Court File and Parties
COURT FILE NO.: CV-13-492419 DATE: 20170110 ONTARIO SUPERIOR COURT OF JUSTICE
RE: APOTEX INC. and APOTEX PHARMACHEM INC., Plaintiffs AND : ELI LILLY CANADA INC. and ELI LILLY AND COMPANY and ELI LILLY AND COMPANY and ELI LILLY SA, Defendants
BEFORE: Mr. Justice M. D. Faieta
COUNSEL: Nando De Luca and Michael Yasskin, for the Plaintiffs Marc Richard, for the Defendants
Costs Endorsement
BACKGROUND
[1] The defendant Eli Lilly and Company Limited (“Lilly UK”) owns the patent for olanzapine. The defendants (“Apotex”) developed an olanzapine product known as Apo-olanzapine, in respect of which it sought approval from the federal Minister of Health in 2006. In order to market this drug in Canada, Apotex was required to comply with the federal Patented Medicines (Notice of Compliance) Regulation, SOR/93-133 (“Regulation”).
[2] Given that this motion to strike was not determined on its merits, the following context is required in order to appreciate the submissions made by the parties.
[3] Under the Regulation, the Minister is not permitted to issue an approval to a generic manufacturer for a drug unless the patent for the drug has expired or the patent would not be infringed by the generic product. If a generic manufacturer alleges that neither of those conditions is met, then the patent holder may apply to the Federal Court for an order prohibiting the Minister from issuing regulatory approval to the generic manufacturer until after the expiry of the patent. The commencement of the application automatically enjoins the Minister from issuing an approval for until 24 months has expired or the proceeding has resolved, whichever occurs first. When an application is dismissed, discontinued or withdrawn, the generic manufacturer is entitled to compensation under section 8 of the Regulation for losses resulting from being kept off the market during the stay period.
[4] In this case, Apotex alleged that Lilly’s patent was invalid. The defendant Eli Lilly Canada Inc. (“Lilly Canada”) brought two proceedings for an order prohibiting the Minister from issuing an approval to Apotex for Apo-olanzapine until after expiry of the patent. On April 27, 2007, the Federal Court granted Lilly Canada’s application. An appeal to the Federal Court of Appeal was dismissed on February 5, 2008.
[5] At about the same time, Lilly Canada also sought a prohibition order against another generic pharmaceutical manufacturer, Novopharm Limited, in respect of olanzapine. On June 5, 2007, the Federal Court dismissed Lilly Canada’s application and found that Novopharm’s allegation of patent invalidity was justified. An appeal to the Federal Court of Appeal was dismissed on November 6, 2007.
[6] This action was commenced on November 7, 2013. Apotex claims compensation for damage which it allegedly suffered as a result of a delay in entering the market for the drug olanzapine because of Lilly’s assertion of a patent over olanzapine. As a result, it claims treble damages under two statutes, An Act concerning Monopolies, and Dispensation with penal laws, etc., R.S.O. 1897, c.323 (“Ontario Statute of Monopolies”) and An Act concerning Monopolies and Dispensations with Penal Laws, and the Forfeitures thereof, 1624, 21 Jac. I, c.3 (“English Statute of Monopolies”) as well as : (1) damages under section 8 of the Patented Medicines (Notice of Compliance) Regulation; (2) damages or an accounting of Lilly’s profits under section 53.2 of the Trade-marks Act, R.S.C. 1985, c. T-13; (3) damages at law.
[7] In a similar proceeding involving other patents, Justice Dunphy found that it was not “plain and obvious” that an action based on the Ontario Statute of Monopolies and the English Statute of Monopolies could not succeed: Apotex Inc. v. Eli Lilly and Company et al., 2015 ONSC 5396. Further, in a subsequent action, he found that it was not plain and obvious that a claim under sections 7(d) and 53.2 of the Trade-marks Act had no chance of success despite the argument that the right to compensation under section 8 of the Regulation creates a “complete code” for compensation: Apotex Inc. v. Schering Corporation, 2016 ONSC 3407.
[8] In another proceeding, involving the drug sildenafil, Justice Lederman found that there can be no claim for damages under section 8 of the Regulation where none of the criteria for compensation (namely, the application for a prohibition order is withdrawn, discontinued or dismissed by the court or the decision granting the prohibition order is reversed on appeal) are satisfied. The court found that a subsequent declaration that the patent was invalid did not allow the court to reach back to retroactively dismiss an application for an order of prohibition. On the other hand, the court dismissed the argument that a claim under section 7 of the Trade-marks Act as well as common law claims for unjust enrichment and conspiracy had no chance of success: see Apotex Inc. v. Pfizer Ireland Pharmaceuticals et al., 2016 ONSC 4966.
[9] The defendants’ motion to strike the entirety of the plaintiffs’ claim was scheduled on May 30, 2016 by this court to be heard on September 13, 2016. The defendants abandoned that motion on the day scheduled for the hearing after the court dismissed Lilly’s request for an adjournment. The plaintiffs seek costs of $84,234.72 in respect of their costs of preparing for this motion.
ANALYSIS
[10] The fixing of costs is governed by section 131 of the Courts of Justice Act and the Rules of Civil Procedure. Rule 57.01 is the primary rule governing costs. It enumerates various matters to be considered in fixing costs. As well, Rule 1.04(1.1) of the Rules of Civil Procedure, whose purpose is to promote access to justice, is also applicable. It provides that:
In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
[11] In fixing costs, the objective is to ascertain “an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding”. Although a successful party is usually indemnified for its costs by the unsuccessful party, the principle of indemnity is but one of many considerations in fixing costs. In order to promote access to justice, the reasonableness of the amount of costs claimed must also be considered: Boucher v Public Accountants Council (Ontario), (2004), 71 O.R. (3d) 291 (Ont. C.A.), at paras, 26, 37; Davies v. Clarington (Municipality), 2009 ONCA 722, at paras. 50-52; Elbakhiet v. Palmer, 2014 ONCA 544, at para. 38.
[12] I now turn to address the relevant considerations.
Offers to Settle
[13] On August 5, 2016 Apotex offered to settle Lilly’s motion to strike this claim on the following terms: 1) the paragraphs of the claim related to the cause of action under section 8 of the Regulation would be struck; 2) the balance of the motion would be dismissed; 3) there would be no costs awarded on this motion. On August 31, 2016, Lilly refused this offer and submitted that its motion not be heard before the final determination of Pfizer’s appeal of Justice Lederman’s decision. Apotex disagreed. Lilly requested delivery of Apotex’s motion materials by the end of the week.
[14] Apotex delivered its motion materials (a responding motion record and factum) on or about September 2, 2016.
Principle of Indemnity
[15] Apotex claims substantial indemnity costs of $84,234.72 and, in the alternative, partial indemnity costs of $56,639.28. Lilly submits that, at most, $6,000.00 in costs should be awarded to Apotex.
[16] Apotex claims the following hourly rates:
| Person | Actual (2016) | Substantial Indemnity | Partial Indemnity |
|---|---|---|---|
| Harry Radomski | 995 | 525 | 350 |
| Nando De Luca | 800 | 487.50 | 325 |
| Jerry Topolski | 660 | 390 | 260 |
| Michael Yasskin | 545 | 360 | 240 |
| Kirby Goldstein | 365 | 262.50 | 175 |
[17] Apotex claims fees in respect of the following items:
- Negotiate and agree to the scheduling of the motion to strike;
- Receipt and review of motion record
- Receipt and review of Lilly’s Factum and Book of Authorities;
- Draft and serve Responding Motion Record
- Research, draft, serve and file Responding Factum
- Research, compile, serve and file Book of Authorities
[18] An analysis of the reasonable of the time spent for each of the above matters is impossible as the costs outline does not specify what number of hours were spent by each lawyer on those items. Instead, Apotex chose to simply provide an outline of the number of hours spent by each lawyer, articling student and law clerk for the above items.
| Person | Hours |
|---|---|
| Radomski | 4.9 |
| De Luca | 65.9 |
| Topolski | 2.3 |
| Yasskin | 23.3 |
| Goldstein | 44.6 |
| Fulop (Student) | 12.8 |
| Stothart (Student) | 6.1 |
[19] In addition, Apotex’s costs outline separately accounted for “preparation for hearing of motion”:
| Person | Hours |
|---|---|
| De Luca | 12.0 |
| Yasskin | 8.0 |
Hourly Rates
[20] In my view the hourly rates claimed on a substantial indemnity and partial indemnity basis by Apotex are reasonable given their actual hourly rates.
Time Docketed
[21] Lilly submits that the number of ours claimed by Apotex in respect of responding to a 19 page factum and no substantive evidence seems exorbitant. As noted, the costs outline does not invite a detailed analysis of the time spent for each fee item. In my view it was unnecessary for two lawyers to appear the hearing of the motion to strike especially given the experience of senior counsel and the straightforward issue – namely, whether Apotex’s claim had no chance of success. I agree with Justice Horkins statement, in a different context, that “while the causes of action in question may be complex, the test on a leave to appeal motion and the applicable law is not”: Apotex v. Schering Corporation, Divisional Court File No. 292/16 & 295/16, October 14, 2016, para. 9.
[22] The Responding Motion Record was comprised of eight paragraph affidavit that simply attached the claims brought by Apotex in five proceedings as well as two other documents related to those other proceedings.
[23] Lilly submits that Apotex has commenced several other actions against other drug manufacturers alleging the same causes of action as asserted in this case. Apotex is represented by the same law firm in all cases. Many of these actions have been the subject of a motion to strike. I agree with Lilly’s submission that Apotex was not required to reinvent the wheel for responding to this motion to strike. For example, about 30 paragraphs from the factum filed by Apotex on this motion appear to have been adopted from the factum filed by Apotex on the motion to strike heard by Justice Lederman in the Pfizer action.
Disbursements
[24] Apotex claims disbursements, inclusive of HST, in the amount of $1,448.38, for photocopying the motion record, factum and book of authorities. Lilly submits that the charge of 25 cents per page is excessive. However, it does not state what counsel for Apotex charges it client for this service or what charge would be a reasonable for this service.
The Amount that an Unsuccessful Party could Reasonably Expect to Pay
[25] In Smith Estate v. Rotstein, 2011 ONCA 491, at para. 50, the Ontario Court of Appeal stated:
In my view, there is no requirement for the losing party, who is not seeking costs, to file a bill of costs although it is preferable that he or she does so. However, if the losing party chooses not to file a bill of costs, this is a factor that the judge, who is assessing costs, may take into account when considering the reasonable expectations of the losing party.
[26] Lilly did not submit its outline of costs and thus there is no evidence of its reasonable expectations.
The Amount Claimed and the Amount Recovered
[27] The amount of Apotex’s claim is undefined. However, it submits that “Apotex is claiming damages or an accounting of profits in respect of a market that is valued in excess of $850,000,000.00.”
The Complexity of the Proceeding
[28] Apotex submits that this motion was particularly complex. It does not explain the basis for this view. The motion raised the issue of whether various common law and statutory causes of action advanced by Apotex should be struck on the basis that there was no reasonable chance of success for any of the causes of action. In my view this motion was of modest complexity.
The Importance of the Issues
[29] As noted earlier, the issues raised on this motion have been recently addressed by other courts. The issues raised are not only of importance to the parties but also of jurisprudential importance.
The Conduct of any Party that Tended to Shorten or Lengthen Unnecessarily the Duration of the Proceeding
[30] Apotex submits that its claim should proceed to trial and not be “stuck” dealing with a motion to strike in light of decisions of this court that have refused to strike similar claims made by Apotex in other actions.
[31] However, a larger issue is the apparent lack of any attempt by Apotex to coordinate the management of the various similar actions (with or without this court’s assistance) that it has brought against other pharmaceutical companies for damages arising from wrongful delayed regulatory approval of various generic drugs that they manufacture. Better coordination of these various actions could have resulted in a more efficient and effective use of the parties’ (and this court’s) resources.
Whether any Step in the Proceeding was Improper, Vexatious or Unnecessary or Taken Through Negligence, Mistake or Excessive Caution
[32] No submissions were made on this point.
A Party’s Denial of or Refusal to Admit Anything that Should Have Been Admitted
[33] No submissions were made on this point.
Any Other Matter Relevant to the Question of Costs
[34] Apotex claims substantial indemnity costs. Such costs are generally awarded where the conduct on the part of one of the parties satisfies the standard of “reprehensible, scandalous or outrageous conduct” or an offer to settle has been made under Rule 49 of the Rules of Civil Procedure. See Young v. Young, [1993] 4 S.C.R. 3, page 134; Davies v. Clarington (Municipality), 2009 ONCA 722, para. 28.
[35] Apotex did not make an offer to settle that triggers an award of substantial indemnity costs. Further, Lilly’s conduct does not meet the requisite standard.
[36] Lilly submits that costs in the cause (to the successful party in the action) should be awarded. However, considering Rule 57.03(1) of the Rules of Civil Procedure, I am not satisfied that it would be more just to do so rather than to fix those costs.
Conclusions
[37] I find that it is fair and reasonable to order that Lilly pay the sum of $20,000.00 to Apotex in respect of its costs of the motion to strike this claim, inclusive of disbursements and HST, within 30 days.
Mr. Justice M. D. Faieta Released: January 10, 2017