Section 8 of the Patented Medicines (Notice of Compliance) Regulations (the Regulations) allows for the recovery of damages sustained by a generic company (defi ned as a “second person” under the Regulations) as a result of an unsuccessful prosecution of a prohibition proceeding brought under the Regulations. An action under section 8 can be brought in the Federal Court or in a provincial superior court. The choice of court may impact the nature of the claims raised by generic companies. As a result of recent decisions, generic companies may choose to litigate in provincial superior courts. However, as will be explained, this may not make a practical difference to the amount of damages that will likely be awarded after trial.
A review of recent jurisprudence explains the recent forum shopping. Through various proceedings brought in the Federal Court under section 8, second persons have sought to recover, not only their damages sustained as a result of the delay associated with the prohibition proceeding, but also the profi ts made by brand name companies (defi ned as a “fi rst person”) during the period of delay. In several matters, Apotex claimed that fi rst persons had made excess profi ts by reason of the higher selling price of brand name products compared to generics. The fi rst such request to reach trial was rejected by both the Federal Court and Court of Appeal. In Apotex Inc. v. Merck & Co.,1 section 8 of the Regulations was construed to allow only a damage claim and not the recovery of the profi ts of a fi rst person. In subsequent Federal Court actions, Apotex tried to distinguish the Merck decision and continued to seek profi ts of fi rst persons under the doctrine of unjust enrichment or through some other equitable claim based upon subsection 20(2) of the Federal Courts Act. In two such matters, Eli Lilly and Nycomed were successful on motions to strike Apotex’s claims to profi ts. Apotex appealed these decisions to a judge of the Federal Court. In decisions released April 18, 2011, Justice Heneghan upheld the striking of Apotex’s claim to profi ts.2 Apotex has appealed both these decisions. In the result, as the case law now stands, a claim to the profi ts of a brand name company will be struck from a section 8 proceeding in the Federal Court irrespective of whether it is based upon section 8, unjust enrichment or subsection 20(2) of the Federal Courts Act.
The Federal Court jurisprudence is contrasted by decisions in the Ontario Superior Court where Apotex claimed a disgorgement of profi ts based upon the common law doctrine of unjust enrichment. Unlike the Federal Court, provincial superior courts have jurisdiction to hear a common law unjust enrichment claim. A claim for unjust enrichment requires a plaintiff to prove: i) an enrichment; ii) a corresponding deprivation; and iii) an absence of a juristic reason for the enrichment. If Apotex was seeking to recover only the profi ts that it otherwise would have made had it not been delayed by the prohibition proceeding, then a claim to damages would be the same as a claim to a partial disgorgement of the profi ts of a fi rst person. On motions to strike, Justice Whittaker concluded it was not plain and obvious that a common law claim to unjust enrichment could not succeed.3 What is interesting to note, however, is that in paragraph 56 of the endorsements, Justice Whittaker said Apotex had pleaded the fi rst two elements of unjust enrichment. Because Apotex is claiming more than it actually would have made in profi ts had it not been delayed in reaching the market, if successful at trial, Apotex would recover a windfall contrary to the restitutionary nature of a claim for unjust enrichment. Because provincial superior courts have not closed off a claim to the fi rst person’s profi ts, the full impact of this decision is yet to unfold.
In summary, a claim to the profi ts of a fi rst person in a section 8 action in the Federal Court will be struck as disclosing no reasonable cause of action. In Ontario, it appears the claim may survive a motion to strike. For practical purposes, to avoid a windfall, any award based upon unjust enrichment will likely be the same as an award of damages under section 8 of the Regulations. If the case law unfolds in this manner, no benefi t will result to generic companies bringing actions in the Ontario courts following an unsuccessful prohibition application brought under the Regulations.