Eli Lilly Canada Inc. v. Teva Canada Limited

Eli Lilly Canada Inc. v. Teva Canada Limited
Court (s) Database
Federal Court of Appeal Decisions
Date
2018-03-20
Neutral citation
2018 FCA 53
File numbers
A-71-17
Notes
A correction was made on December 5, 2018.
Decision Content
Date: 20180320
Docket: A-71-17
Citation: 2018 FCA 53
CORAM:
RENNIE J.A.
GLEASON J.A.
LASKIN J.A.
BETWEEN:
ELI LILLY CANADA INC.
Appellant
(Respondent by Cross-Appeal)
and
TEVA CANADA LIMITED
Respondent
(Appellant by Cross-Appeal)
Heard at Toronto, Ontario, on November 22 and 23, 2017.
Judgment delivered at Ottawa, Ontario, on February 22, 2018.
REASONS FOR JUDGMENT BY:
LASKIN J.A.
CONCURRED IN BY:
RENNIE J.A.
GLEASON J.A.
Date: 20180320
Docket: A-71-17
Citation: 2018 FCA 53
CORAM:
RENNIE J.A.
GLEASON J.A.
LASKIN J.A.
BETWEEN:
ELI LILLY CANADA INC.
Appellant
(Respondent by Cross-Appeal)
and
TEVA CANADA LIMITED
Respondent
(Appellant by Cross-Appeal)
REASONS FOR JUDGMENT
(Confidential Reasons for Judgment Issued February 22, 2018)
LASKIN J.A.
Table of Contents (by paragraph)
Para.
Overview
1
The Regulations
4
Litigation History
11
Grounds that Lilly argues require dismissal of the section 8 claim in its entirety
18
(1) Abandonment
19
(2) Impact of AstraZeneca
24
(a) The AstraZeneca decision
29
(b) The Virgin Atlantic decision
33
(c) Appropriateness of raising the argument on appeal
44
(d) Issue estoppel
50
(e) Application of issue estoppel
55
Grounds relating to the application of subsection 8(5) of the Regulations
69
(1) Delay
72
(2) Abuse of process
76
Grounds relating to the finding that Teva could and would have come to
Market in March 2006
84
(1) Burden of proof
85
(2) Ignoring uncontradicted evidence
94
(a) Access to API
104
(b) Timing of validation and regulatory approval
114
(c) Waiting for regulatory approval for API made through a non-infringing process
120
(d) Infringement of claim 20
123
(3) Hearsay and lay opinion evidence
127
Grounds relating to the trial judge’s finding as to Teva’s trade-spend rate
134
(1) The hearsay arguments
140
(2) Reliance on other section 8 cases
147
Teva’s grounds of cross-appeal
151
(1) Pipefill
154
(2) Under-reporting
171
(3) Pricing in Ontario
178
Proposed disposition
189
I. Overview
[1] Eli Lilly Canada Inc. appeals from the judgment of Justice O’Reilly of the Federal Court (2017 FC 88) awarding damages to Teva Canada Limited under section 8 of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133, for loss suffered when it was kept out of the market for olanzapine by Lilly’s unsuccessful prohibition application under the Regulations. Lilly raises a series of grounds of appeal. Some would, if accepted, require dismissal of Teva’s claim in its entirety and return of the more than $70 million that Lilly has already paid towards the judgment, while others would reduce the amount payable. Teva has cross-appealed, on three grounds.
[2] For the reasons set out below, I would dismiss the appeal and allow the cross-appeal in part.
[3] Given the number of grounds of appeal and cross-appeal, I will start with a brief outline of the scheme of the Regulations and a summary of the litigation history. I will then provide any further factual context necessary to address each ground as I come to it. I will address the main grounds argued by the parties, and will do so largely in the categories and the sequence in which they were argued. For simplicity, I will refer throughout to the respondent and appellant by cross-appeal as Teva, though during the relevant period its corporate name was Novopharm Limited.
II. The Regulations
[4] In setting out the scheme of the Regulations, I borrow heavily from the outline that this Court recently provided in Pfizer Canada Inc. v. Teva Canada Limited, 2016 FCA 161, 483 N.R. 275 at paras. 13-18 (Venlafaxine). I also describe the Regulations as they existed at the relevant time. They were recently substantially amended by the Regulations Amending the Patented Medicines (Notice of Compliance) Regulations, SOR/2017-166.
[5] In order to market a new drug in Canada, an innovator drug manufacturer must, among other things, file a new drug submission and receive approval in the form of a notice of compliance from the Minister of Health. As part of that process, the Regulations permit the manufacturer to list in a patent register all of the patents relevant to the submission.
[6] A generic drug manufacturer wishing to make and market a generic version of the drug may submit an abbreviated new drug submission, using the results of clinical trials regarding safety and effectiveness undertaken by the innovator to demonstrate that the generic formulation is bioequivalent to the innovator’s. This dispenses with the need for the generic manufacturer to undertake its own clinical trials.
[7] In its submission, the generic drug manufacturer must address any patent listed in the patent register concerning the innovator drug. It does so either by stating that it is not seeking the issuance of an NOC until the patent expires or by alleging that the patent is not valid or will not be infringed by the making, using or selling of the generic drug. If it takes the latter course, it must serve a notice of allegation containing a detailed statement of the factual and legal bases for the allegation.
[8] An innovator who wishes to challenge the allegation of invalidity or non-infringement in the NOA must apply to the Federal Court within 45 days for an order prohibiting the Minister of Health from issuing an NOC for the generic product before the expiry of the patent or patents that are the subject of the NOA. The bringing of a prohibition application triggers what is sometimes referred to as a regulatory stay: the Minister may not issue an NOC to the generic drug company for 24 months or until the application is withdrawn, discontinued or dismissed.
[9] If a prohibition application is ultimately unsuccessful either at first instance or on appeal, or if it is discontinued or withdrawn, section 8 of the Regulations gives the generic company a right of action against the innovator for any loss suffered during a period that ordinarily runs from the date on which the Minister certified that an NOC would have been issued in the absence of the Regulations (often called the patent hold date) to the date of the withdrawal, discontinuance or dismissal. By clause 8(1)(a)(ii), the court hearing the section 8 claim may determine that some start date other than the certified date is appropriate.
[10] Subsection 8(5) requires the court, in assessing the amount of compensation, to “take into account all matters that it considers relevant to the assessment of the amount, including any conduct of the [parties] which contributed to delay the disposition of the [prohibition] application.” The assessment of whether the generic manufacturer suffered a loss and, if it did, the proper amount of damages entails comparing what happened in the “real world,” where the generic manufacturer was kept out of the market, with what would have happened in the “hypothetical world” or “but-for world” – a world in which the generic manufacturer was free to enter (Venlafaxine, above at paras. 45-46).
III. Litigation history
[11] The parties have been engaged in litigation concerning olanzapine, a drug primarily useful in the treatment of schizophrenia, since August 2004. At that time Teva, which was seeking to bring to market a generic version of olanzapine, served an NOA under the Regulations alleging that Lilly’s patent for olanzapine was invalid on a variety of grounds. Lilly responded with an application for prohibition in the Federal Court.
[12] In June 2005, before the evidence in the application was complete, Teva served a further NOA and advised that it would be withdrawing the first one. The second NOA was similar to the first, but dropped certain allegations and added several new ones. Once Teva withdrew the first NOA, Lilly’s application was discontinued. In response to the second NOA, Lilly brought a further application for prohibition. That application was dismissed by Justice Hughes in June 2007 (Eli Lilly Canada Inc. v. Novopharm Limited, 2007 FC 596, [2008] 2 F.C.R. 749). Teva then obtained its NOC and was free to enter the olanzapine market. Lilly’s appeal from the dismissal of its prohibition application was dismissed as moot (Eli Lilly Canada Inc. v. Novopharm Limited, 2007 FCA 359, 370 N.R. 140).
[13] On the dismissal of the application, Lilly commenced an infringement action against Teva in the Federal Court. Teva counterclaimed for a declaration of invalidity and for damages under section 8 of the Regulations for the loss that it suffered from being kept off the market until Lilly’s prohibition application was dismissed. Lilly sought and obtained an order bifurcating liability and remedies.
[14] The liability proceeding was tried before Justice O’Reilly (Eli Lilly Canada Inc. v. Novopharm Limited, 2009 FC 1018, 353 F.T.R. 35). He found Lilly’s patent invalid, primarily on the basis that it was not a valid selection patent. He also found it invalid for double patenting, anticipation, insufficiency of disclosure, and obviousness. He found Teva entitled to section 8 damages, and ordered that their amount, together with other related issues, be determined in a separate proceeding.
[15] Lilly’s appeal to this Court was allowed (Eli Lilly Canada Inc. v. Novopharm Limited, 2010 FCA 197, [2012] 1 F.C.R. 349). This Court concluded that the patent was not invalid for anticipation, double patenting or obviousness, but remitted the issues of utility and sufficiency to the Federal Court. Teva sought leave to appeal this Court’s decision to the Supreme Court of Canada. Its application for leave to appeal was dismissed (2011 CanLII 6307 (SCC)).
[16] The re-trial proceeded before Justice O’Reilly (Eli Lilly Canada Inc. v. Novopharm Limited, 2011 FC 1288, 100 C.P.R. (4th) 269). He found that there was no insufficiency of disclosure, but again concluded that the patent was invalid, based on lack of utility. An appeal to this Court was dismissed (Eli Lilly Canada Inc. v. Novopharm Limited, 2012 FCA 232). Lilly again sought leave to appeal to the Supreme Court of Canada. Following an oral hearing, its application was dismissed (2013 CanLII 26762 (SCC)).
[17] The parties then moved on to the remedies proceeding, to determine the amount, if any, of section 8 damages. This proceeding too was tried before Justice O’Reilly. After a 16-day trial, he concluded that Teva was entitled to damages, and made a series of findings, as the parties had requested, to permit them to calculate the amount. I discuss these findings later in these reasons to the extent necessary to address the grounds of appeal and cross-appeal.
IV. Grounds that Lilly argues require dismissal of the section 8 claim in its entirety
[18] There are two grounds in this category. Lilly asserts that (1) the trial judge erred in failing to find that Teva abandoned its section 8 claim when it withdrew its first NOA, and (2) as the result of the recent decision of the Supreme Court of Canada in AstraZeneca Canada Inc. v. Apotex Inc., 2017 SCC 36, 147 C.P.R. (4th) 79, Teva suffered no compensable loss.
(1) Abandonment
[19] Lilly’s abandonment argument is based on written representations made by Teva in response to a motion brought by Lilly for solicitor-and-client costs of its first prohibition application, which became moot and was discontinued once Teva withdrew its first NOC. The representations included the following paragraph (Appeal Book, Vol. 4, p. 898, emphasis added):
The evidence on the record is that [Teva] had to withdraw its first Notice of Allegation and file its second Notice of Allegation to incorporate the new evidence and arguments that came to light between August 2004 and March 2005, thereby ensuring that all relevant issues were before the Court. This was to the prejudice of [Teva]. [Teva] lost time, restarted the “draconian” 24-month stay imposed by the Regulations, abandoned its claim to s. 8 damages and lost its first to market position to its competitor Apotex.
[20] Lilly submits that the trial judge erred in failing to find this to be an unequivocal representation to Lilly and the Court that Teva had abandoned its section 8 claim, as it related not only to Lilly’s first prohibition application but also to the second. It says that if there is any ambiguity about the scope of the abandonment, it should be resolved against the party that made the representation of abandonment. It also submits that to make out a claim of abandonment – unlike other similar types of claims, such as promissory estoppel – there is no need to show reliance by the party to whom the representation of abandonment was made. It asserts that whether and the extent to which there is abandonment is not a question of fact, but “a question of interpretation.”
[21] The trial judge rejected Lilly’s arguments on this issue (at paras. 27-28). He found that, read in context, the statement by Teva that it abandoned its claim for section 8 damages related solely to the first proceeding, that “Teva was simply pointing out that one of the consequences of the withdrawal of its first NOA was a relinquishment of a claim to damages within that proceeding,” and that “Teva did not agree that it would not […] seek s 8 damages in the second proceeding or, indeed, in this action.” He drew support for his conclusion from, among other things, his own determination in the first liability trial that the amount of damages would be decided in a separate proceeding.
[22] In my view the threshold question raised by this ground of appeal – whether Teva’s representation that it had abandoned its section 8 damages claim encompassed its claim flowing from the second application for prohibition – is a question of fact (B. MacDougall, Estoppel (Markham, Ontario: LexisNexis Canada Inc., 2012) at pp. 576-577). It is therefore subject to review on the “palpable and overriding error” standard of review. This is of course a stringent and highly deferential standard (Benhaim v. St-Germain, 2016 SCC 48, [2016] 2 S.C.R. 352 at paras. 38-39).
[23] I see no basis for concluding that the trial judge committed a palpable and overriding error in making the finding that he did. Apart from the factors to which he referred, which were sufficient support for his finding, there was also evidence from Barry Fishman, Teva’s then-Executive Vice President, Commercial Development, to the effect that the abandonment related only to the first application (Appeal Book, Vol. 56, p. 14497). There is therefore no need to consider the legal question whether Lilly is correct in its submission that it did not have to establish reliance on its part to make out the abandonment claim.
(2) Impact of AstraZeneca
[24] Lilly argues that the decision in AstraZeneca rendered legally untenable the sole basis on which its patent for olanzapine was ultimately found invalid. It relies heavily on the decision of the Supreme Court of the United Kingdom in Virgin Atlantic Airways Limited v. Zodiac Seats UK Limited, [2013] UKSC 46, [2014] 1 A.C. 160, in submitting that the Court must take into account a change of circumstances as to the validity of the patent – here, the change resulting from AstraZeneca – that arises between the finding of liability and the quantification of damages, even where the liability decision is res judicata. It points out that recovery of section 8 damages requires proof of a loss (Venlafaxine, above at paras. 44-45), and that damages are not recoverable for sales that in the hypothetical world would likely have been infringing and illegal (Apotex Inc. v. Merck & Co., Inc., 2012 FC 620, 411 F.T.R. 284 at paras. 26, 37-40).
[25] Lilly goes on to argue that even apart from Virgin Atlantic, res judicata and its related doctrines do not preclude taking into account the decision in AstraZeneca. It argues that the issue of causation under section 8 is still open and has not been finally decided, and that issue estoppel does not apply to a declaratory statement of the law like that made in AstraZeneca. It submits that in any event, issue estoppel is an equitable doctrine that is to be flexibly applied, to achieve fairness according to the circumstances of each case. It submits that it would be unfair, and contrary to the ends of justice, to require Lilly to pay $70 million in damages when its patent would not now be found, and should not have been found, to be invalid, and when it has already suffered from the loss of exclusivity in the market for olanzapine. This, it submits, would be “pouring salt on the wounds.”
[26] The Supreme Court of Canada issued its decision in AstraZeneca in June 2017, five months after the trial judge rendered the decision now under appeal. The argument that Lilly now makes is not, therefore, one that was or could have been put to the trial judge before he gave judgment; nor did Lilly seek leave to reopen the trial so that it could advance it before him. However, Lilly sought and was granted leave to amend its notice of appeal to add the argument to its grounds of appeal, without of course any determination of the merits of the argument or whether it could properly be made on appeal.
[27] In my view, the doctrine of issue estoppel bars Lilly from succeeding on this ground of appeal. While the doctrine of issue estoppel contemplates a discretion on the part of a court not to apply it where its application would work an injustice, I do not see a sufficient basis to exercise the discretion in Lilly’s favour here. In argument, there was some discussion of other doctrines within the umbrella of res judicata, but it is not necessary to go beyond issue estoppel in the circumstances here.
[28] Before setting out the elements of the doctrine of issue estoppel and discussing its application in the face of Lilly’s submissions in support of this ground of appeal, I will review first the decision in AstraZeneca and how it affects the basis on which Lilly’s patent was determined to be invalid, and then the decision in Virgin Atlantic. I will also consider why it is at a minimum problematic for Lilly to raise this new ground on appeal.
(a) The AstraZeneca decision
[29] The main issue in AstraZeneca was whether the “promise of the patent” doctrine is the correct approach for determining whether a patent has sufficient utility. The doctrine had grown out of observations by the Supreme Court and had been developed and applied by the Federal Court and this Court in a series of cases. One of these was this Court’s decision on Lilly’s appeal from the trial judge’s first determination of invalidity. This Court set out the doctrine in that case as follows (2010 FCA 197 at para. 76):
Where the specification does not promise a specific result, no particular level of utility is required; a “mere scintilla” of utility will suffice. However, where the specification sets out an explicit “promise”, utility will be measured against that promise […]. The question is whether the invention does what the patent promises it will do.
In allowing the appeal and remitting the matter to the Federal Court, this Court held that the trial judge had erred in failing properly to apply the promise doctrine.
[30] The trial judge applied the doctrine in his second invalidity decision. He found that while the invention had some utility, it failed to meet the explicit promise that the patent set out. The patent was therefore invalid for want of utility (2011 FC 1288 at paras. 209, 267-268). This was the sole ground of invalidity on which Teva succeeded; its sufficiency attack failed.
[31] When Lilly applied for leave to appeal to the Supreme Court from this Court’s decision upholding the second invalidity decision, it was on the basis that the appropriateness of the promise doctrine was a matter of public importance that the Supreme Court should consider. However, its application was dismissed. Some three years later, the Supreme Court granted leave to appeal to address this issue in AstraZeneca.
[32] The Supreme Court concluded in AstraZeneca that the promise doctrine is not the correct approach to determine whether a patent has sufficient utility. The doctrine, it stated, is “unsound,” “not good law,” and incongruent with both the language and the scheme of the Patent Act (at paras. 36, 51). The Court characterized the doctrine as excessively onerous. It also saw it as conflating the statutory requirements of utility and disclosure (at paras. 37-38), and stated that the mischief of overpromising could be dealt with through other requirements for a valid patent, including that of sufficient disclosure. It held that to meet the utility requirement, “a scintilla of utility will do” (at para. 55).
(b) The Virgin Atlantic decision
[33] In Virgin Atlantic, the U.K. Supreme Court dealt with a claim by Virgin against Zodiac for damages for infringement of a European patent for airplane passenger seats. U.K. law, in conjunction with the European Patent Convention, establishes what the Court described as a “system of parallel jurisdiction for determining the validity of European patents” (at para. 3).
[34] Under this system the English courts have the same jurisdiction to determine validity and infringement of a European patent as they have for domestic patents. However, the European Patent Office has concurrent jurisdiction over questions of validity (at para. 7). A determination of invalidity by either an English court or the EPO is a decision in rem, which extends beyond the immediate parties. But the effect of an English decision is territorially limited to the U.K., while an EPO decision is effective in all states for which the patent was granted.
[35] Virgin brought infringement proceedings against Zodiac in the English High Court, claiming an injunction and damages. Zodiac defended on the basis that its seats did not infringe, and that in the alternative the patent was invalid. It also brought opposition proceedings in the EPO.
[36] Virgin’s claim in the High Court was initially dismissed, but the Court of Appeal reversed, held the patent valid and infringed, granted an injunction, and directed an inquiry as to damages. In the meantime a division of the EPO upheld the validity of the patent. Zodiac appealed that decision to the EPO’s Technical Board of Appeal. The TBA held that all of the claims that the Court of Appeal had found infringed were invalid, and amended the patent to remove them. Under the applicable law, its decision was retrospective, with effect from the priority date of the patent.
[37] By this time the Supreme Court had refused permission to appeal the decision of the Court of Appeal upholding the validity of the patent. However, Zodiac applied to the Court of Appeal for an order, among other things, discharging the order for an inquiry as to damages. The Court of Appeal upheld the order, based on res judicata. The question before the Supreme Court was whether Zodiac was entitled to argue at the inquiry as to damages – or alternatively precluded from arguing by res judicata – that there were no damages because the patent had been retrospectively amended to remove the claims held infringed.
[38] The Supreme Court was unanimous in holding that Zodiac was entitled to argue that there were no damages. The leading judgment was given by Lord Sumption; Lord Neuberger wrote a supporting judgment with which the other three members of the panel also concurred.
[39] Lord Sumption began with the observation that the appeal “perfectly [illustrated] the problems arising from the system of parallel jurisdiction for determining the validity of European patents” (at para. 3). He held that there were two reasons why, despite the principles of res judicata, Zodiac could not be precluded from making the argument that there were no damages. First, Zodiac would be relying not on the patent as upheld by the Court of Appeal, but “on the more limited terms of a different patent which, by virtue of the decision of the TBA, must at the time of the enquiry be treated as the only one which ever existed.” Second, Zodiac was not seeking to reopen the question of validity determined by the Court of Appeal: “[t]he invalidity of the patent may be the reason why the TBA amended the patent, but the defendant is relying on the mere fact of amendment, not on the reasons why it happened” (at para. 27).
[40] In reviewing the English authorities on the principles flowing from res judicata, Lord Sumption had quoted from a decision of the House of Lords stating that the “underlying public interest is […] that there should be finality in litigation and that a party should not be twice vexed in the same matter” (at para. 24). He observed that “[t]he ‘vexation’ associated with the pursuit of two proceedings challenging the validity of the patent was an inescapable feature of the statutory scheme which [confers] concurrent jurisdiction on questions of validity on both the English court and the EPO” (at para. 33).
[41] In his reasons, Lord Neuberger was critical of the Court of Appeal for failing to “have appropriate regard to the statutory provisions relating to patents, which reflect the nature of a patent and the effect of its revocation” (at para. 48). The effect of revocation, he stated, “was that everyone was entitled to conduct their affairs as if the patent had never existed” (at para. 49). He added that “an issue of res judicata in connection with a patent case cannot be considered correctly without proper regard to the effect of [the Patents Act] and the [European Patent Convention]” (at para. 50). He described the fact that “the patent in issue” had been revoked as “a new, centrally important, uncontroversial fact” which could not have been raised in the English proceedings because the revocation had not yet occurred; “to deny the alleged infringer the ability to raise it would be to give effect to a monopoly right which the patentee never should have had” (at para. 52).
[42] Lord Neuberger went on to note that Zodiac was not seeking to challenge any of the conclusions reached by the Court of Appeal in the English proceedings. He added (at para. 53) that
[a]ll that Zodiac are seeking to do is to contend that the damages on the assessment should be assessed at nil (or, perhaps, a nominal figure), because, as the Patent has been amended in the course of the EPO proceedings, it is now retrospectively to be treated as amended, so that Zodiac’s product does not infringe, and so Virgin have suffered no damage.
[43] He stated that “it would be positively unjust, as between the parties, for a (former) patentee to recover damages for infringement of a patent after the patent has been irrevocably and retrospectively revoked (or, as in this case, relevantly amended).” He also saw “no public interest in such an outcome” (para. 62).
(c) Appropriateness of raising the argument on appeal
[44] I have serious doubt as to whether it is appropriate for Lilly to raise its new argument based on AstraZeneca and Virgin Atlantic, one that was not considered by the trial judge, on appeal. Ordinarily, an appellate court should not consider an issue that was not raised at trial, particularly where it calls for consideration of facts. In those circumstances “there is always the very real danger that the appellate record will not contain all of the relevant facts, or the trial judge’s view on some critical factual issue, or that an explanation that might have been offered in testimony by a party or one or more of its witnesses was never elicited” (Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678 at para. 32).
[45] An appellate court may depart from this ordinary rule and entertain a new issue “where the interests of justice require it and where the court has a sufficient evidentiary record and findings of fact to do so” (Quan v. Cusson, 2009 SCC 62, [2009] 3 S.C.R. 712 at paras. 36-37). As a matter of fairness, the party seeking to raise a new issue on appeal bears the onus of establishing that “all relevant facts were adduced at trial and that no satisfactory response could have been offered by the opposite party” (Keus v. Canada, 2010 FCA 303, 410 N.R. 150 at paras. 10-11).
[46] Lilly’s position as I understand it is that given the clarity of the decisions in AstraZeneca and Virgin Atlantic, the concerns ordinarily associated with deciding a new issue on appeal do not arise in this case: since the only ground on the Lilly’s patent was invalidated has now been conclusively held to have been wrong in law, this Court need look no further than AstraZeneca in treating the patent as valid for purposes of Lilly’s section 8 claim. Virgin Atlantic, it argues, then applies to reduce the damages to nil.
[47] In my view things are not so simple. For one thing, in this case, unlike in Virgin Atlantic, the subsequent decision related to a patent different from the patent in question. For another, it does not follow from the decision in AstraZeneca that Lilly’s patent would necessarily have been found to be valid if validity had been litigated after the decision was rendered. Parties shape their trial evidence and argument to the law as it exists at the time of trial. The evidence and argument before the trial judge in this case would inevitably have been different if AstraZeneca had been the governing law. That is all the more likely given the Supreme Court’s indication in AstraZeneca that at least some of the concerns that animated the promise doctrine can better be dealt with as issues of sufficiency of disclosure. Following AstraZeneca, generic drug companies have, not surprisingly, sought to recast arguments that were initially made as utility arguments as arguments going to sufficiency and other grounds of invalidity (Pfizer Canada Inc. v. Teva Canada Limited, 2017 FC 777, [2017] F.C.J. No. 944 at paras. 313 and 315; Apotex Inc. v. Shire LLC, 2017 FC 831, [2017] F.C.J. No. 906 (Proth.) at paras. 5-6).
[48] However, it is also not apparent that it would have been possible for Lilly to go back to the trial judge to raise this issue. While this Court has held that motions to vary a judgment of the Federal Court that this Court has affirmed should be made to the Federal Court (AstraZeneca Canada Inc. v. Apotex Inc., 2016 FCA 194, [2016] F.C.J. No. 759 at paras. 15-20), under the Federal Courts Rules, SOR/98-106, the grounds on which a judgment may be set aside or varied are very limited. Paragraph 399(2)(a) of the Rules provides that the Court may on motion set aside or vary an order “by reason of a matter that arose or was discovered subsequent to the making of the order.” But this Court has repeatedly held, consistent with the finality principle referred to below, that subsequent decisions of a higher court do not constitute a “matter” within this provision (Metro Can Construction Ltd. v. The Queen, 2001 FCA 227, 273 N.R. 273 at paras. 4-6; Siddiqui v. Canada (Citizenship and Immigration), 2016 FCA 237, [2017] 1 F.C.R. 69 at paras. 13-17).
[49] Because, in my view, Lilly’s argument fails in substance as explained below, it appears to me to be unnecessary to decide the propriety of the manner in which it was raised in this case.
(d) Issue estoppel
[50] Issue estoppel is one manifestation of the doctrine of res judicata, the doctrine that precludes parties from relitigating an issue in respect of which a final determination has been made as between them (Régie des rentes du Québec v. Canada Bread Company Ltd., 2013 SCC 46, [2013] 3 S.C.R. 125 at para. 24). Res judicata is a fundamental doctrine in the Canadian justice system. It is grounded on the two considerations of public policy referred to in Virgin Atlantic: that it is in the public interest that there be finality in litigation and that no one should be “twice vexed in the same cause” (D.J. Lange, The Doctrine of Res Judicata in Canada, 4th ed. (Markham, Ontario: LexisNexis Canada Inc., 2015) at pp. 4, 6). As the Supreme Court has put it, “[t]he stability and finality of judgments are fundamental objectives and are requisite conditions for ensuring that judicial action is effective and that effect is given to the rights of interested parties” (Boucher v. Stelco Inc., 2005 SCC 64, [2005] 3 S.C.R. 279 at para. 35).
[51] Issue estoppel aims to promote finality, in the interests of justice. It generally precludes a party from relitigating a question decided in a prior proceeding where three conditions are met: (1) the same question has been decided; (2) the judicial decision which is said to create the estoppel was final; and (3) the parties to the judicial decision or those who stand in their place were the same as those in the proceedings in which the estoppel is raised (Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460 at para. 25).
[52] Where these three conditions are met, the court nonetheless retains a discretion not to apply the doctrine. As the Supreme Court stated in Penner v. Niagara (Regional Police Services Board), 2013 SCC 19, [2013] 2 S.C.R. 125 at para. 30, “[t]he principle underpinning this discretion is that ‘[a] judicial doctrine developed to serve the ends of justice should not be applied mechanically to work an injustice’ […].”
[53] While the discretion has been said to be limited to “special circumstances” (Minott v. O’Shanter Development Company Ltd., 1999 CanLII 3686, 42 O.R. (3d) 321 at para. 51 (C.A.)), there is no definitive list of factors for determining whether special circumstances are made out (Penner at para. 38). The Supreme Court has stated that unfairness warranting the exercise of discretion may arise from the unfairness of the prior proceedings, or the unfairness of their result, or both (Penner at para. 39). It has also suggested that the discretion will be more limited where the prior decision is that of a court rather than an administrative tribunal. It has stated that “[a]s a final and most important factor, the Court should stand back and, taking into account the entirety of the circumstances, consider whether application in the particular case would work an injustice” (Danyluk at paras. 62, 80).
[54] There has been some controversy as to whether a change in the law can be regarded as creating an injustice sufficient to call for the exercise of the discretion not to apply the doctrine (Lange, The Doctrine of Res Judicata in Canada, above at pp. 260-273). However, this Court has at least on one occasion exercised the discretion based on a change in the law resulting from a Supreme Court decision (Oberlander v. Canada (Attorney General), 2016 FCA 52, [2016] 4 F.C.R. 55 at para. 22; leave to appeal refused, 2016 CanLII 41772 (SCC)). Accepting that a change in the law like that in Oberlander may suffice for this purpose, that does not, as the Court of Appeal for Ontario has stated, mean that it necessarily will. As that Court has explained (Smith Estate v. National Money Mart Company, 2008 ONCA 746, 92 O.R. (3rd) 641 at para. 42), there is no “guarantee that a litigant who has fought an issue and lost will always be accorded the benefit of a change in the law”:
A litigant has no automatic or presumptive right to relitigate an issue on account of a change in the law: the matter rests upon the discretion of the court to ensure that the finality principle is applied in a manner consistent with the interests of justice.
(e) Application of issue estoppel
[55] In my view all of the three conditions for the operation of issue estoppel are met.
[56] First, the same question has been decided. At issue in the liability proceeding that resulted from the bifurcation order was the validity of Lilly’s patent. Lilly seeks to raise the same issue now as a defence to Teva’s section 8 damages claim.
[57] Lilly argues that the issue now is different – that it is not really raising an issue of validity but rather an issue of causation, and that all that it is seeking is a determination that, in the words of Lord Neuberger in Virgin Atlantic (at para. 53), “the damages […] should be assessed at nil.”
[58] I disagree. The reason Lilly argues the damages should be assessed at nil is that any sales by Teva during the currency of the patent would have been unlawful. The reason they would have been unlawful, according to Lilly, is they would have infringed the patent. But they could have infringed Lilly’s patent only if the patent was valid. At bottom, Lilly’s argument depends on a finding of invalidity. That is an issue already decided.
[59] The second condition, that the judicial decision said to create the estoppel was final, is also met. The trial judge determined in the second validity trial that Lilly’s patent was invalid. His decision was affirmed by this Court on appeal, and leave to appeal to the Supreme Court was denied. That is as final as it gets in the Canadian justice and patent systems.
[60] Here lies the central reason why Virgin Atlantic does not apply in this case. The governing legislation in Virgin Atlantic gave the English courts and the European Patent Office concurrent jurisdiction to determine validity of a European patent. Even though permission to appeal the decision of the Court of Appeal upholding the validity of the patent was refused by the Supreme Court, the Court of Appeal’s determination of validity was not in substance final; it was subject to being displaced by a decision of the EPO. That is what in fact occurred.
[61] In my view, therefore, Virgin Atlantic is very much an artifact of the UK patent system and the concurrent jurisdiction for which it provides. The Federal Court of Appeal of Australia has expressed the same view (Jones Tulloch Pty Ltd v. Commissioner of Patents, [2016] FCA 1108 at para. 25). That is why Lord Sumption was able to say in Virgin Atlantic that the case “perfectly illustrates the problems arising from the system of parallel jurisdiction for determining the validity of European patents” (at para. 3), and to describe “[t]he ‘vexation’ associated with the pursuit of two proceedings challenging the validity of the patent” as “an inescapable feature of the statutory scheme” (at para. 33).
[62] The third condition for the operation of issue estoppel is plainly met: the parties to the proceeding in which invalidity was determined and the parties here are the same.
[63] The question then is whether this Court should exercise its discretion not to apply issue estoppel. As already noted, according to Danyluk answering this question requires that the Court “stand back and, taking into account the entirety of the circumstances, consider whether application […] would work an injustice.”
[64] As I perceive it, the basis on which Lilly submits that the Court should exercise its discretion not to apply issue estoppel to prevent Lilly from relitigating the validity of its patent is that it would be unfair not to give it the benefit of the change in the law made in AstraZeneca. It sees this as particularly unfair when it was unsuccessful itself in attempting to bring the promise doctrine before the Supreme Court, only to have the Court decide to deal with the doctrine just a few years later in response to another innovator company’s leave application. (I appreciate that part of Lilly’s position is that AstraZeneca did not really change but rather restored the law, but that is a distinction without a difference in this context.) Lilly sees the sheer amount of the damages Teva is seeking as a further factor aggravating the unfairness, especially when combined with the financial consequences that it has already suffered from Teva’s entry into the olanzapine market.
[65] There are other factors that, in my view, also call for consideration. The first is the nature of the interests at stake. Here they are entirely commercial in nature. While I do not depreciate the importance of commercial interests, they