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Apo-Esomeprazole Section 8 Action Dismissed Due to Infringement

Apotex Inc. v. AstraZeneca Canada Inc, is the Federal Court’s decision regarding Apotex’s section 8 action, and AstraZeneca’s related infringement action, in relation to Apo-Esomeprazole. The trial took place in May and June 2017 but the parties made supplemental submissions in January 2018 following the Supreme Court’s decision in Apotex Esomeprazole which addressed the utility of AstraZeneca’s 653 Patent and abolished the promise doctrine.

A preliminary issue was Apotex’s request to adduce new evidence regarding the grounds of validity not addressed by the SCC. This turned on whether it was still open to Apotex to challenge  the validity of the 653 Patent in light of the Supreme Court’s decision concluded that the 653 Patent “is not invalid for want of utility.” However, the underlying trial was intended to address all issues of validity, and the sole ground of invalidity accepted by the trial judge (inutility) was now set aside by the Supreme Court. Justice Locke thus held “there remains no avenue for Apotex to challenge the validity of the 653 Patent.” Since Apotex was precluded from challenging the patent’s validity, the request for additional evidence on validity was denied.

Apotex argued that the SCC recognized overpromising in a patent as mischief, which affected other grounds of invalidity. Justice Locke held there was “no indication that the SCC intended to change the state of the law as concerns other grounds of patent invalidity” and “if the SCC wanted to state that the Promise Doctrine remains good law for other grounds of patent invalidity, it could have, but it did not.”

Apotex also sought to introduce evidence in relation to its non-infringing alternative (NIA) defence. However, the Court held that Apotex did not act diligently in this request, had made no effort to introduce such evidence until the supplemental submissions in January 2018, and that prior arguments regarding new evidence related only to invalidity and not the NIA defence.  Apotex also provided “little reason to believe that its NIA allegations have any reasonable chance of success”. Justice Locke thus opted to not exercise his discretion to re-open the trial and allow new evidence.

The main issue was the analysis of Apotex’ section 8 claim. Apotex never disputed infringement of the 653 Patent. The Court held that its sales of Apo-Esomeprazole in the but-for world would have infringed the patent. AstraZeneca argued that any profits Apotex would have made in the but-for world would have been fully offset by liability for infringement, thus resulting in no compensable section 8 damages. Apotex argued that ex turpi causa should not be read into section 8(1) of the PM(NOC) Regulations, but is simply one factor to be considered under section 8(5). The Court agreed that infringement and ex turpi causa should be considered under section 8(5), but that this distinction made little difference:

In the end, it is of little importance in this case whether infringing sales by Apotex in the but-for world are taken into account in s. 8(1) or in s. 8(5). The important thing is that this factor be taken into account.

Apotex asserted that there was no evidence that AstraZeneca would have sued for infringement in the but-for world (and thus infringement would not have affected its but-for profits). The Court declined to draw an adverse inference from AstraZeneca’s lack of evidence on this point, and noted that Apotex’ own witness testified that it was inconceivable that AstraZeneca would not have enforced its patent rights, as it did in the real world. Apotex also asserted there was no evidence that the parties would not have settled in the but-for world. The Court found “there would likely have been no settlement”, as was the case in the real-world.

Apotex asserted that any infringement should not offset its losses due to (a) the large number of prohibition applications that AstraZeneca launched which were dismissed or discontinued and (b) the fact that the Promise Doctrine was good law at the time and the SCC’s change of the law was not foreseeable. The Court held that, even so, “the fact remains that the 653 patent is, and always was, valid” and “the fact is that Apotex claims compensation for loss as a result of being prevented from infringing AstraZeneca’s valid patent.” Infringement “is an important consideration that outweighs those asserted by Apotex” and all of Apotex’ “but-for” profits were fully offset by the costs of “but-for” infringement.

Apotex asserted that this approach upsets the balance sought by the PM(NOC) Regulations. When a patent is found invalid in a prohibition application, a subsequent decision that it is valid allows the patentee to avoid liability under section 8. However, if the situation is reversed (such that a patent is found valid in the prohibition application but invalid in a subsequent proceeding), the subsequent decision does not give rise to liability under section 8. Apotex argued that if a subsequent decision cannot impose liability under section 8, it should not operate to eliminate such liability. Justice Locked found that this consideration was outweighed by the infringement that would have occurred in the but-for world, stating: “I am not prepared to give Apotex’s argument such weight as to award it compensation for being prevented from infringing the 653 Patent.”

All section 8 damages for sales of Apo-Esomeprazole during the relevant period were offset by the liability Apotex would have incurred due to those sales infringing the 653 Patent. Apotex’ section 8 claim was dismissed.

A copy of the decision can be found here.