In its recent decision, reported as Pfizer Canada Inc. v
Teva Canada Limited, 2016 FCA 161, the Federal Court of Appeal
("FCA") overturned the Federal Court's decision
awarding Teva $92 million (plus interest) in damages pursuant to
section 8 of the Patented Medicines (Notice of Compliance)
Regulations ("Regulations"). The FCA
remitted the issue of Teva's entitlement to damages back to the
Federal Court to be decided in accordance with proper evidentiary
principles. In particular, the FCA affirmed that it is Teva who
bears the burden of proving its loss on a balance of
probabilities. Further, the FCA held that the rules of
evidence (in particular, those rules that exclude hearsay) must be
applied when considering whether Teva has satisfied its burden.
The section 8 action arose by virtue of the dismissal of
Pfizer's (formerly, Wyeth) application for a prohibition order
in respect of its extended-release antidepressant, Effexor XR
Before the trial judge, Teva relied extensively on hearsay evidence
in respect of whether its supplier (Alembic Pharmaceuticals) could
have and would have supplied Teva with its venlafaxine
product. Rather than exclude this evidence as inadmissible,
the trial judge relied on it in coming to his decision to award
Teva its damages of approximately $92 million dollars, plus
Pfizer appealed this decision on multiple grounds. However,
the FCA's decision substantially focused on the issue of
Teva's burden to prove its loss and the importance of applying
the rules of evidence in determining admissibility.
Teva bears the burden of proving its loss
The FCA confirmed that, in section 8 cases, the overriding
principles are the same as other damages claims, such as those for
breach of contract or tort. First, the plaintiff is entitled
only to be compensated for losses caused by the commencement of a
prohibition proceeding that was withdrawn, dismissed or
discontinued. Second, the plaintiff must show both that it
could have and would have made the sales for which it seeks
compensation in the hypothetical or "but for"
A key issue in the venlafaxine section 8 trial was whether Teva
could have and would have obtained sufficient venlafaxine product
in the hypothetical world. As explained by the FCA:
Both "would have" and
"could have" are key. Compensatory damages are to place
plaintiffs in the position they would have been in had a wrong not
been committed. Proof of that first requires demonstration that
nothing made it impossible for them to be in that
position—i.e., they could have been in that
position. And proof that plaintiffs would have been in a particular
position also requires demonstration that events would transpire in
such a way as to put them in that position—i.e.,
they would have been in that position.
Both elements have to be present. "Could have" does not
prove "would have"; "would have" does not prove
There must be evidence that the parties "would have" and
"could have" ordered and supplied material at the
... Teva's position was that in the hypothetical world,
Ratiopharm (Teva) could have and would have obtained venlafaxine in
sufficient quantities from Alembic... Teva [bears] the burden of
proving that as part of its general burden to prove its
The rules of evidence must be applied
in section 8 proceedings
In attempting to establish that it had access to venlafaxine,
Teva put forward evidence which Pfizer objected to on the basis
that it was inadmissible hearsay. As noted above, the trial
judge nevertheless considered this evidence in determining that
Teva was in a position to supply the market with generic
venlafaxine in the hypothetical world.
The FCA agreed that this was improper and noted the importance of
applying the rules of evidence:
Recently, some rules of evidence have
been liberalized, allowing for more flexibility. Seduced by this
trend towards flexibility, some judges in various jurisdictions
have been tempted to rule all relevant evidence as admissible,
subject to their later assessment of weight. But according to our
Supreme Court, this is heresy. The trend towards flexibility has
not undermined the need for judges to take a rigorous approach to
admissibility, separating that analytical step from others, such as
determining the weight to be given to evidence...
... Before a court can rely on the evidence and ascribe it any
weight or draw any inferences from it, it first must determine its
In particular, the FCA noted the dangers in admitting hearsay
evidence, in particular the absence of an opportunity to conduct an
effective cross-examination. With respect to the specific
evidence in this case, the FCA held that it was impermissible for a
Teva representative to provide evidence in respect of its
supplier's operating capacity; its ability and willingness to
redirect or add equipment; or how long production would have taken
at the relevant time. Further, it was also impermissible to rely on
emails and documents not authored by the witness, as these could
not be properly authenticated by the witness.
As evidence was admitted which should have been excluded, which
may have affected the outcome of the case, the FCA held that
judgment of the court below must be set aside. The FCA
remitted the issue of Teva's entitlement to damages to the
Federal Court, to be decided in accordance with the appropriate
1 Teva Canada Limited v Pfizer Canada Inc., 2014
2 Pfizer Canada Inc. v Teva Canada Limited, 2016
FCA 161 at paras 50-52, 64
3 Pfizer Canada Inc. v Teva Canada Limited, 2016
FCA 161 at paras 83-84
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