Thursday, January 27, 2011

What is "success" in NOC proceedings, for purposes of section 8?

Apotex Inc. v. Merck Frosst Canada Ltd. / lovastatin (NOC) 2010 FC 1264, Snider J

The leading case on compensation under section 8 is Apotex v Syntex / naproxen (NOC) 2010 FCA 155 affm’g 2009 FC 494, in which a prohibition order had been granted, but subsequently set aside after the patent was held to be invalid in separate proceedings. Apotex was denied compensation under section 8. The Court of Appeal held that “Apotex can not ‘reach back and apply the finding of invalidity in the action so as to argue that the ‘671 patent had "expired" within the meaning of section 8' of the 1993 version of the Regulations.” While this was expressly decided on the 1993 Regulations, the broad point seems to be that NOC proceedings and infringement proceedings are separate. Entitlement to section 8 compensation does not depend on the outcome of an infringement action.

If the trigger under section 8 must be success under the NOC proceedings, what counts as “success”? In Apotex Inc. v. Merck Frosst Canada Ltd. / lovastatin (NOC) 2010 FC 1264 the stay expired without the application for the order of prohibition ever having been heard on the merits. Apotex claimed for section 8 compensation, arguing that Merck had not been successful in the NOC proceedings. Merck, on the other hand, argued that it wasn’t unsuccessful, either.

Snider J held that under the 1993 Regulations the question is not whether the innovator succeeds in getting a prohibition order; it is expiry of the relevant patent, for example by a finding that the allegation of invalidity was justified. As the patent had not expired, Apotex could not claim damages.

This specific holding is of limited interest under the 1998 Regulations as it clearly turns on the specific wording and interpretation of the 1993 version. But the facts raise an interesting question. In her decision in the infringement proceedings, released concurrently, Snider J held that the patent was valid and infringed. What if Apotex had won on section 8? If Syntex says you can’t reach back, presumably this applies both ways, so that Merck would have been liable to compensate Apotex under section 8 despite prevailing in the infringement proceeding. Would Merck then be able to recover that section 8 payment as damages in the infringement action? If not, Apotex would retain a sizeable payment for being kept out of a market that it would not have been entitled to enter. It seems inevitable that this problem will arise at some point, as it stems from the basic point made in Syntex that the NOC proceedings, unlike an interlocutory injunction, are separate from the infringement action.

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