A-339-97
(T-1237-95)
CORAM: MARCEAU J.A.
DESJARDINS J.A.
McDONALD J.A.
BETWEEN:
ELI
LILLY & COMPANY
and ELI
LILLY CANADA, INC.
Appellants
(Respondents)
-
and -
APOTEX
INC.
Respondent
(Applicant)
-
and -
MINISTER OF NATIONAL HEALTH AND
WELFARE
Respondent
(Respondent)
REASONS
FOR JUDGMENT
MARCEAU J.A.
The
Trial Division decision under appeal raises again the difficult problem of
defining the nature and scope of the very special set of regulations, in force
since 1993, called the Patented Medicines (Notice of Compliance) Regulations
(SOR/93-133) (hereinafter "the Regulations"). These Regulations have
been analyzed and commented upon in numerous decisions, mostly of the Trial
Division but also of this Court. Nevertheless, another brief overview of their
nature and purpose at the outset could greatly facilitate the analysis of the
issues raised by this appeal.
Enacted
by the Governor in Council under provisions of the Patent Act Amendment Act,
1992 (S.C. 1993, c. 2), which abolished the system of compulsory licensing
for patented medicines, and grafted onto the regulatory controlling system
established by the Food and Drug Regulations (C.R.C., c. 870), the new
set of regulations were aimed at contributing to the protection of private
commercial patent rights.
The
main features of the new protective scheme may be described in a nutshell as
follows: The Minister of National Health and Welfare ("the
Minister") is responsible, under the Food and Drug Regulations, for
the issuance of "notices of compliance" (hereinafter "NOC")
attesting to the health, safety and efficacy of drugs. An NOC is a
prerequisite for marketing drugs. The drug manufacturer who holds or is
licensed under subsisting patents is invited to file a patent list with the
Minister indicating each of the drugs for which it already holds an NOC. From
that point on, any other manufacturer who applies for an NOC in respect of the
same drug, must support its new drug submission (hereinafter "NDS")
by an allegation asserting that the listed drug patent would not be infringed
if its application was granted, and explaining the basis for the assertion. A
notice of such allegation must be served on the holder of the patent. Within 45
days of service of the allegation, the holder of the patent who wishes to
dispute the justification of the allegation must seek an order from the Federal
Court prohibiting the Minister from issuing the NOC applied for, and the Court
will issue the order unless it finds that the allegation is justified. An NDS
for a listed medicine must be left in abeyance until the expiration of the time
given to the patent-holder to respond and, if proceedings in prohibition are
commenced, until they are dismissed or another 30 months expires. However, in
the absence of proceedings, the Minister is directed to process the application
and, unless there is any concern for public health and safety, will issue the
NOC requested. The three central provisions of these Regulations read as
follows:
5. (1) Where a person files
or, before the coming into force of these Regulations, has filed a submission
for a notice of compliance in respect of a drug and wishes to compare that drug
with, or make a reference to, a drug that has been marketed in Canada pursuant
to a notice of compliance issued to a first person in respect of which a patent
list has been submitted, the person shall, in the submission, with respect to
each patent on the patent list,
(a) state that the
person accepts that the notice of compliance will not issue until the patent
expires; or
(b) allege that
(i) the statement made by the
first person pursuant to paragraph 4(2)(b) is false,
(ii) the patent has expired,
(iii) the
patent is not valid, or
(iv) no claim for the medicine
itself and no claim for the use of the medicine would be infringed by the
making, constructing, using or selling by that person of the drug for which the
submission for the notice of compliance is filed.
(2) Where, after a
second person files a submission for a notice of compliance, but before the
notice of compliance is issued, a patent list is submitted or amended in
respect of a patent pursuant to subsection 4(5), the second person shall amend
the submission to include, in respect of that patent, the statement or
allegation that is required by subsection (1).
(3) Where a person
makes an allegation pursuant to paragraph (1)(b) or subsection (2), the
person shall
(a) provide a detailed
statement of the legal and factual basis for the allegation; and
(b) serve notice of the
allegation on the first person and proof of such service on the Minister.
6. (1) A first person may,
within 45 days after being served with a notice of an allegation pursuant to
paragraph 5(3)(b), apply to a court for an order prohibiting the
Minister from issuing a notice of compliance until after the expiration of one
or more of the patents that are the subject of an allegation.
(2) The court shall
make an order pursuant to subsection (1) in respect of a patent that is the
subject of one or more allegations if it finds that none of those allegations
is justified.
...
7. (1) The Minister shall
not issue a notice of compliance to a second person before the latest of
(a) the expiration of
30 days after the coming into force of these Regulations,
(b) the day on which
the second person complies with section 5,
(c) subject to
subsection (3), the expiration of any patent on the patent list that is not the
subject of an allegation,
(d) subject to
subsection (3), the expiration of 45 days after the receipt of proof of service
of a notice of any allegation pursuant to paragraph 5(3)(b) in respect
of any patent on the patent list,
(e) subject to
subsections (2), (3) and (4), the expiration of 30 months after the receipt of
proof of the making of any application referred to in subsection 6(1), and
(f) the expiration of
any patent that is the subject of an order pursuant to subsection 6(1).
This
brief overview of the main legislative features of the Patented Medicine
(Notice of Compliance) Regulations would not be complete without referring,
in addition, to two refinements attached to them by decisions of this Court.
It
is now settled that the proceedings launched by the patented manufacturer
seeking prohibition are proceedings in judicial review. In Bayer AG v.
Canada (Minister of National Health and Welfare), Mahoney J.A., speaking for
a unanimous Court, commented as follows:
The legislative scheme
does not contemplate a proceeding by way of action. The person claiming patent
rights must commence the proceeding within 45 days of being served with a
notice of allegation and it is contemplated that the court will have resolved
the matter within 30 months after that. Patent infringement actions simply do
not proceed at a rate that would meet the legislative time frame. (When an
extension of time that might delay final resolution of the application beyond
30 months is sought, the court will have to consider the impact of s.
55.2(4)(e) of the Patent Act and s. 7(5) of the Regulations on the discretion
provided by Rule 1614).
By merely commencing the
proceeding, the applicant obtains what is tantamount to an interlocutory
injunction for up to 30 months without having satisfied any of the criteria a
court would require before enjoining issuance of a NOC. In particular, no
liability as to damages arises from the application as would be imposed by the
undertaking any court would require before making an interlocutory injunction.
The liability for damages created by s. 8 of the Regulations pertains only to
those incurred as a result of the NOC not issuing until after the patent has
expired. That is by no means coextensive with the liability that arises on an
undertaking exacted when an injunction is issued.
The court has a clear
duty to deal with an application expeditiously. Given that, in the scheme of
the Regulations, it is the patentee who has both the carriage of the proceeding
and the interest in its dilatory prosecution, departures from the schedule
imposed by the Part V.1 Rules ought not be routine.
It
has also been established that the section 6 proceedings launched by the
patentee should not be likened to actions for determining validity or
infringement but are of the nature of proceedings in judicial review, to be held
expeditiously, whose aim is to determine whether the Minister is free to issue
the notice of compliance requested. Their scope is confined to administrative
purposes. Strayer J.A., in Pharmacia Inc. v. Canada (Minister of National
Health and Welfare), again speaking for a unanimous Court, was
clear to that effect:
It will be noted that the
regulations nowhere create or abolish any rights of action between the parties;
instead they confer a right on the patentee to bring an application for
prohibition against the Minister of National Health and Welfare. That is, the
regulations pertain to public law, not private rights of action. Of course the
real adversary in such a prohibition proceeding is the generic company which
served the notice of allegation.
If the Governor in
Council had intended by these regulations to provide for a final determination
of the issues of validity or infringement, a determination which would be
binding on all private parties and preclude future litigation of the same issues,
it surely would have said so. This court is not prepared to accept that
patentees and generic companies alike have been forced to make their sole
assertion of their private rights through the summary procedure of a judicial
review application. As the regulations direct that such issues as may be
adjudicated at this time must be addressed through such a process, this is a
fairly clear indication that these issues must be of a limited or preliminary
nature. If a full trial of validity or infringement issues is required this
can be obtained in the usual way by commencing an action.
* * *
Such
are the main features of the Regulations involved in this appeal. I now come
to the factual and procedural basis for the appeal.
The
appellants (hereinafter "Eli Lilly") market a pharmaceutical
preparation of the active chemical nizatidine (used to treat peptic
ulcers) pursuant to an NOC issued by the Minister on December 31, 1987. They
hold two Canadian patents pertaining to processes for synthesizing nizatidine.
On
April 29, 1993, the respondent (hereinafter "Apotex"), a Canadian
manufacturer of generic products, submitted an application to the Minister for
an NOC in respect of its own brand of nizatidine compositions. As Eli
Lilly had completed, under the Regulations, a "patent list"
containing its two patents for nizatidine, Apotex appended to its
application and served on Eli Lilly a notice of allegation to the effect that
no claim for the medicine itself, and no claim for the use of the medicine in
the Eli Lilly patents, would be infringed by the preparation and sale of nizatidine
capsules formulated by Apotex, since these would be formulated from bulk nizatidine
supplied by Novopharm Ltd. (hereinafter "Novopharm"), a compulsory
licensee of Eli Lilly, pursuant to an agreement between the two generic
manufacturers.
On
June 14, 1993, Eli Lilly commenced an application for prohibition pursuant to
subsection 6(1) of the Regulations. By order dated February 9, 1995, the
motions judge in the Trial Division, Madame Justice McGillis, allowed the
judicial review application. She found that Apotex's allegation was
unjustified since the agreement with Novopharm constituted an impermissible
sublicense and, in any event, the processing of licensed bulk nizatidine
into capsule form would infringe the patentee's rights. An order of
prohibition was therefore issued as required by the Regulations, which order
was later on appeal upheld by this Court whose judgment is now pending before
the Supreme Court.
Following
the issuance of McGillis J.'s order, Apotex, while pursuing its appeal,
submitted a second notice of allegation and served a copy thereof on Eli Lilly
on February 13, 1995. In this second notice, Apotex stated that, in the
formulation of its nizatidine capsules, it will use only nizatidine
manufactured by means of a process that would not infringe the processes
claimed in the Eli Lilly patents. Eli Lilly did not respond. In May, 1995, as
Eli Lilly had not applied, under subsection 6(1) of the Regulations, for an
order of prohibition within the 45 day limitation period, Apotex requested
confirmation from the Minister that its application for an NOC in respect of
its own brand of nizatidine would be processed. Being left without
comment from the Minister, Apotex applied to the Trial Division of this Court
for declaratory relief and an order in the nature of mandamus compelling the
Minister to process Apotex's new drug submission unconstrained by the
Regulations and the prohibition order of Madame Justice McGillis.
The
different Trial Division judge seized with the application allowed it.
Following, in that respect, what he saw as being the jurisprudence of the
Court, he held that it was not an abuse of process for Apotex to have filed a
second notice of allegation, insofar as the second notice was based on
different grounds than the first, which was the case since the first notice was
based on the existence of a license, whereas the second was on a non-infringing
process. The learned Trial Division judge rejected Eli Lilly's argument that
the principle of res judicata applied. As he saw it, the task of the
Court in a prohibition proceeding was to determine whether a particular notice
of allegation was justified as the contents of the underlying NDS are not
directly before the Court. It would appear to him extraordinary to treat
McGillis J.'s order as resolving any dispute other than that which was before
her at the hearing. She obviously could not rule prospectively in respect of
issues and evidence that were not before her. It followed that the scope of
her prohibition order had to be confined to the specific allegations that were
advanced in the proceedings then involved. The conclusion was inevitable: Eli
Lilly having failed to commence an application for a prohibition order within
45 days of service of the second notice of allegation, the Minister was free to
process Apotex's request.
Eli
Lilly immediately appealed.
* * *
A
preliminary technical point should be addressed at the outset. The formal
judgment signed by the motions judge simply allowed Apotex's application and
granted the relief applied for, referring in general terms to the wording of
the notice of motion. This was obviously inappropriate as part of the relief
sought was, by its generality, not available on a judicial review proceeding,
while another part was claimed only in the alternative. It is clear that this
was done inadvertently. The reasons for judgment should have given rise to a
simple order requiring the Minister to process Apotex's NDS for nizatidine
capsules without regard to the Eli Lilly patents. If the findings of the Trial
Division judge are to be upheld on this appeal, the order will have to be
varied to ensure that its scope does not go beyond what is required to give
them their full effect.
That
being said, let us consider the findings themselves and verify their validity.
Eli
Lilly opposes the findings of the Trial Division judge by resorting to a series
of arguments ranging from the nature of a prohibition order to the meaning of
judicial review proceedings, the spirit of the Regulations, the rules of stare
decisis, the principles against frivolous proceedings and the importance of
the rules of procedure in implementing a specific administrative scheme. I do
not believe it is necessary to decompose so much the analysis in order to
dispose of the contentions of the parties. As I see it, the appeal essentially
raises two issues. The one basic substantive issue is whether the motions
judge could order the Minister to proceed when McGillis J.'s prohibition order
was still in force. There is alternatively a procedural issue, which is
whether the requirements of the Regulations for making an allegation were
sufficiently satisfied to bring into play the effect attached to a failure to
dispute its validity.
Naturally,
it is to the substantive issue that the major part of the analysis must be
directed. Counsel for Eli Lilly advanced two arguments in order to dispute the
validity of the motions judge's conclusion that the prohibition order did not
preclude the issuance of his own order. Counsel argued first that by its very
nature and on its face, the prohibition order then in force was not open to
interpretation as to its scope. It had to be taken as having an absolute
effect; it imposed a prohibition without restriction and qualification which
was meant to remain operative until the expiration of the patents, as provided
in paragraph 7(1)(f) of the Regulations. Such an order, it was urged,
cannot be set aside or varied collaterally on a simple judicial review
proceeding where its involvement is raised only indirectly. Furthermore, added
counsel, an order with an absolute effect was precisely what was contemplated
by the Regulations, which did not provide for the possibility of further
proceedings with the result that the second notice of allegation could have no
legal meaning, which is why Eli Lilly did not react to it.
I
have come to the view that neither of these two arguments has merit. I do not
see why a court, in a clear situation, could not proceed to an assessment of
the scope and meaning of an order of the type issued by McGillis J., and then
attach to it an effect which is not absolute. There is no doubt that this is
possible only exceptionally, but when the order was clearly made in a
particular context, was rendered to give effect to stated reasons, and its
wording in general terms can be explained, I think it can be done. This is
precisely the position adopted by the Manitoba Court of Appeal in Allen v.
Manitoba (Judicial Council), where Twaddle J.A., writing for a
unanimous court, had this to say:
A court order should ordinarily be
construed in the context of the application for it. Reference to the
application in this case shows that what Judge Allen sought to have prohibited
was the inquiry pursuant to the notice dated December 21, 1989.
The Court is also entitled, when
construing an order previously made by it, to look at its reasons for making
it. In this case it is quite clear that the inquiry was prohibited only
because it had not been properly convened pursuant to either s. 31(1) or s.
31(2) of the relevant legislation. Nothing was said to indicate that a
properly convened inquiry was prohibited.
I therefore construe the previous
order of this Court as prohibiting the irregularly convened inquiry of which
noted was given in December, 1989. The order was not intended as a general
prohibition against any subsequent inquiry that might be convened either at the
request of the Attorney-General or following an investigation and report. The
new inquiry is not prohibited by the old order and a new order, if one is to be
made, must be justified on fresh grounds.
I
do not think that anyone could dispute the very unique nature of the proceeding
which led to the order here involved, a proceeding grafted onto the
administrative process of issuing an NOC. What comes before the Court is a
particular allegation and the order, which is required by the Regulations to be
worded in general terms, is made with the sole view of giving effect to the
finding that the allegation is unjustified. The conditions for an assessment
of the scope and meaning of the order, in my opinion, are clearly there. That
such an assessment is not outside the purview of a procedure of the nature of
the one here involved raises no difficulty since the question is not of setting
aside the order or varying the order, but of interpreting the order.
On
the other hand, it does not appear to me that the legislator, in imposing this
special set of rules, could have contemplated that the issuance of an order of
prohibition on a finding that a particular allegation was unjustified would be
absolute and would be deemed to cover any future allegation, however new and
distinct it might be. That would give a summary procedure an effect that goes
way beyond its meaning and object. As pleaded by counsel for Apotex: "it
would be truly perverse to condemn a second person (the second manufacturer) to
advance a ‘once and for all’ allegation of non-infringement in a single
proceeding when the subject patent may have an unexpired term of 17 years or
more, and newly discovered processes which contravene no patent rights are only
developed after the initial allegation has been determined." I agree with
the views expressed in the numerous Trial Division decisions referred to by the
motions judge to the effect that successive allegations are possible and each
one must be treated independently provided it is separate and distinct from the
others and its bringing before the Court cannot be seen as an abuse of process.
In
my judgment, the substantive argument advanced by counsel for Eli Lilly in
support of the appeal fails. The motions judge was correct in determining the
scope of McGillis J.'s order with regard to the context in which it was
rendered and the reasons given for it. He was also correct in believing that a
second allegation, if distinct from the first, as was the case here, must be
treated independently of the first one.
Which
leads me to the second argument relied upon in support of the appeal. It is
submitted that the second allegation was not made by Apotex in the manner
prescribed by the Regulations, so that it could not attract the effects
attached to valid allegations by those Regulations.
According
to subsection 5(3) of the Regulations, an allegation with respect to a patented
medicine must be attached to a new drug submission, must be completed by a
detailed statement as to its legal and factual basis and must be served on the
patent holder. The three requirements were met here, albeit in an order
different from the one that was used to enumerate them in the provision.
Indeed, the allegation was served before the NDS could be updated to refer to
it, and prior to the filing with the Minister of a detailed statement as to its
factual and legal basis. Apotex explained that, in abstaining from making full
disclosure of its non-infringing process in the allegation itself, it was
merely acting in accordance with the teachings of the Court in Bayer, supra,
where it was said:
An applicant for a NOC alleging a
different process cannot be expected to make full disclosure without a
protective order. Confidentiality cannot be assured until there is a
proceeding in court.
And
in delaying to update its NDS, it was trying to avoid having its submission
stripped of its rank among the submissions to be considered under the
administrative procedure then applied by the Minister.
The
only position taken by the Minister on this appeal was with respect to this
procedural argument which incidentally Eli Lilly had not raised as such before
the motions judge. In the Minister's submission, the three step sequence as
set out in section 5 is merely directory, not mandatory. The Minister argues
that the process cannot be vitiated by the sole fact that the requirements of
section 5 were complied with in an out-of-sequence manner. I fully agree. The
basic purpose of the Regulations is to provide a means by which patents are
noted and protected from possible infringement at the instance of the
patent-holder. The Regulations thus ensure that an NOC is not issued without a
patent-holder having the opportunity to defend its patent. This opportunity is
not diminished by the fact that the notice of allegation is given first, if, as
here, it contains sufficient information for the patent-holder to determine
whether to seek a prohibition order and the Court can immediately proceed to
determine its justification. If the sequence is held to be mandatory, the
process would simply have to be commenced anew and this would cause a
purposeless delay in the marketing of a drug in cases where the allegation
proves to have been justified. The intent of the Regulations shows that
compliance with section 5 in a manner inconsistent with the sequence set out
should not be considered a defect sufficient to vitiate the process.
It
is my opinion, therefore, that the motions judge did not err in his reasoning
and that this Court should uphold his conclusion. For those who would feel
uncomfortable with the idea that the mere failure to react properly to a
somewhat unclear legal requirement could have such a drastic result, I will
repeat that the Regulations are not aimed at opening the way to proceedings
directly adjudicating on issues of infringement or validity of patents. They
simply provide a certain protection to a patent-holder by allowing a court to
determine summarily, on the basis of the evidence adduced, whether the
allegation of non-infringement is justified. The appellant is, in no way,
deprived of all the recourses normally available to a patent-holder to enable
it to enforce its rights.
I
would therefore suggest that, subject to a variation of the impugned order so
as to limit its scope to what the motions judge obviously had in mind, that is
to the first two paragraphs of the notice of motion, the appeal be dismissed
with costs.
"Louis
Marceau"
J.A.
"I agree.
Alice Desjardins, J.A."
"I agree.
F.J. McDonald, J.A."
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