An Action under the PM(NOC) Regs Has the Same Effect as an Action under the Act

Janssen Inc v Apotex Inc 2023 FCA 253 Locke JA: de Montigny CJ, Goyette JA revg 2023 FC 912 Manson J

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

This decision addresses two issues of interest: abuse of process under the PM(NOC) Regs and the kinds of activities that may properly be enjoined. This post deals with each in turn.

Apotex sought to launch a generic version of Janssen’s INVEGA SUSTENNA. To that end, Apotex served an NOA alleging non-infringement. Janssen responded by bringing an action pursuant to s 6 of the PM(NOC) Regulations. Apotex lost: 2022 FC 107 discussed here. (An appeal has been heard and the FCA decision is pending [4]). After losing that action, Apotex served a second NOA in respect of the same product, this time alleging invalidity instead of non-infringement. Janssen again brought an action pursuant to s 6, which Apotex defended on the same invalidity basis as in its NOA. Janssen moved for summary judgment on the basis that this is an abuse of process by relitigation. Manson J held it was not, and dismissed Janssen’s motion for summary judgment. The FCA has now reversed.

The overarching point emerging from Locke JA’s decision is that “an action under section 6 of the Regulations is to proceed and have an effect much like a normal patent infringement action” [46]. In the absence of special circumstances, a defendant in a normal patent infringement action that defended itself on the basis of non-infringement, without challenging the validity of the patent, would not be allowed to commence a separate impeachment action concerning the same patent [47]. The same reasoning applies to actions under the Regulations [47]. That follows from the general principles of “judicial economy, consistency, finality and the integrity of the administration of justice” which underpin the law related to abuse of process by relitigation: [10]–[11], citing C.U.P.E. 2003 SCC 63 [37]. While Manson J’s decision relied on a rather technical reading of the Regulations (see here) to distinguish actions under the Regulations from actions under the Act, this distinction is not sound. There is no tension between general principles of abuse of process and the principles applicable under the Regulations. On the contrary, the RIAS to the 2017 amendments “makes it clear that a principal aim was to avoid multiple proceedings concerning patents on medicines, regardless of whether those proceedings are within or outside the Regulations” [44]; moreover, “the aim of avoiding multiple proceedings was front and centre” [45].

Under the old Regs, the second person was held strictly to its NOA, and this might have provided a reason for distinguishing NOC proceedings from a regular action. But Locke JA noted that under the new Regs, it is now established that it is permissible to amend the pleadings in an action under s 6 so as to introduce issues not raised in the underlying NOA: [46], citing Sunovion v Taro 2021 FCA 113 (see here).

Locke JA pointed out that the other arguments made by Apotex as to why there are good reasons to permit sequential NOAs can equally be made in the context of normal patent infringement actions, and are no more persausive in the NOA context [48]. Consequently:

[53] In my view, it was intended that the second person should raise all of its allegations in its NOA, and it should not to keep some in reserve in the event that it is not initially successful. Though this might lead to more complicated proceedings, it would meet the explicit goal of addressing all issues in a single action.

Locke JA therefore held that Manson J had erred in law by not recognizing that the same principle applies in the context of an action under the Regs as in an action under the Act [43]. Neither party asked that the matter be remitted, and Locke JA consequently considered Janssen’s motion anew [59] and declared that Apotex’s invalidity defence to be an abuse of process [60]. If Apotex wished to raise an invalidity argument, it should have done so in the first action [60]. Janssen was accordingly granted the relief it sought [71].

An entirely separate point of interest was raised regarding the remedy. Janssen requested an injunction prohibiting Apotex from making, selling or using the invention; these are the patentee’s express rights under s 42. This much was uncontroversial. But the injunction sought by Janssen also included prohibitions on “(i) offering for sale, (ii) marketing, (iii) having marketed, (iv) importing, (v) exporting, (vi) distributing, or (vii) having distributed” [64]. The exclusive right to engage in these activities is not explicitly granted by the Act. Apotex objected to the inclusion of these acts in the injunction on the basis that they fall outside the scope of the patentee’s rights.

Locke JA dismissed Apotex’ objection. He noted that injunctions in such terms had been granted in other cases [65]–[66] — though I don’t think much weight can be put on that unless the terms were contested. More significantly, he noted that “[w]hile section 42 of the Patent Act refers specifically to the patentee having ‘the exclusive right, privilege and liberty of making, constructing and using the invention and selling it to others to be used’, it is well understood that this does not constitute a definition of infringement” [67]. The SCC in Monsanto v Schmeiser 2004 SCC 34 [34] defined infringement as being “any act that interferes with the full enjoyment of the monopoly granted to the patentee.” As Locke JA noted [68], the SCC in Schmeiser [58] also held that “[i]f there is a commercial benefit to be derived from the invention, it belongs to the patent holder.” Consequently, Locke JA held that

[69] I am satisfied that the wording proposed by Janssen for the injunctive relief is appropriate. All of the activities that Apotex objects to including in the injunction are commercial in nature, and would presumably be done for a commercial benefit. The activities of distributing and having distributed are essentially sales and are thus clearly infringing. The other activities involve commercial use of the patented invention as contemplated in Schmeiser, and would therefore presumably also be infringing. The principle goal of the injunction is to prevent future infringement of the exclusive rights granted by the 335 Patent. In my view, the proposed injunction achieves this, and in clear terms.

Locke JA is of course quite right to say that the rights of the patentee are not limited to the rights enumerated in s 42, per Schmeiser. But there remains a question as which specific non-enumerated rights are exclusive to the patentee. Locke JA’s discussion might well be taken as holding that the activities listed in the injunction and objected to by Apotex — (i) offering for sale, (ii) marketing, (iii) having marketed, (iv) importing, (v) exporting, (vi) distributing, or (vii) having distributed — are per se infringement, at least when done for commercial purposes. While there is caselaw that comes close to saying that activities such as importing and exporting are infringing, I don’t think the point is quite settled. While it would certainly be consistent with Schmeiser to hold that these activities are infringing, it does not flow inexorably from Schmeiser, and there are some issues with so holding that were not addressed in this brief paragraph.

So, Locke JA stated that “distributing and having distributed,” are “clearly infringing” because they are “essentially sales.” This strikes me as potentially problematic, depending on what is meant by “distributing.” Does this mean that the common carrier which transports infringing goods from the manufacturer’s warehouse to a retailer is an infringer? Is a logistics company which organizes distribution of infringing goods on behalf of the manufacturer an infringer which can be named as a defendant in an infringement action? These activities do not seem to me to be “essentially sales.” Perhaps these activities should be considered infringing, but this is a different question from whether Apotex, which has been found to infringe on the enumerated grounds, should be prohibited from engaging in distribution.

Locke JA also said that the other activities are “presumably” also infringing. There is some difficulty with “offering for sale” in particular. In Domco Industries v Mannington Mills (1990) 29 CPR(3d) 481 (FCA) 492, the FCA held that a sale was not established even though “[t]here is no doubt that [the defendant] offered infringing goods in Canada” (491). It might be argued that Domco, which predates Canada’s accession to TRIPS, is no longer good law in light of TRIPS Art 28, which requires that a patent shall confer on its owner the exclusive right of “offering for sale.” On the other hand, a treaty such as TRIPS has to be implemented in legislation, and the statutory language defining the patentee’s exclusive rights has not changed since Domco. It might also be argued that Domco is no longer good law because it is inconsistent with Schmeiser. Or Domco might be distinguished because of the cross-border nature of the activity in that case. But it is difficult to accept that Locke JA intended to hold definitively that “offering for sale” is infringing in a decision that didn’t even mention Domco. I don’t mean to comment on the scope or continued vitality of Domco, one way or the other, but I don’t think Locke JA meant to either.

Consequently, I think it is probably better to read Locke JA’s decision more conservatively, as holding only that an injunction is properly granted to prohibit these activities, even if they are not infringing per se, essentially on a quia timet basis. That does not imply any change in the law. Even under Domco it is clear that once infringement has been established, the infringer may be enjoined from offering to sell: see eg AlliedSignal (1995) 61 CPR(3d) 417 (FCA) 446. And in appropriate circumstances offering to sell or marketing may form the basis for a quia timet injunction: see eg No-Fume (1935) 52 RPC 231 (CA) 251–52. This interpretation implies that an infringer, like Apotex, which has been found to infringe on the basis of the enumerated grounds, might properly be enjoined from “distributing and having distributed,” while leaving open the question of whether a logistics company or common carrier engaged in distribution would itself be an infringer.

No Opportunity to Appeal Means No Abuse of Process in Relitigating Previously Decided Issues

Amgen Inc v Pfizer Canada ULC 2020 FC 522 Southcott J
            1,341,537 / filgrastim / NEUPOGEN / NIVESTYM

My first post on this decision gave an overview of the facts and discussed the main substantive holding, namely that the invention was obvious. The decision also raised an issue of abuse of process, though one that should largely disappear with the new NOC actions.

Amgen had previously asserted the 537 patent against Apotex in proceedings under the old PM(NOC) Regulations, and lost before Hughes J who held the 537 patent invalid for obviousness: Amgen v Apotex 2015 FC 1261 [the Hughes Decision] (here) aff’d as moot 2016 FCA 196. Pfizer had earlier brought a motion seeking dismissal of Amgen’s on the basis of abuse of process. The motion was dismissed, 2018 FC 1078, but in affirming the decision dismissing the motion the FCA, 2019 FCA 249, stated that Pfizer was not precluded from raising the abuse of process doctrine at trial in connection with individual factual and legal findings in the Hughes Decision: see here. In this action, Pfizer accordingly argued that it would be an abuse of process for Amgen to re-litigate certain factual and legal issues that had been decided by Hughes J.

Southcott J exercised his discretion not to apply the abuse of process doctrine, primarily because Amgen had not had the opportunity to appeal the Hughes Decision [160]. Southcott J noted:

[164] In my view, it is unfair to hold Amgen to the results of the Apotex Decision in the current proceedings, when it did not have the benefit of substantive appellate review of that decision. As Amgen emphasizes, the Federal Court of Appeal in Amgen Canada dismissed Amgen’s appeal for mootness in part because it could pursue a subsequent infringement action (at para 22). In conclusion on this issue, regardless of the scope of Amgen’s burden to identify evidence warranting reconsideration of the issues before Justice Hughes,

This observation strikes me as compelling. Presumably such issues will largely disappear with the new NOC actions.

Loss in Old s 6 NOC Application Does Not Preclude Action under New s 6

Pfizer Canada Inc v Amgen Inc 2019 FCA 249 Nadon JA: Pelletier, de Montigny JJA aff’g 2018 FC 1078 Milczynski J
            1,341,537 / filgrastim / NEUPOGEN / NIVESTYM

I’ll have another post on Canmar 2019 FC 1233 later this week, but I don’t want to delay any more in posting on the decision of the FCA in Pfizer v Apotex, which raises a transitional issue arising out of the recent amendments to the PM(NOC) Regulations that converted an NOC proceeding from an application to prohibit the Minister from issuing a NOC into an action for patent infringement [8]. In this case Pfizer wanted to launch a biosimilar to Amgen’s Neupogen. Amgen had listed its 537 patent against Neupogen, and Pfizer accordingly served an NOA. Amgen responded by commencing an action under s 6 of the new Regulations, asserting the 537 patent.

The twist is that Amgen had previously asserted the 537 patent against Apotex in proceedings under the old Regulations, and lost before Hughes J: Amgen v Apotex 2015 FC 1261 [the Hughes Decision] aff’d as moot 2016 FCA 196. Under the former Regulations, a patentee that had lost an NOC proceeding against one generic would be prevented from bringing another NOC proceeding against a different generic in respect of the same drug, on the basis of abuse of process: Sanofi 2007 FCA 163. The question in this case was whether it was also an abuse of process for a patentee that had lost an NOC proceeding under the former Regulations to bring another NOC proceeding against a different generic under the new Regulations.

In this decision, the FCA held that this does not constitute an abuse, essentially because an action under the new s 6 (like a s 55 action), results in a determination of validity and infringement, while proceedings under the old s 6 only determined whether the Minister should be prohibited from issuing a NOC to the generic [63], [65]. In Pfizer Ireland 2011 FCA 77 the FCA clearly held that a s 55 action cannot be prevented by reason of a decision made under s 6 of the former Regulations; in this decision, the FCA pointed out that the same reasoning applies to an action under s 6 of the new Regulations, which is substantively identical to a s 55 action [83].

While “Pfizer cannot succeed on the motion now before this Court, it remains open to it to raise issue estoppel and abuse of process once Amgen’s action goes to trial. Whether or not Pfizer can succeed on those grounds in respect of factual findings and legal determinations made by the Hughes Decision, shall. . . depend on the trial judge’s assessment of these issues in light of the evidence” [84]. Note that this was also true under the old Regulations: Pfizer Ireland 2011 FCA 77 [19].

A Summary Judgment Procedure under the NOC Regulations?

Janssen Inc v Celltrion Healthcare Co, Ltd 2016 FC 651 Hughes J
            2,261,630 / infliximab / INFLECTRA / REMICADE

This decision marks either a straightforward application of s 5(1) of the NOC Regulations, or a procedurally innovative use of s 6(5)(b) of the Regulations to effectively allowing a summary disposition of an NOC proceeding. Unfortunately, Hughes J was writing under a time constraint [1], and the decision is brief and some key facts are not clear (at least to me).

Janssen’s 630 patent covers the use of infliximab in treating rheumatoid arthritis [28]. Celltrion had already received an NOC for rheumatoid arthritis and related indications (the RA indications) based on a NDS filed before the 630 patent was granted, and so it did not have to address the 630 patent at that time [8]. (An infringement action is now underway [9].) Then, after the 630 patent was granted, Celltrion sought an NOC for indications related to inflammatory bowel disease (the IBD indications) [10]. Hughes J stated that “Celltrion was required to address the 630 patent under [the PMNOC Regulations].” Celltrion sent an NOA to Janssen, which then brought an application for an order of prohibition [10]. In response, Celltrion brought a motion under s 6(5)(b) asking that Janssen’s application be dismissed as an abuse of process, evidently on the general ground that the 630 patent did not cover the indications for which the NOC was being sought..Celltrion’s motion was granted by Aalto J.

Hughes J affirmed in brief reasons, in part adopting Aalto J’s reasons as his own [25]. But Hughes J also went to on to rely on Biolyse 2005 SCC 26 to conclude that “in a case such as the present one, where a patent claims a particular use of a drug it is that use that must be compared with the intended use by the generic and not just the drug” [27].

My difficulty with this case is that it is not entirely clear to me whether Celltrion was comparing its product with Janssen’s in seeking its NOC. Celltrion’s application was apparently based on an SNDS, not an ANDS or SANDS [10], and there is no suggestion in Hughes J’s reasons that Celltrion was comparing its drug to Janssen’s. If Celltrion was not comparing its product with Janssen’s, then the reasoning in the case strikes me as a bit odd. Biolyse held that it is only necessary to address patents on the register if the party submitting the application for an NOC compares its drug with that of the another drug against which the patent is listed. In other words, a party who is relying on their own data does not need to address the listed patents, even if the submission is for the same indications; it is only “copy-cats” who need to address listed patents. This was affirmed by the subsequently amended s 5(1), which says patents listed against a drug must be addressed only if “the submission directly or indirectly compares the drug with, or makes reference to, another drug.” (See also the RIAS to the 2006 amendments, SOR2006-242 at 1519-20.) So, if Celltrion was not comparing its product to Janssen’s then it would follow directly from per s 5(1) that it would not be required to address the 630 patent at all, even if the 630 patent was listed against infliximab, and even if Janssen’s NOC covers the IBD indications. The puzzle is that on this view of the decision, it is not clear why “Celltrion was required to address the 630 patent under [the PMNOC Regulations]” [10] in the first place.

On the other hand, if Celltrion was comparing its drug to Janssen’s for the IBD indications, that would explain why Celltrion was required to address the 630 patent. In that case Biolyse would not be directly applicable, as Celltrion’s product would be a “copy-cat” drug, in the sense of relying on Janssen’s data, even if Janssen’s data were for an unpatented indication. On those facts, Hughes J’s holding would not be a direct application of Biolyse, but rather an extension, which would mean that a generic need not address a listed patent even if the generic is indeed piggy-backing off the data submitted by the patentee, so long as the indication for which an NOC was sought did not infringe. Normally that would require an NOC proceeding based on an allegation of non-infringement pursuant to s 5(1)(b)(iv)t, but perhaps the motion under s 6(5)(b) was based on the view that the non-infringement issue was so clear that it would be an abuse to proceed with the NOC proceeding. In other words, s 6(5)(b) was being used for a summary disposition of the NOC proceeding. If that is what happened, then the decision is procedurally quite significant.

Fairness in Abuse of Process: Which Party Will be More Severely Prejudiced

Eli Lilly Canada Inc v Apotex Inc / tadalafil formulation (NOC) 2015 FC 1016 Gleason J
            2,379,948 / tadalafil formulation / CIALIS, ADCIRCA

In Apotex Tadalafil Formulation Gleason J found that Apotex’ product did not infringe the 948 patent [72], which claims a particular formulation of tadalafil, and that the 948 patent was invalid for obviousness as being obvious to try [112], but that it was not invalid for lack of utility [145]. The main points of interest are Gleason J’s discussion of abuse of process, and her discussion of the suggestion in some recent case law that evidence of demonstrated utility must be disclosed in the patent. I will discuss abuse of process in this post, and utility in Monday’s post.

The abuse of process issue arose because de Montigny J ruled against Lilly on the same issues in respect of the same patent in Mylan Tadalafil III question, and in Sanofi Ramipril 2007 FCA 163 the FCA held that when an a patentee has failed in an NOC proceeding against one generic, it is generally an abuse of process within the meaning of paragraph 6(5)(b) of the NOC Regulations to relitigate the same allegation of invalidity when made by second generic. However, as Gleason J noted [11], the FCA did note that the doctrine of abuse of process should be applied on a case by case basis, “to ensure the application of the doctrine of abuse of process does not give rise to unfairness in the circumstances” (Sanofi Ramipril [40]). Gleason J held that “in the rather unique circumstances of this case, this application is not an abuse of process” [10]. The main distinction relied on by Gleason J was the fact that an appeal of de Montigny J's Mylan Tadalafil III decision was still pending, whereas in Sanofi Ramipril [40] appeals of the earlier decision had been exhausted [12], [14].

More important that this specific distinction is the general principle articulated by Gleason J:

[19] I believe the key issue for consideration involves determination of which party will be more severely prejudiced by a negative determination on the dismissal request.

Gleason J then went on to provide a detailed analysis of the consequences to both parties of allowing the prohibition application to proceed on the merits in this particular case. This principle strikes me as valuable in providing structure and meaning to the assessment of fairness in the exercise of the court’s discretion under s 6(5)(b), and indeed when dealing with abuse of process more generally. It is not an exhaustive principle (nor did Gleason J say it was), as it does not address concerns such as economy of judicial resources and the risk of conflicting judgments which go beyond the interests of the parties to the particular litigation, and which were emphasized in Sanofi Ramipril. But it is nonetheless a helpful elaboration on the question of fairness, which was adverted to but not developed in Sanofi Ramipril.

Gleason J’s statement and her subsequent discussion of the facts acknowledges that consideration of fairness requires a comparative balancing analysis, as opposed to focus solely on the plaintiff. A plaintiff may have legitimate reasons for bringing a subsequent action, even if considerations of judicial economy and fairness to the defendant ultimately warrant dismissal of the action for abuse of process. Implicit in Gleason J’s analysis is a risk analysis; there would be prejudice to Lilly from losing its ability to present its case on the merits, and that prejudice would be greatly magnified if it prevailed on the appeal in Mylan Tadalafil III [21]. In that sense, Gleason J’s analysis is broadly analogous to the “lower risk of injustice” principle enunciated by Hoffmann J In the context of interlocutory injunctions in Films Rover [1986] 3 All ER 772, 780. That is, even though one party might suffer a more substantial prejudice on a negative determination on the abuse motion, that prejudice should be discounted if that party would be unlikely to prevail on the merits. That would explain why it is relevant to ask whether the appeals from the prior decision are exhausted, which implies that the merits remain somewhat uncertain.

NOC Abuse of Process Summarized

Gilead Sciences Inc v Apotex Inc 2015 FC 610 Barnes J
            2,298,059 / tenofovir (PMPA) / TRUVADA

In Gilead v Teva / tenofovir (NOC) 2013 FC 1272, the companion case to 2013 FC 1270 (blogged here), Barnes J refused to grant an order of prohibition to Gilead on the basis that the 059 patent was obvious. Teva had put in issue the validity of Claims 1 through 7, but Gilead had relied on on Claims 3 and 4 [3]-[4]. Apotex then served an NOA on Gilead alleging obviousness [5] and also alleging an abuse of process. Gilead responded by saying it intended to fill in an evidentiary gap from the earlier proceeding [6] and that it relied on all the Claims, not just 3 and 4 [8]. Barnes J held that Gilead’s response was indeed an abuse of process:

[13] It seems to me that an abuse of process finding in the NOC context is not dependant on the evidence to be called but, rather, on the issues presented to the Court for determination. Once the second person puts a validity issue into play, the patentee proceeds at its subsequent peril by not fully responding. In other words, it must live with the consequences of not fully joining issue in the first proceeding.

[14] A patentee cannot avoid an abuse of process finding by asserting the validity of only a select number of claims in an initial NOC proceeding, only to assert the validity of different claims in a subsequent NOC proceeding involving a different generic challenger. Where the initial NOA puts in issue the validity of certain patent claims, it is not open to the patentee to concede some of the claims but later resile from that position. If it were otherwise, the patentee could effectively split its case and unilaterally compel subsequent generic challengers to litigate claims, the invalidity of which the patentee had effectively conceded. This would amount to a manipulation of the system and it would violate the principle that the patentee is required to put its strongest case forward in the first instance.

[15] The situation may well be different where the initial generic challenger declines to put the validity of certain claims in issue in its NOA, perhaps relying solely on an allegation of non-infringement. There the patentee could presumably rely on the presumption of validity in the first instance without compromising its right to assert validity in the face of a subsequent challenge.

Foreign Issue Estoppel in Theory and Practice

AstraZeneca Canada Inc v Apotex Inc / omeprazole 2015 FC 322 Barnes J
            1,292,693 / omeprazole formulation / LOSEC

An overview of this litigation is given in yesterday’s post. Parallel litigation US had taken place between the parties and AstraZeneca argued that principles of issue estoppel and abuse of process should apply to prevent relitigation of a number of findings of fact made by the US court in that previous litigation. There is an interesting issue of principle, discussed here, here and here, as to whether issue estoppel in Canadian patent litigation can be based on foreign findings of fact. The theory in favour of accepting foreign issue estoppel is the same as for domestic issue estoppel: it will save judicial resources and save the embarrassment of inconsistent decisions.

Barnes J recognized this theoretical argument, but he had a powerful rejoinder:

[379 [T]he practical problems of applying estoppel in a way that will actually protect judicial resources cannot be ignored. Those problems were quite apparent in this case.

[380] Given the discretionary nature of the application of foreign issue estoppel, AstraZeneca could not prudently assume the doctrine would be applied. It, therefore, independently led evidence on all of the above evidentiary points required to make its case. The practical effect of this was that no time was saved. In fact, by pleading estoppel, the trial was substantially lengthened. In response to AstraZeneca’s plea of estoppel, Apotex led fact evidence from two attorneys involved in the United States omeprazole proceedings, Martin Endres and Robert Silver. It also led opinion evidence from two legal experts, Judge Benson Legg (retired) and Mr. John Whealan. That evidence described the approach that the United States District Court took to the management of its multi-party infringement actions including the separation of the proceeding into waves. The purpose of this evidence was to attempt to explain the differences between United States and Canadian procedures and substantive patent law and to show that the two systems are sufficiently distinct that the application of estoppel would work an injustice on Apotex.

The theory is that foreign issue estoppel will reduce litigation costs; the practical reality, at least in this case, is that costs were increased to no benefit. Consequently,

[381] Considering the somewhat unusual process that was followed in the United States second wave proceedings involving Apotex, the practical disadvantages of applying issue estoppel to only a handful of findings made in that proceeding, and the fact that it is not necessary to rely upon the doctrine to fill a gap in the evidentiary record, I decline to apply the principle here.

It Is Not Necessarily an Abuse of Process for an Innovator to Switch Positions Across NOC Proceedings

Apotex Inc v Pfizer Canada Inc and G.D. Searle & Co / celecoxib (NOC) 2014 FCA 250 Noël CJ: Trudel, Boivin JJA aff’g ) 2014 FC 38 and NOC) 2014 FC 314 Harrington J
            2,177,576 / celecoxib / CELEBREX

The decisions under appeal, Mylan / celecoxib (NOC) 2014 FC 38 and Apotex / celecoxib (NOC) 2014 FC 314 (blogged here and here, respectively), turned primarily on the construction of the promised utility of the ‘576 patent. In both cases Harrington J interpreted the promise of the patent modestly and granted an order of prohibition to Pfizer. In a decision which is primarily an application of Plavix FCA 2013 FCA 186 (blogged here), the FCA has now affirmed both of Harrington J’s decisions. (While Harrington J’s decisions were separate, the reasoning was common, and the appeals were heard together [3].) While the FCA decision elaborates on some points relating to the promise of the patent, it is perhaps more noteworthy in its treatment of abuse of process, particularly the holding that it is not necessarily an abuse of process for an innovator to switch positions across NOC proceedings.

Relitigation of Same Patent Against Different Generic Survives Motion to Strike

Valeant Canada LP v Cobalt Pharma Co / diltiazem (NOC) 2013 FC 1254 Zinn J
             2,242,224 / diltiazem

In Sanofi-Aventis v Novopharm 2007 FCA 163 aff’g 2006 FC 1135 the FCA held that when an a patentee has failed in an NOC proceeding against one generic, it is an abuse of process to relitigate the same allegation of invalidity when made by second generic. In this case, Zinn J distinguished Sanofi-Aventis v Novopharm, and held that Valeant’s attempt to relitigate its ‘224 patent after having previously lost the same argument in Biovail Corp v Rhoxalpharma Inc 2005 FC 1424 (appeal dismissed for mootness 2006 FCA 92), at least survives a motion to strike.

The ‘224 patent is a formulation patent for diltiazem with a surfactant. Claim 35 and 36, which were at issue in both this litigation and Biovail, specify that the diltiazem “is released . . . with the help of a surfactant.” The question in both cases is whether, on the proper construction of these claims, the surfactant must be in the active layers, or whether it could also be in the sustained release lawyer: [10], [Biovail 28]. In Biovail Noël J held that these claims require that the surfactant be located in the active layer. In this litigation, Cobalt sought to have struck those parts of Valeant’s application which raised this same question.

Zinn J dismissed this motion, and allowed Valeant’s argument to stand. He distinguished Sanofi on the basis that “Unlike Sanofi, the present application turns on an issue of law not of fact” [22]. While this is true, this does not strike me as a particularly persuasive distinction. In Sanofi, the patentees argued that their application was not an abuse precisely because it was “a question of fact and that unlike questions of law, one court’s finding of fact is not binding on another judge considering a similar issue” [23]. Now, a prior FC decision is not strictly binding on a subsequent court at the same level, but is followed only as a matter of comity, but nonetheless, there is no evident reason why it is less abusive to relitigate a question of law than a question of fact. Certainly in Sanofi the FCA drew no such distinction: it referred generically about relitigating “the same issues” [26], and whether the allegations were “similar in all material respects” [8].

In Sanofi the FCA held that “[p]ermitting the same innovator to relitigate the same issues repeatedly poses a severe threat to the integrity of the adjudicative process,” because of the “risk of different courts reaching inconsistent results in respect of the same issues” [26], [26]. This does not strike me as entirely compelling; given that NOC proceedings are not in rem, we must accept the possibility of inconsistent results in NOC and infringement proceedings. I do not see this as a particular embarrassment, but simply a reflection of the facts that different evidence may lead to different results, and I don’t see why different factual conclusions in different NOC proceedings are any more embarrassing. With respect to questions of law, the need for legal certainty does make divergent interpretations more problematic, but I do not see the embarrassment. Questions of law may be difficult, and it may be desirable to have different interpretations tested in different proceedings before the law is finally settled. I do not think the FCA is, or should be embarrassed when it is overruled by the SCC. The law turns on the need for finality, not on the need to avoid judicial embarrassment. At the same level of court, the relevant principles are those of comity, which do not require slavish adherence to the first decision on a point of law. But whether it is persuasive or not, that was the basis for the FCA’s holding, and it applies equally in this context. Moreover, the FCA in Sanofi also pointed to the need for efficient use of judicial resources; one NOC proceeding and a subsequent infringement action is already enough litigation over a patent, without allowing multiple NOC proceedings.

Zinn J emphasized that “the blind application of the principle of consistency should not and cannot override fairness” [25]. What appears to be driving his decision is the concern that Noël J’s construction was wrong (and see also [38]), and, as just noted, comity alone is not sufficient reason to allow a wrong decision to stand. But that does not address the FCA’s point about efficiency in litigation, which implies that the patentee gets one shot at the NOC proceeding, and if it is not successful, whether rightly or wrongly, it must proceed by way of an infringement action. Zinn J rejected argument, saying “[32] Must a patentee be required to institute an infringement action or be forever foreclosed from advancing another interpretation of the claims of the patent in a future NOC proceeding? I fail to see any principled reason for adopting such a draconian position.” Whether or not there is a principled reason for such a position, it does appear to be the implication of the FCA Sanofi decision.

In any event, as Zinn J emphasized, this was only a motion to strike. Apart from the point that an argument should be clearly futile, or something close to it, in order to be struck [17-18], Zinn J held that even if this were an abuse of process, he would not exercise his discretion to strike Valeant’s argument on this issue. In part this was because on the particular facts of this case, there would be no judicial economy [38], as the ‘224 patent was one of two patents being litigated, and in Zinn J’s view the additional resources need to argue this point would be modest and could be compensated in costs. This point does go directly to the FCA’s point regarding the need for judicial economy. Zinn J’s other main point was that “I am satisfied, even considering judicial comity, that the position Valeant advances as to the interpretation of the ‘224 Patent has more than a mere possibility of success. To deny it an opportunity to present its case would be unfair” [38]. This brings us back to the points discussed above; there is a tension between justice and certainty; a strict rule that relitigation of the same issues is always an abuse comes down strongly on the side of certainty, but in Zinn J’s view, on these particular facts, the countervailing interest in justice outweighed the need for certainty and economy of judicial resources.

Can Comity Rationalize NOC Litigation?

Allergen Inc v Apotex Inc / COMBIGAN (NOC) 2012 FC 767 Hughes J

In Allergen Inc v Apotex Inc / combigan (NOC) Hughes J faced an NOC proceeding involving the same product and the same patent, but a different generic, as was addressed by Crampton J in Allergan Inc v Sandoz Canada Inc / combigan (NOC) 2011 FC 1316 (blogged here and here). Crampton J held that Sandoz’s allegation that Allergan’s 764 patent was invalid for obviousness was not justified. In contrast, Hughes J concluded that Apotex’s allegation that the patent was invalid for obviousness was justified. Hughes J nonetheless granted an order of prohibition, citing the need for comity. He also expressed concern that “that this Court is overwhelmed at times with NOC Regulation proceedings,” [70] and that it is necessary for the FCA to give instruction on the question of “how, in an NOC context, previous decisions of a Court on the same issues respecting the same patent, should be considered” [193]. He concluded that “only practical way to get the matter before the Court of Appeal is for me to grant the Order for prohibition in the likely expectation that Apotex will appeal” [194].

Pleading Issue Estoppel Based on Foreign Proceedings

Apotex Inc v AstraZeneca Canada Inc 2012 FCA 68 Stratas JA: Dawson, Trudel JJA aff’g 2011 FC 598 Mosley J, aff’g 95 CPR(4th) 414 Lafrenière Pr.

Can issue estoppel in Canadian patent litigation be based on foreign findings of fact? While we do not yet have a definitive answer to this question, the FCA has once again held that such a pleading will survive a motion to strike.

In early skirmishing in the omeprazole infringement action, AstraZeneca sought to allege that Apotex is estopped from litigating certain findings of fact made in US litigation respecting the equivalent US patent. AstraZeneca was careful in its pleading to exclude “matters regarding claim construction.” Despite opposition from Apotex, Prothonotary Lafrenière permitted these allegations to stand, and that decision was affirmed by Mosley J. The FCA has now affirmed, saying “it is not plain and obvious at this time that the facts alleged are inextricably bound or related to the foreign court’s construction of the claims and that these paragraphs cannot succeed in law” [9].

See here for a related discussion, including citations to earlier decision of the FC and FCA on point.

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.

Issue Estoppel and Foreign Proceedings

Astrazeneca Canada Inc v Apotex Inc 2011 FC 862 Hughes J

Inconsistent results in litigation between the same parties over corresponding patents in different jurisdictions is embarrassing and the duplicative litigation is wasteful. While the results of litigation in a foreign jursidiction are not directly binding on Canadian courts, issue estoppel might in principle be invoked to promote comity and reduce wasteful litigation. While I am not aware of any decision actually applying issue estoppel based on foreign litigation to determine a point in a Canadian action, in Apotex Inc. v Wellcome Foundation Ltd. (1996), 68 C.P.R. (3d) 23 (FCTD) and Connaught Laboratories Ltd v. Medeva Pharma Ltd. (1999), 4 C.P.R. (4th) 508 (F.C.T.D.) Sharlow J. aff'd (2000), 4 C.P.R. (4th) 521 (F.C.A.), the Federal Court has refused to strike pleadings that argued issue estoppel based on foreign actions. However, such pleadings will not automatically be accepted. In Astrazeneca Canada Inc v Apotex Inc 2011 FC 862, Apotex pleaded that because the patentee Astrazeneca had elected not to raise certain claims of the US patent in US litigation, it was thereby precluded from asserting the equivalent claims in the corresponding Canadian patent in the Canadian litigation. (It should be noted that this was in response to Astrazeneca’s pleading that Apotex was bound by certain factual determinations in the US litigation: [6:Category 2.1].) Hughes J ordered these paragraphs struck.

The assertion that the patentee was bound not to assert claims that had not been asserted in a foreign proceeding was novel, but Hughes J’s reasoning was based on broader considerations. The principle underlying issue estoppel, which is a branch of res judicata, is to ensure finality by precluding re-litigation of the same issue. Accordingly, issue estoppel requires inter alia, that it must be the same issue that was decided in the other judicial proceedings: Angle v Minister of National Revenue, [1975] 2 S.C.R. 248 (S.C.C.). In patent law, it may be very difficult to determine whether the same issue was decided. This was pointed out in a decision relied on extensively by Hughes J, Johnson & Johnson Inc. v Boston Scientific Ltd., 2008 FC 552 at [260]-[268], in which Layden-Stevenson J refused to apply issue estoppel to settle a point in an infringement action. Even when the patents are based on the same priority document, the claims at issue may differ, and even if the claims are the same, claim construction is a matter of law to which res judicata cannot apply. Expert witnesses on foreign law would be required to establish whether the issue decided was the same. In short, invoking issue estoppel based on foreign actions is likely to be more trouble than it is worth. Hughes J emphasized at [7] that “litigation is costly and that unnecessary irrelevant or distracting matters should not be put in play simply because there is a possibility of relevance.” In the circumstances in which issue estoppel or res judicata is traditionally applied, it would normally reduce litigation cost by avoiding wastefully duplicative litigation of the same issue; in patent litigation it is more likely to increase litigation cost by requiring determination of whether the same issue had been determined in the foreign litigation. In Connaught, Sharlow J was aware of this problem, and responded by saying that “complexity by itself cannot justify striking pleadings that are worthy of the Court's attention.” In this decision, Hughes J has come down in favour of trying to place some limits on the cost of patent litigation, rather than exploring every issue of potential relevance.

Abuse of Process: The Door Opens

Apotex Inc. v. Pfizer Ireland Pharmaceuticals / sildenafil 2011 FCA 77 Sexton JA: Layden-Stevenson, Stratas JJA var’g 2010 FC 968, Hughes J

Pfizer Ireland / sildenafil 2011 FCA 77 is an important decision on abuse of process and other pleadings related to the fact that PM(NOC) proceedings and an infringement action are entirely distinct proceedings that nonetheless often raise the same issues between the same parties. The prior FCA case law had undoubtedly “taken a dim view of attempts to prevent relitigation of issues decided in NOC proceedings in subsequent actions” [12]. In Pfizer Ireland / sildenafil 2011 FCA 77 the FCA affirmed that a defendant is in no way estopped from relitigating any cause of action, whether by way of res judicata, issue estoppel, abuse of process or any other doctrine [19]. Indeed, on the pleadings in issue the FCA varied the decision of Hughes J only by striking some paragraphs that he had allowed to stand. This is not surprising.

What is striking and significant is that the FCA went to considerable lengths to hold, after an extensive review of the case-law, that issue estoppel and / or abuse of process may bar relitigation of subsidiary factual and legal issues [24]. The Court specified that this may be particularly “where the evidentiary record at trial was identical to that of the NOC proceeding,” [23] but the Court did not set out any strict rules in this regard, and it noted that more broadly “issue estoppel generally precludes parties from raising arguments or issues that could have been raised at the original hearing,” [25, emphasis added]. The FCA left to the trial judge the question of whether a discretionary bar should apply in respect of a particular issue or factual determination [29], cautioning one the one hand that “courts should be cognisant of the summary nature of NOC proceedings and the fact that no discoveries or live evidence are permissible,” [25], but also that “issue estoppel and abuse of process exist primarily as pragmatic rules intended to promote judicial economy and efficiency. Those who act in a way such that pragmatism, judicial economy and efficiency are adversely affected, may find that the judge exercises his or her discretion in order to prevent such conduct” [27].

The Court’s reasoning is persuasive on its face, both in the distinction between cause of action estoppel and issue estoppel, and in the policy point regarding judicial economy. Nonetheless, there are clearly problems with this approach. The Court “acknowledge[d] a risk that parties may be tempted to make submissions concerning issue estoppel and abuse of process witness by witness, document by document, thereby prolonging proceedings,” but felt that this risk could be controlled by the discretion of the trial judge [27]. Moreover, even if it true that the trial judge can deal more or less adequately with these concerns, it strikes me that this is a second-best approach as compared with a system in which the NOC proceeding, or its equivalent – namely an interlocutory injunction – was actually part of the same proceeding as the infringement action. The problem of duplicative proceedings is just one of the problems that stems, fundamentally, from the distinct nature of NOC proceedings. Of course, that is a problem which cannot be addressed by the FCA.

Another interesting point is that there may be a split in the FCA on this issue, or at least a shift in views, between Pfizer Ireland / sildenafil and Janssen-Ortho v Apotex / levofloxacin (NOC) 2009 FCA 212. In litigation between Janssen-Ortho and Novopharm, Hughes J had found the levoflaxin patent to be valid and infringed, and this was affirmed by the FCA: 2006 FC 1234 affm’d 2007 FCA 217. In subsequent NOC proceedings between Janssen-Ortho and Apotex, Shore J referred repeatedly to the decision of Hughes J in the Novopharm litigation, and, while he did (in my view) carry out an independent review of the evidence, he relied on abuse principles to say "[t]his Court . . . would require better evidence and more appropriate legal argument . . . to come to a different result” 2008 FC 744 [214]. The majority of the FCA in Janssen-Ortho v Apotex / levofloxacin (NOC) remitted the matter back to Shore J to assess the evidence before him “independently of any findings made by Hughes J. in the Novopharm trial.” [80] (See here regarding the eventual fallout.) In contrast, the Pfizer Ireland / sildenafil decision expressly allows the trial judge to consider whether the evidence in the subsequent proceeding is different from that in the prior action. It is perfectly clear that the principles elaborated on in the Pfizer Ireland / sildenafil decision apply equally whether it involves a prior NOC and a subsequent infringement action, as in Pfizer Ireland / sildenafil, or a prior infringement action and a subsequent NOC, as in Janssen-Ortho / levofloxacin (NOC). The decisions cannot be reconciled on this basis. Indeed, generally the weight given to a prior infringement action should be greater, as the proceedings are full rather than summary.

A more plausible distinction is that the levoflaxin litigation involved different parties – Novopharm in the infringement action and Apotex in the NOC proceeding – while the parties to the sildenafil litigation were the same. However, in Pfizer Ireland / sildenafil the FCA noted that one of the rationales for abuse of process is to “promote the integrity of the justice system [and] prevent inconsistent findings” [24]. Surely the system is embarrassed by inconsistent findings based on the same evidence and arguments, whether the parties are the same or not. Similarly, at some point judicial resources are wasted in repeatedly litigating the validity of the same patent, whether or not the parties are the same. If these really are the justifications for the abuse doctrine, Shore J’s requirement that the new parties raise different arguments or different evidence is not so unreasonable.

Layden-Stevenson JA was the only judge in common between the two panels, and she dissented in the levoflaxin decision. However, she concurred on the abuse of process point [81], and dissented only because she felt that this error did not taint his own assessment of the issues. Thus, this is not a case where we can say that there is an obvious split in the Court in the sense that Layden-Stevenson J was in dissent on a point of principle in levoflaxin. Nonetheless, the principled distinction between the cases is not obvious to me. I would be interested to hear how Layden-Stevenson J would reconcile these cases.