Canada has a system, similar to the Hatch-Waxman proceedings in
the United States, for linking generic drug approval to preliminary
clearance of patent hurdles. These proceedings are colloquially
known as NOC Proceedings, and are brought pursuant to the Patented
Medicines (Notice of Compliance) Regulations (the Regulations ).
There are a few main differences between the systems: 1) The
proceedings are not full actions, and thus have no discovery; 2)
the findings made are not in rem determinations of infringement
and/or validity, and are not binding on any subsequent action to
determine infringement or validity of the patent; 3) the innovator
has no right of appeal if the generic company is successful and
obtains its market approval; and 4) the innovator can be liable to
any generic company it kept off the market, for damages suffered by
that company while the proceeding was pending.
It is this last difference, where there has been a recent
fundamental shift in the law. Until recently, the Federal Courts in
Canada had made a number of findings that prevented generic
companies from gaining a windfall through the operation of the
regulations that govern these proceedings. Generic companies had
been limited to their damages, rather than being able to claim the
profits of the innovators. The time period was limited to that in
the regulations, and there was no ability for the generic companies
to claim twice for the ramp-up period. Damages were owed, but they
were based on the damages suffered by the generic company while it
was being kept off the market. This approach is in keeping with the
purpose of the Regulations.
However, two recent decisions from the Federal Court of Appeal
have changed that.1 These decisions relate to the drug
ramipril. NOC Proceedings were brought against a number of generic
companies, and ultimately, the majority were unsuccessful. Thus,
Sanofi brought patent infringement proceedings against both Apotex
and Teva when they came to market. Counterclaims of invalidity and
for damages pursuant to section 8 of the Regulations were brought.
The patent was held to be invalid, and Sanofi was held to be liable
for damages to both Apotex and Teva, pursuant to s. 8.
The quantum of damages owed to each generic company was
previously thought to be determined by how much of the generic
market each company would take up. However, in previous cases,
there had only been one generic company claiming s. 8 damages;
thus, determining the size of the hypothetical generic market in
the NOC world had been relatively simple. Arguments were mostly
about the timing and extent of market penetration. Nevertheless,
this was generally governed by what had happened in the real world.
However, in the ramipril cases, two generic companies had brought
suits for damages. The innovator argued that the overall market in
the hypothetical NOC world should be the same hypothetical NOC as
between the two companies, with the dispute being over how much to
pay to each from within that overall market. The Federal Court of
The Court held that each claim for s. 8 damages must be
determined on its own merits based on the evidence presented.
Furthermore, it held that the behavior of competing generic drug
manufacturers must be determined on the basis that the Regulations
exist. As a result, the hypothetical world constructed for each
generic market is not the same. This can result in a potential
windfall for each generic company as it is possible for each
generic company to prove to the Court that in the hypothetical NOC
world it would have obtained a share of the market bigger than it
holds in reality.
It is thus possible for the innovator to be forced to pay
damages that exceed the real world market share of a generic
company. Depending upon how many generic companies claim damages,
it is possible that the total payout made by an innovator could be
several multiples of real world damages of any one generic company.
As a result, innovators now need to consider this new reality when
determining whether to bring a proceeding pursuant to the
Originally published in LifeSigns - Life Sciences Legal
Trends in Canada
A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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