Docket: T-656-09
Citation: 2009FC693
Ottawa, Ontario,
July 3, 2009
PRESENT: Madam Prothonotary Mireille Tabib
BETWEEN:
APOTEX
INC.
Plaintiff
and
ELI
LILLY CANADA INC.
Defendant
REASONS FOR ORDER AND ORDER
[1]
The present motion is brought in the context of an action taken
by Apotex Inc. (“Apotex”) against Eli Lilly Canada Inc. (“Lilly”), for damages
pursuant to section 8 of the Patented Medicines (Notice of Compliance )
Regulations (the “Regulations”). Lilly seeks an Order pursuant to
Rule 221 of the Federal Courts Rules striking out paragraphs 1(b) and 22 to 28
of Apotex’ statement of claim, in which Apotex seeks disgorgement of Lilly’s
revenues in application of the principles of unjust enrichment.
[2]
Lilly’s motion further seeks an Order either extending the
time within which to file its statement of defense or staying the action until
the determination of its application for leave to appeal to the Supreme Court
of Canada the Order of the Federal Court of Appeal upholding the dismissal of
Lilly’s application for a prohibition order, extending to the final
determination of the appeal, if leave is granted.
Motion to strike
[3]
Lilly submits that as a result of the decision of this
Court in Apotex Inc. v. Merck and Co. Inc., 2008 FC 1185, upheld by the
Court of Appeal in Merck Frosst Canada Ltd. et al v. Apotex, 2009 FCA
187, it is now plain and obvious that, at law, a generic such as Apotex is
precluded, in a claim pursuant to section 8 of the Regulations, from asserting
a claim for disgorgement or accounting of a first person’s profits.
[4]
Apotex argued at the
hearing that the decision in Apotex v. Merck is not determinative of
whether a second person may assert a claim for unjust enrichment, as it is
specifically mentioned at paragraph 11 of that decision that Apotex’ claim for
unjust enrichment was dropped at trial and was therefore not considered.
[5]
In Apotex v. Merck,
the Court held as follows:
“97 Turning to section 8(4) of the PMNOC Regulations it is immediately apparent that the
generic is not a patentee, in fact it escaped charges of infringement of
somebody else's patent by demonstrating that the patent was invalid (as in the
present case) or not infringed. The generic cannot claim damages or an account
of profits for infringement. What the generic can
claim is "compensation" for "loss" having been kept off the
market for a period of time. That "compensation" takes the form of
"damages or profits". The reasonable interpretation of those words
"damages or profits" is that the generic can seek, as a measure of
its damages in the alternative, the profits that it would have made if it had
been able to market its product at an earlier time.
(…)
101 Having regard to all of the foregoing
discussion, including but not limited to what Professor Sullivan has said, I
conclude that the proper interpretation of section 8(4) of the PMNOC Regulations is to find that the words "damages
or profits" are to be interpreted to include only "compensation"
for the "loss", if any, suffered by a generic, and that those words
do not provide for a right of a generic to elect for a disgorgement or account
of a first person's profits.
102 Section 20(2) of the Federal
Courts Act does not expand upon the remedies afforded by section 8 of
the PMNOC Regulations. It enables the Regulations to
include equitable remedies, but such remedies must be found in the Regulation.
As I have stated above, I cannot find such a remedy in the PMNOC
Regulations.”
[6]
It is clear from that
analysis, with which the Federal Court of Appeal agreed, that the proper
interpretation of section 8 of the Regulations is that it includes only
remedies that would compensate the generic for the loss it has suffered. From
the discussion in Bayer AG v. Apotex Inc., (2001) 10 C.P.R. (4th)
151, cited in Jay-Lor International Inc. v. Penta Farm Systems Limited,
2007 FC 358 and relied upon by the Court in Apotex v. Merck, it is clear
that the remedy of an accounting of profits has the same remedial aim as the
remedy of unjust enrichment, in that it would return to the Plaintiff what
rightly belongs to it, being the revenues or profits earned through the
infringing use of its intellectual property:
“12 The remedy of an accounting of profits is equitable in
origin and its goal is compensatory. The purpose is not to punish the defendant
for its wrongdoing: Beloit Canada Ltd. v. Valmet Oy (1994), 55 C.P.R. (3d) 433
at 455 (F.C.T.D.), var'd on other grounds (1995), 61 C.P.R. (3d) 271
(F.C.A.); Lubrizol Corp. v. Imperial Oil Ltd. (1996), 71 C.P.R. (3d) 26 at 33 (F.C.A.). Like an award of damages, an accounting
of profits is designed to compensate the patentee for the wrongful use of its
property. While the goal of each remedy is the same, the underlying
principles are very different. An award of damages seeks to compensate the
plaintiff for any losses suffered by the plaintiff as a result of the
infringement. The amount of profits earned by the infringing party is
irrelevant. An accounting of profits, on the other hand, aims to disgorge
any profits improperly received by the defendant as a result of its wrongful
use of the plaintiff's property. Such profits, having been earned
through the use of the plaintiff's property, rightly belong to the plaintiff.
The aim is to remedy the unjust enrichment of the defendant by transferring
these profits to their rightful owner, the patentee: Beloit Canada Ltd. v.
Valmet Oy (1994), supra, at p. 455 (F.C.T.D.).”
(emphasis added)
[7]
As discussed by the
Court, at paragraph 97 of Apotex v. Merck: “It is immediately apparent
that the generic is not a patentee. (…) The generic cannot claim damages for an
accounting of profits for infringement.” The reasoning of the Court is
to the effect that the compensatory provisions of section 8 of the Regulations
do not include disgorgement of a patentee’s profits because that type of remedy
only has compensatory effect where the claimant is a patentee claiming for
infringement. I cannot see how this reasoning could possibly be construed as
still allowing Apotex to claim, from a patentee, the disgorgement of the same
kinds of profits or revenues, as compensation for the same kind of harm, of
being kept off the market, merely by invoking the more general principles of
unjust enrichment.
[8]
Counsel for Apotex further
argues that even if remedies for unjust enrichment were unavailable pursuant to
the restricted interpretation of section 8 of the Regulations, it is
still not plain and obvious that an independent claim for unjust enrichment
could not be asserted by Apotex against Lilly outside the scope of section 8.
I disagree. What Apotex would then be asserting is a cause of action
entirely based on unjust enrichment arising from the unjustified commencement
and prosecution by Lilly of proceedings under the Regulations. The
fatal flaw in Apotex’ argument is that a cause of action between private
parties based on unjustified enrichment or abuse of process is simply outside
the jurisdiction of this Court. Outside the statutory scheme provided by the Regulations,
there is simply no body of Federal law creating a cause of action for unjust
enrichment or abuse of process between private parties. Apotex’ reliance on
Section 20(2) of the Federal Courts Act is misguided, as the cause of
action asserted by Apotex is clearly not “respecting any patent” but respecting
solely the conduct of the Defendant in the prosecution of an application under
the Regulations. Further, as stated by the Court at paragraph 102 of Apotex
v. Merck: “Section 20(2) of the Federal Courts Act does not expand
upon the remedies afforded by section 8 of the Regulations. It enables
the Regulations to include equitable remedies, but such remedies must be
found in the Regulations.”
[9]
Finally, I should add that Apotex’ reliance on the
jurisprudence of this Court prior to the Apotex v. Merck decision is
misplaced. The cases cited stand for the proposition that it is not appropriate
to entertain motions to strike proceedings brought under s. 8 of the Regulations
based on the interpretation of the scope of that provision. These decisions
reflect the sate of the law as it existed at that time. There had yet been no
judicial determination as to the interpretation of section 8, as to the type of
remedies that could be sought and awarded thereunder and as to the period of
time for which relief could be claimed, and it was properly held that these
questions should not be resolved as simple questions of law without context and
a full evidentiary record. Now that such judicial determination has been made
in Apotex v. Merck as to the available remedies, in the context of a
trial and on a full argument and evidentiary record, this line of cases is no
longer applicable to these issues. Apotex placed particular reliance on the
unreported decision of Apotex v. Merck & Co., Inc et al, a decision
issued by Justice Pinard on February 18, 2002 in Court file T-411-01, wherein a
motion to strike a claim for unjust enrichment was also dismissed. It appears
that the moving party had specifically pleaded that a claim for unjust
enrichment could neither be sustained pursuant to section 8 of the Regulations
nor as an independent claim as the Court did not have jurisdiction over the
latter. The dismissal order, which contains no reasons, cannot be held as a
vindication of Apotex’ argument that jurisdiction does arguably exist for this
Court to hear a claim for unjust enrichment independently from section 8: It is
clear that the statement of claim in that matter also advanced the same claim
pursuant to section 8 of the Regulations; as the claim was allowed to
proceed on the basis of section 8, it would have served no purpose to pronounce
as to whether or not it could also arguably be maintained independently.
[10]
In conclusion, I find
that it is plain and obvious that any claim made by Apotex in its statement of
claim seeking a disgorgement of the profits or the excess revenues realized by Lilly
cannot succeed, and must be struck.
Motion for a Stay or an
Extension of Time
[11]
It was the dismissal of Lilly’s application for a
prohibition order which paved the way for Apotex to obtain an NOC for its
raloxifene product and gave rise to the present action. Lilly therefore
contends that if it is successful in having that dismissal overturned by the
Supreme Court, the action will automatically fail, and all time, efforts and
costs expended in prosecuting the action in the interim will have been wasted.
[12]
In support of its motion for a stay of proceeding or an
extension of time, Lilly asserts that its motion for leave to appeal to the
Supreme Court presents a reasonable chance of success, notwithstanding previous
determinations by the Federal Court of Appeal to the effect that appeals from
judgments dismissing a prohibition application become moot once the relevant NOC
is issued, and that the prospect of further litigation arising from the earlier
dismissal, such as an action pursuant to section 8 of the Regulations,
is not sufficient to militate in favour of exercising the discretion to hear
the appeal (see Eli Lilly Canada Inc. v. Novopharm Ltd., (2007), 62
C.P.R. (4th) 161, 2007 FCA 359). Lilly suggests that, contrary to
the conclusions of the Federal Court of Appeal in Eli Lilly Canada Inc. v.
Novopharm Ltd., an appellate Court does have the power, on appeal of a
prohibition application, to set aside the NOC issued pursuant to the earlier
dismissal and issue a prohibition order.
[13]
Lilly further contends that, if it is ultimately successful
before the Supreme Court on that argument, it will suffer irreparable harm in
that the solicitor and client costs which it will have expended in defending
this action in the interim will not be fully recoverable, since any award of
costs would be limited to party and party costs.
[14]
Even if I were to agree with Lilly’s argument on the issues
set out above, but without making any determination either way, I would still
decline to exercise my discretion to issue the order sought by Lilly.
[15]
Even assuming that Lilly’s appeal to the Supreme Court
raises an arguable case, it remains that Lilly’s chances of success on the
motion for leave to appeal are very remote: leave to appeal to the Supreme
Court on the issue of mootness has already once been denied (in the specific Lilly
v. Novopharm matter already cited) and there is clearly ample opportunity for
the substantive issues raised in the appeal to be put before and considered by
the Supreme Court in the context of other proceedings. The realization of the
harm feared by Lilly is, accordingly, equally remote. In addition, the steps
which Lilly will be required to take in defending this action are expected to
be relatively straightforward, at least until the beginning of oral
discoveries, at which time it is likely that the Supreme Court will have ruled on
Lilly’s motion for leave to appeal. To the extent there is a discrepancy
between the amounts which Lilly might recover for those steps on a party and
party basis and the amounts in fact expended, the amounts at stake are unlikely
to be very large. It is, in my view, this relatively manageable and remote
prejudice which is to be weighed against the prejudice caused to Apotex in simply
being prevented or delayed in pursuing a recourse which it is, at law, entitled
to pursue. The interest of justice, in ensuring that actions proceed before it
expeditiously and without delay, especially in the context of recent policy initiatives
of this Court in this regard, must also be taken into consideration.
[16]
On balance, at this time, I would decline to stay these
proceedings. Should Lilly’s motion for leave to appeal to the Supreme Court be
successful, the balance of convenience may well shift, and it would then be
appropriate to consider in detail and determine the validity of Lilly’s
arguments as to a serious question to be tried and irreparable harm. In the
circumstances as they currently exist, that exercise is unnecessary.
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