On Jan. 23, 2015, the Federal Court released its decision
regarding the quantum of damages recoverable by Eli Lilly
("Lilly") in an action relating to Apotex's
infringement of patents related to the manufacture of the
antibiotic cefaclor. Lilly was awarded damages, including those
related to lost profits on lost sales and prejudgment interest at
the average rate of Lilly's overall profit rate compounded
annually, for the 17 years between the commencement of the
proceeding and the final disposition on the quantum of damages.
The quantum of the final award including prejudgment interest
totaled to $106,274,649.00.
The Court fully rejected Apotex's argument that damages
should be reduced because Apotex could have hypothetically avoided
infringement if it had known it was going to lose the liability
case (the "non infringing alternative" or NIA
The action commenced in 1997, damages were bifurcated and the
liability phase was decided in 2008 with Justice Gauthier holding
that Apotex infringed at least one valid claim in each of the eight
separate patents asserted by Lilly (Eli Lilly and Co v Apotex
Inc, 2009 FC 991; aff'd 2010 FCA 240; leave to appeal to
SCC refused,  SCCA No 434).
"Infringement of a patent is a statutory tort"
Justice Zinn fully rejected Apotex's argument that
Lilly's remedy for damages was more limited than that provided
for in subsection 55(1) of the Patent Act. Justice Zinn
noted that only Parliament can alter that statutory right, and no
judge has the jurisdiction to limit a plaintiff's recovery to
something less than its entitlement under the Patent
After a thorough review of the applicable jurisprudence, Justice
Zinn fully rejected that a NIA Defence is available in law to an
infringer in Canada in an action for damages for patent
infringement, thereby confirming Justice Snider's position that
"the existence of a non-infringing alternative is not relevant
to an assessment of damages" (Merck & Co v Apotex
Inc, 2013 FC 751).
Justice Zinn also confirmed that the causal connection between
the infringement and the damages it causes is determined based on
the facts as they existed in the real world, not on those that
could have existed. In other words, the infringer is not allowed to
argue that it would not have infringed in the "but for"
world when it did so in the real world.
Justice Zinn explained that a NIA is only considered when one
accounts for an infringer's profits as opposed to in a case
based on a patentee's damages. In an accounting of profits
analysis, it is necessary to determine what profit is directly
attributable to the use of the invention. However,
when one is assessing the damage sustained by the patentee because
of the infringement, it is irrelevant whether the infringer could
have done otherwise, because the damage resulted precisely because
of the infringement.
Justice Zinn relied on the Supreme Court's decision in
Bank of America Canada v Mutual Trust Co, 2002 SCC 43 to
find that compound prejudgment interest was available to Lilly as
an element of the compensation provided by subsection 55(1) of the
Patent Act which provides that the infringer is liable to
the patentee "for all damage sustained" by reason of the
In Bank of America, the Supreme Court recognized the
"time value" of money and concluded that the
unwillingness to award compound interest at common law should be
discarded where that remedy is required for the plaintiff to be
Justice Zinn rejected Apotex's narrow view of the judgment
in Bank of America, holding that the Supreme Court did not
state that equity and the common law right in contract were the
only "rights" available to support an award of compound
Once Lilly established that it lost profits as a result of the
infringement by Apotex, Justice Zinn accepted that "in
today's world there is a presumption that a plaintiff would
have generated compound interest on the funds otherwise owed to it
and also that the defendant did so during the period in which it
withheld the funds." As such, Lilly also sustained the damage
of the lost income that it would have generated from those
Finally, to determine the rate of prejudgment interest, Justice
Zinn held that the best measure to ascertain what loss the patentee
suffered over the period by not having the funds available to
invest in its business is to examine what profit it realized in its
business in the relevant time period.
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