Miscellaneous Issues in Levofloxacin Damages

Janssen Inc v Teva Canada Ltd / levofloxacin 2016 FC 593 Hughes J
            1,304,080 / levofloxacin / LEVAQUIN

Friday’s post discussed the standing issue in Levofloxacin Damages. This post discusses the three other contentious issues, quantum, pre-judgment interest, and mitigation [25].

Damages are assessed as the difference between the patentee’s actual position and the position it would have been in but for the infringement. The main issue respecting quantum was a purely factual one as to which “but for” scenario was most likely. Hughes J resolved this in favour of the scenario preferred by Janssen’s expert [106], with a few relatively minor modifications. While that finding was based on the evidence as a whole, it seems that Teva’s witness did not help his case by arguing that the infringement actually benefitted Janssen to the tune of $4 million [95].

Because a generic cannot normally ramp up its sales immediately on expiry of the patent, absent infringement there will be some period post-expiry during which the patentee has lingering elevated market share. Consistently with established law (see 2013 FC 751, blogged here), Hughes J allowed recovery of damages for these lost post-expiry sales, on the general principle that the patentee is entitled to recover losses caused by the infringement [109]. On the facts, the runoff period allowed by Hughes J was two months for retail sales, and one year for hospital sales [112].

Hughes J also allowed a claim for price suppression – that is, the losses due to the reduced price at which LEVAQUIN was sold in order to compete with infringing generic entry. This is nothing new [116]; the loss is caused by the infringement whether a patentee loses sales entirely, or makes the sales but at a lower price. Of more interest, Teva was eventually forced to withdraw from the marketplace as a result of the injunction granted by Hughes J at the end of the liability phase, but the evidence showed that as a practical matter, Janssen could not raise its price to hospitals after Teva withdrew; the price reduction was effectively locked in, as a matter of customer relations [117]. Hughes J allowed recovery for that continued price suppression. Given the factual finding, recovery for locked-in price suppression follows directly from the principle that the patentee is prima facie entitled to recover losses caused by the infringement. The point was raised again in the context of the argument that Janssen should have mitigated its loss by raising its prices again [144]. Hughes J dismissed this argument on the basis that the burden lies on the defendant to prove that mitigation was possible and the plaintiff failed to make reasonable efforts to do so, and Teva had not discharged its burden in this regard.

Some interesting issues were raised with respect to whether pre-judgment interest should be compounded, with Janssen US relying on Zinn J’s decision in Cefaclor Damages 2014 FC 1254 (blogged here) [134], but Hughes J held that the terms of the liability judgment 2006 FC 1234, [135], awarding pre-judgment interest, not compounded, applied to Janssen US as well as to Janssen Canada [138], so the substantive issues were not really engaged.