Apotex Inc. v. AstraZeneca Canada Inc.

Apotex Inc. v. AstraZeneca Canada Inc.
Court (s) Database
Federal Court Decisions
Date
2018-02-15
Neutral citation
2018 FC 181
File numbers
T-1668-10, T-389-11
Decision Content
Date: 20180215
Dockets: T-389-11
T-1668-10
Citation: 2018 FC 181
Ottawa, Ontario, February 15, 2018
PRESENT: The Honourable Mr. Justice Locke
Docket: T-389-11
BETWEEN:
APOTEX INC.
Plaintiff
and
ASTRAZENECA CANADA INC.
Defendant
Docket: T-1668-10
AND BETWEEN:
ASTRAZENECA AKTIEBOLAG, ASTRAZENECA CANADA INC. and ASTRAZENECA UK LIMITED
Plaintiffs/ Defendants by Counterclaim
and
APOTEX INC. and APOTEX PHARMACHEM INC.
Defendants/ Plaintiffs by Counterclaim
JUDGMENT AND REASONS
I. Introduction
[1] This decision follows a trial that took place over a number of weeks in May and June 2017 in relation to two actions. Supplemental submissions were made in January 2018 following a decision of the Supreme Court of Canada which affected both actions.
[2] In the main action (Court File No. T-389-11), Apotex Inc. (Apotex) seeks damages under s. 8 of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 (since amended) [the Regulations] for its losses suffered during the time it was kept off the market for its version of esomeprazole magnesium (40 mg and 20 mg tablets) by operation of the Regulations. Apotex’s drug product is called Apo-Esomeprazole.
[3] In February 2007, Apotex initiated steps to obtain permission to market a generic version of the esomeprazole magnesium product marketed by AstraZeneca Canada Inc. (AstraZeneca) as Nexium by filing an Abbreviated New Drug Submission (ANDS). As part of this process, Apotex had to address 10 patents that AstraZeneca had identified on the patent list associated with its product under the Regulations. Apotex did this by serving AstraZeneca with seven notices dated January 17, 2008 alleging, for various reasons, that the listed patents should not impede Apotex from obtaining a notice of compliance (NOC) required for access to the market. In response to Apotex’s notices of allegation (NOAs), AstraZeneca commenced seven separate applications under the Regulations on March 7, 2008 (Court File Nos. T-371-08, T-372-08, T-373-08, T-374-08, T-376-08, T-377-08, T-378-08), each seeking to prohibit the Minister of Health from granting Apotex an NOC. By operation of the Regulations, the issuance of Apotex’s NOC was stayed pending resolution of AstraZeneca’s applications.
[4] These applications were all eventually discontinued or dismissed. More precisely, Court File Nos. T-374-10, T-376-10, T-377-10 and T-378-10 were discontinued on October 16, 2008, Court File No. T-373-10 was discontinued on February 17, 2009, Court File No. T-372-10 was dismissed on consent on May 25, 2010, and Court File No. T-371-08 was dismissed on June 16, 2010, by a decision of this Court (2010 FC 714). That decision ruled that Apotex’s allegations of invalidity of Canadian Patent No. 2,139,653 (the 653 Patent) for lack of utility and for obviousness were justified. Apotex obtained its NOC on June 17, 2010.
[5] The delay period during which Apotex claims its losses (Delay Period) begins on December 11, 2009, the date that Health Canada certified that its examination of Apotex’s ANDS was complete and it would withhold issuance of an NOC until the requirements of the Regulations were met. This is often referred to as the patent hold date. The Delay Period ends with the resolution of the last of the proceedings under the Regulations, on June 16, 2010.
[6] In its defence against Court File No. T-389-11 (the Section 8 Action), AstraZeneca asserts many reasons that Apotex should not be awarded any compensation, or that any award of compensation should be reduced. Among these reasons are allegations that, if Apotex had not been kept off the market during the Delay Period, any Apo-Esomeprazole product that it would have sold would have infringed the 653 Patent and Canadian Patent No. 2,193,994 (the 994 Patent). Apotex replies that these patents are invalid and therefore could not have been infringed. Apotex also alleges that its product would not have come within the scope of the claims of the 994 Patent. Apotex does not dispute that its product would have come within the scope of the claims of the 653 Patent.
[7] With regard to the 994 Patent, the parties are now agreed that Apo-Esomeprazole product manufactured by a process that employs the titanium catalyst (the titanium process) falls within the scope of the claims of the 994 Patent, whereas Apo-Esomeprazole product manufactured by a process that employs the zirconium catalyst (the zirconium process) falls outside the scope. In addition, the validity of the 994 Patent is no longer disputed. It appears to be common ground that all Apo-Esomeprazole that was sold commercially in the real world was manufactured according to the non-infringing zirconium process.
[8] The story concerning the 653 Patent is more interesting and is explained beginning at para [11]
below. It is sufficient here to state that there is no dispute that both the zirconium process and the titanium process result in the manufacture of Apo-Esomeprazole that falls within the scope of at least some of the claims of the 653 Patent.
[9] In the other action to be addressed in this decision (Court File No. T-1668-10), AstraZeneca, along with AstraZeneca Aktiebolag (AstraZeneca Sweden) and AstraZeneca UK Limited (AstraZeneca UK), seek damages and other remedies from Apotex, as well as from Apotex Pharmachem Inc. (Pharmachem), for infringement of the 653 and 994 Patents once Apotex obtained its NOC for Apo-Esomeprazole. Just as in the Section 8 Action, Apotex and Pharmachem allege in Court File No. T-1668-10 (the Infringement Action) that the 653 and 994 Patents are invalid, and that Apo-Esomeprazole did not come within the scope of the claims of the 994 Patent. Again, Apotex does not dispute that Apo-Esomeprazole comes within the scope of the claims of the 653 Patent.
[10] With regard to the 994 Patent, the parties have agreed on wording for a declaration of infringement whereby the only remaining issues in dispute are effectively (i) whether, and the extent to which, the experimental and regulatory use exemptions to infringement are applicable; and (ii) the amount of Apotex’s and/or Pharmachem’s liability, if any. These issues are to be addressed at a later hearing.
A. Judicial History of the 653 Patent in the Infringement Action
[11] I return now to the 653 Patent. In the Infringement Action, it was arranged that the following issues would be bifurcated: (i) any experimental and regulatory use exemption, (ii) the quantum of any damages or profits, and (iii) all issues pertaining to the 994 Patent. This left the parties to proceed to a first trial essentially on the 653 Patent alone. Since it was not disputed that Apo-Esomeprazole falls within the scope of the claims in issue of the 653 Patent, the only issues in dispute in the first trial in the Infringement Action concerned the validity of the 653 Patent.
[12] That trial was conducted before Justice Donald J. Rennie (then of this Court) from September to November 2013. The 653 Patent validity issues in dispute were (i) utility (or lack thereof), (ii) novelty (or anticipation), and (iii) inventiveness (or obviousness). Justice Rennie issued his decision (2014 FC 638) on July 2, 2014. He found that the 653 Patent had the required novelty and inventiveness, but that it was invalid because it lacked utility. The basis for the finding of lack of utility was that the 653 Patent makes a promise of a certain therapeutic benefit that had not been demonstrated, and could not be soundly predicted, at the date the patent was filed.
[13] AstraZeneca and its affiliates appealed to the Federal Court of Appeal (FCA) arguing that Justice Rennie had misconstrued the promise in question. For their part, Apotex and Pharmachem argued that Justice Rennie had erred in finding that the 653 Patent was novel and inventive. On July 6, 2015, the FCA dismissed the appeal concerning lack of utility, and found it therefore unnecessary to consider the issues of novelty and inventiveness that Apotex had raised. This decision is cited as 2015 FCA 158. Accordingly, Justice Rennie’s decision stood unaltered after the appeal.
[14] AstraZeneca and its affiliates then sought leave to appeal to the Supreme Court of Canada (SCC), which leave was granted. The appeal to the SCC was heard in November 2016. Its decision (2017 SCC 36, the SCC’s Decision) was rendered on June 30, 2017. The SCC ruled that the Promise Doctrine that had been applied by Justice Rennie is not the correct approach to determine the utility of a patent. The SCC allowed the appeal, set aside the decisions of Justice Rennie and the FCA, and declared that the 653 Patent is not invalid for lack of utility.
B. 2017 Trial of the Present Actions
[15] With the issues pertaining to the 994 Patent largely resolved, the trial before me concerned mainly the Section 8 Action.
[16] During the trial in May and June 2017, the SCC’s Decision had not yet been rendered. Accordingly, the 653 Patent was considered invalid, albeit with the understanding that the SCC would speak to the issue. Without the 653 Patent, AstraZeneca’s defences in the Section 8 Action were limited. Most of the time at trial was devoted to evidence concerning what amount of compensation (if any) should be awarded to Apotex, including what would have happened in the hypothetical world (sometimes called the but-for world) in which AstraZeneca never commenced proceedings against Apotex under the Regulations (prohibition applications), what sales of Apo-Esomeprazole Apotex would have made during the Delay Period, and Apotex’s costs associated with such sales.
[17] The SCC’s Decision profoundly changed the complexion of the Section 8 Action. In its supplemental submissions, AstraZeneca argues that the 653 Patent has now been found valid. AstraZeneca argues that, in light of this and the fact that infringement was never disputed, any sales of Apo-Esomeprazole that Apotex would have enjoyed in the but-for world would have infringed AstraZeneca’s 653 patent, and that Apotex should therefore be denied any compensation under s. 8 of the Regulations.
[18] Apotex disagrees. Firstly, Apotex notes that the SCC’s Decision did not declare the 653 Patent valid, but simply that it is not invalid for lack of utility. Apotex argues that the 653 Patent actually remains invalid, but on other grounds. Secondly, Apotex notes that, even if there had been a declaration that the 653 Patent is valid, it would be of limited relevance because the Section 8 Action must focus on the but-for world rather than the real world. Apotex argues that there is no evidence that, in the but-for world, (i) AstraZeneca would have sued Apotex for patent infringement, (ii) the parties would not have settled the matter before a trial, (iii) the SCC would have granted leave to appeal, or (iv) the SCC would have decided such an appeal the same way.
[19] Perhaps most importantly, Apotex argues that the SCC’s Decision provides reason to believe that the “mischief” of the unmet promise in the 653 Patent remains a basis for invalidity on grounds other than lack of utility. Apotex argues that additional evidence is called for with regard to these other grounds of invalidity and that it is premature to rule on the Section 8 Action until such additional evidence has been received. Further, Apotex notes that it amended its Reply in October 2017 to allege that in the but-for world it would have found an alternative to avoid infringement of the 653 Patent (a non-infringing alternative or NIA). It argues that additional evidence is required on this issue as well. Apotex requests that it be given the opportunity to adduce further evidence before I render a decision.
II. Preliminary Issue: Should the parties be given the opportunity to introduce additional evidence?
[20] Apotex’s request to adduce further evidence should be considered first because, if further evidence is to be received, then it is indeed premature to issue this decision. On the other hand, if no further evidence will be introduced, then there is no reason to delay my decision.
A. Can Apotex Still Mount a Meritorious Attack on the Validity of the 653 Patent?
[21] If 653 Patent validity remains in issue, then it may be relevant to permit additional evidence to be introduced. On the other hand, if the effect of the SCC’s Decision was to close the door to further attacks on the validity of the 653 Patent, then it follows that infringement (at least by Apotex’s real-world Apo-Esomeprazole) has been established and no additional evidence is needed or appropriate. Therefore, I must determine the effect of the SCC’s Decision.
[22] At para 2 of the SCC’s Decision, Justice Malcolm Rowe (on behalf of a unanimous Court) summarized the matter before that Court as follows:
The main issue in this appeal is whether AstraZeneca’s patent is invalid for want of utility under s. 2 of the Patent Act, R.S.C. 1985, c. P-4, on the basis of the “promise of the patent” doctrine (“Promise Doctrine”). Unquestionably, a patent is invalid if it lacks utility. However, for the reasons that follow, I conclude the application of the Promise Doctrine is not the correct approach to determine whether a patent has sufficient utility. Had the trial judge not applied this doctrine, he would have been compelled to find that the ‘653 patent had sufficient utility, and upheld its validity. Accordingly, I would set aside the decisions of the Federal Court and the Federal Court of Appeal which held that the ‘653 patent was invalid for want of utility.
[23] Paragraph 64 of the SCC’s Decision reads: “The appeal is allowed. The ‘653 patent is not invalid for want of utility. AstraZeneca will have its costs in this Court and the courts below.”
[24] The SCC’s judgment in this matter reads as follows:
The appeal from the judgment of the Federal Court of Appeal, Number A-420-14, 2015 FCA 158, dated July 6, 2015, heard on November 8, 2016, is allowed with costs throughout. The appellants’ 2,139,653 patent is not invalid for want of utility.
[25] The parties appear to be agreed that I must interpret what the SCC intended by its decision, and not vary it.
[26] Apotex argues that the SCC deliberately limited its judgment to the issue of utility, and that it was not ruling on validity as a whole. Apotex notes that, despite rejecting the Promise Doctrine (as it applied to patent utility), the SCC recognized overpromising in a patent to be a mischief (para 45), and stated that “[t]he scheme of the [Patent] Act treats the mischief of overpromising in multiple ways” (para 46). Later in the same paragraph, the SCC identified three specific grounds on which a patent might be held invalid for overpromising: (i) overbreadth of claims, (ii) insufficiency of disclosure, and (iii) unnecessary omission or addition to the specification wilfully made for the purpose of misleading.
[27] Apotex also notes that the SCC never addressed the issues of novelty (or anticipation) and inventiveness (or obviousness), which the FCA had found unnecessary to deal with. With the finding of lack of utility set aside, Apotex argues that these issues became relevant once more.
[28] Apotex also notes that much of the relief that AstraZeneca explicitly sought before the SCC was not granted in its judgment. This included a declaration of infringement, an award of damages or an accounting of profits as AstraZeneca may elect, and interest. Apotex argues that this indicates an intention by the SCC not to accept the 653 Patent as valid.
[29] It is important to note that Apotex made arguments similar to these before the SCC itself in a motion seeking (i) an amendment of the SCC’s judgment to remand certain 653 Patent validity issues to the Federal Court and others to the FCA, and (ii) a re-hearing before the SCC. The SCC dismissed that motion without reasons.
[30] There appears to be no dispute that the matter that was heard by Justice Rennie was intended to address all issues of validity of the 653 Patent. It should also be understood that a patent is presumed to be valid: s. 43(2) of the Patent Act, RSC 1985, c P-4. The only ground of invalidity that Justice Rennie accepted was lack of utility based on the Promise Doctrine. That finding now having been set aside by the highest court in the land, that court having also explicitly refused to provide for any further consideration of other grounds of invalidity, I am satisfied that there remains no avenue for Apotex to challenge the validity of the 653 Patent.
[31] In my view, the SCC indicated its intent that the validity of the 653 Patent was finally decided in its decision by stating at para 2 that “[h]ad the trial judge not applied [the Promise Doctrine], he would have been compelled to find that the ‘653 patent had sufficient utility, and upheld its validity” (emphasis added).
[32] The fact that certain specific requests for relief that were included in AstraZeneca’s submissions were not mentioned in the SCC’s judgment does not change my view. I see no indication that the SCC intended to refuse a declaration of infringement, and every indication that it intended that such relief would be granted.
[33] As regards the references in paras 45 and 46 to overpromising as a mischief that can be addressed in other ways, I am not convinced that I should infer that the 653 Patent itself could be invalid on other grounds. If the SCC had intended that the validity of the 653 Patent remained in issue on other grounds, I would have expected the SCC to have said so.
[34] I also see no indication that the SCC intended to change the state of the law as concerns other grounds of patent invalidity. I agree with my colleague Justice Henry S. Brown who recently observed that, if the SCC wanted to state that the Promise Doctrine remains good law for other grounds of patent invalidity, it could have, but it did not: Pfizer Canada Inc v Apotex Inc, 2017 FC 774 at para 360.
[35] Apotex argues that Justice Brown and AstraZeneca misunderstand the change in the law that Apotex asserts. It appears to assert that it is not the law itself that has changed regarding the other grounds of validity mentioned in para 46 of the SCC’s Decision, but rather that the application of overpromising to those grounds has changed. I must confess that I do not understand the distinction that Apotex attempts to draw here. Nevertheless, I am not convinced that other grounds of invalidity of the 653 Patent require further consideration.
[36] Finally, any doubt that might have remained about the SCC’s intent in its decision concerning the validity of the 653 Patent was eliminated, in my view, by the dismissal of Apotex’s motion before the SCC.
B. Apotex’s NIA argument
[37] In its Third Amended Reply dated October 16, 2017, Apotex adds the following allegation at para 21:
Apotex states that, in the hypothetical world and at all material times, it could have and would have supplied the Canadian pharmaceutical market with esomeprazole product that did not infringe the claims of the 653 Patent had it been enjoined from so doing by virtue of a finding of infringement. Specifically, Apotex could have readily made or had made esomeprazole magnesium salts with purity below those specified by the claims of the 653 Patent including, in the environs of 90% ee as taught in the prior art.
[38] This appears to be the allegation that supports Apotex’s NIA argument.
[39] AstraZeneca notes that Apotex’s entitlement to amend its Reply was due to AstraZeneca’s amendment of its Defence to introduce new allegations related to the revived validity of the 653 Patent following the SCC’s Decision. AstraZeneca argues that it was inappropriate for Apotex to introduce new allegations that go beyond the scope of the amendments made in AstraZeneca’s Defence. AstraZeneca argues that Apotex should have made a motion to introduce such amendments and, in the absence of such a motion, Apotex’s new NIA allegations should be ignored.
[40] Apotex responds that its amended allegations concerning an NIA are on record, and that the parties and the Court must address the pleadings as they stand. Apotex continues that, if AstraZeneca felt any of the new allegations in the Reply were inappropriate, it should have moved to strike them.
[41] I agree with Apotex that the parties and the Court must address the pleadings as they stand. Accordingly, Apotex has an NIA allegation that should be considered. However, this is a new allegation in respect of which Apotex bears the burden of proof. Just as I must address the pleadings as they stand, I must also consider the evidence as it has been adduced. It is not enough for Apotex to have made certain allegations without support from adequate evidence.
[42] Of course, the lack of evidence in support of its NIA allegations is a key reason that Apotex now seeks an opportunity to adduce additional evidence. Here, I am concerned that Apotex has not acted diligently in making this request.
[43] The January 11, 2018 hearing date for supplemental submissions in this matter in light of the SCC’s Decision was set three months earlier, on October 10, 2017. Other than some general discussion during a trial management conference earlier that same day in October about the possible need for further evidence, Apotex never made any effort until the January hearing itself to introduce such evidence or to indicate that it would seek to delay supplemental submissions. This is so despite the fact that, during the intervening three months, Apotex made multiple written submissions in respect of the Section 8 Action and the Infringement Action.
[44] Moreover, my recollection is that the discussion on October 10, 2017 of the possible need for additional evidence was in the context of Apotex’s motion before the SCC, which had not yet been decided. That motion concerned patent invalidity, not NIA. My understanding at that time was that, in the event that the SCC dismissed Apotex’s motion, there would be no need for additional evidence.
[45] Despite Apotex’s lack of diligence in requesting the opportunity to introduce additional evidence, I heard the parties’ arguments on the request during the hearing of supplemental submissions. Here, my concern is that Apotex has given me little reason to believe that its NIA allegations have any reasonable chance of success. The only concrete effort by Apotex in this regard was a brief reference to a UK High Court decision in Ranbaxy (UK) Limited v AstraZeneca AB, [2011] EWHC 1831, which discusses one of Apotex’s competitors, Ranbaxy, and its apparent use of an NIA in the UK. This is far from sufficient. I accept that it might be unreasonable to expect Apotex to make its case on NIA on a balance of probabilities at this stage. But Apotex is asking me to exercise my discretion to reopen the trial to receive additional evidence. Before I exercise that discretion, I expect to be convinced that it will not be a waste of time. In my view, the burden is clearly on Apotex to convince me of that. It has not succeeded. For example, it has made no attempt to show how Ranbaxy’s product in the UK (or a product made using a similar process) could have and would have been used in Canada by Apotex during the Delay Period instead of Apo-Esomeprazole made using either the titanium process or the zirconium process (as was shown in the evidence adduced during the trial).
[46] The brief and unconvincing nature of Apotex’s oral submissions on this issue demonstrates that a formal motion to introduce additional evidence, accompanied by supporting evidence and written submissions, might have been preferable. Though I cannot say whether such a motion would have been any more convincing, it would at least have given the opportunity for more detailed evidence and a deeper discussion of the issue.
[47] Apotex argues that AstraZeneca would not be prejudiced by any delay caused by the introduction of additional evidence (since Apotex is the plaintiff in the Section 8 Action), and that Apotex should have its day in Court on the NIA issue. My concern with this argument is that January 11, 2018 was its day in Court. The absence of prejudice does not alter that fact.
[48] In view of Apotex’s lack of diligence in making its case on NIA or in seeking the opportunity to introduce additional evidence, I conclude that Apotex is not serious about its NIA allegations.
C. Conclusion on the Preliminary Issue
[49] For the foregoing reasons, I conclude that the parties should not be given an opportunity to introduce additional evidence. In deciding this matter on its merits, I have considered all of the allegations on record, but I have also considered the lack of evidence on certain issues.
III. Analysis in the Section 8 Action
[50] Having now heard the parties’ supplemental submissions regarding the SCC’s Decision and the 653 Patent, and having decided that there should be no opportunity to adduce additional evidence, I am now in a position to address the merits of Apotex’s claim in the Section 8 Action.
[51] I should preface this analysis by noting that much of the evidence that was adduced at trial is no longer relevant to my decision because it goes to what Apotex would have and could have done in the but-for world and the quantum of Apotex’s sales, expenses and profits in the but-for world. In view of my conclusions below, these issues are now largely irrelevant. For this reason, many impressions that I formed about the evidence pass without comment in this decision.
A. Effect of the SCC’s Decision
[52] As indicated above, the SCC effectively determined that the 653 Patent is valid. Since it was never disputed that Apo-Esomeprazole, as it was manufactured and sold in the real world, falls within the scope of the claims of the 653 Patent, there is no issue on infringement, except the NIA issue raised in Apotex’s recently-amended Reply.
B. Legal Framework of Apotex’s Section 8 Claim
[53] The applicable version of section 8 of the Regulations is reproduced here:
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
8 (1) Si la demande présentée aux termes du paragraphe 6(1) est retirée ou fait l’objet d’un désistement par la première personne ou est rejetée par le tribunal qui en est saisi, ou si l’ordonnance interdisant au ministre de délivrer un avis de conformité, rendue aux termes de ce paragraphe, est annulée lors d’un appel, la première personne est responsable envers la seconde personne de toute perte subie au cours de la période :
(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
a) débutant à la date, attestée par le ministre, à laquelle un avis de conformité aurait été délivré en l’absence du présent règlement, sauf si le tribunal conclut :
(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
(i) soit que la date attestée est devancée en raison de l’application de la Loi modifiant la Loi sur les brevets et la Loi sur les aliments et drogues (engagement de Jean Chrétien envers l’Afrique), chapitre 23 des Lois du Canada (2004), et qu’en conséquence une date postérieure à celle-ci est plus appropriée,
(ii) a date other than the certified date is more appropriate; and
(ii) soit qu’une date autre que la date attestée est plus appropriée;
(b) ending on the date of the withdrawal, the discontinuance, the dismissal or the reversal.
b) se terminant à la date du retrait, du désistement ou du rejet de la demande ou de l’annulation de l’ordonnance.
(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).
(2) La seconde personne peut, par voie d’action contre la première personne, demander au tribunal de rendre une ordonnance enjoignant à cette dernière de lui verser une indemnité pour la perte visée au paragraphe (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.
(3) Le tribunal peut rendre une ordonnance aux termes du présent article sans tenir compte du fait que la première personne a institué ou non une action en contrefaçon du brevet visé par la demande.
(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.
(4) Lorsque le tribunal enjoint à la première personne de verser à la seconde personne une indemnité pour la perte visée au paragraphe (1), il peut rendre l’ordonnance qu’il juge indiquée pour accorder réparation par recouvrement de dommages-intérêts à l’égard de cette perte.
(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).
(5) Pour déterminer le montant de l’indemnité à accorder, le tribunal tient compte des facteurs qu’il juge pertinents à cette fin, y compris, le cas échéant, la conduite de la première personne ou de la seconde personne qui a contribué à retarder le règlement de la demande visée au paragraphe 6(1).
(6) The Minister is not liable for damages under this section.
(6) Le ministre ne peut être tenu pour responsable des dommages-intérêts au titre du présent article.
[54] As applied to the Section 8 Action, s. 8(1) provides that AstraZeneca is liable to Apotex for any loss suffered during the Delay Period. Subsection 8(2) provides for Apotex’s action seeking compensation. Subsection 8(3) provides that I may award such compensation without regard to whether AstraZeneca has commenced its Infringement Action. Subsection 8(4) provides that, if I award such compensation, I may make an order for relief by way of damages that the circumstances require. Subsection 8(5) provides that, in assessing the amount of compensation, I must take into account all matters that I consider relevant. Subsection 8(6) is not relevant here.
[55] The parties disagree on the effect that patent infringement in the but-for world has on a claim under s. 8 of the Regulations. AstraZeneca takes the position that patent infringement in the but-for world gives rise to liability by Apotex to AstraZeneca such that any liability by AstraZeneca to Apotex under s. 8(1) is fully offset and Apotex’s loss under s. 8(1) is effectively zero.
[56] For its part, Apotex argues that infringement is not relevant to the loss contemplated in s. 8(1), and is instead to be considered among the relevant matters to be taken into account in assessing the amount of compensation under s. 8(5).
[57] The position that a second person’s patent infringement should operate to deny it compensation under s. 8(1) of the Regulations has often been identified by the Latin maxim ex turpi causa non oritur actio (from a dishonorable cause an action does not arise).
[58] The FCA had occasion to consider the relevance of patent infringement to a claim under s. 8 of the Regulations in Apotex Inc v Merck & Co, Inc, 2011 FCA 364 [Lovastatin]. There, the FCA identified two requirements for liability under s. 8(1): (i) that the first person’s application under s. 6(1) was withdrawn, discontinued or dismissed, and (ii) that the second person suffered a loss during the Delay Period (paras 34-35). The FCA refused to read into s. 8(1) an exclusion where the second person’s loss resulted from being prevented from infringing the first person’s patent earlier. The FCA concluded that “it is not necessary to read an ex turpi causa exception into subsection 8(1) in order to prevent patent infringers from unjustly recovering compensation from a first person” (para 36). The FCA continued:
[37] This is because subsection 8(5) confers a broad discretion on the court when assessing the amount of compensation that the second person must pay. It provides that the court “shall take into account all matters that it considers relevant to the assessment of the amount,” including any conduct by either party that contributed to the delay in the disposition of the first person’s application for prohibition. In my view, this provision enables the Court to determine in its discretion whether, and to what extent, a second person’s claim for compensation should be reduced, or eliminated.
[38] The Court’s broad discretion under subsection 8(5) allows it, when considering arguments based on ex turpi causa, to have regard to the factual situation in its entirety, including its nuances. … A court is likely to find it easier to apply the ex turpi causa principle through an exercise of judicial discretion than through the definition of liability. Discretion enables the court to assess the appropriate amount of compensation payable (including nil) in a manner that properly takes account of all the relevant facts.
[59] The FCA clearly favoured s. 8(5) over s. 8(1) as the context for taking into account the ex turpi causa principle.
[60] AstraZeneca argues that it is not asserting the ex turpi causa principle here. It argues that any profits that Apotex might have made from lost sales would have been fully offset by its liability to AstraZeneca for infringement of the 653 Patent, and thus the requirement in s. 8(1) that Apotex have suffered a loss is not met simply because that loss is nil. AstraZeneca asserts that the FCA did not exclude this argument.
[61] AstraZeneca’s argument appears at first glance to find favour in the decision of my colleague Justice Robert L. Barnes in AstraZeneca Canada Inc v Apotex Inc, 2017 FC 726 [Losec]. In that case, it was found that lost sales by Apotex would have been infringing. At para 219, Justice Barnes stated that “Apotex is not entitled to recover under section 8 of the NOC Regulations because it suffered no loss by being kept out of the marketplace” (emphasis added). But other passages in Losec indicate that the “offset” of Apotex’s infringement liability against its section 8 losses was actually made under the discretionary provision of s. 8(5). At para 214, Justice Barnes stated that he had discretion to take into account the infringement. Discretion applies in s. 8(5) but not in s. 8(1). Also, at para 218, Justice Barnes cited the view in Lovastatin that “it is unnecessary to apply the theory of illegality to resolve this issue”, and indeed “the strict application of that principle could, in some cases, leave a party undercompensated.”
[62] In my view, it is preferable, at least in this case, to take into account Apotex’s infringement in the but-for world under s. 8(5) rather than s. 8(1). This approach permits the exercise of discretion and seems to be what the FCA had in mind in Lovastatin.
[63] Also, I note that the Regulations contemplate that I determine not the amount of loss but the amount of compensation (if any) that should be awarded to Apotex in respect of such loss. Though loss is a requirement under s. 8(1), its amount is secondary.
[64] In the end, it is of little importance in this case whether infringing sales by Apotex in the but-for world are taken into account in s. 8(1) or in s. 8(5). The important thing is that this factor be taken into account.
C. What Would have Happened in the But-For World
[65] As alluded to above, the assessment of compensation to be awarded in the Section 8 Action requires a determination of what would have happened in the but-for world.
[66] A key principle is that the real world informs the construction of the but-for world, and conduct in the real world is very important to what would have happened in the but-for world: Apotex Inc v Merck & Co, Inc, 2015 FCA 171 at para 90. All steps that were taken in the real world should be assumed to have been taken in the but-for world unless there is evidence upon which the trier of fact may reasonably conclude that different steps would have been taken: Teva Canada Limited v Sanofi-Aventis Canada Inc, 2014 FCA 67 at para 145.
[67] On the other hand, a look into what happened in the real world must not result in a hindsight bias as to what would have happened in the but-for world: Airbus Helicopters, SAS v Bell Helicopter Textron Canada Limitée, 2017 FC 170 at para 295.
[68] Apotex has the burden of proving the but-for world on the balance of probabilities: Pfizer Canada Inc v Teva Canada Limited, 2016 FCA 161 [Venlafaxine] at para 54.
[69] Construction of the but-for world is a factual inquiry which should use robust common sense: Venlafaxine at para 55.
[70] In constructing the but-for world, the Court must determine both what a party could have done and what it would have done if prohibition proceedings had not been commenced. As stated by the FCA in Venlafaxine at para 51:
Both elements have to be present. “Could have” does not prove “would have”; “would have” does not prove “could have”:
• Evidence that a party would have done something does not prove that it could have done something. I might swear up and down that I would have run in a marathon in Toronto on April 1 aiming to complete it, but that says nothing about whether I could have completed it. Maybe I am not fit enough to complete it.
• Evidence that a party could have done something does not prove that it would have done something. A trainer might testify that I was fit enough to complete a marathon race in Toronto on April 1, but that says nothing about whether I would have completed it. Perhaps on April 1 I would have skipped the marathon and gone to a baseball game instead.
[71] When constructing the but-for world, it is important to bear in mind that the SCC’s Decision in the real world concerning the validity of the 653 Patent had not yet happened. That decision may have important implications for the amount of compensation to be awarded, but it does not affect prior events in the but-for world. Accordingly, the evidence of the but-for world that was adduced during the trial (before the SCC’s Decision) remains as credible now as it was then.
[72] In closing arguments in June 2017 (prior to the SCC’s Decision), Apotex’s position was that, in the but-for world, it would have launched Apo-Esomeprazole manufactured by the zirconium process as of December 2009. It also acknowledged that it had conducted tests using Apo-Esomeprazole manufactured by the titanium process. It adduced no evidence concerning Apo-Esomeprazole manufactured by any other process.
[73] AstraZeneca’s position in June 2017 was that Apotex’s evidence was insufficient to establish that it would have launched Apo-Esomeprazole during the Delay Period. In the alternative, AstraZeneca argued that Apotex’s sales of Apo-Esomeprazole during the Delay Period would have been less than Apotex claimed. AstraZeneca disputed whether Apotex could have obtained sufficient quantities of Apo-Esomeprazole manufactured by the zirconium process to meet its claimed sales.
[74] There is no evidence to support Apotex’s assertion that it would have marketed Apo-Esomeprazole during the Delay