Valeant Canada LP/Valeant Canada S.E.C. v. Canada (Health), 2014 FCA 50

This was an appeal by Valeant Canada LP/Valeant Canada S.E.C. and Valeant International Bermuda (collectively “Valeant”) and cross-appeal by Cobalt Pharmaceuticals Company (“Cobalt”) from an order of the Federal Court stemming from a motion for disqualification brought by Valeant within an application for prohibition it brought under the NOC Regulations. The Federal Court granted Valeant’s motion disqualifying Cobalt’s in-house lawyer from any further involvement in the application on the ground that he could be presumed to have Valeant’s confidential information. On appeal, Valeant sought more than the disqualification: Valeant asked the Court to declare Cobalt’s NOA – prepared by the law firm Deeth Williams Wall LLP (“Deeth”) – invalid. The Federal Court refused to grant Valeant any further relief beyond the disqualification.

Soon after Valeant received Cobalt’s NOA comparing to Valeant’s TIAZAC® XC, Valeant learned that Deeth purported to represent Cobalt and that it was involved in preparing the NOA. Deeth was the law firm of Valeant’s predecessor, Biovail. Deeth had previously represented Biovail in numerous proceedings in the Federal Court relating to the same medicinal ingredient that is the subject-matter of this NOA. While those proceedings were subject to confidentiality orders, Valeant believed that Deeth had other confidential information about its affairs and business strategies, and continued to possess confidential communications covered by solicitor- client and litigation privilege.

Valeant notified Deeth of its objection, and soon after receiving the objection, Deeth resigned as Cobalt’s counsel. Deeth undertook not to act further for Cobalt or to assist in any way in the application. However, Valeant had two further issues: (1) Cobalt employed an in-house lawyer who was a former student-at-law and, later, lawyer at Deeth; and (2) Cobalt’s NOA was a direct product of Deeth’s improper use of confidential information and, accordingly, the NOA must be declared invalid.

Cobalt cross-appealed on the basis that the Federal Court’s decision should be set aside because it  erred in principle. In particular, Cobalt argued that the Federal Court misunderstood and misapplied the test for disqualification. The Court of Appeal agreed that the Federal Court did not apply the test “exactly as set out by the Supreme Court”, but found that the result was nevertheless correct.

With respect to Valeant’s submission that the  NOA should have been declared invalid, the Court of Appeal held that it was not persuaded on the record before it that the NOA was the product of the misuse of information and an improper conflict of interest. In particular, the Court of Appeal noted that there was simply not enough evidence on the record before it to show that Valeant’s confidential information was either “used” or “misused”.

Therefore, the Court of Appeal dismissed both Valeant’s appeal and Cobalt’s cross-appeal. In view of the divided success, no costs were awarded. Notably, however, the Court of Appeal commented that, subject to any limitation periods, “Valeant might pursue other steps to restrain or redress any misuse of confidential information.”