Date: 20070103
Docket: T-1548-06
Citation: 2006 FC 1493
BETWEEN:
LES LABORATOIRES SERVIER,
ADIR, ORIL INDUSTRIES,
SERVIER CANADA INC.,
SERVIER LABORATORIES (AUSTRALIA) PTY LTD
and SERVIER LABORATORIES LIMITED
Plaintiffs
and
APOTEX INC.
and
APOTEX PHARMACHEM INC.
Defendants
Restriction
on publication:
“These
are the public version of sealed reasons, dated December 13, 2006, pursuant to
the Order dated January 3, 2007.”
REASONS FOR ORDER
Snider J.
[1] The
Plaintiffs (collectively referred to as Servier or the Plaintiffs) have brought
a motion for an interlocutory injunction against the Defendants (collectively
Apotex or the Defendants) to restrain them from using, making, selling,
distributing, exporting, supplying and in any other way dealing with the
compound perindopril and any pharmaceutically acceptable salts thereof, in the
United Kingdom, Canada and Australia, on the basis that
these activities allegedly infringe Canadian patent no. 1,341, 196 (the 196 Patent).
The Plaintiffs sell the compound under the registered trademark name of
COVERSYL. By Order dated November 29, 2006 (2006 FC 1443), Justice Simon Noël
granted the Plaintiffs an interim injunction in relation to perindopril
products destined for the Australian market.
Issues
[2] The overarching question before me is whether the Plaintiffs are
entitled to the equitable remedy of an interlocutory injunction. As
well-established in relevant jurisprudence (RJR-MacDonald Inc. v. Canada
(Attorney General), [1994] 1 S.C.R. 311; American Cyanamid v.
Ethicon Ltd., [1975] A.C. 396) entitlement to injunctive relief is based on
establishing all elements of a tri-partite test.
[3] Thus the issues before me are:
1.
Is there a serious question to be tried?
2. Will the
Plaintiffs suffer irreparable harm if the injunctive relief is not granted?
3. Does the
balance of convenience favour the Plaintiffs?
[4] In addition, the Defendants raise the issue of whether
the motion should be denied because: (a) the Plaintiffs do not come to this
Court with clean hands; and (b) the Plaintiffs have delayed bringing this
motion.
[5] For the reasons that follow, I have determined that
the motion should be dismissed.
BACKGROUND
[6] The
Plaintiffs are affiliated companies. ADIR is the owner of the 196 Patent. Oril
Industries is the manufacturer of perindopril, an inhibitor used to treat
hypertension and related cardiovascular disease, which is sold worldwide under
the trademark COVERSYL. COVERSYL is Servier’s most important product worldwide;
it is registered in over 120 countries and has over 500 marketing
authorizations.
[7] The
196 Patent, entitled “Procédé de Préparation d’Imino Diacides Substitués” was
granted on March 6, 2001 and will expire on March 6, 2018.
[8] The
Defendants are both located in Ontario and are affiliated
companies and members of the Apotex group of companies. Apotex is manufacturing
perindopril tablets at its facilities in Ontario and there is
evidence that some of its production is exported.
[9] On
October 26, 2006, the Plaintiffs obtained a copy of the Australian
Pharmaceutical Benefits Schedule (“PBC”), the Australian reimbursement
formulary for medicines to take effect on December 1, 2006, which listed
generic perindopril for the first time. On the PBC for December 1, 2006, three
generic perindopril brands were listed. For all three listings, GenRx Ltd Pty
(GenRx), an Australian company, who exclusively sells perindopril manufactured
by Apotex, was named as the seller.
[10] Although the Australian patent for perindopril expired October 1,
2006, in an action against GenRx, the Plaintiffs assert rights to the patent process.
GenRx,
a distributor and seller of generic pharmaceutical products and a company
affiliated with Apotex, has received marketing authorization from the Australian
regulatory authorities to market and sell generic perindopril erbumine in 2, 4,
and 8 mg tablets beginning December 1, 2006. All perindopril tablets that will
be sold by GenRx are manufactured by Apotex in Canada, allegedly
in breach of the Plaintiffs’ Canadian 196 Patent. As it stands, GenRx has
received three shipments of perindopril from Apotex and has already shipped
over 1.6 million tablets of perindopril to the two other private labels listed
as selling perindopril in the December 1, 2006 PBC. The evidence shows that
GenRx proposes to sell generic perindopril at a 45% discount. Also, perindopril
tablets have been distributed to over 39 warehouses across Australia and will
subsequently be distributed to over 5000 pharmacies in the country.
[11] In
Canada, Apotex is
seeking regulatory approval to market and sell generic perindopril in 2, 4, and
8 mg tablets. According to the patent list submitted by Servier Canada Inc.
(Servier Canada) to Health Canada pursuant to the Patented Medicines (Notice
of Compliance) Regulations,
SOR/93-133 (NOC Regulations), the
196 Patent is listed in respect of the 2 and 4 mg dosage form of COVERSYL but
not the 8 mg dosage form. Thus, for the 8 mg tablets, Health Canada has
apparently taken the position that the NOC Regulations do not apply.
It is unclear when this separate litigation will be resolved. Consequently,
Apotex will be in a position to market and sell 8 mg perindopril tablets in Canada, perhaps as
early as four to six months from now. However, it is unlikely that Apotex will
be able to sell 2 and 4 mg tablets for some time.
[12] A summary of the procedural steps taken by the Plaintiffs follows to
assist in understanding the context in which this motion has been brought.
[13] In the United Kingdom, two of the Plaintiffs – Les Laboratoires
Servier (LLS) and Servier Laboratories Limited (Servier UK) – have commenced a patent infringement action against the
Defendants (and other affiliated companies) in respect of UK patents for COVERSYL. LLS and Servier UK obtained an
interlocutory injunction on August 8, 2006 enjoining the Defendants in the UK action from selling generic perindopril erbumine in the UK. A trial is set to begin February 21, 2007.
[14] On
August 25, 2006, LLS, ADIR and ORIL Industries instituted an action in Canada against the
Defendants for infringement of the 196 Patent. The Statement of Claim plead
that Apotex was making perindopril in Canada for supply to the United Kingdom, thus
infringing the 196 Patent. This action underlies this motion for injunctive
relief.
[15] On
September 12, 2006, French regulatory authorities obtained a document entitled
“Perindopril Erbumine Summary of Physico-chemical Analyses”, dated 2004, after
conducting a “saisie contrefaçon” (seizure for infringement). This document
stated that the generic perindopril that was to enter the French market was
manufactured by Apotex Pharmachem Inc. in Brantford, Ontario. Given the
information obtained in France, an amended Statement of Claim dated November 3,
2006 was filed adding Servier Canada, Servier Laboratories (Australia) Pty. Ltd.
(Servier Australia) and Servier UK as co-Plaintiffs. The
amended Statement of Claim plead new material facts, including that Apotex was
infringing the 196 Patent by supplying perindopril that was made in Canada to
various markets.
[16] On
November 8, 2006, the Plaintiffs filed a Notice of Motion for an interlocutory
injunction restraining the Defendants from using, making, selling,
distributing, exporting, supplying and in any way dealing with the compound
perindopril and asked that a judgment on the interlocutory injunction motion be
issued before December 1, 2006. In the event that the interlocutory injunction
could not be heard and a judgment issued before December 1, 2006, the
Plaintiffs asked the Court for an interim injunction.
[17] On November 21, 2006, the Statement of Claim was amended for a third
time. A paragraph related to the situation in Australia was varied and augmented.
[18] The
Plaintiffs’ interim injunction motion was heard on November 24, 2006 in Ottawa. As noted
above, Justice Noël granted the motion. The interim injunction expires on
December 13, 2006.
ANALYSIS
(a) Serious Issue
[19] The
first question to be asked on the tri-partite test is whether the pleadings of
the Plaintiffs raise a serious issue. With respect to the seriousness of the
issue to be tried, the Supreme Court of Canada in RJR-MacDonald, above
at 337-338, held:
The threshold is a low one. ... Once
satisfied that the application is neither vexatious nor frivolous, the motions
judge should proceed to consider the second and third tests, even if of the
opinion that the plaintiff is unlikely to succeed at trial. A prolonged
examination of the merits is generally neither necessary nor desirable.
[20] The
threshold to be met on the matter of serious issue is very low. Other cases,
where interlocutory injunctions have been sought in pharmaceutical matters,
have also adopted the “frivolous or vexatious” standard (see, for example Merck
& Co. Inc. v. Apotex Inc. (1993), 51 C.P.R. (3d) 170 at 181 (F.C.T.D.).
[21] The
substance of the claim of the Plaintiffs is that the Defendants are infringing
the 196 Patent by the making, selling and exporting of a generic form of
perindopril. On the question of serious issue, the Plaintiffs rely on the
presumption of validity contained in s. 45 of the former Patent Act
(which Act governs this patent). They also point to the fact that this
particular patent has had significant scrutiny during the conflict proceedings
that preceded the grant of the 196 Patent. Further, they refer to the Order of
Justice Nadon that, in their view, confirms that the subject matter of the 196
Patent was invented by the named inventors. Finally, they submit that Dr. Bernard
Sherman, the controlling mind of Apotex, effectively conceded, during
cross-examination on his affidavit, that Apotex is infringing the 196 Patent.
The Plaintiffs assert that they have a “strong serious issue”.
[22] The
Defendants produced significant affidavit evidence that, they submit,
demonstrates that the Plaintiffs do not satisfy the requirement for a serious
issue. They raise a number of concerns with the Plaintiffs’ claim. One of the
first arguments that they make is that, because the Plaintiffs are seeking
orders that are mandatory (a requirement to account for perindopril products
and an order to effect the return of any shipment of product exported from
Canada), the applicable standard is “strong prima facie case” (Aetna
Financial Services Ltd. v. Feigelman, [1985] 1 S.C.R. 2).
[23] In
general terms, other arguments made by the Defendants include the following:
- Some of the
Plaintiffs have no standing to bring the action, since they are not
operating in Canada and have no express licence from the patentee, ADIR,
upon which rights in Canada are created;
- The claim is
premature, particularly in Canada, where Apotex, at
this time, holds no approvals to sell the generic drug; and
- The patent is
invalid on at least three different grounds, described as “Overbreadth:
Lack of Utility”, “Overbreadth: Lack of Sound Prediction” and
“Inventorship”.
[24] The
Defendants note that the Plaintiffs submitted no expert evidence to rebut the
affidavit or other evidence they advanced. Accordingly, they submit that the
Plaintiffs’ claim is without merit and that there is no serious issue.
[25] It
is clear from the jurisprudence that the hearing of an interlocutory injunction
is not the time to finally determine the merits of a claim. Certainly, there
may be situations where the claim advanced is so devoid of logic or merit that
it can be characterized as frivolous and vexatious. That, in my view, is not
the case here. A question on the validity of a patent that has undergone
scrutiny in the past and where inventorship has been confirmed by this Court is
a serious matter. Only after a much deeper consideration of all of the evidence
that will come forward in the context of a trial should such a determination be
made.
[26] Further,
I do not accept that the Plaintiffs must meet a higher standard of “strong prima
facie case”. I acknowledge that there has been some jurisprudence that
accepts this notion. However, I believe that the most recent determination of
the issue was in Sawridge Band v. Canada, 2004 FCA 16, [2004] 3 F.C.R. 274
at paras. 43-46, 316 N.R. 332, where the Federal Court of Appeal rejected a
higher standard in the context of an interlocutory injunction. In my mind, for
cases such as this, the standard remains that set out in RJR-MacDonald.
[27] On
the basis of the record before me, I am satisfied that there is a serious
issue. However, I am not persuaded (nor need I be) that there is a “strong
serious issue”.
[28] Having
said that, I must be clear that this, in no way, is a judgment of the quantity
or quality of the evidence produced by either side. I need not conclude that
the Plaintiffs have raised a “strong serious issue” (or a weak one). All I am
saying is that the Plaintiffs have raised issues that satisfy the threshold of
serious issue in the context of an application for injunctive relief.
(b) Irreparable Harm
[29] The
second branch of the tri-partite test requires that the Plaintiffs demonstrate
that they would suffer irreparable harm if the injunctive relief is not
granted. Justice James Russell provided a helpful overview of the nature of
irreparable harm in the recent case of Aventis Pharma S.A. v. Novopharm Ltd.,
2005 FC 815; aff’d 2005 F.C.A. 390, 40 C.P.R. (4th) 210 at paras.
59-61 (F.C.):
As Mr. Justice Kelen pointed out in Pfizer
Ireland Pharmaceuticals, at para. 25, it is well established in the
jurisprudence that an interlocutory or interim injunction should only be
granted in cases where there is clear evidence of irreparable harm. The
Plaintiffs must adduce "clear and not speculative" evidence that
irreparable harm will follow the entry of Novopharm's Novo-enoxaparin
into the market.
It is also well understood that
irreparable harm refers to the nature of the harm suffered rather than its
magnitude. As the Supreme Court of Canada pointed out in RJR-MacDonald,
it is "harm which either cannot be quantified in monetary terms or which
cannot be cured, usually because one party cannot collect damages from the
other." (p. 341)
Furthermore, difficulty in precisely
calculating damages does not constitute irreparable harm, provided there is
some reasonably accurate way of measuring those damages. See Merck & Co.
v. Nu-Pharm Inc. (2000), 4 C.P.R. (4th) 464 at 476 para. 32 (F.C.T.D.).
[30] As
noted, the Plaintiffs seek an injunction for all of Canada, Australia and the UK. They must
establish irreparable harm for each jurisdiction as each turns on its own
facts. However, even if I conclude that irreparable harm has not been
demonstrated for one or two jurisdictions, an injunction limited to the
remaining jurisdictions may issue.
(i) Irreparable Harm in the UK
[31] I
will begin with the situation in the United Kingdom.
[32] The
Plaintiffs, in my view, have failed to demonstrate irreparable harm related to
the UK. As
discussed earlier, an injunction has been in place in the UK, issued by
the High Court of Justice, Chancery Division, Patents Court, since
August 8, 2006. The injunction orders that the four affiliated Apotex companies
named as Defendants in the action described earlier not “dispose of, offer to
dispose of, or import into the United Kingdom their generic
perindopril erbumine product”. As I understand it, this injunction will be in
place until the trial into the alleged patent infringement, which trial is
scheduled to begin February 21, 2007.
[33] For
so long as the injunction is in place, the Plaintiffs cannot suffer any harm in
the UK from actions of Apotex in Canada. Should LLS and Servier
UK be
successful at trial in the UK, the injunction will become permanent.
Should they lose at trial, the situation will, obviously, change and there will
be no UK prohibition
against Apotex selling Canadian-produced perindopril into that market. However,
we do not know what the Defendants would do. Apotex may choose to manufacture
the drug in India, where it
apparently has manufacturing facilities. Or, it may choose to forego the UK market. In
my view, it is premature to assume that Servier UK, if unsuccessful at trial,
would suffer harm attributable to the manufacturing of perindopril in Canada by Apotex,
allegedly in breach of the 196 Patent. It is certainly not necessary or
equitable to put in place an injunction, at this time, to address that
hypothetical situation.
[34] The
balance of the discussion on this determinative issue relates to the situation
in the Canadian and Australian markets.
(ii) Plaintiffs’ Evidence
[35] The
Plaintiffs submit that the irreparable harm to them following Apotex’s launch
and subsequent withdrawal in Australia and Canada of its
generic perindopril is clear and not speculative. The damages, they assert,
will not be quantifiable, as there is no reasonable way of measuring their
damages, particularly in respect of the losses after the trial. In these
arguments, they rely, almost exclusively, on the evidence of Dr. Jerry Hausman,
Professor of Economics at M.I.T.
[36] Dr.
Hausman’s academic specialties are econometrics and applied microeconomics. As
he states, “One of the major things that econometrics does is the analysis of
data to predict how consumers and companies will behave in a certain market.”
There can be no question that Dr. Hausman is eminently qualified in the area.
Dr. Hausman was asked by the Plaintiffs to consider the economic outcomes if
Apotex were to introduce a generic version of COVERSYL into the UK, Australian
and Canadian marketplaces and are subsequently required to withdraw the generic
product because of the Plaintiffs’ success at trial. He was asked to consider
whether such economic outcomes will result in the Plaintiffs suffering
irreparable harm.
[37] In
general terms, Dr. Hausman found the following economic outcomes of Apotex’s
marketing and sale of generic perindopril into the three countries:
- The Plaintiffs
would lose a large percentage of COVERSYL market share;
- If Apotex’s generic
drug were subsequently withdrawn from the market, the Plaintiffs would not
recover COVERSYL’s full pre-generic market share due to competition from
other generic ACE inhibitors;
- Servier would
immediately be forced to decrease its price of COVERSYL and, upon Apotex’s
withdrawal, would not be able to increase its price to the level it would
have been absent the generic entry;
- The Plaintiffs
would be forced to reduce their sales forces and promotional activities
significantly in each of the countries; and
- The Plaintiffs
would reduce research and development activities.
[38] Dr.
Hausman concluded, after reviewing the situation for each of the jurisdictions
affected, that “the damages suffered by Servier will not be quantifiable, as
there is, and will be, no reasonably accurate way of measuring damages using
econometric or statistical methods.” In forming this opinion, Dr. Hausman
pointed frequently to the difficulty in predicting damages over the remaining
12 years to expiry of the 196 Patent.
[39] The
Plaintiffs’ only other evidence relevant to the issue of irreparable harm in
Canada and Australia, was from Mr. Yves Langourieux, Managing Director of
International Operations of Servier International (responsible for Canada, the
United States and Europe), and Mr. Michael Sumpter, Chief Executive Officer of
Servier Canada Inc. (Servier Canada).
[40] In
response to the evidence of the Plaintiffs on this issue, the Defendants
presented expert affidavit evidence from Stephen R. Cole (Canada), Aidan M.
Hollis (Canada), David Matthew (UK) and Philip Williams (Australia). All of
these experts hold significant qualifications in regard to the subject matter
of their evidence. In general, these experts considered the assumptions
underlying Dr. Hausman’s conclusions. To the extent that they are successful in
convincing me that those assumptions are flawed, the Plaintiffs’ claim that
their damages cannot be monetarily quantified or cannot be cured is seriously
undermined. Rather than summarizing their testimony, I will refer to it, as
necessary, throughout my analysis.
(iii) Vulnerability of Servier
[41] The
Plaintiffs point out the importance of COVERSYL to their companies and argue
that this separates them from the other pharmaceutical companies who have
failed to meet the threshold of irreparable harm. Indeed, in oral submissions,
counsel described the Plaintiffs as being “overly dependent” on COVERSYL. Let
me review the numbers set out in the evidence for Canada and Australia.
|
Market
|
%
of all Servier Products
|
%
of growth of Servier
|
Predicted
diminution after entry of generic
|
|
Australia
|
XXX
|
XXX
|
XXXXX
in 1 to 2 years
|
|
Canada
|
XXX
|
XXX
|
XXXXX
in 18 months
|
[redacted pursuant to
the Order dated January 3, 2007]
[42] In
cross-examination, Mr. Millichamp, an affiant put forward by Apotex,
acknowledged that GenRx is expected to capture 17% of the Australian market in
perindopril within 1 year. The size of market drop of 50 to 90% was put forward
by Dr. Hollis, another of Apotex’s experts, who described this drop as “fairly
drastic”. Counsel for the Plaintiffs described the potential market loss in Canada as a
“catastrophic collapse”. The Plaintiffs also submit that the loss in the
Canadian market would leave Servier Canada, who operates on a stand alone
basis, financially unable to carry out any promotional activities.
[43] I
do not think that the Defendants are disputing the percentages set out above.
In fact, at least two of their experts acknowledged the loss. Both Dr. Hollis
and Dr. Cole ran their calculations on the basis of market losses in these ranges.
I find that the market loss figures set out above are likely to occur upon
entry to the markets by Apotex’s generic perindopril. However, the question
before me is not whether the percentage market loss is high but whether the
effects of this market loss are irreparable.
[44] The
Plaintiffs refer to jurisprudence where injunctions have been issued in
situations where the sales of a patented product represented a significant
proportion of the plaintiff’s total sales. In Chic Optic Inc. v. Safilo
Canada Inc. (2004), 35 C.P.R. (4th) 396 (Qc. Sup. Ct.), the
patented product accounted for 80% of plaintiff’s sales. In Alkot Industries
Inc. v. Consumers Distributing Co. Ltd. (1986), 4 F.T.R. 270, 11 C.P.R.
(3d) 276 (F.C.T.D.), 30% of sales were attributable to the patented product.
Finally, in Allergan Pharmaceuticals Inc. et al v. Bausch & Lomb Inc.
et al (1985), 7 C.P.R. (3d) 209, 35 A.C.W.S. (2d) 342 (F.C.T.D.), the
defendant was enjoined in a situation where a “significant” market share was
held by the plaintiff’s patented product. Given the Plaintiffs’ dependence on
COVERSYL, the Plaintiffs submit that loss of this market will be permanent. In
turn, the Plaintiffs refer to jurisprudence that establishes that injunctions
should be granted where the plaintiff is able to demonstrate that it will
suffer permanent market loss (see, for example, Procter & Gamble Inc. et
al v. Colgate-Palmolive Canada Inc. (1995), 61 C.P.R. (3d) 160 (F.C.T.D.), Lubrizol
Corp. v. Imperial Oil Ltd. (1989), 22 C.P.R. (3d) 493 (F.C.T.D.), varied as
to costs (1989), 26 C.P.R. (3d) 461 (F.C.A.), Cabot Corp. et al v. 3M Canada
Inc. (1987), 15 C.P.R. (3d) 247 (F.C.T.D.).
[45] It
is difficult to assess the impact of the foregoing percentages in the abstract.
While the percentages seem high, are the Plaintiffs financially able to absorb
the temporary market loss and to finance actions that could mitigate their
losses? Absent this information, I would find it very difficult to conclude
that harm to the Plaintiffs would be irreparable or that they will suffer
permanent market loss. Clearly, the full impact of such losses on an
organization can only be made in the context of its financial situation. While
not all harm can be measured in financial terms, in this case, the financial
position of the Plaintiffs is a key element of the analysis. Indeed, I find it
very strange that Dr. Hausman was not provided with the financial records and
yet still managed to opine that the Plaintiffs would suffer irreparable harm.
[46] For
obvious reasons, Apotex sought access to the financial records of the
Plaintiffs during cross-examination of Mr. Langourieux. When Apotex filed its
final Memorandum of Fact and Law for this motion, they still did not have the
requested information. The records were provided to the Defendants’ counsel
after the deadline for submitting their final Memorandum and to me on the
morning of the hearing of the motion. There was no opportunity to cross-examine
Mr. Langourieux (or an appropriate company representative) on the contents of the
financial records. In spite of the delay in producing the information and
because of the importance of this information to the issue of irreparable harm,
I allowed the financial records to be submitted at this late date.
[47] Having
reviewed the financial records, I cannot characterize the Servier group of
companies as an unsophisticated “Mom and Pop” organization. A simple reading of
the financials on a consolidated basis as of September 30, 2005 shows that the
liquid assets of the Servier group of companies were over [redacted pursuant
to the Order dated January 3, 2007].
[48] The
financials, quite simply, do not support the allegation of “catastrophic
collapse”. In particular, they disclose two weaknesses in the position of the
Plaintiffs. Firstly, I cannot accept, on the basis of the financial information
finally and reluctantly provided, that the Plaintiffs are unable to afford to
continue promotional activities for COVERSYL for the three to four years until
trial. Given the Plaintiffs’ overall financial resources, continued payment of
sales personnel in Australia and Canada would not leave them
destitute. The matter of whether they choose to continue to carry out
promotional activities is another question addressed below.
[49] Secondly,
the financial records contain information that undermines the Plaintiffs’
assertions that each of their affiliated companies is required to stand on its
own two feet financially. Since COVERSYL forms such a dominant portion of their
sales in Canada and Australia, they submit
that loss of revenues from sales of COVERSYL would make it financially
difficult, if not impossible, to continue to fund promotional activities. [redacted
pursuant to the Order dated January 3, 2007] This diminishes the reliance
that I place on any declaration of financial independence and impacts
negatively on the testimony of Dr. Hausman where he has made such assumptions.
[50] In
light of the financial information before me and having reviewed the cases of Chic,
Alkot or Allergan, above, I cannot find that the situation faced
by the Plaintiffs will approach that of the plaintiffs in those cases.
(iv) Price Reduction and Calculation of
Damages
[51] The
jurisprudence is clear that difficulty in precisely calculating damages does
not constitute irreparable harm, provided there is some reasonable methodology
that could, at the time damages would be assessed, measure those damages (Merck,
above at 186; Merck & Co. v. Nu-Pharm Inc. (2000), 4 C.P.R. (4th)
464 at para. 32 (F.C.T.D.); Aventis Pharma S.A. v. Novopharm Ltd., above
at para. 61).
[52] It
is important to note that the Court is not being called upon to measure the
damages at the time of granting the injunction. Damages are calculated only
after success at trial. At that time, there would be two time periods. Firstly,
there would be a period, from the date of the entry of the generic perindopril
into the market to issuance of the permanent injunction, where the Court would
assess “retrospective” damages. Secondly, there would be a calculation of “prospective”
damages from the date of judgment forward to the end of the patent. Courts are
frequently called upon to make these types of assessments. Dr. Hausman, in
cross-examination, acknowledged that the most difficult calculations, in terms
of predicting the future, would be at the end of the trial. Implicit in this
statement is an admission that the Plaintiffs’ retrospective damages would be
calculable.
[53] Thus,
the question of the ability to quantify damages boils down to whether the
Plaintiffs will suffer any harm beyond trial that cannot be quantified in a
reasonable manner so as to provide a sufficient remedy in damages. Dr. Hausman
says that the Plaintiffs will suffer such irreparable harm.
[54] The
Plaintiffs submit that much of the difficulty in assessing damages will result
from a reduction in the price of COVERSYL upon entry of the generic
perindopril. They assert they will be forced to reduce the price of COVERSYL to
continue to compete in the Canadian market. Once the price is reduced, it will
not be possible to subsequently raise the price back to the level prior to the
entry of Apotex’s generic product. As a patented medicine, the price of
COVERSYL is controlled by the Patented Medicines Prices Review Board (PMPRB),
and the PMPRB typically limits price increases to the consumer price index
(CPI). Thus, they argue, even if successful at trial, the PMPRB will not permit
the Plaintiffs to increase the price of COVERSYL back to its previous level.
Over the remaining term of the patent (until 2018), the amount attributable to
this permanent price reduction cannot be calculated. Similar arguments are made
in respect of Australia.
[55] One
of Dr. Hausman’s basic conclusions – from which flowed much of the harm to be
suffered by the Plaintiffs – was that the Plaintiffs would reduce the price of
COVERSYL upon entry into the market of generic perindopril.
[56] For
Canada, both Dr.
Cole and Dr. Hollis assert that the Plaintiffs could enter the market with
their own pseudo-generic brand of perindopril. Rather than reducing the price
of COVERSYL to compete with Apotex’s generic perindopril, the pseudo-generic
could be priced to compete. As I understand it, from reviewing the evidence,
such strategy would have two impacts. First, the Plaintiffs would maintain at
least a share of the perindopril market. Secondly – and critical in this case –
the use of a pseudo-generic as opposed to reducing the price of COVERSYL would
avoid the result that the Plaintiffs would not be able to increase its price to
the level it would have been absent the generic entry. It is true that drug
prices in Canada can only be
increased in moderate annual increments pursuant to the PMPRB. It follows that,
if the price of COVERSYL is reduced during the time prior to trial, the
Plaintiffs will be unable to immediately raise the price of the branded drug to
pre-generic entry levels. However, if Servier Canada obtains approval for and
competes on price with its own pseudo-generic, the price of COVERSYL will not
be any different than if Apotex had not been in the market.
[57] The
situation in Australia, as
described by Dr. Williams, is more complicated. Nevertheless, I conclude that
similar protective pricing strategies could be pursued in that jurisdiction.
[58] While
Dr. Hausman makes passing reference to this possibility, he appears to have
rejected the possibility of this alternative strategy with little or no reasoning.
[59] I
have no evidence before me that this strategy – which, on its face, and
according to the Apotex experts, is logical – would not assist the Plaintiffs.
Indeed, there is some evidence that Servier Australia has taken at least some
steps to begin selling a pseudo-generic in Australia, named
PERINDO. While there was disagreement as to whether Servier Australia could
immediately begin to sell PERINDO, its pseudo-generic brand, there is
sufficient evidence to show that it has taken steps that would enable it to do
so.
[60] I
also have no evidence on why Servier Canada could not enter into the Canadian
market with its own branded pseudo-generic.
[61] Dr.
Hollis, one of the Defendants’ experts, is an economist who is currently an
Associate Professor of Economics at the University of Calgary. A review of
his curriculum vitae shows that he has substantial experience in the
operation of pharmaceutical markets, including acting as a witness in three
cases relating to pharmaceutical patents. While the quantity of his experience
does not match that of Dr. Hausman, his overall credibility is enhanced by the
fact that his experience is in the Canadian market. Dr. Hollis disagrees with
Dr. Hausman’s key assumptions; specifically, he does not agree that:
- Servier would
reduce the price of COVERSYL if Apotex introduces a generic perindopril;
- Servier would
reduce its promotional expenditures in the absence of an interlocutory
injunction; or
- The shortfall in
cashflow caused by the generic competition will be so large as to imperil
Servier’s continued operations in Canada.
[62] Of
particular relevance at this point of my analysis was Dr. Hollis’ research into
the prices of cardio-vascular drugs in the Ontario Drug Benefit Formulary. He
found that, in all but one case, the branded drug retained exactly the same
price after generic competition as before. During cross-examination, Dr. Hollis
restated his findings that “for almost every other product in the
cardio-vascular category in Ontario, price of the
brand-name drug did not decrease upon generic entry”. Dr. Hollis, also in
cross-examination, expressed the view that “Servier would likely maintain its
price on COVERSYL for the entire five years [to trial] and continue to sell it
at that price.” This conclusion, based on an actual study of the Ontario market, runs
in direct contradiction of the hypothetical view of Dr. Hausman. I prefer the
testimony of Dr. Hollis on this point.
(v) Promotional Activities and the
Preservation Mode
[63] The
Plaintiffs maintain that, in the face of market entry by Apotex’s generic
perindopril, they will drastically reduce active marketing of COVERSYL. This
was another fact that was accepted and relied on by Dr. Hausman. As stated by
Dr. Hausman, “Faced with the irreversible loss of market, branded companies
typically significantly reduce or almost eliminate marketing of their product
after generic entry because of the changed economic situation, and the
prescribing patterns of physicians …”. The effects of this diminution of
promotional activities, he posits, would be irreparable.
[64] Above,
I have addressed the issue of whether the Plaintiffs could afford to continue
to fund these activities; I am not persuaded that they cannot. But, this leaves
the issue raised by Dr. Hausman of whether, regardless of financial viability,
a company would reduce promotional activities in the face of the entry of a
generic into the market.
[65] The
Defendants’ experts do not agree with this assumption. In particular, Dr. Cole
carefully laid out a scenario under which Servier Canada would maintain the
price of COVERSYL, introduce a pseudo-generic and continue promotional
activities at current levels. Dr. Cole referred to this model as the
“Preservation Mode”. In his view, “it makes eminent common and business sense
for the Plaintiffs to adopt the Preservation Mode even if, in the time period
pending trial, it will mean promoting their product at the doctor level which
may result in sales to Apotex at the pharmacy level”.
[66] The
Plaintiffs submit that I should prefer the “model” put forward by Dr. Hausman,
where promotional activities cease and the companies reduce the price of the
branded drug rather than introducing a pseudo-generic. In part, they rely on
what they term the better qualifications of Dr. Hausman. They also point out
the examples raised by Dr. Hausman of other drugs (ZESTRIL and TRITACE in the UK; RENITEC in
Autralia; and MONOPRIL in Canada) and that Dr. Cole was unable to provide
any examples that had followed his Preservation Mode.
[67] I
do not accept the first argument of relevant qualifications of the experts. Dr.
Hausman, while eminently qualified, has limited experience with Canadian and
Australian markets and litigation. During cross-examination, he was unable to
answer some basic questions about the regulatory schemes in both jurisdictions.
Dr. Cole’s practice, on the other hand, is in Canada and his
experience is extensive on matters directly relevant to the issues before me.
Similarly, Dr. Williams has direct experience in Australia (albeit
somewhat limited in matters of intellectual property).
[68] In
my view, the more important concern that I have with Dr. Hausman’s testimony
relates to his underlying assumptions and failure to address some key
questions. As discussed above, Dr. Hausman dismisses the potential for
continued promotional activities, coupled with the introduction of a pseudo-generic;
in short, he does not address the Preservation Mode described by Dr. Cole.
[69] The
Plaintiffs criticize Dr. Cole for not having examples of a successful
Preservation Mode in action. However, let me consider the examples offered by
Dr. Hausman. The Defendants point out that, in each of these cases, the patent
for the branded drug was close to its expiry when the generic entered the
market. The situation faced by the Plaintiffs is critically different in that
its patent is not set to expire until 2018. From a trial in three to four
years, the Plaintiffs would have eight or nine years of continued monopoly for
COVERSYL.
[70] With
respect to the possibility of a reduction in promotional activities, Dr. Hollis
accepts that brand name companies typically reduce their promotional
expenditures following generic entry. However, he opines that this pattern can
only be applied to companies who are anticipating permanent generic competition,
due to the permanent loss of exclusivity.
[71] In
my view, this opinion carries a great deal of common sense. I agree that it
would be reasonable to reduce or eliminate promotional activities in the face
of an expiring patent. Why would a patent holder continue to market a product
to which it will soon lose the exclusive rights? Much of the benefit of such
activities would logically accrue to the generic companies poised to leap into
the market at the expiry. Thus, for example, the reduction of promotional
activities by MONOPRIL, whose patent rights in Canada were about
to expire, was logical. But, the same cannot be said if the generics will be
unable to access the market for several years. That is the situation faced by
the Plaintiffs. Given that the Plaintiffs are expecting an additional nine or
ten years of exclusivity for COVERSYL after the trial, any elimination of its
promotional efforts may not be rational business behaviour.
[72] Thus,
I conclude that Dr. Hausman’s conclusion as to market loss is based on an
incomplete and flawed assumption of the elimination of promotional activities.
Consequently, his conclusion of irreparable harm is seriously undermined.
(vi) Summary on Irreparable Harm
[73] In
sum, the Plaintiffs have failed to persuade me that they will suffer
irreparable harm if the injunction applied for is not granted. There is no
question that Dr. Hausman has provided a fulsome analysis of this issue.
Without anything further, his opinion formed the basis of the interim
injunction granted by Justice Noël. However, when viewed in the light of the opinions
offered by the Defendants’ experts, I have serious concerns about some of Dr.
Hausman’s assumptions and, thus, on his conclusions. For the reasons that I
have described, I prefer the opinions expressed by the Defendants’ experts.
[74] In
this conclusion, I am assisted by many decisions of this Court and the Federal
Court of Appeal where many of the same arguments have been presented. In
particular, I refer to the decision of Justice Russell in Aventis Pharma,
above, where the plaintiff put forward many of the same arguments as were made
before me. Justice Russell, on similar facts and – at least to some extent, the
same arguments – did not find irreparable harm.
(c) Balance of
Convenience
[75] Having
concluded that the Plaintiffs have failed to satisfy the irreparable harm
branch of the test, there is no need for me to consider the balance of
convenience.
(d) TRIPS
[76] The
Plaintiffs raised an interesting argument related to the World Trade
Organization (WTO) agreement entitled Trade Related Aspects of Intellectual
Property Agreement (TRIPS), 1869 U.N.T.S. 299. Canada is a
signatory to TRIPS, which is the subject of the World Trade Organization
Agreement Implementation Act, S.C. 1994, c. 47. Under Article 41 of TRIPS, Canada is obliged
to ensure that enforcement procedures are available to permit effective action
against any act of infringement of a patent, including expeditious remedies
which constitute a deterrent to further infringement. Pursuant to Article 50,
judicial authorities are to be given the authority to order prompt and
effective provisional measures to prevent infringement. The Plaintiffs submit
that the practice of Canadian courts to refuse interlocutory injunctions in
nearly all cases is inconsistent with TRIPS. Of particular concern to the
Plaintiffs is the length of time that plaintiffs must wait for a decision on
the merits of a patent infringement claim and, afterwards, for a determination
on damages.
[77] I
cannot see any application for TRIPS in this motion. I am not persuaded that
the failure of this Court to enjoin the Defendants is in breach of Article 41
obligations. Nowhere in TRIPS does Canada commit to immediate
injunctive action where a party claims patent infringement. Surely, TRIPS is
not intended to obviate the necessity for hearing from the defendants in a
motion for injunctive relief. While I will concede that some patent actions
have proceeded slowly through our courts, once a trial is completed and
infringement has been found, the usual remedy of permanent injunction and
damage awards are in compliance with the TRIPS obligations.
[78] Secondly,
I question the reference by the Plaintiffs to the “practice” of refusing
interlocutory injunctions. For clearly described reasons, Canadian courts have
established a high standard for plaintiffs to meet the test for granting an
injunction. In each case where injunctions have been considered, the court has
taken care to assess the evidence against the test established in our
jurisprudence. I cannot believe that TRIPS requires anything further.
[79] Neither
of the two cases referred to by the Plaintiffs is of assistance. In Merck
& Co. v. Apotex Inc., 2006 FCA 323 at paras. 117-124, 152
A.C.W.S. (3d) 142, the Federal Court of Appeal ordered that an infringing
product be delivered up for destruction “in order to comply with Canada’s
obligations under TRIPS”. In Apotex Inc. v. Wellcome Foundation Ltd.
[2001] 1 F.C. 495, 10 C.P.R. (4th) 65, the reference to TRIPS by the
Federal Court of Appeal was to the prohibition of discrimination based on a
field of technology. I do not regard either of these cases as having
application to or modifying the test set out in RJR-MacDonald.
(e) Other Issues
[80] Given
my determination that the Plaintiffs do not meet the requirements of the tri-partite
test, there is no need to consider the other issues raised by the Defendants.
Specifically, I decline to decide whether the Plaintiffs came to their Canadian
litigation and this motion with “clean hands” and, if not, whether this should
be an equitable bar to the injunctive relief they seek.
[81] I
also do not need to consider whether the Plaintiffs delayed in bringing this
motion to the point that such delay should also be considered a bar to bringing
this motion.
CONCLUSION
[82] At
various times, the Plaintiffs and their affiants, including Dr. Hausman,
assumed that commencement of the trial of this matter in Canada would take
somewhere between 3 and 7 years. As I advised the parties at the commencement
of their oral submissions, the Court is prepared to set a trial date of
February 2008 and to assist, as far as possible, in realizing that date.
Assuming that this trial date can be met, the assumptions of the Plaintiffs
overstate the length of time that the generic perindopril would be on the market
and likely would impact on the evidence as to irreparable harm.
[83] In
spite of this, I wish to make it clear that my analysis in these reasons does
not rely on an early 2008 trial. For purposes of this motion, I have accepted
the Plaintiffs’ assumption of three to four years to trial (but not longer).
While I am optimistic that motivated parties could meet the early 2008 trial
date, I believe that it would be imprudent of me to assess the issue of
irreparable harm on that basis.
[84] For
these reasons, an order dismissing the motion for an interlocutory injunction
will issue.
“Judith
A. Snider”
__________________________
Judge
Ottawa,
Ontario
January
3, 2007
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