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Patents - Generic Drugs. Apotex Inc. v. Eli Lilly and Company
In Apotex Inc. v. Eli Lilly and Company (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here from the dismissal of an action claiming damages under s.8 of the Patented Medicines (Notice of Compliance) "which allows generic companies to claim damages from the patent owner for delayed entry into the market".
Here the court explains this Patent Act generic drug regime and it's damages remedy:[5] In Canada, patent owners hold a 20-year monopoly. But the Patent Act allows for an “early work” exception to patent infringement, reflected in s. 55.2 of the Act. Section 55.2 provides as follows:55.2 (1) It is not an infringement of a patent for any person to make, construct, use or sell the patented invention solely for uses reasonably related to the development and submission of information required under any law of Canada, a province or a country other than Canada that regulates the manufacture, construction, use or sale of any product. [6] This provision allows a generic manufacturer to “piggyback” on the work done by a patent-owning innovator in developing, testing, and marketing a drug. It can take more than two years to complete the work necessary to obtain approvals. By allowing “early work” by generic companies, the Act allows them to prepare and stockpile product so that no time is lost once the patent expires.
[7] If a generic manufacturer wants to market a “copycat” drug – a pharmaceutical equivalent of a patented drug – it has a choice. It can wait until the patent expires, or it can try to enter the market while the patent is still in place. In the latter scenario, the generic company must challenge the patent by filing a “notice of allegations” (a “NOA”) against the patent owner under s. 5 of the Regulations. Once served with a NOA, the patent owner has a choice. It can allow the generic to enter the market, reserving the right to sue for patent infringement, or it can bring an application to prohibit the marketing of the generic (a “prohibition application”) under s. 6 of the Regulations.
[8] When the patent owner launches a prohibition application, the Minister cannot issue a notice of compliance (a “NOC”) for the generic drug for 24 months, unless the prohibition proceeding resolves before then. And a NOC is required before a drug can enter the market. Therefore, a prohibition application will delay a generic’s entry into the market. If the prohibition application is unsuccessful, the generic company may have a claim in damages against the patent owner for the loss arising from the delay.
[9] Section 8 of the Regulations makes a patent holder liable for damages where its prohibition application is “withdrawn or discontinued…” or “is dismissed by the court hearing the application”, or the order is “reversed on appeal”. The full text is as follows:[1]8. (1) If an application made under subsection 6(1) is withdrawn or discontinued by the first person or is dismissed by the court hearing the application or if an order preventing the Minister from issuing a notice of compliance, made pursuant to that subsection, is reversed on appeal, the first person is liable to the second person for any loss suffered during the period
(a) beginning on the date, as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations, unless the court concludes that
(i) the certified date was, by the operation of An Act to amend the Patent Act and the Food and Drugs Act (The Jean Chrétien Pledge to Africa), chapter 23 of the Statutes of Canada, 2004, earlier than it would otherwise have been and therefore a date later than the certified date is more appropriate, or
(ii) a date other than the certified date is more appropriate; and
(b) ending on the date of the withdrawal, the discontinuance, the dismissal or the reversal.
(2) A second person may, by action against a first person, apply to the court for an order requiring the first person to compensate the second person for the loss referred to in subsection (1).
(3) The court may make an order under this section without regard to whether the first person has commenced an action for the infringement of a patent that is the subject matter of the application.
(4) If a court orders a first person to compensate a second person under subsection (1), the court may, in respect of any loss referred to in that subsection, make any order for relief by way of damages that the circumstances require.
(5) In assessing the amount of compensation the court shall take into account all matters that it considers relevant to the assessment of the amount, including any conduct of the first or second person which contributed to delay the disposition of the application under subsection 6(1).
(6) The Minister is not liable for damages under this section. [10] If the patent holder is found to be liable to the generic under s. 8, the quantum of damages depends on the profits the generic would have made in a “hypothetical world” in which the patent holder did not initiate the prohibition proceeding: Merck Frosst Canada & Co. v. Apotex Inc., 2011 FCA 329, 107 C.P.R. (4th) 155, at para. 75 [Norfloxacin]; Apotex Inc. v. Sanofi-Aventis, 2014 FCA 68, 125 C.P.R. (4th) 403, at paras. 160-62, 170-71 [Ramipril FCA], aff’d 2015 SCC 20, [2015] 2 S.C.R. 136.
[11] The period relevant to this inquiry is called the “liability period”. It begins “on the date, as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations”, and ends on the date of the dismissal of the prohibition proceeding: Regulations, ss. 8(1)(a), (b).
[12] The “hypothetical world” analysis turns in part on (a) whether the generic could have entered the market during the liability period, and if so, when, and (b) whether the generic would have entered the market during the liability period, and if so, when. These are factually-driven questions that depend on contingent circumstances. See, e.g., Norfloxacin, at paras. 78-79 (the generic’s ability to acquire a supply of the relevant materials); Apotex Inc. v. Sanofi-Aventis, 2012 FC 553, 410 F.T.R. 78, at para. 11 [Ramipril FC] (the share of the market the generic would have obtained), rev’d on other grounds, Ramipril FCA.
[13] If the generic could and would have entered the market during the liability period, it is entitled to damages for the profits lost as a result of the patent holder preventing it from doing so: Ramipril FC, at para. 237.
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THE HYPOTHETICAL WORLD
[23] Apotex, as the plaintiff, bore the onus to establish that the facts of the hypothetical world would support its claim for damages: Pfizer Canada Inc. v. Teva Canada Ltd., 2016 FCA 161, 400 D.L.R. (4th) 723, at paras. 53-56. To succeed, Apotex had to establish that it would have come to market in the hypothetical world sooner than it did in the real world. The conduct of the parties in the real world is useful evidence for constructing the hypothetical one. The court should assume that their behaviour in the real world reflects what they would have done in the hypothetical world, absent evidence to the contrary: Teva Canada Limited v. Sanofi-Aventis Canada Inc., 2014 FCA 67, 126 C.P.R. (4th) 1, at para. 145.
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