The generic pharmaceutical manufacturer Apotex Inc. (Apotex)
commenced an action seeking declarations of invalidity and
non-infringement with respect to Canadian patent no. 1,339,452 (the
'452 patent), owned by H. Lundbeck A/S (Lundbeck),
relating to the medicine escitalopram. During the course of
these proceedings, Apotex brought a motion for an order striking
Lundbeck's counterclaim, or, in the alternative, requiring that
Lundbeck provide security for costs.
Lundbeck's counterclaim was in the nature of a quia timet
action on infringement (essentially an injunction to restrain
threatened and imminent patent infringement that has not yet
commenced). While Lundbeck admitted that such action would be
improper and subject to being struck if brought as an independent
action, it argued that its counterclaim should be saved and allowed
to proceed on the basis that it was brought in response to an
action seeking a declaration of non-infringement. If the
counterclaim was permitted to proceed, Lundbeck further argued that
it should not be required to post security for costs or, in the
alternative, that the amount requested by Apotex was
Wishing to sell its generic version of the antidepressant
escitalopram in Canada, Apotex filed an abbreviated new drug
submission with Health Canada to receive the necessary notice of
compliance (NOC), along with serving Lundbeck with a notice of
allegations (NOA) pursuant to the Patented Medicines (Notice of
Compliance) Regulations (SOR/93-133)
(Regulations). Lundbeck thereafter sought and was granted a
prohibition order preventing the Minister of Health from issuing a
NOC, thereby preventing Apotex from selling its drug in Canada
until after expiry of the '452 patent. Apotex commenced the
current action notwithstanding that an appeal from the prohibition
order has been scheduled for hearing on September 14, 2010.
Quia timet actions on infringement
The Court has consistently held, as demonstrated in Connaught Laboratories Ltd. v.
Smithkline Beecham Pharma Inc., (1998) 86
C.P.R. (3d) 36 (Connaught), that the actions of a
"second person" (or generic pharmaceutical company) in
pursuing a NOC under the mechanism set out in the Regulations, will
not, without more, justify the bringing of a quia timet action by a
"first person" (or innovator pharmaceutical company). The
Court, however, accepted Lundbeck's argument that the criteria
applied in Connaught should be applied flexibly in a situation
where a quia timet proceeding is brought in response to an action
for a declaration of non-infringement.
The fundamental concern in regulating the use of quia timet
proceedings is to prevent abuses of process and the avoidance of
wasting judicial resources on matters that will have no practical
effect. While an abuse of process might arise in situations where a
counterclaim was used to launch a fishing expedition at discovery,
in the present case Apotex would itself be putting sufficient
particulars before the Court relating to use of its generic
product, including revealing its formulation and method of
manufacture, in seeking a declaration of non-infringement. Given
that Lundbeck's counterclaim relied on the same facts as those
put forward by Apotex, the Court found that Lundbeck's
counterclaim would not constitute an abuse of process and would
instead avoid a potential waste of judicial resources by ensuring
that all issues between the parties were finally resolved. As
a result, Apotex's motion to strike was refused.
Security for costs
Given that Lundbeck's counterclaim was allowed to proceed
and that Lundbeck was not ordinarily resident in Canada, Apotex was
prima facie entitled to an order for security for costs. Lundbeck,
however, argued that the amount requested by Apotex was excessive
and, further, that the Court should exercise its discretion to
dispense with the requirement as Lundbeck had substantial foreign
assets sufficient to cover any award of costs.
The Court concluded that Lundbeck should only be required to
post security for costs if Apotex's expected costs in defending
the counterclaim could be shown to exceed its costs in pursuing the
main action. The Court used Tariff rates to determine that
Apotex's initial request was clearly excessive and that any
additional costs in defending the counterclaim would be minimal.
Upon considering a variety of factors and finding the counterclaim
to be dependent on the main action, the Court decided that Lundbeck
should be exempted from the requirement to post security for
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