Eli Lilly and Company v. Apotex inc.

Eli Lilly and Company v. Apotex inc.
Court (s) Database
Federal Court Decisions
Date
2009-10-01
Neutral citation
2009 FC 991
File numbers
T-1321-97
Decision Content
Date: 20091001
Docket: T-1321-97
Citation: 2009 FC 991
Ottawa, Ontario, October 1, 2009
PRESENT: The Honourable Justice Johanne Gauthier
BETWEEN:
ELI LILLY AND COMPANY
and ELI LILLY CANADA INC.
Plaintiffs
and
APOTEX INC.
Defendant
AND BETWEEN:
APOTEX INC.
Plaintiff by Counterclaim
(Defendant)
- and -
ELI LILLY AND COMPANY
and ELI LILLY CANADA INC.
Defendants by Counterclaim
(Plaintiffs)
and
SHIONOGI & CO. LTD.
Defendant by Counterclaim
REASONS FOR JUDGMENT AND JUDGMENT
[1] The plaintiffs in this action claim that their rights under eight Canadian patents were infringed when Apotex Inc. (Apotex) imported bulk cefaclor into Canada for use in the various Apo-cefaclor dosage forms they sold after January, 1997. The plaintiff Eli Lilly and Company (Lilly U.S.) is the owner of these eight patents. Eli Lilly Canada Inc. (Lilly Canada) is a wholly owned subsidiary of Lilly U.S. incorporated under the laws of Ontario and it alleges that it has rights under the patentee, which is contested by Apotex. These plaintiffs will collectively be referred to as “Lilly”.
[2] Lilly sold dosage forms of cefaclor in Canada under the registered name of Ceclor®. This medicine was put on the market in 1980.[1]
[3] The following four patents, all filed on February 1, 1979, were issued to, and were continuously owned by, Lilly U.S. (the Lilly patents):
a. Canadian Letters Patent No. 1,133,007 (“the ‘007 Patent”), issued October 5, 1982, expired October 5, 1999;
b. Canadian Letters Patent No. 1,146,536 (“the ‘536 Patent”), issued May 17, 1983, expired May 17, 2000;
c. Canadian Letters Patent No. 1,133,468 (“the ‘468 Patent”), issued October 12, 1982, expired October 12, 1999; and,
d. Canadian Letters Patent No. 1,150,725 (“the ‘725 Patent”), issued July 26, 1983, expired July 26, 2000.[2]
The patents referred to in paras. b, c and d will collectively be referred to as “the Lilly process patents”.
[4] The other four relevant patents were issued to Shionogi & Co. Ltd., a Japanese pharmaceutical company, (Shionogi) on the dates indicated below:
a. Canadian Letters Patent No. 1,095,026 (“the ‘026 Patent”), issued February 3, 1981, expired February 3, 1998;
b. Canadian Letters Patent No. 1,132,547 (“the ‘547 Patent”), issued September 28, 1982, expired September 28, 1999;
c. Canadian Letters Patent No. 1,136,132 (“the ‘132 Patent”), issued November 23, 1982, expired November 23, 1999; and,
d. Canadian Letters Patent No. 1,144,924 (“the ‘924 Patent”), issued April 19, 1983, expired April 19, 2000.[3]
While all have the same filing date of February, 1976 (when the original application was filed in Canada), three of these patents resulted from the filing of divisional applications, which will be further discussed below. These patents will be collectively referred to as the “Shionogi patents”. Lilly U.S. became the owner of the Shionogi patents by way of assignment dated April 27, 1995 which was registered in Canada on August 24, 1995.
[5] Although this action was instituted nearly twelve years ago, the dispute between the parties as to whether or not the sale by Apotex of a generic version of Ceclor® in Canada would infringe the patents at issue started earlier, with the filing of an application under the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 (PM (NOC) Regulations) by Lilly and Shionogi on June 23, 1993.[4] Earlier, the issue had also been raised when Apotex sought a compulsory licence with respect to cefaclor and certain Lilly patents related thereto in 1986.
[6] Despite the fact that for the most part of this period, the parties have been intensively litigating the matter, neither the discovery process nor any other steps taken in this long period of time succeeded in significantly reducing the number of issues involved or to focus the debate at trial.
[7] Given the amount of evidence filed and the many issues involved, the parties’ counsel made a real effort in attempting to consign all their arguments in writing. This entails that they filed nearly one thousand pages of submissions (including those filed with respect to the counterclaim), not counting the various submissions filed in respect of a number of objections which had to be taken under reserve to avoid delaying the trial. The Court thanks each counsel involved for their effort in reducing the number of those objections that remained outstanding in the end.
[8] Despite all this goodwill, the Court was left with a daunting task. This is only partially reflected in these reasons which are, unfortunately, too long despite the fact that the Court could not really do justice to all the issues raised. It was simply not possible or even desirable to refer to all the evidence and the hundreds of cases put forth by the parties.[5]
[9] At the end of the process, one must wonder where the system failed for the Court is convinced that there has to be a better way to achieve the objectives set out in section 3 of the Federal Court Rules, SOR/98-106 (the Rules), which seeks to achieve the just, most expeditious and least expensive determination of every proceeding on its merits.
INDEX
Heading Para. No.
1. General Background 10
2. The Evidence 16
3. Lilly Canada’s Lack of Standing 75
4. Patent Construction 87
4.1. Person Skilled in the Art 91
4.2. Common General Knowledge (Principles) 95
4.3. The ‘007 Patent 106
4.4. The Lilly Process Patents 144
4.4.1. The ‘536 Patent 145
4.4.2. The ‘725 Patent 164
4.4.3. The ‘468 Patent 170
4.5. The Shionogi Patents 175
4.5.1. Common Disclosure 177
4.5.2. The ‘547 Patent 184
4.5.3. The ‘924 Patent 188
4.5.4. The ‘132 Patent 192
4.5.5. The ‘026 Patent 199
5. Infringement
5.1. Burden 211
5.2. Statutory and Common Law Presumptions 212
5.3. Lupin Process 224
5.4. Kyong Bo Process 257
5.4.1. Existence of a License 263
5.5. Importation 270
5.6. The Exception Under Subsection 55.2(1) of the Patent Act 342
6. Invalidity 347
6.1. Standard of Review and Burden of Proof 348
7. Inherency and Lack of Subject Matter
7.1. Shionogi Patents 371
7.2. Lilly Patents 380
8. Anticipation
8.1. The Legal Test 391
8.2. The ‘007 Patent 399
8.3. The Lilly Process Patents 409
8.4. The Shionogi Patents 411
9. Obviousness
9.1. The Legal Test 412
9.2. The ‘007 Patent (Claim 17) 426
9.2.1. The Person Skilled in the Art 428
9.2.2. Relevant Common General Knowledge 429
9.2.3. Rydon, Coe and Ramirez 432
9.2.4. The Inventive Concept 438
9.2.5. The Difference Between the Common General Knowledge and
the Above-mentioned Publications and the Inventive Concept 439
9.2.6. Would these differences be obvious to the person skilled in
the art? 441
9.3. The Lilly Process Patents
9.3.1. Identify the Skilled Addressee 476
9.3.2. The Relevant Common General Knowledge 477
9.3.3. The Dreux Article and Other Prior Art 484
9.3.4. The Inventive Concept 489
9.3.5. The Differences between the Prior Art Including Common
General Knowledge and the Inventive Concept of the Claims 491
9.3.6. Do these differences constitute steps which would have been
obvious or do they require any degree of invention? 496
9.4. The Shionogi Patents 512
9.4.1. The Person Skilled in the Art 515
9.4.2. Common General Knowledge 516
9.4.3. Contested Art 532
9.4.3.1. Cocker 533
9.4.3.2. Chauvette Application 538
9.4.3.3. Kishi 539
9.4.4. The Inventive Concept 544
9.4.5. The Differences between the Prior Art and the Inventive
Concept
9.4.5.1. The ‘547 Patent 547
9.4.5.2. The ‘924 Patent 549
9.4.5.3. The ‘132 Patent 552
9.4.5.4. The ‘026 Patent 554
9.4.6. Are these differences inventive? 557
10. Lack of Utility – Sound Prediction – Inoperability 583
10.1. The Lilly Patents 585
10.2. The Shionogi Patents 604
10.3. Deficiency of Specification and Ambiguity 613
11. Remedies and Costs
11.1. Disentitlement and Set-off 626
11.2. Remedies 646
11.3. Exemplary/Punitive Damages 657
11.4. Interest 665
11.5. Costs 676
12. Apotex’s Counterclaim 683
12.1. Relevant Statutory Provisions 718
12.2. The Framework of Inquiry into Apotex’s Counterclaim 720
12.3. Is Apotex’s Counterclaim Time-Barred? 728
12.4. Apotex’s Claim for Damages 754
12.5. The Applicable Evidentiary Standard 757
12.6. Background 771
12.7. Apotex’s “But For” Scenarios with Respect to Causation 793
12.7.1. Scenarios 1 and 2: Apotex Obtains a Licence from
Shionogi or Lilly 803
12.7.2. Scenario 3: Apotex Practices the Shionogi Process and
is not sued 835
12.7.3. Scenarios 4 and 5: Apotex Practices the Shionogi and
Lilly Processes and is Sued by Shionogi and Lilly 840
12.8. Is there a loss resulting from the assignment under the most
likely “but for” world scenario? 842
12.9. Increased Cost of Legal Bulk Cefaclor 849
12.10. Infringement Liability 853
12.10.1. The Lilly Patents 855
12.10.2. The Shionogi Patents 861
12.11. Costs 882
1. General Background
[10] It is not disputed that penicillin is the oldest of the β-lactam compounds, having first been discovered in 1928. Semi-synthetic penicillin came later. The β-lactam molecule per se is a small square molecule that is highly reactive, to which, in penicillin, a five-membered ring is attached, whereas in cephalosporin (which includes cefaclor) the β-lactam is attached to a six-membered ring containing sulfur. There are different types of β-lactam depending on their side-chain, such as penicillin V (Pen V) and penicillin G (Pen G).
[11] Cephalosporins were first discovered in 1948. Semi-synthetic cephalosporins were prepared by altering the naturally produced compounds for greater anti-bacterial activity. Like penicillins, cephalosporins are bactericidal and exhibit similar modes of action. Cephalosporins are classified based on their generation. First generation cephalosporins, such as cephalexin (another Lilly product), have good activity against gram positive bacteria and more modest activity against gram negative. Second generation cephalosporins, such as cefaclor, have better activity against gram negative bacteria. Third generation cephalosporins, such as cephotaxim, ceftazidine and ceftriaxone, were less active than the first generation but have good activity against Enterobacteriaceae.
[12] Shortly after it was introduced in the market by Lilly, Ceclor® was a very successful drug. It remained so for several years, however, by 1997, when Apotex came to market, it was definitely in decline, having been overtaken by other antibiotics.
[13] The basic patent on the compound Cefaclor or the class of second generation cephalosporins to which it belongs (7-χ-aminoacyl-3-halo-3-cephem carboxylic acid or ester compound) is patent 1,016,537 (the ‘537 patent) filed on February 22, 1974 and issued in Canada on August 30, 1977. It expired August 30, 1994. It was also owned by Lilly U.S., having been discovered by Dr. Chauvette, a member of its β-lactam research team. Cefaclor was specifically disclosed in an example and the process to prepare it, or an obvious chemical equivalent, was claimed. Other claims dealt with other 7-χ-acylamino-3-chloro-3-cephem compounds prepared by those processes.
[14] It is not disputed that although the disclosure of the ‘007 patent directly refers to the preparation of a cephalosporin compound using the kinetically controlled complexes claimed in the patent, the claims do not expressly refer to such use. Also, none of the claims in the Lilly process patents or the Shionogi patents are directly claiming a process to make cefaclor itself. As a matter of fact, and as will be explained in more detail later on, these patents more generally relate to the making of what all experts agree was a key intermediate compound (the 3-hydroxy-3-cephem compound)[6] if one were to make cefaclor. The steps required to make cefaclor from this key intermediate were disclosed in the ‘537 patent.
[15] An important part of the debate relates to processes involved in the transformation of a penicillin molecule into a cephalosporin molecule. Penicillin molecules could be synthetically produced at very low cost whereas the original starting material used by Dr. Chauvette to make cefaclor or other second generation cephalosporins described in his patent was very expensive.
2. The Evidence
[16] An important part of the evidence in this trial is a long list of facts agreed to by the parties that are applicable both to the main action and the counterclaim. To avoid excessive duplication, the Court will attempt to avoid repeating those admitted facts which are relevant to both actions, with the understanding that the totality of said facts were considered in the course of the determination of both actions.
[17] In the infringement action Lilly produced six factual witnesses: Dr. Stephanie Parra, Mr. Thomas Lee Pytynia, Ms. Debbie Rassos, Dr. Larry Blaszczak, Dr. Robin Cooper and Mr. John Gardner.
[18] Dr. Parra is acting manager of the general direct quality division one at Health Canada. Her division is responsible for evaluating data submitted to support the quality of drug submissions made to the department including chemistry and manufacturing data. Her testimony mainly served the purpose of entering into evidence, as well as offering a brief explanation of, documents filed in relation to Apotex’s submission for its Apo-cefaclor product.[7] This included particularly the “open” and “closed” portions of the relevant Drug Master Files (DMFs) submitted by Apotex’s suppliers, Lupin Laboratories Ltd. of India (Lupin) and Kyong Bo Chemical Ltd. of South Korea (Kyong Bo).
[19] Various important exhibits discussed throughout the trial were put into evidence in the course of Dr. Parra’s testimony, such as the Comprehensive Summary regarding Apo-cefaclor (TX-124), the open and closed portions of Kyong Bo’s DMF (TX-126; TX-129), Apotex’s notifiable change for new source (TX-157) and letters from the Department of Justice to Gowlings Lafleur Henderson LLP with information provided by Lupin attached (TX-167; TX-168).
[20] Dr. Parra also explained the meaning of a “notifiable change” and the various levels ascribed thereto, which correspond to greater or lesser regulatory filing requirements. A change of supplier for example is classified as a level 2 notifiable change and will receive an objection letter if Health Canada has an objection to the proposed change.[8] In this matter, before approving the change of supplier notified by Apotex (from Kyong Bo to Lupin), Health Canada requested additional information by way of a document called a “Clarifax” (TX-152) to which Apotex replied by a letter dated June 21, 1997 with an attachment explaining the source of the starting material and a full diagram representing the synthetic route used to make 7-amino-3-chloro-3-cephem-4-carboxylic acid esters (7-ACCA) (TX-150).
[21] Mr. Pytynia was in-house counsel for Lilly U.S. between May 1977 and December 31, 2007. He testified mainly about the relationship between Lilly U.S. and Lilly Canada, including particularly their licensing and distribution agreements. He introduced various documents which will be referred to later on, such as the 1991 licensing agreement between Lilly U.S. and Lilly Canada (TX-109), the 1995 patent and trademark licence amendment (TX-110), the Master Supply and Distribution Agreement between the said two companies (TX-112) as well as the Authorization to grant sub-licences from Lilly U.S. to Lilly Canada (TX-113).
[22] Ms. Rassos is the senior regulatory affairs manager at Lilly Canada, a position she has held for two and a half years. She had no direct knowledge of any of the events relevant to the proceedings and testified only to the documentation she found in Lilly Canada’s regulatory records concerning cefaclor. She introduced in evidence, among other things, Lilly Canada’s process information filed in relation to its New Drug Submission (NDS) (TX-208; TX-209) for Ceclor® as well as a portion of its 1979 NDS (TX-115). It was made clear during her cross-examination that her testimony with respect to the identity of Lilly Canada’s supplier during the 1979 and 2000 period is solely based on the said documentation for she had no independent knowledge of such matters.[9]
[23] Dr. Blaszczak is one of the inventors listed in the Lilly patents in suit, with the exception of the ‘536 patent. However, he did not testify in this capacity but rather to explain his relationship with a graduate student in chemistry from the University of Modena, Alberto Spaggiari. This student had solicited Dr. Blaszczak’s supervision in conducting research in β-lactam chemistry with the view of preparing dual action cephalosporins. This led to Dr. Blaszczak collaborating with Mr. Spaggiari as a co-author for a scientific article referred to here as the Spaggiari paper published in 2004. In the course of his testimony on this issue, Apotex formulated a number of objections to hearsay evidence. While the objections were largely justified in this regard, none of this evidence is relevant to the issues upon which this judgment turns.
[24] On cross-examination, Dr. Blaszczak was referred to a 1978 cefaclor progress report (TX-211) and questioned as to his role in relation with it. He was also probed as to the process used by Lilly in the late 1970’s, particularly the transition to triphenyl phosphite (TPP) chloride (Cl) complex and the comparative yields achieved. Finally, Dr. Blaszczak offered evidence as to how Lilly structured its research operations with regard to cefaclor, particularly the de facto merging of the process research and development and discovery groups (he was part of the latter) when Lilly requested that the discovery chemists thoroughly consider the problem posed by the production of cefaclor on a commercial scale.
[25] Dr. Cooper was working with Lilly’s research team at the relevant time. He was already a world-renowned expert in cephalosporin chemistry. He was presented as a factual witness to relate any attempts he made back in the early 1970’s to cyclicize the thiazoline azetidinone compound he discovered (Cooper compound), which is used as starting material in the process described in the Shionogi patents. The content of his testimony will be discussed in more detail when assessing the allegations of invalidity of the Shionogi patents.
[26] Mr. Gardner is a chemist who performed the experiment described in example nine of the ‘007 patent (characterised as a side chain cleavage using the tri-p-chloro phenyl phosphite chlorine complex) while at Lilly in the late summer, early fall of 1978. Although Lilly produced a copy of his thirty-year-old lab notebook (TX-1799), Apotex objected to this evidence being used to counter the arguments of Apotex’s experts with regard to invalidity. Mainly, Apotex argues that Rule 248 of the Federal Courts Rules precludes this evidence from being introduced as Apotex sought to obtain all these lab notebooks during the discovery and its requests went unheeded. However, I fail to see how Rule 248 can apply when it is the Court which determined that the requested documents were not relevant.[10] That said, in order to avoid further peripheral debates, the Court does not consider this evidence to be necessary to reach its findings.
[27] Subject to what I said about Ms. Rassos and my further comments in respect of Dr. Cooper, I accepted as credible the evidence of these witnesses.
[28] Apotex presented eight fact witnesses in the main action: Ms. Julie Carrière, Mr. Donald Barber, Mr. Gordon Fahner, Dr. Bernard Sherman, Mr. John Hems, Mr. Rajeev Patil, Mr. Vilas Satpute and Mr. Haracharan (Harry) Singh.
[29] Ms. Carrière is Apotex’s director of quality assurance and she testified about the regulatory context which requires Apotex to conduct tests and analyses of the bulk chemicals it uses in making pharmaceutical formulations. Her testimony was put forth in support of Apotex’s defence pursuant to s. 55.2 of the Patent Act, R.S.C. 1985, c. P-4. In cross-examination, she explained that the related compounds which must be tested referred to the synthetic or degradation impurities which have been previously identified in the New Drug Submission or Notifiable Change. She also agreed that these related compounds may change from supplier to supplier, depending upon the processes used, which may create a need for different analytical techniques.[11] Finally, Ms. Carrière agreed that apart from the regulatory obligation, testing is beneficial to Apotex for it must ensure that the products it puts on the market are safe and of good quality, otherwise its sales might suffer.
[30] Mr. Barber has been the formulation development manager at Apotex since 1998. He provided testimony on product development at Apotex. He explained in detail the various testing required to develop a commercially viable product, which includes the formulation stages, the scaling up of a process or formulation that is thought to be workable on an industrial scale and the testing or evaluation of the formulation so produced. The raw material testing is ongoing throughout the process.
[31] He noted that whenever Apotex switches to a different supplier for an active pharmaceutical ingredient (API), evaluations, both chemical and physical, are repeated and a “good amount” of the formulation development work must also be repeated. Mr. Barber discussed how, with regard to cefaclor, such work started as early as 1991. He identified several exhibits relating to quantities of cefaclor which have not been sold or used for commercial purposes. Again, this testimony was offered in support of Apotex’s defence pursuant to s. 55.2 of the Patent Act. On cross-examination, Lilly’s counsel focused on the accuracy of records which are not relevant to the issues the Court must decide today, given that if infringement is established, the damages will be assessed by reference. The accuracy of Apotex’s records in this regard can be contested at the reference stage, in accordance with the Court’s reasons below on the proper scope of the exemption.
[32] Mr. Fahner has been Apotex’s Vice-President of Finance since 2003, having held the position of Director of Finance at the relevant period. He testified twice in the course of the main action. Firstly, Mr. Fahner testified as to the inventory tracking system at Apotex and the gradual evolution of this system from a paper-based system to an electronic SAP system in the 1999 to 2001 timeframe. The main purpose of Mr. Fahner’s testimony was to introduce in evidence, and explain the significance of, spreadsheets (TX-1559; TX-1560; TX-1561) he prepared representing compilations of quantities of cefaclor which Apotex claims is covered by the defence provided for at s. 55.2 of the Patent Act. Also, Mr. Fahner explained the significance of another spreadsheet he prepared (TX-1759) which represents a summary of raw cefaclor quantities purchased by Apotex primarily for commercial use as well as prices paid for said cefaclor.
[33] On cross-examination it became apparent that some of the material included in the spreadsheets was in fact material that had been acquired post-patent expiry and thus is not relevant for the purposes of this proceeding. On this basis, Apotex undertook to have Mr. Fahner revise said spreadsheets to ensure that they only include quantities relevant to the allegation of infringement. This was provided by Apotex on May 12, 2008. Inconsistencies were also identified with regards to the summary of raw cefaclor quantities (TX-1759) and various purchase orders, which again, in a context where a reference will take place, are not germane to the issues presently at hand. Finally, Mr. Fahner also identified a spreadsheet representing international sales of Apo-cefaclor (TX-1747) and confirmed that no sales had occurred in the United States.
[34] Following the testimony of Mr. Singh, which will be discussed below, Apotex re-called Mr. Fahner to testify with regard to certain invoices emanating from Tektrade Ltd. (contained in Glopec-36) which called into question Mr. Fahner’s earlier testimony. Mr. Fahner testified that the relevant invoices (# TTL-981006-02 and TTL-981006-3) were not in Apotex’s records, that the cefaclor quantities represented therein had not been received by Apotex and that no payment had been made to Tektrade Ltd. in relation thereto. Lilly objected to Mr. Fahner being called back to testify, but on June 17, 2008, the Court ruled that it would exercise its discretion and allow said testimony, noting that Lilly did not suffer any prejudice in light of the bifurcation order for the issue of the quantum of damages, save perhaps in losing what was indeed a very able cross-examination of Mr. Singh by counsel for Lilly.
[35] Mr. Hems is the Director of Regulatory Affairs at Apotex. He testified as to the regulatory requirements which Apotex must meet in order to offer a drug on the market and the process used to meet these requirements. He oversaw the process for seeking approval for cefaclor, which began in 1993 with the filing of the original drug submission (TX-1761; TX-1762) and explained the analysis of the API which is necessary for such submissions. Mr. Hems also explained what a DMF contains and the portions of said files which Apotex may gain access to and how it may gain access to them.
[36] Except for the issue relating to the Tektrade invoices in respect of which the Court will make no finding, the evidence of the aforementioned witnesses was accepted.
[37] Dr. Sherman is the Chairman and Chief Executive Officer of Apotex. In this phase of the trial, he testified as to Apotex’s practices with regard to the sourcing of APIs, particularly cefaclor. He explained that, around the time where Apotex received its NOC for cefaclor, it hired an in house lawyer named Brigitte Fouillade, who has since passed away. Her role was to advise Dr. Sherman as to intellectual property issues. Referring to correspondence addressed to Ms. Fouillade from Kyong Bo dated October 10, 1997 (TX-662), Dr. Sherman explained that Kyong Bo represented to Apotex that it had rights to use the Shionogi process.
[38] With regard to Lupin, Dr. Sherman testified that while no formal agreement was entered into at first, it is his understanding that Ms. Fouillade attempted to ensure that the material supplied was not infringing. Ms. Fouillade developed a flow sheet for such a non-infringing process and, relying on correspondence between Ms. Fouillade and Mr. Singh (TX-679), explained that she was to ensure that this process was followed even if the cefaclor so produced was more costly, which is why Apotex then entered into a formal agreement.
[39] On cross-examination, Dr. Sherman was led to explain the reasons for which Apotex limited its choice of Lilly patents in its compulsory licence application (TX-265) and the reason which led him to terminate said licence (TX-267). He was also questioned as to why the agreement with Lupin (TX-1656) was not in the original affidavit of documents he signed (TX-327) and why no Notifiable Change had been filed by Apotex for this new process. He was also thoroughly questioned with regard to his answers on discovery pertaining to Lupin process information and communications between Lupin and Apotex. Finally, he also attempted to explain price variations for bulk cefaclor purchased, from Lupin and Kyong Bo.
[40] Generally, the Court has no problem with the credibility of Dr. Sherman’s testimony in respect of matters where he was directly involved as opposed to those where others were directly involved such as Ms. Fouillade. It is obvious and understandable that Dr. Sherman did not recall factual details and appeared sometimes to be offering explanations based on common sense and written documentation. The Court was certainly surprised by his candour when he noted that he did not read correspondence from his lawyers (there was simply too much of it) and he entirely relied on them when signing affidavits (it is not clear if he even read them all).[12]
[41] The testimonies of Mr. Singh, Mr. Patil and Mr. Satpute were heard under reserve of general objections (generally referred to as voir dire by the parties) which will be discussed in the section regarding infringement. Still, it is useful to briefly note what their testimonies relate to.
[42] Mr. Singh is the owner of Glopec International Inc. (Glopec), a company which imports and distributes raw pharmaceutical ingredients in both Canada and the United States. Glopec represents Indian manufacturers, such as Lupin, taking care not only of selling their products in Canada but also filing their regulatory materials with Health Canada. With regard to cefaclor, a certain amount of such correspondence related thereto was introduced in the course of his testimony (Glopec 1-14; 28-33). Also, Mr. Singh had in his files a certain amount of correspondence between Glopec and Apotex (addressed to Ms. Fouillade) regarding the process used by Lupin in the summer of 1997 and the subsequent development with Lupin of a non-infringing process (Glopec 16-26), as well as related correspondence with Lupin (Glopec 27; 35).[13]
[43] Mr. Singh also testified as to a big order of 7,500 kg of cefaclor passed by Apotex to be manufactured using the so-developed process. When Apotex was invoiced for bulk cefaclor manufactured by Lupin, these invoices were issued by Tektrade Ltd. (Glopec 36), a trading company owned by his in-laws in India and which Mr. Singh represents in Canada. Mr. Singh explained how the prices represented in these invoices were set and how payments are processed from Apotex through Tektrade Ltd. and finally to Lupin. While much of his cross-examination focused on these same points, counsel for Lilly was able to identify a rather large discrepancy between Tektrade Ltd. invoices and the data compiled by Apotex as to quantities received, which, as mentioned above, prompted Apotex to recall Mr. Fahner to testify on this point.
[44] Mr. Patil is the Vice-President of Regulatory Affairs at Lupin. At the relevant period, he was a senior manager within the same department. He was tasked with the registration of the companies’ products (DMFs), which include dosage form and API (bulk), the study of regulatory requirements in countries to which Lupin exports and compliance with these requirements. Mr. Patil testified as to how the registration and other requirements were performed at Lupin as well as what they generally entailed, with a particular focus on communications with Health Canada concerning cefaclor both directly from Lupin and via Glopec (which were tendered as Patil 1-6; TX-337; Glopec 4-5; 10). These documents came into the possession of Mr. Patil following a request made to Health Canada in 2008 to provide them as Lupin’s records had been largely lost in a flood in 2005 (some files still existed at the Bombay office while others were salvaged).
[45] Mr. Patil also testified as to the locations where cefaclor and 7-ACCA are manufactured. Correspondence between Lupin and Glopec was also tendered, for example Patil 8 (but also Patil 9; TX-158), which contained Mr. Patil’s handwriting in the margins and which prompted testimony about the interaction Mr. Patil had with the research and development (R&D) department (the letter was addressed to Dr. Gutpa, the chief of the R&D department) of Lupin regarding Apotex’s request for cefaclor produced using a third process. Concerning this third process, Mr. Patil testified as to a mix up in the correspondence in 1999, specifically an incorrect flow sheet depicting the manufacture of 7-ACCA appended thereto (see, for example, Patil 10).
[46] Mr. Satpute is the Vice-President of API manufacturing at Lupin’s Mandideep facilities. At the relevant period (1996-1999), he was the senior manager of Lupin’s Ankleshwai facility, which manufactured ethambutol, vitamin B-6 and two intermediates, 7-ADCA and 7-ACCA. After 1999, he took up this same role but at the Mandideep facilities where cephalexin, cefadroxil, cefaclor, ceftriaxone and cefatoxime are manufactured. Mr. Satpute testified as to the process used at the Ankleshwai facility to manufacture 7-ACCA and its subsequent transformation to cefaclor at Mandideep and the delay this entails.
[47] He testified that initially, in 1996, Lupin used a process which began with Pen V acid. Sometime in 1997, Lupin did trial batches and a few commercial ones to validate a new process starting with Pen G before reverting in 1998 to Pen V acid but using a third process which was slightly different from the one used in 1996 (particularly at what is described as step V in some of Lupin’s documents) to fulfill what he qualified as a “one of the biggest orders we received”. Mr. Satpute explained the implementation of this third process, the fact that it produced substantially lower yields (about 60 percent of the yields of the previous Pen V acid process used) and the use of chlorine (Cl) gas and TPP. Also when he was asked to find batch records for the 7-ACCA so produced, for which the plant manager and the R&D department would have created a template a few weeks before coming to Canada, he found that these documents no longer existed. It is not clear if anybody verified the files of the R&D department for the data relating to this process.
[48] Once this order was filled, Mr. Satpute testified that Lupin reverted to the Pen G process validated in the latter part of 1997. Documents referred to in the course of Mr. Satpute’s cross-examination were marked Satpute 1-3.
[49] Finally, the parties filed by consent an affidavit of Leslie Sands, Director of regulatory affairs at Lupin Pharmaceuticals Inc., a subsidiary of Lupin operating in the United States (TX-340). This filing was made under reserve of an objection that the documents therein are not proof of their contents but rather only of the existence of such communications with the U.S. Food and Drug Administration. The Court agrees with Apotex in this respect.
[50] In the main action, the parties filed 33 expert reports dealing with the infringement and invalidity allegations. They are listed in Chart A[14] attached hereto with the names of the experts, dates, subject matter and exhibit numbers, together with their area of expertise and a brief summary of their qualifications.
[51] On the question of infringement of the Shionogi patents by the use of the Kyong Bo process, Lilly called Dr. Anthony Barrett while Apotex responded with the evidence of Dr. Stephen Hanessian who touches on the issue of infringement of all the patents in issue mostly to support Apotex’s arguments with regard to importation (A-10). Both experts were properly qualified to opine on these issues. Their evidence in that respect was not contradicted. The Court accepts the evidence of Dr. Barrett in respect of the Kyong Bo process. While the relevance of Dr. Hanessian’s evidence will be discussed in the section dealing with importation.
[52] A much more contentious issue concerns the infringement of the Lilly patents, particularly whether the Lupin process described in the Health Canada file fell within the scope of the monopoly of the plaintiffs. Lilly’s main expert witnesses[15] in this respect were Drs. Miller and Baldwin. While Dr. Hunter[16] and Mr. Moraski reported and commented on the results of numerous experiments conducted by both sides in relation to this question, particularly with the use of 31P Nuclear Magnetic Resonance (31P NMR) Spectroscopy. Apotex’s experts on this question were Drs. Modro, McClelland and Cowley. Dr. Chase also testified about the tests he performed.
[53] An inordinate amount of time was spent discussing the results of the various experiments performed by both sides as well as their respective alleged flaws. It is clear that most of these experiments involved a certain amount of subjectivity (for example, what is yellow vs. light or faint yellow, or what is cooled vs. ice cooled or cooled with ice salt, what is room temperature, etc.) and that really none of the tests performed were perfect. For various reasons, choices were made with respect to temperature and equipment. Many things can and do go wrong in laboratories (broken valves, etc.). The Court used considerable caution in assessing the weight to be given to this evidence, but in the end, considering the construction of the claims at issue adopted, most of these experiments and the comments relating thereto became somewhat irrelevant. With respect to those that remain relevant, such as reactions carried out on cephalosporin substrate with or without a halogen scavenger, individual tests were not considered in isolation, in the sense that the Court always looked to confirm if the results were supported by other evidence on the record.
[54] The one positive aspect of the testing is that it led to the abandon of some of the arguments and helped focus the debate.
[55] There was a lengthy debate about the admissibility of tests performed ex parte and how tests must be introduced in the evidence. In the end, these issues were settled without the need for a ruling. Nevertheless, it is important to note that pre-trial scheduling orders setting deadlines for the reporting of test results, absent an express indication to the contrary, must not be construed to constitute a waiver of any requirement that may exist regarding notice of testing to be performed pre-trial.
[56] Also, with respect to the infringement of the Lilly process patents, the Court granted leave to both parties to file expert evidence on issues arising from the testimony of Mr. Satpute. Dr. Barrett (E-15), who had only previously been dealing with the Shionogi patents, and Dr. Hanessian (A-20) testified in respect of the various processes allegedly used by Lupin.
[57] Turning now to the validity phase of the trial, Apotex relied on the evidence of Drs. McClelland, Hanessian and Martin in respect of the Shionogi patents while Lilly responded with the evidence of Dr. Barrett and that of Mr. Murphy, who focused on the prosecution of the Shionogi patents and the unity of invention practice of the Canadian Patent Office.
[58] In respect of the Lilly patents, Drs. Modro, Chivers, Olah and McClelland discussed the validity of the ‘007 patent while Dr. McClelland also addressed issues relating to all the Lilly process patents and Dr. Olah opined in respect of the ‘536 patent. In response, Lilly relied upon the evidence of Dr. Baldwin who discussed all of the Lilly patents and Dr. Hunter who focussed on certain allegations in respect of the ‘007 patent. Mr. Murphy also discussed the prosecution of the Lilly patents and the unity of invention practice in relation thereto.
[59] In respect of infringement by the Lupin process, the Court found the evidence of Dr. Baldwin and Dr. Miller particularly helpful. Despite Apotex’s attempts to challenge their credibility on the basis that they had worked as a consultants for Lilly from time to time and the university where Dr. Miller teaches received some grants from Lilly, the Court is satisfied that they gave their evidence in a straightforward, unbiased manner. In that respect, the Court notes that early in his testimony, Dr. Baldwin readily admitted that the kinetic complex must have formed when one carried out some of the experiments in the prior art.
[60] In respect of the validity of the Lilly patents, like the House of Lords in Synthon BV v. Smithkline Beecham plc, [2005] UKHL 59, [2006] 1 All ER 685 (Synthon), who described him as one of the foremost organic chemists in the world, the Court found Dr. Baldwin to be particularly well qualified to opine on the issues of fact covered in his report. In fact, he was the only expert witness that was properly qualified to opine on the common general knowledge of the posita to whom the Lilly process patents were addressed and how said posita would read those patents or the relevant prior ar