Apotex Inc. v. Abbott Laboratories, Limited, Takeda Pharmaceuticals America, Inc., and Takeda Pharmaceuticals Company Limited, 2012 ONSC 2104

COURT FILE NO.: 09-00391938

MOTION HEARD: 20111004

ENDORSEMENT RELEASED: 20120613

SUPERIOR COURT OF JUSTICE – ONTARIO

RE:

Apotex Inc. Plaintiff v. Abbott Laboratories, Limited Takeda Pharmaceuticals America, Inc., and Takeda Pharmaceuticals Company Limited Defendants

BEFORE: MASTER D.E. SHORT

COUNSEL: Christopher Van Barr, Fax: 613-563-9869

for the Takeda Defendants (moving parties)

Sandor Shogilev Fax: 416-979-1234

for the Plaintiff, Apotex

Fiona Legere Fax: 416-868-0673

for the Defendant, Abbott

HEARD: October 4, 2011

REASONS FOR DECISION

I. Motion

[ 1 ] Canada’s federal legislation dealing with the ability to continue to produce generic drugs in the face of the challenge by the alleged patent holder for a particular compound can lead to quite convoluted legal battles.

[ 2 ] The bulk of these cases traditionally are dealt with the Judges and Prothonotaries of the Federal Court. However there apparently is room in both jurisdictions to address issues such as those raised in this case which is still at the pleading stage, some three years after it began.

[ 3 ] The D efendant Abbott Laborator i es, Limite d ("Abbott") markets and sells, among oth e r things, the drug lansopra z ol e un der the bra n d n a me P R E V ACID ® .

[ 4 ] Apotex is a generic drug manufacturer that markets and sells, among other things, a generic version of PREVACID® called Apo-lansoprazole.

[ 5 ] T a keda Pharmaceuticals America, Inc. ("TPA") and Takeda Pharmaceutical Company Limited ( " Takeda Japan") (collectively " Takeda") seek leave to add Takeda Pharmaceuticals North America, Inc. ("TPNA") and Takeda Pharmaceuticals LLC ("TPL") as plaintiffs by counterclaim to Takeda Japan's counterclaim in the action.

[ 6 ] The Registrar refused to accept Takeda's Statement of Defence and Counterclaim for either filing or issuance because of the added parties. The moving parties seek an Order allowing them to do so.

II. Patent Act

[ 7 ] The claims in the action arise out of the provisions of the Patent Act , R.S.C., 1985, c.P-4. Section 55 of that act, reads in part:

[ 8 ]

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.

(3) Unless otherwise expressly provided, the patentee shall be or be made a party to any proceeding under subsection (1) or (2). [emphasis added]

[ 9 ] This motion concerns the interaction of the Ontario Rules of Civil Procedure and the interpretation this provision of the federal Patent Act .

III. Overview

[ 10 ] In the main action, Apotex claims damages and, in the alternative, restitution for the Defendants' wrongful initiation of prohibition proceedings under the Patented Medicines (Notice of Compliance) Regulations . Broadly speaking, Apotex claims that the Defendants' commencement of the prohibition proceedings improperly delayed Apotex from obtaining federal marketing approval for its Apo-Lansoprazole anti-ulcer medication.

[ 11 ] The Defendants have each denied liability on various grounds, Moreover, both Abbott and Takeda Japan) have brought a counterclaim, alleging that, by manufacturing and selling Apo-Lansoprazole, Apotex infringes certain claims of two patents, namely Canadian Letters Patent Nos. 1,327,010 (“the '010 Patent") and 2,009,741 ("the '741 Patent").

[ 12 ] Apotex submits that the issue on the within motion at first is quite simple: does the proposed Statement of Defence and Counterclaim plead the material facts necessary to establish that the two proposed new Plaintiffs-by-Counterclaim meet the legal test of "persons claiming under the patentee", such as would give standing to assert a cause of action in patent infringement?

[ 13 ] The moving party argues that it has pleaded the requisite material facts, because it has pleaded that the proposed new Plaintiffs-by-Counterclaim are "licensees" under the patents in question.

[ 14 ] Apotex argues however, that the plea of licence is entirely bald and further submits that no material facts are pleaded such as would establish a licence, whether express or implied.

[ 15 ] Conversely, TPNA and TPL assert they are members of the supply chain relating to the patents at issue in the main action and claim under Takeda Japan under the Patent Act , and therefore submit that they have standing to claim against Apotex.

[ 16 ] Takeda submits that it is permitted under the Rules to join TPNA and TPL to its counterclaim because:

(l) TPNA, TPL and Takeda are related companies represented by the same lawyers;

(2) TPNA and TPL are asserting relief arising out of facts alleged in both Takeda's defence to the main action and Takeda Japan's counterclaim;

(3) there are common questions of fact and law; and

(4) TPNA's and TPL's addition to Takeda Japan's counterclaim promotes the convenient administration of justice and avoids a multiplicity of proceeding.

IV. The Takeda P a rties

[ 17 ] Takeda Japan is a Japanese corporation and the owner of a number of Canadian patents relating to lansoprazole, which were the subject of PM (NOC) Regulations proceedings against Apotex. Takeda Japan was required to be added to as a respondent to these PJ.\1 (NOC) proceedings by virtue of section 6(4) of the PM (NOC) Regulations.

[ 18 ] TPA is the current owner of t he Notices of Compliance issued i n respect of PREVACID®.

[ 19 ] The first proposed plaintiff by counterclaim TPNA is an importer and supplier of pharmaceutical products in North America and is related to Takeda. TPNA is a licensee of the patents at issue in the main action and claims under Takeda Japan.

[ 20 ]

[ 21 ] T he second pro po s ed p lai nt if f by co u n ter cl a i m T P L i s a pur ch a s er , su pplie r an d licensor of pharmaceutical p ro ducts in N o r t h A m e r i c a an d is r e lat e d to Takeda.

[ 22 ] T P L i s a licens e e o f the p atents a t iss ue i n t h e ma in ac t i o n an d c la i m s und e r Ta ke d a Jap a n.

[ 23 ] TPNA a nd TPL are clearly c ompanies r e la t ed to the T a k eda c ompanies, and ar e represented by the lawy e rs of r ecord for T a keda.

V. Litigation Background

[ 24 ] Apo t ex c omm e nc e d t h e w it h in act i on i n t his C ourt by st a tement of cl a im i ssued on No v ember 29 , 2009 .

[ 25 ] On January 20, 2010, Abbott brought a motion to strike Apotex's statement of claim. Takeda filed supporting submissions.

[ 26 ] In his decision dated December 15 , 2010, Justice Whitaker, of this court, dismissed Abbott's motion to strike the unjust enrichment claims.

[ 27 ] O n De ce mber 22, 2 010 , e a ch of Ta keda an d A bbott se r v e d on Apotex a Not ic e of Motion for leave to ap p e al t he Decisi o n to t he D iv is io n a l Court . That motion was heard on Jun e 2 1 , 2011, a nd was dismiss e d on July 4 , 2011 .

[ 28 ] Prior to the dismiss a l of the motion fo r l e a v e to ap pe al, the parties agreed that Ta ke da and Abbott w o u ld deliver their st a tements of de f ence, w ithout p r ejudice t o Takeda's and Abbott ' s right to amend their ple a dings a c cording to t h e resul t of the mo t i o n.

[ 29 ] Takeda and Abbott served o n Ap o t e x their respecti v e statements of defe n ce and counterclaim.

[ 30 ] On May 5,2011, Takeda sought to file its Statement of Defence and Counterclaim, however the Registrar required that it be issued because it sought to add a p a rty to the proceeding (TPNA).

[ 31 ] On May 10, 2011, in accorda n ce wi t h t he R e gis t ra r 's request, Takeda sought i s su an ce o f i t s Statement of Defence and Counterclaim. Howev e r , the R e gi st ra r re fu s e d t o issue i t, t h is t i me t a kin g th e p os i t ion t h a t TPNA r equi r e d a n o r de r of t his C ou r t p r io r t o acce pt i n g the Statement of Defence and Counterclaim .

[ 32 ] Abbott consented to adding TPNA to Takeda's counterclaim on May 26, 2011.

[ 33 ] T aked a s o u g h t co n se nt fr om A p ot e x to am e nd i t s pleading. A p o t e x r e sponded on J un e 6 , 201 1 t o ref u se cons e nt.

[ 34 ] As a consequence it was necessary to bring this motion wherein Takeda therefore seeks an Order to add the additional Takeda entities.

[ 35 ] The T a ke da en t ities de s ire t h at T PN A an d T P L be ad d ed as a p ar t y t o T ake d a's counte r c l aim to ensure all of Takeda's d a m age s m a y b e pr ope r l y cla i m ed .

VI. The Law

[ 36 ] The moving parties support their decision to add further claimants against Apotex by reference to a Federal court decision which has not been disputed by any decisions of this court. In Domco Industries Ltd. v. Armstrong Cork Canada Ltd ., (1 986 ), 1986 7625 (FC) , 10 C ,P . R . (3d) 53 a t 69, the Federal Court Trial Division did not allow the plaintiff's claim for damages which were suffered by its subsidiaries, which had not been included as parties to the action. Specifically, the Court held that such damages were only recoverable by the legal entities who incurred them. In order to seek to avoid a similar result, Takeda now seeks to add the Takeda entities that have incurred damages.

[ 37 ] Takeda ple a ds that TPNA and T PL are licen s ees of the patents at issue in main action and claim under Takeda Japan pursuant t o s e c t ion 55 of the Patent Act . The proposed pleading asserts that each of Takeda Japan, TPNA a nd TPL are entitled to a differ e n t subs e t of the damages claimed against Apotex. In particular, the assertion is that each of these Takeda e n titie s is a m e mber of a supply chain resulting in the sale of lansoprazole through TPNA to Abbott a nd ultimately to Canadian customers.

[ 38 ] In a dditi o n , in the proposed pleading Ta ked a pl e ad s that TP L is t he e x cl u sive lice n s e e in C an ad a of th e ' 010 Pat e nt a nd ' 7 4 1 Pa tent in re sp e ct of lan sop r a o z l e a nd has gran ted t o T P N A th e e xc lu s i v e r ight to import l a n s opr az ol e. T ak ed a s ub m it s t hat a s p l e ad ed T PNA a n d T PL ha ve s ta ndi ng in the within pro c eeding again s t Apotex,

[ 39 ] Rule 5.02(1) of the Rules of Civil Procedure provides that two or more persons who are represented by the same lawyer of record may join as plaintiffs or applicants in the same proceeding where, inter alia :

• th ey a s ser t , w heth e r join tl y, several l y or i n the al t ernative , any c laim s to re l ief a ri sing o ut o f the sa me t r an sa ct i on o r occurre n c e , o r series o f t r a n sac t io ns or o cc u rr e n c es;

• a comm o n question of law or fact may arise i n t he proceeding; or

• it a p pea r s that their jo i n i ng i n the sam e p roce e d i ng m ay promote the con v enien t admini s t r ati o n of ju s ti c e .

[ 40 ] Takeda submits that a d d i n g T PN A a nd T P L t o the w ith i n a cti o n w o u l d p rom o t e th e c on v e nient a d mini s tr a ti o n o f ju s tice b y a vo idin g a m ul ti p l ic i t y of a ct i o ns . B y doing s o , T PN A an d T P L w i l l n ot b e d r iv e n t o c o mm e n ce s e pa r at e a cti o n s and to seek j oind e r of th o se actio n s w it h t h e pr e sent ac tion , a l l of w h ic h a re i nc on v enien t a n d u n n e c es sa ry p rocedu ra l ste p s.

[ 41 ] If TPNA and TPL were required to commence separate actions, then joinder to have their actions heard with the present action would in all probability ultimately be granted in any event.

[ 42 ] T a k e d a furth e r s ub mi t s t ha t A po t e x wi ll n ot be p rej u di ce d by t h e add iti on of T PN A and T PL a s plaintif f s by count e rclaim to T a k e da J a p a n ' s c ounter c lai m . A p o tex will not incur fur t her c os t s or b e s ubject t o a ny f u rt h e r l i abi l it y t h a n w ould ar is e i f T PNA and T PL co mm e n ce d s ep a r a t e ac tion s . On the o t h er h a nd , it is argued that cos t s may b e s a v e d b y a ddin g T PN A a n d TPL t o th e within a c tion. Fu r th e r , addin g TPN A and TPL a t th i s s t a ge of l iti ga t io n , w he re pl ead in g s h a ve not e ven cl o sed , will n o t dela y the res o luti o n of this action.

[ 43 ] These arguments seem reasonable to me.

[ 44 ] In coming to this view, I rely upon the analogous case of Gordon's Film & C o . v . Ne w G ol d e n H ar v e st C i n e ma Ltd ., (1998) O.J. N o. 3 9 91 , the Court a dded a plaintiff b y counter c laim s e eking damag es a ri s ing from it s participa t in g in a mo v i e r e n t al s c h e m e w it h th e plaintiff a nd th e d ef e n d ant, which damages were to be set off against the plaintiffs claim against the defendant in the main action. The Court found that a multiplicity of proceedings was to be avoided and noted that the proposed party in that case was represented by the defendant's solicitor, and that the claimed relief arose out of the same occurrence and involved common questions of fact. The Court found that adding the non-party promoted the convenient administration of justice.

VII. Apotex Position

[ 45 ] Apotex argues that while the moving parties may allege that their claims relate to implied licences, “there is no plea of the necessary material facts.” They argue that the pleading thus fails to meet the minimum level of fact disclosure required by the Rules.

[ 46 ] Rule 26 deals with pleading amendments generally and (with my emphasis added) provides in part:

26.01 On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just , unless prejudice would result that could not be compensated for by costs or an adjournment.

[ 47 ] Apotex asserts that when leave is sought to add a party, the moving party must, amongst other things, satisfy the tests for obtaining leave to amend, pursuant to Rule 26.01. Counsel notes that in Chesnie v. Snider, 2004 34949 (ON SC) , [2004] O.J . No . 4462, Master MacLeod noted that the tests to be applied in adding a party include the tests for amending pleadings under Rule 26.01.

[ 48 ] Apotex asserts that the jurisprudence is clear that leave to amend (and, thus, leave to add a party) will not be granted if the proposed pleading is insufficiently particularized. This issue was addressed in Vaiman v. Yates , (1987), 1987 4345 (ON SC) , 60 O.R. (2d) 696, where Rosenberg J. stated:

Upon an application for leave to amend there are four principles to be applied:

(1) unless the opposite party will suffer an injustice, the amendment should be allowed;

(2) the proposed amendment should be prima facie meritorious;

(3) the proposed amendment should be a pleading permissible in the first instance ...

(4) the proposed amendment must contain sufficient particulars . [emphasis added]

[ 49 ] Apotex submits in its factum that, in the present case, the proposed Statement of Defence and Counterclaim, as it relates to the proposed new Plaintiffs-by-Counterclaim, falls well short of the standard set by the jurisprudence. It is submitted by them that it fails to plead the requisite material facts in order to establish a cause of action in patent infringement on the part of either TPL or TPNA.

[ 50 ] What degree of detail is sufficient under the Ontario Rules in this particular case?

[ 51 ] In addressing that question, it is necessary to note that the cause of action in patent infringement is a creature of statute. It is created by subsection 55(1) of the Patent Act , which as noted earlier, provides that a person who infringes a patent is liable both to the patentee and to "all persons claiming under the patentee".

[ 52 ] Counsel for Apotex submits that the relevant jurisprudence that has developed in the Federal Court has established that, in order to qualify as a person "claiming under the patentee", it is not enough to show that the patentee consented to that person joining as a plaintiff in the proceeding, and it is also not enough to show that the person is related to the plaintiff.

[ 53 ] In support of this submission Apotex relies upon Laboratoires Servier v. Apotex Inc, 2008 FC 825 (at para . 70 ):

“The test for who qualifies as a person claiming under the patentee is not simply whether the patentee has consented to the person being joined as a plaintiff in an action; nor is it enough to demonstrate that two parties are related.

[ 54 ] The position based upon this decision is that, in order to have standing to bring an action in patent infringement as a "person claiming under the patentee", the proposed plaintiff must have some right to use the patented invention. The right can derive from an assignment, or from a licence, or from some other means (such as a sale of the patented item).

[ 55 ] Apotex asserts however, that full particulars of any such arrangements are required before any amendment may be permitted.

[ 56 ] Apotex bases this submission upon the Federal Court of Appeal’s decision in Signalisation de Montreal Inc. v. Services de Bé ton Universels Ltée (1992), 1992 2427 (FCA) , 46 C.P.R. (3d) 199 :

[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 . . . . 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 the article embodying the invention. It may also be a lease thereof.

[ 57 ] Apotex submits that in the present case, Takeda asserts that the proposed two new Plaintiffs-by-Counterclaim derived their respective rights to use the patented inventions by licence. However, the proposed pleading is both bald and internally inconsistent in the manner in which these alleged licences are pleaded.

[ 58 ] My reading of Signalisation de Montreal , however suggests that the relationship between the patent holder and the party proposed to be added was more tenuous than that in the case before me.

[ 59 ] I turn to the next asserted issue of problems flowing from apparent inconsistency within the proposed amended pleading. Counsel for Apotex notes that courts have held that leave to amend will not be granted when the proposed pleading is internally inconsistent. (e.g. Russell v. Toronto International Dragon Boat Race Festival , [2002] O.J. No . 3672 at paras. 5-6 ). Nevertheless, it is also clear that the Rules contemplate, and allow, pleadings in the alternative in a number of circumstances.

[ 60 ] In the present case, the proposed pleading states that Takeda LLC is "the exclusive licensee in Canada" of the two patents. At the same time, it states that Takeda North America is "a licensee" under the two patents. Counsel argues that it is not clear how one entity - i.e. Takeda LLC- could be the "exclusive" licensee, while another entity - i.e. Takeda North America - also has a licence.

[ 61 ] Apotex further submitted that, for example, there is no plea as to whether the licences are express or implied. If they are alleged to be express licences, there is no plea as to when they were granted, or what their terms are. If they are alleged to be implied licences, there is no plea of the material facts that would support a finding of an implied licence.

[ 62 ] In this regard, counsel noted that the courts have held that no implied licence can be found if the purported licensee does not use the patented invention in Canada. Thus, in Laboratoires Servier , ( supra at paras . 90-91 ) the court held that, where the purported licensees did not use the patented invention in Canada and, therefore, did not need a licence (because a patent only grants a monopoly over practicing the claimed invention in Canada), there was no basis for finding an implied licence. The court stated:

“[N]one of these Plaintiffs has ever needed a licence in respect of the '196 Patent because none of their foreign activities relating to the manufacture, use or sale of perindopril can constitute an infringement of the '196 Patent .... It is a stretch to say that [these Plaintiffs] are parties to an implied licence for the '196 Patent when no such licence.”

[ 63 ] In the present case, there is no plea that either Takeda LLC or Takeda North America - both of which are foreign (Delaware) companies – “uses” the patented invention in Canada. More specifically, there is no plea that these entities are resident in, or carry on business in Canada, or that either is involved in producing and/or selling in Canada any compound or product within the claims of the patents in question, such as might provide the factual basis for a plea of implied licence.

[ 64 ] The respondent asserts that the failure to plead any facts that would establish activities by the proposed new Plaintiffs-by-Counterclaim in Canada is also apparent from the manner in which the damages are pleaded. Specifically, Takeda simply pleads that Takeda LLC and Takeda North America are "members of a supply chain" that "ultimately" results in the sale of lansoprazole in Canada. They argue that based on the proposed pleading, the only sales that appear to be made in Canada are those made by Abbott (which unquestionably has standing to sue as a "person claiming under the patentee"). Apotex argues that if TLC and TPLA do not use the patented invention in Canada (for example, by selling lansoprazole), then they cannot be implied licensees such as would give them standing to sue for patent infringement.

[ 65 ] In my view these are all matters that can be canvassed on discovery and ought not to prevent the amendments sought being made at this stage.

[ 66 ] The plaintiff however further argues that the proposed Statement of Defence and Counterclaim does not plead any of the other material facts that the courts have held are sufficient to establish an implied licence. In this instance, they rely upon the Federal Court’s decision in Jay-Lor International Inc. v. Penta Farm Systems Ltd ., 2007 FC 358 (at paras. 28 and 37 ) and note the failure of Takeda to plead:

“ (a) that the patentee and the purported licensees were all under the control of the same individual;

(b) that no other licence had been granted either explicitly or by implication to any third party; or

(c) that the companies had structured their affairs in a manner consistent with a licensee-licensor relationship (e.g. all of the licensees' profits "flowed up" to the patentee company).”

[ 67 ] Apotex argues, in other words, Takeda has not pleaded any of the facts that are necessary to support the assertion that Takeda LLC and Takeda North America are licensees, either express or implied and submits that, without a plea of such material facts, the proposed pleading that Takeda LLC and Takeda North America are "persons claiming under the patentee" is bald and does not meet the required minimum level of fact disclosure.

[ 68 ] In the alternative, it is submitted by Apotex that leave to add Takeda LLC and Takeda North America should be conditional upon Takeda providing full particulars of the licences pleaded including the following:

(a) whether the licences are express or implied;

(b) if the licences are express, when the licences were granted, what their terms are, and what the scope of the licence is; and

(c) if the licences are implied, the material facts necessary to establish such a licence, such as, whether the patentee and the licensees are controlled by the same individual, whether the licensees' and the patentee's profits flow up to the same parent corporation, and the specific actions undertaken by the licensees in Canada pursuant to the licence.

[ 69 ] This action was commenced by Apotex in the Ontario Superior Court of Ontario. It is my holding based upon my understanding of the current provisions of the applicable Ontario Rules and the Roche Palo Alto Ontario Superior Court decision discussed below, that further particulars are not required to justify granting the amendment sought.

IX. Roche Palo Alto LLC v. Apotex Inc.

[ 70 ] In 2006 , the plaintiff in this action addressed a similar motion in Roche Palo Alto LLC v. Apotex Inc., (“ Roche Palo Alto ”) [ 2006] O.J. No. 374 ; 145 A.C.W.S. (3d) 598 . An appeal from the Master was upheld on appeal by Polowin, J. A further motion was brought before A. Panet, J. seeking leave to appeal to the Divisional Court.

[ 71 ] In refusing leave with respect to issues relating to adding parties based upon claims under Section 55 of the Patent Act , the Court made a number of observations relevant to the issues before me.

[ 72 ] The amendments in issue in Roche Palo Alto are set out in paragraph 27 of the decision of Polowin, J.:

“5(a). The Plaintiff Allergan Sales, LLC ("Allergan Sales") is a single member limited liability company incorporated under the laws of the State of Delaware in the United States of America, with its principal place of business at 2525 Dupont Drive, Irvine, California, U.S.A., 92612. Allergan Sales is the licensor of technical knowhow related to the manufacture of ketorolac ophthalmic products under the 614 patent manufactured by Allergan Pharmaceuticals Ireland.

5(b). The Plaintiff Allergan Pharmaceuticals Ireland ("Allergan Ireland") is a corporation incorporated under the laws of the Cayman Islands with its principal place of business in Westport, county Mayo, Ireland. Allergan Ireland is the manufacturer of ketorolac ophthalmic products under the 614 patent which are then sold to Allergan Canada.

30. Indirectly, Allergan Ireland is a wholly owned affiliate of Allergan U.S. and is, and at all material times, has been the exclusive manufacturer of ketorolac ophthalmic products under the 614 patent sold to Allergan Canada for sale in Canada.

31. Allergan Sales LLC is an affiliated company of Allergan, Inc, and is the licensor of technical knowhow to Allergan Ireland with respect to the manufacture of ketorolac tromethamine products under the 614 patent. Allergan Sales LLC and Allergan Ireland entered into a Royalty Agreement on or about January 1, 2003 relating to this license.

32. Pursuant to section 55 of the Patent Act, R.S.C. 1985, c. P-4 , as amended, Allergan U.S. and Allergan Canada are persons claiming under the patentee.”

[ 73 ] In comparison the first germane paragraphs of the proposed amendments before me (with my emphasis added) read:

“44. TPL is a limited liability company under the laws of Delaware, United States of America. TPL purchases, supplies and licenses pharmaceutical products in North America. TPL is not a party to the main action but is a party to this counterclaim as it has suffered damages as a result of Apotex's infringement of the Takeda Patents. TPL is the exclusive licensee in Canada of the '010 Patent and '741 Patent in respect of lansopraozle, and claims under Takeda Japan in respect of the relief claimed herein.

45. TPNA, a subsidiary of Takeda Japan, is incorporated under the laws of Delaware, United States of America. TPNA manufactures, markets, and distributes pharmaceutical products in North America. TPNA is not a party to the main action but is a party to this counterclaim as it has suffered damages as a result of Apotex's infringement of the Takeda Patents. TPNA is a licensee under the '010 Patent and the '741 Patent having the exclusive right to import lansoprazole and to supply lansoprazole to TPL, and claims under Takeda Japan in respect of the relief claimed herein.”

[ 74 ] The other relevant proposed amendments before me read:

“82. By virtue of its ownership of the '010 and '741 Patents, Takeda Japan possessed, until February 15,2011 and February 9, 2010, respectively, the exclusive right, privilege and liberty of making, constructing, using and selling to others to be used, the inventions as described and claimed in the Takeda Patents.

83. TPNA and TPL are persons claiming under the patentee of the Takeda Patents, namely Takeda Japan. In particular, by reason of the activities of Apotex set out below, TPNA and TPL have suffered damages by reason of the manufacture, use and sale of lansoprazole by Apotex in violation of the exclusive rights granted under the '010 and '741 Patents.

84. Each of the Takeda Japan, TPNA and TPL are entitled to a different subset of the damages claimed against Apotex. Namely, each of these Takeda entities is a member of a supply chain resulting in the sale of lansoprazole through TPNA to Abbott and ultimately to Canadian customers. Accordingly, sales lost by TPNA result in corresponding sales lost by the other members of this supply chain. This supply chain operates as follows:

(a) Takeda Japan is owner of the '010 Patent and the '741 Patent and manufactures lansoprazole claimed by said patents;

(b) TPNA imports lansoprazole from Takeda Japan and sells lansoprazole to TPL; and

(c) TPNA then supplies lansoprazole sold to TPL to Abbott on behalf of, and for the account of, TPL.”

[ 75 ] It seems to me that these two pleadings are parallel in substance and relevant content. In evaluating the content of the proposed amendments in Roche Palo Alto, Justice Panet provided this useful guidance (my emphasis):

8 Polowin J. stated at paragraph 29 of her decision that, in seeking the amendment to their pleadings, the Plaintiffs relied on subsection 55(1) of the Patent Act which provides:

Any person who infringes a patent is liable to the patentee and to all persons claiming under him for all damages sustained by the patentee or any person, by reason of the infringement.

9 The position of Apotex was that the amended pleading did not disclose a reasonable cause of action that is tenable at law. However Polowin J. did not accept that submission. She concluded as follows at paragraph 35:

In my view, and reading the amended pleading as a whole, informed by the decision in Signalisation de Montreal Inc. v. Services de Bé ton Universels Ltée et al., 1992 2427 (FCA) , [1992] F.C.J. No. 1151 , supra , it appears that Allergan Sales and Allergan Ireland are claiming under the patentee for damages sustained by reason of the alleged patent infringement. On its face, the amended pleadings disclose a reasonable cause of action which is tenable at law.

10 She also rejected the further assertion by the Defendant that the amended pleadings did not disclose a reasonable cause of action in that the Plaintiffs failed to plead specifically that the actual sales between Allergan Ireland and Allergan Canada took place in Canada and failed to plead that any of the Allergan Sales activities took place in Canada. Polowin J. stated that in her view this appeared to be an overly technical approach to the pleading and that the pleadings set out the relationship between the parties and that Allergan Ireland has been the exclusive manufacturer of Ketorolac Ophthalmic Products under the '614 Patent sold to Allergan for sale in Canada.

12 ... The Defendant has also referred to the decision of the Federal Court of Appeal in American Cyanamid Company v. Novopharm Ltd. [1972] F.C. 739 . However, that issue was set to rest by the Supreme Court of Canada in Armstrong Cork Canada Ltd . v. Domco Industries Ltd. (1982), 1982 185 (SCC) , 66 C.P.R. (2d) 46 at pp. 54 and 55 where Martland J. stated:

In my opinion, the reasons which led this court, 1943 43 (SCC) , [1943] S.C.R. 547 , and the Privy Council, 1947 304 (UK JCPC) , [1947] A.C. 313, to the conclusions reached in the Fiberglas case are as applicable to a non-exclusive licensee as to an exclusive licensee. If an exclusive licensee is a person claiming under the patentee within s-s. 57(1), [now s-s 55(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.

[ 76 ] Justice Panet concludes her evaluation of this portion of the leave to appeal application by affirming the correctness of the approach below:

13 I conclude that the Defendant has not established that there is any conflicting decision in this matter. The Defendant has also failed to establish that there is any good reason to doubt the correctness of the decision of Polowin J. with respect to this motion. Polowin J. properly applied the principles of the Signalisation decision in the present case. She concluded that the elements of the causes of action are properly set out in the Statement of Claim. She noted that the pleadings state that Allergan Sales is the licensor of the subject products under the patent to Allergan Ireland and that Allergan Ireland is the manufacturer of the subject products under the patent. She properly reviewed the proposed amendments and the relationship between Allergan Sales and Allergan Ireland and between those parties and the other plaintiffs, and she rejected the submissions of the Defendant. I conclude that the Defendant has failed to establish that there was any good reason to doubt the correctness of the decision of Polowin J. and has failed to establish that the proposed appeal involves any matter of such importance that leave to appeal should be granted.

[ 77 ] Similarly in the matter before me, I conclude applying the principles of the Signalisation decision in the present case the elements of the causes of action are properly and adequately set out in the proposed Statement of Defence and Counterclaim. The pleadings state that each of the Takeda Japan, TPNA and TPL are entitled to a different subset of the damages claimed against Apotex. These allegations if proven, disclose a reasonable cause of action which is tenable at law.

[ 78 ] The plain assertion is that each of these Takeda entities is a member of a supply chain resulting in the sale of lansoprazole through TPNA to Abbott and ultimately to Canadian customers. Accordingly, sales lost by TPNA result in corresponding sales lost by the other members of this supply chain.

X. DISPOSITION

[ 79 ] I am satisfied that this is an appropriate case where under the Rules the addition of TPNA and TPL to the proposed defence and counterclaim ought to be permitted. TPNA, TPL and Takeda are related companies represented by the same lawyers. TPNA and TPL are asserting relief arising out of facts alleged in both Takeda's defence to the main action and Takeda Japan's counterclaim. There are clearly common questions of fact and law.

[ 80 ] Rule 1.04 directs that the Rules should be construed to secure the most expeditious and least expensive determination of every proceeding on its merits.

[ 81 ] Similarly rule 5.02 directs that it appears that it is appropriate to join parties in the sam e proce e ding where to do so may promote the con v enien t admini s trati o n of ju s ti c e. Here I see no valid offsetting reason put forward by the plaintiff, which would justify not granting the order sought.

[ 82 ] Lastly the “general rule” dealing with the joinder of “necessary parties”, Rule 5.03, provides:

5.03 (1) Every person whose presence is necessary to enable the court to adjudicate effectively and completely on the issues in a proceeding shall be joined as a party to the proceeding.

(2) A plaintiff or applicant who claims relief to which any other person is jointly entitled with the plaintiff or applicant shall join, as a party to the proceeding, each person so entitled.

(4) The court may order that any person who ought to have been joined as a party or whose presence as a party is necessary to enable the court to adjudicate effectively and completely on the issues in the proceeding shall be added as a party.

[ 83 ] To require a separate action in this fact situation or to prevent the addition of the proposed parties, would serve no useful purpose and would in my view be directly contrary to the intention of the Rules .

[ 84 ] An Order will therefore go granting Takeda leave to add Takeda Pharmaceuticals North America Inc. and Takeda Pharmaceuticals LLC as plaintiffs-by-counterclaim to this action.

XI. COSTS

[ 85 ] T a k e da w as obli ge d to pr e p a r e, b rin g a nd a tt e nd thi s o ppo s e d m otion t o a dd TP N A and TPL a s pl a intiff s b y c o unt e r c l a im a nd in c ur the c o s ts a s s oc iat e d t h e re w ith. Apot e x h as not p r ov i d ed sufficient r e a s ons a s t o w h y i t w o u ld s u f fe r p r ej u d ic e f r o m t h i s pr o ce d ur a l m at t e r, and as a consequence, I am holding that Takeda is entitled to its costs on a partial indemnity basis, payable within forty days. If the parties cannot agree upon the quantum, I may be contacted through my Assistant Trial Co-ordinator to deal with an appropriate resolution.

Master D. E. Short

DATE: June 13, 2012

DS/ R50