The Federal Court of Appeal has overturned the earlier finding that Allergan and Apotex had settled their patent infringement litigation (2015 FC 367).
Allergan had sued Apotex for patent infringement. The parties discussed settlement for almost two years, through emails, draft Minutes of Settlement and reporting letters to the Federal Court. In reviewing the evidence, the Federal Court had determined that although the parties did not have a signed agreement, they had reached agreement on all essential terms.
The Court of Appeal began its analysis by laying out the following requirements for a Court to find whether a settlement agreement has been reached in a common law jurisdiction:
- objectively viewed, the parties had a mutual intention to create legal relations;
- there must be consideration flowing in return for a promise;
- the terms of the agreement are sufficiently certain;
- there is matching offer and acceptance on all terms essential to the agreement; and
- any other requirements, such as legislative requirements.
In reviewing the requirements, the Court of Appeal stated that this is an objective test, not a subjective one. The Federal Court Judge had applied a subjective test, which was found to be in error.
In applying an objective view to the evidence, the Court of Appeal found that the scope of the restrictions sought to be placed upon Apotex was an essential term that had not been agreed upon. Furthermore, it was found that counsel to Apotex only agreed to recommend the terms of settlement to his client. In finding that counsel did not have the authority to bind his client, there was no legally-effective acceptance of Allergan's offer.
Thus, the original decision was overturned.
The Court of Appeal made a few comments of note at the end of the appeal. First, it was noted that the patent at issue had expired during the appeal, and Allergan moved to dismiss the appeal as moot. The Court of Appeal held it was not moot because Apotex would have been subject to obligations under the settlement agreement, which if breached, could be the foundation for a future damages claim. There was also a lack of authority on the legal points in the appeal and some uncertainty in the state of the law, which meant it was in the public interest to continue the appeal.
Second, it was noted that not only did the Federal Court declare the parties had reached settlement and identified the terms of the settlement, the Court had set out the terms and ordered Apotex to comply. This was found to be too broad, as a breach of the settlement agreement could now lead to proceedings for contempt. In the Court of Appeal's view, there should only have been a declaration that a settlement agreement had been made by reference to the documents in the record.