Canada: Ontario Court Of Appeal Allows Sanofi And Schering To Plead That Federal Court Ramipril Patent Invalidity Decision Was Flawed Due To "Promise Doctrine"

In an action by Apotex for compensation from Sanofi and Schering under the Ontario Statute of Monopolies, U.K. Statute of Monopolies and the Trade-marks Act, the Ontario Court of Appeal has overturned a motion judge's decision denying Sanofi and Schering leave to amend their defences to plead the Supreme Court of Canada's decision in AstraZeneca Canada Inc. v Apotex Inc., 2017 SCC 36 [AstraZeneca]: Apotex Inc. v Schering Corporation, 2018 ONCA 890.

Background

The litigation relates to Canadian Patent No. 1,341,206 ("206 patent"), owned by Schering, and the drug ramipril (ALTACE), previously marketed by Sanofi.

In 2009, applying the "promise doctrine" of patent utility, the Federal Court held that certain claims of the 206 patent were invalid (Sanofi-Aventis Canada v Apotex Inc., 2009 FC 676 ("invalidity decision") aff'd 2011 FCA 300). Relying on that invalidity decision, Apotex brought the present action in 2011 seeking damages beyond those available under section 8 of the PMNOC Regulations. The Federal Court has already awarded damages under section 8 (Apotex Inc. v Sanofi-Aventis, 2012 FC 553, var'd 2014 FCA 68, aff'd 2015 SCC 20).

The Supreme Court of Canada subsequently rejected the promise doctrine, finding in AstraZeneca that it was "unsound" law and not the correct approach for assessing patent utility (previously reported).

Decision under appeal

In light of AstraZeneca, Sanofi and Schering sought leave to amend their statements of defence to plead that the Federal Court relied on wrong legal principles in finding the 206 patent claims invalid. Leave was denied by Dunphy J. (reported here), primarily on the grounds that the defences amounted to re-litigation and collateral attack of the invalidity decision. On November 8, 2018, the Ontario Court of Appeal overturned the motion judge's decision and allowed Sanofi's and Schering's amendments.

"Special circumstances" exception to issue estoppel and collateral attack

The Court of Appeal determined that issue estoppel should not prevent the amendments. Contrary to the motion judge's reasons, the Court of Appeal held that statutory amendments are not the only changes in the law relevant to the special circumstances exception to issue estoppel; the exception also contemplates a decision by a court on a point of law. AstraZeneca was such a decision – by the Supreme Court of Canada – on a point of law "central" to the invalidity decision.

The Court of Appeal repeated earlier guidance by the Supreme Court of Canada that the "most important factor" in determining whether issue estoppel should apply is whether "taking into account the entirety of the circumstances, ... application of issue estoppel in the particular case would work an injustice" (Danyluk v Ainsworth Technologies Inc., 2001 SCC 44). The Court stated "...the strict application of issue estoppel in this case would work an injustice on [Sanofi and Schering]..." The Court noted the invalidity decision is "central" to Apotex's claim and it would be "fundamentally unfair" to deprive Sanofi and Schering of the opportunity to argue that the invalidity decision is suspect.

The Court of Appeal rejected the view that the potential for delay or expansion of the trial in the action (if re-litigation of validity is required) should bar the amendments. The Court of Appeal noted that Apotex is the party who is effectively raising the issue by pursuing its "novel claim" for an "extraordinary level of damages" beyond what it has already received in the Federal Court. In that context, Apotex cannot complain if Sanofi and Schering are given an "equal opportunity to defend."

Moreover, the Court of Appeal found that applying the special circumstances exception in the present case would not undermine the objective of finality underlying res judicata and related doctrines, contrary to the motion judge's reasons and a recent decision of the Federal Court of Appeal (Eli Lilly Canada Inc. v Teva Canada Ltd., 2018 FCA 53, leave to appeal refused, SCC Case No. 38077). The Court of Appeal noted that each case requires its own contextual consideration of the discretion not to apply issue estoppel. AstraZeneca represented a rare foundational change in the law, by the Supreme Court of Canada, on a fundamental legal point. As such, the present case is "precisely the type of special circumstance where the principle of finality should yield to the justice of the case."

The Court of Appeal also refused to apply the doctrine of collateral attack to preclude Sanofi's and Schering's amendments, concluding that to do so would "work the same injustice" as issue estoppel.

Federal Court's obviousness finding does not bar the amendments

As the Federal Court of Appeal had expressly declined to comment on the alternative finding of obviousness in the invalidity decision, labelling it "obiter", the Ontario Court of Appeal concluded that in these circumstances the invalidity decision "cannot be considered to be binding on the basis of obviousness" and it would be unfair to hold Sanofi and Schering to it.

Apotex has several Statute of Monopolies claims pending

The present action is one of several novel claims by Apotex seeking damages pursuant to the Ontario Statute of Monopolies and U.K. Statute of Monopolies. One such action is scheduled for trial in May of 2019.

Sanofi was successfully represented by Gunars Gaikis, Lynn Ing and Brandon Heard of Smart & Biggar.

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