Wednesday, July 19, 2023

Are Successive NOAs Permitted in Respect of the Same Patent?

Janssen Inc v Apotex Inc 2023 FC 912 Manson J

2,655,335 / paliperidone regimens / INVEGA SUSTENNA / NOC

This summary judgment motion raises a tricky question on the application of res judicata / abuse of process. Apotex sought to launch a generic form of paliperidone and had to address Janssen’s 335 patent. In its initial NOA, Apotex alleged it would not infringe; it did not allege invalidity [12]. That led to a summary trial in which Apotex alleged non-infringement without challenging the validity of the 335 patent. Apotex lost, but an appeal is ongoing: see Janssen v Apotex 2022 FC 107 (see here) [14]–[16]. Apotex then amended its NOA to allege invalidity, without alleging non-infringement [17]. Janssen brought this motion for summary judgment, on the basis that Apotex was precluded from raising the defence of invalidity, on the basis of res judicata or abuse of process.

Manson J held that the issue was suitable for summary judgment as it turned solely on the application of the law to settled facts [38]. However, Manson J dismissed the motion. His key holding was that

[69] The Regulations, when viewed contextually and purposively, do not preclude successive dual NOAs in respect of the same patent, one alleging non-infringement and another alleging invalidity.

There are two branches to res judicata, namely cause of action estoppel and issue estoppel. Manson J held that neither of these was engaged.

Both branches require that the prior decision is final [42], [52]. Manson J noted that there is conflicting caselaw on whether a decision is final when there is a pending appeal, but he held that the weight of authority is to the effect that a decision is not final if an appeal is pending [48]–[51]. It was not disputed that the appeal in Janssen v Apotex 2022 FC 107 is pending, and consequently Manson J held that the matter is not res judicata [51], [53].

I must say that I don’t find the authorities relied on by Manson J to be strong support for his conclusion that a decision is not final if an appeal is pending. He quoted the statement in CUPE 2003 SCC 63 [46] that “[a] decision is final and binding on the parties only when all available reviews have been exhausted or abandoned.” But the thrust of that paragraph as a whole is that a party who is dissatisfied with a decision can attack it through an appeal or judicial review, but it is an abuse of process to attempt to impeach a decision in a different forum. This could just as well support the view that the only mechanism for attacking a decision is by way of appeal or judicial review. Manson J also relied on Lilly v Teva 2018 FCA 53 [83]. That case held that a decision was final even though there was no opportunity for appeal because the issue was moot. This is entirely consistent with saying that the only mechanism for attack is by way of appeal. In both these cases, the prior decision was held to be final. Finally, Manson J relied on Canada v MacDonald 2021 FCA 6 [15], in which Stratas JA remarked that “If an appeal is brought, the appeal court can interfere with the order or judgment. Thus, an order or judgment under appeal is not final for the purposes of the doctrine of res judicata.” Again, this is consistent with saying that the only mechanism for attack is by way of appeal. As I read it, Stratas JA was saying that taking an appeal is not precluded by res judicata, but this does not mean that it is not final for other purposes. Indeed, Stratas JA held that res judicata did apply to bar re-litigation on the facts [24] (albeit in obiter, as the matter was disposed of on other grounds [12]).

I am not saying that Manson J is necessarily wrong in his conclusion that a decision is not final for the purposes of res judicata if it is under appeal, but I would suggest that the point is not settled by the authorities he referred to. In my view, those cases stand primarily for the proposition that any attack on a decision other than by way of appeal or judicial review is an abuse of process.

While Manson J would have dismissed the issue estoppel argument on finality alone, he also found that the issue of infringement is not the same as the issue of validity, so that branch of the test for issue estoppel was not satisfied either [57]–[63]. For issue estoppel, it is not enough that the argument might have been raised; it must actually have been raised and decided (albeit possibly implicitly).

This left abuse of process, which is a supplementary doctrine that “has applied to bar needless litigation that may not meet the technicalities of issue estoppel or cause of action estoppel” [65]. There is no test as such for abuse of process, which turns on the court’s assessment of whether the proceedings are oppressive or vexatious: CUPE 2003 SCC 63 [35]–[43].

Janssen’s main argument was that:

[66] Apotex “testing a non-infringement allegation before alleging invalidity” constitutes an abuse of process. Janssen argues that allowing these actions to continue would lead to the absurd result that generic drug manufacturers could deliver one NOA making just one allegation, fully litigate that issue, only to then deliver another NOA with a fresh allegation in respect of the same patent and drug.

I must say that strikes me as a strong purposive argument. If the PM(NOC) system did not exist and a generic brought a declaratory action alleging non-infringement in order to “clear the way,” I think it would have to be an abuse of process to bring a second declaratory action alleging invalidity if the non-infringement action failed.

Now, this is not a declaratory action, so the text and context of the PM(NOC) Regulations are crucial [68]. Manson J stated that “Nowhere in the text of the Regulations does it state that a [generic] can serve only one NOA in respect of each patent” [70]. That’s true, but nether it say that multiple NOAs are permitted; the Regs simply do not directly address this situation. He continued “On the contrary, the Regulations require that an NOA is served on a patentee each time an allegation is made leading to, in some cases, successive NOAs and successive litigation” [70]. I’m not sure what examples he had in mind. To the extent that a generic serves successive NOAs because it is seeking ANDS for different products, that is clearly not an abuse of process, but in such a case the underlying facts are different, because the products are different, so res judicata or abuse of process is clearly not engaged. That is going on here.

Manson J relied heavily on the fact that allegations of invalidity and non-infringement are contemplated in different subparagraphs of the Regs, namely 5(2.1)(c)(ii) and (iv) [72]–[73]. I have difficulty reading as much into this as did Manson J. It looks to me like this paragraph is simply trying to set out an exhaustive list of allegations in a clear format. Manson J placed considerable emphasis on the fact that invalidity and non-infringement found in separate paragraphs, noting that

[72] There is, however, no such distinction between individual grounds of invalidity. If a generic drug manufacturer were attempting to serve a second NOA in order to pursue different grounds of invalidity it did not pursue in previous litigation that would almost certainly be abusive of the process set out under the Regulations.

This strikes me as being somewhat formalistic. Yes, they are in two separate paragraphs. But what function or purpose is served by allowing separate allegations of non-infringement and invalidity, while prohibiting separate allegations of different grounds of invalidity? Invalidity attacks are not generally more closely linked than validity and infringement; eg an attack based on patentable subject matter will have little evidence or argument related to an obviousness attack.

Janssen also relied on the statement in the 2017 RIAS that “[the amendments eliminate] the need for separate proceedings to address all claims in a single patent” [66]. Manson J dismissed this on the basis that “the new Regulations were implemented to avoid the dual track litigation that occurred under the old Regulations where limited issues of patent validity or infringement were addressed summarily via applications for prohibition orders under the Regulations, and then re-litigated as actions for infringement under the Patent Act” [75]. No doubt that was one specific objective of the new Regs, but the amendments were not limited to curing that problem: the RIAS states that “[a]s a general statement, the amendments seek to facilitate the just and expeditious resolution of patent infringement and validity disputes under the Regulations.” The need for an efficient and expeditious resolution of the disputes is emphasized throughout in a variety of contexts.

Moreover, the 2017 RIAS contemplates that non-infringement and invalidity will normally be litigated in the same proceeding. So, when the patentee brings an infringement action, “[i]n addition to defending such an action, a second person may commence a counterclaim seeking to invalidate the patent.” This is directly reflected in s 6(3)(a), which contemplates that when a patentee brings an action for infringement in respect to the NOA, the generic may respond with a validity attack. The RIAS also remarks that because the proceedings “will focus on underlying questions of patent validity and infringement” mootness is no longer an issue. The RIAS explains that “[n]on-infringement allegations need not be as detailed as invalidity allegations; a second person will be free to choose how detailed a non-infringement allegation may be. However, the second person is required to serve, along with its NOA, any portions of its submission or supplement that could be relevant for determining whether a listed patent would be infringed. The second person must comply with this requirement even if it makes no allegation of non-infringement.”

Overall, I would say that purposive and contextual factors relating to the desirability of promoting efficient and expeditious resolution of the proceedings weigh quite strongly against permitting separate allegations of invalidity and non-infringement. A sufficiently clear text will dominate purposive and contextual considerations, but the only textual point invoked by Manson J was that that invalidity and non-infringement allegations are mentioned in separate subparagraphs of 5(2.1)(c); this strikes me as a fairly weak textual point, which is not sufficiently clear to warrant an interpretation contrary to the purposive and contextual emphasis on streamlining the litigation process.

The issue will be slightly different if an appeal had been decided in the earlier proceeding, or if the time for taking an appeal had passed. If a generic argues non-infringement, and, for example, does not appeal, can it then allege invalidity in a new NOA? According to Manson J, doing so would not be an abuse of process, as nothing in his abuse of process analysis turns on the finality of the prior decision. This strikes me as counter-intuitive. Perhaps the answer is that in such a case cause of action estoppel might apply. In that scenario, the finality requirement would not be an obstacle, so the question would be whether an allegation in an NOA is a “cause of action.” The answer isn’t entirely clear, because strictly the cause of action is for infringement, brought by the patentee in response to the NOA. But given the emphasis in the 2017 amendments on efficient dispute resolution, I find it very difficult to believe that the generic would be permitted to file successive NOAs alleging that the patentee is not in fact the owner or licensee, then after losing in a final decision, and then another alleging invalidity, and another alleging that the patent at issue was not properly listed, and yet another alleging non-infringement. If that is not permitted if the prior decision is final, I find it difficult to see why it should be permitted simply because the prior decision is under appeal.

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