FIRST FEDERAL COURT OF APPEAL DECISION – SECTION 8:

At long last, on June 4, 2009, the Federal Court of Appeal rendered its first substantive judgment on section 8 of the Patented Medicines (Notice of Compliance) Regulations (the “Regulations”). In so doing, the Court of Appeal provided the first appellate opinion as to the scope of liability flowing from the dismissal of prohibition applications under the pre-2006 version of the Regulations.

In a unanimous judgment, the Federal Court of Appeal allowed Merck’s appeal, in part, from the first trial under section 8 and dismissed Apotex’s related appeal with costs. Writing for the Court, Noël J.A. reached the following conclusions:

  1. Section 8 does not provide for a disgorgement of a first person’s profits.
  2. Section 8 does not provide for damages for permanent loss of market share or any other loss suffered after the defined period.
  3. A section 8 claim is limited to the generic’s damages for the defined period.
  4. The Federal Court has jurisdiction to hear an action under section 8 pursuant to section 20(2) of the Federal Courts Act.
  5. Section 8 is enabled by section 55.2(4) of the Patent Act.
  6. Section 8 is within the constitutional authority of Parliament.

Merck was represented by Ogilvy Renault. This decision provides clarity in an area of law that has been uncertain for many years since the first case was commenced under the Regulations in 2001. There are presently more than 10 cases pending under this version of section 8.

BACKGROUND:

In July 2005, Apotex commenced an action against Merck for relief under section 8 of the Regulations (as they read prior to October 5, 2006). In particular, Apotex sought damages or a disgorgement of Merck’s profits for the period beginning on the date when its product would have been approved, and ending on the date when the prohibition application was dismissed (the “defined period”). Apotex also sought damages for “permanent loss of market share” extending beyond the defined period.

Merck denied these allegations and argued that: (1) the Federal Court lacks jurisdiction to hear actions under section 8; (2) section 8 does not “prevent infringement” and is not enabled by s. 55.2(4) of the Patent Act; and (3) section 8 is ultra vires the legislative authority of Parliament, as it relates in pith and substance to a matter of property and civil rights which is within the exclusive legislative authority of the provinces.

The trial was heard by Justice Hughes over a five-day period beginning on October 6, 2008. Merck was represented by Ogilvy Renault. On October 21, 2008, the Court released its reasons for decision:

  1. Apotex is not entitled to a disgorgement of Merck’s profits.
  2. Apotex is entitled to recover its damages or lost profits for the defined period.
  3. Apotex may “claim recovery of damages that occurred during said period and extended beyond said period if said damages could not have been or were not rectified in that period.”
  4. The Federal Court has jurisdiction to hear an action under section 8.  
  5. Section 8 is enabled by section 55.2(4) of the Patent Act.
  6. Section 8 is within the constitutional authority of Parliament.

This is the decision that gave rise to the present appeal.

LINK TO DECISION:

http://decisions.fct-cf.gc.ca/en/2008/2008fc1185/2008fc1185.html

LINK TO APPEAL DECISION: The Federal Court of Appeal decision will soon be posted on the internet at:

http://decisions.fct-cf.gc.ca/en/index.html