Date: 20111219
Docket: A-10-11
Citation: 2011 FCA 364
CORAM: EVANS
J.A.
GAUTHIER J.A.
STRATAS
J.A.
BETWEEN:
APOTEX INC.
Appellant
and
MERCK & CO., INC. and
MERCK FROSST CANADA CO.
Respondents
AND
BETWEEN:
MERCK & CO., INC. and
MERCK FROSST CANADA CO.
Respondents
and
APOTEX INC. and
HER MAJESTY THE QUEEN
IN RIGHT OF CANADA
as represented by the
ATTORNEY GENERAL OF CANADA
Apotex Inc., Appellant
REASONS FOR JUDGMENT
EVANS J.A.
Introduction
[1]
This is an
appeal from a decision of the Federal Court (2010 FC 1264) in which Justice
Snider (Judge) dismissed a statement of claim by Apotex Inc. seeking
compensation from Merck & Co. Inc., Merck Frosst Canada Ltd., and Merck
Frosst Canada & Co. (collectively Merck) under section 8 of the Patented
Medicines (Notice of Compliance) Regulations, SOR/93-133 (PMNOC
Regulations).
[2]
Apotex’
claim is for loss allegedly sustained in the period that it was prevented from
selling a generic version of the medicine lovastatin by the statutory stay
imposed as a result of Merck’s application under subsection 6(1) of the PMNOC
Regulations.
[3]
In that
application, Merck requested an order prohibiting the Minister of Health
(Minister) from issuing a Notice of Compliance (NOC) authorizing Apotex to
market its version of lovastatin in Canada. Merck submitted that Apotex’
allegations of invalidity and non-infringement of Merck’s Canadian Patent No.
1,161,380 (’380 patent) were not justified. The ’380 patent was for lovastain
made by a particular process, referred to in this litigation as AFI-1.
[4]
Merck’s
application for an order of prohibition was dismissed without an adjudication
of its merits, and the Minister granted Apotex an NOC. Apotex then started to
manufacture and import lovastin, and to sell tablets containing lovastatin in
Canada.
[5]
Merck subsequently
commenced an infringement action against Apotex, alleging that it had infringed
the ’380 patent. In this action, the Judge found the patent to be valid and held
that some of the lovastatin tablets sold by Apotex had been made by the
infringing process. However, she also held that Merck had not proved that all
Apotex’ lovastatin was infringing: Apotex had patented another process for
making lovastatin (referred to in this litigation as AFI-4) that did not
infringe the ’380 patent. The Judge’s decision is reported at 2010 FC 1265.
This Court dismissed Apotex’ appeal from her decision in reasons released today:
see 2011 FCA 363.
[6]
The
present appeal raises three issues. First, is Apotex’ claim for compensation
governed by the version of section 8 of the PMNOC Regulations enacted in 1993
(1993 Regulations) or that enacted in 1998 (1998 Regulations)? This, in turn,
depends on whether Merck’s application for prohibition was “pending” on March
11, 1998, the date that the 1998 Regulations came into effect. Second, has
Apotex established an entitlement to compensation under subsection 8(1) of the
applicable version of section 8? Third, if it has, should this Court determine
the basis on which compensation is to be calculated and what defences to
Apotex’ claim are available to Merck, or should it remit these issues to the
Judge?
[7]
I would
answer these questions as follows. Merck’s application for prohibition was
“pending” on March 11, 1998, and the 1998 Regulations therefore apply. Merck is
liable to Apotex under subsection 8(1) for loss suffered as a result of the Minister’s
delay in issuing the NOC to Apotex. The legal and factual issues relevant to the
amount of compensation (if any) payable by Merck to Apotex are not
appropriately decided at first instance in this Court.
[8]
Accordingly,
I would allow the appeal and remit the matter to the Judge to determine the
legal and factual issues necessary to quantify Merck’s liability to Apotex
under section 8 of the 1998 Regulations.
Issue 1: Does the 1993
or 1998 version of the Regulations apply?
[9]
Whether
the 1993 or 1998 version of section 8 of the PMNOC Regulations applies is
governed by the transitional provision, subsection 9(6) of the 1998 Regulations.
|
9(6) Section 8 of the Regulations, as
enacted by section 8, applies to an application pending on the coming
into force of these Regulations.
|
9(6) L’article 8 du même règlement,
édicté par l’article 8, s’applique aux demandes qui sont pendantes à
la date d’entrée en vigueur du présent règlement.
|
[10]
In order
to determine whether Merck’s application for an order of prohibition under
subsection 6(1) of the PMNOC Regulations was “pending” when the 1998
Regulations came into force, I shall first set out the chronology of key events
and then review the applicable law.
(i)
chronology
[11]
June 1,
1993: Merck
commenced its application for prohibition, arguing that Apotex’ allegations
that the ’380 patent was invalid, and that its version of lovastatin would not
infringe, were not justified.
[12]
September
6, 1995: The
Federal Court, Trial Division, extended the 30-month statutory stay from
December 1, 1995 to December 1, 1996.
[13]
February
13, 1997: Merck
applied for an extension order under subsection 7(5) of the PMNOC Regulations.
[14]
March
26, 1997: The
Federal Court, Trial Division (per Justice Rothstein) held that the
Court had no jurisdiction either to extend the statutory stay after its expiry,
or to issue an order of prohibition after the statutory stay had expired.
Merck’s application for prohibition was accordingly dismissed without an
adjudication of whether Apotex’ allegations of invalidity and non-infringement
were justified: Merck Frosst Canada Inc. v. Canada (Minister of National
Health and Welfare) (1997), 127 F.T.R. 18, 72 C.P.R. (3d) 148 (Merck
FCTD 1997).
[15]
March
27, 1997: The
Minister issued an NOC to Apotex for its generic lovastatin.
[16]
April 1997: Merck filed an appeal to the
Federal Court of Appeal from the decision in Merck FCTD 1997.
[17]
April
21, 1999: The
Federal Court of Appeal dismissed Merck’s appeal from Merck FCTD 1997 on
the ground that issuing an NOC to Apotex in March 1997 rendered it moot: Merck
Frosst Canada Inc. v. Canada (Minister of National Health
and Welfare)
(1999), 240 N.R. 195 (F.C.A.) (Merck FCA 1999).
[18]
Thus, when
section 8 of the 1998 Regulations came into effect on March 11, 1998, the
Federal Court had already dismissed Merck’s application for prohibition, and
Merck had filed an appeal from this decision, but the appeal had not yet been
decided.
(ii) law
[19]
A few days
before the hearing of the present appeal, another panel of this Court released
its decision in Merck Frosst Canada & Co. v. Apotex Inc. 2011 FCA
329 (Merck Frosst), a case concerning another drug, but the same parties
and the interpretation of the words “application pending” in subsection 9(6) of
the 1998 Regulations.
[20]
The Judge
in the present case did not, of course, have the benefit of this decision when
she concluded that the 1993 version of section 8 applied. She held that, on the
facts before her, Merck’s appeal was not pending because its application for
prohibition had been determined in the final decision of the Federal Court in Merck
FCTD 1997.
[21]
In Merck
Frosst, the question was whether the patent holder’s application for
prohibition was “pending” on March 11, 1998, while it was awaiting the Supreme
Court of Canada’s determination of Apotex’ appeal from a decision of this Court
upholding the decision of the Federal Court, Trial Division to issue an order
of prohibition. The Supreme Court allowed Apotex’ appeal on July 9, 1998, and
the NOC was issued soon thereafter.
[22]
Giving the
reasons of this Court, Justice Stratas stated (at para 17):
… the correct test for
determining whether an application is “pending” is whether the application
remains alive either at first instance, or on appeal.
Applying this test, he noted (at para. 21) that the Supreme
Court had the power to give the judgment that the Federal Court, Trial Division
should have given. It exercised that power by dismissing the application for
prohibition.
[23]
Merck
argues that Merck Frosst is distinguishable because, in the present
case, its application for prohibition was dismissed by the Federal Court in Merck
FCTD 1997 on the ground that the Court had no jurisdiction either to extend
the statutory stay after it had expired or to prohibit the Minister from
issuing an NOC after the NOC has been issued.
[24]
I disagree
with this argument for three reasons. First, Merck’s prohibition application
remained alive on March 11, 1998, in the sense that this Court had jurisdiction
to hear Merck’s appeal from Merck FCTD 1997. Even though the issue of
the NOC rendered the application moot, the Court nonetheless could have
exercised its discretion to decide the question in dispute and, if it allowed
the appeal, it could have granted the application, although there was nothing
left to prohibit.
[25]
In giving
the reasons of the majority in Abbott Laboratories v. Canada (Minister of Health), 2007 FCA 187, 282 D.L.R. (4th)
69, Justice Nadon stated that the expiry of a statutory stay does not deprive
this Court of jurisdiction to hear an appeal. Thus, referring to Pfizer
Canada Inc. v. Apotex Inc., (2001), 266 N.R. 371 (F.C.A.), he said (at
para. 52):
It is important to note that
Isaac C.J. did not conclude that the Court was without jurisdiction to make the
order sought because the statutory stay had expired, but rather that the Court
would not exercise its jurisdiction because the matter had become moot.
[26]
Further,
Nadon J.A. stated (at para. 58) that Rothstein J. was wrong to have concluded
in Merck FCTDC 1997 that the expiry of the statutory stay deprived the
Federal Court of jurisdiction over the application for an order of prohibition
under subsection 6(1) of the PMNOC Regulations, whether or not the Minister had
issued an NOC. This reasoning applies equally when an NOC is issued before the
expiry of the statutory stay: the application may become moot, but it is not
beyond the Court’s jurisdiction.
[27]
Second,
subsection 9(6) is a transitional provision which, statutory language
permitting, should be interpreted in a way that makes it easy to apply. There
is much to be said for bright line tests in the application of transitional
provisions: fine distinctions between questions of law and questions of
jurisdiction can only introduce unnecessary confusion in this context, as they
have in others.
[28]
Third, the
statutory objective of the 1998 version of section 8 was more to clarify the
meaning of the obscurely drafted 1993 version, than to amend its substance: see
Regulatory Impact Analysis Statement, Canada Gazette Part II, vol. 132,
No. 7 at 1056. Hence, undue restrictions should not be placed on the
circumstances in which parties are entitled to have their legal rights
determined in accordance with the more recent version of the Regulations that
is drafted so as to express the legislator’s intent more clearly.
[29]
Accordingly,
the question is whether Merck is liable to compensate under the 1998 version of
subsection 8(1).
Issue 2: Did Merck’s
application for prohibition under subsection 6(1) of the PMNOC Regulations make
it liable under section 8 of the 1998 Regulations for loss caused by the
Minister’s delay in issuing an NOC to Apotex for its lovastatin tablets?
[30]
Section 8
of the 1998 Regulations provides as follows.
|
8. (1) If an application made under
subsection 6(1) is withdrawn or discontinued by the first person or is
dismissed by the court hearing the application or if an order preventing
the Minister from issuing a notice of compliance, made pursuant to that
subsection, is reversed on appeal, the first person is liable to the
second person for any loss suffered during the period
(a) beginning on the date, as certified
by the Minister, on which a notice of compliance would have been issued in
the absence of these Regulations, unless the court is satisfied on the
evidence that another date is more appropriate; and
(b) ending on the date of the
withdrawal, the discontinuance, the dismissal or the reversal.
(2) A second person may, by action
against a first person, apply to the court for an order requiring the first
person to compensate the second person for the loss referred to in subsection
(1).
(3) The court may make an order under
this section without regard to whether the first person has commenced an
action for the infringement of a patent that is the subject matter of the
application.
(4) The court may make such order for
relief by way of damages or profits as the circumstances require in respect
of any loss referred to in subsection (1).
(5) In assessing the amount of
compensation the court shall take into account all matters that it considers
relevant to the assessment of the amount, including any conduct of the first
or second person which contributed to delay the disposition of the
application under subsection 6(1).
|
8. (1) Si la demande présentée aux termes
du paragraphe 6(1) est retirée ou fait l'objet d'un désistement par la
première personne ou est rejetée par le tribunal qui en est saisi, ou
si l'ordonnance interdisant au ministre de délivrer un avis de conformité,
rendue aux termes de ce paragraphe, est annulée lors d'un appel, la première
personne est responsable envers la seconde personne de toute perte subie au
cours de la période :
a) débutant à la date, attestée par le
ministre, à laquelle un avis de conformité aurait été délivré en l'absence du
présent règlement, sauf si le tribunal estime d'après la preuve qu'une autre
date est plus appropriée;
b) se terminant à la date du retrait,
du désistement ou du rejet de la demande ou de l'annulation de l'ordonnance.
(2) La seconde personne peut, par voie
d'action contre la première personne, demander au tribunal de rendre une
ordonnance enjoignant à cette dernière de lui verser une indemnité pour la
perte visée au paragraphe (1).
(3) Le tribunal peut rendre une
ordonnance aux termes du présent article sans tenir compte du fait que la
première personne a institué ou non une action pour contrefaçon du brevet
visé par la demande.
(4) Le tribunal peut rendre
l'ordonnance qu'il juge indiquée pour accorder réparation par recouvrement de
dommages-intérêts ou de profits à l'égard de la perte visée au paragraphe
(1).
(5) Pour déterminer le montant de
l'indemnité à accorder, le tribunal tient compte des facteurs qu'il juge
pertinents à cette fin, y compris, le cas échéant, la conduite de la première
personne ou de la seconde personne qui a contribué à retarder le règlement de
la demande visée au paragraphe 6(1).
|
[31]
References
in section 8 to the “first person” connote the innovator drug company, and to
the “second person”, the generic drug company.
[32]
The Judge
did not consider the application of these provisions to the facts of this case.
She concluded (at para. 28) that the 1993 version of section 8 applied, and
interpreted it as entitling Apotex to compensation only when the Minister
issued the NOC after all relevant patents had expired. Since the ’380 patent
was extant in the period that Apotex claims it was kept off the market by the
application of paragraph 7(1)(e) of the PMNOC Regulations, the Judge
concluded that Merck was not liable to compensate Apotex for loss suffered as a
result of the delay to its entry onto the market.
[33]
Merck’s
principal argument in this Court was that Apotex is not entitled to
compensation under subsection 8(1). It said that, after obtaining an NOC,
Apotex immediately started to infringe the ’380 patent by selling tablets
containing lovastatin made by Apotex Fermentation Inc., a wholly owned
subsidiary of Apotex, using the patented process, AFI-1. The infringement
continued when Apotex imported lovastatin from a company in China that had made it by the infringing
process. It cannot have been the legislator’s intention, Merck says, to
compensate an infringer for loss suffered as a result of being prevented by the
statutory stay from starting to infringe sooner. Merck interprets subsection
8(1) in light of the maxim that a cause of action does not arise from an
illegal or immoral act of the plaintiff: ex turpi causa actio non oritur.
[34]
An
assessment of this argument calls for an examination of the structure of
section 8 and an identification of the issues that are in play in this appeal
and those that are not. Subsection 8(1) of the 1998 Regulations defines when a
first person is liable to compensate a second person. As applicable to the
facts of the present case, the first requirement is that the first person’s
application under subsection 6(1) is dismissed. Apotex satisfies this
requirement: Merck’s application was dismissed in Merck FCTD 1997, which
was affirmed by this Court in Merck FCA 1999.
[35]
The other requirement
is that the second person must have suffered loss in the period starting on the
date, as certified by the Minister, on which an NOC would have been issued in
the absence of the Regulations (unless the Court is satisfied on the evidence
that another date is appropriate), and ending on the date of the dismissal of
the application for prohibition.
[36]
I do not
accept Merck’s submission that the Court should read into this provision
limiting words to the effect, “unless the second person’s claim is based on the
loss that is has suffered by being prevented from infringing the first person’s
patent earlier.” The presumption against reading words into a statutory text
may be rebutted when demanded by context and legislative objective. In my view,
it is not necessary to read an ex turpi causa exception into subsection
8(1) in order to prevent patent infringers from unjustly recovering
compensation from a first person.
[37]
This is
because subsection 8(5) confers a broad discretion on the court when assessing
the amount of compensation that the second person must pay. It provides that
the court “shall take into account all matters that it considers relevant to
the assessment of the amount,” including any conduct by either party that
contributed to the delay in the disposition of the first person’s application
for prohibition. In my view, this provision enables the Court to determine in
its discretion whether, and to what extent, a second person’s claim for
compensation should be reduced, or eliminated.
[38]
The
Court’s broad discretion under subsection 8(5) allows it, when considering
arguments based on ex turpi causa, to have regard to the factual
situation in its entirety, including its nuances. In the present case, one such
nuance is that not all the tablets sold by Apotex were found in the
infringement action to contain lovastatin made by the infringing process. A
court is likely to find it easier to apply the ex turpi causa principle
through an exercise of judicial discretion than through the definition of
liability. Discretion enables the court to assess the appropriate amount of
compensation payable (including nil) in a manner that properly takes account of
all the relevant facts.
Issue 3: Are the
remaining legal and factual issues concerning the amount of compensation (if
any) payable to Apotex under section 8 appropriately decided in this appeal?
[39]
The
conclusions that I have reached above leave many issues of law and fact to be
decided before the amount of Apotex’ compensation can be quantified, including:
the basis on which loss should be determined; the extent to which the ex
turpi causa principle should be applied on these facts, if at all; and the
starting date of the period during which the loss must have occurred under
paragraph 8(1)(a).
[40]
These
issues were not considered by the Judge because of the basis on which she
disposed of Apotex’ claim for compensation. In my view, it would not be
appropriate for this Court to decide any of them in the first instance: they
raised contested factual issues, involved difficult questions of law, and were
not the subject of full argument in the appeal to this Court.
[41]
Accordingly,
I would return the matter to the Judge on the basis that: the 1998 version of
section 8 applies; Merck is liable under subsection 8(1); and an ex turpi causa
defence is capable of being raised under subsection 8(5) so as to reduce or
eliminate the amount of loss otherwise recoverable. All other issues of fact
and law relevant to the quantification of Merck’s liability to Apotex are to be
decided by the Judge.
Conclusion
[42]
For these
reasons, I would allow the appeal with costs here and below, set aside the
decision of the Federal Court, and remit the matter to be re-determined by the
Judge in accordance with these reasons.
“John M. Evans”
“I
agree
Johanne
Gauthier J.A.”
“I
agree
Stratas
J.A.”
Email this Content