No Entitlement to s 8 Damages Unless the Generic Prevails on the Merits in the Underlying s 6 Proceeding

Apotex v Eli Lilly 2023 ONSC 1968 Koehnen J

2,209,735 / atomoxetine / Strattera

Under the patent linkage system set out in the PM(NOC) Regulations, a 24-month statutory stay is triggered when a patentee brings proceedings against a generic seeking to obtain an NOC by relying on a comparison between its product and the patentee’s product. Under s 8 of the Regulations, the generic is entitled to damages for having been kept off the market during that 24-month period if the proceeding is “discontinued or dismissed.” This decision holding that Apotex was not entitled to damages under s 8 of the PM(NOC) Regs is interesting for two points. First, it applies the established rule that a generic is not entitled to s 8 damages if the patent is invalidated in separate proceedings to facts which present a slight twist on the prior cases. Second, it is an interesting example of the independent application of the “would” branch of the “could and would” test for assessing damages.

Apotex had filed an ANDS for generic atomoxetine in Feb 2008. At that time, it indicated on Form V that it would not challenge Lilly’s 735 patent, and would instead wait for its expiry before launching. A few months later, Teva began an action to impeach the 735 patent. Shortly thereafter, Apotex served Lilly with an NOA challenging the validity of the 735 patent, and Lilly responded with an application pursuant to s 6 for a prohibition order (this was under the old Regs), thereby triggering the statutory stay. Both the Teva action and the Lilly application were heard before Barnes J. In the Teva action, released first, Barnes J held that the 735 patent was invalid for lack of utility: Novopharm / atomoxetine 2010 FC 915 affd 2011 FCA 220. In the Apotex proceeding, released six weeks later, he held that the Apotex’s allegations of invalidity failed: Apotex / atomoxetine 2010 FC 1065. Different evidence and a different approach to the issue meant that Apotex failed in its utility argument even though Teva had succeeded: 2010 FC 1065 [96]. But because the 735 patent had already been invalidated in the Teva action, Apotex had already received its NOC by the time the Apotex / atomoxetine decision was released. The proceeding was an application for an order of prohibition under the old Regs, and Barnes J therefore dismissed Lilly’s application “on the ground of mootness” [104]; the judgment was that “this application for an order prohibiting the Minister from issuing a NOC is dismissed.” Apotex then sought s 8 damages. Apotex argued that since the Lilly application had been “dismissed,” which is what is required under [then] s 8(1), it was therefore entitled to s 8 damages even though it had not been successful on the merits.

There is obvious merit to Apotex’s submission on the text of s 8(1). The provision says the generic is entitled to damages if “an application made under subsection 6(1) is . . .dismissed by the court hearing the application,” which indeed it was. But Koehnen J pointed out that a purely textual approach to the interpretation of the provision is not sufficient; context and the purpose of the regulation must also be taken into account [28].

Koehnen J pointed out that it is well-established that a generic cannot claim s 8 damages if the patent is invalidated in a subsequent action. This “no reach back” rule was established in cases such as Apotex / Olanzapine 2010 FC 952 and Ratiopharm 2009 FC 1165 and by the FCA in Syntex / naproxen 2010 FCA 155 affg 2009 FC 494 and re-affirmed in Ratiopharm / amlodipine 2011 FCA 215 (see here). The cases illustrated a few variations on the theme. In Syntex / naproxen, the generic seeking s 8 damages had been unsuccessful in the NOC prohibition application, and the same generic was subsequently successful in having the patent declared invalid in a different proceeding. In Apotex / Olanzapine 2010 FC 952 the generic (Apotex) had been unsuccessful in the NOC prohibition application, but the prohibition order was subsequently lifted when the underlying patent was declared invalid in an action involving a different generic (Teva).

This case presented another variation, because the invalidity holding came before the decision in the s 8 action, rather than after. Koehnen J held this was not a good basis for distinguishing the prior authorities. He noted that if Barnes J had released the Apotex decision before the Teva decision, the no reach back rule would clearly have applied to bar Apotex’s s 8 claim. The fact that Barnes J had released the Teva decision first, rather than second, was not sufficient reason to come to a different conclusion: “Results of cases should turn on matters more substantive than the order in which a judge chose to release reasons in related cases” [48].

Koehnen J also noted that “Apotex wants damages not for anything that occurred as a result of its Notice of Allegations or the prohibition proceeding that followed. It wants damages for something that Teva accomplished in a different action even though Teva is not entitled to damages for what it had accomplished” [33]. This seems to be a kind of fairness argument. While the point is reasonable enough, I don’t find it particularly persuasive, as the Regs are primarily motivated by incentives and balancing interests, rather than fairness.

I find the flip side of this point more compelling:

[47] The importance of the second person’s Notice of Allegations cannot be overstated in this analysis. When a second person decides to issue a Notice of Allegations, it chooses what allegations to make. The nature of those allegations inevitably affects the first person’s decision about whether to commence a prohibition application or whether to let the NOC issue and then pursue the second person for breach of patent. The combination of the allegations Apotex made and the prohibition application Lilly commenced led Barnes J. to conclude that the Minister should be prohibited from granting Apotex a NOC until the 735 Patent expired. Once that issue has been decided, Apotex should not get a second chance to raise new and better arguments that might have led to a different outcome.

The innovator cannot make an informed decision of whether to resist a particular generic’s application unless its exposure to s 8 liability turns on the allegations made in that particular NOA.

Koehnen J therefore concluded that Apotex’s right to s 8 damages had not been triggered [62].

Koehnen J went on to address the damages, in case he was reversed on appeal on the entitlement point. His analysis raised an interesting application of the general principle that events in the real world are good evidence of what would have happened in the but for world (see eg Teva v Sanofi-Aventis 2014 FCA 67 [83]). It is also an interesting example of the independent application of the “would” branch of the “could and would” test. On the could branch of the test, Koehnen J found that Apotex could have manufactured product and entered the market early in the s 8 compensation period [91]. However, he held that it would not have done so. Recall that when Apotex originally filed its Form V in the real world, it stated that it would not challenge the 735 patent, but would instead wait for its expiry. Presumably, this is because Apotex was of the view that the likelihood of prevailing was not great enough to offset the cost of the proceeding. Koehnen J noted that in the hypothetical world in which Apotex was not kept off the market by the statutory stay, it would still have been exposed to an infringement action brought by Lilly, and “Apotex’s risk exposure in a patent infringement action was significantly larger than its exposure in a prohibition proceeding” [96]. This implies that “[i]f Apotex preferred to wait for the 735 Patent to expire before incurring the risk of even a prohibition action, it was even more likely to wait for the 735 Patent to expire before incurring the much larger risk of a patent infringement lawsuit” [97]. Koehnen J therefore found that Apotex would not have launched any earlier in the hypothetical world that it would have in the real world [107]. (This analysis raises some interesting issues about what Teva would have been doing in the but for world, which I won’t pursue since the discussion is all strictly obiter.)

Legal or Factual Hypothetical in the S 8 “But For” World?

Apotex Inc v Sanofi-Aventis Canada Inc 2014 FCA 68 Sharlow JA, Pelletier JA concurring, Mainville JA dissenting, affd 2015 SCC 20 SCC 35886 varg 2012 FC 553 Snider J

Teva Canada Ltd v Sanofi-Aventis Canada Inc 2014 FCA 67 Sharlow JA, Dawson JA concurring, Mainville JA dissenting varg 2012 FC 552 Snider J

1,187,087 & others / ramipril / ALTACE / NOC s 8

Pfizer Canada Inc v Teva Canada Ltd 2016 FCA 161 Stratas JA: Ryer, Gleason JJA varg 2014 FC 248 Zinn J

            1,248,540/ 2,199,778 / venlafaxine / EFFEXOR XR

In a post last week I revisited the question of how to construct the “but for” world for the purposes of s 8 damages when there are multiple claimants. I pointed out Ramapril / Apotex 2014 FCA 68 (and the companion Ramipril / Teva 2014 FCA 67), raised a puzzle as to the exact nature of the hypothetical used in constructing the “but for” world. A few days later, in reviewing Venlafaxine 2016 FCA 161, it occurs to me that there is a basic question as to whether the “but for” world is premised on a legal hypothetical or a factual hypothetical. On a legal hypothetical, we are to assume that some aspects of the PMNOC Regulations don’t exist for some purposes; on a factual hypothetical we are to assume that the patentee would have behaved differently in some way.

In Ramipril the FCA rejected Sanofi’s argument that there should be only one “but for” world in which none of the potential generic entrants would have been constrained by the PMNOC Regs. Sharlow JA summarized in Ramipril / Teva [145] by saying (my emphasis):

in the hypothetical world constructed for the purposes of determining section 8 damages, the NOC Regulations should not be assumed away except to the extent required by paragraph 8(1)(a) [now 8(2)], that is, for the purpose of determining the beginning of the section 8 liability period. For all other purposes, the NOC Regulations should be assumed to exist in the hypothetical world

This posits a legal hypothetical as the basis for the “but for” world: the Regs are assumed away, though only for the specific purpose of determining the beginning of the liability period.

In last week’s post I pointed out that this is hard to reconcile with Norfloxacin 2011 FCA 329 [75], a s 8 case where the FCA stated that “the Federal Court had to assess [the generic’s s 8] damages on the basis of a hypothetical question: what would have happened had [the patentee] not brought an application for prohibition?” This is a factual hypothetical; the Regs are exactly as they are in the real world, with no modification whatsoever, and the only difference is that the patentee acts differently than it did in the real world. Venlafaxine 2016 FCA 161 also explicitly poses a factual hypothetical: to assess the impact of lost sales, the court’s task is “to assess a hypothetical world where the defendant’s impugned conduct did not take place” [46] (and similarly [45]). This says nothing about the Regs; it is the patentee’s conduct that is different in the “but for” world. More specifically, in Venlafaxine the s 8 claim was triggered because it was ultimately determined that the patent at issue was not eligible for listing on the patent register [24], and “with the benefit of hindsight, it can be said [the patentee] should not have listed [the patent at issue] on the patent register . . . and should not have brought a prohibition application” [26]. The FCA held that the trial judge had properly proceeded on the basis that “the hypothetical world . . . was one where [the patentee] did not improperly list its [] Patent,” and it is for that reason that the generic would have received its NOC on the patent hold date [71]. That is, the impugned conduct was listing a patent that we now know was not legally eligible for listing: see also [26].

There is considerable logic to positing a factual hypothetical rather than a legal hypothetical. It avoids the problem of assuming that there is a world in which some parts of the Regs exist for some generics, but not for other generics. This is a a strange assumption, as a law that applies to some parties but not to others who are similarly situated would not be possible in the real world. Moreover, the legal hypothetical used in Ramipril is not even internally coherent; as I explained in last week’s post, the decision assumed that in the “but for” world the patentee would have brought a prohibition application against the claimant, that would have unfolded as it did, even though the prohibition application would have been moot from the outset if the statutory stay did not apply to the claimant (which would have therefore received its NOC). One might say that it is just a hypothetical to allow us to calculate damages, but it is a tortured hypothetical nonetheless. In general, the damages hypothetical is realistic—the negligent driver would have driven safely, the defective house would have been built to Code, the infringer would have competed with a non-infringing alternative. Indeed, a hypothetical that is not realistic is generally not permitted: in assessing s 8 damages, the generic has to show that it could and would in fact have supplied the market, so why should we assume that the patentee would have done something that in reality would have been quite irrational?

More generally, the usual damages hypothetical is that the wrongdoer would have acted legally instead of illegally. This general approach can be applied to s 8 by using a factual hypothetical, in which the patentee acted properly instead of (with hindsight) improperly. In a case such as Venlafaxine, in which the patent was not eligible for listing, it is reasonable to suppose that the patentee would not have listed it in the first place, if the patentee knew that its patent was not in fact eligible. If the patent is ultimately held to be invalid, then it is also reasonable to suppose that the patentee would not have listed it, had it been able to foresee that outcome. If the s 8 claim arises because the patent was eligible and valid, but the generic’s product was found not to infringe, then the obvious counter-factual is to suppose that the patentee would have listed it, but would not have brought a prohibition application against that particular claimant, knowing it was bound to lose. (I’m referring to prohibition applications because that is the regime under which those cases were decided, but the same logic could be applied under the new Regs.)

A factual hypothetical is also consistent with the broad holding in Ramipril, summarized in Venlafaxine [136], that “the regulatory barriers to entry, including the PMNOC Regulations, which all generic manufacturers face in the real world, also affect all generic manufacturers in the hypothetical world. Thus, in order to assess whether and when other generic manufacturers could have and would have entered the market in the hypothetical world, the Federal Court had to assess, among other things, whether regulatory barriers stood in their way.” A factual hypothetical assumes that the Regs themselves operate exactly as they do in the real world, without any modifications whatsoever to the Regs themselves; the difference in the “but for” world lies only in the factual hypothetical as to the patentee’s behaviour, plus whatever consequences might realistically flow from that, in the context of the NOC Regs as they actually exist.

While I think using a factual hypothetical is appealing, I doubt it is consistent with Venlafaxine or Ramipril. As noted, the court in Venlafaxine stated a factual hypothetical as the basis for constructing the “but for” world, but when it came to actually assessing damages, Zinn J in Venlafaxine FC stated that

[130] The plaintiff generic need not comply with the NOC Regulations in the but-for world as they relate to the patent(s) that were the subject of the Prohibition Application for the reasons provided above. However, any competing generic manufacturer must do so because in the real world it has not addressed the patents on the Patent Register.

This is a legal hypothetical: the Regulations do not apply to the claimants, but do apply to other generics. The FCA affirmed [136]. As I understand it—and to be clear, I have not reviewed the Venlafaxine FC decision closely on this point—Novopharm’s entry was delayed by NOC proceedings related to the patent that was improperly filed. This was true in the real world and Zinn J took it to be true in the hypothetical world as well [136]. But if we actually use the factual premise that the FCA stated was the basis for constructing the “but for” world—that Pfizer had not listed the patent that was improperly listed in the real world—then Novopharm’s entry would not have been delayed. That is not because of a legal hypothetical that the Regs would not have applied to Novapharm, but rather as a consequences of the way in which the factual hypothetical plays out. So, if I am reading the cases correctly, it seems that Zinn J stated a factual hypothetical as being the correct approach, but actually applied a different, legal, hypothetical—and the FCA affirmed both. Similarly, in Ramipril, as I understand it (again, I did not review the decisions in detail on this point), the patents at issue were declared invalid, which, to my mind, implies that the appropriate factual hypothetical is that Sanofi would not have listed the patents.

I wonder if the use of a legal hypothetical in Ramipril was a consequence of the way the case was argued. Recall that Pfizer had argued for a methodology that “assumes the NOC Regulations away for the purpose of constructing the hypothetical market” 2014 FCA 68 [157]. As Mainville JA put it, dissenting on this point and agreeing with Pfizer, “those Regulations should be disregarded not only with respect to the claimant generic drug manufacturer, but also with respect to any other generic drug manufacturer that is found, on a balance of probabilities, to also be a market participant” 2014 FCA 67 [98]. That is, Pfizer argued for a sweeping legal hypothetical in which the Regs were assumed away for all purposes; Sharlow JA rejected this in favour of a minimalist legal hypothetical in which the Regs are assumed away only to the extent necessary to establish the liability period start date. Given that Sanofi’s argument was framed around a legal hypothetical, it is not surprising that Sharlow JA chose a minimalist approach. With that said, Snider J at first instance seems to have relied on a factual hypothetical, that Sanofi would not have responded to Apotex’s NOA with an application for an order of prohibition (Ramipril / Apotex FC [6], [157]), which is a reasonable counter-factual if we suppose Sanofi knew it would lose, and Sharlow JA reversed on that point, though without clearly articulating the premise of her hypothetical.

Finally, there is also the statutory point relied on by Sharlow JA in Ramipril / Teva [145], quoted above, which is that 8(1)(a) (now 8(2)) of the Regulations themselves assume away the Regs for a specific purpose, namely for the purpose of determining the beginning of the s 8 liability period. The argument is that the Regs themselves mandate a legal hypothetical. But the Regs do not explicitly say that any part of the Regs are to be disregarded for the purposes of constructing the “but for” world. Rather, as Sharlow JA noted, it says they are to be disregarded for the purposes of determining the start date for the liability period. Para 8(1)(a) (and 8(2)) states that if the patentee brings an action and is unsuccessful, the patentee is liable to the generic “for any loss suffered after . . . the day. . . on which a notice of compliance would have been issued in the absence of these Regulations.” On its face, this says nothing about how the “but for” world is to be constructed, but only addresses the start date for the liability period. It seems to me that this provision is entirely consistent with awarding s 8 damages based on a but for world based on a factual hypothetical in which, eg the patentee never listed the ineligible patent.

I don’t see how to sort this out. It strikes me that adopting a factual hypothetical is consistent with the Regs, is consistent with the general approach to damages in other areas of the law, and would avoid some of the contortions required with the legal hypothetical. But it may be that, as a matter of precedent, that ship has sailed.

Section 8 Damages with Multiple Claimants

Apotex Inc v Sanofi-Aventis 2014 FCA 68 Sharlow JA, Pelletier JA concurring, Mainville JA dissenting, affd 2015 SCC 20 varg 2012 FC 553 Snider J

1,187,087 & others / ramipril / ALTACE / NOC

Dr Reddy’s Laboratories Ltd v Janssen Inc 2022 FC 1672 Southcott J

Apotex Inc v Janssen Inc 2022 FC 1473 Southcott J

2,661,422 / abiraterone acetate & prednisone / ZYTIGA / NOC

If a generic that is kept off the market as a result of a statutory stay under s 7(1)(d) of the PM(NOC) Regs prevails in the subsequent proceedings, it is entitled under s 8 to damages for its loss during period that it was ‘wrongly’ (in hindsight) kept off the market. The idea is broadly that the statutory stay is the equivalent of an automatic interlocutory injunction, and s 8 damages are equivalent to the undertaking in damages that is normally required of a party seeking an interlocutory injunction.

If more than one generic has been kept off the market for the same drug during the same period, there is a difficult question of how to construct the “but for” world for the purpose of assessing damages, and specifically, whether there should be a single “but for” world applicable to all the generics. This is important, because in reality, there is essentially a fixed market for generic products, and the more generics in the market in the “but for” world, the smaller the market share for the s 8 claimant. If there is in principle only one “but for” applicable to all the potential s 8 claimants, then the patentee’s total liability is capped by the size of the generic product market. But if the “but for” worlds for the different claimants are completely independent, then Generic A might get 100% of the generic market in its s 8 action on the view that Generic B would have been kept out of the market by the stay; and at the same time, Generic B might also get 100% of the market in its s 8 action on the view that Generic A would have been kept out of the market by the stay.

This question was addressed by the FCA in Ramipril 2014 FCA 68 varg 2012 FC 553 affd 2015 SCC 20, which held that the second option, with independent “but for” worlds, is the law. We now have a couple of procedural motions involving Janssen as the patentee, and Apotex, Riva and Teva as the s 8 claimants, that should flesh out the Ramipril approach. This case will be very interesting to follow; depending on how the facts play out, it might well give rise to the counter-intuitive result that Janssen will be liable to the various generics for an amount that represents two or three times the total generic market. That would make for an interesting test of the holding in Ramipril.

I blogged Ramipril on this issue when it came out, but looking back, I’m not sure my post accurately described the holding, and in any event, it was confusing even to me, so I’ll try again before turning to the cases at hand.

In Ramipril, Sanofi was the patentee and the s 8 claimant was Apotex. Two other generics, Teva and Riva had filed ANDS and served NOAs on Sanofi in respect of the same drug during the relevant period, and were also seeking s 8 damages in separate actions [FC 8], [FC 154], [FC 163]. Sanofi argued that there should be one “but for” world applicable to all the generics, arguing that if the but for worlds are all separate, then the patentee might be liable to each generic in separate s 8 actions for the entire generic market. Snider J, at first instance, rejected the “one world” approach. She held that the NOC Regs are assumed to exist and operate against all generics in the “but for” world in exactly the same way as in the real world. For Snider J, the only twist in the “but for” world is that we should assume that Sanofi did not bring an application for prohibition against the s 8 claimant, namely Apotex, in response to its NOA: [FC 6], [FC 157]. On this point she relied on Norfloxacin 2011 FCA 329 [75], a s 8 case where the FCA stated that “the Federal Court had to assess [the generic’s s 8] damages on the basis of a hypothetical question: what would have happened had [the patentee] not brought an application for prohibition?” That is a minimally counter-factual scenario that is entirely consistent with the Regs existing and operating as normal. Sanofi is assumed to resist entry by the other generics, much as it did in the real world—subject to whatever consequences flow from the fact that it did not oppose Apotex’s entry.

On appeal, Sharlow JA for the majority, largely agreed with Snider J’s approach [159]. The key question on appeal was whether Snider J was right to reject Sanofi’s “one world” approach. Sharlow JA unequivocally affirmed Snider J on this point, holding that the NOC Regs should be assumed to be effective against the other generics [159], [161], [171]. Consequently, “the behaviour of competing generic drug manufacturers must be determined on the basis that the NOC Regulations exist, and each generic drug manufacturer will conduct itself accordingly” [162]. In general, this means that so far as the other generics are concerned, the NOC process will proceed in the “but for” world in the same way as it proceeded in the actual world: “it seems to me that Riva and Teva would have behaved in the hypothetical world just as they did in the real world, which was to seek summary dismissal as soon as they considered they had a fair chance of success” [187]. This assumption holds unless there is some specific legal basis in the “but for” world that would support an earlier entry date [182].

The difficulty with Sharlow JA’s approach (and Snider J’s approach) is that is may lead to the patentee being liable for damages that are greater than the size of the market. Mainville JA, dissenting, gave the example where there are two generics that each served an NOA and were each subject to the stay in the real world. In the subsequent s 8 action, each would be entitled to 100% of the generic market (less any authorized generic), during the two years of the stay [108]. Sharlow JA did not disagree with this assessment: “that inconsistency is inherent in the scheme of section 8 of the NOC Regulations. If that is a problem that requires a remedy, the remedy lies with Parliament or the Governor-in-Council, not this Court” [164]. (Snider J suggested that in an egregious case, an adjustment might be made pursuant to s 8(5): [FC 138].)

One point puzzles me about Ramipril. In the real world, Apotex, Riva and Teva all served NOAs on Sanofi, and Sanofi brought prohibition applications against all of them [FC 34]. The application against Apotex was heard first and dismissed. The applications against Riva and Teva were then also dismissed as being an abuse of process, as was established law under the Regs at the time, so that Riva and Teva piggy-backed off Apotex’s success [181]. In the s 8 action, Apotex argued that if no application for prohibition was brought against Apotex in the “but for” world, that non-existent application could not have been dismissed, and Riva and Teva could not have piggy-backed off that dismissal. That means that in the “but for” world, Riva and Teva would have entered later than in the actual world. Snider J accepted this argument in principle, though she held that it didn’t make any difference on the facts (for reasons I don’t entirely understand) [159]. Sharlow JA reversed on this point, saying “it appears to me that in the hypothetical world as well as in the real world, the prohibition applications against Apotex would have been dismissed just as they were in the real world” [186].

Here is the puzzle: if the prohibition application was dismissed in the hypothetical world, that means it must have been brought in the hypothetical world. But if the prohibition application was brought in the hypothetical world, what exactly is the difference between the hypothetical world and the real world? What is the counter-factual premise for constructing the “but for” world? So far as I can see, Sharlow JA simply doesn’t address this question at all; her decision is focused on the effect of the Regs against the other generics and whether Snider J was right to reject the “one world” approach. But given that Sharlow JA expressly held that the prohibition applications against Apotex, the s 8 claimant, were dismissed in the hypothetical world, they must first have been brought in the hypothetical world. The idea seems to be that in the “but for” world, Apotex would not have been subject to the statutory stay, but everything else is the same. That doesn’t really make sense to me – if the stay doesn’t operate, Apotex has its NOC, and the prohibition application is moot. Further, I don’t really see how to reconcile this with the Norfloxacin FCA decision that Snider J relied on: it was not mentioned at all by either Sharlow JA or Mainville JA in his dissent. In any event, that’s the puzzle; I don’t have a solution.

Ramipril was decided under the old NOC Regs, but the same puzzle arises, with a twist. The proceeding is now an action. If Generic A serves the NOA and the patentee responds by bringing an action, and Generic A is successful and the patent is declared invalid, then all other generics on patent hold can enter the market, even if they had not served an NOA: s 7(5)(a). If, in a s 8 action under the new Regs, we follow the logic of Snider J and Norfloxacin, and assume that the patentee never served the NOA, and the action never happened, then all the other generics will be assumed to be kept off the market until the expiry of the patent, even though we know it’s invalid. On the other hand, if we follow the logic of Sharlow JA, and assume that the patent was declared invalid, then it seems to me that we have to assume that all the other generics would enter the market immediately (subject to normal lead times). Presumably this will all be sorted out when the cases at hand go to trial.

With that review of Ramipril in mind, we can turn to the cases at hand. Both arise out of the same facts. Apotex, Dr. Reddy’s and Pharmascience all sought to launch a generic version of Janssen’s abiraterone acetate product. The parties agreed to have the subsequent NOC action (under the new Regs) heard at a common trial [6], with the result that the 422 patent was held to be invalid: Janssen v Apotex 2021 FC 7 affd 2022 FCA 184 (blogged here and here). The three generics then brought separate actions for s 8 damages.

In Dr Reddy’s v Janssen 2022 FC 1672, Dr Reddy’s brought a motion to determine a question of law prior to trial, pursuant to Rule 220(1)(a). Relying on Ramipril, Dr Reddy’s argued that, since, in the real world, Janssen brought an action in response to Apotex’s NOA, and Apotex was therefore kept out of the market by a statutory stay, Janssen cannot turn around and say that Apotex would also have entered the market in the “but for” world when Janssen is defending against Dr Reddy’s s 8 claim [21], [23]. Janssen acknowledged that “there is a legal presumption in a section 8 proceeding that a patentee would have taken the same steps in the but-for world that it did in the real world, it is open to the patentee (or any party) to lead evidence that events in the but-for world would have unfolded differently than they did in the real world” [25]. My reading of Ramipril is that Janssen is right, though it will be interesting to see exactly what kinds of arguments along these lines might be successful. With the “one world” rule shot down in Ramipril, patentees will now focus on trying to establish specific counter-factuals to show that particular generics would have entered, despite the NOC hurdles.

In the result, Southcott J declined to answer the question, on the view that this is an important question, likely to have a considerable impact on damages [47], and “the Court could benefit from the full factual context provided by a trial in considering the parties’ legal arguments surrounding a question that may have an impact upon not only this litigation but also related and future litigation” [50]. That strikes me as a sound position. As Sharlow JA essentially acknowledged, the Ramipril holding sets up some potentially paradoxical scenarios. It’s not clear at this point what kind of arguments will be ruled out as a matter of law, and which will just fail (or succeed) on the facts, so it does seem better to address the issue in a fully developed factual context.

In the other decision at hand, Apotex v Janssen 2022 FC 1473, Janssen sought to have four common issues heard together under Rule 105(a). The issues all relate to the nature of the “but for” world, namely the size of the market, whether the plaintiff generics would enter the market, whether the non-party generics would enter the market, and how Janssen would market its products [8]. [26]. The last point goes to the idea that Janssen would reduce its marketing of ZYTIGA and promote an alternative product, which is presumably still patented [26].

An initial issue on the motion was the test for consolidation under Rule 105(a). The purpose of Rule 105(a) is “to avoid a multiplicity of proceedings and promote an expeditious and inexpensive determination of those proceedings” [12]. One issue is of course whether the issues actually are common. It was also uncontroversial that prejudice to responding parties weighs against granting the motion. The contentious issue was whether the moving party, Janssen, also has to show it would be prejudiced. That is, is it enough that the trial of common issues would promote an expeditious and inexpensive determination and that no responding party would be unduly prejudiced, or is it additionally necessary to show that the moving party would be prejudiced without a trial of common issues?

In Ramipril 2009 FC 1285 [11] Snider J held that the moving party must show it would be prejudiced, relying on Apotex v Wellcome (1993) 51 CPR(3d) 480 (FCTD); Mon-Oil (1989) 26 CPR(3d) 379 (FCTD) and Fruit of the Loom (1984), 79 CPR(2d) 274. There was some dispute over whether the FCA decision in Bayer 2020 FCA 86 had indirectly signalled a departure from these principles: Southcott J held it had not, in my view correctly [22]. (That’s not to say that Bayer affirmed this view of the test, but only that it did not address the question directly enough to disturb the prior caselaw.)

So, the law is reasonably well settled. Is it sound? As a matter of principle, if a consolidation can secure a just result at less cost, without any prejudice to a responding party, it would seem that the interest in an expeditious and inexpensive determination of the matter is a good reason for ordering a consolidation, even if there is no specific prejudice to the moving party. The argument to the contrary is that “a genuine onus rests on an applicant seeking to interfere with a plaintiff’s right to pursue a lawful cause of action”: Fruit of the Loom 278. Against that, it might be said that in the absence of any prejudice to the responding party, the desirability of conserving the resources of the justice system should be a good answer to that concern. A consolidated trial doesn’t just affect the parties; by freeing up judicial resources it benefits litigants in entirely unrelated matters.

As a practical matter, I’m not sure it really matters that much whether the moving party has to show it will be prejudiced. If the responding parties are opposing the motion, they have some reason that can normally be characterized as prejudice. If the responding parties are prejudiced, then the ultimate question will be whether that prejudice is outweighed by the efficiencies of a common trial. So, in this case, while Soutcott J held that Janssen had to show prejudice, it was not determinative: he would have refused the motion under either test [24]. The same seems to be true of several of the other cited cases (though I didn’t review them all in detail).

To my mind, the more important question is not whether the moving party has to show prejudice, but as to what kinds of prejudice to the responding parties are cognizable. In particular, a key question is whether the litigation advantages that the responding parties might gain through separate trials–what Janssen referred to as “tactical” advantages—should be weighed against efficiency benefits to the judicial system. Southcott J held that such litigation advantages are indeed cognizable, so that their loss constitutes a prejudce to the responding party: [50]. For example, in this case, Southcott J gave significant weight to Apotex’s position that “Apotex does not wish to have non-party lawyers cross-examining adverse witnesses in Apotex’s s.8 damages case” [44]. So long as these kinds of advantages are cognizable, the responding parties will normally be able to show some kind of prejudice, and I doubt the issue of prejudice to the moving party will often play a major role.

I’m torn on the question of whether litigation advantages should be cognizable. On the one hand, our adversarial justice system depends on the parties being able to run their own case. As Southcott J put it,

[50] A party’s interest in planning and controlling its approach to litigation in which it is involved, and therefore avoiding an adverse impact upon that approach caused by others who would not normally be party to that litigation, strikes me as engaging an aspect of the administration of justice more fundamental than a mere tactical advantage.

On the other hand, our system does ultimately aim to find the truth, and the idea that there might be different truths about the same world in different trials is problematic. Under the old NOC proceedings, the courts regularly expressed embarrassment about the prospect of different result re validity or infringement in the NOC proceeding and the subsequent action. This never struck me as such a problem, given the summary nature of the old NOC proceedings; there’s no reason for embarrassment if a prima facie view of the merits in an interlocutory injunction application turns out differently from the result in the subsequent trial. It seems to me that the embarrassment would be significantly greater in a case in which separate actions could mean that four different trials would find that four different generics would have had a majority of the market in the same but for world. But as just noted, in Ramipril the FCA effectively embraced that inconsistency, as being inherent in the s 8. Under the “one world” approach, in which the same but-for world would be used for all the s 8 claimants, a trial of common issues would have considerable appeal in order to avoid inconsistent results. But given that the FCA held, in effect, that there is no common truth, as a matter of law, there is nothing left to the argument that we need a common trial to discover a common truth. With nothing to balance against it, it is really just a matter of weighing any efficiencies against the desirability of allowing each party to control its own case.

On the facts, Southcott J gave significant weight to a variety of litigation concerns raised by the generics [44]–[45]; he also noted that because witnesses would have to testify to different but-for worlds in the common trial, the efficiencies in adjudication would not be as great as if the there was a truly common factual issue [51]; and, moreover, one of the generics, namely Pharmascience, would suffer a more uncontroversial kind of prejudice because its trial date was 17 months later than the other two: [55]. Consequently, he refused to order the consolidation.

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.

NOC s 8 Regime is Still a Complete Code

Apotex Inc v Pfizer Ireland Pharmaceuticals 2021 ONSC 6345 Diamond J

            2,163,446 / sildenafil / VIAGRA

This decision is one more short chapter in the saga of Apotex’s attempts to avoid the limitation on recovery of damages under s 8 of the NOC regulations. Bigger news will be coming in the new year, with the appeal of Schabas J’s decision in Apotex v Eli Lilly 2021 ONSC 1588 (here) scheduled for February [22]. In the meantime, Diamond J’s decision in this motion for summary judgment followed Schabas J in dismissing Apotex’s claims, on the basis that the NOC regime provides a complete code governing recovery in respect of the statutory stay provisions of the NOC regime.

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. But 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). In an attempt to get around this and other limitations on s 8 recovery, a number of actions have been brought in provincial superior courts (mostly by Apotex), pleading a variety of causes of action other than s 8. So far these attempts have been largely unsuccessful, with the courts generally expressing the view that s 8 provides a “complete code” in respect of recovery pursuant to the statutory stay: see Low v Pfizer 2015 BCCA 506 [46]–[72], and see here, here and here. The most recent decision is that of Schabas J in Apotex v Eli Lilly / Zyprexa 2021 ONSC 1588, relating to olanzapine / ZYPREXA (see here), with an appeal to the ONCA scheduled for February 2022 [22].

The principle that the legislature intended s 8 to be a complete code governing the relationship between generic and innovators implies that the generic cannot recover under any cause of action other than s 8, even if the generic otherwise had a good claim under the alternative cause of action. This is apparent both in Schabas J’s decision, in which he held that the claims were not tenable even before considering the specific causes of action [122], as well as in Low v Pfizer, in which the BCCA [67] addressed the specific causes of action in the alternative, assuming that s 8 was not a complete code. Thus, while some causes of action have survived a motion to strike, they are doomed to fail if the complete code argument is accepted by the ONCA.

In this decision Diamond J came to the same conclusion as Schabas J, in a case related to sildenafil / VIAGRA. (The scheduled trial had been adjourned in light of Schabas J’s decision to allow the matter to be decided by a motion for summary judgment: see 2021 ONSC 1860.)

Diamond J relied on principles of comity, which indicate he should follow the decision of Schabas J unless it was clearly wrong: [15]–[26]. But comity did not play a pivotal role: Diamond J concluded that Schabas J’s decision was not clearly wrong, and “on the contrary, I agree with it” [28]. While Diamond J agreed generally with Schabas J’s analysis, he seemed to place particular emphasis on the point that all of Pfizer’s acts were legally permissible pursuit of the interest under the Patent Act and related legislation: eg “It is the provisions of the Patent Regime itself that precluded Apotex from competing with Pfizer through the development and sale of generic drugs, and not by reason of any alleged wrongful act or omission on the part of Pfizer” [30], and “There is no evidence in the record before me that Pfizer took any steps other than employing the regular legal process set out in the Patent Regime to its conclusion” [36].

Diamond J expressly noted that his conclusion that the patent regime is a complete code was sufficient to dispose of the matter even without the need to consider the merits of the specific causes of action that had been pleaded by Apotex [41]. He nonetheless briefly addressed the two additional common law causes of action advanced by Apotex which had not been raised in Schabas J’s Zyprexa decision, namely unjust enrichment and nuisance.

With respect to unjust enrichment, Diamond J noted that “[t]here is no causal connection between Pfizer’s alleged enrichment and Apotex’s alleged deprivation, as there was no ‘transfer of wealth’ from Apotex to Pfizer,” and more importantly, the patent regime provides a juristic reason for the enrichment [43]. With respect to nuisance, Diamond J stated that “There is nothing alleged to have been done on the part of Pfizer that substantially interferes with Apotex’s use and enjoyment of its property. The right to manufacture generic drugs is not a land right” [45].

Second Person Not Strictly Bound by NOA

Sunovion Pharmaceuticals Canada Inc v Taro Pharmaceuticals Inc 2021 FCA 113 Locke JA: de Montigny, Rivoalen JJA affg 2021 FC 37 Furlanetto J

2,538,265 / 2,696,510 / 2,814,828 / lurasidone hydrochloride

In this decision the FCA has held that under the new NOC Regs a second person is not strictly limited to the infringement and invalidity allegations set out in its NOA, as was the case in the old proceedings. This holding was based in large part on an express statement in the RIAS accompanying the amendments that the requirement to set out the legal and factual allegations in the NOA “does not circumscribe or otherwise limit the issues and arguments that may be raised in a proceeding brought under the Regulations” [5].

Locke JA acknowledged the concern that this might make it difficult for a patentee to assess its risk when deciding whether to respond and might also lead to case splitting. The FCA agreed with Furlanetto J that there are two checks on this problem. First, the discretion afforded under s 8(6) of the Regs, permits the Court to consider whether the first person was improperly influenced to start an action because of an incomplete NOA as a factor in assessing s 8 compensation: [7]. The second check is the Court’s discretion to grant or dismiss a motion to amend a pleading. “If a Court is convinced that a proposed amendment seeks to introduce invalidity allegations of which the moving party was aware when its NOA was served, the Court may dismiss the motion on the basis that permitting the amendment would not serve the interests of justice” [8].

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

Apotex Inc v Eli Lilly Canada Inc 2021 ONSC 1588 Schabas J

            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. There are limitations to the s 8 remedy which are now clearly established. First, if the generic prevails in the s 8 proceeding, s 8 entitles it only to its own damages, and not disgorgement of the patentee’s profits: 2011 FCA 358 (here); 2013 ONCA 555 (here). Second, 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). A number of actions have been brought in provincial superior courts pleading a variety of causes of action (other than s 8), seeking a way around both of these limits. So far, none of these attempts to avoid the limits on s 8 recovery have been successful, though some causes of action have survived a motion to strike. Other causes of action have been struck, or class certification refused on substantive grounds: see here for a summary as of Aug 2016, and here and here for discussion of two decisions since then. (I think that is a complete list, though I won’t make any promises.)

In this case, Apotex sought to avoid the second limit on s 8 damages. Lilly had prevailed in NOC proceedings against Apotex ( 2007 FC 455 affd 2008 FCA 44), but 113 patent was subsequently declared invalid in separate proceedings (2011 FC 1288 affd 2012 FCA 232): [10]–[23]. (As Schabas J noted [23], the 113 patent was invalidated on the basis of the promise doctrine—see here—which was subsequently abolished by the SCC in AstraZeneca 2017 SCC 36, so it appears that the 113 patent would be valid under current law. Nothing turned on this point.) Apotex had attempted to claim s 8 damages in Federal Court proceedings, and it was that litigation, culminating in 2013 FCA 282, that established that s 8 recovery is not permitted in those circumstances.

In this action, Apotex sought to recover damages for having been kept off the market on the basis of three 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].

Schabas J dismissed the action on a motion for summary judgment, holding that none of these causes of action raised a genuine issue for trial. There were two preliminary points: whether the matter should be dealt with by way of summary judgment (yes), and whether the limitations period had run (no), which I won’t address, as the former is not patent specific and the latter is only relevant to the old NOC proceedings.

Schabas J’s holding rested primarily on two general points.

First, the PM(NOC) Regulations are a “complete code” which comprehensively sets out the remedies available to the parties. The underlying NOC proceedings in this case were standard NOC proceedings of the kind that would have been directly within the contemplation of the legislature. To provide additional remedies which are not found in the Regulations, in circumstances that undoubtedly were contemplated by the drafters, would upset policy choices and balancing of interests arrived at by Parliament: [110] and generally [97]–[110], [114]. As Schabas J pointed out, this reasoning has been accepted in all of the highest authorities to consider the question in this context.

In my view this logic is sound. Since I’m an academic, I have to quibble a tiny bit. Schabas J stated a few times, including at the very outset of his analysis, that “patent law is ‘wholly statutory’” [97], [110]. Yes, that is quoting the SCC in Sanofi 2008 SCC 61, which in turn quoted Lord Walker’s decision in Synthon [2005] UKHL 59, but Apotex nonetheless is right to say that this is an “overstatement” [98]. For example, all of the law of utility, including the doctrine of sound prediction and its enhanced disclosure requirement (if that exists), and the prohibition of post-filing evidence, rests on a single word in the Act; the obviousness requirement was not in the code at all until 1993, despite having been part of the law for a century before that. The Supreme Court in Sanofi used this phrase to indicate two somewhat narrower points: first, that there is no common law right to a patent; and second, that specific statutory provisions will always prevail over judicially developed doctrines. Both of these points are unassailable, and neither rests on the notion that the Act is a complete code in a strong sense. Lord Walker’s statement in Synthon [57] is particularly curious:

The law of patents is wholly statutory, and has a surprisingly long history. It has been wholly statutory since the Statute of Monopolies 1623, an important landmark in constitutional history because of its effect in curbing the royal prerogative.

As Lord Walker states explicitly, the Statute of Monopolies did nothing but curb the royal prerogative. Even after the Statute of Monopolies, the basis for the grant in English law rested on the exercise of the royal prerogative and not on the statute: in principle, this was true in the UK until the Patents Act 1977. The Crown could, and occasionally did, refuse to grant patents for general policy reasons, such as protection of tax revenue, which had not even the slenderest basis in the Statute of Monopolies. Thus the very basis of the grant was not statutory. Moreover, the Statute of Monopolies itself is and was at the time generally considered to be a reflection of the common law. Indeed, Dr Fox has gone so far as to say that the Statute of Monopolies “was not by any means enacted as a patent statute having as its primary purpose the establishment of a system whereby letters patent might be obtained for meritorious inventions. It was enacted as the result of a long and turbulent agitation against the abuse of monopolies of all kinds as well as other grievances which are set out in the preamble to the Act”: Fox, “Abuse of Monopoly”(1945) 23 Can Bar Rev 353, 371. Consequently, Lord Walker’s statement that patent law “has been wholly statutory since the Statute of Monopolies 1623" is a bit of a stretch.

With that said, Schabas J’s decision does not rest on the view that the entirety of patent law is statutory. It rests on the much narrower ground that the balance of interests struck in the PM(NOC) Regulations, and the remedies provisions in particular, are a complete code for addressing the harm done by the statutory stay. That is the main point made by the authorities quoted and relied on by Schabas J. This narrower point is entirely compelling. The PM(NOC) Regulations were high profile enactments which were heavily lobbied. They reflect a political compromise between the interests of the generics and the innovators, and more broadly “a compromise between the interests of the public in encouraging research and development of new patentable drugs and in encouraging generics to market drugs at lower prices” [106]. I won’t multiply references on this point, as it is made in all of the decisions quoted by Schabas J, noting eg the “highly regulated” nature of this field [109].

I’ll add one point that wasn’t mentioned in the decision. It is widely recognized that the statutory stay "is tantamount to an interlocutory injunction": Bayer AG v Apotex (1993) 51 CPR(3d) 329 [13]. While the 1993 RIAS is not explicit, it appears that the NOC proceedings under the original regulations were broadly modeled on an interlocutory injunction application (in contrast to the deemed infringement approach under the US Hatch-Waxman system and under the new NOC proceedings). So, in addition to the stay, the proceeding was summary in nature, and the fact that the outcome had no in rem effect is also similar to an interlocutory injunction application. A defendant may also suffer loss from being enjoined by an interlocutory injunction if it turns out that the injunction was ‘wrongly’ (with the benefit of hindsight) granted, and it is very well-established that the party subject to an interlocutory injunction has no common law right to damages for its loss. This is because the loss is due to an order of the court, not the action of the plaintiff. The defendant will only be compensated if an undertaking is given, as is normally required. Section 8 damages play the role of damages on the undertaking; and to the extent that the proceedings were indeed modeled on an interlocutory injunction, the parallel implies that the background assumption is that there would be no recovery other than that provided for by s 8, just as there is no recovery for the harm caused by an interlocutory injunction apart from that provided for by the undertaking.

The second general point made by Schabas J is that Lilly cannot be made liable for exercising its statutory rights [113]–[118]. The direct cause of the loss to Apotex is the statutory stay. The stay is indirectly caused by Lilly listing the 113 patent, and then responding to Apotex’s NOA. While Lilly was not required to list the 113 patent, it was entitled to do so: “such acts ‘were the opposite of unauthorized’ and were acts that Lilly ‘was at liberty to commit’” [118], quoting Harris 2010 ONCA 872 [50] affg 2010 ONSC 2326 [94]. This is true “even if Lilly was motivated by an improper motive” (on which there is no evidence) [111].

This reminds me broadly of the US Noerr–Pennington doctrine, which is to the effect that it is not actionable under the antitrust laws to petition government to enact anticompetitive legislation, even if the intent is to eliminate competition: Noerr 365 US 127 (1961); Pennington 381 US 657, 670 (1965). The parallels are not exact, as Noerr and Pennington themselves are about petitioning government in the antitrust context specifically. But there is a broad parallel in the idea that petitioning the government in respect of legislation cannot be actionable in a democracy (Noerr 137–38), and similary taking advantage of one’s rights under legislation should not be actionable. The lower federal courts in the US have consequently expanded that immunity far beyond the antitrust context to a wide variety of claims: see Gugliuzza, Patent Trolls and Preemption, (2015) 101 Va L Rev 1579, 1611–12. Moreover, the Court noted in Pennington 671 that “it is clear under Noerr that Phillips could not collect any damages under the Sherman Act for any injury which it suffered from the action of the Secretary of Labor. The conduct of the union and the operators did not violate the Act, the action taken to set a minimum wage for government purchases of coal was the act of a public official who is not claimed to be a co-conspirator, and the jury should have been instructed, as UMW requested, to exclude any damages which Phillips may have suffered as a result of the Secretary’s Walsh-Healey determinations.” That is, if the direct cause of the injury is the operation of the legislation, the injured party cannot claim damages against the legislator, and any improper motive in petitioning for the legislation is vitiated by the intervention of the legislator itself. The principle applies not only to petitioning a legislative body, but also petitioning a court for relief, unless the litigation is a “sham”: see Professional Real Estate Inventors v Columbia Pictures 508 US 49, 56–58 (1993). More broadly, in the United States under Noerr-Pennington and related doctrines, a patentee is generally immune from civil liability for harm arising from assertions of infringement so long as the assertions are not (1) objectively baseless and (2) made with subjective ill intent: see Gugliuzza, Patent Trolls and Preemption, 1616–28. While there is room for debate about whether the precise contours of the US rule are sound as applied in the patent context (see Gugliuzza, arguing that threats made in bad faith should not be immune from liability), that is not relevant here as there is no question of objective baselessness or ill intent on the facts at hand. (Indeed, as noted above, the patent at issue would probably be valid under existing law.)

I’m not sure how much this parallel adds, but in any event, I do find the basic point made by Schabas J and Harris—that it cannot be actionable to take advantage of one’s statutory rights—to be entirely convincing.

It seems to me that these points are independent, and either would be sufficient to dispose of Apotex’s claim. The policy balance struck by the legislature happens to be triggered by the pharma innovator listing its patent; but even if there were some other trigger, the policy balance still shouldn’t be upset. Conversely, if listing is authorized under the Act, it shouldn’t give rise to liability, even if there weren’t a comprehensive balance backing it up. But that’s an issue for another day, as here the two principles did work in tandem.

So at this point there is a strong argument for dismissing Apotex’s action—and I haven’t even discussed the actual causes of action themselves, except in passing at the outset. Schabas J’s decision proceeded similarly: he apparently held that the claims were not tenable even before considering the specific causes of action [122], though he did go on to consider the specific causes of action, and concluded that none of them could be supported on the evidence or the law. While this approach is a bit unorthodox, it strikes me as sound. At the very least, the general principles establish that the claims should be dismissed unless examination of the specific causes of action shows some good reason to the contrary.

The first cause of action was for breach of s 4 of the Ontario Statute of Monopolies, which provides (in part),

If any person shall be . . . grieved . . . by [any] letters patents . . . tending as aforesaid, . . . the same person shall have his remedy . . . against him by whom he shall be so . . . grieved . . . and every such person . . . shall recover three times so much as the damages which he sustained by . . . occasion of being so . . . grieved

This is essentially identical to s 4 of the original English Statute of Monopolies (barring some transitional language in the original statute). As I understand it, there was some controversy as to whether various Imperial statutes affecting property and civil rights became part of the law of Canada ex proprio vigore. To resolve the uncertainty, “An Act respecting the Imperial Statutes relating to property and civil rights” SO 1902 c 13, was enacted, confirming that certain listed Acts were part of the law of Ontario. The Ontario Statute of Monopolies was made part of the RSO 1897 under the authority of that Act: see Fox, “Abuse of Monopoly” (1945) 23 Can Bar Rev 353, 363–64. The Ontario Statute of Monopolies has never been judicially considered until this recent spate of proceedings. Section 4 of the original English statute appears to have been judicially considered exactly once in the 400 years since it was enacted, in Peck v Hindes (1898) 15 RPC 113 (QB) (see 117 indicating that it was the first time the provision had been considered).

There are serious questions as to the validity of the Ontario Statute of Monopolies, which Schabas J found it unnecessary to address in light of his conclusion that the provision, even if validly enacted, did not support Apotex’s claim in the circumstances [127]–[130]. I’ll note that Dr Fox was firmly of the view that it was intra vires: see “Abuse of Monopoly” at 370–72

Apotex’s argument, as I understand it, is that Apotex was “grieved” by the 113 patent, by virtue of having been kept off the market. Section 6 of the Statute of Monopolies (s 5 of the Ontario Statute) provides that s 4 does not apply to any letters patents granted to the true and first inventor of for new manufactures; but this exception, so the argument goes, should be interpreted as only applying to valid letters patent, so that patents that granted but which are ultimately held to be invalid are subject to s 4. This is a purely textual interpretation of s 4, and it must be said that a purely textual parsing of an obscure 400 year old statute is a very slender ground for disrupting the legislative balance struck by the NOC Regulations.

The historical intent of s 4 is obscure. In Peck v Hindes, counsel argued at 124–25 that s 4 was aimed at extrajudicial enforcement of patent rights; that was not accepted (or rejected) by the court, and even if correct, that theory of s 4 would not support a cause of action on the present facts. Mathew J in Peck v Hindes concluded at 127 that s 4 did not apply at all to letters patent for invention. The famous s 6 of the original Act (s 5 of the Ontario Statute, as s 5 of the original Statute was transitional), the foundation of the law of patents, provides an exception for letters patent for invention in the following terms: “any declaration before mentioned” —including s 4—”shall not extend to any letters patents. . . made. . .of the sole working or making of any manner of new manufactures.” The Court in Peck v Hindes observed that “Section 6 does not say anything about valid Letters Patent. It says, Letters Patent for new inventions” (127). Schabas J agreed with this holding [135].

The only scholarship I have been able to find that considers the effect of s 4 is series of articles by Dr Fox, primarily “Abuse of Monopoly”(1945) 23 Can Bar Rev 353; and see also “Patents in Relation to Monopoly” (1946) 12 Can J Econ Pol Sci 328; Fox, “Patents in Relation to Monopoly: A Rejoinder” (1947) 13 Can J Econ Pol Sci 68-80. Fox argues that s 4 was intended to address unjustified threats of legal proceedings, similar in spirit to the UK Intellectual Property (Unjustified Threats) Act 2017, and which are normally dealt with in current Canadian law under s 7(a) of the Trademarks Act: see here and here. While Dr Fox’s theory was not considered by Schabas J, Fox’s conclusions are entirely consistent with his reasons. Fox agreed with the holding in Peck v Hindes, saying that it is authority for the proposition that “an action for infringement of a patent, whether valid or invalid, does not give rise to the action contemplated by sec. 4” (370, my emphasis); and similarly, on the authority of Peck v Hindes, "a person could not be penalized for bringing action in a court of law to support his letters patent even though he were unsuccessful” (369). Fox goes on to argue that “nevertheless he could be and would be penalized if he endeavoured to use his patent as a club held in terrorem over the heads of his competitors, and by so doing grieved, disturbed or disquieted those persons, by methods other than bringing the matter for hearing and determination before a court of law” (369). Whether Fox is right as to the intent and effect of s 4 is a question that we need not resolve here; it is enough to say that on Fox’s view, s 4 would clearly not allow recovery for damages in the circumstances of this case.

It is also worth noting that Fox explicitly agreed with Schabas J’s second general point: “No person can be penalized, other than by costs, for bringing an action to support what he considers to be a legal right” (372). This observation illustrates that s 4 is not in tension with the general principles set out by Schabas J; on the contrary, it can, and should, be interpreted harmoniously with that basic principle.

The next cause of action raised by Apotex is based on s 7(a) of the Trademarks Act, which is breached when one makes “a false or misleading statement tending to discredit the business, goods or services of a competitor.” Apotex argued that the false statement by Lilly lay in listing the 113 patent on the Patent Register, which entailed a representation that the '113 Patent was valid and enforceable [139]. Schabas J noted that “there is nothing untrue or false in any material respect, let alone disparaging or discrediting of Apotex, in the Form IV. At the time it was completed, Lilly did have the 113 Patent for Olanzapine. That is essentially all that was stated” [141].

Apotex’s final cause of action is common law conspiracy, which alleged a conspiracy to fix monopolistic prices. This was premised entirely on Lilly applying for a patent and listing on the register, which Lilly was perfectly entitled to do. There was no suggestion of improper conduct, other than obtaining a patent that was ultimately held to be invalid; this cannot constitute a conspiracy.

Finally, I note that Schabas J did not hold that use of the litigation process can never give rise to civil liability, but rather that any such liability must be based on a “stand alone cause of action” or a claim “totally independent of the regulatory regime”: [115], adopting the language of Apotex v Eli Lilly 2015 ONCA 305 [53] and 2013 ONSC 5937 [8]. Schabas J did not elaborate, as there was no allegation capable of supporting any independent ground, but in my view, groundless threats of infringement, that were the concern of authors such as Dr Fox and Prof Gugliuzza, would certainly fall into that category. There is therefore not the slightest conflict between Schabas J’s holding and the FC decisions, mentioned above, dealing with unjustified threats under s 7(a) of the Trademarks Act.

PS — Various similar actions are also before the courts at various stages of case management. In a case management decision in one such matter, Apotex Inc v Pfizer Ireland Pharmaceuticals 2021 ONSC 1860 Myers J adjourned a trial set for September in light of Schabas J’s decision in this case, and instead ordered that the matter be decided by way of a motion for summary judgement.