Janssen Inc. v. Teva Canada Limited

Janssen Inc. v. Teva Canada Limited
Court (s) Database
Federal Court Decisions
Date
2016-05-31
Neutral citation
2016 FC 593
File numbers
T-2056-11, T-2175-04
Decision Content
Date: 20160531
Dockets: T-2175-04
T-2056-11
Citation: 2016 FC 593
Toronto, Ontario, May 31, 2016
PRESENT: The Honourable Mr. Justice Hughes
Docket: T-2175-04
BETWEEN:
JANSSEN INC. AND DAIICHI SANKYO COMPANY, LIMITED
Plaintiffs
(Defendants by Counterclaim)
and
TEVA CANADA LIMITED
Defendant
(Plaintiff by Counterclaim)
Docket: T-2056-11
AND BETWEEN:
JANSSEN-ORTHO LLC, JANSSEN PHARMACEUTICALS, INC., and OMJ PHARMACEUTICALS, INC.
Plaintiffs
and
TEVA CANADA LIMITED and
DAIICHI SANKYO COMPANY, LIMITED
Defendants
PUBLIC JUDGMENT AND REASONS
[1] This decision relates to the determination of damages and quantification thereof arising out of a Judgment of this Court in Action No. T-2175-04 dated October 17, 2006, in which I determined that Claim 4 of Canadian Patent No. 1,304,080 was valid and had been infringed by the Defendant, Novopharm Limited, now Teva Canada Limited. I granted an injunction and damages but not profits. That decision, Reasons cited at 2006 FC 1234, was affirmed by the Federal Court of Appeal on June 7, 2007 (Docket No. A-500-06, Reasons cited as 2007 FCA 217). Leave to appeal was refused by the Supreme Court of Canada on December 6, 2007 (Docket No. 32200).
[2] For the purposes of this decision, the operative part of my previous Judgment, following a declaration as to validity and infringement of Claim 4 and an award of damages (as subsequently affirmed aforesaid), is as follows:
3. The Defendant may, at its election, do one of the following in respect of levofloxacin containing products in its possession, custody or control as of the date of issue of this Judgment:
a. Sell them in the normal course of business in accordance with paragraph 2 above, provided that all unsold product at the end of the thirty (30) day period shall be treated in the manner provided in one of b) or c) below;
b. Destroy them and provide an appropriate affidavit of a responsible officer of the Defendant to that effect; or
c. Deliver them up to the Plaintiffs at a place and manner as the Plaintiffs may direct provided that if such delivery is to take place outside of the Greater Toronto area it shall be at Plaintiffs’ expense;
4. The Plaintiffs are entitled to receive from the Defendant all damages sustained by them by reason of the activities of the Defendant which infringe claim 4 of the Patent. A separate trial, preceded by discovery if requested, shall be held as to the quantum of damages and interest as awarded herein. Any monies paid as set out in paragraph 2 above shall be taken into consideration by way of set off or otherwise, in the final calculation of damages.
5. The Plaintiffs are entitled to pre-judgment interest on the award of damages, not compounded, at a rate to be calculated separately for each year since infringing activity began at the average annual bank rate established by the Bank of Canada as the minimum rate at which it makes short term advances to the banks listed in Schedule 1 of the Bank Act, RSC 1985, c. B-1;
6. The Plaintiffs are entitled to post judgment interest, not compounded, at the rate of five percent (5%) per annum. This interest shall commence upon the final assessment of the monetary damage amount, prior to that, pre-judgment interest shall prevail;
[3] The following is an Index to the topics covered in these Reasons, by paragraph number:
TOPIC
PARAGRAPH NO.
THE PARTIES
4
PATENT AT ISSUE
8
JANSSEN’S PRODUCTS
11
TEVA/NOVOPHARM PRODUCTS
13
V. THE EVIDENCE / WITNESSES
a) Agreed Evidence
b) Plaintiffs Janssen’s Evidence
c) Defendant Teva’s Evidence
14
15
16
20
GLOSSARY
24
ISSUES
25
ISSUE NO. 1 – STANDING OF JANSSEN US
26
ISSUE NO. 2 – QUANTUM OF DAMAGES
a) Quantifying Damages Generally
b) Facts, Assumptions and Fun with Numbers
c) Positions and Concessions
d) The Marketplace as it Existed in Fact
e) Scenarios
f) The “But For” Marketplace
i) What Would Have Been the Normal Course of Events
ii) Competition – Other Molecules
iii) Disruptions in the Market
g) Findings as to What the “But For” World Would have Been
h) Damage Period
i) Hospital Sales – Price Suppression
j) Hospital Sales – Diamond, Non-Diamond and Educational Institution/Government
k) Hospital Sales – Percentage
l) Royalty Paid to Janssen Puerto Rico
69
69
72
74
75
89
91
97
99
101
104
107
116
119
125
132
ISSUE NO. 3 – PRE-JUDGMENT INTEREST
133
ISSUE NO. 4 - MITIGATION
139
COSTS
148
CONCLUSIONS
149
I. THE PARTIES [4] The Plaintiff in Action No. T-2175-04 is Janssen Inc. (previously Janssen-Ortho Inc.) and is referred to herein as Janssen Canada. It was found, in my previous Reasons at paragraph 3, to be a Canadian Company which is licensee of the Plaintiff, Daiichi Sankyo Company, Limited, hence is a person claiming under the patent at issue.
[5] Daiichi Sankyo Company, Limited, referred to herein as Daiichi, was found in my previous Reasons at paragraph 2 to be a Japanese company and owner of the patent at issue. Daiichi, as an owner of that patent, is also a named Defendant in Action No. T-2056-11. By letter to the Court dated November 9, 2012, Daiichi’s solicitors stated that it does not intend to participate in this proceeding, that it has settled its damage claim against Teva Canada Limited, and that Daiichi will abide by the outcome decided by the Court herein.
[6] The other Defendant in Action No. T-2056-11, and only Defendant in T-2175-04, is Teva Canada Limited. At the time of my earlier decision in T-2175-04, it was known as Novopharm Limited. I found in my previous Reasons at paragraph 4 that it was a Canadian-based corporation which had, since about December 2004, been marketing and selling levofloxacin products in Canada. I will generally refer to this party as Teva although sometimes it may be referred to as Novopharm.
[7] The Plaintiffs in Action No. T-2056-11, are three Janssen-related companies. Janssen-Ortho LLC is a Delaware limited liability company and is sometimes referred to in the evidence as JOLLC. Janssen Pharmaceuticals, Inc. is Pennsylvania corporation and is sometimes referred to in the evidence as JPI or Janssen US. OMJ Pharmaceuticals, Inc. is a Delaware corporation and is sometimes referred to in the evidence as OMJ. Collectively, JOLLC and OMJ are sometimes referred to as Janssen Puerto Rico.
II. PATENT AT ISSUE [8] The patent at issue is Canadian Patent No. 1,304,080 which will be referred to as the 080 Patent. The application for that patent was filed in the Canadian Patent Office on June 19, 1986, thus the patent is governed by the provisions of the “old” (pre-October 1, 1989) Patent Act, RSC 1985, c. P-4. The patent was issued and granted to Daiichi on June 23, 1992, and expired seventeen (17) years from that date; that is, on June 23, 2009.
[9] Claim 4 of the 080 Patent was held by my previous Judgment to be valid and infringed by Teva by its sale, offering for sale, and other dealings in levofloxacin containing products in Canada. On October 17, 2006, I enjoined Teva from further sale and other dealings in levofloxacin containing products in Canada subject to a thirty (30) day sell-off period to permit it to dispose of such products subject to payment to Janssen. Teva took advantage of this sell-off period and has already paid Janssen in respect of such products. The expert witnesses have taken this payment into account in their calculations.
[10] After the patent expired on June 23, 2009, Teva as well as any other person, was able to sell and otherwise deal in levofloxacin containing products in Canada free from a claim for infringement of the 080 Patent.
III. JANSSEN’S PRODUCTS [11] Janssen Inc. has sold and otherwise dealt with levofloxacin containing products in Canada since about 1998. They have been provided at various times in tablet form having strengths of 250 mg, 500 mg and 750 mg under the name LEVAQUIN.
[12] Janssen Inc. also sold and otherwise dealt with levofloxacin containing intravenous solution products in Canada but is not claiming damages in respect thereof in this action.
IV. TEVA / NOVOPHARM PRODUCTS [13] The Defendant, Teva/Novopharm, introduced its generic levofloxacin containing tablets into the Canadian market in December 2004, and continued to sell and distribute them until the injunction was granted by this Court on October 17, 2006, subject to the thirty day sell-off period aforesaid. These tablets were sold in 250 mg and 500 mg strengths under the name Novo- levofloxacin.
V. THE EVIDENCE / WITNESSES [14] The evidence adduced at trial is common to both actions, T-2175-04 and T-2056-11.
a) Agreed Evidence [15] Counsel have done a commendable job in agreeing to many facts. These are set out in Exhibits A1, A2, A3, A40, and A43. They have also agreed as to several documents, the proof of which may be dispensed with, although the truth of the contents of some of them may be disputed. These documents are contained in seven volumes, each document is provided with a numbered tab; these volumes are collectively marked as Exhibit A4 supplemented by electronically recorded documents in a USB key, Exhibit A14. A booklet containing Notices to Admit and Responses thereto served by each party upon the other was entered as Exhibit A66.
b) Plaintiffs Janssen’s Evidence [16] Janssen called three expert witnesses all of whom submitted Reports which were deemed to have been read into the Record; they were:
1. Dr. Jerry Rosenblatt, Town of Mount Royal, Quebec. His Report and Reply were marked as Exhibits P5 and P6. The parties agreed that he could be called as an expert witness and agreed as to his qualifications as follows:
He is an expert in the marketing of pharmaceutical products in Canada and the data analysis and forecasting of pharmaceutical sales and market share in Canada including the impact of generic entry.
I found him to be straightforward and professional in his evidence. Some of his opinions were based on what he was told by Dr. Chan as to the state of the marketplace in Canada.
2. Farley Cohen, Toronto, Ontario. His reports and schedules to those reports were marked as Exhibits P7, P8, P9, P10 and P11. The parties agreed that he could be called as an expert witness and agreed as to his qualifications as follows:
… expert chartered account and chartered business valuator with a specialist designation in investigative and forensic accounting and expertise in the quantification of economic damages, lost profits, and income determination.
Again, I found him to be straightforward and professional in his evidence. Some of his opinions were based on those of Dr. Rosenblatt and Dr. Chan.
3. Dr. Charles Chan, North York, Ontario. His Report and Reply report were marked as Exhibits P19 and P20. The parties agreed that he could be called as an expert witness but disagreed as to his qualifications. Janssen’s Counsel proposed his expertise as follows:
…as an expert on the following basis: a medical doctor with a specialist certification in respiratory medicine and expertise regarding respiratory tract diseases, antiinfectives, and prescribing practice including expertise on the Canadian antibiotic guidelines.
Teva’s Counsel did not agree as to his expertise respecting prescribing practice and expertise on Canadian antibiotic guidelines. Having heard Dr. Chan, I accept Janssen’s statement as to his qualifications. I have some difficulties with respect to his evidence. While Dr. Chan has a depth of knowledge and years of experience with respect to many of the drugs at issue, he could not answer even simple questions from his own Counsel or cross-examining Counsel without going into long, complex, and often irrelevant answers. He is undoubtedly a person not used to being challenged as to his opinions as he frequently accused cross-examining Counsel as trying to deceive him or misstate the facts or his answers. I treat Dr. Chan’s evidence with caution.
[17] Janssen called seven fact witnesses; they were:
1. Rod Curtis, Markham, Ontario. He is Chief Financial Officer of Janssen’s medical operations in Canada. He gave evidence as to the corporate structure of Janssen in Canada and elsewhere in the Western Hemisphere.
2. Jeff Smith, Flemington, New Jersey. He is Vice President, Business Development of Janssen Pharmaceuticals Inc. He has been with Janssen and its predecessors for about three decades and gave evidence as to the evolution of its corporate structure. He provided a corporate chart, Exhibit P17. While I accept his evidence, for what it was, it was not backed up by any documents. I am not surprised that he could not identify documents such as invoices. However, he could not identify more “high level” documents such as apparent license agreements and letters of agreement.
3. John Stewart, Holland Landing, Ontario. He is Business Unit Director of Janssen Inc., and has been involved at the senior level in Janssen Inc. and its predecessors in marketing its levofloxacin products in Canada. He gave his evidence in a straightforward manner in dealing with the marketing strategy and decisions of Janssen in respect of its levofloxacin products in Canada.
4. Seth Fischer, Bridgewater, New Jersey. He was with the Johnson & Johnson organization including various Ortho-McNeil entities for many years in the 1990’s and 2000’s. He has left the Johnson & Johnson organization and is presently employed by a different organization in California. He gave evidence respecting the launch of levofloxacin products in the United States and Canada, and the relationship between various Johnson & Johnson entities and Daiichi. He identified several agreements between these entities and Daiichi and e-mail exchanges in respect thereof. He gave his evidence in a straightforward manner.
5. Lindsey Villacis, Flemington, New Jersey. She is a Senior Financial Analyst with the Johnson & Johnson group. She gave evidence as to the documents relating to manufacture and sale of the levofloxacin containing products within the Johnson & Johnson group of companies and, in particular, sales to the Canadian organization. She addressed many sales related documents found in Exhibit P37 but was unable to identify certain documents put to her in cross-examination. She was a straightforward, if careful, witness.
6. Carlos Fernandini, Bayamon, Puerto Rico. He is a Senior Finance Manager of Johnson-Ortho Puerto Rico. He gave evidence as to the shipment of levofloxacin (sometimes called the active pharmaceutical ingredient or API) from Daiichi to the Puerto Rico manufacturing facility and, from there, to Janssen Inc. in Canada. He identified several documents related to these transactions. His evidence was straightforward. He was unable to identify certain documents put to him in cross-examination.
7. Bob Roarty, Flemington, New Jersey. He is Director, Global Finance with the Janssen supply chain division of Johnson & Johnson, New Jersey. He gave evidence as to the physical flow of goods and related paperwork, from Daiichi through Puerto Rico, and then to Canada. This evidence is illustrated in charts entered as Exhibits P39 and P17. His evidence was straightforward; he identified certain documents in his evidence in chief but could not identify others put to him in cross-examination.
[18] At the conclusion of the evidence of the Plaintiffs’ witnesses, Plaintiffs’ Counsel tendered an affidavit of Cheewooi Lim, a Japanese resident, who is with the Business Development and Licensing Department at Daiichi. Defendant’s Counsel objected to the filing of this affidavit since Lim was not presented for cross-examination and apparently, is precluded from giving sworn evidence in Japan in a non-Japanese proceeding. I entered the affidavit into evidence as Exhibit P41 but indicated that I would give it little, if any, weight.
[19] The Plaintiffs introduced a portion of their Examination for Discovery of the Defendant as Exhibit P42 which was deemed to have been read into the Record.
c) Defendant Teva’s Evidence [20] The Defendant Teva did not call any fact witnesses but did call four expert witnesses. The parties agreed that these four witnesses could be called as experts, and agreed as to the scope of their expertise (Exhibit A45). Their reports were marked as Exhibits and were deemed to be read into the Record. These experts were:
1. Alan Mak, Toronto, Ontario. The parties have agreed as to his expertise:
…an expert in litigation and forensic accounting.
Mr. Mak was provided with a number of assumptions and data and asked to calculate Janssen’s losses (gains) consequent upon Teva’s entry into the levofloxacin market with a generic product. His reports were marked as Exhibits D46, D47, and D48.
Mr. Mak gave his evidence in a straightforward manner. The opinions and conclusions that he reached however are dependent upon the assumptions that he was asked to make.
2. Dr. Paul Grootendorst, Oakville, Ontario. The parties have agreed as to his expertise:
…an expert in health and pharmaceutical economics.
Dr. Grootendorst was provided with a number of assumptions and data and asked to provide his opinion as to the market share Janssen’s levofloxacin products, LEVAQUIN, would have had in the “but for” world had Teva not entered with a generic. His reports were entered as Exhibits D52, D53, with corrections as D54.
His opinions are dependent upon the assumptions which he was given and others that he made. His evidence was given in a frank and straightforward manner.
3. Dr. Lea Katsanis, Westmount, Quebec. The parties have agreed as to her expertise:
…an expert in pharmaceutical marketing.
Her report was marked as Exhibit D55. She gave evidence as to the likely market share that Janssen’s Levaquin would have received in the “but for” world had Teva not entered the marketplace concluding that it would have been a declining share. I accept that she was endeavouring to give reasonable opinions although, in cross-examination, she tended to be overly loquacious or confused. When I asked her to compare Dr.Grootendorst’s conclusion with hers, she said that they were about the same but that Dr. Grootendorst may have been working with more data than she had.
4. Dr. Andrew Simor, Toronto, Ontario. . The parties have agreed as to his expertise:
…an expert in medical microbiology and the treatment of infectious diseases.
He gave evidence as to the use and recommendations for use (guidelines) of anti-infection drugs including macrolides and quinolones. His reports are marked as Exhibits D58 (2 volumes) and D59. He gave his evidence in a straightforward and candid manner.
[21] The Defendant entered into evidence four volumes of excerpts from its discovery of the Plaintiff in Action No. T-2175-04 as Exhibit D61, and a supplemental volume in the same action as Exhibit D62. Documents referred to in those excerpts were marked as Exhibit D63.
[22] Excerpts from the Defendant’s Examination for Discovery of the Plaintiffs in Action No. T-2056-11 were marked as Exhibit D64, and documents referred to as Exhibit D65.
[23] All of this discovery material was deemed to have been read into the Record and, in accordance with the understanding in both these actions, all of these discovery excerpts and documents are applicable equally to both actions.
VI. GLOSSARY [24] The following is a glossary of some of the terms used in evidence:
1. Fluoroquinolones were sometimes referred to in the evidence as quinolones. They include medications with generic names ending in –floxacin such as ciprofloxacin (CIPRO), levofloxacin (LEVAQUIN), moxifloxacin (AVELOX), and gatifloxacin (TEQUIN).
2. Respiratory fluoroquinolones are a subset of the fluoroquinolones. These are fluoroquinolones that may be used to treat a range of bacteria that cause Respiratory Tract Infections (RTI’s) such as S. pneumoniae. Of the fluoroquinolones in the evidence, levofloxacin (LEVAQUIN), moxifloxacin (AVELOX), and gatifloxacin (TEQUIN) are respiratory fluoroquinolones. While ciprofloxacin (CIPRO) is not a respiratory fluoroquinolone, it was used to treat some RTI’s in the 2000’s.
3. Macrolides are a group of antibiotics also used in the treatment of RTI’s. They have generic names ending in –omycin and include erythromycin, clarithromycin (BIAXIN BID or BIAXIN XL), and azithromycin (ZITHROMAX).
4. Beta-lactams or β-lactams are another class of antibiotics. An old example of a beta-lactam is penicillin. Of the drugs in this class, a common element is a molecular structure known as a beta-lactam ring. During the proceedings, mention was made of several of these antibiotics including amoxicillin, cefuroxime, and ceftriaxone.
5. Combination therapy with beta-lactam and a macrolide is a combination of one drug from each class that can be used together for the treatment of RTI’s.
6. API or active pharmaceutical ingredient is the active medicinal ingredient in a drug. It is combined with other ingredients, often called excipients, to make the final product (e.g., a tablet). Levofloxacin is an API made by Daiichi and shipped to Puerto Rico where it is mixed with other ingredients (excipients) and made into tablets.
7. A respiratory tract infection (RTI) is an infection anywhere along the respiratory tract from the nose to the lungs. They are usually caused by a virus or bacteria and include colds, sinusitis, influenza, bronchitis, and pneumonia.
8. Community-acquired pneumonia or CAP is one of the more common RTI’s. It is a pneumonia developed by someone who has not had contact with a hospital or other medical institution. Hospital-acquired pneumonia or HAP is a pneumonia developed by someone who has had contact with a hospital or other institution.
VII. ISSUES [25] There are four issues that the Court must address in these proceedings; the first three are proposed by Janssen, and the fourth by Teva who agrees with the three proposed by Janssen. They are:
1. Does Janssen US have standing to claim damages as a result of Teva’s infringement of the 080 Patent?
2. What is the quantum of damages suffered by each of Janssen Canada and Janssen US?
3. How is the pre-judgment interest, if any, awarded to Janssen US to be calculated?
4. Should Janssen Canada have taken steps to mitigate its damages and, if so, when and to what extent?
VIII. ISSUE NO. 1 – STANDING OF JANSSEN US [26] The 080 Patent is owned by Daiichi and Daiichi has settled its claim against Teva. Janssen Inc., the Plaintiff in Action No. T-2175-04, has a claim for damages against Teva which claim is contested only as to the quantum of damages, and not its right to damages which right was settled in the earlier decision in this case.
[27] There are three Plaintiffs in Action No. T-2056-11; of these, two, Janssen-Ortho LLC and OMJ Pharmaceuticals Inc. (collectively known as Janssen Puerto Rico), make no claim for damages. That leaves only Janssen Pharmaceuticals, Inc. (JPI or Janssen US) as the entity making a claim for damages in that action.
[28] The claim by Janssen US for damages rests on the provisions of section 55(1) of the Patent Act (the provisions are the same in the pre- and post- October 1989 versions of that Act) which state that an infringer is liable for all damages sustained not only by a patentee, but also by all persons “claiming under” the patentee.
55 (1) A person who infringes a patent is liable to the patentee and to all persons claiming under the patentee for all damage sustained by the patentee or by any such person, after the grant of the patent, by reason of the infringement.
55 (1) Quiconque contrefait un brevet est responsable envers le breveté et toute personne se réclamant de celui-ci du dommage que cette contrefaçon leur a fait subir après l’octroi du brevet.
[29] Who constitutes a person “claiming under” a patentee has generated a good deal of jurisprudence in Canadian Courts. By way of contrast, the United Kingdom Patents Act 1977, c. 37, sections 33, 61, 67 and 68, give a right to take action for infringement and to claim remedies not only to the proprietor (owner) of a patent but also to an exclusive licensee provided that the licensee has, within six months, registered the particulars of the licence with the Patent Office. This brings a good deal of certainty to the situation.
[30] The leading case in Canada is the decision of the Supreme Court in Armstrong Cork Ltd. Canada v Domco Industries Ltd., [1982] 1 SCR 907. That case proceeded on an Agreed Statement of Facts. The patent owner (Congoleum) granted to Domco a restricted non-exclusive licence under a patent directed to etched pattern floor coverings. The licence provided that the patentee itself would not enter the Canadian market for three years and would not give a licence to anyone else for five years. The issue was whether Domco was a person “claiming under” the patentee. Martland J., for the Court, reviewed prior decisions including that of the Privy Council in Spun Rock Wools Ltd. v Fiberglas Canada Ltd., [1947] AC 313, and the Federal Court of Appeal in American Cyanamid Co. v Novopharm Ltd., [1972] FC 739. In Fiberglas, the Privy Council, at pages 320 to 321, stated that “licensees” were entitled to sue for damages under section 55 of the Patent Act. On the facts of that case, however, the “licensee” was an exclusive licence and Counsel sought to distinguish that decision on that basis. Martland J. rejected that submission and stated that there was no valid reason to exclude a non-exclusive licensee from the provisions of the Patent Act respecting persons “claiming under” the patentee. He wrote at pages 917 to 920:
While it is true that the licensee actually under consideration in the Fiberglas case was said to be “the exclusive sub-licensee” (or “exclusive licensee”) under the patent, no information is given in any of the judgments as to the precise nature of the licence, and nothing in the reasons for judgment on this point turned on the distinction between an exclusive licensee and a non-exclusive licensee or a bare licensee. Both Mr. Justice Davis in this Court delivering his and Mr. Justice Taschereau’s judgment and Lord Simonds in the Judicial Committee used the general word “licensee”
in delivering their judgments. It cannot be supposed that they did so intending that only an exclusive licensee was being considered, particulary when Lord Simonds defined the issue of law as being: “Here the question is whether a licensee is a person claiming under the patentee” (p. 320).
Armstrong sought to distinguish an exclusive licence from a non-exclusive licence on the basis that the former was a grant of a part of the monopoly and that such a licensee was practically an assignee of the patent for the term of the licence with all the beneficial rights of the patentee. It is difficult to reconcile this reasoning with what was said in Heap v. Hartley (supra) (applied by this Court in the Electric Chain Co. case) in the passage which I have already quoted. I repeat from that passage the following portion which is apt in relation to Armstrong’s submission:
Now he puts his case in a two-fold manner. He says: “In the first place, as exclusive licensee, I am in the position of an assign of the letters patent for that district and for that term, and as an assign of letters patent, I have a right to restrain any person who is infringing within the district.” That argument appears to be based on an entire error with regard to the nature of a license. An exclusive license is only a license in one sense; that is to say, the true nature of an exclusive license is this. It is a leave to do a thing, and a contract not to give leave to anybody else to do the same thing. But it confers like any other license, no interest or property in the thing.
In my opinion, the reasons which led this Court and the Privy Council to the conclusion reached in the Fiberglas case are as applicable to a nonexclusive licensee as to an exclusive licensee. If an exclusive licensee is a person claiming under the patentee within s. 57(1), and the Fiberglas case so holds, there is no valid basis, under the wording of the subsection, to exclude its application to a non-exclusive licensee, and there is no valid basis for interpreting the Fiberglas case as holding otherwise.
It was also contended on behalf of Armstrong that a non-exclusive licensee has no rights which can be infringed and therefore has no claim against the infringer of a patent. This was the view of Jackett C.J. in the American Cyanamid case. He was of the opinion that the non‑exclusive licensee had only a right to use the patent, which right was not affected by its infringement.
This was the legal position, even in respect of an exclusive licensee, prior to the enactment of s. 55 of the 1935 Act. Section 55 was enacted to meet this difficulty and, in my opinion, it has overcome the problem. Section 55(1), by its terms, imposes a liability upon the infringer of a patent to the patentee and also to all persons claiming under him for all damages sustained by the patentee or any such person by reason of such infringement. It is the infringement of the patent which gives rise to a liability. If that infringement causes damage to the patentee or to any person claiming under him, the infringer must compensate for the damage sustained by reason of the infringement of the patent. A licensee relying on this subsection is not claiming against the infringer for infringement of his rights under the licence, he is claiming for the damage he has sustained in consequence of the infringement of the patent.
On this point, I adopt the reasons of Sweet D.J. in the American Cyanamid case which have already been quoted.
Armstrong contended that the meaning of the word “damages” in s. 57(1) meant loss resulting from interference with the legal rights of the claimant. “Damages”, it was said, refers to pecuniary recompense given by process of law to a person for an actionable wrong that another has done to him.
The meaning of the word “damages” must be ascertained in respect of its use in this specific statutory provision. In section 57(1) it is provided in terms that an infringer of a patent is liable for all damages sustained by reason of his infringe-
ment by a patentee or by any person claiming under him. This is a statutory obligation to pay damages and it applies in favour of any person who comes within the provisions of the subsection. In my opinion, Domco does come within the terms of the subsection.
[31] The Federal Court of Appeal considered whether a party was a person “claiming under” a patentee in Signalisation de Montréal Inc. v Services de Béton Universels Ltée [1993] 1 FC 341(CA). In that case, the owner of a patent directed to machines that moved highway barriers granted an exclusive license to an entity known as Barrier. In turn, Barrier appointed the Plaintiff Signalisation as its exclusive representative in Quebec. Hugessen J.A. took a broad view as to who was a person “claiming under” the patentee. He wrote at paragraphs 24 and 25:
24 In my view, a person "claiming under" the patentee is a person who derives his rights to use the patented invention, at whatever degree, from the patentee. The right to use an invention is one the monopoly to which is conferred by a patent.9 When a breach of that right is asserted by a person who can trace his title in a direct line back to the patentee that person is "claiming under" the patentee. It matters not by what technical means the acquisition of the right to use may have taken place. It may be a straightforward assignment or a licence. It may, as I have indicated, be a sale of an article embodying the invention. It may also be a lease thereof. What matters is that the claimant asserts a right in the monopoly and that the source of that right may be traced back to the patentee. That is the case with the appellant here.
25 In my view, the appellant has the status to assert a claim for damages under section 55 of the Patent Act and has done so inter alia in the paragraphs in the statement of claim reproduced and summarized above. That statement of claim should not have been struck out.
[32] Décary J.A. disagreed, writing at paragraphs 44 to 46:
44 Nor is it impossible that the appellant may have some ground for bringing action itself against the respondent on the basis of some form of liability in tort.
45 Whether or not there is, or was, any possibility of a contractual remedy against Energy or Barrier or of a remedy in tort against the respondent, it is not for this Court to extend the statutory remedy provided by Parliament. As Judson J. pointed out in Commissioner of Patents v. Farbwerke Hoechst Aktiengesellschaft Vormals Meister Lucius & Bruning, [1964] S.C.R. 49, at page 57:
There is no inherent common law right to a patent. An inventor gets his patent according to the terms of the Patent Act, no more and no less.
The same is true of a person who claims under the patentee. That person is the person whom the Patent Act recognizes as such, and no one else. To accept the appellant's arguments would, in my opinion, be to interpret subsection 55(1) of the Act as if the words "claiming under the patentee" did not appear, and as if it were sufficient for damages to have been incurred as a result of the infringement of a patent in order for the injured party to have a remedy under that subsection.
46 I therefore conclude that a mere contract of purchase of a patented product does not make the purchaser a person claiming under the patentee within the meaning of subsection 55(1) of the Act.
[33] Létourneau J.A. agreed with Hugessen J.A. and responded to Décary J.A. in writing at paragraph 51:
51 Nor do I believe as my colleague Décary J.A. suggests that the words "persons claiming under the patentee" in subsection 55(1) are more limited than the word "person" in subsections 60(1) and (2) of the Act. In subsection 60(1), it has to be an interested person and therefore it is not unqualified. In subsection 60(2), it has to be a person who uses or proposes to use a process or a person who makes, uses or sells an article that might constitute an infringement of a patent. Likewise in subsection 55(1), it has to be a person who claims under the patentee, that is to say a person who as a user, an assignee, a licensee or a lessee had a title or a right which may be traced back to the patentee.
[34] The final words used by Létourneau J.A. are instructive; a person “claiming under” who, as a user, an assignee, a licensee or lessee, had a title or a right that may be traced back to the patentee, thus can be a person claiming under the patentee.
[35] There have been a number of more recent decisions of the Courts where consideration was given to whether a person was one “claiming under” a patentee. Some of these decisions dealt with circumstances not unlike those of the present case where it was agreed that, despite the lack of a written agreement, the claimant was part of a family or group of entities all dealing in some way with the patented goods.
[36] In AstraZeneca Canada Inc. v Apotex Inc., 2014 FC 638 (aff’d 2015 FCA 158, leave to appeal to SCC granted March 10, 2016), Justice Rennie (as he then was) made a careful review of the evidence and concluded that one of the Plaintiffs, AstraZeneca Canada Inc., had standing as a person “claiming under”. He wrote at paragraphs 10 and 23 to 24:
[10] In my view, AstraZeneca Canada has standing. More specifically, AstraZeneca Canada qualifies as a person claiming under the patentee because there is an implied license between AstraZeneca and AstraZeneca Canada regarding the sale of Nexium. However, prior to elaborating on this finding, it is important to note the factual background underlying Apotex’s surprisingly technical standing defence against its alleged infringement.
...
[23] In this case, there is something more. Indeed, a number of facts support the finding that AstraZeneca Canada’s right of use can be traced back to AstraZeneca Aktiebolag:
1. AstraZeneca Canada and AstraZeneca Aktiebolag are both indirect subsidiaries of a common parent, AstraZeneca PLC, located in Sweden;
2. AstraZeneca Aktiebolag, the owner of the ‘653 patent, is the principal source of supply to AstraZeneca Canada and globally;
3. AstraZeneca Canada sought and obtained regulatory approval to sell Nexium in Canada. The information in support of the regulatory filing derived from AstraZeneca Aktiebolag – the holder of the master regulatory file for Nexium;
4. AstraZeneca Canada and AstraZeneca Aktiebolag entered into a Formulation, Packaging and Distribution Agreement (Distribution Agreement) in December 2000. In the Distribution Agreement, AstraZeneca Canada is defined as the“Distributor,” and is granted non-exclusive rights to the “Products” which are defined to include Nexium. This agreement addresses intellectual property rights in articles 24.1 and 24.2:
24 INTELLECTUAL PROPERTY RIGHTS
24.1 All intellectual property rights relating to the Products shall remain the property of ASTRAZENECA at all times. The Distributor shall not acquire any intellectual property rights relating to the Products and shall only have permission to use such rights granted to the Distributor under this Agreement.
24.2 The Distributor will inform ASTRAZENECA of any infringement or suspected infringement of any of ASTRAZENECA’s intellectual property rights in the Market which comes to the notice of the Distributor. ASTRAZENECA will take all reasonable steps, at its own expense, to prosecute infringers. The Distributor will give ASTRAZENECA all reasonable assistance in such prosecution [emphasis added].
5. From 2001-2008 AstraZeneca Canada packaged Nexium which it received from AstraZeneca Aktiebolag in bulk tablets, prior to sale in Canada. In 2008, AstraZeneca Canada’s packaging facility in Mississauga was closed. The letter agreement between AstraZeneca Canada and AstraZeneca Aktiebolag dated December 12, 2007 stated that after closure, Nexium would be supplied by AstraZeneca Aktiebolag to AstraZeneca Canada in finished packaged form, and that AstraZeneca Canada would continue to act as the distributor. Accordingly, after 2008, AstraZeneca Canada received pre-packaged Nexium from AstraZeneca Aktiebolag for sale in Canada. Thus, AstraZeneca Canada has always received its supply of Nexium (pre-packaged or in bulk) from AstraZeneca Aktiebolag, except for a three month period in 2001 and a six month period in 2012, during which AstraZeneca UK was the source of supply.
6. According to the evidence of Ms. Elaine Campbell, CEO of AstraZeneca Canada, AstraZeneca Canada has obtained the consent of AstraZeneca Aktiebolag to file Form IV patent lists under the PMNOC Regulations;
7. Ms. Campbell testified that all of AstraZeneca Canada’s legal costs in respect of this litigation were being paid by AstraZeneca Aktiebolag.
[24] When assessed against this factual landscape, AstraZeneca Canada’s right to use the patent may be traced back to AstraZeneca Aktiebolag, the patentee. All rights of use of Nexium by AstraZeneca Canada are derivative, by an implied agreement, from AstraZeneca Aktiebolag. While there is no express licence and no plea of licence, the conduct of the parties is consistent with a finding of an implied licence granted by AstraZeneca Aktiebolag. The Distribution Agreement grants AstraZeneca Canada permission to use AstraZeneca Aktiebolag’s intellectual property rights “insofar as is necessary to exercise the rights granted” under the Distribution Agreement. These rights include the right to sell Nexium and the obligation to assist AstraZeneca Aktiebolag in the civil prosecution of possible infringement by others. Commencement of an infringement action by AstraZeneca Canada falls within a reasonable interpretation of sections 24.1 and 24.2, and implicit to that is an acknowledgment of a right to recover damages on behalf of the patentee for infringement. Consequently, Astr