Merck & Co. et al. v. Apotex Inc., 2003 FCA 234

• Judge: Stone, Noël and Sexton, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: May 26, 2003
• Jurisdiction: Canada (Federal)
• Citations: 2003 FCA 234;(2003), 305 N.R. 68 (FCA);227 DLR (4th) 106;25 CPR (4th) 289;305 NR 68;[2003] FCJ No 837 (QL)

Merck & Co. v. Apotex Inc. (2003), 305 N.R. 68 (FCA)

MLB headnote and full text

Temp. Cite: [2003] N.R. TBEd. JN.002

Apotex Inc. (appellant/defendant) and Bernard Sherman (appellant) v. Merck & Co. Inc. and Merck Frosst Canada & Co. (respondents/plaintiffs)

(A-226-00)

Apotex Inc. (appellant/defendant) and Dr. Bernard Sherman (appellant) v. Merck & Co. Inc. and Merck Frosst Canada & Co. (respondents/plaintiffs)

(A-410-01; 2003 FCA 234)

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

Federal Court of Appeal

Stone, Noël and Sexton, JJ.A.

May 26, 2003.

Summary:

Merck & Co. held a patent for enalapril maleate and Apotex Inc. manufactured its generic equivalent. Merck sued Apotex for patent infringement.

The Federal Court of Canada, Trial Divi­sion, in a decision reported 88 F.T.R. 260 allowed the action and held that Merck was entitled to a permanent injunction restraining further infringement on the part of Apotex (December 14, 1994). Counsel agreed to submit a draft judgment for discussion incor­porating the court's findings. The next day, December 15, 1994, before a draft was prepared, Apotex sold $9 million worth of the drug (i.e., the equivalent of a month's normal sales by Apotex). Judgment was entered on December 22, 1994. Apotex continued to make direct sales until January 9, 1995, when the injunction went into full force and effect. Thereafter, Apotex facili­tated the distribution of its product by third parties (the third party sales). Merck pursued contempt proceedings against Apotex and Sherman, Apotex's CEO.

The Federal Court of Canada, Trial Divi­sion, in a decision reported [2000] F.T.R. Uned. 230, found Apotex and Sherman in contempt for carrying out sales between December 14, 1994 and January 9, 1995 (the December sales). The court found that Apo­tex, but not Sherman, had committed con­tempt of court by aiding abetting third party sales after January 9, 1995.

The Federal Court of Canada, Trial Divi­sion, in a decision reported 206 F.T.R. 51, fined Apotex $250,000 and fined Sherman $4,500. Additionally, Apotex and Sherman were jointly and severally liable to pay Merck's costs on a solicitor-client basis. Apotex and Sherman appealed the finding of contempt. Merck cross-appealed, arguing that the fine for Apotex was too low.

The Federal Court of Appeal allowed the appeal in part. The court affirmed the find­ing of contempt respecting the December sales. The court, however, set aside the find­ing of contempt as it related to the time period after January 9, 1995 (i.e., the third party sales). The court reduced the fine for Apotex to $125,000, but affirmed Sherman's fine. The court affirmed that costs should be awarded on a solicitor-client basis, but should reflect Merck's lack of success on the third party sales issue. The cross-appeal was dismissed.

Contempt - Topic 42

General - Elements of contempt - Mens rea - [See Contempt - Topic 683 ].

Contempt - Topic 681

What constitutes contempt - Judgments and orders - Requirement of formal judgment or order - [See first Contempt - Topic 1005 ].

Contempt - Topic 682

What constitutes contempt - Judgments and orders - Requirement of knowledge of court order - [See first and second Con­tempt - Topic 1005 ].

Contempt - Topic 683

What constitutes contempt - Judgments and orders - Requirement of clear and unam­biguous order - Rule 355(1) of the Federal Court Rules provided that a person was guilty of contempt if they disobeyed any court process or order (i.e., branch 1) or if they interfered with the orderly administra­tion of justice or impaired the authority or dignity of the Court (i.e., branch 2) - The Federal Court of Appeal held that the test with respect to the level of intent necessary for proving contempt was the same for both branches of the rule - The issue in both cases, should be whether the court's intention was clear in issuing its order, reasons for judgment etc., and whether the alleged contemner knowingly committed the prohibited act - It was not necessary to show that the alleged contemner intended, by doing the impugned action, to disobey the order or interfere with the orderly administration of justice, etc. - The court noted that the matter of good faith went only to mitigation of sentence - See para­graphs 50 to 53.

Contempt - Topic 684

What constitutes contempt - Judgments and orders - Disobedience of or non-compli­ance with - [See Contempt - Topic 683 and first and second Con­tempt - Topic 1005 ].

Contempt - Topic 1005

What constitutes contempt - Legal process - Impeding or frustrating orderly adminis­tration of justice - Apotex, a generic drug manufacturer, was found to have infringed Merck's patent for enalapril maleate and according to the reasons for judgment a permanent injunction was to issue - A draft judgment was to be prepared for discussion - Nevertheless, Apotex continued to sell the drug directly until judgment was entered (the December sales) - Contempt proceedings ensued against Apotex and its CEO, Sherman - The Federal Court of Appeal affirmed that the defendants were in contempt of court with respect to the December sales where they had knowl­edge of the reasons for judgment and committed acts in contravention of those reasons - The court noted that the reasons for judg­ment were clear and unam­biguous and did not lend themselves to the inter­pretation by the defendants that they were allowed to continue selling the drug until judgment was entered - See para­graphs 50 to 73.

Contempt - Topic 1005

What constitutes contempt - Legal process - Impeding or frustrating orderly adminis­tration of justice - Apotex, a generic drug manufacturer, was found to have infringed Merck's patent for enalapril maleate and according to the reasons for judgment a permanent injunction was to issue - A draft judgment was to be prepared for discussion - Nevertheless, Apotex continued to sell the drug directly until judgment was entered (the December sales) and thereafter facilitated distribution and sales by third parties (the third party sales) - Contempt proceedings ensued against Apotex its CEO, Sherman (the defendants), who alleged that Apotex was in contempt for aiding and abetting third party sales - The Federal Court of Appeal held that the defendants were not in contempt respecting the third party sales - The court held that third party sales were legally exempted from the injunction and one could not be found to be "aiding and abetting" an act when the act assisted was a legal act - Therefore the provision of assistance by Apotex to such third parties, whether financial or otherwise did not constitute contempt - See paragraphs 74 to 77.

Contempt - Topic 1005

What constitutes contempt - Legal process - Impeding or frustrating orderly adminis­tration of justice - [See Contempt - Topic 683 ].

Contempt - Topic 3315

Punishment - Fines - Apotex, a generic drug manufacturer, was found to have infringed Merck's patent for enalapril maleate and according to the reasons for judgment a permanent injunction was to issue - A draft judgment was to be pre­pared for discussion - Nevertheless, Apotex continued to sell the drug directly until judgment was entered (the December sales) - Contempt proceedings ensued against Apotex and its CEO, Sherman (the defend­ants) - The trial judge found both Apotex and Sherman in contempt and imposed fines of $250,000 and $4,500 respectively -The defendants appealed the fines - The Federal Court of Appeal varied Apotex's fine to $125,000 but affirmed the $4,500 fine for Sherman - In reducing the fine the court took into account that it had set aside the trial judge's finding of contempt with respect to some sales - The court noted however that in arriving at the ap­propriate fine, deterrence was of particular import­ance with respect to corporate offender and contempt cases in general - Also deterrence was not a factor to be minimized in the area of intellectual prop­erty - See para­graphs 80 to 92.

Contempt - Topic 5115

Punishment - Costs - Apotex, a generic drug manufacturer, was found to have infringed Merck's patent for enalapril maleate and according to the reasons for judgment a permanent injunction was to issue - A draft judgment was to be pre­pared for discussion - Nevertheless, Apotex continued to sell the drug directly until judgment was entered (the December sales) and facilitated third party sales thereafter - The trial judge found that Apotex and Sherman, its CEO (the defendants) were in contempt and imposed fines - The trial judge also awarded costs against the defend­ants on a solicitor and client basis - The Federal Court of Appeal affirmed that costs should be awarded on a solicitor-client basis, but noted that costs should reflect the fact that Merck was unsuccess­ful (on appeal) with its contempt allega­tions respecting the period of time after judg­ment was entered - See paragraphs 93 to 94.

Practice - Topic 7464

Costs - Solicitor and client costs - Entitle­ment - In contempt proceedings - [See Contempt - Topic 5115 ].

Cases Noticed:

Baxter Laboratories of Canada Ltd., Travenol Laboratories Inc. and Baxter Travenol Laboratories Inc. v. Cutter (Canada) Ltd., [1983] 2 S.C.R. 388; 50 N.R. 1; 75 C.P.R.(2d) 1, appld. [para. 13].

Baxter Travenol Laboratories of Canada Ltd. v. Cutter (Canada) Ltd. (1980), 52 C.P.R.(2d) 163 (F.C.T.D.), refd to. [para. 52].

Baxter Travenol Laboratories of Canada Ltd. v. Cutter (Canada) Ltd. (1984), 1 C.P.R.(3d) 433 (F.C.T.D.), refd to. [para. 55].

Baxter Travenol Laboratories Inc. v. Cutter (Canada) Ltd. (1987), 81 N.R. 220; 14 C.P.R.(3d) 449 (F.C.A.), refd to. [para. 56].

Skipper Fisheries Ltd. v. Thorbourne et al. (1997), 157 N.S.R.(2d) 241; 462 A.P.R. 241 (C.A.), dist. [para. 57].

Canada Games Co. v. Hasbro Canada Inc., [1989] F.C.J. No. 500 (T.D.), dist. [para. 58].

Beverley Hills Home Improvements Inc. v. Greenberg (1993), 47 C.P.R.(3d) 66 (Ont. Gen. Div.), refd to. [para. 59].

United Nurses of Alberta v. Alberta (Attor­ney General), [1992] 1 S.C.R. 901; 135 N.R. 321; 125 A.R. 241; 14 W.A.C. 241; 89 D.L.R.(4th) 609, refd to. [para. 61].

R. v. Hill (1976), 73 D.L.R.(3d) 621 (B.C.C.A.), refd to. [para. 62].

Sheppard v. Sheppard (1976), 67 D.L.R.(3d) 592 (Ont. C.A.), refd to. [para. 62].

Lubrizol Corp. et al. v. Imperial Oil Ltd. et al. (1994), 84 F.T.R. 197; 58 C.P.R.(3d) 167 (T.D.), revd. [1996] 3 F.C. 40; 197 N.R. 241 (F.C.A.), refd to. [para. 72].

Canada (Attorney General) v. First Nation­al Export & Import Co. et al. (1996), 108 F.T.R. 49; 66 C.P.R.(3d) 1 (T.D.), refd to. [para. 72].

Blencoe v. Human Rights Commission (B.C.) et al., [2000] 2 S.C.R. 307; 260 N.R. 1; 141 B.C.A.C. 161; 231 W.A.C. 161, refd to. [para. 79].

R. v. Regan (G.A.) (2002), 282 N.R. 1; 201 N.S.R.(2d) 63; 629 A.P.R. 63 (S.C.C.), refd to. [para. 79].

Canada (Minister of Citizenship and Immi­gration) v. Tobiass et al., [1997] 3 S.C.R. 391; 218 N.R. 81, refd to. [para. 79].

Health Care Corp. of St. John's et al. v. New­foundland and Labrador Association of Public and Private Employees, [2001] Nfld. & P.E.I.R. Uned. 4 (Nfld. T.D.), refd to. [para. 85].

West Lincoln (Township) v. Chan et al., [2001] O.T.C. 421 (Sup. Ct.), refd to. [para. 87].

Vuitton (Louis) S.A. v. Tokyo-Do Enter­prises Inc. (1990), 37 C.P.R.(3d) 8 (F.C.T.D.), refd to. [para. 88].

Pfizer Canada Inc. et al. v. Apotex Inc. et al. (1998), 162 F.T.R. 169; 86 C.P.R.(3d) 33 (T.D.), refd to. [para. 93].

Dimatt Investments Inc. v. Presidio Cloth­ing Inc. (1993), 62 F.T.R. 142; 48 C.P.R.(3d) 46 (T.D.), refd to. [para. 93].

Innovation and Development Partners/IDP Inc. v. Canada (1993), 64 F.T.R. 177 (T.D.), refd to. [para. 93].

Statutes Noticed:

Federal Court Rules (1978), rule 355(1), rule 355(2), rule 355(4) [para. 49].

Federal Court Rules (1998), rule 400(1) [para. 49].

Authors and Works Noticed:

Canadian Judicial Council, Some Guidelines on the Use of Contempt Powers (May 2001), pp. 40, 41 [para. 86].

Ewaschuk, E.G., Criminal Pleadings & Practice in Canada (2nd Ed. 2002), vol. 1, p. 18:0380 [para. 83].

Counsel:

H.B. Radomski and David Scrimger, for the appellant, Apotex;

Brian Greenspan and Sharon Lavine, for the appellant, Dr. Bernard Sherman;

Brian Crane, G. Alexander Macklin and Ritu Gambhir, for the respondent.

Solicitors of Record:

Goodmans, Toronto, Ontario, for the appellant, Apotex;

Greenspan, Humphrey, Lavine, Toronto, Ontario, for the appellant, Dr. Bernard Sherman;

Gowling, Lafleur Henderson LLP, Ottawa, Ontario, for the respondent.

This appeal and cross-appeal were heard at Toronto, Ontario, on April 8 and 9, 2003, before Stone, Noël and Sexton, JJ.A., of the Federal Court of Appeal.

Sexton, J.A., delivered the following judg­ment for the Court of Appeal on May 26, 2003.