Apotex Inc. v. Merck & Co. et al., 2008 FC 1185

• Judge: Hughes, J.
• Court: Federal Court (Canada)
• Case Date: October 06, 2008
• Jurisdiction: Canada (Federal)
• Citations: 2008 FC 1185;(2008), 335 F.T.R. 255 (FC)

Apotex Inc. v. Merck & Co. (2008), 335 F.T.R. 255 (FC)

MLB headnote and full text

Temp. Cite: [2008] F.T.R. TBEd. OC.009

Apotex Inc. (plaintiff) v. Merck & Co. Inc., Merck Frosst Canada Ltd. and Merck Frosst Canada & Co. (defendants)

(T-1144-05; 2008 FC 1185)

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

Federal Court

Hughes, J.

October 21, 2008.

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 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 determined the issues accordingly.

Constitutional Law - Topic 6281

Federal jurisdiction (s. 91) - Patents of invention and discovery - General - 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 - 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 to prohibit the Minister from issuing an NOC to Apotex - On February 3, 2004, Apotex's application was approved pending the outcome of Merck's proceedings - On May 26, 2005, Mosley, J., dismissed Merck's application - On May 27, 2005, the Minister issued an NOC to Apotex - 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 - 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, 1967 - The Federal Court disagreed - Section 8 was an integral part of a scheme set out in the Regulations directed to the enforcement of rights in certain types of medicinal patents including a balanced procedure respecting such enforcement - The right to take an action under s. 8 was of limited scope and arose only where an innovator chose to commence proceedings under the Regulations regarding a listed patent and was ultimately successful - The action was part of the overall scheme of the Regulations to create a balance between innovators and generics - Overall, s. 8 was nourished by the Patent Act and patents were clearly a subject within the exclusive competence of the federal Parliament - See paragraphs 76 to 83.

Courts - Topic 4029

Federal Court of Canada - Jurisdiction - Federal Court - Patents of invention - 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 - 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 to prohibit the Minister from issuing an NOC to Apotex - On February 3, 2004, Apotex's application was approved pending the outcome of Merck's proceedings - On May 26, 2005, Mosley, J., dismissed Merck's application - On May 27, 2005, the Minister issued an NOC to Apotex - 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 - As a preliminary issue, Merck asserted, inter alia, that the court lacked jurisdiction to hear an action under s. 8 - The Federal Court held that it had jurisdiction to hear the action - The essential requirements to support a finding of jurisdiction in the Federal Court were (i) a statutory grant of jurisdiction by the federal Parliament, (ii) an existing body of federal law that was essential to the action and which nourished the statutory grant and (iii) the law on which the action was based was a "law of Canada" as per s. 101 of the Constitution Act, 1867 - The court rejected Merck's argument that the first requirement was not satisfied because there was no conferral of jurisdiction on the Federal Court in the Patent Act to hear actions under s. 8 of the Regulations - Under s. 20(2) of the Federal Courts Act, the Federal Court had jurisdiction in a patent matter as being made "under authority" of a federal statute - The Patent Act authorized regulations to be made, conferring jurisdiction on "any court of competent jurisdiction" - Section 2 of the Regulations named the Federal Court as such a court - Section 12(2) of the Patent Act gave the Regulations the same effect as a statute - Further, both the Patent Act and the Federal Courts Act were bodies of federal law (second requirement) and were existing laws and laws of Canada (third requirement) - See paragraphs 57 to 69.

Food and Drug Control - Topic 1102

Drugs - New drugs - Legislation, re - [See Constitutional Law - Topic 6281 , first Food and Drug Control - Topic 1108.2 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 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 - 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 to prohibit the Minister from issuing an NOC to Apotex - On February 3, 2004, Apotex's application was approved pending the outcome of Merck's proceedings - On May 26, 2005, Mosley, J., dismissed Merck's application - On May 27, 2005, the Minister issued an NOC to Apotex - 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 court considered a number of preliminary issues, including Apotex's argument 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 Federal 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 - Under s. 8, Apotex could claim compensation for its loss for having been kept off of the market for a period of time during Merck's proceedings - The use of the words "damages or profits" meant that Apotex could seek, as a measure of its damages in the alternative, the profits that it would have made if it had been able to market its product at an earlier time - See paragraphs 85 to 102.

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 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 - 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 to prohibit the Minister from issuing an NOC to Apotex - On February 3, 2004, Apotex's application was approved pending the outcome of Merck's proceedings - On May 26, 2005, Mosley, J., dismissed Merck's application - On May 27, 2005, the Minister issued an NOC to Apotex - 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 court considered a number of preliminary issues, including the period of time in respect of which Apotex could claim recovery - The Federal Court held that the relevant starting date for the period of compensation, per s. 8(1)(a) of the Regulations, was the date that Apotex's application was approved subject to any outstanding Regulations matters, such as Merck's proceedings - Here, that date was February 3, 2004 - The termination date was May 25, 2005 - The only discretion afforded to the court under s. 8(4)(a) was with respect to the first date if it was satisfied on the evidence that another date was more appropriate - Here, there was no such evidence - See paragraphs 103 to 116.

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 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 - 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 to prohibit the Minister from issuing an NOC to Apotex - On February 3, 2004, Apotex's application was approved pending the outcome of Merck's proceedings - On May 26, 2005, Mosley, J., dismissed Merck's application - On May 27, 2005, the Minister issued an NOC to Apotex - 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 court considered a number of preliminary issues, including Apotex's claim for damages (future losses) regarding a loss of market share that endured beyond the period from February 3, 2004, to May 26, 2005 - The Federal Court held that it was appropriate for Apotex to make this claim - 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 - This was analogous to an injury suffered by a person due to the tortious act of another person - The injury might heal, while a disability remained - This was a matter of quantification, not a matter of injury, itself - Thus, the claim was appropriate, provided that the marketplace had not rectified or Apotex could not have remedied the marketplace disadvantage prior to May 26, 2005 - See paragraphs 117 to 122.

Statutes - Topic 5367

Operation and effect - Delegated legislation - Regulations - Validity of - Ultra vires - Whether purpose authorized by empowering statute - 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 - 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 to prohibit the Minister from issuing an NOC to Apotex - On February 3, 2004, Apotex's application was approved pending the outcome of Merck's proceedings - On May 26, 2005, Mosley, J., dismissed Merck's application - On May 27, 2005, the Minister issued an NOC to Apotex - 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 - As a preliminary issue, Merck asserted, inter alia, that s. 8 was ultra vires s. 55.2(4) of the Patent Act - The grant of power in s. 55.2(4) was to enact regulations "necessary for the preventing of the infringement of a patent" - Merck argued that s. 8 created a new cause of action not directed to patent infringement, but to punishment of an unsuccessful innovator in an NOC application - The Federal Court disagreed - The Regulations were directed toward "patent infringement" because, inter alia, they allowed an innovator to launch an application to prevent a generic from receiving an NOC which, if successful, would prevent patent infringement - The commencement of the innovator's application would put the generic's application in a 24 month "deep freeze" - Section 8 provided, just as in any court proceeding, a disincentive for seeking what was, in effect, an interlocutory injunction - It was like an undertaking given by a person seeking an injunction and was part of the "balance" of the Regulations - Section 8 was properly enabled by s. 55.2(4) of the Patent Act - See paragraphs 70 to 75.

Words and Phrases

Damages or profits - The Federal Court discussed the interpretation of the phrase "damages or profits" as found in s. 8(4) of the Patent Act Regulations (Can.), Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 - See paragraphs 85 to 102.

Cases Noticed:

R. v. Manuel (1982), 38 O.R.(2d) 321 (C.A.), refd to. [para. 14].

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. 17].

Apotex Inc. v. Canada (Attorney General) et al., [2000] 4 F.C. 264; 255 N.R. 319; 6 C.P.R.(4th) 165 (F.C.A.), refd to. [para. 17].

Bayer AG and Miles Canada Inc. v. Canada (Minister of Health and Welfare) and Apotex Inc. (1993), 163 N.R. 183; 51 C.P.R.(3d) 329 (F.C.A.), refd to. [para. 17].

Bristol-Myers Squibb Co. et al. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 533; 334 N.R. 55; 39 C.P.R.(4th) 449, refd to. [para. 17].

Reference Re Validity of Regulations in Relation to Chemicals, [1943] S.C.R. 1, refd to. [para. 20].

Micro Chemicals Ltd. v. Smith, Kline & French Inter-American Corp., [1972] S.C.R. 506, refd to. [para. 22].

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. 39].

Pfizer Canada Inc. v. Canada (Minister of Health) (2008), 326 F.T.R. 88; 2008 FC 500, refd to. [para. 39].

Searle (G.D.) & Co. et al. v. Novopharm Ltd. et al. (2007), 296 F.T.R. 254; 56 C.P.R.(4th) 1 (F.C.), refd to. [para. 39].

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; 80 C.P.R.(3d) 368, refd to. [para. 40].

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. 44].

Eli Lilly Canada Inc. v. Canada (Minister of Health) (2003), 300 N.R. 76; 23 C.P.R.(4th) 289 (F.C.A.), refd to. [para. 45].

Fournier Pharma Inc. v. Canada (Attorney General) et al. (1998), 154 F.T.R. 56; 83 C.P.R.(3d) 72 (T.D.), refd to. [para. 47].

Delrina Corp. v. Triolet Systems Inc. et al. (2002), 156 O.A.C. 166; 17 C.P.R.(4th) 289 (C.A.), refd to. [para. 54].

Ordon et al. v. Grail, [1998] 3 S.C.R. 437; 232 N.R. 201; 115 O.A.C. 1; 166 D.L.R.(4th) 193, refd to. [para. 59].

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.), refd to. [para. 59].

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; 28 D.L.R.(4th) 641, appld. [para. 60].

R. v. Singer, [1941] S.C.R. 111, refd to. [para. 65].

Canadian Pacific Ltd. v. Matsqui Indian Band et al., [1995] 1 S.C.R. 3; 177 N.R. 325; 122 D.L.R.(4th) 129, refd to. [para. 66].

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; 24 C.P.R.(3d) 417, appld. [para. 78].

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. 85].

JAY-LOR International Inc. et al. v. Penta Farm Systems Ltd. et al. (2007), 313 F.T.R. 1; 2007 FC 358, refd to. [para. 90].

Voith (J.M.) GmbH v. Beloit Corp. (1997), 214 N.R. 85; 73 C.P.R.(3d) 321 (F.C.A.), refd to. [para. 92].

Bayer Aktiengesellschaft et al. v. Apotex Inc., [2001] O.T.C. 2; 10 C.P.R.(4th) 151 (Sup. Ct.), affd. (2002), 155 O.A.C. 117; 16 C.P.R.(4th) 417 (C.A.), refd to. [para. 93].

Allied Signal Inc. v. DuPont Canada Inc. and Complax Corp. (1998), 142 F.T.R. 241; 78 C.P.R.(3d) 129 (T.D.), affd. (1999), 235 N.R. 185; 86 C.P.R.(3d) 324 (F.C.A.), refd to. [para. 94].

Statutes Noticed:

Patent Act Regulations (Can.), Patented Medicines (Notice of Compliance) Regulations, SOR/93-133, sect. 8 [para. 26].

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), pp. 165, 166 [para. 99]; 167, 168 [paras. 99, 100]; 172, 173 [para. 98].

Terrell on the Law of Patents (16th Ed. 2006), paras. 13-32 to 13-35 [para. 95].

Counsel:

Andrew Brodkin, Ken Crowfoot and Jerry Topolski, for the plaintiff, Apotex Inc.;

Patrick Kierans, Jason C. Markwell, Kristin E. Wall and Andres Garin, for the defendants, Merck & Co. et al.

Solicitors of Record:

Goodmans, LLP, Toronto, Ontario, for the plaintiff, Apotex Inc.;

Ogylvie Renault, LLP, Toronto, Ontario, for the defendants, Merck & Co et al.

This action was heard at Toronto, Ontario, on October 6, 2008, by Hughes, J., of the Federal Court, who delivered the following reasons for judgment on October 21, 2008.