Canada: ONCA Permits Pleading Amendments Asserting Validity Of Previously Invalidated Patent Following Nexium Decision

Last Updated: November 22 2018
Article by Kassandra Shortt, David Yi and Allyson Whyte Nowak

Most Read Contributor in Canada, November 2018

This decision of the Ontario Court of Appeal (ONCA) arises in the context of a novel action brought by Apotex seeking damages for the delayed market entry of its generic version of Sanofi's blockbuster ramipril drug.

Apotex's claims in this action are linked to the invalidity of Canadian Patent No. 1,341,206 (206 Patent). The 206 Patent had previously been invalidated based on the application of the "promise doctrine". In June 2017, the Supreme Court of Canada (SCC) held that the invocation of the "promise doctrine" was an error in law and abolished the doctrine once and for all in AstraZeneca Canada Inc. v. Apotex Inc. (Nexium). This decision of the ONCA reverses a lower court decision denying Sanofi's pleadings amendments, which asserted that the underlying decision invalidating the 206 Patent was based on wrong legal principles, and relied on the Nexium decision.

This is a significant development in this case which also highlights a growing tension between decisions of the Federal Court and the Ontario Superior Court in a novel legal proceeding.

Background

In this action Apotex claims damages pursuant to three statutes: An Act concerning Monopolies, and Dispensation with penal laws, etc., R.S.O. 1897, c. 323 (Ontario Statute of Monopolies); An Act concerning Monopolies and Dispensations with Penal Laws, and the Forfeitures thereof, 1624, 21 Jac. I, c. 3 (UK Statute of Monopolies, and collectively with the Ontario Statute of Monopolies, the Monopolies Acts); and the Trade-marks Act, R.S.C., 1985, c. T-13. While the Patented Medicines (Notice of Compliance) Regulations (the Regulations) provide a specific remedy for delayed generic market entry pursuant to section 8, and despite Apotex having already received $215 million in section 8 compensation, Apotex commenced this novel action in the Ontario Superior Court claiming additional sums under the Monopolies Act and Trade-Marks Act.

Following the SCC's rejection of the promise doctrine in Nexium, Schering and Sanofi-Aventis et al. (Defendants) sought to amend their pleadings, which Apotex opposed on the basis of issue estoppel. The motions judge denied the Defendants' amendments, as we previously reported.

The amendments assert the validity of the 206 Patent, which was previously held to lack utility in both PM(NOC) proceedings and in a subsequent infringement action. Both cases predated the abolition of the promise doctrine by the SCC in the Nexium decision, reported here. The ONCA found that the SCC's rejection of the promise doctrine in Nexium constituted "special circumstances" that exempted the application of the doctrine of issue estoppel and distinguished a decision by the Federal Court of Appeal (FCA) on a similar point in Eli Lilly Canada Inc. v. Teva Canada Ltd., 2018 FCA 53 (FCA Olanzapine), previously reported.

Decision on Appeal

The ONCA allowed the Defendants to amend their pleadings, finding that the preconditions for issue estoppel had been met, but exercised its discretion not to apply the doctrine. It found that the SCC's decision in Nexium constituted a change in the law and that denying the amendments would work an injustice in the circumstances of the case. Apotex's own claims for relief put the validity of the 206 Patent in issue — it is an essential element of Apotex's claims. Additionally, the quantum of damages claimed is approximately $1 billion to $3 billion. The ONCA accepted that allowing the amendments would lead to re-litigating the 206 Patent's validity, but noted that the costs of any re-litigation of patent validity paled in comparison with the quantum of damages claimed by Apotex. Accordingly, it would be fundamentally unfair to deprive the Defendants of the opportunity to defend the validity of the 206 Patent in these circumstances.

Distinguishing FCA Olanzapine

In its analysis, the ONCA also distinguished the FCA Olanzapine decision. In FCA Olanzapine, the impact of Nexium on the validity of a patent was raised on appeal in a section 8 action. The FCA found that the validity of the patent had been previously determined and that Nexium did not warrant the application of the "special circumstances" exception to issue estoppel in the circumstances of that case.

The ONCA observed that the exercise of discretion in the application of issue estoppel permits different courts to exercise their discretion differently. Nevertheless, it distinguished FCA Olanzapine on the bases that it:

  • Concerned a section 8 damages award, not claims for damages pursuant to the Monopolies Acts and the Trade-marks Act; and
  • Was an appeal of a trial decision rather than a decision on a motion for leave to amend pleadings.

The ONCA also expressly disagreed with the FCA on certain issues. First, the ONCA rejected the distinction drawn by the FCA between litigation involving commercial interests and other types of litigation and the FCA's suggestion that issue estoppel is more applicable in commercial litigation. Second, the ONCA disagreed that permitting a change in the law to constitute a "special circumstance" weakened the objective of finality and held instead that the change in the law presented by Nexium was "precisely the type of special circumstance" that warranted the principle of finality yielding to the circumstances of the case.

Link: Apotex Inc. v. Schering Corporation, 2018 ONCA 890; rev'g 2018 ONSC 903


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