Damages under Patented Medicines (Notice of Compliance) Regulations - International Law Office

Introduction
Decisions


Introduction

In May 2012, nearly 20 years after the Patented Medicines (Notice of Compliance) Regulations were passed, the Federal Court released its first decisions assessing the quantification of damages under Section 8 of the regulations. In its simplest terms, Section 8 provides for liability by an innovator to a generic manufacturer for the generic manufacturer's damages if an application for a prohibition order is unsuccessful.

Decision

On May 23 2012, in two separate but concurrently released decisions assessing Section 8 claims advanced by Teva Canada Limited (Teva Canada Limited v Sanofi-aventis Canada Inc, 2012 FC 552) and Apotex Inc (Apotex Inc v Sanofi-aventis Canada Inc, 2012 FC 553) against Sanofi-aventis Canada Inc in respect of the drug ramipril (Sanofi's Altace), Justice Snider of the Federal Court made the following key conclusions:

• The period of liability cannot begin before the date upon which a statutory stay provided for in Section 7(1)(e) of the regulations commences;
• The court should have regard to the possibility of multiple generic market entrants during the period of liability, but is not required to establish a single 'but for' world that would apply to all possible Section 8 claims; and
• In assessing damages under Section 8, claims for lost business value that are calculated as of the final day of the period of liability and based on future lost profits or duplicate ramp-up are unrecoverable on the basis that such recovery is prohibited by the Court of Appeal's decision in Apotex Inc v Merck & Co (2009 FCA 187; referred to as Alendronate).

With respect to the court's conclusion, the judge noted that:

"[c]ompetition in the generic market is clearly relevant to a second person's recovery … [and] [c]onsideration of the market share that would have been captured by competition is relevant to a s. 8 claim, much as it is to any damages claim."

That said, the judge did not go so far as to accept Sanofi's argument that there should be one 'but for' world applicable to all cases involving the genericisation of ramipril. Rather, the judge noted that:

"[t]he assessment of damages can and should be made on the facts of each case. To the extent that there are common elements that impact on the quantification of damages, these will more likely than not come forth during the trial."

As a result, and based on the facts of the cases before her, many of the judge's findings in the respective ramipril Section 8 actions differed, including with regard to:

• the respective entry dates of the generic manufacturers (both authorised and unauthorised generics);
• the overall size of the ramipril market and generic market shares obtained by the various competitors; and
• the effect of a prohibition order issued against one of the generic manufacturers.

The court also released a third decision that same day (2012 FC 551) that dealt with allegations of invalidity of Section 8 of the regulations which had been raised as a defence by Sanofi in each of the above-noted Section 8 actions.

Validity of Section 8

While agreeing that the specific questions raised by Sanofi were not directly addressed by the Court of Appeal in Alendronate, the judge noted that the general validity of Section 8 had been determined by the Court of Appeal in Alendronate, and that any questions that were not explicitly addressed in that decision must be considered in a manner consistent with its teachings.

With that in mind, the judge went on to interpret Section 8 and held that it falls completely within the purpose of Section 55.2(4) of the Patent Act and is intra vires(ie, within the scope of its authority). With respect to arguments that were raised by the parties as to the proper interpretation of the start and end dates for the periods of liability under Sections 8(1)(a) and (b) of the regulations and competition in the 'but for' hypothetical period, the judge concluded that she need not determine the issues, as they did not arise on the particular facts of the Section 8 actions before her. Further, she indicated that the trial judge in a Section 8 action will be applying well-established principles of damages, including causation, to the facts before him or her. Relying on Alendronate, the judge confirmed that the question of infringement is a matter that can be addressed under Section 8(5) of the regulations. Lastly, adopting the reasons of Justice Hughes in Apotex Inc v AstraZeneca Canada Inc (2012 FC 559), the judge held that Section 8 is not contrary to Canada's obligations under the Agreement on Trade-Related Aspects of IP Rights (TRIPS) or the North American Free Trade Agreement (NAFTA).

Relevant factors in assessing quantum of damages under Section 8

In addition to the court's key conclusions expressed above, the judge held that Section 8 does not preclude the consideration of an authorised generic in assessing damages that are sought by the second person and that depending on the particular facts of a case, a second person's recovery of damages may be reduced pursuant to Section 8(5) where sales of the generic product are found to have been associated with unapproved indications.

Apotex, Teva and Sanofi have appealed the judge's decisions in respect of the Section 8 claims, and Sanofi has appealed the court's decision regarding the validity of Section 8 (A-147-12, A-191-12, A-192-12 and A-193-12).

For further information on this topic please contact Andrew Mandlsohn at Smart & Biggar/Fetherstonhaugh by telephone (+1 416 593 5514), fax (+1 416 591 1690) or email (amandlsohn@smart-biggar.ca).