Urszula Wojtyra May 28 2018 Apotex fails to establish that it would have obtained non-infringing product from foreign suppliers Smart & Biggar | Intellectual Property - Canada Urszula Wojtyra Intellectual Property IntroductionFactsInitial reference decision and appeal'Could have' analysis'Would have' analysisIntroductionServier and its related company ADIR were recently successful in another chapter of the patent litigation concerning perindopril (Servier's Coversyl) when the Federal Court again dismissed the non-infringing alternative defence of Apotex Inc and Apotex Pharmachem Inc (collectively, Apotex). The court found that Apotex would not have called on foreign third parties to manufacture perindopril to supply its affiliates in the United Kingdom and Australia and thus reaffirmed its original judgment that Apotex must pay all of its profits attributable to the infringement of ADIR's Canadian Patent 1,341,196 (the '196 patent').(1)FactsIn 2006 Apotex began manufacturing perindopril tablets in Canada and selling them in Canada and to its UK and Australian affiliates. In 2008 the Federal Court found that these activities infringed the 196 patent and enjoined Apotex from infringing it.(2) The plaintiffs elected an accounting of Apotex's profits as their remedy.Initial reference decision and appealWhile Apotex did not dispute that it was required to disgorge profits from its domestic sales, it argued that the profits from its sales to its UK and Australian affiliates were not attributable to the infringement of the 196 patent. Apotex asserted that it could have avoided infringement and made the same or higher profits by enlisting third parties in foreign countries to manufacture perindopril.In 2015 the Federal Court dismissed the legal relevance of Apotex's alleged non-infringing alternative defence. However, the Federal Court of Appeal held that this was an error.(3) It thereby remitted back to the Federal Court the factual issue of whether, in a hypothetical world where Apotex had not infringed, Apotex could and would have obtained non-infringing perindopril from three specific third-party suppliers and, if so, whether it could and would have sold this material to its UK and Australian affiliates.'Could have' analysisIn order to succeed in a 'could have' analysis, Apotex had to establish that, in the relevant timeframe, it could have:transferred the required technology to the third-party suppliers;obtained the required marketing approvals; andmanufactured the required quantities of the perindopril active pharmaceutical ingredient and tablets.On the basis that it was the 'fastest means' for Apotex to obtain non-infringing perindopril, the court proceeded on the theory that the third-party suppliers would have been included in Apotex's original regulatory applications.The court found that each of the three third-party suppliers could have supplied the necessary perindopril, but rejected Apotex's proposed timeline for the replacement of all real world sales as 'utopic' (ie, requiring all events in the hypothetical world to occur perfectly), which the court found to be unrealistic. Instead, using the 'broad axe' principle, the court concluded that Apotex could have started selling non-infringing perindopril one year after it had started selling in the real world.'Would have' analysisThe court concluded that a 'would have' analysis is largely subjective and that the "intentions, motivations and preferences of an infringing party must be considered". Therefore, inferences must be drawn from objective evidence presented at trial and from what transpired in the real world.The court held that Apotex had not established that it would have used a third-party supplier to produce non-infringing perindopril, relying on real world facts, including the fact that Apotex had:manufactured perindopril in Canada even though the evidence established that it could have increased its profits by outsourcing to third-party suppliers;preferred to do everything in Canada;preferred to manufacture products at its own sites rather than contracting to non-affiliated third parties; andenlisted its foreign affiliates to manufacture the perindopril product and ultimately sold that non-infringing product to its UK and Australian affiliates only after it was enjoined from manufacturing perindopril in Canada.The court held that in the hypothetical world, Apotex would have:done exactly what it had done in the real world (ie, pursued its technology transfers to its own foreign affiliates rather than third-party suppliers); andentered the foreign markets later than it did in the real world.The court therefore reaffirmed the quantum of profits from its original judgment, holding that Apotex and Apotex Pharmachem must collectively pay over C$61 million.Apotex may appeal as of right.For further information on this topic please contact Urszula Wojtyra at Smart & Biggar/Fetherstonhaugh by telephone (+1 416 593 5514) or email ([email protected]). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.Endnotes(1) ADIR v Apotex Inc, 2018 FC 346.(2) 2008 FC 825, aff'd 2009 FCA 222. Further information is available here.(3) ADIR v Apotex Inc, 2015 FC 721, overturned 2017 FCA 23. Further information is available here.