Court File and Parties

COURT FILE NO.: CV-14-514915 DATE: 20160808 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Apotex Inc. Plaintiff – and – Pfizer Ireland Pharmaceuticals and Pfizer Canada Inc. Defendants

Counsel: Nando DeLuca and Julie Rosenthal and Michael Yasskin, for the Plaintiff, Respondent Rahool Agarwal and Randy Sutton and Stephen Taylor, for the Defendants, Moving Parties

HEARD: May 26, 2016

LEDERMAN J.

Nature of Motion

[1] This is yet another in a series of actions brought by the plaintiff, Apotex Inc. (“Apotex”), against various originators holding patents that have proved to be invalid, seeking to assert claims pursuant to and beyond the limited ones provided for in the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 (the “PMNOC Regulations”). In this case, the defendants (“Pfizer”), as in the other cases, brings this motion under Rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to strike out various claims in the Amended Statement of Claim as disclosing no reasonable cause of action.

[2] In its Amended Statement of Claim, Apotex seeks various forms of relief for being kept out of the market by reason of Pfizer’s Patent for the drug Viagra which later was found to be invalid. Apotex asserts statutory claims under (a) the PMNOC Regulations (paras. 39 to 41E); (b) the English and Ontario Statutes of Monopolies (paras. 42 to 47); and (c) the Trade-marks Act (paras. 48 to 55). It also asserts common law claims for: (a) unjust enrichment (paras. 56 to 59A); (b) nuisance (paras. 59B to 59E); (c) under the principle in Ashby v. White (1703), 2 Raym. Ld. 938 (paras. 59B to 59E); and (d) conspiracy (paras. 59F to 59G).

[3] On this motion, Pfizer moves to strike Apotex’s claims as above, except for its claim for treble damages under the Statutes of Monopolies, presumably because jurisprudence has held such claims to be viable and should not be struck prior to trial: Apotex Inc. v. Eli Lilly, 2015 ONSC 5396; Apotex Inc. v. Schering Corporation, 2016 ONSC 3407.

Background

[4] On November 8, 2012 in Teva Canada Ltd. v. Pfizer Canada Inc., 2012 SCC 60, the Supreme Court of Canada determined that Pfizer’s Canadian Patent No. 2,163,446 (“Patent 446”) was invalid.

[5] Patent 446 had purported to protect Pfizer’s lucrative monopoly in Canada for the erectile dysfunction drug, sildenafil citrate (“sildenafil”) marketed by Pfizer under the trade name, Viagra.

[6] The basis for the finding of invalidity was that Pfizer deliberately failed to fully and clearly describe its invention. In strong language, the Supreme Court stated as follows at para. 80:

“… Pfizer gained a benefit from the Act – exclusive monopoly rights – while withholding disclosure in spite of its disclosure obligations under the Act. As a matter of policy and sound statutory interpretation, patentees cannot be allowed to “game” the system in this way. This, in my view, is the key issue in this appeal. It must be resolved against Pfizer.

[7] The invalidation of Patent 446 marked the end of Pfizer’s monopoly in Canada for sildenafil which had lasted for a period of 14 years, and which had provided it with enormous profits.

[8] The fundamental basis for Apotex’s action is that Pfizer should never have had the 446 Patent with which it was able to keep Apotex out of the market and Apotex has been damaged by Pfizer’s unlawful conduct in connection with its invalid patent.

Basis for Pfizer’s Motion

[9] At the heart of Pfizer’s position on this motion is what has become known as “the complete code theory”. Pfizer submits that there is a comprehensive statutory scheme which deals exclusively with patents and delayed market entry. It submits that Apotex’s Amended Statement of Claim should be struck as disclosing no reasonable cause of action for the following reasons:

(a) Apotex’s claim for losses under the PMNOC Regulations fails to satisfy the threshold statutory pre-conditions;

(b) Apotex’s common-law claims for unjust enrichment, conspiracy, and nuisance, as well as its “Ashby v. White” claim, are not available at law as the Patent Act and the PMNOC Regulations constitute a complete code that ousts any common-law claims arising from conduct governed by that statutory and regulatory regime. In any event, Apotex’s pleading does not, and cannot, establish the fundamental elements of these claims; and

(c) Apotex’s claim under s. 7 of the Trade-marks Act, conflicts with the PMNOC Regulations. The principle of coherence requires that (i) the Trade-marks Act must be interpreted to exclude Apotex’s claim; or (ii) the PMNOC Regulations must take precedence over the Trade-marks Act such that Apotex’s claim is not available as a matter of law.

The Applicable Test

[10] A pleading will be struck under Rule 21.01(1)(b) only where it is plain and obvious that the claim cannot succeed - such that it is beyond doubt that the claim is doomed to fail: Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959 at p. 980.

[11] The pleading should be read generously and, if necessary, leave to amend should be given to cure any technical deficiencies: Nash v. Ontario, [1995] O.J. No. 4043 (C.A.) at para. 11.

Claim Under Section 8 of the PMNOC Regulations

[12] Pfizer submits that there can be no claim for damages under s. 8 of the PMNOC Regulations based on the following:

(a) In or around December 3, 2003, Apotex sought a Notice of Compliance from Health Canada for approval to market a generic version of sildenafil.

(b) As Patent 446 was listed on the federal Patent Register, Apotex served a Notice of Allegation under the PMNOC Regulations alleging that Patent 446 was invalid.

(c) In response, Pfizer commenced a proceeding under s. 6 of the PMNOC Regulations (the “Prohibition Proceeding”). The Prohibition Proceeding would determine whether Apotex’s allegation of invalidity was justified and enjoined the issuance of a Notice of Compliance for up to 24 months or until the Prohibition Proceeding was resolved.

(d) The Prohibition Proceeding was successful: the Federal Court determined that Apotex’s allegation of invalidity was not justified and issued an order prohibiting the issuance of a Notice of Compliance for Apotex’s generic version of sildenafil.

(e) Apotex appealed to the Federal Court of Appeal and its appeal was dismissed.

(f) Section 8 of the PMNOC Regulations provides that if a Prohibition Proceeding is withdrawn, discontinued or dismissed, or if a Prohibition Order is reversed on appeal, the generic manufacturer may make a claim for losses suffered during the relevant period.

(g) The Prohibition Proceeding in this case was not withdrawn, discontinued or dismissed. Nor was the Prohibition Order reversed on appeal. The statutory criteria for a s. 8 action have therefore not been satisfied and Apotex’s claim under s. 8 has no legal basis.

(h) Both Patent 446 and Canadian Letters Patent No. 2.044.748 (“Patent 748”) were listed on the Patent Register under s. 4 of the PMNOC Regulations in relation to Viagra. Apotex was successful in having the Patent 748 Prohibition Proceeding dismissed. Pfizer submits that Apotex also has no cause of action under s. 8 with respect to Patent 748 as s. 5 requires that both patents have to be addressed by Apotex before it could obtain its Notice of Compliance for its generic drug.

(i) Accordingly, the s. 8 claim should be struck for failing to disclose a reasonable cause of action.

[13] Section 8 of the PMNOC Regulations gives generic manufacturers the right to claim losses due to their exclusion from the market as a result of a statutory stay upon satisfaction of certain conditions that are dependent on the Prohibition Proceeding being “withdrawn” “discontinued”, or “dismissed”, or initially successful but then “reversed on appeal.” In this case, the Patent 446 Prohibition Proceeding brought by Pfizer was wholly successful. Pfizer was granted the Prohibition Order by the Federal Court; the Order was upheld by the Federal Court of Appeal and there was no appeal to the Supreme Court of Canada. In other words, the Prohibition Proceeding was never withdrawn, discontinued, or dismissed, and the Prohibition Order was not reversed on appeal. Thus, the threshold criteria established by s. 8 for a claim for losses and liability for Pfizer under that provision were not satisfied.

[14] The fact that there has been a subsequent declaration that Patent 446 is invalid does not change the fact that there can be no remedy under s. 8 of the PMNOC Regulations as the statutory threshold was not met. This was made clear by Evans J.A. for the Federal Court of Appeal in Eli Lilly Canada Inc. v. Apotex Inc., 2013 FCA 282 at paras. 5-7, leave to appeal refused, 2014 CarswellNat 1194 (SCC), as follows:

5. The question at issue is whether a declaration that a patent is invalid enables the Court to vary its earlier order and dismiss an application for a prohibition under subsection 6(1) of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 (Regulations) in which the Court had granted an order prohibiting the Minister from issuing a NOC pending the expiry of a patent on the list submitted by an applicant in respect of a new drug, and listed by the Minister on the patent register in respect of that drug.

6. This Court has unequivocally held on several occasions that a finding that a patent is invalid does not enable the Court to reach back and retroactively dismiss an application for an order of prohibition granted earlier on the ground that an allegation of non-infringement or invalidity in a Notice of Allegation was not justified: . . .

7. The practical significance of this issue is that a generic pharmaceutical manufacturer may claim damages under section 8 of the Regulations if an application for an order of prohibition under subsection 6(1) is withdrawn or discontinued, dismissed, or reversed on appeal. Since a subsequent declaration that a patent listed on the register is invalid is none of these, it does not give rise to a claim by the generic manufacturer for damages for loss of profits sustained during the time that the prohibition order kept its product off the market.

[15] The jurisprudence is unequivocal: a prohibition order made under s. 6 is not affected by a subsequent finding of invalidity. Accordingly, the invalidity of Patent 446 is irrelevant to Apotex’s lack of entitlement to damages under s. 8 of the PMNOC Regulations.

[16] Accordingly, a subsequent declaration that Patent 446 is invalid does not give rise to a claim by Apotex under s. 8 of the PMNOC Regulations for damages for loss of profit sustained during the time that the Prohibition Order kept its product off the market.

[17] Further, even though Pfizer’s Patent 748 prohibition proceeding was dismissed, it was Pfizer’s successful Patent 446 Prohibition Order that delayed Apotex’s entry into the market.

[18] It is plain and obvious that Apotex’s claim under s. 8, beginning at para. 39 of the Amended Statement of Claim, has no legal basis and should be struck.

[19] That being said, the proceedings under the s. 6 of the PMNOC Regulations are designed to be summary and administrative in nature. They provide a mechanism for summary determinations of patent infringement and/or patent invalidity as a means of permitting or denying early market entry for generic drugs. The decisions are provisional only and do not preclude findings of impeachment or infringement of patents under s. 60 of the Patent Act. That raises the question whether in the absence of a s. 8 claim, Apotex may still assert causes of action based on a finding of impeachment or declaration of invalidity of the patent under s. 60 of the Patent Act.

The Claim Under the Trade-marks Act

[20] Pfizer also moves to strike the plaintiff’s Trade-marks Act claim on the basis that it conflicts with the PMNOC Regulations. Because of that conflict, it is argued that the court should apply the principle of the presumption of coherence and, if need be, resolve the conflict by giving precedence to the PMNOC Regulations.

[21] This argument is premised on the assumption that the PMNOC Regulations constitute a complete code governing the rights and remedies relating to the approval and marketing of prescription medicines. This complete code argument was recently rejected by Dunphy J. in respect of a Trade-marks Act claim in Apotex v. Schering, 2016 ONSC 3407 at paras. 40-45. In particular, Justice Dunphy’s observation at para. 45, provides authority for the proposition that the motion to strike out the plaintiff’s Trade-marks Act claim should not be granted:

The “complete code” argument ought not to be decided in the context of a motion under Rule 21.01(1)(b) of the Rules of Civil Procedure … the law on the question of “complete code” and s. 8 of the PMNOC Regulations is insufficiently settled to permit a claim [under the Trade-marks Act] to be precluded at this preliminary stage on that basis.

[22] At para. 38, Justice Dunphy stated:

The Trade-marks Act cause of action may be a novel one in this context, but I cannot say that it is one that is necessarily doomed to fail before the plaintiff has had an opportunity to lead evidence to support it.

[23] Similarly, John MacDonald J. in Apotex Inc. v. Eli Lilly and Co., 2012 ONSC 3808 dismissed the motion to strike in that matter as it related to the Trade-marks Act claim, concluding at para. 41 that

“in my opinion, there is a reasonable prospect that the Applicants can be held to have made assertions of fact which, by reason of the retroactive voiding of the patent, were false. Given that, the Respondent 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: see Rowell v. S. & S. Industries Inc., [1966] S.C.R. 419 at p. 425. This claim, therefore, has a reasonable prospect of success…”

[24] On the motion for leave to appeal MacDonald J.’s decision, Ducharme J. refused to grant leave in respect of the Trade-marks Act claim finding that there were no decisions conflicting with that of MacDonald J. and there was no reason to doubt its correctness.

[25] As the Trade-marks Act allegations in the Amended Statement of Claim in this action are virtually identical to the Trade-marks Act allegations in those other cases, it cannot be said that it is plain and obvious that the Trade-marks Act cause of action in this case is not a reasonable one.

[26] Pfizer argues that neither Dunphy J. in Schering, nor MacDonald J. in Apotex Inc. v. Eli Lilly considered or applied the principle of coherence. Pfizer submits that this principle requires the Court to either (i) interpret the Trade-marks Act consistently with the PMNOC Regulations such that Apotex has no cause of action in these circumstances, or (ii) resolve the apparent conflict between the two enactments in favour of PMNOC Regulations, such that Apotex’s proposed claim is not permitted.

[27] There is a live issue as to whether subordinate legislation such as the PMNOC Regulations can oust the statutory remedies in the Trade-marks Act merely because the PMNOC Regulations contain a limited remedy for damages suffered by a generic manufacturer as a result of the institution of a Prohibition Proceeding. I agree with Dunphy J.’s statement in Schering supra, at para. 69:

“The correct and most efficient course of action in my view is to have the entire claim and all of its discrete legal issues determined at once.”

[28] Therefore, Apotex’s claim under Trade-marks Act stands.

The Claim for Unjust Enrichment

[29] As to whether the claim for unjust enrichment is subject to the “complete code theory”, the Ontario Court of Appeal considered this but deliberately declined to adopt it in dismissing appeals in Apotex Inc. v. Eli Lilly and Co., 2015 ONCA 305; but rather preferred to rely on the substantive elements of unjust enrichment itself.

[30] Pfizer also relies on the British Columbia Court of Appeal decision in Low v. Pfizer Inc., 2015 BCCA 506, leave to appeal to SCC ref’d, June 9, 2016, which adopted the complete code theory to preclude common law claims in the context of a class action by consumers involving the drug Viagra. It should be noted that the Ontario Court of Appeal in Apotex Inc. v. Eli Lilly supra, did refer to the lower court decision which was upheld by the British Columbia Court of Appeal in Low; however, the Ontario Court of Appeal did not expressly adopt it.

[31] All to say, as Dunphy J. did in Apotex v. Eli Lilly and Company et al., 2015 ONSC 5396 in respect to the claim under the Statutes of Monopolies in question in that case at para 39:

Our Court of Appeal has not yet been presented with a case requiring it to rule squarely on the matter. There being no binding decision from that Court here, I cannot view the matter as settled. It will be decided by our Court of Appeal when it must be or by the Supreme Court of Canada in due course. At this point, I need only conclude that it is hardly plain and obvious that the “complete code” argument will carry the day.

[32] Dunphy J., at para. 37, also stated:

“As regard common law actions, I view the jurisprudence as inconclusive.”

[33] I would reach the same conclusion in respect of the common law claim of unjust enrichment in this case.

[34] Although it may be said that Apotex does not plead the various required elements of its unjust enrichment claim with precision, it does plead that there has been an enrichment to the defendant, a corresponding deprivation suffered by the plaintiff and the absence of a juristic reason justifying the enrichment and deprivation.

[35] The Court of Appeal in Apotex Inc. v. Eli Lilly, 2015 ONCA 305 struck the unjust enrichment claim there because the pleading failed to assert a proper deprivation. Here, however, Apotex’s pleading in this case is significantly different in that, rather than claiming disgorgement of Pfizer’s monopolistic profits, it claims only that portion of Pfizer’s revenues that represent the revenues Apotex was deprived of because of the delay in obtaining its Notice of Compliance. Given this difference in pleading, it cannot be said that Apotex’s unjust enrichment claim is doomed to fail.

[36] Therefore, Apotex’s claim for unjust enrichment stands.

The Claims for Nuisance and Under Ashby v. White

[37] Although unusual, Apotex makes a claim for damages in nuisance in paras. 58B to 59E of the Amended Statement of Claim. Pfizer argues that the nuisance claim must fail because Apotex fails to plead an element of private nuisance i.e. that there be an interference with exclusive property rights, citing the Ontario Court of Appeal’s decision in Tucows.Com Co. v. Lojas Renner SA, 2011 ONCA 548 at para. 58; and fails to plead the requisite elements of public nuisance.

[38] However, the Supreme Court of Canada in St. Pierre v. Ontario (Minister of Transport & Communications), [1987] 1 S.C.R. 906 at 915 indicated that the tort of private nuisance is established where injury to land results from substantial interference with the use or enjoyment of land or an interest in land. Here, Apotex has pleaded a loss of ability to use its facilities for the manufacture and sale of sildenafil. That is sufficient to ground a claim for private nuisance. With respect to the tort of public nuisance, a plaintiff must establish two elements, namely, special damages and unreasonable interference. In this case, Apotex has pleaded the requisite elements by alleging that Pfizer’s invalid patent has interfered with Apotex’s right to trade freely in the sildenafil market and it has suffered damages distinct from those suffered by the public at large in having been overcharged by Pfizer.

[39] It is not plain and obvious that Apotex’s claim in nuisance does not disclose a reasonable cause of action and that claim should stand.

[40] However, Apotex’s claim in paras. 59B, 59C and 59E of the Amended Statement of Claim based on Ashby v. White, to the extent it asserts an independent cause of action, must fail. Apotex argues that it had a common law right to trade freely that was infringed by Pfizer’s assertion of an invalid patent. The principle borrowed from that case – “no right without a remedy” – is simply a phrase, a principle or a maxim. By itself, it does not disclose a cause of action and should be struck.

The Claim for Conspiracy

[41] Apotex has pleaded the following essential elements of the tort: the presence of an unlawful act (the restraint of trade); that the defendants’ predominant purpose was to cause the plaintiff injury, whether or not the defendants’ means were lawful; or where the defendants’ conduct is unlawful and directed towards the plaintiff (alone or with others) and in circumstances that the defendants should know that the injury to the plaintiff is likely to, and does, result in injury.

[42] Pfizer argues that it exercised its lawful rights under the statutory scheme for legitimate commercial purposes and therefore its conduct cannot underpin a conspiracy claim: Harris v. GlaxoSmithKline, 2010 ONCA 872, leave to appeal ref’d, 2011 CarswellOnt 6308 (SCC).

[43] An unlawful act was absent from the facts in Harris supra. Here, the Amended Statement of Claim asserts that Pfizer committed an unlawful act by restraining trade, monopolizing the sildenafil market, knowingly procuring an invalid patent, and enforcing an invalid patent.

[44] It cannot be said at this stage that this conspiracy claim is doomed to fail and it should therefore stand.

Conclusion

[45] The claims under s. 8 of the PMNOC Regulations and under Ashby v. White are to be struck out. In all other respects, Pfizer’s motion is dismissed.

[46] Given the history of similar proceedings, I would expect that the parties can agree upon the costs of this motion. If not, they may make written submissions within 30 days.

Lederman J. Released: August 8, 2016