Friday, January 6, 2012

Double Recovery in Transnational Patent Litigation

Apotex Inc v Sanofi-Aventis / clopidogrel 2011 FC 1486 Boivin J
            1,336,777 PLAVIX

The recent decision of the Federal Court of Canada invalidating Sanofi’s Canadian Plavix patent raises some interesting points relating transnational patent litigation. Sanofi holds US and Canadian patents for Plavix (clopidogrel). Apotex imported bulk clopidogrel from a third jurisdiction into Canada and then exported it into the US for sale there, so the same pills that were infringing the US patent by sale in the US, were also infringing the Canadian patent by importation into Canada [251]-[253]. The parties entered into a settlement agreement respecting the US litigation. The settlement was subject to regulatory approval, and provided for alternate terms in the event of regulatory denial; in particular, if Sanofi prevailed in subsequent litigation, damages were specified to be 50% of Apotex’s net sales. Regulatory approval was denied, Sanofi prevailed in the subsequent US litigation (492 F Supp 2d 353 (SDNY 2007), aff'd, 550 F 3d 1075 (Fed Cir 2008)), and, in an October 2010 decision (748 F.Supp.2d 293 (SDNY)), Sanofi was awarded damages of 50% of Apotex’s net sales, as provided for in the settlement agreement. In November, 2010 Apotex paid into court US$556,000,000 in respect of the judgment. The Canadian litigation went to trial in April of 2011, after US proceedings were concluded. Apotex argued that Sanofi should not be able to “com[e] to Canada to sue Apotex and recover a second time for the same Apo-clopidogrel in respect of which they have already secured judgment and payment in the U.S.” [276]. Apotex raised three legal arguments to give effect to this general point of principle.

First, Apotex argued that the settlement agreement governed and precluded claims in any litigation, worldwide, in respect of the infringing US sales. Boivin J disagreed, noting that the settlement agreement provided that the parties agreed “to settle the litigations between them involving the U.S. Patent No. 4,847,265.” There was no mention of the Canadian patent, which was the basis of the Canadian litigation. In other words, the parties had agreed to settle litigation in respect of the US patent, not to settle litigation in respect of the US sales. It’s hard to argue with this conclusion, at least on the facts as discussed by Boivin J. It is possible that the parties deliberately drafted the settlement narrowly, and chose not to encompass litigation based on Canadian or other patents. But I have to suspect that the drafters were simply focused on the US, and didn’t think about the possibility that the same acts might infringe a foreign patent. If that is the case, this result is a powerful reminder that even US patent lawyers have to think transnationally.

While the settlement agreement is interesting in its own right, the double recovery problem is just as compelling even if the parties had never entered into a settlement agreement at all. If I sue you in one jurisdiction, and win, and actually get paid, I shouldn’t be able to turn around and sue in another jurisdiction and recover again in respect of exactly the same wrong. Patent infringement is said to be a kind of tort, and “[i]t is a fundamental principle of tort law that an injured person should be compensated for the full amount of his loss, but no more” Ratych v Bloomer, [1990] 1 SCR 940. Similarly, “the plaintiff is not entitled to a double recovery for any loss arising from the injury” Cunningham v Wheeler [1994] 1 SCR 359. This principle is so fundamental that in a case in which harm caused by the defendant’s negligence prevented the plaintiff from working, the SCC held that the defendant was not required to pay damages to the extent that the loss of income had been compensated by welfare benefits: M B v British Columbia, 2003 SCC 53. It is difficult to see why the plaintiff patentee should have any greater entitlement to double recovery than the plaintiff on welfare, quite aside from any settlement.

To give effect to this principle, Apotex asserted res judicata and abuse of process. Boivin J held that there was no res judicata, as the cause of action was different, being based on the Canadian patent rather than the US patent [290]. This conclusion seems to me to be correct.

Apotex’s argument appealed to the court’s inherent jurisdiction to prevent an abuse of process. Boivin J dismissed this argument summarily, in a couple of sentences [291]. My feeling is that there must be more to the abuse of process argument than that; the fundamental principle against double recovery cannot be dismissed so readily, though perhaps it might better be raised at the remedial stage, rather than as a defence. (The SCC decisions mentioned above all deal with the principle in the remedial context.)

Ultimately the matter was moot because Boivin J held the Canadian patent to be invalid, but the underlying problem is a general one which must arise with some regularity. However, I was unable to find any authority directly on point. I am not an expert in this particular area, and I feel that I must be missing something (though a few quick queries to colleagues who know more in the area also drew a blank). If any readers have dealt with this problem, please leave your insights in the comments.

Finally, I should mention that I will be guest blogging on IPKat for a couple of months, and this post is an expanded version of a note I have posted there as well. Interested readers might check there, in case some European readers will be able to solve this puzzle.

PS:  While the decision does not address any legal issues relating to the settlement agreement itself, it provides details of the nature of the settlement, as well as a thorough discussion of the business rationale. Readers interested in the “pay-for-delay” debate might find paragraphs  [260]-[275] worth reading.

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