Court File and Parties

COURT FILE NO.: CV-09-391938 DATE: 20181227 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: APOTEX INC., Plaintiff AND: ABBOTT LABORATORIES LIMITED, TAKEDA PHARMACEUTICALS COMPANY LIMITED and TAKEDA PHARMACEUTICALS AMERICA INC., Defendants

AND

ABBOTT LABORATORIES LIMITED, TAKEDA PHARMACEUTICALS AMERICA INC., TAKEDA PHARMACEUTICALS U.S.A., INC. and TAKEDA PHARMACEUTICALS COMPANY LIMITED, Plaintiffs by Counterclaim,

AND

APOTEX INC., Defendants by Counterclaim

BEFORE: LEDERER J.

COUNSEL: Steven Mason, James Holtom, Counsel, for the moving party Abbott Laboratories Limited Benjamin Pearson, Counsel, for the moving parties Takeda Pharmaceuticals Company Limited, Takeda Pharmaceuticals America Inc., and Takeda Pharmaceuticals U.S.A. Inc. Andrew Brodkin, Daniel Cappe, Counsel, for the responding party Apotex Inc.

HEARD: December 17 and 21, 2018

Endorsement

[1] These are two motions, both brought by the defendants, to amend their pleadings. They are governed by rule 26.01. The words of the rule, and the case law that has developed in respect of it demonstrate that there is, what amounts to, a predisposition that such a motion will be granted. The rule is mandatory. [1] It states:

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.

[Emphasis added]

[2] Absent non-compensable prejudice or that the claims being advanced are untenable at law, an amendment will be granted. [2] “The motion judge has jurisdiction to refuse to allow amendments that are not tenable in the law.” [3] Any prejudice relied on to oppose an amendment must arise from the amendment. Any pre-existing prejudice unconnected to the amendment will not suffice. [4] “Concern that proposed amendments to add new causes of action and parties would reconstitute and lengthen what is already a lengthy and complex commercial litigation cannot be allowed to emasculate the well-established rule that amendments should be presumptively approved…” [5] “Delay without more is not prejudicial.” [6]

[3] The case concerns the marketing of pharmaceutical products. Approval of a new drug is governed by the Food and Drugs Act [7] and the regulations promulgated pursuant to its terms. To be approved the “innovator” (the inventor) of a new product must demonstrate its efficacy. The proposed product will be subject to clinical tests. It will be approved through the issuance of a Notice of Compliance. The defendants Abbott Laboratories Limited, Takeda Pharmaceuticals Company Limited and Takeda Pharmaceuticals America Inc. (hereinafter “Abbott/Takeda”) together, through appropriate licensing arrangements, hold rights under a Notice of Compliance to produce and market Lansoprazole. It may be that another manufacturer (commonly a “generic manufacturer”) will seek to bring a similar product to market. Apotex Inc. (hereinafter “Apotex”) is well-known as active in this branch of the industry. This, too, requires a Notice of Compliance. The “generic manufacturer” need not undertake clinical studies. It provides an “abbreviated submission.” The thrust is not foundational health and safety but a comparison to the initial or already approved product. Apotex made submissions seeking a Notice of Compliance for a generic version of Lansoprazole.

[4] The difficulty is that the process of obtaining a Notice of Compliance and bringing the generic version to market does not only involve the regulation under the Food and Drugs Act but also concerns the infringement of patents under the Patent Act [8] and its regulations, specifically the Patented Medicines (Notice of Compliance) Regulations. In its submission the innovator may provide a list of the patents relevant to its new product and, thereby, seek their protection. The generic manufacturer having made its abbreviated submission is confronted with a choice: wait out the period of patent protection or challenge the patent (or patents) of concern as to either or both of its (their) validity or infringement by the generic product. Upon the receipt of a Notice of Allegation, the document through which the challenge is made, the innovator has 45 days to consider and bring a prohibition proceeding opposing the issuance of a Notice of Compliance to the generic manufacturer. During the 45 day period and for up to two years following the commencement of a prohibition proceeding, a “statutory injunction” places a stay on the efforts of the generic manufacturer to obtain a Notice of Compliance and begin the marketing of its product. The proceeding that follows is summary in nature. It is an application, not an action. There is no discovery. The issue is not whether the patent is valid or will be infringed but only whether the allegations raising these questions are justified. With the injunction in place, the generic manufacturer is left to wait out the two years. The injunction is as of right. There is no undertaking as to damages. However, if the prohibition application is unsuccessful, that is if, but for the prohibition application, a Notice of Compliance would have been issued, the generic manufacturer may claim, from the innovator, the losses it suffered as a result. Section 8 of the Patented Medicines (Notice of Compliance) Regulations begins:

If an application made under subsection 6(1) [the section authorizing the prohibition proceeding] is withdrawn or discontinued by the first person or is dismissed by the court hearing the application or if an order preventing the Minister from issuing a notice of compliance, made pursuant to that subsection, is reversed on appeal, the first person [the innovator] is liable to the second person [the generic manufacturer] for any loss suffered during the period…

[what follows identifies the period of time involved]

[5] This action concerns the claim of Apotex for “section 8” damages from Abbott/Takeda.

[6] It has a lengthy history. Lansoprazole is the subject of a patent for its use as an antibacterial agent to treat and prevent infectious diseases caused by the H. pylori bacteria (referred to as the ‘741 Patent). Lansoprazole was a known compound that had been used to treat gastric acid secretions. Another manufacturer, Novopharm applied for the issuance of a Notice of Compliance for its generic version. Abbott commenced a prohibition proceeding. Novopharm took the position that it would not be breaching the ‘741 patent because its generic version was to be marketed only for the old uses and not those protected by that patent. The Federal Court ruled in Abbott’s favour and issued an order prohibiting the Minister from issuing a Notice of Compliance until the expiry of the ‘741 patent. [9] This ruling was upheld by the Federal Court of Appeal. [10] It was clear to the Court of Appeal that the use actually sought by Novopharm was for the treatment of ulcers caused by the H. pylori bacteria. As a result Novopharm would not have been granted a Notice of Compliance, had suffered no loss as a result of its inability to market the drug and could not commence a claim for damages under section 8 of the Patented Medicines (Notice of Compliance) Regulations.

[7] Despite this, Apotex issued its own Notice of Allegations against Abbott/Takeda in respect to the same Lansoprazole patents that had been challenged by Novopharm raising allegations of non-infringement and invalidity of the ‘741 patent that were virtually identical to those found not to be justified by the Federal Court in the Novopharm proceeding. The prohibition proceeding, commenced by Abbott/Takeda, was settled. Apotex agreed not to proceed with its generic version of the drug. However, it reserved its rights to claim damages under section 8 of the Patented Medicines (Notice of Compliance) Regulations. Pursuant to the settlement, Apotex was restricted to claiming such damages for the period from April 1, 2007 to May 1, 2009. [11]

[8] Apotex undertook proceedings in the Federal Court. Apotex discontinued that action on September 1, 2009. By that time, it had commenced this action in the Ontario Superior Court. In the intervening nine years the action has been the subject of a motion to strike; two significant motions for summary judgement, one of which included considerations of the jurisdiction of this court; several amendments to every pleading and discovery. On June 5, 2017, a case management order was issued relating to the trial and, as recently as June 2018, a motion to amend pleadings was heard. There has been at least one attempt at mediation and a pretrial which has outlined the witnesses to be called and the amount of time each of them is expected to take up. It is ready for trial. The trial is set for ten weeks commencing January 14, 2019. Now on the proverbial eve of trial; at the figurative, if not the literal court room door; there is another request for further amendments to the pleadings, amendments which may well raise the prospect of an adjournment.

[9] What rule 26.01, and the case law that considers it, make clear is that when an amendment to a pleading is brought forward, even after all this time and activity, the history does not matter. The only issues are (1) whether the proposed amendment raises an issue that is tenable and if the answer is yes, (2) whether there is prejudice that would result from the amendment that is not compensable in costs (money) or an adjournment (time). To understand the impact of those questions it is important to appreciate the substance behind the proposed amendments.

[10] The amendments concern a possible defence that, it is submitted, may be available to Abbott/Takeda. It is grounded in Apotex Inc. v. Merck & Co., Inc. [12] In that case Apotex was found to have infringed on a patent held by Merck in respect of its product, Lovastatin. Apotex argued that the infringement did not result in any damage. It had available an alternative that it could have utilized to the same purpose, in the same market, that would not have infringed. Had it marketed the non-infringing alternative it would have reduced the sales of the innovator without transgressing on its patent. The trial judge concluded that this was not a relevant consideration in assessing damages. They should not be reduced on account of a non-infringing alternative. The Federal Court of Appeal disagreed. It held that the availability of a non-infringing alternative was relevant but in the particular case concluded, on the evidence, that Apotex had failed to establish that it could and would have pursued the non-infringing alternative. [13] The Court recognized that the relevance of the non-infringing alternative was not, in itself, demonstrative of the defence being raised. The patent of concern was the patent that supported the rights of Merck in respect of Lovastatin. It was the patent that was the subject of the action, the patent said to be “in suit”. While not determinative of the issues in this one, that case set the stage.

[11] The immediate catalyst for the amendments now being sought is Apotex Inc. v. Eli Lilly and Company. [14] This is a decision released by the Federal Court of Appeal as recently as November 23, 2018. [15] As counsel for Abbott/Takeda sees it, this case is a significant step in what they see as the continuing evolution of the understanding of the breadth and impact of the presence of a non-infringing alternative.

[12] In the course of the litigation, Apotex had been found to infringe a patented process for making cefaclor, the active ingredient in a generic drug Apotex had been selling in Canada. Eli Lilly was the patentee. It claimed damages for lost sales it would have made but for the infringement by Apotex. The Federal Court ordered Apotex to pay Eli Lilly damages and prejudgment interest totalling $106,274,649.00. The critical issue was whether Apotex had available a non-infringing alternative process for the making of cefaclor. Apotex argued that it could have sold its drug containing non-infringing cefaclor and captured the market legally. From this, Apotex argued there was no harm to Eli Lilly. The damage suffered by Eli Lilly was nil. As argued by Apotex, either way (with an infringing version or its non-infringing alternative) it would have captured the same share of the market.

[13] The Federal Court of Appeal held that the alleged non-infringing alternative relied on by Apotex did not infringe the patent at issue in the litigation (the in-suit patent). Nonetheless, Apotex could not escape the impact of any actual infringement because the so-called non-infringing alternative did infringe on a different patent held by Eli Lilly as the patentee:

… It goes without saying that to be a real alternative, and NIA must be lawful, that is to say, non-infringing. This applies to more than just the patent(s) in suit in the proceedings. [16]

[Emphasis added]

[14] This holding stands as an important step in the understanding of the boundaries of the effect of any prospective reliance on the presence of a non-infringing alternative. If it turns out that the so-called non-infringing alternative does infringe, not just the patent that is the subject of the litigation but any patent held by the patentee, it will not serve to exculpate the party infringing from the impact of that infringement.

[15] A review of the facts in the case that are the subject of these motions reveals that, in proposing the amendments, Abbott/Takeda seek to take the understanding of the impact of a proposed non-infringing alternative a step beyond its current state, even accounting for the decision in Eli Lilly. Unlike Apotex Inc v. Eli Lilly and Company this is not an action for infringement relying on an alternative said not to infringe on the patent that is the subject of that litigation. This is an action for damages pursuant to section 8 of the Patented Medicines (Notice of Compliance) Regulations. In this proceeding Abbott/Takeda defend the claim for damages by alleging that any sales lost by Apotex, in the section 8 period, would have infringed the 010 Patent, a patent which Abbott licensed from the Takeda defendants. Apotex submits that if it is found that Apo Lansoprazole would have infringed the 010 Patent it could have and would have sold the non-infringing alternative, capturing the same hypothetical sales as Apo-Lansoprazole would have done. On this basis, Apotex says it is entitled to section 8 damages for lost Apo-Lansoprazole sales, even if those sales would have infringed the 010 Patent.

[16] For Apotex, so far so good. But there is more.

[17] The 891 Patent, entitled “Pharmaceutical Formulations of Acid Labile Substances for Oral Use” was filed on April 29, 1987. The patent was issued on June 9, 1992 and expired on June 9, 2009. It was extant for the entire duration of the period subject to the Section 8 claim. The 891 Patent was not owned by Abbott/Takeda. It was owned by AB Hässle, a Swedish pharmaceutical company. AB Hässle is not a party to and has no interest in this proceeding. Abbott/Takeda has never held any rights in the 891 Patent. It is the position of Abbott/Takeda that the non-infringing alternative relied on by Apotex would infringe on the 891 Patent. Abbott/Takeda have produced experts reports which they say demonstrate that both Apo-Lansoprazole and the non-infringing alternative fall within the claims of (would infringe on) the 891 Patent.

[18] The substance of the amendments Abbott/Takeda propose would establish as an issue for the trial the proposition that the infringement of the 891 Patent would be unlawful, that an alternative that relies on such an infringement cannot be dealt with as a non-infringing alternative and cannot serve to save Apotex from the impact of any infringement on the 010 Patent. Abbott/Takeda submit that this position has already been addressed by the Federal Court of Appeal in Apotex Inc. v. Eli Lilly and Company. The Abbott factum filed in support of the proposed amendments (and relied on by Takeda) submits:

This holding-the first of its kind-is not restricted to patents owned or licensed by the parties to the litigation. It has been described by one academic commentator as “sound in principle”. While Eli Lilly was decided in the context of an alleged NIA, Abbott submits the principle applies equally to alleged hypothetical sales grounding a claim for section 8 damages. If Apotex’s alleged lost sales would have been unlawful because they would have infringed any patent, there can be no damages. [17]

[19] Apotex Inc. v. Eli Lilly and Company does not go that far. It deals with the damages associated with an actual infringement as opposed to the hypothetical infringement considered in a claim for damages under section 8 of Patented Medicines (Notice of Compliance) Regulations. Moreover, it does not extend to the infringement of a patent owned by a third party uninvolved in the action, claiming no harm or damage from the infringement.

[20] The extension of Apotex Inc. v. Eli Lilly and Company in this way, is novel. It is outside of the factual matrix on which that decision is based. Having said this, the words of, and the case law that explains rule 26.01, make clear the test is not whether what is being submitted has been successfully argued before. The question is whether the position taken is tenable at law.

[21] This is not a high bar. Yet, counsel for Apotex submitted that it has not been met.

[22] First, it is argued on behalf of Apotex that Apotex Inc. v. Eli Lilly and Company does nothing to advance the law as it relates to a non-infringing alternative. On its face the decision of the Federal Court of Appeal acknowledges the limitations of the case. Counsel for Apotex refers to the following to make this point:

Though the parties raised many issues, given the amounts involved, I do not agree with Apotex that new questions of law requiring the consideration of new policy concerns are at play. The facts of this case are so unusual that it would be unwise to use them as a backdrop for stating general principles of law. As the adage goes, “hard facts” often make “bad law”. [18]

[23] If it does not extend the law beyond Apotex Inc. v. Merck & Co., Inc. then Apotex Inc. v. Eli Lilly and Company does not stand for an overarching and established principle that a so-called non-infringing alternative is ineffective in assisting a generic manufacturer in an infringement action, much less a claim for Section 8 damages, because it infringes on a patent other than the one that is the subject of the litigation. This would be so whether the alternative patent being infringed is owned by the patentee of the patent in-suit or by a disinterested third party.

[24] Again, like the concern that this is an ongoing litigation finally set for trial, this submission is confounded by the apparent predisposition found in rule 26.01. The standing of the decision in Apotex Inc. v. Eli Lilly and Company is unclear. Even as obiter dicta, or observations that are otherwise not binding, the reference to the lawfulness of a non-infringing alternative applying to “more than just the patent(s) in suit” raise the issue. [19] The question of the ultimate power or persuasiveness of Apotex Inc. v. Eli Lilly and Company makes, rather than bars, the tenable standing of the argument the proposed amendments would support.

[25] Counsel for Apotex went on to submit that the amendments do not pose a tenable question of law because Abbott/Takeda do not have the standing to rely on an argument based on the infringement of a patent they do not own. The only party who can make such a claim is the patentee. In support of this submission reference was made to Section 44 of the Patent Act as it applied to the 891 Patent (referred to by counsel as the pre-1989 Patent Act) stated:

What patent shall contain and confer

Every patent granted under this Act shall… grant to the patentee and his legal representatives for the term therein mentioned, from the granting of the patent, the exclusive right, privilege and liberty of making, constructing, using and vending to others to be used the invention, subject to the adjudication in respect thereof before any court of competent jurisdiction.

[26] From this it is submitted that only the patentee obtained rights under the patent to make use of it. Where the patent is infringed only the patentee, and those it licensed or otherwise granted such rights, had a claim. Section 55 of the same version of the Patent Act states:

Infringement and remedy

(1) 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 by any person, by reason of the infringement.

Patentee to be a party

(2) Unless otherwise expressly provided, the patentee shall be or be made a party to any action for the recovery of damages referred to in subsection (1)

[27] There is no dispute. None of Abbott/Takeda are the patentee or a person claiming under the patentee. They are not seeking damages for the infringement of the 891 Patent. While this is so, counsel for Apotex submitted that the allegations in the proposed amendments are tantamount to allegation seeking damages for infringement. On behalf of Apotex it was submitted that a purposive reading of these provisions leads to the inescapable conclusion that none of Apotex/Takeda has standing to allege infringement of the 891 Patent, regardless of whether damages are sought. Maybe, but is there an argument to the contrary that may account for standing and leave the substance of the amendments tenable?

[28] Counsel for Abbott/Takeda points to Section 8, in particular, Subsection 8(5) of the Patented Medicines (Notice of Compliance) Regulations which states:

In assessing the amount of compensation the court shall take into account all matters that it considers relevant to the assessment of the amount, including any conduct of the first or second person which contributed to delay the disposition of the application under subsection 6 (1).

[29] This clause provides a broad discretion to the court, in the context of considering an award of damages under section 8, to take into account anything that may be relevant. Counsel for Abbott/Takeda submitted that this includes any infringement by the party claiming the benefit of a non-infringing alternative that, in fact, infringes on the patent of some other disinterested party. In their view, reliance on this clause is distinct from the rights provided for in section 44 and section 55 of the Patent Act as quoted above. Those sections reflect on a right to seek damages (in legal parlance, a “sword”); whereas, insofar as Subsection 8(5) may benefit a defendant, it provides only for a defence (in legal parlance, a “shield”). On the words of the section, the discretion it provides for, can work for the “innovator” (“the first person”) as Abbott/Takeda suggests could happen in this case but it could also be exercised to the benefit of the “generic manufacturer” (“the second person”). In such circumstances, the discretion could be exercised to increase the damages that might otherwise be provided pursuant to Section 8 of the Patented Medicines (Notice of Compliance) Regulations.

[30] Again, like the issues of the impact of Apotex Inc. v. Eli Lilly and Company, the question is not whether section 8(5) of the Patented Medicines (Notice of Compliance) Regulations would allow Abbott/Takeda to question whether the patent of a disinterested third party would be infringed. Rather it is whether there is a tenable argument that it does. Given the wording of the subsection and the broad discretion it provides, there is.

[31] This takes this endorsement to the issue that goes, not to the impact of a case or the standing of a party, but to the merits of the case at hand. Fundamental to the position of Abbott/Takeda is its reliance on the principle ex turpi causa non oritur action: Latin meaning "from a dishonorable cause an action does not arise". This is a legal doctrine which states that a plaintiff will be unable to pursue a legal remedy if it arises in connection with his own illegal act. The proposition, as put on behalf of Abbott/Takeda, is that the breach of a patent, regardless of who the patentee may be, is an illegal act and that, pursuant to the doctrine, Apotex should not be able to rely on an alternative as non-infringing when it does infringe, albeit on the patent of a disinterested third party. This puts legal substance to the submission that the evolution of the understanding of the law governing non-infringing alternatives should be such that to successfully rely on one, it cannot infringe on any patent, including those of disinterested third parties. This position is founded on the acceptance that infringing on a patent is an illegal act. But is it? Counsel for Apotex said that it is not. As he sees it, ex turpi causa connotes a level of moral turpitude not present when a patent is infringed.

[32] Counsel relied on Les Laboratoires Servier v. Apotex Inc., a case from the United Kingdom, to make this point. [20] Two lawsuits, one in the United Kingdom and one in Canada, were commenced alleging that Apotex had infringed patents for the same compound, one in Europe and the other in Canada. In the United Kingdom an interlocutory injunction was granted restraining the importation, by Apotex, of the generic form of the compound. An undertaking as to damages was included. Subsequently, judgment was given holding that the patent had been infringed but was invalid. The injunction was discharged. In Canada, the interlocutory injunction was refused but, in time, the Canadian patent was held to be valid and infringed. A final injunction was granted. The case cited concerned the claim made in the United Kingdom pursuant to the undertaking as to damages that had been made upon the grant of the interlocutory injunction. Among the issues raised was what the court referred to as the “illegality point”: was it contrary to public policy for Apotex to recover damages for being prevented from selling a product manufactured in Canada that would have been illegal as an infringement of the Canadian patent? The issue had been decided differently in the first instance and at the Court of Appeal. In the former, the judge ruled that a “relevant illegality” was one which was sufficiently serious in all circumstances of the case, including, in particular, whether the illegal act was done with knowledge or deliberately. From this, and for other reasons he barred Apotex’s claim. The latter concluded that the infringement of the Canadian patent was not a “relevant illegality” for the purposes of the defence.

[33] The United Kingdom Supreme Court began with what it referred to as the celebrated statement of principal in Holman v. Johnson [21]:

No court will lend its aid to a man who founds his cause of action on an immoral or an illegal act. If, from the plaintiff’s own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says that he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff… [22]

[34] The reasons then move the doctrine to more modern times:

The paradigm case of an illegal act engaging the defence is a criminal offence. So much so, that much modern judicial analysis deals with the question as if nothing else was relevant. Yet in his famous statement of principle in Holman v Johnson Lord Mansfield spoke not only of criminal acts but of “immoral or illegal” ones. What did he mean by this? I think that what he meant is clear from the characteristics of the rule as he described it, and as judges have always applied it. He meant acts which engage the interests of the state or, as we would put it today, the public interest… [23]

[35] The substance of the decision is found in, among others, the following two quotations:

Apart from these decisions, the researches of counsel have uncovered no cases in the long and much-litigated history of the illegality defence, in which it has been applied to acts which are neither criminal nor quasi-criminal but merely tortious or in breach of contract. In my opinion the question what constitutes “turpitude” for the purpose of the defence depends on the legal character of the acts relied on. It means criminal acts, and what I have called quasi-criminal acts. This is because only acts in these categories engage the public interest which is the foundation of the illegality defence. Torts (other than those of which dishonesty is an essential element), breaches of contract, statutory and other civil wrongs, offend against interests which are essentially private, not public. There is no reason in such a case for the law to withhold its ordinary remedies. The public interest is sufficiently served by the availability of a system of corrective justice to regulate their consequences as between the parties affected. [24]

In my opinion, the illegality defence is not engaged by the consideration that Apotex’s lost profits would have been made by selling product manufactured in Canada in breach of Servier’s Canadian patent. A patent is of course a public grant of the state. But it does not follow that the public interest is engaged by a breach of the patentee’s rights. The effect of the grant is simply to give rise to private rights of a character no different in principle from contractual rights or rights founded on breaches of statutory duty or other torts. The only relevant interest affected is that of the patentee, and that is sufficiently vindicated by the availability of damages for the infringements in Canada, which will be deducted from any recovery under Servier’s undertaking in England. There is no public policy which could justify in addition the forfeiture of Apotex’s rights. [25]

[36] If this case, standing on its own, was determinative, it might well be that the infringement of a patent could not stand as an illegal act. There is more. Counsel for Abbott/Takeda submitted that there is case law in Canada that proposes the possibility of a different result. Les Laboratoires Servier v. Apotex Inc. quoted one of them. It is Hall v. Hebert a decision referred, by the United Kingdom Supreme Court as the “much admired judgment of McLachlin J. [26]:

To allow recovery in these cases would be to allow recovery for what is illegal. It would put the courts in the position of saying that the same conduct is both legal, in the sense of being capable of rectification by the court, and illegal. It would, in short, introduce an inconsistency in the law. It is particularly important in this context that we bear in mind that the law must aspire to be a unified institution, the parts of which - contract, tort, the criminal law - must be in essential harmony. For the courts to punish conduct with the one hand while rewarding it with the other, would be to create an intolerable fissure in the law’s conceptually seamless web…We thus see that the concern, put at its most fundamental, is with the integrity of the legal system. [27]

[37] To differ between breaches of contract, tortious acts and the criminal law, making a breach of the first and acting on the second something less than illegal, and the third as the instance where the doctrine of ex turpi causa would apply would serve to render the law inconsistent and raise questions about its overall integrity.

[38] The application of ex turpi causa to cases of patent infringement is demonstrated in Apotex v. Merck [28]:

In my view, Apotex should not be able to recover damages for the hypothetical sale of any lovastatin that, more probably than not, would have been produced and sold illegally. Quite simply, the doctrine of ex turpi causa provides that a plaintiff should not profit from an illegal or wrongful act (see e.g. Hall v Hebert, 1993 SCC 141, [1993] 2 SCR 159, [1993] SCJ No 51). If it can be shown that Apotex would have likely used the infringing AFI-1 process during the Relevant Period, Merck’s ex turpi causa defence will succeed and I will exercise my discretion under s. 8(5) of the Regulations to disallow recovery by Apotex of those amounts. [29]

[39] This quotation does more than apply ex turpi causa to patent infringement; it confirms the discretion provided by subsection 8(5) as the means by which such questions enter into a consideration of damages under section 8 of the Patented Medicines (Notice of Compliance) Regulations. Both the applicability of the doctrine of ex turpi causa and the broad understanding of the discretion authorized by section 8(5) are confirmed by the following quotation from Apotex Inc. v. Merck [30] which is repeated in Apotex v. AstraZeneca Canada Inc.: [31]

...In my view, it is not necessary to read an ex turpi causa exception into subsection 8(1) in order to prevent patent infringers from unjustly recovering compensation from a first person.

This is because subsection 8(5) confers a broad discretion on the court when assessing the amount of compensation that the second person must pay. It provides that the court “shall take into account all matters that it considers relevant to the assessment of the amount,” including any conduct by either party that contributed to the delay in the disposition of the first person’s application for prohibition. In my view, this provision enables the Court to determine in its discretion whether, and to what extent, a second person’s claim for compensation should be reduced, or eliminated.

The Court’s broad discretion under subsection 8(5) allows it, when considering arguments based on ex turpi causa, to have regard to the factual situation in its entirety, including its nuances. In the present case, one such nuance is that not all the tablets sold by Apotex were found in the infringement action to contain lovastatin made by the infringing process. A court is likely to find it easier to apply the ex turpi causa principle through an exercise of judicial discretion than through the definition of liability. Discretion enables the court to assess the appropriate amount of compensation payable (including nil) in a manner that properly takes account of all the relevant facts. [32]

[40] As with each of the other issues raised, the question is not whether the infringement of a patent is an act that does or should cause the application of the doctrine of ex turpi causa. The question is whether an argument that it does is tenable. Like the other issues raised, I find that it is.

[41] What is plain is that the test set by rule 26.01 is met.

[42] The only question that remains is whether the ordering of the amendments requested would cause prejudice that cannot be compensated for by costs or an adjournment. I repeat what was said at the outset. Any prejudice must arise from the amendments and not from any pre-existing circumstance. The timing of the arrival of the reliance, by Apotex, on non-infringing alternatives is instructive. Apotex first gave notice of its non-infringing alternative plea by an email between counsel on April 14, 2015. On December 4, 2017 Apotex provided a Notice of Testing detailing two alleged non-infringing alternatives. In one of them meglumine would substitute for magnesium hydroxide as it is utilized in the original formulation of Lansoprazole. It was only on October 24, 2018 that Apotex gave notice that it was relying on that non-infringing alternative. On that day Apotex provided an expert report offering the opinion that Abbott did not suffer any hypothetical lost profit. The report suggests that Apotex would have made the same hypothetical sales and earned the same profit with the non-infringing alternative as it would have earned selling Apo-Lansoprazole. Abbott/Takeda has delivered experts’ reports establishing that the non-infringing alternative utilizing meglumine would have infringed the ‘891 patent owned by AB Hässle. Quite apart from the recent delivery of Apotex Inc. v. Eli Lilly, it is apparent that the reliance on the meglumine alternative as non-infringing and the corresponding development of the response proposing that it does infringe the 891 Patent has all taken place in the relatively recent past. If a defence to an allegation of infringement is raised late in the day, it is not for the party raising it to complain about prejudice when the full response is forthcoming in due course and amendments are sought to rationalize the pleadings to conform to the position being developed and taken.

[43] The onus of demonstrating prejudice in on the responding party. Apotex submits that it would be prejudiced because its ability to demonstrate that the 891 Patent was invalid, a typical response to an allegation of infringement, would be problematic. If this is an issue it is not one that arises from the amendment but will arise in any circumstance where infringement of a patent owned by a third party is said to have been infringed particularly when, as here, the patent in question has expired. Any delay to the trial occasioned by the timing of these amendments can be compensated for by costs and adjournment, if either or both are appropriate.

[44] The motions are granted.

[45] The amendments requested are ordered.

[46] As these motions have come on quickly following the release of Apotex Inc. v. Eli Lilly and Company, the parties were not able to review the issue of costs of the motions. If the parties are unable to agree, I may be spoken to.

Lederer J. Date: December 27, 2018

Footnotes

[1] Perell and Morden, The Law of Civil Procedure in Ontario, Third Edition LexisNexis Canada Inc. 2017 at p. 510 referring to Mazzuca v. Silver Creek Pharmacy Ltd. 2001 ONCA 8620, [2001] O.J. No. 4567, 56 O.R. (3d) 768 (Ont. C.A.); King’s Gate Developments Inc. v. Drake, 1994 ONCA 416, [1994] O.J. No. 633, 17 O.R. (3d) 841 (Ont. C.A.) [2] Ibid referring to Iroquois Falls Power Corp. v. Jacobs Canada Inc., [2009] O.J. 2642 at para. 20, 2009 ONCA 517 (Ont. C.A.), leave to appeal refused [2000] S.C.C.A. No. 367 (S.C.C.); Marks v. Ottawa (City), [2011] O.J. No. 1445, 2011 ONCA 248 at (Ont. C.A.); LBP Holdings Ltd. v. Allied Nevada (Gold Corp.) [2016] O.J. No. 2164, 2016 ONSC 1629 (Ont. S.C.J.), leave to appeal refused [2016] O.J. No. 4925, 2016 ONSC 6037 (Ont. S.C.J.), aff’d [2017] O.J. No. 71, 2017 ONCA 13 (Ont. C.A.); Steel Tree Structures Ltd. v. Gemco Solar Inc., [2016] O.J. No. 655, 2016 ONSC 955 (Ont. Div. Ct.) [3] Archibald and Sugunasiri, Ontario Superior Court Practice 2019, LexisNexis Canada Inc. 2018 at p. 1218 [4] Perell and Morden, The Law of Civil Procedure in Ontario, Third Edition, supra (fn. 1) at p. 510 referring to Iroquois Falls Power Corp. v. Jacobs Canada Inc., supra (fn. 2) [5] Archibald and Sugunasiri, Ontario Superior Court Practice 2019, supra (fn. 3) at p.1221 [6] Perell and Morden, The Law of Civil Procedure in Ontario, Third Edition, supra (fn. 1) at p. 510, There may come a point where the delay is so long and the justification so inadequate that some prejudice to the defendants will be presumed absent a demonstration by the party seeking the amendment that there is, in fact, no prejudice despite the lengthy and unexplained delay. (Ibid at p. 511referring to Family Delicatessen Ltd. v. London (City), 2006 ONCA 5135, [2006] O.J. No. 669 at para. 6 (Ont. C.A.); Ontario Securities Commission v. McLaughlin, [2009] O.J. No. 1993 (Ont. Div. Ct.); Morgan v. Spanogreco, [2009] O.J. No. 81 (Ont. S.C.J.). As will become plain, this idea has no application in this case. [7] RSC 1985, c F-27 [8] RSC 1985, c. P-4 [9] Abbott Laboratories Limited. v. Canada (Ministry of National Health and Welfare), 2006 FC 1411, 304 FTR 104; 55 CPR (4th) 48; [2006] FCJ No 1766 (QL) [10] Novopharm Limited v. Abbott Laboratories Limited, 2007 FCA 251, 367 NR 120; 61 CPR (4th) 97 [11] Apotex Inc. v. Abbott Laboratories Ltd. 2013 ONSC 356 at paras. 42-53 [12] 2015 FCA 171, [2016] 2 FCR 202; 2015 FCA 171; 387 DLR (4th) 552; [2015] FCJ No 900 (QL) [13] Ibid at para. 32 [14] 2018 FCA 217 [15] The Factum relied on by Abbott on this motion, at para. 18 notes that the decision was “publicly released on November 29, 2018.” [16] Apotex Inc. v. Eli Lilly and Company, supra (fn. 10) at para. 55 [17] Factum of Abbott Laboratories Limited at para. 22: The "academic commentator" referred to is Norman Siebrasse, in “Legitimate and NIA Must Not Infringe Any Patent” on his blog Sufficient Description: Observations on Canadian Patent Cases, online: <http:// www.sufficientdescription.com/2018/12/legitimate-nia-must-not-infringe-any.html. For completeness I point out that counsel for Apotex referred the court to another posting on the same blog (this one dated November 3, 2014) four years earlier than the posting relied on by counsel for Abbott/Takeda and before the Federal Court of Appeal decision in Apotex Inc. v. Eli Lilly and Company to a different effect: “Ex Turpi Causa Not Relevant to Patent Litigation”. [18] Apotex Inc. v. Eli Lilly and Company, supra (fn. 10) at para. 4 [19] Apotex Inc. v. Eli Lilly and Company, supra (fn. 10) at para. 55. The relevant part of that paragraph is repeated in the quotation referenced at fn. 12 herein. [20] [2014] UKSC 55 [21] (1775) 1 Cowp. 341 [22] Ibid at p. 343 quoted in Les Laboratoires Servier v. Apotex Inc, supra (fn.16) at para. 13 [23] Les Laboratoires Servier v. Apotex Inc, supra (fn.16) at para. 23 [24] Ibid at para. 28 [25] Ibid at para. 30 [26] (1993) 1993 SCC 141, 101 DLR (4 th ) 129 [27] Ibid at p. 165 quoted in Les Laboratoires Servier v. Apotex Inc, supra (fn.16) at para. 24 [28] 2012 FC 620 [29] Ibid at para.26 [30] 2011 FCA 364, 2011 CarswellNat 6112, [2011] FCJ 1864 (QL), 430 NR 74 [31] 2018 FC 181 [32] Supra (fn. 11) (Merck) paras. 36-38; Ibid (AstraZeneca) at para. 55