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Earlier PM(NOC) Loss Does Not Disentitle Patentee From Electing Infringement Remedy

Justice Fothergill’s recent decision establishes that a prior favourable decision under the NOC Regulations cannot be relied upon by a generic pharmaceutical company to disentitle a patentee to an election between damages and an accounting of profits once the patent has been found to be valid and infringed.

Justice Fothergill’s decision issued following Bayer’s successful patent infringement action against Apotex and Cobalt relating to Canadian Patent No. 2,382,426 and the combination contraceptive product containing ethinylestradiol and drospirenone (see our earlier post here.) Following this decision, Justice Fothergill permitted the parties to make written submissions regarding Bayer’s entitlement to elect between its damages and an accounting of Apotex’s and Cobalt’s profits.

Apotex argued that based on a prior judicial determination under the NOC Regulations that Apotex’s allegation of non-infringement was justified (reported as 2014 FC 436) it, rather than Bayer, should be entitled to elect between damages and an accounting of profits for Bayer. Justice Fothergill disagreed, noting that section 55(1) of the Patent Act left him with no discretion as to the remedy of damages:

Pursuant to s. 55(1) of the Patent Act, “[a] person who infringes a patent is liable […] for all damage sustained by the patentee […] by reason of the infringement.” A trial judge has no discretion with respect to the remedy of damages, for the simple reason that Parliament has conferred that right upon a patentee and only Parliament can alter that right (Eli Lilly and Co v Apotex Inc, 2014 FC 1254 at paras 13 and 14).

Justice Fothergill further noted that the accounting of profits was an equitable remedy and was at the Court’s discretion, subject to the principles governing its availability. With respect to Apotex’s prior success under the NOC Regulations, Justice Fothergill held that this could not be relied upon to prevent Bayer from making an election:

[8]…The fact that a defendant has taken a business risk and obtained authority to market an infringing product pursuant to the NOC Regulations will not deprive a successful plaintiff of an election between damages and profits….

[10] An unsuccessful defendant cannot invoke the Court’s equitable jurisdiction to shield itself from an award of damages. This would turn the doctrines of equity and parliamentary sovereignty on their heads. At most, an unsuccessful defendant may oppose the grant of an equitable remedy based on considerations that have been recognized in the jurisprudence, e.g., the plaintiff’s lack of “clean hands”; the plaintiff’s undue delay in commencing the proceedings; the plaintiff’s undue delay in prosecuting the proceedings; the complexity of an accounting of profits; or the infringer’s conduct (see Varco Canada Ltd v Pason Systems Corp, 2013 FC 750 at paras 403-410; Philip Morris Products SA v Marlboro Canada Ltd, 2015 FC 364 at paras 22-45, aff’d 2016 FCA 55). Aside from Apotex’s adherence to the NOC Regulations, the defendants do not claim that any of these considerations arise here.

In the result, Justice Fothergill ordered that Bayer, after due inquiry and reasonable discovery, could elect either an accounting of the profits of Apotex and Cobalt, or all damages sustained by reason of infringement.

A copy of Justice Fothergill’s Order and Reasons may be found here.