Court File and Parties

COURT FILE NO.: CV-13-492419

DATE: 20210427

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: APOTEX INC. and APOTEX PHARMACHEM INC., Plaintiffs

AND:

ELI LILLY CANADA INC., ELI LILLY AND COMPANY, ELI LILLY AND COMPANY LIMITED and ELI LILLY SA, Defendants

BEFORE: Paul B. Schabas J.

COUNSEL: Nando De Luca and Jerry Topolski, for the Plaintiffs

Marc Richard, Alex Gloor and Rebecca Stiles, for the Defendants

HEARD: December 3 and 4, 2020

COSTS ENDORSEMENT

Introduction

[1] On March 8, 2021, I released Reasons for Judgment in this matter granting a summary judgment motion brought by the defendants, and dismissed the action: Apotex Inc. v. Eli Lilly Canada Inc., 2021 ONSC 1588. The defendants (collectively, “Lilly”) now seek costs of the action.

[2] There is no dispute that Lilly is entitled to costs; the only issue is quantum, and the parties are far apart. Lilly has filed material indicating that it has incurred legal fees in defending the proceeding of $1,218,162.26, plus $18,018.21 in disbursements. It seeks costs on an “elevated” or substantial indemnity basis of 70% of the fees – $852,713.58, plus disbursements. Alternatively, it seeks costs on a partial indemnity basis of 60% of the fees - $730,897.35, plus disbursements.

[3] The plaintiffs (collectively, “Apotex”) describe Lilly’s demand as “outrageous,” “excessive” and “beyond any reasonable expectation as to what Apotex could have reasonably expected to pay in the present circumstances.” Apotex submits that “a reasonable award of costs would be in the order of $150,000.”

[4] I conclude that Lilly is entitled to costs of the action on a partial indemnity basis in the amount $700,000, inclusive of disbursements and taxes.

Legal Principles

[5] Under the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1), there is broad discretion in determining costs. Rule 57.01(1) of the Rules of Civil Procedure lists factors to be considered. In addition, the court should have regard to the principle of proportionality and seek to balance the indemnity principle with the objective of facilitating access to justice. As Rule 1.04(1.1) states:

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.

[6] The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances: Boucher v. Public Accountants Counsel for Ontario, 2004 CanLII 14579 (Ont. C.A.). In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66, Epstein J.A. stated at paras. 51-52:

As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said “[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice.”

[7] Generally, courts award costs on a partial indemnity basis which, as a starting point, are usually in the range of 60% of the fees actually incurred by the successful party. But this is subject to the particular circumstances of the case and the reasonable expectations of the parties.[^1] In some circumstances courts will award costs on an elevated scale, which may provide either full or substantial indemnity to the successful party. Such cases are relatively rare. Generally, they arise where serious but unfounded allegations of wrongdoing have been asserted and pressed by the unsuccessful litigant, or the losing party conducted the litigation in an oppressive or unreasonable manner, unnecessarily increasing the length and expense of the action which the court finds worthy of sanction. As Epstein J.A. stated in Davies, however, at para. 45:

Of course, a distinction must be made between hard- fought litigation that turns out to have been misguided, on the one hand, and malicious counter-productive conduct, on the other. The former, the thrust and parry of the adversary system, does not warrant sanction: the latter well may. In Apotex v. Egis Pharmaceuticals 1991 CanLII 2729 (ONSC), 4 O.R. (3d) 321 (Gen. Div.), substantial indemnity costs were justified as a means [at para. 8] "to discourage harassment of another party by the pursuit of fruitless litigation . . . particularly where a party has conducted itself improperly in the view of the court".

Discussion and Analysis

[8] This action involves two large and well-resourced pharmaceutical companies. They litigate frequently, often against each other. In this case it might be said that they litigate repeatedly, having regard to the extensive litigation that has been going on between Apotex and Lilly over the drug in issue, Olanzapine, and the 113 Patent. In January 2005, Lilly commenced proceedings pursuant to the Patent Act, R.S.C, 1985, c. P-4, and the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 (“PM(NOC) Regulations”), in response to Apotex’s notice alleging invalidity of the 113 Patent. As my Reasons for Judgment outline, that was the first of many proceedings in the Federal Court involving the 113 Patent, all brought before this action was commenced in 2013.

[9] When one of these companies chooses to sue the other, they know it will be expensive, and they know they will be putting the defendant to considerable expense too. These parties engage teams of lawyers from leading law firms. As this case illustrates, the cost of this kind of litigation is high – almost breathtakingly high. But so are the stakes. Although not particularized, the damages claimed by Apotex in this case were in the hundreds of millions of dollars, especially when one considers the claims for disgorgement of profits under the Trademarks Act, R.S.C. 1985, c. T-13, and for “treble damages” under the Monopolies Acts.[^2]

[10] My Reasons for Judgment addressed for the first time the merits of claims Apotex has asserted in several other actions - whether claims for damages arising from invalid patents can be pursued after all statutory remedies set out in the Patent Act and the PM(NOC) Regulations have been exhausted. This goes far beyond the particular dispute over Olanzapine. As Dunphy J. noted in Apotex v. Schering, 2019 ONSC 1393 at para. 3, Apotex’s claims involve amounts that “in this and similar claims could easily surpass $1 billion.” The stakes, therefore, are high, both financially and having regard to the importance of the issues.

[11] In addition to the legal issues, in its extensive pleadings Apotex raised many factual issues regarding the validity of the 113 Patent. Apotex’s Reply pleading alone is 30 pages long and includes 77 paragraphs. I note this because Apotex takes issue with the amount of time spent on the pleadings by Lilly. But a review of the pleadings underlines the number of issues Apotex, the plaintiff, chose to raise in this case, which required careful consideration and response by Lilly. It also, however, highlights the savings which have resulted from Lilly’s successful summary judgment motion, avoiding the need to deal with complex factual issues.

[12] Although the discoveries only spanned 5 or 6 days, given the amount at stake and the issues raised, I do not find the time and fees to be surprising or unreasonable. Damages were also complex having regard to the claim for disgorgement of profits.

[13] On the summary judgment motion, Apotex filed a large record including material from other, similar cases it has brought, and even filed material from NAFTA proceedings.

[14] Apotex’s complaint that the time spent by Lilly’s lawyers on the various aspects of the case is excessive can be given little credence when Apotex no doubt saw similar time being expended by its lawyers. On this point, Apotex complains that Lilly has not provided dockets; however, Lilly has at least provided hours spent by the various lawyers broken down by stages of the litigation. Apotex, on the other hand, has not provided any information or evidence whatsoever on the legal fees it has incurred in this matter to support its allegation that the costs claimed are “outrageous.” I infer from this that Apotex’s legal fees were similar to those incurred by Lilly.

[15] I therefore reject the unsupported assertion by Apotex that the amount of costs claimed by Lilly is “unjustifiable and beyond the reasonable expectation of the parties,” let alone “outrageous.” Put simply, both parties spent huge sums of money on this litigation and should therefore expect to pay large amounts in costs when unsuccessful. Indeed, it is unreasonable for Apotex, having commenced and pursued this litigation, to have expected anything less than a very large claim for costs by Lilly should the action be dismissed.

[16] Lilly argues that it should receive an elevated costs award for a number of reasons, including:

(a) Apotex was essentially seeking to relitigate issues it had lost in the Federal Court, including patent validity issues and damage claims;

(b) Apotex unnecessarily included several Lilly entities as defendants;

(c) Apotex conducted the litigation unreasonably by refusing to bifurcate liability and damages and insisting on discovery while the summary judgment motion was being brought; and

(d) Apotex made allegations of wrongful and fraudulent conduct which had no basis in fact.

[17] In my view, items (a), (b) and (c) listed above do not warrant an elevated award.

[18] While this action may well be seen as an attempt to relitigate matters on which Apotex lost in the Federal Court, the action raises important, if not necessarily novel, issues under the Monopolies Acts which could not be raised in the Federal Court. This court dismissed motions to strike similar actions, which is why Lilly chose to abandon its motion to strike the action a few years ago.

[19] The inclusion of multiple Lilly entities as defendants is troubling. It may have been due to the desire to claim a conspiracy, but related parties, including parent companies and subsidiaries, are often named as defendants out of an abundance of caution, and this does not amount to misconduct. Furthermore, in such circumstances the related parties are often defended by the same counsel, as occurred here.

[20] Similarly, a refusal to bifurcate proceedings or to postpone discovery may raise questions respecting tactics, but does not generally support an elevated award.

[21] Item (d) is more complicated. Allegations of fraud and conspiracy made without foundation and pursued in litigation often justify an elevated award. In this case Apotex made three such allegations: (a) that the Lilly defendants conspired against Apotex to, among other things, procure an invalid patent; (b) that Lilly’s 113 Patent should be declared invalid under the Patent Act’s fraud provision (s. 53(1)); and (c) that Lilly made false and misleading statements disparaging of Apotex contrary to the Trademarks Act.

[22] None of these allegations had any foundation in the evidence. Apotex could point to no unlawful acts or actions of Lilly which supported the claim that Lilly had conspired to injure Apotex, or that Lilly had made, knowingly or unknowingly, any false or misleading statements in obtaining and enforcing the 113 Patent, or that it had committed any acts whatsoever that could be characterized as deliberate, or even inadvertent, wrongdoing. As stated by Quigley J. in Apotex v. Abbott, 2013 ONSC 2958, another case in which Apotex sought relief over and above that provided for in the PM(NOC) Regulations, at para. 23, “baseless allegations of wrongful conduct plainly cross the line into counter-productive conduct that warrants a costs sanction.”

[23] Put against this is Apotex’s argument that the monopolies claim was “novel,” as had been noted in other decisions that considered whether to strike similar causes of action. However, as I point out in my Reasons, on closer analysis the claim under the Monopolies Acts had been made and dismissed in England in Peck v. Hindes (1898), 15 RPC 113 (Q.B.D.).

[24] Nevertheless, in the unique circumstances of this case I am not satisfied that Apotex’s conduct rises to a level that can be called “reprehensible, scandalous, or outrageous” such that an elevated award is warranted: see, e.g., Krieser v. Garber, 2020 ONCA 699 at para. 137. Apotex has been raising the legal issues that were addressed in this case for some time, and they needed to be resolved. While Apotex pleaded serious wrongdoing, its claim was essentially based on a legal argument that the Patent Act and the PM(NOC) Regulations are not exhaustive in providing remedies in the context of disputes over patented medicines.

[25] As to quantum, I agree with Apotex that one must not simply engage in a mathematical exercise of multiplying hours by rates. I also agree that the lack of a detailed breakdown of time and the involvement of so many timekeepers warrants some downward adjustment.

[26] For most litigants, awards of costs modify behaviour. Costs thereby have a controlling effect on the use of courts and court resources – which are public resources that must provide access to justice to everyone. As LeBel J. stated in British Columbia (Minister of Forests) v. Okanagan Indian Band, [2003] 3 S.C.R. 371, 2003 SCC 71, at paras. 25-26:

…modern costs rules accomplish various purposes in addition to the traditional objective of indemnification. An order as to costs may be designed to penalize a party who has refused a reasonable settlement offer; this policy has been codified in the rules of court of many provinces [citations omitted]. Costs can also be used to sanction behaviour that increases the duration and expense of litigation, or is otherwise unreasonable or vexatious. In short, it has become a routine matter for courts to employ the power to order costs as a tool in the furtherance of the efficient and orderly administration of justice.

Indeed, the traditional approach to costs can also be viewed as being animated by the broad concern to ensure that the justice system works fairly and efficiently. Because costs awards transfer some of the winner's litigation expenses to the loser rather than leaving each party's expenses where they fall (as is done in jurisdictions without costs rules), they act as a disincentive to those who might be tempted to harass others with meritless claims. And because they offset to some extent the outlays incurred by the winner, they make the legal system more accessible to litigants who seek to vindicate a legally sound position. These effects of the traditional rules can be connected to the court's concern with overseeing its own process and ensuring that litigation is conducted in an efficient and just manner. In this sense it is a natural evolution in the law to recognize the related policy objectives that are served by the modern approach to costs. [emphasis added]

[27] These objectives must apply, if possible, to wealthy and well-resourced litigants, just as they apply to individuals who may struggle under the economic burden of asserting or defending their legal rights in court.

[28] In high-stakes litigation between two very well-resourced companies, Apotex would reasonably expect Lilly to have incurred the fees which it did, and Apotex should, accordingly, pay a large amount in costs. In my view, an award of $700,000 inclusive of disbursements is reasonable in these circumstances. This reflects an amount that is close to 60% of the full costs incurred by Lilly, taking into account some reduction due to the lack of a full breakdown and concerns regarding duplication of work by so many lawyers.

[29] I appreciate that this award is larger than awards in many other summary judgment cases, and in cases which have involved much longer hearings. Apotex makes that point in suggesting an award of $150,000. However, the figure suggested by Apotex bears no relationship to the fees actually incurred and ignores “the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding” [emphasis added] as noted by the Court of Appeal in Davies v. Clarington, quoted above.

[30] Here, the two parties know that they will each incur huge legal costs in this type of litigation, and costs awards between them should reflect that knowledge and their circumstances. In this way, cost awards may have some of the effect on these parties that they are intended to have on other, less well-resourced, litigants. This includes a significant measure of indemnification, deterring claims which have a limited chance of success, and ensuring that litigation in our publicly-funded courts is “conducted in an efficient and just manner,” which may further access to justice.

[31] Accordingly, I award costs of the action to the defendants and order the plaintiffs to pay costs of $700,000, inclusive of disbursements and taxes.

Paul B. Schabas, J.

Date: April 27, 2021

[^1]: See James v. Chedli, 2020 ONSC 4199 at paras. 8 – 14 for a discussion of the case law that suggests a “rule of thumb” that partial indemnity costs should be approximately 60% of full indemnity.

[^2]: An Act concerning Monopolies, and Dispensation with penal laws, etc., R.S.O. 1897, c. 323 (the Ontario Statute of Monopolies) and An Act concerning Monopolies and Dispensation with Penal Laws, and the Forfeitures thereof, 1624, 21 Jac. I, c.3 (the English Statute of Monopolies, collectively, the “Monopolies Acts”).