Canada: Canadian Court Determines Scope Of Financial Recovery For Delayed Generic Entry

Copyright 2008, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Intellectual Property, October 2008

A judge of Canada's Federal Court has issued the first trial decision on a claim made by a generic manufacturer under section 8 of the Patented Medicines (Notice of Compliance) Regulations (the Regulations) for damages suffered as a result of being kept off the market due to an innovator's assertion of its patent rights under the Regulations.

Background to the Regulations

The Regulations were initially implemented by the Canadian government in 1993, at the same time that the government abolished the compulsory licensing scheme that had been in place for patented pharmaceuticals for many years.

The Regulations link the ability of the Minister of Health (the Minister) to approve the marketing of a generic drug through the issuance of a Notice of Compliance (NOC) with the patent status of the equivalent innovative drug product.

A generic manufacturer which compares its product with a patented, innovative drug must either await the expiry of the innovator's patent(s) before obtaining its NOC or, alternatively, make an allegation of non-infringement or invalidity that is either not disputed by the innovator or is upheld by a court.

If the innovator commences court proceedings for an order prohibiting the Minister from issuing a NOC to the generic manufacturer ("NOC proceedings" or "prohibition proceedings"), the Regulations provide for a stay of up to 24 months, which can be extended or abridged by court order, before the Minister can issue a NOC.

The purpose of this stay is to allow sufficient time for the innovator's prohibition proceeding to be heard by the court.

The Canadian government's stated goal in implementing the Regulations was to strike a balance between the prevention of patent infringement and the facilitation of entry of generic drugs into the marketplace where no infringement exists.

Section 8

As part of this attempted balance, section 8 of the Regulations enables a generic manufacturer to obtain recovery for losses that it suffers as a result of a prohibition proceeding where the prohibition proceeding is withdrawn or discontinued by the innovator or dismissed by a court.

Section 8 provides that, in such circumstances, the innovator is liable to the generic manufacturer for any loss suffered during the period beginning on the date that a NOC would have been issued but for the Regulations and ending on the date of the withdrawal, discontinuance or dismissal of the prohibition proceeding.

Apotex v. Merck

In Apotex v. Merck, the first trial decision on a section 8 claim, Justice Hughes of the Federal Court had to decide the following three issues: (a) whether section 8 was validly enacted; (b) whether the section limits a generic manufacturer to recovering its lost profits or, alternatively, allows it to elect recovery of the innovator's profits; and (c) whether a generic manufacturer can obtain recovery for events occurring beyond the date on which a NOC proceeding is dismissed or withdrawn.

Validity of Section 8

Merck raised several attacks on the validity of section 8. First, Merck argued that the Patent Act (the Act) did not give the Federal Court jurisdiction to hear section 8 claims. Hughes J. disagreed, holding that the Regulations, including section 8, were properly authorized under the Act and conferred jurisdiction on the Federal Court to hear a section 8 claim.

Second, Merck argued that section 8 was not enabled under the regulation-making power granted in the Act. In this regard, Merck relied upon the wording of subsection 55.2(4) of the Act which permits the making of regulations "necessary for the preventing of the infringement of a patent". Merck argued that section 8 of the Regulations was not enabled since it punished an unsuccessful innovator rather than prevented infringement. Justice Hughes dismissed this argument, holding that the Regulations had to be viewed as a whole and that section 8 was an important part of the balance being sought by Parliament under the Regulations. In this regard, Hughes J. analogized section 8 to the undertaking that a party seeking an interlocutory injunction must provide to the court to compensate the defendant for damages that it may suffer through the wrongful granting of an injunction.

Third, Merck argued that section 8 creates a civil cause of action between individuals and as such is a matter respecting property and civil rights and thus a matter within exclusive provincial jurisdiction under Canada's constitution. In dismissing this argument, Hughes J. held that section 8 was an integral part of the scheme set out in the Regulations, authorized by the Patent Act, and which was directed to the enforcement of patent rights, a matter falling within exclusive federal jurisdiction under the constitution.

There are other arguments that can be made to attack section 8 and so it is likely that the Federal Court and the Federal Court of Appeal will be called upon to determine the validity of this section in future cases.

Recovery of Innovator's Profits

One of the arguments raised by Apotex was that it was entitled to its election of the greater of its damages or Merck's profits.

In recent years, there has been a series of interlocutory skirmishes over whether subsection 8(4) of the Regulations permits a court to award a generic manufacturer an election of either its damages or the innovator's profits. Subsection 8(4) formerly read "The court may make such order for relief by way of damages or profits as the circumstances require in respect of any loss referred to in subsection (1)". As a result of amendments to the Regulations made in 2006, section 8 now provides that the court can only make an award of damages to a successful generic manufacturer. This amendment does not, however, apply to any action commenced under section 8 prior to the coming into force of the amended Regulations on October 5, 2006. In the Regulatory Impact Analysis Statement accompanying the 2006 amendments, the Canadian government noted that it was reserving comment on the proper interpretation of the word "profits" in the former subsection 8(4), presumably since it did not wish to influence the outcome of litigation between innovators and generic manufacturers on this very issue.

Apotex relied upon the inclusion of the wording "relief by way of damages or profits" in the former subsection 8(4) as allowing its claim for Merck's profits. In response, Merck noted that under the wording of subsection 8(1) an innovator "is liable to the second person (i.e., the generic manufacturer) for any loss suffered", thus mandating that recovery is limited to losses suffered by the generic manufacturer, not profits made by the innovator.

Hughes J. agreed with Merck's argument, holding that the purpose of section 8 was to "compensate" a generic manufacturer for its losses suffered as a result of its delayed entry into the marketplace and that unless the Regulations expressly granted an equitable remedy (such as an accounting of profits) to a generic manufacturer, the court had no jurisdiction to go beyond a damages award.

This finding will substantially reduce the financial risk faced by innovators who have been unsuccessful in NOC proceedings since the profits earned by them during the period that the generic manufacturer was kept off the market will typically exceed the profits lost by the generic manufacturer during the same period.

Recovery for Period Beyond Dismissal of NOC Proceeding

As noted above, section 8 provides that a generic manufacturer is entitled to claim for losses suffered during the period between the date on which its abbreviated new drug submission (ANDS) was approvable and the date on which the NOC proceeding was withdrawn, discontinued or dismissed. In this case, there was nearly a 16-month gap between February 3, 2004 when Apotex' ANDS became approvable and May 26, 2005 when Merck's NOC proceeding was dismissed.

Apotex argued that part of the loss that it suffered during this 16-month period was its permanent loss of market share attributable to the fact that instead of being the first generic to enter the marketplace, two other generic manufacturers were able to enter the market at about the same time as Apotex.

In very brief reasons, Justice Hughes agreed with Apotex' interpretation. Hughes J. held that Apotex is entitled to claim damages for this permanent loss of market share as long as it was not a matter that Apotex rectified or could have rectified before the NOC proceeding was dismissed.


Justice Hughes' decision, like the Regulations themselves and the periodic amendments to them, is unlikely to entirely please either the innovators or the generic manufacturers. Although the innovators will be pleased with Hughes J.'s decision that their profits are not at stake in section 8 proceedings, they will be disappointed by his holding that section 8 is valid. Perhaps more important than either finding, however, is Hughes J.'s ruling on the recovery of damages for the period after the dismissal of an NOC proceeding. Not only will it be difficult in many cases to quantify such damages but the permanent nature of these damages could make for some large awards.

In view of the consequences, it is unlikely that Apotex v. Merck will constitute the last word on section 8. There are other section 8 cases pending and several of them are likely to make their way to the Federal Court of Appeal, if not the Supreme Court of Canada, before the scope of section 8 is conclusively determined.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

    By clicking Register you state you have read and agree to our Terms and Conditions