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19 December 2018
Decision under appeal
Special circumstances: exception to issue estoppel and collateral attack
Federal Court's obviousness finding does not bar amendments
Apotex has several Statute of Monopolies claims pending
In an action by Apotex for compensation from Sanofi and Schering under the Ontario Statute of Monopolies, the UK Statute of Monopolies and the Trademarks Act, the Ontario Court of Appeal has overturned(1) a motion judge's decision denying Sanofi and Schering leave to amend their defences to plead the Supreme Court of Canada's decision in AstraZeneca Canada Inc v Apotex Inc.(2)
The litigation related to the Canadian patent 1,341,206 (the '206 patent'), which was owned by Schering and the drug ramipril (Altace), which was previously marketed by Sanofi.
In 2009 applying the promise doctrine of patent utility, the Federal Court held that certain claims of the 206 patent were invalid.(3) Relying on that invalidity decision, Apotex brought the present action in 2011 seeking damages beyond those available under Section 8 of the Patented Medicines (Notice of Compliance) (PMNOC) Regulations. The Federal Court has already awarded damages under Section 8.(4)
The Supreme Court of Canada subsequently rejected the promise doctrine, finding in AstraZeneca that it was unsound law and not the correct approach for assessing patent utility.
Considering AstraZeneca, Sanofi and Schering sought leave to amend their statements of defence to plead that the Federal Court had relied on wrong legal principles in finding that the 206 patent claims had been invalid. Leave was denied by Justice Dunphy, primarily on the grounds that the defences had amounted to re-litigation and collateral attack of the invalidity decision. On 8 November 2018 the Ontario Court of Appeal overturned the motion judge's decision and allowed Sanofi's and Schering's amendments.
The court of appeal determined that issue estoppel should not prevent the amendments. Contrary to the motion judge's reasons, the court held that statutory amendments are not the only changes in the law that are relevant to the special circumstances exception to issue estoppel; the exception also contemplates a decision by a court on a point of law. AstraZeneca was such a decision, by the Supreme Court of Canada, on a point of law that had been central to the invalidity decision.
The court of appeal repeated earlier guidance by the Supreme Court of Canada that the most important factor in determining whether issue estoppel should apply is whether "taking into account the entirety of the circumstances… application of issue estoppel in the particular case would work an injustice".(5) The court stated "the strict application of issue estoppel in this case would work an injustice on [Sanofi and Schering]". The court noted that the invalidity decision is central to Apotex's claim; therefore, it would be unfair to deprive Sanofi and Schering of the opportunity to argue that the invalidity decision was suspect.
The court of appeal rejected the view that the potential for delay or expansion of the trial in the action (if re-litigation of validity is required) should bar the amendments. The court noted that Apotex is the party who is effectively raising the issue by pursuing its novel claim for an extraordinary level of damages beyond what it has already received in the Federal Court. In that context, Apotex cannot complain if Sanofi and Schering are given an "equal opportunity to defend".
Moreover, the court of appeal found that applying the special circumstances exception in the present case would not undermine the objective of finality underlying res judicata and other doctrines relating to it, contrary to the motion judge's reasons and the Federal Court of Appeal's recent decision.(6) The court of appeal noted that each case requires its own contextual consideration of the discretion to not apply issue estoppel. AstraZeneca represented a rare foundational change in the law by the Supreme Court of Canada, on a fundamental legal point. As such, the present case is "precisely the type of special circumstance where the principle of finality should yield to the justice of the case".
The court of appeal also refused to apply the doctrine of collateral attack to preclude Sanofi's and Schering's amendments, concluding that to do so would work the same injustice as issue estoppel.
As the Federal Court of Appeal had expressly declined to comment on the alternative finding of obviousness in the invalidity decision, labelling it obiter, the Ontario Court of Appeal concluded that in these circumstances the invalidity decision "cannot be considered to be binding on the basis of obviousness" and it would be unfair to hold Sanofi and Schering to it.
The present action is one of several novel claims by Apotex seeking damages that are pursuant to the Ontario Statute of Monopolies and the UK Statute of Monopolies. One such action is scheduled for trial in May 2019.
For further information on this topic please contact Brandon Heard or Lynn Ing at Smart & Biggar/Fetherstonhaugh by telephone (+1 416 593 5514) or email (email@example.com or firstname.lastname@example.org). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.
(1) Apotex Inc v Schering Corporation, 2018 ONCA 890.
(2) 2017 SCC 36.
(5) Danyluk v Ainsworth Technologies Inc, 2001 SCC 44.
(6) Eli Lilly Canada Inc v Teva Canada Ltd, 2018 FCA 53, leave to appeal refused, SCC Case No 38077.
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