In very general terms, section 8 of the Patented Medicines (Notice of Compliance) Regulations (“Regulations”) provides for liability of an innovator to a generic manufacturer for damages based on the latter’s lost sales if an application for an Order of prohibition is unsuccessful. On May 10, 2013, Justice O’Reilly allowed Apotex’s claim for relief under section 8 in a proceeding regarding azithromycin tablets (Pfizer’s ZITHROMAX): Apotex Inc v Pfizer Canada Inc, 2013 FC 493. The period of liability and the quantum of damages will be determined in a subsequent proceeding. This was the first decision under section 8 to consider the interplay between the issues raised in a notice of allegation (NOA) and those that may be raised in a section 8 claim.

The proceeding before Justice O’Reilly followed from Justice Snider’s dismissal of Pfizer’s application for an Order of prohibition on December 9, 2003 (2003 FC 1428), where she held that Apotex’s allegation of non-infringement of Canadian Patent No. 1,314,876 (“'876 patent”) was justified. Apotex argued before Justice O’Reilly that it met the requirements for relief under section 8 of the Regulations as Pfizer had lost the prohibition proceeding. Pfizer disagreed, asserting that Apotex would have entered the market with material that infringed the '876 patent and had misled the Court with the allegation of non-infringement in the previous proceeding.

Justice O’Reilly analyzed how proceedings under section 8 of the Regulations “connect” with those brought pursuant to section 6 (as was the proceeding before Justice Snider). In particular, he considered whether the construction of the patent in the previous proceeding binds the judge hearing the section 8 action, and whether the NOA from the previous proceeding shapes the issues under section 8. He answered both questions affirmatively.

Regarding the construction of the '876 patent, Justice O’Reilly held — based on stare decisis and judicial comity, particularly in proceedings under the Regulations — that he was bound by Justice Snider’s construction as he had not been shown any reasons to depart from it. In the previous proceeding, Justice Snider construed the essential element of claim 1, the only claim in issue, as “crystalline azithromycin dihydrate.”

In further considering the connection between sections 6 and 8 of the Regulations, Justice O’Reilly rejected Apotex’s argument that section 8 creates a “free-standing right of action” or a “completely new and open-ended proceeding” entirely separate from the section 6 proceeding. To do so would create “a duplicative regulatory alternative to infringement and impeachment actions under the Patent Act, one completely disconnected from the rest of the scheme of the Regulations” and would “unfairly expose first persons to allegations that could not have been anticipated when making the decision whether to apply for an Order of prohibition.” He held that the NOA defines “the limits of what is relevant for purposes of” section 8. Thus, as Apotex’s NOA had made no reference to invalidity, he held that infringement was the only issue before him.

To meet the conditions for relief under section 8, Apotex was required to show that (i) Pfizer’s application was dismissed, and (ii) Apotex suffered a loss during the period it was kept off the market by the Regulations. Justice O’Reilly held that Apotex’s defeat of Pfizer’s application for an Order of prohibition was sufficient to entitle Apotex to compensation for losses during the period of time Apotex was kept off the market. Although Justice O’Reilly considered Pfizer’s evidence of infringement, which was not previously available, he did not accept that the new evidence established infringement. Apotex’s section 8 claim was therefore not defeated; however, Justice O’Reilly held that the infringement evidence — which supported the possibility that Apotex’s tablets may contain a small amount of infringing material — may be relevant under section 8(5) of the Regulations in assessing the quantum of damages.

Pfizer may appeal to the Federal Court of Appeal as of right.