CITATION: Apotex Inc. v. Eli Lilly, 2013 ONSC 1135
DIVISIONAL COURT FILE NO.: 379/12
DATE: 20130222
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
APOTEX INC.
Plaintiff/Responding Party
– and –
ELI LILLY AND COMPANY and ELI LILLY CANADA INC.
Defendants/Moving Parties
D. Conklin Esq., for the Plaintiff/Responding Party
P. Smith Esq. and T. Burke Esq., for the Defendants/Moving Parties
HEARD: November 27, 2012
T. DUCHARME J:
REASONS FOR JUDGMENT
I. Introduction
[1] The defendants in the principal action, Eli Lilly and Company and Eli Lilly Canada Inc., seek leave to appeal from a decision of Justice J. Macdonald of this Court dated July 25, 2012 dismissing in part a motion to strike out parts of the Statement of Claim delivered by Apotex Inc. pursuant to rule 21.01(1)(b) and rules 25.11(b) and (c) of the Rules of Civil Procedure.
[2] In the Defendants’ motion to strike before Mr. Justice John Macdonald, the Defendants’ argued that the following claims advanced by Apotex should be struck:
(i) Apotex’s claim for the Defendants’ profits based on unjust enrichment;
(ii) Apotex’s claim for damages under the Trade-marks Act, R.S.C., 1985, c. T-13; and
(iii) Apotex’s stand alone claim to the Defendants’ profits under some unspecified cause of action.
[3] Justice Macdonald struck Apotex’s unspecified stand alone claim to the Defendants’ profits and, as such, only the first two points listed above, are subject to this motion for leave to appeal.[^1]
II. The Test for Leave to Appeal
[4] Pursuant to Rule 62.02(4) of the Rules of Civil Procedure, leave to appeal shall not be granted unless:
(i) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or
(ii) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that in his or her opinion, leave to appeal should be granted.
[5] It is not necessary for the moving party to show that the decision is wrong or probably wrong, only that there is good reason to doubt the correctness of the decision. Nonetheless the test for leave is an onerous one. The question is whether the decision is open to serious debate and, if so, that the decision warrants resolution by a higher level of judicial authority. Leave then should be granted if the maters involved are of general importance that relate to matters of public importance and matters relevant to the development of the law and the administration of justice.
III. Apotex’s Claim for the Defendants’ Profits Based on Unjust Enrichment
A. The Statutory context
[6] The Applicants manufacture and sell Strattera, a brand of atomoxetine hydrochloride. The Applicant, Eli Lilly and Company, was the owner of the Canadian patent for this pharmaceutical product during the relevant time. The Respondent is a generic drug company which competes with the originators of drugs, such as the Applicants. The Respondent wanted to bring its generic version of atomoxetine hydrochloride to market.
[7] Pursuant to the Patented Medicines (Notice of Compliance) Regulations (“PM(NOC) “) the Applicant submitted its patent list to the Minister of Health. The list included the patent for atomoxetine hydrochloride. The Minister placed the submitted patents on the patent register pursuant to the PM(NOC) Regulations. In order to market its generic version of atomoxetine hydrochloride in Canada, the Respondent needed to obtain a Notice of Compliance ("NoC") from the Minister. The placing of the Applicants' patent in the patent register meant that, to comply with the PM(NOC) Regulations, the Respondent either had to await the expiry of the Applicants' patent or make an allegation attacking the patent or disputing its application to its generic drug.
[8] The Respondent delivered a notice of allegation and in response the applicants commenced a prohibition application in the Federal Court for an order prohibiting the Minister from issuing a NoC to the Respondent for its generic drug. The PM(NOC) Regulations provide that the Minister was thereby precluded from issuing a NoC to the Respondent until the earlier of (a) disposition of the prohibition proceeding or (b) 24 months from the commencement of that proceeding. Consequently, the Respondent could not obtain a NoC for it generic drug and was unable to market it in Canada.
[9] Prior to the hearing of this prohibition application, the Applicants’ patent was declared to be invalid and void ab initio in a separate proceeding involving the Applicants and another generic drug company. As a result, the Applicants' prohibition proceeding with respect to Apotex was dismissed, and the Minister issued a NoC to the Respondent for its generic drug.
[10] The Respondent Apotex claims that it was delayed in obtaining its NoC for approximately 23 months by reason of the Applicants' voided patent having been listed in the patent register and by the applicable provisions of the PM(NOC) Regulations. Therefore, the within action was commenced by the Respondent Apotex seeking recovery of damages under the PM(NOC) Regulations as well as a disgorgement of the Defendants’ profits under a claim for unjust enrichment with respect to Strattera, the Defendants’ brand of atomoxetine hydrochloride.
B. Arguments for Leave to Appeal
[11] At the time of oral argument in this matter, the applicants urged the Court to await the decision of Justice Quigley in Apotex v. Takeda and Abbott, 2013 ONSC 356 ("Abbott") which dealt with a summary judgment motion dealing with a disgorgement of profits claim brought against two innovator pharmaceutical companies by Apotex Inc. This decision was released on January 15, 2013. Following its release, I received further written submissions from both parties with respect to the significance of this decision in the context of this motion for leave to appeal.
[12] Justice Quigley granted summary judgment in Abbott. While the test for summary judgment is obviously different than the test in a motion to strike, the importance of Justice Quigley’s decision is his interpretation of the decision of the Federal Court of Appeal in Apotex v. Eli Lilly (“Apotex (FCA)”) as standing for the following propositions of law: First, it definitively establishes that the framework of s. 8 of the PM(NOC) Regulations constitutes a complete remedial code and, Second, a remedy for unjust enrichment does not exist in the context of remedies provided in the NOC Regulations absent "extraordinary egregious circumstances" which would establish a different cause of action. This, of course, eliminates the disgorgement of an innovator’s revenues based on a claim of unjust enrichment. Justice Quigley then offered a careful analysis of why Apotex (FCA), while not binding on this Court, should be followed in this regard.
[13] The applicants submit that the propositions of law accepted by Justice Quigley conflict with the analysis of Justice Macdonald and make it clear that, in this case, it is plain and obvious that this aspect of Apotex’s claim discloses no reasonable cause of action and has no reasonable prospect of success. The respondents argue that Abbott conflicts with earlier decisions of this Court.[^2] They also submit that these conflicts, as well as conflicts between decisions of this Court and the Federal Court, all demonstrate that the law in this area is unsettled and consequently it cannot be said that it is plain and obvious that their claim for unjust enrichment cannot succeed. They also note that both Justice Quigley in Abbott and the Federal Court of Appeal in Apotex (FCA) left open the possibility that, in limited and rare circumstances, equitable relief might be available against a party who asserts an invalid patent.
C. Conclusion
[14] Obviously, Justice Macdonald did not have the benefit of Justice Quigley’s decision at the time of his ruling. It may well be that if Justice Quigley is right about the limited availability of equitable relief in PM(NOC) cases, that there is reason to doubt the correctness of the Motion Judge’s decision not to strike Apotex’s claim in this case for the disgorgement of the defendants’ profits based on unjust enrichment. Certainly, Abbott conflicts with the decision of the Motions Judge in this case. Thus, the first part of the tests in Rule 62.02(4)(ii) and Rule 62.02(4)(i) is satisfied.
[15] The only remaining issue under Rule 62.02(4)(ii) is whether I am of the view that the proposed appeal involves matters of such importance that in my opinion, leave to appeal should be granted. General importance relates to matters of public importance and matters relevant to the development of the law and the administration of justice. This appeal raises issues of general importance as the decision of the motions Judge will affect all innovator and generic drug companies involved in PM(NOC) proceedings. Moreover, to the extent that the decision of the motions Judge differs from the jurisprudence of the Federal Court, this could leave to undesirable forum shopping with generic pharmaceutical companies seeking to circumvent the Federal Court jurisprudence, which has considered and rejected disgorgement of profits in section 8 proceedings, by bringing claims in the Ontario Superior Court of Justice.[^3] Finally, further consideration of this point is merited as it seems clear that Parliament in 2006 amended s. 8 of the PM(NOC) to delete any reference in “profits” in part to exclude the possibility of a patentee's revenues or profits being open to disgorgement claims at the instance of generic manufacturers.[^4] Thus, I am satisfied that leave to appeal should be granted under Rule 62.02(4)(ii) with respect to the Motions Judge’s refusal to strike Apotex’s claim in this case for the defendants’ profits based on unjust enrichment.
[16] For the same reasons, applying the second part of the test in Rule 62.02(4)(i), I am satisfied that it is desirable that leave to appeal be granted on this issue.
IV. Apotex’s Claim for Damages Under the Trade-marks Act [R.S.C., 1985, c. T-13](https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-t-13/latest/rsc-1985-c-t-13.html)
A. The Statutory context
[17] Apotex also claims for damages pursuant to ss. 7(a) and 7(d) of the Trade-Marks Act R.S.C., 1985, c. T-13 which provides:
- No person shall
(a) make a false or misleading statement tending to discredit the business, wares or services of a competitor;
(d) make use, in association with wares or services, of any description that is false in a material respect and likely to mislead the public as to
(i) the character, quality, quantity or composition,
(ii) the geographical origin, or
(iii) the mode of the manufacture, production or performance of the wares or services; ...
B. Arguments for Leave to Appeal
[18] Apotex’s claim as pleaded alleges an improper assertion of patent rights by the Defendants without the commencement of an infringement action, namely by registering on the Patent Register a patent which was ultimately declared invalid and commencing the prohibition proceeding. The Motions Judge held that it was an “unsettled legal question” whether statements made within the statutory framework set out in the Patent legislation could form the basis of a claim under the Trade-Marks Act, or whether these statements were subject to absolute privilege. Consequently he declined to strike this aspect of Apotex’s statement of claim.
[19] The Defendants’ argue that leave to appeal this issue should be granted because there is good reason to doubt its correctness. Specifically, they argue that Justice Macdonald disregarded the 1966 Supreme Court of Canada decision in S&S Industries Inc. v. Rowell, 1966 53 (SCC), [1966] SCR 419 and the Federal Court’s decision in Canadian Copyright Licensing Agency v. Business Depot Ltd, 2008 FC 737, with respect to trade libel.
[20] I reject this contention. Justice Macdonald pointed out that neither counsel had provided him with any case law relating to such a claim in this context and he correctly found that the governing legal principles had not been determined. He did not disregard S&S Industries Inc. v. Rowell, rather he referred to it explicitly for the proposition that Apotex does not need to assert or prove that the Applicants knew that such statements were false, in order to come within s. 7(a) of the Trade-marks Act. Nor is his decision inconsistent with Canadian Copyright Licensing Agency v. Business Depot Ltd. The passage from that case relied on by the applicants states:
The line of patent abuse cases, commencing with the decision of the Supreme Court in S&S Industries, has clearly limited the validity of a section 7(a) claim to the improper assertion of patent rights without the commencement of an infringement action, and is an extension of the common law in the 19th century.[^5] [Emphasis added.]
As noted in paragraph 18 above, this is precisely the nature of Apotex’s claim here.
C. Conclusion
[21] Contrary to the Applicant’s submissions, there are not decisions that conflict with this decision of Justice Macdonald and they have identified no reason to doubt the correctness of this decision. Leave to appeal the refusal to strike the claim for damages under the Trade-marks Act is therefore denied.
V. CONCLUSION
[22] The motion for leave to appeal the order of Macdonald J. dated July, 2012 is granted with respect to his refusal to strike Apotex’s claim for the Defendants’ profits based on unjust enrichment. However, leave to appeal his decision not to strike Apotex’s claim for damages under the Trade-marks Act is denied.
[23] Given the divided success, there will be no order as to the costs of this motion.
T. Ducharme J.
Released: February 22, 2013
CITATION: Apotex Inc. v. Eli Lilly, 2013 ONSC 1135
DIVISIONAL COURT FILE NO.: 379/12
DATE: 20130222
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
APOTEX INC.
Plaintiff/Responding Party
– and –
ELI LILLY AND COMPANY and ELI LILLY CANADA INC.
Defendants/Moving Parties
REASONS FOR JUDGMENT
T. Ducharme J.
Released: February 22, 2013
[^1]: Justice MacDonald also decided that Apotex’s claim for damages pursuant to section 8 of the PM(NOC) Regulations should not be struck. The parties are agreed that this portion of the original motion had been discontinued and therefore was not properly before MacDonald J. As such it does not form part of this application for leave to appeal. [^2]: Abbott v. Takeda 2010 ONSC 6909 (S.C.J.); Abbott v. Takeda 2011 ONSC 3988 (Div. Ct.). [^3]: In this regard, I note that Apotex has at least three other actions pending in the Superior Court seeking similar claims. [^4]: Regulation Impact Analysis Statement SOR/2006-228 to 248 and SI/2006-119 to 224, Canada Gazette, Part II, October 18, 2006. [^5]: Canadian Copyright Licensing Agency v. Business Depot Ltd, 2008 FC 737 at para. 32