Eli Lilly and Co. et al. v. Apotex Inc., (2015) 471 F.T.R. 292 (FC)

• Judge: Zinn, J.
• Court: Federal Court (Canada)
• Case Date: January 23, 2015
• Jurisdiction: Canada (Federal)
• Citations: (2015), 471 F.T.R. 292 (FC);2014 FC 1254

Eli Lilly & Co. v. Apotex Inc. (2015), 471 F.T.R. 292 (FC)

MLB headnote and full text

Temp. Cite: [2015] F.T.R. TBEd. FE.063

Eli Lilly and Company and Eli Lilly Canada, Inc. (plaintiffs) v. Apotex Inc. (defendant)

(T-1321-97; 2014 FC 1254)

Indexed As: Eli Lilly and Co. et al. v. Apotex Inc.

Federal Court

Zinn, J.

January 23, 2015.

Summary:

Eli Lilly & Co. (Lilly U.S.), owned eight patents relating to cefaclor, an antibiotic sold under the registered name of Ceclor®. Lilly U.S. and its Canadian subsidiary, Lilly Canada (the plaintiffs) sued Apotex Inc., a generic drug manufacturer, alleging that Apotex infringed the patents by using bulk cefaclor in its Apo-cefaclor product which was imported from overseas manufacturers who used infringing processes to make cefaclor. Apotex challenged the validity of the patents. Apotex also filed a counterclaim raising Competition Act issues.

The Federal Court, in a decision reported 351 F.T.R. 1, allowed the plaintiffs' infringement action. The court found that at least one valid claim in each of the eight patents was infringed by Apotex by its importation, manufacture, export, sale and offers for sale of the antibiotic cefaclor in Canada. The infringing Apotex cefaclor was manufactured by Kyong Bo (South Korea) and Lupin (India) and received by Apotex before June 3, 1998. The court held that the plaintiffs were entitled to elect either an accounting of profits or all damages sustained by reason of sales directly lost as a result of the infringement, to be assessed by reference. The plaintiffs were awarded interest and costs. The counterclaim was dismissed. The plaintiffs elected to recover its damages. A number of issues arose respecting how damages would be calculated.

The Federal Court, in the decision reported below, determined the issues accordingly. Apotex was ordered to pay the plaintiffs damages of $31,234,000 plus prejudgment interest of $75,040,649.

Courts - Topic 82

Stare decisis - Authority of judicial decisions - Prior decisions of same court - Federal Court (incl. judicial comity) - The Federal Court noted that it was not bound by a decision of another judge of the court - However, the principle of comity applied to judges of the court - The court stated that conclusions of law of a Federal Court judge should not be departed from, unless one was convinced that the departure was necessary and cogent reasons could be articulated for so doing - See paragraph 51.

Courts - Topic 103

Stare decisis - Authority of judicial decisions - English, American and foreign authorities - American decisions - The Federal Court noted that there was a significant and material difference between Canadian and United States legislation defining a patentee's recoverable damages for patent infringement - The court, for this and other reasons, found that the United States jurisprudence had no value to a Canadian court when undertaking assessments of patent damages following an infringement - See paragraphs 46 to 50.

Patents of Invention - Topic 3821

Infringement actions - Damages - General - The Federal Court stated that "'Infringement of a patent is a statutory tort' ... Subsection 55(1) of the Patent Act ... creates that statutory tort: 'A person who infringes a patent is liable to the patentee and to all persons claiming under the patentee for all damage sustained by the patentee or by any such person, after the grant of the patent, by reason of the infringement'" - The court, thereafter, discussed damages in this context - See paragraphs 10 to 22.

Patents of Invention - Topic 3821

Infringement actions - Damages - General - The Federal Court stated that "In determining how one restores the patentee who has sustained injury or loss to the condition in which he would have been, had he not sustained it, courts have often said that one must create a but-for world. The but-for world is a legal fiction described by asking: 'But for the infringing product being on the market, what would the patentee's position have been?' The answer to that question responds to the damage calculation in scenario one - the patentee's profits lost as a consequence of the infringement" - See paragraph 20.

Patents of Invention - Topic 3821

Infringement actions - Damages - General - Apotex Inc., a generic drug manufacturer, was found liable for infringing Eli Lilly's patents - Eli Lilly elected to be paid damages - The parties differed as to one specific characteristic of the "but-for world" (the legal fiction used in calculating damages to determine the patentee's position "but for" the infringing product being on the market) - Apotex urged the court to find that if there was a non-infringing alternative (NIA) to the infringing product or process that was available to the infringer in place of the infringing product or process, then, even though the infringer did not employ the NIA in the real world, it had to be considered in the "but-for world" (i.e., the NIA defence) - The Federal Court held that the NIA defence was not available in Canada - Therefore, the court rejected the submission that Apotex was entitled to the benefit of the NIA defence - See paragraphs 21 to 57.

Patents of Invention - Topic 3821

Infringement actions - Damages - General - Apotex Inc., a generic drug manufacturer, was found liable for damages for infringing Eli Lilly's patents by importing and using a cefaclor antibiotic product manufactured overseas by Kyong Bo and Lupin prior to June 3, 1998 - Apotex submitted that in assessing Eli Lilly's damages, the court had to do so on the basis that from and after June 3, 1998, Apotex would have had a legal generic cefaclor in the Canadian market, as a consequence of which, sales of Lilly's cefaclor would have decreased substantially - The Federal Court held that Apotex had the burden of proving on a balance of probabilities that it would have come to market with non-infringing cefaclor prior to the expiration of the patents - However, Apotex failed to prove that had the infringing material not been available to it, it would have entered the market with a non-infringing material prior to when the patents expired in April 2000 - That is, Eli Lilly would have occupied the whole of the cefaclor market until at least April 2000 - See paragraphs 58 to 71.

Patents of Invention - Topic 3821

Infringement actions - Damages - General - Apotex Inc., a generic drug manufacturer, was found liable for damages for infringing Eli Lilly's patents by importing and using a cefaclor antibiotic product manufactured overseas by Kyong Bo and Lupin - The Federal Court, for purposes of calculating damages, determined when Apotex would have entered the market, when Apotex would have been listed on the provincial formularies, the size of the market and the royalty rate - In the result, Apotex was ordered to pay Eli Lilly damages of $31,234,000 plus prejudgment interest of $75,040,649 - See paragraphs 58 to 138.

Patents of Invention - Topic 3821

Infringement actions - Damages - General - [See Courts - Topic 103 ].

Patents of Invention - Topic 3834

Infringement actions - Damages - Interest - Prejudgment - Apotex Inc., a generic drug manufacturer, was found liable for damages for infringing Eli Lilly's patents by importing and using a cefaclor antibiotic product manufactured overseas by Kyong Bo and Lupin - The Federal Court awarded Eli Lilly prejudgment interest compounded annually on the damages to be awarded - See paragraphs 104 to 125.

Patents of Invention - Topic 3839

Infringement actions - Damages - Defences (incl. non-infringing alternative defence) - The non-infringing alternative (NIA) defence provided that if the infringer could show that there was an alternative substitute to the patented product that did not infringe the patent, and which was available, then the patentee could not prove that it would have made the sales made by the infringer because the infringer could have made those sales using the NIA - Absent proof that the patentee would have made the infringing sales in the "but-for world", it could not prove that it suffered a loss of profits on those sales - The Federal Court held that the NIA defence was not available in Canada in an action for damages for patent infringement - See paragraphs 23 to 57.

Patents of Invention - Topic 3839

Infringement actions - Damages - Defences (incl. non-infringing alternative defence) - [See third Patents of Invention - Topic 3821 ].

Cases Noticed:

Gerber Garment Technology Inc. v. Lectra Systems Ltd., [1997] R.P.C. 443 (C.A.), refd to. [para. 10].

Watson, Laidlaw & Co. v. Pott, Cassels & Williamson (1914), 31 R.P.C. 104 (H.L.), refd to. [para. 17].

United Horse-Shoe & Nail Co. v. Stewart & Co. (1888), 5 R.P.C. 260, refd to. [para. 18].

Panduit Corp. v. Stahlin Bros. Fibre Works Inc. (1978), 575 F.2d 1152 (6th Cir.), not folld. [para. 23].

Grain Processing Corp. v. American Maize-Products Co. (1999), 185 F.3d 1341 (U.S. App.), not folld. [para. 23].

Merck & Co. et al. v. Apotex Inc. et al. (2013), 437 F.T.R. 1; 2013 FC 751, refd to. [para. 25].

Monsanto Canada Inc. et al. v. Rivett et al. (2010), 408 N.R. 143; 2010 FCA 207, refd to. [para. 25].

Sanofi-Aventis Canada Inc. et al. v. Teva Canada Ltd. (2012), 410 F.T.R. 1; 2012 FC 552, varied (2014), 456 N.R. 241; 2014 FCA 67, refd to. [para. 25].

Clements v. Clements (2012), 431 N.R. 198; 331 B.C.A.C. 1; 565 W.A.C. 1; 2012 SCC 32, refd to. [para. 27].

Allied Signal Inc. v. DuPont Canada Inc. and Complax Corp. (1998), 142 F.T.R. 241; 78 C.P.R.(3d) 129 (T.D.), refd to. [para. 33].

Meters Ltd. v. Metropolitan Gas Meters Ltd. (1911), 28 R.P.C. 157 (C.A.), refd to. [para. 33].

Hamilton v. Featherweight Aluminum (1965), 47 C.P.R. 40 (Ex. Ct.), refd to. [para. 33].

JAY-LOR International Inc. et al. v. Penta Farm Systems Ltd. et al. (2007), 313 F.T.R. 1; 59 C.P.R.(4th) 228; 2007 FC 358, refd to. [para. 33].

Monsanto Canada Inc. et al. v. Schmeiser et al., [2004] 1 S.C.R. 902; 320 N.R. 201; 2004 SCC 34, refd to. [para. 38].

Reading & Bates Construction Co. v. Baker Energy Resources Co. et al., [1995] 1 F.C. 483; 175 N.R. 225; 85 F.T.R. 240, refd to. [para. 40].

Allergan Inc. et al. v. Canada (Minister of Health) et al. (2012), 440 N.R. 269; 2012 FCA 308, refd to. [para. 51].

Apotex Inc. v. Allergan Inc. - see Allergan Inc. et al. v. Canada (Minister of Health) et al.

Bank of America Canada v. Mutual Trust Co. et al., [2002] 2 S.C.R. 601; 287 N.R. 171; 159 O.A.C. 1; 2002 SCC 43, refd to. [para. 106].

AstraZeneca Canada Inc. et al. v. Apotex Inc. et al., [2011] F.T.R. Uned. 528; 2011 FC 663, refd to. [para. 113].

Statutes Noticed:

Patent Act, R.S.C. 1985, c. P-4, sect. 55(1) [para. 11].

Counsel:

Anthony Creber, Isabel J. Raasch and Marc Richard, for the plaintiffs;

Harry Radomski, David Scrimger, Sandon Shogilev, Jordan Scopa and Daniel Cappe, for the defendant.

Solicitors of Record:

Gowling Lafleur Henderson, LLP, Ottawa, Ontario, for the plaintiffs;

Goodmans, LLP, Toronto, Ontario, for the defendant.

This decision was heard on Toronto, Ontario, on September 2 to 5, 9 to 12, 15, 16, 18, 23 to 25, 29, 30, 2014, before Zinn, J., of the Federal Court, who delivered the following decision on January 23, 2015.