Merck Frosst Canada Inc. v. Canada, docket T-1695-95

     T-1695-95

BETWEEN:

     MERCK FROSST CANADA INC.

     - and-

     MERCK & CO., INC.

     Applicants,

AND:

     THE MINISTER OF NATIONAL HEALTH AND WELFARE

     - and -

     APOTEX INC.

     Respondents.

     REASONS FOR ORDER

     [Mootness of Prohibition Application]

     [Delivered from the Bench at Montreal,

     Wednesday, March 26, 1997, as edited]

ROTHSTEIN J.:

     The issue on this preliminary motion by the respondent Apotex Inc. (Apotex), brought at the commencement of the hearing on the merits of the applicant's (Merck) prohibition application under subsection 6(1) of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 is whether the application is moot.¹

     Some background is necessary to explain why the issue arises in this case. The scheme of the Regulations is simply set out by Nadon J. in AB Hassle and Astra Pharma Inc. v. The Minister of National Health and Welfare and Novopharm Limited, court file T-2167-93, March 7, 1996, at page 2:

The Patented Medicines (Notice of Compliance Regulations) SOR/93-133 were enacted to replace a mandatary licensing scheme and to ensure that patents are not infringed. Under the scheme a "first person" is one who holds a NOC [Notice of Compliance] with respect to a particular product and has already filed a patent list with respect to that drug. A "second person" is one who wishes to get a NOC with respect to the same or a similar drug and submits an application to the Minister in order to obtain a NOC. In the submission to the Minister the second person will compare his or her drug to a drug already marketed in Canada. The second person must then send to the holders of all of the patents on the patent list associated with that drug a notice which alleges [amongst other things] that the new drug for which the second person seeks a NOC will not infringe their respective patents. Upon receipt of the notice of allegation, the first person may apply to the court for an order prohibiting the Minister from issuing a NOC, thereby preventing the second person from manufacturing [or marketing] that drug. Such an application by the first person must be [amongst other things] on the ground that the allegation of non-infringement made by the second person cannot be justified.

     The drug which Apotex seeks to market and which is the subject of a Merck patent is lovastatin, an anti-cholesterol drug. On or about April 19, 1993, Apotex filed with the Minister of Health and Welfare a new drug submission together with an allegation under subparagraph 5(1)(b)(iv) of the Regulations² that the process by which its lovastatin would be produced would not infringe Merck's relevant patent. The notice of allegation was served on Merck pursuant to paragraph 5(3)(b) of the Regulations.³ In court file T-1305-93, Merck initiated prohibition proceedings under subsection 6(1) of the Regulations⁴ arising from service on it of notice of that allegation.

     On June 23, 1995, Apotex filed a second allegation with respect to another process by which Apotex says lovastatin may be produced that does not infringe Merck's patent. It appears that no new drug submission was filed but rather that this second allegation was in effect an amendment or addition to the new drug submission of April 19, 1993. On August 9, 1995, Merck initiated prohibition proceedings in this court file in respect of that second notice of allegation. On February 10, 1997, Apotex says it withdrew its second allegation filed with the Minister.     

     On that date, the Federal Court of Appeal in court file T-1305-93, reversed the order of Dubé J. extending the statutory stay⁵ under paragraph 7(1)(e) of the Regulations until a decision had been reached on Merck's prohibition application in that file. As a result, the statutory stay had expired on December 1, 1996. Apotex was of the opinion that this brought an end to the prohibition application in court file T-1305-93 and that a notice of compliance would issue in respect of its new drug submission and allegation for lovastatin which had been the subject of the prohibition application in that court file. On February 10, 1997, counsel for Merck wrote to counsel for the Minister advising that even though the Federal Court of Appeal had reversed the extension order of Dubé J. in court file T-1305-93 the Minister was still prohibited from issuing a notice of compliance by reason of proceedings in this court file T-1695-95. It is for this reason that counsel for Apotex wrote counsel for the Minister on the same date formally withdrawing the allegation that gave rise to the prohibition application in this court file.

     By letter dated February 12, 1997, counsel for the Minister wrote to counsel for Merck and Apotex indicating that withdrawal of the second notice of allegation by Apotex was insufficient to negate the statutory stay in this matter and that a dismissal of the prohibition application would be necessary to have that effect. The letter states in part:

Second, it is at present our position that the withdrawal of the notice of allegations by Apotex in T-1695-95 does not negate the effect of paragraph 7(1)(e). Once the application referred to therein has been made, the provision ceases to apply only in specified circumstances, of which only the following bear consideration in this case:

. . .

It is clear that none of these circumstances applies [sic] here. In particular, the withdrawal of the notice of allegations by Apotex is not equivalent to the withdrawal of the [prohibition] application, which clearly can be done only at the initiative of the "first person".

     As a result of the Minister's position, Apotex seeks an order dismissing the Merck prohibition application in this file on the grounds that the application, because of the withdrawal of the allegation giving rise to the application, is moot.

     Merck takes the position that under the Regulations, if the Court grants a prohibition order, it is effective at large against Apotex in respect of the patented drug at issue. Merck relies on paragraph 7(1)(f) of the Regulations which requires that the Minister not issue a notice of compliance if a prohibition order issues⁶. Merck says there is no necessary linkage between the prohibition order and the allegation that gave rise to the proceedings. Therefore, a prohibition order issuing under this court file would effectively prohibit Apotex from obtaining a notice of compliance for lovastatin until the expiry of Merck's relevant patent. Merck believes it has a strong case in this court file and therefore insists that the prohibition application proceed and that it is not moot.

ANALYSIS

     The doctrine of mootness is discussed by Sopinka J. in Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 340 at page 353. The question is whether the decision of the Court will have a practical effect on the rights of the parties. If there is no live controversy existing between the parties, the case is said to be moot.

     However, even if the case is moot, the Court may decide to exercise its discretion to hear the case. The applicable considerations are outlined by Sopinka J. in Borowski:

(1)      Does an adversarial context remain? For example, even if the parties no longer have a direct interest in the outcome of the litigation, there may be collateral consequences that will provide the necessary adversarial context (page 353).

(2)      Are there special circumstances that would justify applying scarce judicial resources to resolve the moot issue, e.g., is an issue of public importance involved for which a resolution is in the public interest (page 353)?

(3)      Is the judicial branch to be seen to be intruding into the function of the legislative branch of government (page 362)?

Is this case moot?

     Attached to the affidavit of Dr. Bernard Sherman, Chairman of Apotex, is the February 10, 1997 letter from counsel for Apotex, which states:

Notwithstanding the foregoing, we have written to Nelson Landry on behalf of Apotex, a copy of which correspondence is enclosed herewith, advising Mr. Landry that the second Apotex notice of allegation, that which gave rise to court file No. T-1695-95, is being withdrawn. Please treat this letter as a formal withdrawal of that allegation.

[emphasis added]

Dr. Sherman, in his affidavit, states:

As a result of the withdrawal of the second allegation, there is nothing before the Minister, upon which an approval could be given to Apotex relating to or arising out of the second allegation and the alleged non-infringing process in respect thereof. That process is not now part of the Apotex new drug submission upon which a notice of compliance, if granted by the Minister, would or could be based.

[emphasis added]

     There is no doubt from the affidavit of Dr. Sherman and the letter of withdrawal sent to the Minister's counsel by counsel for Apotex, that it was Apotex's intention to withdraw the second allegation. The question, however, is whether the second allegation giving rise to this prohibition application no longer has any effect as far as the Minister is concerned. Reed J. pointed out in Hoffman-La Roche Ltd. v. Canada (Minister of National Health and Welfare) (1996), 67 C.P.R. (3d) 484 at page 505:

. . . the notice of allegation is part of the new drug submission which is before the Minister. It is not under the control of this Court. Whether that document can be amended, or withdrawn, is a matter to be dealt with by the Minister in accordance with the rules normally applied to material filed as part of a new drug submission and in accordance with the rules normally applied to the withdrawal or substitution of the submission as a whole.

Apotex says there are no rules of the Minister which apply to withdrawals of allegations. No express evidence was advanced by the Minister who is a party to these proceedings and whose counsel was present for argument, of his approach to withdrawals of allegations and their effect. The record is therefore not as complete as would be desired. However, I think a reasonable inference can be drawn from the February 12, 1997 letter of counsel for the Minister to counsel for Merck and Apotex that the Minister was prepared to treat the allegation as having been withdrawn. There is no suggestion of any impediment to such withdrawal and counsel for the Minister contrasts the withdrawal of the allegation with the non-withdrawal of the prohibition application. On the basis of this evidence, I cannot see how the Minister could issue a notice of compliance based on any process, product or indeed anything else that is relevant in the withdrawn allegation. On a balance of probabilities, I am satisfied that the withdrawal of the allegation by Apotex is effective as far as the Minister is concerned. I accept Dr. Sherman's evidence that the second alleged non-infringing process is not now part of Apotex's new drug submission upon which a notice of compliance would be based. These considerations would lead to the conclusion that the prohibition application is indeed moot.

     However, Merck says the relevant date for adjudication is the date of the notice of allegation or forty-six (46) days thereafter when the allegation was still before the Minister and the prohibition application had been filed.⁷ In Borowski, Sopinka J. states at page 353:

The general principle applies when the decision of the Court will not have the effect of resolving some controversy which affects or may affect the rights of the parties. If the decision of the Court will have no practical effect on such rights, the Court will decline to decide the case. This essential ingredient must be present not only when the action or proceeding is commenced, but at the time when it is called upon to reach a decision. Accordingly if, subsequent to the initiation of the action or proceeding, events occur which affect the relationship of the parties so that no present live controversy exists which affects the rights of the parties, the case is said to be moot.

[emphasis added]

I am of the opinion that for the controversy to still be said to be "live", the decision of the Court must be seen to have some practical effect on the rights of the parties and that this ingredient must be present not just when the proceedings are commenced but when the Court is called upon to make a decision. In this case, now that the Court has been called upon to decide the matter, it is plain that its decision will have no practical effect on the rights of the parties because the allegation giving rise to the prohibition application had been withdrawn. As such, the condition necessary to make the matter justiciable is not present. The allegation or cause of action giving rise to the prohibition application in this court file has disappeared and these proceedings must be considered to be moot.

Should the Court exercise its discretion to decide a moot issue?

     Does an adversarial relationship prevail between the parties such that the Court should exercise its discretion to decide the matter notwithstanding its mootness? As I interpret Sopinka J. in Borowski, the continuing adversarial relationship does not simply mean that the parties are competitors or that they do not like each other or that there is other litigation pending between them. The adversarial relationship that must prevail must have some logical nexus to the proceedings that have become moot. For example, are there collateral consequences that arise from the moot proceedings such as to provide the parties with the necessary interest to justify proceeding?

     If the prohibition application may have an effect not solely related to the withdrawn allegation, while the application may be moot in respect of the withdrawn allegation, there may still be collateral consequences from the litigation. Merck says paragraph 7(1)(f) of the Regulations must be interpreted to the effect that if a prohibition order issues, it is not restricted to prohibiting the issuance of a notice of compliance based on the allegation that was found not to be justified. Merck asserts that it has a wider application with the effect that, in this case, Apotex is totally precluded from obtaining a notice of compliance for lovastatin during the lifetime of Merck's relevant patent. During the course of argument, I questioned Merck's counsel as to why the Governor-in-Council would have intended such a result. Counsel's response was that the words have such an effect and they must be interpreted in that way.

     A reading of paragraph 7(1)(f) in the abstract might lead to the conclusion that any prohibition order issued under subsection 6(2) absolutely and for all purposes precludes the Minister from issuing a notice of compliance to a second person until expiry of the relevant patent of the first person⁸. However, nothing in the Regulations precludes a second person from filing more than one submission for a notice of compliance, and/or different allegations based on different non-infringing methods of producing a product. (See Schering Canada Inc. et al. v. Nu-Pharm Inc. et al. (1994), 58 C.P.R. (3d) 14 and Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1995), 61 C.P.R. (3d) 80). Indeed, I see no reason why the Regulations would be intended to discourage second persons from developing non-infringing methods to produce a product otherwise protected by a patent. I think the necessary implication of the Regulations is that any prohibition order prohibits the issuance of a notice of compliance based on a new drug submission containing an allegation that has been made but has been found not to be justified.

     In the case of an allegation of non-infringement, the issue is whether the allegation by the second person is justified. If it is not, the prohibition application will be granted. If the allegation is justified, no prohibition order will be issued against the Minister and the Minister will be unconstrained in dealing with the new drug submission. But this does not mean that the second person is entitled to ignore the parameters of its own new drug submission and produce the drug according to a method not contained in the new drug submission so that there is infringement of the first person's patent. By the same reasoning, even if the allegation is found not to be justified, this does not preclude the second person from making another submission for a notice of compliance based on different methods or procedures that it alleges do not infringe the first person's patent. This reasoning is consistent with the dicta of Noël J. in Merck Frosst Inc. v. Canada (Minister of National Health ad Welfare) (1995), 61 C.P.R. (3d) 80 at 82 with which I agree:

There is, in my view, no contradiction between the two notices and the undertaking which they incorporate. The notices reflect independent allegations aimed at nofloxacin made by an infringing process in the first instance and by a non-infringing process in the second. They could in the end result both fail or succeed, or either one could succeed or fail independently of the other. Each calls for a totally different inquiry and I fail to see how the second allegation could be of relevance to the adjudication of the first.

Viewed in this context, a prohibition order is solely related to the allegation which gives rise to it.⁹

     Had I been of the view that a prohibition order in this matter would have consequences beyond prohibiting Apotex from using the process disclosed in the withdrawn notice of allegation, the necessary adversarial relationship may have continued. But I have concluded that the prohibition application is solely related to the allegation that gives rise to it. I do not see collateral consequences or other factors that would suggest that in respect of these proceedings an adversarial relationship prevails. To the contrary, the evidence is that Apotex agrees not to use the process which was the subject of the withdrawn allegation, and counsel for Apotex in argument stressed that Apotex is indeed aware of the serious consequences should it be determined in the future that Apotex was using the process in the withdrawn allegation. The Court accepts that this is a good faith undertaking that Apotex will not use the process which is the subject of the withdrawn allegation, and that Apotex recognizes the consequences should it do so.

     Is there anything particular to these proceedings that justifies the expenditure of judicial resources to decide a moot application? Merck submits the case is ready for determination on the merits, that infringement is clear and that the application will take little time to hear and decide. While I do not doubt that Merck hopes and believes the application should take little time, my experience in cases arising under the Regulations is the opposite. This is highly controversial litigation and counsel's ingenuity in identifying issues and developing arguments is impressive. I am not prepared to presume that the case will be resolved as expeditiously as Merck would hope.

     While resolution of issues of public importance in a case which is moot sometimes justifies expenditure of judicial resources, I do not see that this condition is applicable here. It is true that the issuance of a notice of compliance by the Minister is a matter of public interest as well as the interest of the relevant competitors. However, a determination of this prohibition application on the merits would not resolve any matter of public importance. Apotex has said it will not be producing lovastatin by the method in the withdrawn allegation.

     Merck says that this is a test case and that the Court should decide the matter on the merits so that the Court will not be seen to condone multiple allegations for the same drug by generic competitors and the subsequent withdrawal of the allegations unilaterally and selectively by the generics to their own advantage. It is true that there have been cases in which multiple allegations have been filed with the Minister giving rise to numerous prohibition applications and that the Court has found the multiple allegations to be an abusive practice. See Schering v. Nu-Pharm (1996), 68 C.P.R. (3d) 332 at 342 per Muldoon J. However, the circumstances in Schering were different from the case here. In Schering, the generic manufacturer had missed a deadline for filing evidence and sought, through the filing and service of an additional duplicative of allegation, to start the prohibition proceeding anew to circumvent the missed deadline.

     Here, a second allegation is based upon what is said to be a different non-infringing process. While the Court must guard against abuse of its process, and clearly the successive filing and subsequent withdrawal of allegations could in some circumstances be abusive, I am not prepared to say that the mere withdrawing of an allegation is, for all purposes, abusive. Each case must be determined on its own facts and, in this case, it has not been argued and I have no reason to believe that the second notice of allegations is a duplication of the first. Therefore, I am not satisfied this is a case of abuse and that the matter is one of public importance which requires resolution of a moot application.

     Whether the Court might be intruding on the functions of the legislative branch of government is not a consideration that arises here.

     For all these reasons, I conclude that the application is moot and that there is no reason which would justify the Court exercising its discretion to hear and decide the application in any event. The application of Apotex to dismiss the prohibition application on the grounds of mootness is granted and the prohibition application is dismissed.

     Apotex agrees that it should be liable to Merck for costs on a solicitor-client basis and an order to that effect, for the period commencing with the service on Merck of the notice of allegations giving rise to this prohibition application to the conclusion of proceedings, will be made. If the parties are unable to agree on the amount of solicitor-client costs payable they may apply to the Court for a resolution of that amount.

     Marshall Rothstein

    

     J U D G E

OTTAWA, ONTARIO

APRIL 1, 1997

__________________

     ¹      Apotex brought an interlocutory application to dismiss the present prohibition application on the ground that it is moot. That motion was dismissed on the ground that it was almost always inappropriate to bring an interlocutory application to dismiss a judicial review application (see Pharmacia Inc. v. Canada (Minister of National Health and Welfare) (1994), 58 C.P.R. (3d) 209). The Court then fixed February 27, 1997 as the date on which the hearing of the merits of Merck's prohibition application would commence. Apotex was given leave to raise the mootness issue by way of a preliminary motion at the outset of proceedings. This is that preliminary motion.

     ²      5. (1) Where a person files or, before the coming into force of these Regulations, has filed a submission for a notice of compliance in respect of a drug and wishes to compare that drug with, or make a reference to, a drug that has been marketed in Canada pursuant to a notice of compliance issued to a first person in respect of which a patent list has been submitted, the person shall, in the submission, with respect to each patent on the patent list,      . . .
         (b) allege that      . . .
             (iv) 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 that person of the drug for which the submission for the notice of compliance is filed.

     ³      5. (3) Where a person makes an allegation pursuant to paragraph (1)(b) or subsection (2) the person shall      . . .
         (b) serve a notice of the allegation on the first person and proof of such service on the Minister;

     ⁴      6. (1) A first person may, within 45 days after being served with a notice of an allegation pursuant to paragraph 5(3)(b), apply to a court for an order prohibiting the Minister from issuing a notice of compliance until after the expiration of one or more of the patents that are the subject of an allegation.

     ⁵      The 30-month period referred to in paragraph 7(1)(e ) of the Regulations was referred to by Cory J. in Merck Frosst Canada Inc. v. Apotex Inc., SCC file 25812, an order refusing a stay of proceedings sought by Merck as a statutory stay. Paragraph 7(1)(e) provides:
     7. (1) The Minister shall not issue a notice of compliance to a second person before the latest of                          . . .          (e) Subject to subsections (2), (3) and (4), the expiration of 30 months after the receipt of proof of the making of any application referred to in subsection 6(1) [a prohibition application].

     ⁶      7 . (1) The Minister shall not issue a notice of compliance to a second person before the latest of
     . . .
         (f) the expiration of any patent that is the subject of an order pursuant to subsection 6(1).

     ⁷      Paragraphs 7(1)(b ) and (d) provide:
     7. (l) The Minister shall not issue a notice of compliance to a second person before the latest of      . . .          (b) the day on which the second person complies with section 5; (serves the notice of allegation)      . . .          (d) subject to subsection (3), the expiration of 45 days after the receipt of proof of service of a notice of any allegation pursuant to paragraph 5(3)(b) in respect of any patent on the patent list.

     ⁸      6. (2) The court shall make an order pursuant to subsection (1) in respect of a patent that is the subject of one or more allegations if it finds that none of those allegations is justified.

     ⁹      However, if separate allegations are interdependent in some way, the finding that one is unjustified may have wider consequences. That is not the situation here.