Tuesday, June 28, 2011

The Role of the Merits in an Interlocutory Injunction

Astrazeneca Canada Inc. v. Apotex Inc. / esomeprazole 2011 FC 505 Crampton J aff’d 2011 FCA 211

Though I haven’t done a search, my impression is that it has been quite a while since I’ve seen an interlocutory injunction motion on a patent case out of the Federal Court. Perhaps patentees have more or less given up in light of the restrictive approach taken in the Federal Court of Appeal from about 1990. If so, there is nothing in this decision to change their minds. This is a typical case of a patentee pharmaceutical company seeking an interlocutory injunction to prevent generic entry pending an infringement action. The main twist – an important one in my view, though not in the view of Crampton J – is that AstraZeneca had been unable to obtain a order of prohibition in the related NOC proceedings. The result also is typical: the interlocutory injunction was refused. Crampton J’s opinion is entirely consistent with Federal Court precedent, and it was affirmed by the Court of Appeal on the basis that the decision was heavily fact based and therefore subject to a deferential standard of review. There is little new law in the decision. Nonetheless, in my view, the decision illustrates problems with the current approach to interlocutory injunctions, both in general and in the Federal Court.

There are three points of note: first is the role of an assessment of the merits in an interlocutory injunction; second is the stringency of the irreparable harm requirement in the Federal Courts; third is the view taken by Crampton J regarding the need to prove that patents encourage innovation in the pharmaceutical industry.

Crampton J applied the well-known three part test originally set out in Lord Diplock’s decision in American Cyanamid v Ethicon and entrenched in Canadian law by the Supreme Court in RJR-MacDonald [1994] 1 SCR 311. It requires that the applicant show [54]:

i. There is a serious issue to be tried;
ii. The applicant is likely to suffer irreparable harm if the injunction is not granted;
iii. The balance of convenience favours the granting of the injunction

I have recently criticized the approach taken by the Federal Courts to the irreparable harm requirement in particular (Siebrasse, Interlocutory Injunctions and Irreparable Harm in the Federal Courts, 88(3) Can Bar Rev 515), but since this is a blog post and not an academic article, I will be less restrained, and say that in my view the three-part test itself is fundamentally flawed. I suggest that the correct approach to interlocutory injunctions was stated by Hoffmann J (as he then was) in Films Rover International Ltd v Cannon Film Sales Ltd [1986] 3 All E.R. 772 at 781(Ch.):

The principal dilemma about the grant of interlocutory injunctions. . . is that there is by definition a risk that the court may make the “wrong” decision. . . . A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong.”

Films Rover concerned an application for a mandatory injunction, and the lower risk of injustice principle is now well established in English law in that context. Perhaps because it is not easily reconciled with Cyanamid, it has not made headway in the context of prohibitory injunctions, though Hoffmann J stated expressly that “The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle.”

In any event, I would appeal to the lower risk principle for its logic, as it is evidently not binding authority. As I noted in my Irreparable Harm article, “The lower risk principle provides a coherent approach to the grant of interlocutory injunctions, with a compelling logic. The premise is that in the absence of a full trial on the merits, neither party can be considered inherently more worthy. The parties are therefore treated symmetrically. The applicant may be injured if an injunction is wrongly refused, to the extent of the difference between the value of damages and the value of the injunction. The defendant may be injured if the injunction is wrongly granted, to the extent of the difference between damages on the undertaking and the value of being free to act. The court should grant or deny the injunction so as to minimize the risk of that injury.”

From the perspective of the lower risk principle, Cyanamid was right to relax the rule stated by the Court of Appeal in that case, which would have required the plaintiff to show, on the balance of probabilities, that it would succeed on the merits. A forty percent change of success, combined with a high risk of serious harm if the injunction was denied, might warrant the grant of the injunction. But Lord Diplock went on to suggest that beyond establishing that there was a serious question to be tried, the merits should play little role in the decision on the interlocutory injunction. Ignoring the merits made sense on the facts in Cyanamid itself, which was a complex case with eight days of hearings in the Court of Appeal alone. It was difficult in that case to form a clear view as to which party’s case was stronger while preserving the summary nature of an interlocutory injunction application. But it does not follow that the merits should always be ignored.

As Laddie J explained in Series 5 Software Ltd v Clarke [1996] 1 All ER 853 (Ch):

In fact, as any lawyer who has experience of interlocutory proceedings will know, it is frequently the case that it is easy to determine who is most likely to win the trial on the basis of the affidavit evidence and any exhibited contemporaneous documents. If it is apparent from that material that one party's case is much stronger than the other's then that is a matter the court should not ignore. To suggest otherwise would be to exclude from consideration an important factor and such exclusion would fly in the face of the flexibility advocated earlier in American Cyanamid.

Laddie J also quoted Lord Fraser of Tullybelton in NWL Ltd v Woods [1979] 3 All ER 614 at 628, remarking that in Scotland “[i]t seems to make good sense [to consider the merits]; if the pursuer or petitioner appears very likely to succeed at the end of the day, it will tend to be convenient to grant interim interdict and thus prevent the defender or respondent from infringing his rights, but if the defender or respondent appears very likely to succeed at the end of the day it will tend to be convenient to refuse interim interdict because an interim interdict would probably only delay the exercise of the defender's legal activities.” Good sense in Scotland is not different from good sense anywhere else. Laddie J also pointed out that the fact that the evidence on the merits remains in dispute at the interlocutory stage is in itself no reason not to consider such evidence, “since American Cyanamid directs courts to assess the adequacy of damages and the balance of convenience, yet these too are topics which will almost always be the subject of unresolved conflicts in the affidavit evidence.” He concluded therefore that the real lesson from Cyanamid “is to avoid courts at the interlocutory stage engaging in mini-trials, which is what happened, at least in the Court of Appeal, in American Cyanamid itself. Interlocutory applications are meant to come on quickly and to be disposed of quickly.”

This is a long detour by way of background. Returning to the case at hand, Crampton J was easily satisfied that there was a serious issue to be tried [72], but he declined “to accord much significance” [71] to the NOC proceedings for the purpose of the interlocutory injunction motion. It is of course true, as Crampton J pointed out [59], that NOC proceedings do not operate as res judicata; this is true in practice as well as in principle, as there are examples in which a patent was held to be invalid for the purposes of an NOC proceeding and yet valid after a trial on the merits. But surely it goes too far to ignore the outcome of the NOC proceedings entirely. In Cyanamid Lord Diplock remarked that “[t]he court is not justified in embarking on anything resembling a trial of the action on conflicting affidavits in order to evaluate the strength of either party's case," and "[i]t is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial.” But after NOC proceedings, there has already been something "resembling a trial of the action, " which had provided “detailed argument and mature considerations.” As Crampton J pointed out at [70] in the NOC proceedings in respect of one patent in issue, Hughes J “reviewed an extensive evidentiary record, totalling more than 9,000 pages of evidence and argument.” If Laddie J was right that the real message from Cyanamid was not that the merits should be ignored, but rather that “mini-trials” should be avoided, it does not seem right to ignore the merits when a “mini-trial,” in the form of an NOC proceeding, has actually taken place.

With that said, Crampton J also pointed out that three of the patents at issue in the infringement litigation (process patents) were not the subject of any NOC proceedings [71], and perhaps the need to avoid a mini-trial in respect of these patents is sufficient reason to avoid consideration of the merits. It is not possible to assess that issue here, since it was not developed in Crampton J’s reasons.

The question of role of the merits in the interlocutory injunction application also goes to the broader question of the relationship between interlocutory injunctions and the statutory stay under the NOC regulations. Apotex argued, as Crampton J described it at [64], that it “would be inconsistent with the underlying spirit of the PMNOC Regulations to enjoin a generic drug manufacturer from launching its product after that manufacturer has already been delayed from launching its products by a statutory injunction under those regulations.” That is an attractive argument in principle (though of course such questions must ultimately be decided on the details of the legislation rather than its underlying spirit, particularly has the NOC regulations have tended to be interpreted as reflecting a pragmatic compromise rather than a broad principle). Crampton J did not consider this argument [64], since he decided for other reasons to refuse the interlocutory injunction. Giving some weight to the outcome of the NOC proceedings would be one way of respecting the “underlying spirit” of the NOC regulations (if such exist), without doing violence to the law of interlocutory injunctions. To the extent that the patentee has a stronger argument in respect of process patents, for example, than it had in respect of product patents that were listed on the register, this could be taken into account, without giving the patentee the two clear kicks at the can, to which Apotex understandably objected.

No comments:

Post a Comment