The Federal Court has vindicated Lilly, reinstating a patent infringement damages decision that awarded Lilly prejudgment interest equal to its average annual rate of return during the interest earning period, on a compound basis. It found that Lilly's real-world rate of return was convincing evidence of both what could have and what would have occurred in the but-for world.


This was a redetermination of the prejudgment interest portion of damages awarded to Eli Lilly and Company and Eli Lilly Canada Inc. (collectively, Lilly) for patent infringement by Apotex Inc. (Apotex) in respect of Lilly's drug cefaclor. At first instance, the Federal Court found that there was a presumption that prejudgment interest should be awarded on a compound basis and awarded prejudgment interest at a rate equal to Lilly's real-world average annual rate of return, compounded.

As we reported, the Federal Court of Appeal overturned the decision on this issue, finding that there was no presumption that prejudgment interest should be awarded on a compound basis. The Federal Court of Appeal found that compensation could be awarded for a lost opportunity or to reflect the time value of money, but that the burden was on the plaintiff to prove its loss.

Evidence of real-world use of profits is strong evidence of the use that "could have" been made of lost profits in the but-for world

On redetermination, the Federal Court held that proof of a specific lost opportunity requires a plaintiff to prove both that it "could have" and "would have" pursued that opportunity. Lilly provided evidence of its real-world rate of return, shifting the burden to Apotex to show that it would have been impossible for Lilly to earn the same rate of return on the lost profits in the but-for world. The Federal Court found that Lilly's real-world average rate of return was convincing and unequivocal evidence that the same rate of return could be generated on the lost profits in the but-for world.

Proportion of lost profits to real-world profits is relevant to how lost profits "would have" been invested in the but-for world

The Court held that in assessing the rate of return that would have been earned in the but-for world, a relevant consideration is the relative size of the lost profits as compared to other profits available to Lilly in the real-world over the same period. When lost profits are relatively small, it is more likely that they would have been used in a manner similar to real-world profits. When lost profits are relatively large, it is more likely that they would have been used in a manner different than real-world profits. The Court found that Lilly's lost profits represented a small proportion of its real-world profits and accepted that the lost profits would have earned the same rate of return as Lilly's real-world profits.

Burden on infringer to prove tax deductions

Apotex argued that any award for interest ought to be reduced to factor in taxes in the but-for world. The Court agreed in principle, but held that the burden of proving tax deductions lies with the party asserting the deduction. Apotex provided no evidence to this effect.

In the result, the original damages award was maintained.

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