Canada: Pharma In Brief - Canada: Ontario Superior Court Affirms That Section 8 Damages Do Not Include Disgorgement Of Innovator’s Profits

Case: Apotex Inc. v. Abbott Laboratories Limited

Drug: Lansoprazole (PREVACID®)

Nature of case: Section 8 damages

Successful party: Abbott and Takeda

Date of decision: January 15, 2013

Summary

This is the first proceeding under the Patented Medicine (Notice of Compliance Regulations) ("NOC Regulations") brought by Apotex Inc. in the Ontario Superior Court of Justice. Apotex sought damages against Abbott Laboratories Limited ("Abbott") and Takeda Pharmaceuticals Company Limited ("Takeda") based on unjust enrichment. Abbott and Takeda brought a motion for partial summary judgment to dismiss Apotex's claim for disgorgement of their revenues or profits from sales of their patented medicine PREVACID®, known generically as lansoprazole.

The issue before the Court, as phrased by Quigley J. was "the extent to which a generic pharmaceutical company can obtain an equitable damages remedy from this court for an alleged violation of the federal legislative regime relating to patented pharmaceuticals – when the exact remedy sought has already been denied by the Federal Court and the Federal Court of Appeal."

Justice Quigley granted Abbott and Takeda's motion for partial summary judgment and dismissed Apotex's claim for disgorgement of profits based on unjust enrichment, which he held was outside of the parameters of section 8 of the NOC Regulations.

Brief Background of the Litigation and Settlement

Abbott and Takeda commenced an application under the NOC Regulations for an order prohibiting the Minister of Health from issuing a Notice of Compliance to Apotex until the expiry of the lansoprazole patent. Apotex's allegations of non-infringement and invalidity were virtually identical to those found not to be justified by the Federal Court in an earlier proceeding involving the generic manufacturer Novopharm for the same patent.

The NOC proceeding commenced by Abbott and Takeda against Apotex was ultimately settled while the decision of the trial judge was under reserve. Under the terms of the settlement agreement, Apotex reserved the right to claim for section 8 damages under the NOC Regulations but nothing in the agreement permitted Apotex to commence an action for unjust enrichment.

Equitable Jurisdiction of the Superior Court and the Federal Court

Justice Quigley had to consider whether the Ontario Superior Court enjoys a broader jurisdiction to grant equitable relief than the Federal Court, since Apotex was claiming exactly the same equitable disgorgement remedy before the Superior Court that it had been denied relative to other patentees by the Federal Court. He held that for matters of concurrent jurisdiction between the two Courts such as an award of damages for patent infringement or for actions under section 8 of the NOC Regulations, the Superior Court does not have a broader equitable jurisdiction than the Federal Court.

Was this an Appropriate Case for Summary Judgment?

Justice Quigley determined that the case before him was an appropriate case for summary judgment. He rejected Apotex's argument that the question of law central to the motion was unsettled and therefore should not be determined on a summary judgment motion. Rather, he held that it was particularly appropriate for that question of law to be determined in this case, given that in his view the recent appellate judicial developments had caused it to be a settled question. Even if the law was unsettled, Quigley J. held that he was in as good a position as the trial judge to determine the issue in this case.

The Effect of the Decision in Apotex v. Eli Lilly Canada Inc.

Justice Quigley went on to consider whether he should follow the Federal Court of Appeal's decision in Apotex v. Eli Lilly Canada Inc., 2011 FCA 358 ("Eli Lilly"), in which the Court held that section 8 of the NOC Regulations was a "complete code" and did not include disgorgement of an innovator's profits. While not strictly bound by the decision, Quigley J. held that the doctrine of judicial comity called for it to be followed in order to prevent the same legal issue from being decided differently by different courts. He offered five reasons that the Superior Court should follow the reasoning of the Federal Court of Appeal in Eli Lilly:

Reason #1: The Eli Lilly decision ought to be followed because it "plainly and conclusively" determines that unjust enrichment is not an available remedy to Apotex in this case. Justice Quigley noted the vast experience of the Federal Court of Appeal in the interpretation of the NOC Regulations. He also noted that the Eli Lilly decision was consistent with earlier appellate jurisprudence and that section 8 of the NOC Regulations was amended by Parliament in 2006 as a clear statement that the damages framework in section 8 was meant to be exclusive and all-embracing.

Reason #2: There was an absence of factual elements which would permit Apotex to access the remedy it was seeking. Justice Quigley noted that the Eli Lilly decision left open the possibility that unjust enrichment may be available in circumstances that would give rise to an abuse of process. However, the mere invocation of the NOC Regulations, regardless of the outcome, is not sufficient. Justice Quigley could find no basis upon which Apotex could allege wrongful invocation of the NOC Regulations.

Reason #3: Apotex sought leave to appeal the Eli Lilly decision to the Supreme Court of Canada, but leave to appeal was denied. Justice Quigley held that this clearly supported added weight being ascribed to the correctness of the decision.

Reason #4: Apotex's reliance on previous decisions of the Ontario Courts refusing to strike Apotex's unjust enrichment claims was misguided. Justice Quigley emphasized that the decisions referred to by Apotex involved motions to strike pleadings that embrace different tests and sets of assumptions than those that are to apply in the context of a summary judgment motion. Further, two of those decisions were rendered prior to the decision in Eli Lilly and the only decision that was rendered after Eli Lilly makes no mention of it in the reasons. Therefore, there was no appellate guidance in Canada regarding the availability of an unjust enrichment remedy as a substantive matter in the context of section 8 of the NOC Regulations.

Reason #5: The language used by Parliament in enacting and amending section 8 of the NOC Regulations was clear. Justice Quigley held that absent "cogent evidence of egregious conduct", the section 8 framework is a complete code and Parliament intended to eliminate any claim to unjust enrichment.

Juristic Reasons for the Enrichment of Abbott and Takeda

Justice Quigley held that even if a claim for unjust enrichment were available to Apotex, he would still find Apotex's claim untenable because the test for unjust enrichment could not be met. The parties agreed that for the purposes of this analysis there was an enrichment and corresponding deprivation. The only question was whether there was an absence of juristic reason for that enrichment.

After considering the legislative framework surrounding the NOC Regulations as well as the "early working" and "stockpiling" provisions that are part of the balance struck between innovators and generics, Quigley J. concluded that the NOC Regulations provide a juristic reason for the deprivation that Apotex complains about. He further held that the settlement agreement entered into between the parties also qualified as a valid juristic reason for the deprivation.

Conclusion

Justice Quigley summarized his decision by emphasizing that there was strong appellate authority which squarely addressed the questions upon which Abbott and Takeda sought summary judgment. As such, there was no genuine issue for trial and the motion for partial summary judgment against Apotex was granted.

Link to decision

Apotex Inc. v. Abbott Laboratories Limited, 2013 ONSC 356

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