Apotex Inc. v. Sanofi-Aventis

Apotex Inc. v. Sanofi-Aventis
Court (s) Database
Federal Court Decisions
Date
2010-02-18
Neutral citation
2010 FC 182
File numbers
T-644-09
Notes
Digest
Decision Content
Federal Court
Cour fédérale
Date: 20100218
Citation: 2010FC182
Ottawa, Ontario, Thursday, this 18th day of February 2010
PRESENT: MADAM PROTHONOTARY MIREILLE TABIB
Docket: T-644-09
BETWEEN:
APOTEX INC.
Plaintiff
- and -
SANOFI-AVENTIS
Defendant
Docket: T-933-09
BETWEEN:
SANOFI-AVENTIS and
BRISTOL-MYERS SQUIBB SANOFI
PHARMACEUTICALS HOLDINGS PARTNERSHIP
Plaintiffs
- and -
APOTEX INC.
APOTEX PHARMACHEM INC. and
SIGNA SA de CV
Defendants
REASONS FOR ORDER AND ORDER
[1] Apotex Inc. started action T-644-09 in May 2009, seeking a declaration that the product it intends to manufacture and sell in Canada, made with clopidogrel bisulfate and/or clopidogrel besylate, will not infringe Sanofi-Aventis’ Canadian Patent ‘777, and seeking a declaration that the said patent is invalid. One month later, Sanofi-Aventis and Bristol-Myers Squibb Sanofi Pharmaceutical Holdings Partnership (jointly “Sanofi”) sued Apotex Inc. and Apotex Pharmachem Inc. (jointly “Apotex”) alleging that Apotex is already manufacturing and exporting for sale in various countries a clopidogrel bisulfate product, infringing the ’777 patent. Both parties requested that early trial dates be set. The actions were consolidated and trial dates have been set aside for the trial to begin in April 2011.
The motion:
[2] By this motion, Apotex seeks to “consolidate” its statement of claim in T-644-09 and its defence to the T-933-09 action into a single defence and counterclaim to the T-933-09 action, as well as to:
(a) Make several cosmetic and definitional changes intended to clarify the pleadings, without affecting their substance.
(b) Add certain factual admissions about the activities of Apotex relating to the manufacture and sale of clopidogrel-containing products.
(c) Include additional pieces of prior art in the schedule to its pleading.
(d) Specifically plead the experimental use and related exceptions to infringement provided for in the Patent Act and at law.
(e) Include its claim for a declaration of non-infringement with respect to three salt forms of clopidogrel in its counterclaim to the T-933-09 action, including with respect to a new salt form, the hydrobromide salt.
(f) Add a defence of limitation based on the application of the Ontario Limitation Act 2002, S.O. 2002 c.24.
(g) Add a defence of set-off based on the “break fee” contained in the “March 2006 Agreement”.
(h) Add a defence of set-off based on the tort of deceit.
(i) Add a defence of set-off based on abuse of process.
(j) Add details about the circumstances giving rise to the “2006 Agreements” already pleaded and the legal effects of certain provisions as they related to the action.
(k) Add details as to a defence of disentitlement to monetary remedies.
[3] Sanofi objects in principle to Apotex “consolidating” into a counterclaim to the T-933-09 action the action for impeachment and declaration of non-infringement originally brought by Apotex Inc. in the T-644-09 action. As to the modifications and additions themselves, Sanofi:
· Takes no issue with those set out in paragraphs (a), (b) and (c) above.
· Agrees to the addition of details for the experimental use and other exemptions ((d)), provided that Apotex be ordered to provide particulars as to the quantities and specific exemptions to be applied.
· Objects to the addition of a declaration of non-infringement in respect of salts other than the besylate as a counterclaim ((e)), as being based on a mere intention and therefore premature and having no practical effect.
· Objects to the addition of a limitation defence ((f)) as not disclosing a reasonable defence and failing to plead all relevant facts necessary to its application.
· Objects to the addition of the claims for set-off ((g), (h) and (i)) on the basis that they are outside the Court’s jurisdiction, are not properly pleaded, disclose no reasonable defence or cause of action and are scandalous, frivolous and vexatious.
· Objects to the addition of circumstances giving rise to the 2006 Agreements ((j)) as seeking to contravene the parole evidence rule and as being an attempt to improperly broaden discoveries, to the prejudice and inconvenience of Sanofi.
· Objects to item (k) insofar as it relates to the new allegations relating to set-off (for the same reasons as given above) and insofar as they purport to apply to Sanofi’s claim for damages pursuant to the Patent Act.
Preliminary observations:
[4] Not a single one of Apotex’s proposed new allegations could not have been made at the time Apotex filed its original pleadings. I repeat here the comments made in the Reasons for Order issued in this consolidated action on January 22, 2010 (Apotex Inc. v. Sanofi-Aventis, 2010 FC 77):
“[7] The Court’s early trial initiative was a response to the frustration expressed by a significant number of litigants and members of the bar, very notably in the specialized field of intellectual property, that matters were taking too long to get to trial. As the Court began experimenting with this initiative on a case-by-case basis a few years ago, it quickly became obvious that it is not realistic, practical or reasonable to merely shorten the time between the filing of a statement of claim and the start of the trial if the parties and their counsel do not also adapt their litigation practice and strategies to the shorter time frames. Litigation that dragged on for five years or more typically featured three or more “rounds” of discoveries as well as numerous amendments to pleadings, often resulting in more discoveries and affidavits of documents. Attempting to shoe-horn into two years the never-ending discovery and amendments process that used to take five to ten years is simply unsustainable for most litigants and most lawyers, not to mention the limited resources of the Court.
[9] I make these lengthy observations because they inform and highlight the consequences of both parties’ expressed intention to avail themselves of the Court’s streamlining and early trial initiative. In pressing for and committing to a trial in the spring of 2011, intended to last five weeks, the parties and their counsel have committed to a schedule that does not allow infinite time for discoveries and to a trial of fixed duration. The parties themselves are extremely sophisticated litigants, with extensive experience before this Court. Their respective counsel are knowledgeable and experienced trial lawyers. One expects and must demand from such parties that with a trial expected to begin in less than 15 months, with pleadings now closed and with the known history of litigation in this and other jurisdictions over the drug at issue, they have a clearly developed and articulated theory of their respective case, of what is required to prove it at trial, and how they intend to do so. There is no time in this schedule – and indeed, precious little trial time – for embarking on fishing expeditions, for cobbling up a strategy as one goes or for being unable to articulate a coherent theory of the case until all discoveries are completed or until the eve of trial.
[10] In ruling on these motions, I have assumed from the parties that level of professionalism, and I intend, in managing this case to trial, to consistently expect this higher standard. The parties themselves should be able to expect and rely upon the same standard from their opponent. How that assumption will impact the case management of this matter will become apparent as I deal with the various aspects of these motions.”
(Emphasis added)
[5] Either Apotex is only belatedly taking these comments to heart, and the proposed amendments reflects a now clearly developed and articulated theory of the case, or this new pleading represents the very illustration of the fishing expeditions, cobbled strategy and inability to articulate a coherent theory of the case which the Court then censured.
Prejudice:
[6] Apotex has taken the view that its amendments are sought at an “early stage”, and cannot prejudice Sanofi or the conduct of these proceedings. Apotex takes this view, it appears, because discoveries have not yet been completed (Apotex has had discovery of the inventors and of Sanofi on scientific issues, but some three days of discoveries are contemplated with a representative of Sanofi on non-scientific issues and the discovery of Apotex by Sanofi has not yet commenced). Apotex also asserts that the amendments, if allowed, would not require more than the three days already contemplated to complete discovery of Sanofi and would not require any additional trial time over and above the five weeks already set aside.
[7] I must disagree with Apotex on its characterization. As a streamlined proceeding, a schedule was set whereby the “first round” of discoveries of all parties was meant to have been completed by February 1, 2010. Two motions for further and better affidavits of documents have already been heard and determined. As a result of the outcome of one of these motions, the discovery of Apotex by Sanofi would have been slightly delayed, but completion of Sanofi’s discovery by Apotex should not have been affected. The very filing of Apotex’s motion to amend, on January 25, 2010, has caused the discoveries to be further delayed. If the amendments are permitted, discoveries will be delayed even more by the need for Sanofi to prepare and file amended pleadings in response and the need for the parties to serve supplementary affidavits of documents relating to the amendments. Notably, some of the amendments now proposed would require the documents sought by Apotex on its motion for a further and better affidavit of documents, found irrelevant on the basis of Apotex’s then pleadings, to be considered anew for relevance. Even in the best-case scenario, the earliest the “first round” of discoveries could be concluded would be the end of March 2010, a delay of two months from the initial schedule, with barely twelve months left before the trial, and with motions arising out of discoveries, re-attendances, further motions thereon and expert reports still to be done.
[8] If this litigation is still in its “early stages”, it should not be. The extensive amendments now sought to be made would cause the litigation to remain at this “early stage” well passed the time where discoveries should be winding down.
[9] The delay, in turn, will inevitably compress the schedule for the remaining months before trial. It will leave even less margin for unforeseen events. It will put more pressure on the parties, including Sanofi, to complete discoveries and prepare for trial in a shorter time frame, and on the Court to schedule and determine interlocutory motions.
[10] As to the time required for trial, unless it is suggested that both parties knowingly inflated the time they estimated necessary for trial when it was originally set, it is plain that the extensive new facts alleged by Apotex will require more evidence at trial than originally contemplated, and should therefore require some additional trial time over and above the time already contemplated. Apotex’s assertion that no more than the already scheduled time will be required implies that Apotex is prepared to make compromises in its use of its portion of the allotted trial time, either to cram in imperfectly all of its evidence or to scrimp on that evidence it had initially intended to bring when the issues were narrower. It is certainly at liberty to do so, but adding all these issues without extending the trial time – or at least Sanofi’s portion of the trial time – would force Sanofi to make similar compromises as to its use of its own allotted trial time. Apotex therefore cannot claim that Sanofi will not be prejudiced by the addition of all of these new facts if the trial time is to remain the same. Nor is it an answer for the trial simply to be adjourned or for additional weeks to be scheduled. These trial dates were set aside over six months ago; other trials have since been fixed before and after them. The trial cannot be extended without re-scheduling previously scheduled hearings or causing serious inconvenience to the administration of this Court. As to adjourning the dates, both parties had specifically requested early hearing dates and accepted the resulting obligation upon them to do what was required to meet theses dates and keep to them. The Court accommodated their request. If, by their conduct, the parties make it impossible to keep the dates set aside, they cannot expect the Court to simply accommodate them again, by again reserving in advance of a formal pre-trial conference dates that could be used for trials that are actually ready to proceed. To the extent Sanofi shared Apotex’s desire for early trial dates, an adjournment would therefore also cause prejudice to Sanofi as it would delay trial by as much as one year.
[11] Despite the lack of any direct evidence on record by Sanofi as to how it might be prejudiced by the amendments, I am satisfied, on the basis of the observations made above, that if all of the amendments proposed by Apotex are allowed, Sanofi is more likely than not to be prejudiced, either as a result of a compressed schedule and of having to fit more evidence into the same allotted trial time, or as a result of a delayed trial.
[12] That is not to say that the amendments should be denied for that reason. There are several groups of amendments, some of which are discrete and involve few facts, some of which are interrelated and call upon a substantial body of facts. The likelihood of prejudice depends on the number and nature of the amendments that are, otherwise, permissible (i.e. that should not otherwise be refused as disclosing no reasonable defence or being frivolous or vexatious).
[13] Furthermore, even if all or most of the amendments were found to be proper, the prejudice identified above could be avoided or mitigated by imposing other conditions, such as restricting discoveries by Apotex or re-bifurcating the issues so that the subject matter of the new amendments be reserved to be dealt with at the “damages” stage, after the issues going very specifically to infringement and invalidity have been resolved.
[14] It is therefore appropriate to consider, in turn, each proposed group of amendments to determine whether, apart from the potential prejudice to Sanofi, they are otherwise appropriate.
Experimental use and other exemptions:
[15] The proposed paragraphs to be added by Apotex read as follows:
“83. Further, the Apotex Defendants plead and rely upon the common law “experimental use” exception to infringement. The Apotex Defendants also plead and rely upon subsections 55.2(1) and (6) of the Patent Act, as they read at all material times, dealing with the manufacture, construction, use or sale (collectively, for the purposes of paragraphs 83 to 84, “use”) of a patented invention relating to the development of regulatory submissions, private use and experimental use.
84. In this respect, the Apotex Defendants state that one or more of the foregoing exceptions would exempt from infringement the following uses of clopidogrel:
(a) use of clopidogrel for research and development purposes;
(b) use of clopidogrel for internal and external quality control purposes; and
(c) use of clopidogrel in compliance with regulatory requirements specified in the Food and Drug Regulations (Canada), provincial regulatory requirements (section 6 of Regulation 935, Drug Interchangeability and Dispensing Fee Act (Ontario) and foreign regulatory requirements.”
[16] It As mentioned, Sanofi does not object to an amendment that would specifically plead these exemptions, and indeed, the parties’ representations in earlier motions seemed to assume that these exemptions would be relied upon. Sanofi however argues that the proposed pleading “is deficient in that insufficient particulars, including the quantities and specific exemptions to be applied, have not been provided”. I agree. The pleading as proposed is no more than a bare recital of “one or more” of the common law or statutory exceptions that “would” exempt certain uses of clopidogrel from infringement. It does not allege that the exemptions in fact apply, in that it does not allege that Apotex in fact used any clopidogrel for any exempted use. It does not provide any material fact as to any particular research and development purpose, any particular internal or external quality control or identify for which foreign regulatory requirement(s) clopidogrel was used. It does not state the quantities for which each exemption is sought.
[17] This is not a matter for discovery, especially not in a streamlined proceeding. Pleadings are meant to define the facts a party intends to prove at trial. They also frame and define the scope of discovery. As proposed, the pleading leaves entirely unclear whether the exemptions are sought in respect of one kilogram or one ton of clopidogrel, of one percent or of ninety percent of Apotex’s production and whether there are any material facts that would support Apotex’s contention that any of those quantities were actually used for any of the purposes alluded to. It leaves open for potential questioning on discovery the use of every gram of clopidogrel produced by Apotex. It negates any possibility that Sanofi could, upon considering the quantities and purposes defined and finding them reasonable, narrow the pleadings and the scope of discovery by admitting all or parts of the exemptions sought. The amendments are therefore permitted, but on condition that Apotex provide particulars of the quantities claimed for each exemption, and of the material facts in support of each exemption.
Declaration of non-infringement with respect to other salts:
[18] A declaration of non-infringement in respect of the besylate salt was already sought on the basis of the same allegations of “intent” in Apotex’s T-644-09 action. Sanofi did not move then to strike the pleading, and it is not appropriate for it to seize the opportunity presented by Apotex’s desire to transport the same allegations from its statement of claim in T-644-09 action to its counterclaim in T-933-09 to mount a belated challenge to the sufficiency of these allegations. Similarly, Sanofi’s motion for a further and better affidavit of documents was heard on the understanding that the parties had agreed between themselves that Apotex would and could amend its pleadings in T-644-09 to add a declaration of non-infringement in respect of the hydrobromide salt, in all appearances on the same allegations of intent as were made for the besylate. Sanofi’s belated objection is untimely and improper.
[19] Although it was not raised by Sanofi on this motion, I note that in moving the claim for a declaration of non-infringement from the T-644-09 action (where only Apotex Inc. was the plaintiff), to a counterclaim in the T-933-09 action (where Apotex Inc. and Apotex Pharmachem Inc. are defendants), Apotex has included Apotex Pharmachem Inc. in the scope of its declaration of non-infringement:
“121. The Apotex Defendants (plaintiffs by counterclaim) seek:
(b) An order that their clopidogrel (…) will not infringe (…)”.
(Emphasis mine)
[20] Yet the factual allegations supporting this request, imported from the T-644-09 action, are in respect of Apotex Inc.’s product and intended manufacture only. There is no allegation whatsoever relating to Apotex Pharmachem’s proposed manufacture or sale. A declaration that Apotex Pharmachem’s product will not infringe is therefore plainly and obviously unsustainable, as there are no material facts pleaded with respect to Apotex Pharmachem. The amendment at paragraph 121(b) would therefore have to be modified to be restricted to Apotex Inc.
The defence of limitation:
[21] Although section 55.01 of the Patent Act provides for a six year limitation period, it is common ground between the parties that the transitional provisions relating to this section could arguably be read as excluding from its application actions for infringement of patents issued under the “Old Act”. Sanofi of course argues that properly interpreted, the transitional provisions provide for the application of section 55.01 in this case, but it properly conceded at the hearing that Apotex’s position to the contrary is at least arguable.
[22] Apotex wishes to plead that if section 55.01 does not apply, then the two year limitation provided by the Ontario Limitations Act applies, as “the cause of action” arose entirely in the province of Ontario. To this effect, it seeks to add the following allegations of fact:
“59. Any manufacture, sale or use of clopidogrel or any clopidogrel-containing product by Apotex Inc. or Apotex Pharmachem took place in and only in Ontario. Any manufacture, sale or use of clopidogrel or any clopidogrel-containing product by Apotex Inc. or Apotex Pharmachem outside of Ontario, which is denied, does not constitute infringement of the ‘777 patent.
60. Specifically with respect to the U.S., the Apotex Defendants state that, at all times prior to June 9, 2007, the Plaintiffs knew that the U.S. Apo-clopidogrel Product:
(a) Did not involve Apotex Pharmachem in any manner; and
(b) Was manufactured, sold and used (if at all) by Apotex Inc. solely in Ontario, Canada.”
[23] Sanofi argues that for a provincial limitation period to apply, all constituent elements of a cause of action must have occurred in the province, including the damage suffered and the act that caused the damage (Canada v. Maritime Group (Canada) Inc., [1995] 3 F.C. 124). It argues that the proposed pleading is deficient and insufficient because it fails to address where exportation (an act of infringement specifically pleaded) occurred, and fails to address where the damage was suffered.
[24] As to where damage occurred, Sanofi asserts, but does not point to any authority to support its assertion, that damage is necessary located at the place where the plaintiff resides. Assuming – but without deciding – that this proposition is plain and obvious at law, what is not plain and obvious is that the “cause of action” in a patent infringement action requires, as a necessary or essential component, that damage be suffered. Canada v. Maritime Group involved a tort, and it was specifically found that damage (in that case, the loss of a ship on the high seas) was indeed an essential element of the tort without which the cause of action would not arise. It is not plain and obvious to me that a monetary loss is an essential element or requirement for a cause of action for patent infringement to arise. Indeed, an injunction is one of the remedies available in a patent infringement action, regardless of whether or not a loss was suffered. It is true that Sanofi here also claims damages, but I cannot agree that the mere fact that damages are an available remedy must, plainly and obviously, mean that for the purpose of section 39(1) of the Federal Courts Act, those damages can be characterized as a constituent element of the cause of action, such that the place where they were suffered determines the applicable limitation.
[25] The pleading is therefore not plainly and obviously deficient at law for failing to allege that the damage was suffered in Ontario.
[26] I now turn to the pleading’s failure to address the place where the export, as an alleged act of infringement, occurred. The proposed pleading contains a clear statement to the effect that any sales of clopidogrel by Apotex occurred in Ontario and in Ontario only. As such, Apotex’s position on the pleadings negates and denies any export by Apotex, and its defence of limitation would accordingly be complete without reference to the place where export, which is essentially denied, occurred.
[27] The proposed pleadings contain new admissions to the effect that Apotex Pharmachem has manufactured the bulk product in Ontario and sold and delivered same to Apotex Inc. in Ontario (paragraph 6), that Apotex Inc. has made a clopidogrel bulk product into tablets in Ontario, that neither Apotex Inc. nor Apotex Pharmachem have marketed or sold clopidogrel in the U.S. (paragraph 7) and that, rather, sales in the U.S. were made by Apotex Corp. (not a party to this action) using Apotex Inc.’s product (paragraphs 7, 15 and 19). It becomes inescapable on the pleadings as proposed, that as Apotex Inc. admits that any sale it has made was made in Ontario, any sales by Apotex Inc. of product eventually sold in the U.S. were made in Ontario, either directly to Apotex Corp. or to an intermediary, and that any export was therefore made by Apotex Corp. or this intermediary.
[28] The proposed pleading at paragraph 59 is not limited to product eventually sold in the U.S., but is general and absolute. It also covers sales of product eventually sold in other jurisdictions. I am mindful that there is a potential ambiguity with the allegations found in paragraph 16, relating to other jurisdictions. It is said in that paragraph that “the Apotex defendants deny that the plaintiffs have been harmed by the sale in Hong Kong, New Zealand, Iran, Libya, Malaysia and Singapore of clopidogrel bisulfate made in Canada. Any export by Apotex Inc. to the aforementioned countries did not result in a sale in Canada”. Read alone, these sentences could be thought to imply a recognition that Apotex Inc. might have exported the product to those other countries, and perhaps there sold it, but with the contention that such sales were not made in Canada. However, the clear, unambiguous and most recent amendments that “any(…) sale(…) by Apotex Inc.(…) took place in and only in Ontario”, and that “any(…) sale(…) by Apotex outside Ontario, which is denied(…)” take precedence over and resolve such potential ambiguity. Paragraph 16 must therefore be read as a mere pleading that if Apotex were to be found to have exported the product, the resulting sales in foreign countries (necessarily by a third party since Apotex denies any sale outside Ontario) cannot equate to sales in Canada. This is quite consistent since, according to paragraph 59, Apotex’s sale of the product, and its loss of ownership of the product, would have taken place in Ontario, prior to export.
[29] I am therefore satisfied that, even as regards the alleged export of clopidogrel for sale in countries other than the U.S., Apotex’s failure to plead the location of the alleged export is not a fatal flaw to its plea of limitation.
[30] I note in passing that the new pleadings and the admission that all sales of clopidogrel by Apotex were made in Canada have the potential to substantially narrow the issues in dispute and the scope of discoveries, at least to the extent Sanofi were to accept the admissions of Apotex that all its sales took place in Ontario. Indeed, I understand that much documentary discovery has been concerned with pinpointing the place where sales were made, inasmuch as Apotex’s previous pleadings appeared to deny any sale by Apotex in Canada.
Set off: Jurisdiction and general principles:
[31] Apotex’s proposed amendments seek to introduce three new defences of set-off: One based on an alleged debt for a “break fee” arising out of the March 2006 Settlement Agreement, one based on the tort of deceit, and one based on the tort of abuse of process.
[32] Counsel for Apotex at the hearing conceded that the tort of deceit and the claim for the “break fee”, would not, if brought as independent actions or as counterclaims, fall within the jurisdiction of this Court. However, Apotex argued that these two claims, because they are pleaded here as a defence of set-off rather than as independent counterclaims, can validly be heard and adjudicated by the Court regardless of the Court’s lack of jurisdiction over their subject matter.
[33] I agree that cross-claims arising out of matters over which the Court would not have jurisdiction could perhaps arguably be raised as a defence of set-off in this Court, but if, and only if, they meet the jurisprudential criteria to qualify as a defence of equitable set-off.
[34] General speaking, set-off is the process whereby two mutual claims for money are set-off against each other to produce a balance before any party is called upon to execute its obligation. The essence of a set-off is the existence of cross-demands, that is, the existence – or assertion of – a mutual claim for money.
[35] Canadian law recognizes two general types of set-off: Legal or statutory set-off, and equitable set-off. Whereas it seems that equitable set-off may be a substantive defence, it is plain that legal, or statutory set-off is a procedural defence and not a substantive defence to an action.
[36] The history of the development of the law of set-off, and particularly, of legal set-off, as set out in the leading Supreme Court decision of Holt v. Telford [1987] 2, S.C.R. 193, and as discussed in Kelly R. Palmer, The Law of Set-Off in Canada, (Aurora: Canada Law Books Inc., 1993 at pages 5 to 9), shows clearly that it was created and continued to evolve as a procedural means to allow the resolution in a single hearing and a single judgment of separate monetary claims mutually asserted between parties so as to prevent multiplicity of litigation, much like the procedural right to assert a cross-claim by way of counterclaim. Its procedural nature is confirmed by the fact that while it was originally promulgated by specific statute in England, it is now generally found, both in Canada and in England, in the applicable judicature acts or rules of Court, as it is indeed found in our Federal Courts Rules at Rule 186. As telling is the fact that statutes establishing the right to assert a monetary cross-claim as a “defence” of set-off generally allow the choice of asserting this claim as a defence or as a counterclaim, the main practical difference being that whereas a counterclaim will result in a separate judgment, with its own award of costs, a cross-claim asserted as a defence of set-off will result in a single judgment and cost award.
[37] That a procedural means is developed for a particular right to be determined does not elevate that procedural means into a substantive right or defence. The right to assert a monetary claim as set-off does not detract from the fact that the debt so asserted remains to be heard and adjudicated by the Court, and that this debt, if found to be valid, is effectively enforced by reducing the amount of the judgment that would otherwise be pronounced in favour of the plaintiff. The provision of a procedural means to assert a right does not vest the Court with jurisdiction it would not otherwise have to hear, determine and enforce the substantive matter brought before it through that procedural means. To allow any monetary cross-claim to be asserted and determined in defence to an action before this Court when it could not be asserted and determined as a counterclaim, merely because the procedural vehicle is contemplated in Rule 186 of the Federal Courts Rules, would allow the Court to do indirectly what it cannot do directly and to accept that the Court can give itself jurisdiction not otherwise given to it by statute, through a simple rule of procedure.
[38] As mentioned above, it is at least arguable that a defence of set-off that meets the criteria for equitable set-off could be considered a substantive defence to a claim, and thus be amenable to be considered and determined by the Court even though it would not independently fall within its jurisdiction.
[39] The criteria for equitable set-off, as found in Coba Industries Limited v. Millie’s Holdings (Canada) Limited and Tsang [1985] 6 W.W.R. 14 at page 22, and approved by the Supreme Court of Canada in Holt v. Telford, at page 213, are the following:
“1. The party relying on a set-off must show some equitable ground for being protected against his adversary's demands: Rawson et al v. Samuel (1841), Cr. & Ph. 161, 41 E.R. 451.
2. The equitable ground must go to the very root of the plaintiff's claim before a set-off will be allowed: British Anzani.
3. A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim: Federal Commerce & Navigation Ltd.
4. The plaintiff's claim and the cross-claim need not arise out of the same contract: Bankes v. Jarvis, [1903] 1 K.B. 549; British Anzani.
5. Unliquidated claims are on the same footing as liquidated claims: the Newfoundland case.”
(Emphasis mine)
[40] It appears that the requirement that the equitable ground go to the very root of the Plaintiff’s claim is what raises equitable set-off to the level of a substantive defence, allowing it to be asserted even where the cross-claim is not otherwise enforceable by reason of limitations (unlike statutory set-off, which is affected by expiration of a limitation period, see Canada Trustco. Mortgage Co. v. Pierce Estate; Pierce v. Canada Trustco. Mortage Co. (2005) 254 D.L.R. (4th) 79, 197 O.A.C. 369) and allowing it to be used even against an assignee, avoiding the requirement of mutuality which is a condition of statutory set-off, as was the case in Holt v. Telford. The possibility of equitable set-off having the status of a true substantive defence, tentatively discussed in Canada in The Law of Set-Off in Canada at pages 9 to 12, now appears to have been generally accepted (see most recently Eli Lilly and Co. v. Apotex Inc. 2009 FC 991 at paragraphs 636 to 639. For further discussion, see R. Derham, The Law of Set-Off (Oxford: Oxford University Press, 2003 at pages 93 to 105). While it remains to be specifically determined whether the status of equitable set-off as a substantive defence would overcome the Court’s lack of jurisdiction over the subject matter of the cross-claim, I am satisfied that the issue is at least arguable, considering the discussions in Innovation and Development Partners/IDP Inc. v. Canada, [1992] F.C.J. No. 203, Castlemore Marketing Inc. v. Intercontinental Trade and Finance Corp., [1996] F.C.J. No. 302 and Bristol-Myers Squibb Co. v. Apotex Inc., 2008 FC 1196, amongst others.
[41] Accordingly, I am satisfied that to the extent any of Apotex’s claims for set-off could arguably constitute equitable set-off, it is not plain and obvious that this Court would not have jurisdiction to consider same as a defence to Sanofi’s action for infringement. However, if it is plain and obvious that a claim of set-off does not meet the requirement of equitable set-off and is not otherwise within the Court’s jurisdiction, then the Court would lack jurisdiction to hear and determine same and the claim will be struck.
[42] I now turn to consider each individual claim of set-off proposed to be pleaded by Apotex.
The “break fee” arising out of the March 2006 Agreement:
[43] Apotex alleges that Sanofi and it entered into a series of related agreements (the “2006 Agreements”) to settle litigation between them in the U.S. involving clopidogrel, the drug at issue in this action. The 2006 Agreements were pleaded in Apotex’s original statement of defence, but for the proposition that the May 2006 Agreement barred Sanofi from claiming against Apotex in this Court in relation to U.S. sales of clopidogrel, and for the proposition that Sanofi’s action for “alleged harms governed by this contractual relationship” was an abuse of process, Sanofi having successfully objected to the Ontario Court’s jurisdiction when Apotex earlier attempted to enforce the “break fee” arising out of the March 2006 Agreement.
[44] It is this very “break fee” which Apotex now wishes to set-off against Sanofi’s claim for damages for infringement.
[45] While the “break fee” is part of the 2006 Agreements by which Apotex submits Sanofi agreed to limit any claim “related to” infringing U.S. sales, it is clear that the alleged “break fee”, claimed to be due pursuant to the March 2006 Agreement, has nothing whatsoever to do with any sales in the U.S. and therefore, with any alleged or actual infringement. According to the March 2006 Agreement, as pleaded, the “break fee” became due simply as a result of the State Attorney General declining to approve the March 2006 Settlement Agreement, irrespective of whether Apotex decided to launch “at risk” in the U.S. or not. It is plain and obvious that the contractual claim for payment of the “break fee” has no connection whatsoever with the claim for infringement asserted by Sanofi. It is equally clear that there is no equitable ground to that claim and that the fact that the “break fee” is allegedly due to be paid to Apotex in no way impeaches Sanofi’s claim. It is therefore plain and obvious that the defence of set-off based on the alleged “break fee” cannot amount to an equitable set-off.
[46] As conceded by Apotex’s counsel at the hearing, the claim for the “break fee” is contractual in nature and this Court would have no jurisdiction to hear and determine that claim as a counterclaim or as an independent action. For the reasons given above, I am satisfied that the Court has equally no jurisdiction to hear and determine same in the context of a defence of set-off.
[47] Even if I am wrong in this, raising a claim based on the “break fee” as set-off in this action is clearly abusive and vexatious. Apotex’s pleadings admit that Apotex attempted to have this very claim litigated before the Ontario Courts, and that the Ontario Superior Court, affirmed on appeal, found both that it did not have jurisdiction to hear it and that Ontario was forum non conveniens. Apotex’s proposed pleadings further admit that Apotex has since instituted proceedings in the Superior Court of New Jersey, over twelve months ago, to recover from Sanofi that very debt, and that it is currently proceeding with that action. There is no conceivable reason why this Court should be asked to consider and rule upon a claim which is already being actively prosecuted in another jurisdiction, with the obvious risk of contradictory judgments. For Apotex to seek to submit this dispute to this Court for parallel adjudication is all the more clearly abusive that the New Jersey Court has been found to be the most appropriate Court to determine that dispute, not only by the Ontario Superior Court but by the United States’ Federal Court, as admitted by Apotex itself in its proposed pleading.
[48] Apotex’s proposed amendment to include a claim for the “break fee” as set-off is clearly abusive and vexatious.
The tort of deceit:
[49] Apotex’s initial defence alleges that the 2006 Agreements govern any claims, including those asserted by Sanofi in this action, related to sales in the U.S. of clopidogrel made by Apotex in Canada. Specifically, it alleges that Sanofi, through the “Liability Exposure Provision” found in the May 2006 Agreement, has agreed that its recovery in respect of sales in the U.S. of infringing clopidogrel made by Apotex in Canada is to be limited to fifty percent of Apotex’s net sales of clopidogrel in the U.S. The proposed amended pleading adds numerous particulars going to Apotex’s contention that either explicitly, by contextual interpretation or by implied terms, the Liability Exposure Provision applies to this action in respect of clopidogrel ultimately sold in the U.S.
[50] The claim for set-off based on tort is an alternative plea to this defence. In essence, it alleges that if the Liability Exposure Provision does not apply to limit Sanofi’s recovery as argued, then Apotex will suffer damage equivalent to the difference between the amount awarded to Sanofi in this action for clopidogrel ultimately sold in the U.S. and the amount to which it was entitled in respect of these sales in the U.S. litigation