ONCA Affirms that PM(NOC) Statutory Stay Damages Regime is a Complete Code

Apotex Inc v Eli Lilly Canada Inc 2022 ONCA 587 affg Apotex v Eli Lilly 2021 ONSC 1588

2,041,113 / olanzapine / ZYPREXA

Under the patent linkage system established by the PM(NOC) Regulations, a patent that is ultimately held to be invalid can keep competitors off the market for two years by operation of the statutory stay pursuant to s 7(1)(d). If the generic prevails, s 8 provides a remedy in the form of damages for the losses suffered from having been kept off the market by the statutory stay. One well-established limitation to s 8 damages is that if the generic is unsuccessful in the NOC proceeding, it cannot claim s 8 damages, even if the patent is subsequently held invalid in an infringement action: 2013 FCA 282 (here). So, Lilly had prevailed in NOC proceedings against Apotex based on the 113 patent (2007 FC 455 affd 2008 FCA 44), but that patent was subsequently declared invalid in separate proceedings (2011 FC 1288 affd 2012 FCA 232). Because Apotex lost in the NOC proceedings, it was not entitled to s 8 damages. In this action, Apotex sought to recover damages for having been kept off the market on the basis of three other causes of action: breach of the Ontario Statute of Monopolies; s 7(a) of the Trademarks Act; and common law conspiracy in restraint of trade [34]–[36]. As discussed here, Schabas J, at first instance, dismissed the action on a motion for summary judgment, holding that none of these causes of action raised a genuine issue for trial. The ONCA has now affirmed, essentially holding that Schabas J was correct on all points. I won’t go through the decision in detail. Instead, I’ll summarize and point out some highlights.

The first point is that the NOC Regulations are a “complete code.” Well, they’re not actually a complete code, as Apotex pointed out [36], but the real point of Schabas J’s decision is that the Regulations are “a complete code” for the purposes of determining whether damages were available to Apotex for having been kept off the market as a result of the operation of the Regulations; and for that purpose, they are a complete code [37], [39].

Second, Schabas J held that Lilly cannot be made liable for exercising its statutory rights [ONSC 113]–[118]. The ONCA agreed:

[42] Eli Lilly is not liable for actions that it was authorized by law to take and for harms that were caused by the operation of the patent regime that Apotex invoked. Absent abuse of process, which was not alleged or found here, Eli Lilly was entitled to pursue the legal process provided for under the PM(NOC) Regulations.

This is probably the most significant general holding of law in this decision. As I noted in my post on Schabas J’s decision, it is broadly similar to the US Noerr–Pennington doctrine. The Noerr–Pennington doctrine has found application in a variety of contexts in US law: see Gugliuzza, Patent Trolls and Preemption, (2015) 101 Va L Rev 1579, 1611–12. It will be interesting to see if this holding takes on a life of its own in the Canadian context.

The Statute of Monopolies point turned on Apotex’s argument that the Statute of Monopolies only exempts valid patents from actions for damages [44]. But, on its face, the Statute “does not distinguish between valid and subsequently invalidated patents” [47]. The ONCA further explained that:

Parliament passed the Statute of Monopolies in an attempt to limit abuses by the Crown in granting “letters patent”, not “patents of invention”. The Statute was passed in response to the Crown granting letters patent to operate or regulate industries, or to have others act as agents of the Crown in operating monopolies for trade and industry, independent of merit or invention.

The ONCA did not cite any authorities on this point. It is more confident than I might be as to the purpose of the Statute, and of course patents of invention are, or at least were at the time, letters patent, so that distinction is a bit strained. But that doesn’t really make any difference given the basic point that the Statute does not distinguish between valid and invalid patents.

The Trademark claim turned on the notion that Form IV filed by Lilly to list the 113 patent on the register was misleading because the 113 patent was invalid. However, all statements made by Lilly were true at the time it made them [51].

The conspiracy claim was struck because Lilly committed no unlawful acts; Lilly was entitled to seek and obtain a patent and list it on the Register: [53].

The ONCA also affirmed a very substantial cost award in Lilly’s favour on a deferential standard of review, after taking the opportunity to review the relevant principles of costs awards. The discussion might be useful to lawyers more familiar with Federal Court practice who are involved in litigation in the Ontario courts.