"Grave consequences" defence may be asserted against a generic in a section 8 action under the PM(NOC) Regulations

Apotex Inc. v. Shire Canada Inc., 2010 FC 828

In an action brought by Apotex Inc. (Apotex) to recover damages under section 8 of the Patented Medicines (Notice of Compliance) Regulations (SOR/93-133) (Regulations) in respect of the medicine modafinil, Shire Canada Inc. (Shire) brought this motion for leave to amend its statement of defence, alleging two new defences. Apotex opposed Shire’s motion, arguing that the proposed amendments did not disclose a reasonable defence and ought not to be permitted. The prothonotary struck out the first proposed amendment, finding that a defence based on the outcome of a separate infringement action to which Shire was not a party would be speculative and hypothetical, but permitted the second proposed amendment which alleged a “grave consequences” defence.

Background

Apotex filed an abbreviated new drug submission (ANDS), seeking a notice of compliance (NOC) that would allow it to market its generic Apo-modafinil tablets, by comparing its tablets to Shire’s modafinil product.  Shire had listed Canadian patent no. 2,201,967 (the ‘967 patent) on the patent register in respect of its modafinil tablets.  On March 16, 2006, Apotex served a notice of allegation (NOA) on Shire, alleging that the claims of its ‘967 patent were invalid, void and of no effect. In response, Shire commenced an application for an order prohibiting the issuance of a NOC to Apotex. This application was dismissed two years later, on April 25, 2008. Apotex obtained a NOC shortly after the judgment was released and now seeks damages under section 8 of the Regulations for the delay in issuance of the NOC resulting from Shire’s unsuccessful application for a prohibition order.


Defence based on a separate action by Cephalon Inc.

For its first proposed new defence, Shire proposed to rely on the outcome of a separate infringement action against Apotex commenced by the owner of the ‘967 patent, Cephalon Inc. (Cephalon). Shire argued that, should the ‘967 patent be found to be valid and infringed in that other action, Apotex should not be entitled to recover any damages in the present proceeding based on the loss of infringing sales.
The prothonotary struck this proposed defence, finding that the outcome of the Cephalon action was an uncertain future event which was not susceptible of being determined or even influenced in the context of the present action.  This was the essence of a speculative and hypothetical pleading that ought to be struck.  Moreover, these issues could not be determined unless and until the proceedings by Cephalon in the other court file were resolved.  This would unreasonably delay, embarrass and prejudice the trial of the present action by Apotex againt Shire.


Defence based on the “Grave Consequences” Doctrine

For its second proposed new defence, Shire sought to rely on the existence of Canadian patent no. 2,165,824 (the ‘824 patent), a second patent listed on the patent register against Shire’s modafinil tablets. In particular, in a NOA served on Shire by Apotex, dated August 30, 2005, Apotex alleged that it would not infringe the ‘824 patent on the basis of its draft product monograph and gave an undertaking that it would not make, use or sell its tablets for the patented use of treatment of sleep apnea or ventilation problems of central origin.  However, according to Shire, Apotex’s product monograph does include the patented indication, and Apotex has sold its modafinil tablets for such use in breach of its undertaking.  Shire therefore seeks to allege that Apotex breached this undertaking, giving rise to the possible finding of “grave consequences”, alluded to by the Federal Court of Appeal, in the form of a denial of any remedy for delayed entry into the market pursuant to section 8 of the Regulations.
Apotex argued that subsection 8(5) of the Regulations, which requires the court to take into account “all matters that it considers relevant to the assessment of the amount, including any conduct [of the parties] which contributed to delay the disposition of the application”, should be interpreted as any valid defence arising exclusively in the context of the very prohibition proceeding that was dismissed or discontinued.

The prothonotary, however, found that Apotex’s argument raised a difficult question that should not be determined on a motion to strike.  It was reasonably arguable that the Court could conclude that Apotex’s breach of an undertaking, if established, could affect the assessment of damages.  Apotex therefore did not meet the very heavy onus of showing that this proposed defence was plainly and obviously devoid of any merit and stood no chance of success whatsoever.
 

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