On March 20 2018 the Federal Court of Appeal issued public reasons for its dismissal of Eli Lilly Canada Inc's appeal of a Federal Court decision that had awarded Teva Canada Limited more than C$70 million under Section 8 of the Patented Medicines (Notice of Compliance) (PMNOC) Regulations in respect of olanzapine (Eli Lilly's Zyprexa). The Federal Court of Appeal granted:
- Teva's cross-appeal, which sought to add to its recovery of lost pipefill sales (ie, sales that it would have made to distributors in the 'but-for' world that would not have been captured by retail sales figures); and
- an adjustment to account for an underreporting of sales in the data relied on by both parties' experts (for further details please see "Teva awarded Section 8 damages regarding pregabalin and olanzapine").(1)
Generally, Section 8 of the PMNOC regulations permits the recovery of a generic manufacturer's losses if the innovator's prohibition application is discontinued, dismissed or reversed on appeal.
Eli Lilly asserted that the trial judge had erred in failing to find that Teva had abandoned its Section 8 claim by withdrawing its first notice of allegation (NOA). Another NOA had subsequently been served, which had led to the failed application that gave rise to the claim. Eli Lilly also asserted that Teva had suffered no compensable loss in view of the Supreme Court's decision in AstraZeneca Canada Inc v Apotex Inc (for further details please see "Promise doctrine struck down and AstraZeneca's NEXIUM patent upheld as useful"),(2) which had struck down the "promise of the patent" doctrine and thus "rendered legally untenable the sole basis on which [Eli Lilly's] patent for olanzapine was ultimately found invalid". The Federal Court of Appeal:
- held that there was sufficient evidence for the trial judge to have rejected Eli Lilly's abandonment defence; and
- declined to exercise its discretion to not apply the doctrine of issue estoppel, as "[s]tanding back and taking into account the entirety of the circumstances… it would not work an injustice to apply issue estoppel in this case".
Eli Lilly also asserted that the Section 8 damages award should be eliminated or reduced under Section 8(5) of the PMNOC regulations, as the trial judge had erred by:
- ignoring the almost one-year delay that had resulted from Teva withdrawing its first NOA only to then serve a second NOA; and
- failing to find that this was an abuse of process.
The Federal Court of Appeal rejected both grounds of appeal. With respect to the delay argument, the court:
- noted that the trial judge had not ignored the issue as alleged; and
- found no error in the trial judge's finding that the start date of the liability period was the date on which Teva would have received its notice of compliance (ie, the presumptive start date under Section 8(1)(a) of the pre-amended PMNOC regulations).
The Federal Court of Appeal:
- rejected the abuse of process argument, as the service of two NOAs was not, in its view, an abuse; and
- held that Eli Lilly was estopped from re-litigating the issue, as it had been previously decided in earlier litigation between the parties.
The Federal Court of Appeal also found that there was evidence to support the trial judge's finding that Teva could and would have come to the market in March 2006, despite the court's finding that:
"the trial judge incorrectly stopped witnesses called by Teva on the question of what it could and would have done in the hypothetical world from giving admissible evidence on 'their own conduct and that of their businesses in the 'but-for' world'."
Teva had sought to recover lost pipefill sales. In finding that Teva was entitled to recover such sales, the Federal Court of Appeal held that the trial judge had improperly excluded sales that Teva would have made during the liability period. According to the court:
"the fact that the sales were to distributors or wholesalers rather than directly to retail customers does not take them outside of section 8. Nor does the fact that sales of that product further down the distribution stream – sales to retail customers – would have taken place beyond the liability period."
Further, as the parties' experts agreed that an adjustment to account for an under-reporting of the sales data was required and that the trial judge's list of findings to provide direction for a final calculation of Teva's damages was silent on the issue, the court declared that such an adjustment be made. Lastly, the court rejected Teva's argument that the trial judge had erred in finding that Teva would not have obtained an exemption from the applicable pricing regulations in Ontario.
The parties can appeal this decision if leave is sought from and granted by the Supreme Court.
For further information on this topic please contact Andrew Mandlsohn at Smart & Biggar/Fetherstonhaugh by telephone (+1 416 593 5514) or email (firstname.lastname@example.org). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.
(1) Eli Lilly Canada Inc v Teva Canada Limited, 2018 FCA 53.
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