Canada: Why Innovators Need A Right Of Appeal In PM(NOC) Applications

On Friday, November 23, 2012 the Federal Court of Appeal released its decision in A-312-12 dismissing Apotex's appeal of Justice Hughes' order dated June 18, 2012 granting Allergan's application for a prohibition order in respect of the drug COMBIGAN. This decision, and related litigation involving COMBIGAN, clearly demonstrates why innovators need a right of appeal when unsuccessful in applications they bring pursuant to section 6 of the PM(NOC) Regulations.

Facts and Issues

COMBIGAN is an ophthalmic drug marketed in Canada by Allergan. It is useful for lowering pressure in the eye and treating glaucoma.

The first generic to seek early market entry for a generic version of COMBIGAN was Sandoz. Of particular importance, Sandoz alleged that the invention claimed in Canadian Patent Number 2,440,764 (the '764 Patent) was obvious and therefore the claims were invalid. Allergan commenced an application seeking an order prohibiting the Minister of Health from issuing a Notice of Compliance to Sandoz prior to the expiry of the '764 Patent. That application was heard before Justice Crampton who held that Sandoz's allegation that the claims of the '764 Patent were obvious was not justified. Accordingly, Justice Crampton granted Allergan's application. Sandoz did not appeal.

The second generic to seek early market entry for a generic version of COMBIGAN was Apotex. Like Sandoz, Apotex alleged that the claims of the '764 Patent were obvious and therefore invalid. Allergan commenced an application seeking a prohibition order. That application was heard before Justice Hughes six months after Justice Crampton rendered his decision. Sandoz had already elected not to appeal Justice Crampton's order. Accordingly, as Justice Hughes held, Justice Crampton's order was "final".

The key issue before the Court on both occasions was the inventive concept of the claims of the '764 Patent. The claims were to a fixed combination drug containing two known medicinal ingredients. That fixed combination was demonstrated in a large clinical trial (disclosed in the patent) to have an improved safety profile as compared with one of the medicinal ingredients administered alone. Justice Crampton held that the inventive concept included this improved safety profile. Because that improved safety profile would not have been obvious to the skilled person on the relevant date, Sandoz's allegation that the inventive concept of the claims was obvious was not justified.

Justice Hughes disagreed with Justice Crampton's construction of the inventive concept. Specifically, Justice Hughes held that the inventive concept did not include the improved safety described in the specification. Justice Hughes construed the inventive concept as being limited to the stated objectives of the inventors, which he held to be obvious.

Ordinarily, Allergan's application would have been dismissed because Apotex's allegation that the claims were obvious was held to be justified. The result would have been that:

  1. The Minister of Health would have issued a Notice of Compliance to Apotex for its generic version of COMBIGAN;
  2. Apotex would have immediately commenced marketing of its drug;
  3. Provincial formularies would have been required to dispense Apotex's drug and not COMBIGAN (greatly diminishing Allergan's sales); and
  4. Allergan would have been required to pay section 8 damages for Apotex's delay in market entry (if proven).

Importantly, Allergan would not have had a right of appeal of Justice Hughes' order because the issuance of the Notice of Compliance sought by Apotex would have rendered Allergan's appeal moot. The reason Allergan's appeal would have been moot is because, at present, The Federal Court of Appeal does not have the power to quash a Notice of Compliance already issued to a second person (Apotex) on an appeal from an unsuccessful application brought by a first person (Allergan) pursuant to section 6 of the PM(NOC) Regulations.

The reason none of this happened is because Justice Hughes granted Allergan's application for the stated purpose of allowing the Federal Court of Appeal to provide guidance on the application of judicial comity where, as was the case here, the Federal Court had previously held that the same invalidity allegation was not justified. As Justice Hughes stated in his reasons, were he to have dismissed Allergan's application on the basis that Apotex's allegation was justified, Allergan's appeal would never be heard due to its mootness.


The unique facts of the COMBIGAN cases are unlikely to be repeated. It is unlikely that a first person will again be granted, effectively, a right of appeal where a second person's allegation (like Apotex's here) has been found to be justified. However, what this means is that there will be cases, as there have been, where an innovator's application is wrongly dismissed yet is immune from review with catastrophic consequences.

The current legislative scheme is unbalanced and unfair. An unsuccessful generic always has a right of appeal because any loss it suffers means that its Notice of Compliance does not issue. There are many cases where a generic has successfully exercised its right to appellate review; the VIAGRA decision from the Supreme Court of Canada is only the most recent example.

However, where an innovator loses a PM(NOC) case, its legal options are limited to bringing an action for patent infringement, and perhaps a motion for an interlocutory injunction (which have often been dismissed in the past). An innovator may simply elect to save its costs. An infringement proceeding would go on in parallel to, or in conjunction with, section 8 proceedings brought by the generic for its delay in market entry. The innovator may be required to pay damages where it never had the opportunity to challenge the correctness of the decision giving rise to automatic liability. All of this expends considerable Court resources at considerable cost to the public and to the litigants.

Applications brought pursuant to the PM(NOC) Regulations are summary in nature and proceed on a paper record. Appeals can be dealt with swiftly (as was the case in COMBIGAN) with the Court of Appeal equally placed to assess the evidence and render a decision. The injustice that would have occurred had Allergan not been permitted its day in the Court of Appeal is manifest and will be repeated absent legislative change.

Legislative Change

The Federal Government should amend the PM(NOC) Regulations to grant appellate Courts the power to quash a Notice of Compliance that is granted when an application brought pursuant to section 6 of the PM(NOC) Regulations is dismissed. With this change, an appeal brought by a section 6 applicant after its application is dismissed will not be mooted by the regulatory decision to issue a Notice of Compliance.

Fairness, balance and judicial economy demands that the Federal Government enact this change.

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