On September 12, 2013, the Ontario Court of Appeal upheld the Superior Court’s dismissal of Apotex’s claim for disgorgement of Takeda’s and Abbott’s profits in the context of the Patented Medicines (Notice of Compliance) Regulations (the “NOC Regulations”). The Ontario Court had previously dismissed motions to strike such claims on the basis that it was not “plain and obvious” that they could not succeed. In contrast, by upholding the underlying summary judgement, the Ontario Court of Appeal has confirmed and clarified the law. 

The Divisional Court has been swift to apply the Court of Appeal’s decision. In a case decided on September 19, 2013 involving another Apotex claim for disgorgement (“Eli Lilly”) the Divisional Court followed Takeda & Abbott and, in a decision delivered from the bench, reversed the Court belowand struck Apotex’s claim for disgorgement of profits against Eli Lilly.

As a result of these decisions, Ontario’s jurisprudence now closely tracks that of the Federal Court of Appeal1 (“Eli Lilly FCA Decision”), which bars claims for unjust enrichment arising out of the operation of the NOC Regulations. In so doing, the Ontario courts have resolved the uncertainty surrounding the availability of this remedy in Ontario, lessening their appeal to generic drug manufacturers.

Apotex v. Takeda and Abbott

In the underlying summary judgment motion (the “Quigley Decision”), Justice Quigley dismissed Apotex’s allegation that Takeda and Abbott wrongfully invoked the NOC Regulations and that such wrongful invocation entitled Apotex to disgorgement of Takeda’s and Abbott’s profits on the basis of unjust enrichment. Justice Quigley noted the delicate balance struck by Parliament in crafting Canada’s laws concerning pharmaceutical inventions. He was persuaded by the Federal Court of Appeal’s finding in the Eli Lilly FCA Decision that its jurisdiction to grant equitable relief could not be used to grant a remedy that the NOC Regulations were intended to exclude. Justice Quigley also found that there were two juristic reasons for the alleged unjust enrichment: the NOC Regulations and an existing settlement agreement between the parties.

The Court of Appeal unanimously affirmed the Quigley Decision, rejecting all arguments raised by Apotex on appeal. The Court of Appeal held that, regardless of the enforceability of a settlement agreement between the parties to the proceeding, “the deprivation that the appellant suffered could be no more than their damages for that period calculated according to s. 8 of the Patent Regulations.” The Court of Appeal found that such deprivation could not extend to the innovator’s profits.

The Court of Appeal also rejected Apotex’s argument that it should be entitled to pursue an unjust enrichment claim, separate from the NOC Regulations:

In our view, the simple answer to that argument is that the profits or revenues earned by the respondents for which the appellant claims disgorgement are due to the operation of the regulatory scheme of the Patent Regulations. The respondents' right to be in the market to the exclusion of the appellant and therefore to earn its profits or revenues is that provided for by the Patent Regulations. Those Regulations constitute a valid juristic reason for the respondents' profits and revenues for the period in question. This precludes the appellant's claim for disgorgement. (para. 6)

Apotex v. Eli Lilly

In the lower Court, the Motions Judge declined to strike Apotex’s claim for disgorgement of Eli Lilly’s profits. On appeal, the Divisional Court noted at the outset that the Motions Judge “did not have the benefit of the thorough reasons [...] in [the Quigley Decision] which was recently affirmed by the Court of Appeal.”

The Court recognized that the Quigley Decision was decided in the context of a motion for summary judgment rather than a motion to strike. However, the Court rejected Apotex’s attempts to distinguish the Quigley Decision on grounds which it held “arise from the [PMNOC] Regulations which are a part of a complete statutory code governing patent law.”

The Court held that it was plain and obvious that Apotex’s Statement of Claim disclosed no claim totally independent from the NOC Regulations.