gave its first Notice of Allegation. At this time, the Apotex New Drug Submission had not been updated such that the original infringing process remained as part of the submission.

(c)      The Torcan process was slightly revised and was disclosed to the Applicants in the course of the cross-examination of Dr. Scherrer-Pangka. That is the same process, although slightly revised, as originally relied upon by Apotex as the non-infringing process. That is the same process that was relied upon by Apotex in its second Notice of Allegation. That is the same process which, at the appropriate time for update, was filed with the Minister and is now part of the Apotex New Drug Submission.

[18]      By reason of its discovery of the aforesaid information, the Applicants amended their Originating Notice of Motion to raise procedural objections in regard to Apotex" Notice of Allegation dated July 4, 1994. Briefly, the Applicants took the position that since the process that was before the Minister at the time Apotex served its Notice of Allegation dated July 4, 1994 was not the process on which Apotex was relying in making its allegation of non-infringement, the Notice of Allegation was not justified, since the process before the Minister was admittedly infringing of the "847 Patent.

[19]      In paragraph 10 a. of its Originating Notice of Motion in these proceedings, the Applicants make a similar objection in regard to the Notice of Allegation dated May 24, 1996:

a.      The process set out in the second Notice of Allegation is not the process set forth in Apotex" NDS and therefore Apotex" supplier will not be legally able to utilize the process set out in the second Notice of Allegation to make cisapride for sale in Canada pursuant to an Apotex NOC. As such, the second Notice of Allegation does not reflect the process that may be used if a NOC is issued based on the submission for a NOC. Therefore, the allegation is not justified as it a NOC is to be granted, Apotex would not be permitted to make, construct, use or sell tablets made by the process set out in the second Notice of Allegation.

[20]      On May 3, 1996, counsel for Apotex wrote to counsel for the Applicants in the following terms:

This is further to the Order of Madame Justice McGillis providing you with portions of the Apotex New Drug Submission.

You may recall that, in the hearing before Madame Justice McGillis for an Order compelling disclosure of the New Drug Submission, you represented that the most appropriate way to proceed was for Apotex to withdraw its existing allegation and to serve and file a new allegation. You indicate this to be the proper approach in view of the fact that the process for the manufacture of cisapride has been "altered" and that the current process had not been on file with the HPB at the time Apotex gave its allegation.

My client is prepared to proceed in the fashion which you represented to the Court was the appropriate course. I am writing to you, therefore, to confirm that the existing proceedings will be discontinued upon Apotex withdrawing its allegation and filing a new allegation. Thereafter, we would simply proceed in respect of the [sic] new allegation, all of the evidence having already been provided to you through the course of the [sic] cross-examinations of Veronica Scherrer-Pangka.

May I please hear from you by return facsimile confirming your agreement to the foregoing.

[21]      By letter dated May 13, 1996, counsel for the Applicants advised Apotex that the Applicants were not willing to proceed as suggested in the May 3, 1996 letter.

[22]      As a result, Apotex served its May 24, 1996 Notice of Allegation upon the Applicants. I have already set out in full the text of that letter. I simply wish to emphasize the fourth and fifth full paragraphs of page 2 of the Notice of Allegation, which read as follows:

In order to more [sic] forward on a determination on the merits as quickly as possible, we ask that you abandon the position that the process must be before the Minister when the Notice of Allegation is served, in which case we will undertake that we will not rely on this further Notice of Allegation. This will avoid the need for you to serve another Originating Notice of Motion.

Alternatively, if you wish, as we had proposed, the first application could be discontinued and you could proceed with a further application in response to this Notice of Allegation.

[23]      At paragraph 113 of his Memorandum, counsel for Apotex makes the following point:

113.      On the facts of the within proceeding [in T-1542-96], it is clear that the purpose of the Second Allegation was not to permit Apotex to argue the substantive matters of non-infringement twice, but rather, to permit Apotex to argue the matter once. The Second Allegation was given to ensure that, in either the first or the second proceeding, the substantive matter of non-infringement was dealt with on the merit.

Counsel then goes on, at paragraphs 116 and 117 of his Memorandum, to make the following submissions:

116.      It is respectfully submitted that, upon a reasonable interpretation of the facts giving rise to this proceeding, if any party is guilty of abusive conduct, it is Janssen. In particular, Janssen was given the opportunity to avoid the multiplicity of proceedings about which they now complain. Instead of rationalizing the proceedings at the same the second allegations were served, Janssen, without explanation or justification, took a position that made it absolutely necessary that two proceedings go forward.

117.      Now, after the second proceeding has reached the hearing stage, Janssen finally appears prepared to waive the technical procedural arguments raised in the first proceeding. This is precisely what Janssen was invited by Apotex to do at the time the second allegation was given.

[24]      In their Memorandum of Fact and Law dated June 1, 1998, filed in Court file T-1970-94, the Applicants do not discuss nor argue the issue which led Apotex to serve the Notice of Allegation dated May 24, 1996. In other words, the Applicants, in the end, waived the objections which they had raised following their discovery that the Torcan Process was not before the Minister at the time that Apotex served the Notice of Allegation dated July 4, 1994.

[25]      In their Memorandum, at paragraph 46, the Applicants submit that the Notice of Allegation dated May 24, 1996 should never have been sent. Paragraph 46 reads as follows:

Apotex" stated reasons for sending the Second Notice of Allegation was a concern with respect to the prematurity of the First Notice of Allegation. In light of the decision of the Federal Court of Appeal in Eli Lilly v. Apotex [and subject to the recent amendments to the Regulations which do not apply to this proceeding], it appears to be settled law that a second person may send a notice of allegation before the factual basis is in its NDS, so long as the factual basis is in the NDS at the time of the hearing. That is to say, the precise order of filing the allegation in an NDS, providing a detailed statement and service of the notice on the first person, is not mandatory but directory. Consequently, there was no need to have sent the Second Notice of Allegation. Apotex, however, has insisted in proceeding with the Second Proceeding.

[26]      In my view, Apotex cannot be blamed entirely for what has happened. The offer made by counsel for Apotex in his letter of May 3, 1996 to the Applicants was, in my view, a sensible way of resolving the problem which had arisen. I do not know why Apotex" offer was rejected by the Applicants, but, in my view, the offer was quite reasonable. Further, by its Notice of Allegation dated May 24, 1996 served upon the Applicants, Apotex reiterated its offer to withdraw the Notice of Allegation dated July 4, 1994 or the Notice of Allegation dated May 24, 1996. In other words, Apotex was proposing that the merits of the substantive issue, i.e. whether the Torcan Process was within the scope of the "847 Patent, be argued in one of the two proceedings.

[27]      In the circumstances, I cannot conclude, as the Applicants would like me to, that Apotex" conduct was abusive. In my view, Apotex made reasonable offers to the Applicants to avoid litigation in two Court files. As I have just indicated, I believe that Apotex" offers were reasonable and ought to have been accepted. After careful consideration of the matter, it was certainly unreasonable, in my view, for the parties to proceed to a hearing in two separate Court files where the substantive issue for determination was the same. If the Applicants had accepted Apotex" offers to resolve the problem which had arisen, there would have been litigation in only one Court file.

[28]      As I also indicated earlier, the only issue argued by the Applicants at the hearing in Court file T-1970-94 was the substantive issue, i.e. whether the Torcan Process infringed the "847 Patent. In paragraph 117 of his Memorandum, counsel for Apotex argued as follows:

117.      Now, after the second proceeding has reached the hearing stage, Janssen finally appears prepared to waive the technical procedural arguments raised in the first proceeding. This is precisely what Janssen was invited by Apotex to do at the time the second allegation was given.

[29]      I am therefore of the view that costs ought to be allowed in favour of Apotex. Apotex shall be entitled to a sum which represents 40% of the costs payable to the Applicants pursuant to my Order in Court file T-1970-94.

[30]      Since the substantive issue raised in these proceedings is now moot, no Order will be made regarding the Applicants" application for a prohibition order. With respect to the Applicants" application for a declaration that the Notice of Allegation dated May 24, 1996 is void and of no effect, that application shall be allowed. However, as I have just stated, costs shall be in favour of Apotex.

     Marc Nadon

     ________________________

     JUDGE

CALGARY, Alberta

February 7, 2000.

__________________

¹      For the present purposes, the Revised Torcan Process is the same as the Torcan Process.