Canada: Federal Court Of Appeal Rules On Non-Infringing Alternatives And Apportionment As Defences To An Accounting Of Profits From Patent Infringement

On February 2, 2017, the Federal Court of Appeal released a significant decision on accounting for profits, a remedy for patent infringement in Canada: Apotex Inc v ADIR, 2017 FCA 23. The appeal concerned two defences raised by Apotex (and a related company) to reduce the profits it had to disgorge for its wrongful export sales of generic perindopril (COVERSYL). The two defences - non-infringing alternatives ("NIAs") and apportionment - are closely related, both contending that an infringer's profits, in full or part, are not causally attributable to the infringement.

The Court of Appeal found that, in this circumstance, the Federal Court had erred in law by rejecting Apotex's argument that the availability of NIAs reduced the profits to be disgorged. The question of whether an NIA was available on the facts was remitted to the Federal Court. The Court of Appeal upheld the Federal Court's decision not to apportion Apotex's foreign revenues between those received for perindopril and those allegedly received for non-infringing services.


Starting around 2006, Apotex sold, in Canada and abroad, generic perindopril that it had manufactured in Canada. In 2008, as previously reported, the Federal Court found that these activities infringed ADIR's Canadian Patent No. 1,341,196 ("196 patent"): 2008 FC 825, aff'd 2009 FCA 222. The plaintiffs elected to claim an accounting of Apotex's profits.

In 2015, after a 17-day hearing, a trial judge of the Federal Court determined the amount of Apotex's profits attributable to infringing activity: 2015 FC 721 (previously reported here). At trial, Apotex acknowledged that to make domestic sales of perindopril it had to infringe the 196 patent; it followed that profits from these sales had to be completely disgorged. At issue at trial, and on appeal, were Apotex's profits from its export sales, particularly to Apotex affiliates in Australia and the UK. Apotex received revenue from these affiliates under transfer price agreements.

Non-infringing alternatives

At trial, Apotex tried to establish that it could have made profits by selling NIAs to its foreign affiliates, namely perindopril active pharmaceutical ingredient and finished tablets manufactured outside Canada. In some of the hypothetical scenarios advanced by Apotex, selling NIAs would have been even more profitable than selling its real-world perindopril, ostensibly reducing to zero the profits from exports Apotex would have to disgorge. The trial judge rejected the relevance at law of the alleged NIAs.

The Court of Appeal reversed. The Court acknowledged that the Supreme Court of Canada in Monsanto Canada v Schmeiser, 2004 SCC 34, had found that the differential profit approach ("profits are allocated according to the value contributed to the defendant's wares by the patent .... A comparison is to be made between the defendant's profit attributable to the invention and his profit had he used the best non-infringing option") was the preferred means of calculating an accounting of profits, and not the only means. But the Court noted that a patentee should only receive that portion of the infringer's profit that is causally attributable to the invention. In this circumstance, the invention's value could only be quantified if NIAs were considered, because a patent's value lies in the ability to exclude competition.

The Court of Appeal provided guidance on how to determine whether an alleged NIA was available. The Court observed that in considering this question, one enters a hypothetical world where the infringer did not infringe. The Court held that its recent findings on the nature of the hypothetical world applied to an accounting of profits context. In particular, an infringer must establish that in the hypothetical world it "could have" and "would have" obtained and used the NIA. To prove "could have", the infringer must demonstrate that it was possible for it to secure the NIA; to prove "would have", the infringer must demonstrate that events would have transpired in such a way as to put them in that position. See Apotex Inc v Merck & Co, Inc, 2015 FCA 171 (a claim for damages for patent infringement, previously reported here) and Pfizer Canada Inc v Teva Canada Ltd, 2016 FCA 161 (a claim for damages under section 8 of the Patented Medicines (Notice of Compliance) Regulations, previously reported here).

The Court added that the inquiry is not limited to whether a supply of the NIA was available to replace the initial infringing sales, as the supply may become available at some later time in the hypothetical world.

The Court of Appeal remitted to the Federal Court the factual issue of whether Apotex could have and would have obtained non-infringing perindopril from three specific offshore suppliers, and, if so, whether Apotex could have and would have sold this material to its Australian and UK affiliates.


At trial, Apotex asserted that a portion of the transfer price paid by its Australian and UK affiliates for perindopril was for services that did not infringe the 196 patent, namely an indemnity for liability under foreign patents and related legal services. Apotex sought a $22 million deduction from its foreign profits on this basis. The trial judge found that although apportionment could have been appropriate, Apotex had not led sufficient evidence.

The Court of Appeal upheld the decision not to apportion. The Court found that apportionment was not appropriate because "but for" the infringing perindopril, Apotex would not have earned anything on its sales to its Australian and UK affiliates. What drove these sales were the new and useful characteristics of perindopril. Thus, the profit resulting from these sales was entirely causally attributable to the patented invention. This finding was fatal to Apotex's apportionment argument. Nonetheless, the Court went on to also find that Apotex's evidence for apportionment was insufficient, particularly as the transfer price agreements and surrounding factual matrix did not support an intention to provide the non-infringing services in exchange for a higher price for perindopril.

Finally, the Court of Appeal noted that Apotex's apportionment argument had no air of reality. It was not credible that Apotex objectively intended to apportion the transfer price where "this notion was first floated on the eve of trial".

For further information, please contact a member of our firm's Pharmaceutical group.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.