Canada: Profiting In The Provinces? Evolving Strategies Of Generic Pharmaceutical Damages Claims

Generic pharmaceutical companies operating in Canada have, in recent years, developed new strategies to claim increased statutory damages.

Section 8 of the Patented Medicines (Notice of Compliance) Regulations (the Regulations) provides that a generic shall be entitled to any loss suffered if a prohibition application against it is withdrawn, discontinued, or dismissed. Generics have focused on the phrase "any loss suffered" in an attempt to expand the scope of their claims.

A first and primary generic strategy to increase claimed losses, as employed in Merck v. Apotex (2009 FCA 187), is to seek disgorgement of innovator profits pursuant to section 8. However, in this case, the Federal Court of Appeal held that the Regulations limit generics to claiming only their own lost profits.

A second generic strategy employed in Merck was to seek damages beyond the statutorily prescribed period by seeking its lost future profits. The FCA, overturning the trial judge on this point, rejected this claim and limited damages to losses suffered, as opposed to caused, during the statutory period. The Court recently confirmed this in Teva v. Sanofi-Aventis (2011 FCA 149).

A third generic strategy sought to revisit the issue of innovator profits through a different juridical mechanism by adding a claim for unjust enrichment. However, in Apotex v. Servier (2009 FC 319) the Federal Court found that a claim for unjust enrichment framed in the same terms as the damages claim was improper. Furthermore, in Eli Lilly v. Apotex (2009 FC 693), the Court subsequently held that it lacked jurisdiction to hear equitable causes of action such as unjust enrichment, and that the Federal Courts Act does not confer jurisdiction where the conduct of a party, not a patent, is at issue. Likewise, in Apotex v. Nycomed (T-1786-08, April 18, 2011, unreported) the Federal Court found that the generic could not claim for unjust enrichment independent of section 8 of the Regulations.

These decisions culminated in the recent decision of the Federal Court of Appeal in Apotex v. Nycomed (2011 FCA 358). Here, the Court rejected claims for disgorgement of an innovator's profits for wrongful invocation of the Regulations, holding that Parliament had excluded such claims from the scope of section 8, and that the Federal Court had no jurisdiction to provide equitable relief in relation to such claims. Moreover, the Court specifically added that generics are not entitled to innovator profits simply because the prohibition applications which innovators initiated were ultimately dismissed as contemplated by section 8 of the Regulations.

While the federal courts have spoken definitively on the issue of innovator profits, that is not the end of the story. Generic manufacturers are now bringing unjust enrichment claims to the provincial courts. The recent decisions in Apotex v. Abbott (2010 ONSC 6909, leave to appeal refused 2011 ONSC 3988) were the first in these courts to consider this issue. Apotex had claimed damages pursuant to section 8 of the Regulations in the Federal Court. However, given unhelpful Federal Court jurisprudence, it discontinued the action there and commenced a virtually identical action in the Ontario Superior Court of Justice, adding a claim for unjust enrichment. The apparent goal was to claim innovator profits in a more favourable jurisdiction. Abbott brought a motion to strike the claim. The motions judge dismissed the motion, holding that it was not plain and obvious that the Regulations are a complete code ousting common law causes of action or remedies. The motions judge also held that the Regulations were not a "disposition of law" constituting a juristic reason for the innovators' enrichment because innovators were not "required by law" to invoke the Regulations.

The motions judge therefore held that it was not plain and obvious that the claim for unjust enrichment would fail. Subsequent motions for leave to appeal, attacking among other things, the fact that a disposition of law need not be "required by law," were dismissed.

These recent decisions have not decided that claims for unjust enrichment in cases for generic damages are proper; they have merely delayed deciding the issue. Furthermore, the Ontario cases were decided prior to the Federal Court of Appeal's most recent decision.

In any event, perhaps as a result of this temporary success, Apotex has, in Apotex v. Eli Lilly (CV-11-420115), also discontinued its claim for generic damages in the Federal Court and commenced a similar action in the Ontario Superior Court of Justice. In this case Apotex claims not only for unjust enrichment, but also treble damages and double costs pursuant to old English statutes, as well as damages or profits pursuant to section 53.2 of the Trade-marks Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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