Apotex Inc. v. Merck & Co. et al., (2009) 391 N.R. 336 (FCA)

• Judge: Noël, Layden-Stevenson and Ryer, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: June 04, 2009
• Jurisdiction: Canada (Federal)
• Citations: (2009), 391 N.R. 336 (FCA);2009 FCA 187

Apotex Inc. v. Merck & Co. (2009), 391 N.R. 336 (FCA)

MLB headnote and full text

Temp. Cite: [2009] N.R. TBEd. JL.026

Merck Frosst Canada Ltd. and Merck Frosst Canada & Co. (appellants) v. Apotex Inc. (respondent)

(A-571-08; A-580-08; 2009 FCA 187)

Indexed As: Apotex Inc. v. Merck & Co. et al.

Federal Court of Appeal

Noël, Layden-Stevenson and Ryer, JJ.A.

June 4, 2009.

Summary:

In February 2002, the defendants (Merck) received a Notice of Compliance (NOC) under the Patented Medicines (Notice of Compliance) Regulations approving for sale its version of alendronate, a drug for the treatment of osteoporosis. In February 2003, Apotex Inc. filed an Abbreviated New Drug Submission and sent a Notice of Allegation to Merck, alleging that its patent for alendronate was invalid. Merck commenced proceedings under s. 6 of the Regulations to prohibit the Minister from issuing an NOC to Apotex. On February 3, 2004, Apotex was advised that its application was approved pending the outcome of Merck's proceedings. On May 26, 2005, Mosley, J., dismissed Merck's application (see 274 F.T.R. 113). On May 27, 2005, the Minister issued an NOC to Apotex permitting it to sell its generic version of alendronate. Apotex brought an action under s. 8 of the Regulations, claiming recovery for its damages or lost profits for the period from February 3, 2004, to May 26, 2005. Leaving the quantification of any award, if necessary, for a later trial, the parties raised a number of preliminary issues.

The Federal Court, in a decision reported at (2008), 335 F.T.R. 255, determined the issues accordingly. Merck appealed and Apotex cross-appealed.

The Federal Court of Appeal allowed the appeal in part and dismissed the cross-appeal.

Constitutional Law - Topic 6281

Federal jurisdiction (s. 91) - Patents of invention and discovery - General - In February 2004, Apotex Inc.'s application for a Notice of Compliance (NOC) approving for sale a generic version of alendronate was approved, but was to be held in abeyance pending the outcome of prohibition proceedings commenced under s. 6 of the Patented Medicines (Notice of Compliance) Regulations by Merck & Co. et al. - In May 2005, Merck's application was dismissed and an NOC was issued to Apotex - Apotex brought an action under s. 8 of the Regulations, claiming recovery for its damages or lost profits from February 2004 to May 2005, the period in which its NOC was held in abeyance - Section 8 enabled the court to order payment of damages for losses arising from the operation of the automatic stay where a prohibition application was withdrawn, discontinued or dismissed - As a preliminary issue, Merck asserted, inter alia, that s. 8 was unconstitutional in that it created a civil cause of action between individuals for the recovery of damages and, as such, in its pith and substance was a matter respecting property and civil rights and, thus, a matter for exclusive jurisdiction of the provinces under s. 92(13) of the Constitution Act, 1867 - The trial court disagreed - The Federal Court of Appeal dismissed Merck's appeal - The court applied the three part test from City National Leasing Ltd. v. General Motors of Canada Ltd. (1989 S.C.C.) for determining the constitutional validity of federal laws that encroached on provincial heads of power - First, dealing with the extent of the encroachment, the right of action created by s. 8 was only available to a limited group of persons operating within a defined industry - The intrusion was minor - As to the second and third parts of the test, the Regulations were validly promulgated under the Patent Act and constituted a valid regulatory scheme within Parliament's competence - Section 8 was sufficiently integrated into the overall scheme - An award of damages under s. 8 logically flowed from the s. 6 prohibition proceedings and would normally be adjudicated by the judge who heard the prohibition application - The trial judge correctly held that s. 8 came within s. 91(22) of the Constitution Act, 1867 and was, as such, valid federal legislation - See paragraphs 62 to 67.

Courts - Topic 4029

Federal Court of Canada - Jurisdiction - Federal Court - Patents of invention - In February 2004, Apotex Inc.'s application for a Notice of Compliance (NOC) approving for sale a generic version of alendronate was approved, but was to be held in abeyance pending the outcome of prohibition proceedings commenced under s. 6 of the Patented Medicines (Notice of Compliance) Regulations by Merck & Co. et al. - In May 2005, Merck's application was dismissed and an NOC was issued to Apotex - Apotex brought an action under s. 8 of the Regulations, claiming recovery for its damages or lost profits from February 2004 to May 2005, the period in which its NOC was held in abeyance - Section 8 enabled the court to order payment of damages for losses arising from the operation of the automatic stay where a prohibition application was withdrawn, discontinued or dismissed - As a preliminary issue, Merck asserted, inter alia, that the court lacked jurisdiction to hear an action under s. 8 - The trial court held that it had jurisdiction to hear the action - The Federal Court of Appeal dismissed Merck's appeal - Both s. 6 and s. 8 of the Regulations provided remedies pursuant to a regulatory scheme aimed at the prevention of patent infringement and, as such, were within the express grant of jurisdiction conferred on the Federal Court under s. 20(2) of the Federal Courts Act - The court disagreed with the reasoning of the trial judge where he concluded that the authority given to the Governor-in-Council under s. 55.2(4)(d) of the Patent Act to make regulations "conferring rights of action in any court of competent jurisdiction" allowed the Governor-in-Council to confer jurisdiction on "any court" by way of regulations and that s. 2 of the Regulations which defined "court" to mean the Federal Court or Superior Courts of competent jurisdiction constituted such a grant - Section 55.2(4)(d) did not empower the Governor-in-Council to confer jurisdiction on courts not already possessed with such jurisdiction - Further, the trial judge incorrectly reasoned that s. 2 of the Regulations amounted to a statutory grant of jurisdiction - The court had to look no further than s. 20(2) of the Federal Courts Act - Therefore, the trial judge correctly held that the Federal Court had jurisdiction over the action brought by Apotex - See paragraphs 68 to 81.

Food and Drug Control - Topic 1102

Drugs - New drugs - Legislation, re - [See Constitutional Law - Topic 6281 and Statutes - Topic 5367 ].

Food and Drug Control - Topic 1108.2

Drugs - New drugs - Notice of compliance - Prohibition order - Dismissal of application for (incl. compensation by first person) - In February 2004, Apotex Inc.'s application for a Notice of Compliance (NOC) approving for sale a generic version of alendronate was approved, but was to be held in abeyance pending the outcome of prohibition proceedings commenced under s. 6 of the Patented Medicines (Notice of Compliance) Regulations by Merck & Co. et al. - In May 2005, Merck's application was dismissed and an NOC was issued to Apotex - Apotex brought an action under s. 8 of the Regulations, claiming recovery for its damages or lost profits from February 2004 to May 2005, the period in which its NOC was held in abeyance - Section 8 enabled the court to order payment of damages for losses arising from the operation of the automatic stay where a prohibition application was withdrawn, discontinued or dismissed - Apotex asserted that, by way of relief, it was entitled to an election that would include either Apotex's damages or Merck's profits during the relevant period - Apotex referred to s. 8(4) of the Regulations, which provided for "relief by way of damages or profits" - The trial court held that the proper interpretation of s. 8(4) was to find that the words "damages or profits" included only compensation for the "loss", if any, suffered by Apotex and did not provide for a right to elect for a disgorgement or account of Merck's profits - The Federal Court of Aappeal dismissed Apotex's appeal - A contextual reading of s. 8 indicated that "compensation" for the loss resulting from the automatic stay was to be computed by reference to the loss suffered by Apotex by reason of the stay or the profits that Apotex would have made during the period when it was prevented from going to the market - The claim by Apotex that it was entitled to all of the remedies available to a patentee whose patent was infringed ignored the plain fact that it was not in that position - The compensation provided was for prejudice actually suffered by reason of the stay's operation - The trial judge correctly concluded that s. 8 did not envisage the disgorgement of Merck's profit - See paragraphs 82 to 91.

Food and Drug Control - Topic 1108.2

Drugs - New drugs - Notice of compliance - Prohibition order - Dismissal of application for (incl. compensation by first person) - In February 2004, Apotex Inc.'s application for a Notice of Compliance (NOC) approving for sale a generic version of alendronate was approved, but was to be held in abeyance pending the outcome of prohibition proceedings commenced under s. 6 of the Patented Medicines (Notice of Compliance) Regulations by Merck & Co. et al. - In May 2005, Merck's application was dismissed and an NOC was issued to Apotex - Apotex brought an action under s. 8 of the Regulations, claiming recovery for its damages or lost profits from February 2004 to May 2005, the period in which its NOC was held in abeyance - Section 8 enabled the court to order payment of damages for losses arising from the operation of the automatic stay where a prohibition application was withdrawn, discontinued or dismissed - At issue was including Apotex's claim for damages (future losses) regarding a loss of market share that endured beyond the period from February 2004 to May 2005 - Apotex's claim was that the marketplace for alendronate became distorted during the relevant period because two other generics entered the marketplace and, if not for Merck's NOC proceedings, Apotex would have been first or contemporaneous and its market share would have been larger - The trial court held that it was appropriate for Apotex to make this claim - The Federal Court of Appeal allowed Merck's appeal - Section 8 limited the measure of the losses that could be compensated by way of damages to those suffered, rather than caused, during the relevant period - Compensation for losses occurring in future years was excluded because such losses could not be said to have been suffered during the period - Apotex's entitlement to damages for lost sales resulting from the alleged decrease in its market share had to be confined to sales that could be shown to have been lost within the relevant period - See paragraphs 92 to 102.

Statutes - Topic 5352

Operation and effect - Delegated legislation - Regulations - Scope of regulation-making power - [See Courts - Topic 4029 ].

Statutes - Topic 5367

Operation and effect - Delegated legislation - Regulations - Validity of - Ultra vires - Whether purpose authorized by empowering statute - In February 2004, Apotex Inc.'s application for a Notice of Compliance (NOC) approving for sale a generic version of alendronate was approved, but was to be held in abeyance pending the outcome of prohibition proceedings commenced under s. 6 of the Patented Medicines (Notice of Compliance) Regulations by Merck & Co. et al. - In May 2005, Merck's application was dismissed and an NOC was issued to Apotex - Apotex brought an action under s. 8 of the Regulations, claiming recovery for its damages or lost profits from February 2004 to May 2005, the period in which its NOC was held in abeyance - Section 8 enabled the court to order payment of damages for losses arising from the operation of the automatic stay where a prohibition application was withdrawn, discontinued or dismissed - As a preliminary issue, Merck asserted, inter alia, that s. 8 was ultra vires s. 55.2(4) of the Patent Act - The trial court disagreed - The Federal Court of Appeal dismissed Merck's appeal - The essence of Merck's argument was that because the authority of the Governor-in-Council was limited to the making of regulations for the purpose of preventing infringement, a regulation that made a patent holder liable for damages only by reason of being unsuccessful in asserting its patent right could not be said to prevent infringement - As such, s. 8 was ultra vires the Patent Act - However, the authority to devise remedies to prevent infringement necessarily brought with it the power to ensure that those remedies were used by patent holders for that purpose and not for some other purpose such as perpetuating their monopolies beyond the statutory period - This was particularly so in light of the balance that the Patent Act sought to establish between effective patent enforcement through the Regulations and the timely market entry of lower-priced generic drugs - As a result of s. 8, a patent holder had to focus on the issue of infringement and consider the strength of its position before initiating a prohibition proceeding - This promoted the use of the Regulations for their intended purpose: the prevention of infringement - The trial judge came to the correct conclusion when he held that s. 8 was validly promulgated - See paragraphs 34 to 61.

Cases Noticed:

Beloit Canada Ltée v. Valmet-Dominion Inc. - see Beloit Canada Ltd. v. Valmet Oy Inc.

Beloit Canada Ltd. v. Valmet Oy, [1997] 3 F.C. 497; 209 N.R. 374; 73 C.P.R.(3d) 321 (F.C.A.), refd to. [para. 22].

New Brunswick (Board of Management) v. Dunsmuir (2008), 372 N.R. 1; 329 N.B.R.(2d) 1; 844 A.P.R. 1; 2008 SCC 9, refd to. [para. 34].

Biolyse - see Bristol-Myers Squibb Co. et al. v. Canada (Attorney General) et al.

Bristol-Myers Squibb Co. et al. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 533; 334 N.R. 55; 2005 SCC 26, refd to. [para. 35].

AstraZeneca Canada Inc. v. Canada (Minister of Health) et al., [2006] 2 S.C.R. 560; 354 N.R. 88; 2006 SCC 49, refd to. [para. 35].

Merck Frosst Canada Inc. et al. v. Canada (Minister of National Health and Welfare) et al. (1994), 169 N.R. 342; 55 C.P.R.(3d) 302 (F.C.A.), refd to. [para. 45].

Merck Frosst Canada Inc. et al. v. Canada (Minister of National Health and Welfare) et al., [1998] 2 S.C.R. 193; 227 N.R. 299, refd to. [para. 54].

Bayer AG and Miles Canada Inc. v. Canada (Minister of National Health and Welfare) and Apotex Inc. (1993), 163 N.R. 183; 51 C.P.R.(3d) 329 (F.C.A.), refd to. [para. 55].

Apotex Inc. v. Ferring Inc. - see Ferring Inc. v. Canada (Attorney General) et al.

Ferring Inc. v. Canada (Attorney General) et al. (2003), 310 N.R. 186; 26 C.P.R.(4th) 155; 2003 FCA 274, refd to. [para. 57].

Hoffman-La Roche Ltd. v. Canada (Minister of Health) et al. (2005), 336 N.R. 383; 2005 FCA 140, refd to. [para. 57].

AB Hassle et al. v. Canada (Minister of National Health and Welfare) et al. (2000), 256 N.R. 172; 7 C.P.R.(4th) 272 (F.C.A.), refd to. [para. 58].

Apotex Inc. et al. v. Canada (Minister of National Health and Welfare) et al. (1999), 252 N.R. 72; 3 C.P.R.(4th) 1 (F.C.A.), refd to. [para. 59].

City National Leasing Ltd. v. General Motors of Canada Ltd., [1989] 1 S.C.R. 641; 93 N.R. 326; 32 O.A.C. 332, appld. [para. 63].

Miida Electronics Inc. v. Mitsui O.S.K. Lines Ltd. and ITO-International Terminal Operators Ltd., [1986] 1 S.C.R. 752; 68 N.R. 241, refd to. [para. 69].

Blacktop (R.W.) Ltd. et al. v. Artec Equipment Co. et al. (1991), 50 F.T.R. 225; 39 C.P.R.(3d) 432 (T.D.), dist. [para. 72].

Netbored Inc. v. Avery Holdings Inc. et al. (2005), 272 F.T.R. 131 (F.C.), dist. [para. 72].

Aktiebolaget Hassle v. Apotex Inc. (1987), 15 F.T.R. 204; 17 C.P.R.(3d) 349 (T.D.), dist. [para. 72].

Innotech Pty. Ltd. v. Phoenix Rotary Spike Harrow Ltd. et al. (1997), 215 N.R. 397; 74 C.P.R.(3d) 275 (F.C.A.), dist. [para. 72].

Composers, Authors and Publishers Association of Canada Ltd. v. Sandholm Holdings Ltd., [1955] Ex. C.R. 244; 24 C.P.R. 58 (Ex. Ct.), refd to. [para. 73].

Minister of Health v. R.; Ex parte Yaffe, [1931] A.C. 494 (H.L.), refd to. [para. 80].

Trans-Canada Pipe Lines Ltd. v. Saskatchewan (Provincial Treasurer) (1968), 67 D.L.R.(2d) 694 (Sask. Q.B.), refd to. [para. 80].

Bell ExpressVu Limited Partnership v. Rex et al., [2002] 2 S.C.R. 559; 287 N.R. 248; 166 B.C.A.C. 1; 271 W.A.C. 1; 2002 SCC 42, refd to. [para. 83].

Monsanto Canada Inc. et al. v. Schmeiser et al., [2002] N.R. Uned. 261; 22 C.P.R.(4th) 455; 2002 FCA 449, refd to. [para. 104].

Statutes Noticed:

Federal Courts Act, R.S.C. 1985, c. F-7, sect. 20 [para. 15].

Patent Act, R.S.C. 1985, c. P-4, sect. 52.2(1), sect. 55.2(4) [para. 11].

Patent Act Regulations (Can.), Patented Medicines (Notice of Compliance) Regulations, SOR/93-133, sect. 8 [para. 12].

Patented Medicines (Notice of Compliance) Regulations - see Patent Act Regulations (Can.).

Authors and Works Noticed:

Sullivan, Ruth, Sullivan on the Construction of Statutes (5th Ed. 2008), generally [para. 88].

Counsel:

Patrick E. Kierans, Jason C. Markwell, Kristin E. Wall and Andres Garin, for the appellants;

Kenneth Crofoot and Andrew Brodkin, for the respondent.

Solicitors of Record:

Ogilvy Renault LLP, Toronto, Ontario, for the appellants;

Goodmans LLP, Toronto, Ontario, for the respondent.

This appeal and cross-appeal were heard at Toronto, Ontario, on April 21-22, 2009, by Noël, Layden-Stevenson and Ryer, JJ.A., of the Federal Court of Appeal. On June 4, 2009, Noël, J.A., delivered the following reasons for judgment for the court.