T-1305-93
BETWEEN:
MERCK FROSST CANADA INC.
- and-
MERCK & CO., INC.
Applicants,
AND:
THE MINISTER OF NATIONAL HEALTH AND WELFARE
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APOTEX INC.
Respondents.
REASONS FOR ORDER
COSTS APPLICATION
EXPIRY OF TIME DECISION
ROTHSTEIN J.:
This is an application by Apotex for costs relative to proceedings under the Patented Medicines (Notice of Compliance) Regulations. Apotex was the successful party by reason of the Court dismissing Merck"s application to extend time and prohibition application. (See reasons for order delivered from the Bench March 27, 1997, and issued as edited April 1, 1997 in this court file).
The following issues were argued:
| (1) Must a party demonstrate special reasons in order to obtain costs in proceedings under the Patented Medicines (Notice of Compliance) Regulations? |
| (2) Are there special reasons in this case and if so should the fact that a new issue was in play cause the Court to refuse cost to the successful party? |
| (3) Are there grounds for an award of solicitor-client costs? |
With regard to the first issue, Rule 1618 of the Federal Court Rules states that no costs shall be payable in judicial review proceedings unless the Court, upon finding special reasons, so orders. Apotex, relying on the decision of Wetston J. in Pharmacia v. Minister of National Health and Welfare (1995), 64 C.P.R. (3d) 5, argued that because the prohibition proceedings under the Regulations are judicial review "in name only", Rule 1618 is not applicable. Merck relies upon the decision of Richard J. in Glaxo v. Minister of National Health and Welfare (1996), 66 C.P.R. (3d) 302, to the effect that although proceedings are essentially private in nature, they are proceedings in judicial review and are governed by Part V.I of the Federal Court Rules; therefore, Rule 1618 is applicable. Although these would appear to be conflicting decisions of the Trial Division, this is not in fact the case. Upon a careful reading of the decision of Mr. Justice Wetston in Pharmacia, it is apparent that he, like Richard J., is of the opinion that Rule 1618 is applicable to such proceedings. Indeed he expressly states at page 8:
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Firstly, I am of the opinion that Rule 1618 governs the award of costs in proceedings brought pursuant to the PMNOC Regulations. |
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I agree with this view. These proceedings under the Regulations are best characterized as private litigation1. With this in mind, the applicability of the policy underlying Rule 1618, which is to enable persons to challenge decisions of federal administrative tribunals without running the risk of being ruined by costs (see Friends of the Island v. Canada (Minister of Public Works), 131 D.L.R. (4th) 285 (F.C.A.)), is not easily understood as applying in these circumstances. Nonetheless, these are judicial review proceedings [see Pharmacia v. Minister of National Health and Welfare, 58 C.P.R. (3d) 209 at 215 (F.C.A.) and authorities cited at letter (c)], and the Court cannot turn a blind eye to the legislative and regulatory words. Rule 1618 is therefore applicable to these proceedings and costs may only be awarded for special reasons.
Are there special reasons in this case? Although Apotex's written submissions seem to suggest that the nature of proceedings under the Regulations themselves constitute special reasons, this argument was not seriously pursued. It could not be, because a legislative or regulatory regime per se cannot constitute special reasons. One must look at the particular circumstances of the case.
The better argument made by Apotex relates to the fact that in this case there never was a determination on the merits. Merck"s prohibition application was dismissed because the statutory stay under the Regulations expired, which resulted in the Court losing jurisdiction to grant prohibition or extend time. The scheme of the Regulations provides a procedure whereby the Court determines, within a limited time, whether an allegation of non-infringement by the competitor of a patentee is or is not justified. If justified, the prohibition application brought by the patentee to enjoin the Minister from issuing a notice of compliance to the competitor will be dismissed. If not justified, the Court will prohibit the Minister from issuing a notice of compliance to the competitor. These proceedings are to take place within a 30-month period during which, by the simple filing of an application for prohibition, the Minister is automatically prohibited, within that time period, from issuing a notice of compliance unless and until the prohibition application is dismissed. Apotex says that what the Regulations contemplate is a determination on the merits of the prohibition application. Where no determination on the merits takes place, the Regulations have been invoked, but not for the purpose for which they were intended.
I think there is substance to this argument and that it constitutes special reasons for awarding costs under Rule 1618 against the party who is responsible for a matter not being adjudicated on its merits within the statutory period provided under the Regulations. Thus, if as in this case, a patentee does not bring the matter on for hearing during the time when a determination on the merits may be made, i.e. within 30 months of the filing of the prohibition application unless that time is shortened or lengthened, the patentee has obtained a statutory prohibition against the Minister from issuing a notice of compliance to its competitor but has not followed through so that a determination on the merits of infringement is made. Conversely, if a competitor serves a notice of allegations which gives rise to prohibition proceedings and then seeks to withdraw or abandon those proceedings, the patentee has been put to time and expense of defending its right under its patent, again without a determination on the merits being made. I consider either of these "aberrations" of the proceedings under the Regulations as special reasons for awarding costs. Although it is unnecessary to go further, I would add that if a patentee or competitor has a particularly unmeritorious position in a case under the Regulations, even if a determination on the merits is made by the Court, an argument for costs based on special reasons might be accepted.
On this question of special reasons, two arguments made by Merck must be addressed. First, Merck submits that its intent always was to have the matter adjudicated on its merits and the fact that time expired was as a result of an unusual series of events: specifically, an initial extension of time and a second extension granted by the Trial Division within time but reversed by the Federal Court of Appeal after the time for adjudication on the merits had expired. I agree that the circumstances here are unusual. There is absolutely no indication that Merck was simply seeking to delay the issuance of a notice of compliance to Apotex and that it did not move the matter forward because its case was unmeritorious. Nonetheless, the purpose of the Regulations, to obtain adjudication on the merits within the statutory period provided, has not been carried out by Merck and this is the basis of the special reasons for awarding costs.
Second, Merck says that the question of the Court"s jurisdiction to grant prohibition and/or an extension of time after the statutory period prescribed by the Regulations is a novel and controversial issue raised for the first time in this case. It is true these issues were raised for the first time here and they were aggressively argued by both sides. Perhaps (and I do not decide the issue here) these might be arguments with respect to the level of costs to be awarded. However, they do not "cancel" the special reasons for awarding costs for purposes of Rule 1618. Indeed, new and novel issues are regularly before the courts and I am not aware of any general rule that in such cases no costs should be awarded, although, of course, the Court is not precluded from taking such considerations into account in exercising its discretion with respect to costs.
With respect to the last point, Apotex submitted that the exercise of the Court"s discretion as to costs was already exercised once special reasons were found that justified an award of costs and that a second exercise of discretion based upon the novelty or newness of the issue was inappropriate. I do not agree. As Wetston J. stated in Pharmacia at page 8:
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While it is generally in the Court"s discretion to award costs, in these circumstances the threshold to seek an exercise of discretion is that "special reasons" must be demonstrated. |
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| Here, it is the expiry of the statutory period during which a determination of the merits could have been made that constitutes special reasons that enable the Court to award costs. However, the Court must still exercise its discretion in accordance with Rule 344 of the Federal Court Rules with respect to the amount of costs. |
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| Are there grounds for an award of solicitor-client costs? Apotex argued for solicitor-client costs on the basis that because of the expiry of time, the entire proceeding was for naught. The Court should discourage patentees from taking steps under the Regulations simply to obtain the statutory stay against the issuance of a notice of compliance to a competitor with no other purpose, namely a determination on the merits of the prohibition application. I agree with Apotex that if there was evidence that a patentee's objective in delaying was to take advantage of the statutory stay under the Regulations and not to obtain a decision on the merits, there might be grounds for solicitor-client costs. There is no such evidence here. Indeed, it was Merck that was attempting to have the matter determined on its merits and it was Apotex that argued that Merck was not entitled to such a determination because of the expiry of time. In the circumstances, only party-party costs would be appropriate. |
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| I conclude therefore that special reasons exist and that an award of costs in favour of Apotex may be made. At the request of Merck, the matter is adjourned to enable the parties, with the benefit of these reasons, to attempt to settle the amount of costs between themselves. If they are unable to do so, a conference call will take place with the Court on Monday, June 30, 1997, at 9:00 a.m., to fix a time and place or conference call for the final determination of the amount of costs to be awarded to Apotex. |
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| (Sgd.) "Marshall E. Rothstein" |
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NAMES OF COUNSEL AND SOLICITORS OF RECORD
| STYLE OF CAUSE: MERCK FROSST CANADA INC. and MERCK CO., INC. |
- and -
| THE MINISTER OF NATIONAL HEALTH AND WELFARE and APOTEX INC. |
COURT NO.: T-1305-93
PLACE OF HEARING: Halifax, NS
DATE OF HEARING: May 12, 1997
REASONS FOR ORDER OF Rothstein, J. dated
June 10, 1997
APPEARANCES:
Mr. Nelson Landry for Applicant
Mr. Harry Radomski for Respondent
SOLICITORS OF RECORD:
Ogilvy Renault
Montreal, PQ for Applicant
Goodman, Phillips & Vineberg for Respondent
Toronto, ON
__________________
1 Patent protection may be seen as a matter of public interest because the monopoly afforded to an inventor is part of the public-investor "bargain". That is to say, the public has an interest in the continuing encouragement of innovation to advance Canadian society as a whole. However, in the context of the litigation here, the outcome will be to the benefit of one private party and to the detriment of the other and it is in this sense that the litigation is best characterized as private.
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