Date:
20111216
Dockets: A-172-11
A-173-11
Citation: 2011 FCA 358
CORAM: NOËL
J.A.
DAWSON J.A.
TRUDEL
J.A.
A-172-11
BETWEEN:
APOTEX INC.
Appellant
and
ELI LILLY
CANADA INC.
Respondent
A-173-11
BETWEEN:
APOTEX INC.
Appellant
and
NYCOMED CANADA INC. and
NYCOMED GmbH
Respondents
REASONS FOR
JUDGMENT
NOËL J.A.
[1]
These
are two appeals – heard together but not consolidated – involving Apotex Inc.
as the appellant (Apotex or the appellant) which both raise the same issue,
namely whether paragraphs claiming disgorgement profits in Apotex’ statements
of claim, pled in conjunction with others seeking damages pursuant to section 8
of the Patented Medicines (Notice of Compliance) Regulations, S.O.R./93-133
(PM(NOC) Regulations), were properly struck by Prothonotaries Milczynski
(A-173-11) and Tabib (A-172-11), as confirmed by Justice Heneghan of the Federal Court (the
Federal Court judge) by decisions issued on April 18, 2011.
[2]
The
reasons which follow dispose of both appeals. The original will be filed in
A-172-11 and a copy will be filed as reasons for judgment in A-173-11.
[3]
The
paragraphs which have been struck in each case are almost identical. They
provide respectively:
A-173-11
1. The
Plaintiff, Apotex Inc. (“Apotex”), claims:
…
(b) disgorgement of
the excess revenues realized by the Defendant by reason of the higher prices
charged by it for its 20 mg and 40 mg pantoprazole tablets as a consequence of
the delay in issuance to Apotex of its NOC as described in subparagraph (a);
…
20. Furthermore, by
reason of the delay in Apotex obtaining its NOC for 20 mg and 40 mg
pantoprazole tablets, the Defendant was free from competition from Apotex for
approximately 12 months.
21. Apotex states
that, during this 12-month period, the Defendant generated revenue from sales
which it would not otherwise have made.
22. Apotex states that
the Defendant, by reason of its wrongful invocation of the Patent
Regulations, will generate a windfall even if it is compelled to compensate
Apotex for its damages flowing from its exclusion in the market. This windfall
arises from the higher price charged by the Defendant for its 20 mg and 40 mg
pantoprazole tablets over the price which would have been charged by Apotex for
its 20 mg and 40 mg pantoprazole tablets.
23. There is no
juristic reason for the Defendant to retain this windfall, namely, the excess
revenues generated from sales made at a higher price than the price Apotex
would have charged.
24. The Defendant thus
has no entitlement to such excess revenues.
25. In the absence of
a disgorgement of this unjust enrichment, every patentee would have an
incentive to use the Patent Regulations in all cases to unjustly delay
entry of every generic product at the expense of the Generic, in the knowledge
that the revenues made by it would exceed the damages for which it will be
liable for the delay caused to the Generic.
A-172-11
1. The Plaintiff, Apotex Inc. (“Apotex”), claims:
…
(b)
disgorgement of the excess revenues realized by the Defendant by reason of the
higher prices charged by it for its raloxifene tablets as a consequence of the
delay in issuance to Apotex of its NOC as described in subparagraph (a);
…
22.
Furthermore, by reason of the delay in Apotex obtaining its NOC for
Apo-Raloxifene tablets, the Defendant was free from competition from Apotex for
approximately 36 months.
23. Apotex
states that, during this 36-month period, the Defendant generated revenue from
sales which it would not otherwise have made.
24. Apotex
states that the Defendant, by reason of its wrongful invocation of the Patent
Regulations, will generate a windfall even if it is compelled to compensate
Apotex for its damages flowing from its exclusion in the market. The windfall
arises from the higher price charged by the Defendant for its raloxifene
tablets over the price which would have been charged by Apotex for
Apo-Raloxifene tablets.
25. There
is no juristic reason for the Defendant to retain this windfall, namely, the
excess revenues generated from sales made at a higher price than the price
Apotex would have charged.
26. The
Defendant thus has no entitlement to such excess revenues.
27. In the
absence of a disgorgement of this unjust enrichment, every patentee would have
an incentive to use the Patent Regulations in all cases to unjustly
delay entry of every generic product at the expense of the Generic, in the
knowledge that the revenues made by it would exceed the damages for which it
will be liable for the delay caused to the Generic.
28. Apotex pleads
and relies upon subsection 20(2) of the Federal Courts Act.
[4]
This
last plea did not form part of the statement of claim as originally filed in
A-173-11. Apotex’ motion to add this plea to its statement of claim in that
docket was heard at the same time as the motion to strike. Prothonotary Milczynski
allowed the motion to strike in its entirety, and denied leave to plead
subsection 20(2) of the Federal Courts Act, R.S.C. 1985, c. F-7 (the Federal
Courts Act).
[5]
In docket A-172-11, Prothonotary Tabib also ordered that
the above quoted paragraphs be struck in their entirety, including paragraph
28, which pled subsection 20(2) of the Federal Courts Act.
[6]
The
appeals from these decisions were heard by the Federal Court judge who dismissed
them both for distinct reasons issued on the same day.
[7]
In
its memoranda, the appellant provides a fair description of the decisions below
which I have taken the liberty to reproduce (citations omitted):
A-172-11
The decision of Prothonotary Tabib
10. […] The operative part of the
decision of Prothonotary Tabib for present purposes reads as follows:
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.
The decision of Justice Heneghan
11. [The Federal Court judge]
dismissed Apotex’s appeal from the order of Prothonotary Tabib, on the basis
that there was no statutory grant of jurisdiction to award equitable remedies
in this case. She found that the cause of action arises from section 8 of the Regulations
alone, and that this Honourable Court’s decision in … Apotex Inc. v. Merck
& Co. Inc., (2009), 76 C.P.R. (4th) 1, lv to app ref’d,
[2009] S.C.C.A. No. 347 (S.C.C.) [(Merck F.C.A.)], makes it “plain and
obvious” that section 8 does not include a claim for unjust enrichment.
A-173-11
The decision of Prothonotary Milczynski
10. … The operative part of
[Prothonotary Milczynski’s decision]
reads as follows:
… Apotex conceded … that it can no longer
advance a claim in unjust enrichment under section 8(4) of the Regulations.
Apotex does not take a different position … but seeks leave to file an amended
statement of claim that leaves the wording of the current pleading unchanged
and intact, except for adding the following paragraph at the end:
26. Apotex pleads and relies
upon subsection 20(2) of the Federal Courts Act.
…
The difficulty for Apotex is that the
insertion of this plea does not change the nature of its claim. Paragraph 1(b)
of the statement of claim still refers to disgorgement of profits pursuant to,
and for actions exclusively arising out of the PM(NOC) Regulations .
Paragraph 25 alleges that “in the absence of disgorgement of profits, every
patentee in all cases unjustly delay the entry of every generic product”.
Counsel for Apotex further confirmed for the Court at the hearing of the motion
that Apotex does not rely on and will not plead any additional material facts
in support of its claim for disgorgement of profits on the grounds that Nycomed
was unjustly enriched. Apotex relies exclusively on the fact that Nycomed
commenced an application for an order of prohibition under the Regulations
and that that act alone caused the deprivation suffered by Apotex (the delay in
the issuance of the NOC to Apotex) for which there is no juridical reason.
While Apotex argues that it is relying on section 20 of the Federal Courts
Act for its claim in equity, the claim for disgorgement is still tied to
the Regulations, and there is no other basis for Apotex to claim that
remedy.
In this respect, the present case may be
distinguished from the decision of Justice Kelen in Apotex Inc. v.
AstraZeneca Canada Inc., 2009 FC 120, where the Court allowed a claim
against the Minister of Health to proceed where Apotex had commenced a section
8 claim, notwithstanding the clear statement in subsection 8(6) of the PM(NOC)
Regulations that the Minister is not liable for any damages under section
8. Justice Kelen upheld the decision of Prothonotary Aronovitch who found that
the claim against the Minister was based in negligence – not the Regulations.
Accordingly, I am satisfied that it is
plain and obvious and without doubt that Apotex cannot succeed with its claim
for disgorgement of profits in the manner it was pleaded originally or in the
manner proposed in its draft amended statement of claim. The claim is still
tied to the Regulations and there is no other basis to claim the remedy.
…
The decision of Justice
Heneghan
11. [The Federal Court
judge] dismissed Apotex’s appeal from the order of Prothonotary Milczynski
striking its unjust enrichment claim. She decided that the decision of this
Honourable Court in … [Merck F.C.A.], endorsing the interpretation of
section 8 as decided by the trial judge in that case [Apotex Inc. v. Merck
& Co. Inc., 2008 FC 1185 (Merck F.C.)], “makes it plain and
obvious that section 8 does not include a claim for unjust enrichment, or
provide this Court with the jurisdiction to grant the equitable remedy of
disgorgement as a remedy on section 8 claims”.
12. Justice
Heneghan also found that the Prothonotary had correctly refused leave to amend,
as Apotex was “trying to advance a claim of unjust enrichment in the context of
a section 8 claim under the Regulations, a cause of action that does not
lie within the jurisdiction of the Federal Court”.
13. Finally,
the motion judge concluded that, since there is no statutory grant of
jurisdiction to award equitable remedies in this case, Apotex could not bring a
claim for unjust enrichment independent of section 8 of the Regulations.
This cause of action arose squarely from the Regulations, hence the only issue
was whether a section 8 claim included a claim for unjust enrichment and, for
the reasons previously stated, it was plain and obvious that it did not.
POSITION OF THE PARTIES
[8]
Although
the reasons for striking out the pleadings in A-173-11 and A-172-11 are not
exactly the same, the arguments advanced by Apotex in support of the two
appeals are identical.
[9]
Apotex
recognizes that section 8 of the PM(NOC) Regulations does not entitle it
to any remedy other than damages computed in the manner set out in that
provision. However, it contends that unjust enrichment is a different cause of
action, independent of section 8, and that it is entitled to the disgorgement
of the respondents’ profits as a remedy which flows from this independent cause
of action.
[10]
Apotex
acknowledges that the decision of this Court in Merck F.C.A. on which
the Federal Court judge relied has determined the scope of the damages
available to second persons under section 8, but says that this decision is
silent on whether disgorgement of profits may be obtained by independent
action.
[11]
Keeping
in mind the stringent test applicable on a motion to strike, Apotex submits that
it is not plain and obvious that its claim is doomed to fail, or does not
exhibit a “scintilla of success” (Apotex v. Wellcome Foundation Ltd. (1996),
113 F.T.R. 241). In this respect, Apotex relies on the decisions of the Ontario
Superior Court (Divisional
Court) in Apotex
Inc. v. Abbott Laboratories Limited et al., 2010 ONSC 6909. (2010),
89 C.P.R. (4th) 141 and Apotex Inc. v. Laboratoires Fournier S.A.
et al., 2010 ONSC 6947, where attempts to strike claims for unjust
enrichment in the context of a claim pursuant to section 8 of the PM(NOC)
Regulations were dismissed.
[12]
Apotex
submits that the Prothonotaries and the Federal Court judge proceeded on wrong
principle when they held that the outcome of its claim for unjust enrichment
was clear and beyond doubt and struck the paragraphs asserting this claim.
[13]
The
respondents for their part submit that the Federal Court judge correctly
dismissed the appeals, and essentially stand by the reasons given by the
Federal Court judge and the Prothonotaries.
ANALYSIS AND DECISION
[14]
There
is no dispute as to the standard of review. Although a decision on a motion to
strike is discretionary, it may be reversed on appeal if, as alleged, it is
based on an error of law or principle (Domtar Inc. v. Canada, 2009 FCA
218).
[15]
Before
turning to the alleged errors, it is useful to first identify the precise
claims advanced by the two statements of claims and the material facts advanced
in support of these claims. A good starting point is the prayer for relief
which in each seeks:
a) damages suffered by
Apotex in respect of the delay in issuance to Apotex of a Notice of Compliance
(NOC) for [the relevant] tablets by reason of the [PM(NOC) Regulations];
b) disgorgement of the
excess revenues realized by the Defendant by reasons of the higher prices
charged by it for its [relevant] tablets as a consequence of the delay in
issuance to Apotex of this NOC as described in subparagraph (a);
[My
emphasis]
[16]
Paragraphs
22 of the statement of claim in A-173-11 and 24 of the statement of claim in
A-172-11, each allege that “… the defendant by reason of its wrongful
invocation of the Patent Regulations, will generate a windfall …” to
which it is not entitled [my emphasis]. The only material fact advanced in
support of the characterization of the defendant’s conduct as “wrongful” is
that the prohibition proceedings initiated by the respondents were eventually
dismissed (para. 16 in file A-173-11 and paras. 16 to 18 in file A-172-11) with
the result that the issuance of the relevant Notices of Compliance to Apotex
were delayed by reason of the regulatory stay which operates in favour of the
respondents (paras. 18 and 20 to 25 in file A-173-11; paras. 20 and 22 to 27 in
file A-172-11). These are the requirements which underlie a first person’s liability
under section 8 and indeed the identical allegation is made in support of the
claim for damages under that provision (paras. 18 and 19 in file A-173-11;
paras. 20 and 21 in file A-172-11). Significantly, no other “wrongful” act is
alleged to have been committed (compare Apotex Inc. v. Laboratoires Fournier
S.A., [2006] O.J. No. 4555, 54 C.P.R. (4th) 241
(O.H.C.J.) at para. 25 where the constituent elements of the tort of abuse of
process as set out in R. Cholkan & Co. v. Brinker (H.C.J.), [1990] O.J. No. 1, 71 O.R.
(2d) 381 as well as conspiracy to commit this tort were also alleged).
[17]
It
follows that as found by Prothonotary Milczynski in the above
quoted passage (para. 7 above), while Apotex relies on the Federal Court’s
jurisdiction to provide equitable relief under subsection 20(2) of the Federal
Courts Act for its claim for disgorgement of profits, this claim is tied to
the PM(NOC) Regulations since entitlement is said to flow from the fact
that the prohibition proceedings initiated by the respondents were ultimately
dismissed, as contemplated by section 8, and nothing more. Given this, the
question which arises is whether Apotex can have any hope of successfully
invoking subsection 20(2) of the Federal Courts Act to obtain the
additional remedy which it seeks.
[18]
In
my respectful view, the answer to this question is no. Parliament, through the
delegated authority of the Governor-in-Council, has considered the question
whether a remedy should be available to second persons in the circumstances
alleged by the statements of claim and the extent of that remedy. It did so in
an attempt to strike a balance between the need for patent protection on the
one hand and the timely entry of lower priced drugs on the market, on the
other. Section 8 fits within this compromise (see Merck F.C.A. at paras.
45 to 61; Bristol Myers Squibb Co. v. Canada (Attorney General), 2005
SCC 26, [2005] 1 S.C.R. 533 at paras. 6 to 12, 45, 46 and 50; AstraZeneca
Canada Inc. v. Canada (Minister of Health), 2006 SCC 49, [2006] 2 S.C.R. 560
at paras. 12 to 23).
[19]
Compromises
by their nature fall short of fully responding to the competing interests at
stake with the result that no one was happy with section 8. Innovative
companies did not believe that they ought to be visited with damages for simply
availing themselves of the procedure devised by Parliament to ensure patent
protection (Merck F.C.A. at para. 51). Generic companies argued,
as Apotex does here, that the balance struck did not provide a sufficient
disincentive to first persons when regard is had to the negative impact which
the “automatic stay” has on the access to cheaper drugs.
[20]
Prior
to the 2006 amendment, section 8 was ambiguous as it provided for an
entitlement to “damages or profits”. However, the reference to “profits” was
eventually determined to refer to a second person’s lost profits rather than to
profits earned by the first person during the regulatory stay period (see Merck
F.C. at para. 97 as confirmed by Merck F.C.A. on this point at
paras. 88 to 91).
[21]
Any
doubt in this regard was removed by the 2006 amendment which deleted the
reference to the word “profits” in section 8. The Regulatory Impact Analysis
Statement (RIAS) which accompanied this amendment explained the change as
follows:
The Government is aware of a number of
ongoing section 8 cases in which it is argued that in order for this provision
to operate as a disincentive to improper use of the PM(NOC) Regulations
by innovative companies, the term “profits” in this context must be understood
to mean an accounting of the innovator’s profits …
After referring to the introduction of related
measures, the RIAS concluded:
… The Government believes that this line
of argument should no longer be open to generic companies that invoke
section 8.
[My emphasis]
[22]
When
regard is had to this amendment, and the decision of this Court in Merck
F.C.A., the matter could not be any clearer. Parliament, through the
auspices of the Governor-in-Council, has considered whether generic companies
should be entitled to the disgorgement of first persons’ profits in the
circumstances contemplated by section 8, and has excluded this remedy. It did
so in the context of the above-noted balance which is sought to be achieved by
the PM(NOC) Regulations. This is a legislative policy issue with respect
to which the will of Parliament is paramount.
[23]
It
follows that whatever jurisdiction the Federal Court has under subsection 20(2)
of the Federal Courts Act to provide equitable relief, it cannot be used
to grant a remedy which section 8 was intended to exclude (compare Radio
Corp. of America v. Philco Corp. (Delaware) (1966), 48 C.P.R. 128 at 136
(SCC); see also Zaidan Group Ltd. v. London (City) (1990), 71 O.R. (2d)
65 at 69 (C.A.), aff’d [1991] 3 S.C.R. 593), unless a cause of action
independent of the operation of section 8 is alleged. Here, no such cause of
action has been pled. The result is that Apotex’ claim for disgorgement of
profits cannot possibly succeed.
[24]
Counsel
for Apotex did not place before us the statements of claim which are the
subject matter of the two decisions of the Ontario Superior Court (Divisional Court) on which he relies
(see para. 11 above). It is therefore difficult to comment on these decisions.
However, if as here, Apotex claimed to be entitled to the disgorgement of the
first persons’ profits simply because the prohibition applications which it
initiated were ultimately dismissed as contemplated by section 8, I
respectfully disagree with the conclusion reached in these cases.
[25]
This
suffices to dispose of the appeals, which I would dismiss with costs, in each
case.
“Marc
Noël”
“I
agree.
Eleanor R. Dawson J.A.”
“I
agree.
Johanne Trudel J.A.”
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