Monsanto Canada Inc. v. Novopharm Ltd., docket T-769-96

     T-769-96

BETWEEN:

     MONSANTO CANADA INC.

     Plaintiff

     - AND -

     NOVOPHARM LIMITED

     Defendant

     REASONS FOR ORDER

McKEOWN J.

     Monsanto Canada Inc. (Monsanto), the plaintiff, seeks an interlocutory injunction to restrain the defendant Novopharm Limited (Novopharm) from marketing a generic version of its patented drug in the same shape and colour. The plaintiff carries on in Canada the business of manufacturing, packaging and marketing brand name pharmaceutical preparations through its Searle Canada division.

     The issue is whether the applicant has established that: (1) there is a serious issue to be tried; (2) it will suffer irreparable harm; and (3) the balance of convenience favours the granting of the injunction.

FACTS

     I do not intend to review the facts extensively except as they affect the reputation in trade dress of the plaintiff's drug and irreparable harm. The drug is prescribed for patients with hypertension.

     Hypertension is a cardiovascular illness common among patients ranging in age from their early twenties to advanced years. Hypertension is a chronic condition that can be treated by medication that patients usually take for the rest of their lives. A patient's family physician will initially commence the treatment of the patient on a particular medication. Hypertension can be difficult to control, particularly if the patient is taking a combination of medications. The physician will, therefore, spend time selecting the medication and discussing the selection of the medication with the patient, particularly if the patient has allergies. In the discussions, the physician will explain the treatment of the patient's hypertension with the medication and the potential side effects of the medication selected by the physician. After the medication has been selected the physician will identify the medication to the patient by the brand name and show the patient a sample of the medication. It is important for the physician to know of the appearance of the medication, both its colour and shape, to enable the physician to have a meaningful discussion with the patient.

     It is common for the physician to commence the patient's treatment with samples of the medication selected. After the patient has used the samples furnished by a pharmaceutical company, the patient will return to the physician within a week. If the medication is having the desired effect, the physician will prescribe a one month supply of the medication by completing a prescription request and have the patient return before the end of the month. If the patient is continuing to respond to the medication in the desired way, the physician will prescribe a six month repeat of the prescription and will have the patient return twice a year to monitor the patient's condition. If the family physician is having difficulty in controlling the patient's hypertension, the physician will refer the patient to a specialist, either in internal medicine or cardiology.

     I will now describe the dealings between the pharmacist and the patient.

     A patient will have the prescription request provided by the physician filled by a pharmacist. The pharmacist will identify the patient and consult the patient's profile to identify any allergies that the patient has and any possible adverse reaction that the patient might have from any other medication that the patient is taking. If the patient's records are not on file, the pharmacist will compile a record from information provided by the patient. The pharmacist will enter the particulars of the prescription in the pharmacy records, select the medication prescribed from the dispensary, count out the number of tablets or capsules, put the tablets or capsules in a vial, print out a label for the vial and a bill for the patient, and check the medication selected with the medication identified on the prescription request. The pharmacist then provides the medication and the bill to the patient, discusses with the patient potential side effects of the medication and provides the patient with an opportunity to ask questions concerning the medication.

     The pharmacist will identify the pharmaceutical company whose product is being dispensed by a code and a drug identification number (DIN) applied to the vial label and, depending on the practice of the pharmacy, identify the medication on the label by either the brand name or the name of the active ingredient. It is common for pharmacists to fill prescriptions to be picked up by the patient, and in response to a telephone order, to fill repeat prescriptions. Pharmacists will deliver prescriptions; these are usually repeat prescriptions. In the sample of prescription bottles that were before me there was no reference to the plaintiff Monsanto or its trade name "Searle Canada" on the bottles. The word "Isoptin SR tablet" is on the label.

     In order to understand the importance of the colour and shape of the pill, it is also necessary to review the statutory regime that governs the marketing of generic pharmaceutical preparations in Canada. The Health Protection Branch of the federal Department of Health (HPB) approves the sale of a generic preparation by issuing a Notice of Compliance (NOC). The NOC for a generic preparation will indicate that the drug is bioequivalent to a brand name preparation. HPB considers two preparations to be bioequivalent if they are plus or minus 20 percent in potency, i.e. there could be a difference of 40 percent in the potency of the preparations. There are regulatory regimes in most of the provinces that determine whether a generic drug for which an NOC has issued is interchangeable with the brand name preparation considered bioequivalent by HPB.

     Once an NOC is issued for a generic preparation, applications are made under the provincial regulatory regimes for the preparation to be designated as being interchangeable with the brand name preparation. If a province concludes that a generic preparation is interchangeable with a brand name preparation, the province will list the generic preparation in a publication that is commonly referred to as the formulary and the generic preparation may thereafter be substituted for the brand name preparation. Until a recent change in the jurisprudence, generic pharmaceutical preparations have had the same shape and colour as brand name preparations.

     Sales of generic pharmaceutical preparations are largely dependent on the regulatory regimes which designate the preparations to be interchangeable with brand name preparations. Until a generic preparation is listed in a formulary, it is unlikely that it will have substantial sales to patients, as it will not be supplied by a pharmacist in place of a brand name preparation until such listing takes place.

     The pharmacist must then make a decision on whether to select one generic pharmaceutical preparation over another and, in doing so, a pharmacist will consider: 1) the quality of the preparations; 2) the reputation of the pharmaceutical companies and their service; and 3) the price. The factors considered in the service provided by the pharmaceutical companies are: 1) speed of delivery; 2) how often the company's preparations are back ordered; 3) the return policy; and 4) the ease of dealing with the company's credit department.

     It is expected that the immediate market for Novopharm's SR tablets are the provinces of Quebec and Newfoundland. The defendant expects its tablets to be interchangeable in those provinces and expects that it will be listed in Alberta and New Brunswick formularies later in 1996. It is unlikely that Novopharm SR tablets will be listed as interchangeable in the province of Ontario or be considered as interchangeable in the province of British Columbia.

     Until recently in the province of Quebec the pharmacist had the discretion whether or not to substitute an interchangeable pharmaceutical preparation. The pharmacist was reimbursed under the Quebec drug insurance plan for the price of the preparation dispensed, less the $2 dispensing fee. The plan was changed within the last year. Prior to the change the generic pharmaceutical market penetration in Quebec was not as high as in other provinces. This was because pharmacists in Quebec elected to dispense brand name preparations instead of lower cost interchangeable generic preparations. This is a different situation from Ontario where under sections 4 and 5 of the Prescription Drug Cost Regulation Act, R.S.O. 1990, c. P-23, pharmacists are required to dispense the lowest cost interchangeable preparation unless otherwise directed by the patient or physician. However, the recent change to the Quebec drug insurance plan provides that the plan will pay only the amount of the lowest cost listed in the formulary for pharmaceutical preparations considered as interchangeable regardless of which interchangeable preparations is dispensed. The amount paid is referred to as the best available price; the preparation with the best available price is identified in the formulary with the designation "PPB".

     There are no requirements in the provinces of Quebec and Manitoba that pharmacists advise patients that a substitution of an interchangeable pharmaceutical preparation has been made. Certain pharmacists will advise patients of a substitution as a matter of practice. This practice is not uniformly followed where the generic preparation has the same shape and colour as the brand name preparation, particularly on repeat prescriptions that are ordered by telephone for delivery or pick up at the pharmacy. If the generic preparation is different in shape and colour, pharmacists are compelled to advise their patients of a substitution. If they fail to do so when the prescription is dispensed, their patients will call the pharmacist to ensure that there has been no mistake by the pharmacist in dispensing the preparation. If the patient is not satisfied with the pharmacist's explanation of the substitution, the patient may (1) call the physician to obtain the physician's opinion on whether the preparation dispensed is equivalent to the brand name preparation, (2) have the physician specify on the prescription request "No Substitution" or (3) request the brand name preparation and pay any applicable premium. If a patient is not advised by the pharmacist that a substitution has been made and the generic preparation has the same appearance as the brand name preparation, the patient will conclude that the preparation dispensed is the same brand name preparation that the patient previously received.

     Some of the evidence indicated that substitution of cardiovascular preparations can be very dangerous to a patient's health in cases in which there is a difference of potency between the preparations even though the preparations may be considered bioequivalent by HPB. It is, therefore, important for patients to have a choice to either accept a generic cardiovascular preparation or require the brand name preparation.

     Searle Canada has sold Isoptin SR tablets in Canada since 1988. At all material times, each Isoptin SR tablet has been formulated as a tablet having a trade dress comprising a biconvex capsule shape with score lines on both sides of the tablet and a light-green coloured film coating (Isoptin SR trade dress). The only markings on Isoptin SR tablets are two embossed triangles. Patients rarely notice the embossed triangles on the tablets. Markings on tablets are often not noticed by patients because they are not easy to see, particularly for seniors with failing eyesight. Even if a patient notices a marking on a tablet, the patient will not likely bother to read the marking.

     Labels are attached to bottles of Isoptin SR tablets which are sold by Searle Canada to pharmacists and they prominently identify Searle Canada and the name "Searle". However, these names do not appear on the bottle which the pharmacist sells to the patient.

     The choice of the shape and colour of a pharmaceutical preparation is largely arbitrary. There are a number of pharmaceutical preparations on the market that compete with Isoptin SR tablets. The appearance of each of such preparations differs significantly from the appearance of Isoptin SR tablets. Searle Canada has directed its promotion and advertisements for Isoptin SR tablets to physicians to encourage physicians to prescribe the tablets for their patients who suffer from hypertension. As part of such promotion Searle Canada has distributed to such physicians samples of Isoptin SR tablets in sleeves which the physicians have dispensed to patients. Searle Canada is prominently identified on the sample sleeves. In the past three years, Searle Canada has distributed in excess of 3,000,000 samples of Isoptin SR tablets to physicians in Canada. Physicians initially introduced Isoptin SR tablets to their patients by showing their patients a sample tablet to enable the patients to recognize the appearance of the tablet and by identifying the tablet by reference to the trade-mark ISOPTIN. Many physicians identify Isoptin SR tablets on prescription requests by reference to the trade-mark ISOPTIN. Pharmacists generally identify Isoptin SR tablets on the label for their patients' vial by reference to the trade-mark ISOPTIN. Evidence from physicians and pharmacists shows that patients identify Isoptin SR tablets by the shape and colour of the tablets.

     On March 15, 1996, Searle Canada obtained from a pharmacy a copy of a notice published by Novopharm announcing that Novopharm SR tablets were to be made available to pharmacies and distributors on April 10, 1996 in the trade dress substantially identical to the Isoptin SR trade dress. Novopharm SR tablets can only be differentiated from Isoptin SR tablets by the difference in the embossed markings on the tablet, markings which it is unlikely that the patient would notice.

     The defendant commenced to book orders for Novopharm SR tablets immediately after it was issued the NOC for the tablets and its representatives would have completed securing initial orders by the end of March 1996. By June 1996 the defendant had booked orders for $1.1 million of Novopharm SR tablets.

     Searle Canada made an application for an interim injunction which was heard on April 9, 1996, the day before the defendant was to commence shipment of its Novopharm SR tablets. The interim injunction was granted by Order of Noël J. dated April 11, 1996. The defendant appealed the Order and the Federal Court of Appeal allowed the appeal on May 23, 1996 relying on the untested evidence furnished in the said affidavit of Mr. Steven Johnston. The defendant commenced to ship its Novopharm SR tablets to its depots in Quebec and Nova Scotia in June 1996.

     The pharmaceutical company Wyeth-Ayerst markets in Canada a sustained release formulation of verapamil hydrochloride formulated as a capsule containing 240 mg of verapamil hydrochloride as the active ingredient (Verelan SR capsules). Verelan SR capsules, marketed under the brand name VERELAN, have a yellow body and blue cap. These capsules were listed in the Quebec formulary in January 1996 as being interchangeable with Isoptin SR tablets. They are the first preparations listed as interchangeable with Isoptin SR tablets. They are therefore considered a generic version of Isoptin SR tablets in Quebec, although the parties agree that Verelan SR capsules are not bioequivalent to Isoptin SR tablets. Verelan SR capsules are also believed to be listed as interchangeable with Isoptin SR tablets in the province of British Columbia. As Verelan SR capsules are different in appearance from Isoptin SR tablets, pharmacists will be obliged to explain to patients a substitution of Verelan SR capsules for Isoptin SR tablets.

     On March 4, 1996, upon learning that Novopharm had received HPB approval for Novopharm SR tablets, Searle Canada authorized and permitted Genpharm Inc., a generic pharmaceutical company (Genpharm), to proceed to market a generic version of Isoptin SR tablets sourced from Searle Canada and identical in composition to Isoptin SR tablets (Genpharm SR tablets). Such a generic version is referred to in the trade as "ultrageneric".

     Genpharm has a relatively small share of today's market for generic pharmaceutical preparations. The company does not have the same level of service or the breadth of product line as the defendant. Ultrageneric preparations have an advantage over more traditional generic preparations in being able to secure faster regulatory approval to be designated as interchangeable with brand name preparations. Ultrageneric preparations are usually able to secure regulatory approval in a matter of weeks.

     Searle Canada will source Genpharm SR tablets from Knoll AG, the same source as its own Isoptin SR tablets. Searle Canada is a distributor of Isoptin SR tablets. The packaging of the Isoptin SR tablets has both the "Knoll" and the "Searle" names and indicates that Isoptin SR is a registered trade mark of Knoll AG. Searle Canada has authorized and permitted Genpharm to use a trade dress for Genpharm SR tablets identical to the Isoptin SR trade dress. Genpharm SR tablets will, however, be marked with the designation "SR 240" embossed on one side of the tablets instead of the two embossed triangles that appear on Isoptin SR tablets. Because Genpharm SR tablets are the same shape and colour as Isoptin SR tablets, I infer that patients will assume that Genpharm SR tablets are made by the same pharmaceutical company as Isoptin SR tablets. Genpharm commenced shipping Genpharm SR tablets as early as mid-March 1996 before the defendant had initially planned to commence shipping Novopharm SR tablets. Under its arrangement with Genpharm, Searle Canada will receive the majority of the income from the sale of Genpharm SR tablets. The plaintiff chose not to supply the Court with a copy of its agreement with Genpharm nor was the Court informed of other terms and conditions in the agreement. Moreover, we are unaware of the relevant terms and conditions of the agreement between Knoll AG and Searle Canada.

     The plaintiff introduced evidence to show that with another drug "Generic Fluoxetine", when an injunction was granted precluding the defendant from marketing its capsules similar in shape and colour to the brand name of Eli Lilly and Company, the company was able to quickly introduce the Generic Fluoxetine onto the market in a shape and colour different from the brand name preparation. In order to assist pharmacists in counselling patients on the substitution of Generic Fluoxetine for the brand name preparation and to answer patient questions, the defendant issued a pamphlet to pharmacists intended to be handed out to patients who received Generic Fluoxetine. The brochure avoids confusion for the patients and saves the pharmacist time in explaining to the patient the substitution of Generic Fluoxetine for the brand name preparation.

ANALYSIS

     As is usual in an interlocutory injunction the applicant must establish 1) that there is a serious issue to be tried; 2) that the applicant will suffer irreparable harm; 3) the balance of convenience favours the granting of the injunction.

     On the question of serious issue the plaintiff must establish under paragraph 7(b) of the Trade-marks Act, R.S.C. 1985, c. T-13, that the defendant: 1) has directed public attention to its wares or services or business; 2) in such a way as to cause confusion or be likely to cause confusion; and 3) at the time he so commenced to so direct such attention. In considering a cause of action under paragraph 7(b) of the Trade-marks Act, I must look at the jurisprudence under the common law of passing off. Gonthier J. in Ciba-Geigy Canada Ltd. v. Apotex Inc. (1992), 44 C.P.R. (3d) 289 at 304 (S.C.C.) stated:

There is no need to dwell at length on the purposes of the passing-off action in this field [pharmaceutical field] as they are essentially the same as those I have just considered. Adapting the principles set out to cases such as that now before this court leads to the conclusion that competing laboratories must avoid manufacturing and marketing drugs with such a similar get-up that it sows confusion in the customer's mind.

First, I should make a few observations on the get-up of the products at issue here. As Wadlow points out (op. cit., at p. 379), pharmaceutical companies are limited in the choice of ways to distinguish the get-up of their products. As pharmacists buy such products in bulk and dispense them to the public in standard containers which are transparent and anonymous, the only way of drawing the attention of patients to the origin of the product is the capsule or tablet itself. There are not many possibilities: what is written on tablets is often too small to be legible, at least not readily so, and that leaves only the shape, size and colour of the products as a means of distinguishing them ...

     In considering the marketing of prescription pharmaceutical preparations, an action for passing off will be maintained if the plaintiff can show: 1) the existence of a secondary meaning or goodwill in the appearance of the preparation; (2) deception of the physicians, pharmacists or patients who prescribe, dispense or use the preparation; and (3) actual or potential damage.

     To establish secondary meaning in the appearance of a product the plaintiff must show that, by reason of the appearance, consumers regard products of the same appearance as having one trade source. There is no evidence to show that patients know that Searle Canada is the source. It is not necessary to establish that the source is the plaintiff. (Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd., [1982] 1 S.C.R. 494">[1982] 1 S.C.R. 494 at 503). Accordingly, it is not necessary to identify Searle or Monsanto as the source.

     There is an issue under subsection 50(1) of the Trade-marks Act which reads as follows:

For the purposes of this Act, if an entity is licensed by or with the authority of the owner of a trade-mark to use the trade-mark in a country and the owner has, under the license, direct or indirect control of the character or quality of the wares or services, then the use, advertisement or display of the trade-mark in that country as or in a trade-mark, trade-name or otherwise by that entity has, and is deemed always to have had, the same effect as such a use, advertisement or display of the trade-mark in that country by the owner.

     The only evidence we have with respect to the agreement between Genpharm and Monsanto is paragraphs 53 and 54 of Mr. Cloutier's affidavit. We know only that it is an agreement which deals with revenue sharing. I am unable in the absence of evidence relating to the terms and conditions of the agreements between Searle Canada and Knoll AG and Searle Canada and Genpharm to determine any issue with respect to subsection 50(1).

     I am satisfied in light of all of the foregoing that the plaintiff has established that there is a serious issue.

     I must now consider the question of irreparable harm. I should note that prior to making my decision but after the completion of argument, the Federal Court of Appeal released its decision in Apotex Inc. v. Eli Lilly and Company, September 25, 1996, Court File A-382-96, (Eli Lilly) which reversed the decision of Rothstein J. at trial. The trial judgment had been relied on by the plaintiffs. The motions judge judgment had been relied on by the plaintiff in the case before me. Accordingly, when this appeal decision was brought to my attention, I asked both parties to make submissions with respect to irreparable harm. In Eli Lilly, supra, Décary J.A. states at page 4:

It is trite law in our Court that a plaintiff seeking an interlocutory injunction must establish with clear evidence that it, as opposed to another person or party, will suffer irreparable harm. That burden is not an easy one for the remedy is an extraordinary one that will not be granted unless the applicant convinces the court, inter alia, that damages at common law would not provide an adequate remedy if the court refused to grant the injunction.

     In the Eli Lilly case, Lilly based its action on passing off of its alleged trade mark in the colour, shape and size of its fluoxetine hydrochloride capsules, and also sought an interlocutory injunction. Before the proceedings were commenced, Lilly granted a licence to Pharmascience to market a generic version of fluoxetine hydrochloride which was nearly identical in colour, shape and size to Lilly's brand name version of the same drug. This agreement was not put into evidence before the court. The evidence before the court regarding the nature of the licence was sparse. Pharmascience was not a party to the proceedings.

     At trial, Rothstein J. found that Lilly would suffer irreparable harm if the injunction were not granted. His conclusion was based in part on the finding that there would be an incalculable loss to Lilly in the absence of an injunction. In particular, he rejected the defendants' argument that any loss in market share due to the presence of the defendants in the marketplace would be suffered by Pharmascience, and that there was no evidence that such loss would accrue back to Lilly. Rothstein J. admitted that the evidence concerning the agreement between Lilly and Pharmascience was "sparse", but nevertheless concluded that Lilly benefitted from Pharmascience's sales. He reached this conclusion based on an assertion in an affidavit filed by a representative of Lilly that such a benefit existed. He was overturned on this point by the Court of Appeal. Décary J. stated at page 4:

In the case at bar, the Motions Judge did not base his conclusion on a finding of direct loss to the respondents [Lilly]. What he found, essentially, was that the irreparable loss would be suffered by Pharmascience and that it would be transmitted to the respondents. Assuming that he was correct in finding that Pharmascience's loss was incalculable, licence causing irreparable harm, the problem is that his finding that the loss would be transmitted to the respondents was not supported by sufficient evidence.

     In particular, the Court of Appeal characterized Lilly's evidence as "vague and self-serving", and as falling short of the evidentiary burden that proof of irreparable harm to Lilly must be clear. The Court pointed out that:

Pharmascience is not a plaintiff. It is not even a party to the proceedings. Any loss it sustains is therefore irrelevant unless such loss can be traced back directly to the respondents themselves. Absent clear evidence that the respondents would suffer the loss sustained by the sub-licensee, the Court cannot infer that the respondents will suffer irreparable harm.

     The Court of Appeal then went on and defined that since the agreement was not put before the Court and that there was only an affidavit signed by the director of the generic business unit for Lilly Canada to the effect that "my company benefits in Pharmascience sales" this would not meet the evidentiary burden. Décary J.A. went on to state at page 5:

... The respondents must prove that the loss would be theirs and that it would be as irreparable to them as it would be to Pharmascience. It was within the sole power of the respondents to lift the veil of secrecy which concealed the true nature of their relationship with Pharmascience, and thus at least provide some description of their arrangement with the sub-licensee. They failed to do so. In our view, the only reasonable inference that could be made of this failure is that the information would have been prejudicial to their case.

     In the matter before me, the only evidence with respect to the agreement between Genpharm Inc. and Searle Canada is contained in paragraphs 53 and 54 of the affidavit of Mr. Cloutier:

53.      Under the arrangement with Genpharm Inc., Searle Canada sources the identical formulations of sustained release verapamil hydrochloride as Isoptin SR Tablets from Knoll AG. Genpharm SR Tablets are identical to Isoptin SR Tablets in composition and appearance except that Genpharm SR Tablets do not have the two embossed triangles that appear on the Isoptin SR Tablets and instead have the designation "SR 240" embossed on one side of the tablets. Now shown to me and marked as Exhibit T to my Affidavit is a vial containing Genpharm SR Tablets.

54.      Under its arrangement with Genpharm Inc., Searle Canada will receive the majority of the income on the sale of Genpharm SR Tablets to pharmacists. Searle Canada has also authorized and encourages Genpharm Inc. to promote Genpharm SR Tablets as an ultrageneric version of Isoptin SR Tablets.

     During cross-examination, Mr. Cloutier attempted to assert that Searle licenses Genpharm to sell look-alike generic verapamil hydrochloride. However, Mr. Cloutier backed away from this position on further cross-examination and stated there was simply an "agreement between Searle and Genpharm".

     In my view, Monsanto has failed to discharge its evidentiary burden to prove that it will suffer irreparable harm in the absence of an injunction. As was stated at page 4 of Apotex v. Eli Lilly, supra:

... Absent clear evidence that the respondents would suffer the loss sustained by the sub-licensee, the Court cannot infer that the respondents will suffer irreparable harm.

     In my view, Mr. Cloutier's statement about the sharing of income is a vague and self-serving statement and does not satisfy the plaintiff's evidentiary burden. I infer that, as was stated in Eli Lilly, supra, it was within the sole power of the plaintiff "to lift the veil of secrecy which conceals the true nature of their relationship with" Genpharm and at least provide some description of their arrangement with the sub-licensee. In my view, the only reasonable inference that can be made of this failure is that the information would have been prejudicial to the plaintiff's case.

     The motion for an interlocutory injunction is dismissed. In light of the Court of Appeal decision in Apotex v. Eli Lilly, supra arising after the case had been argued, in my view, there should be no costs in this matter.

                         _______________________________

                                 Judge

OTTAWA (ONTARIO)

November 22, 1996