Court of Appeal Dismisses Apotex’ Perindopril Non-Infringing Alternative Appeal

In Apotex Inc v ADIR, 2020 FCA 60, the Federal Court of Appeal dismissed Apotex’ appeal on its non-infringing alternative (NIA) defence in the perindopril infringement case. The decision demonstrates the factual complexity of a NIA analysis and the resulting deference that the Court of Appeal will give trial judges on NIA issues.

Following a trial in 2008, Apotex was found to have infringed Servier’s patent relating to the drug perindopril. The litigation continued to the quantification phase where the Court assessed Servier’s remedy of an accounting of Apotex’s profits. Apotex appealed the Federal Court’s finding that Apotex’ profits should not be reduced based on its NIA defence.

The NIA test requires consideration of whether the infringer could have and would have used the NIA. The focus of the appeal was on the “would have” component of the analysis. Apotex took issue with the Trial Judge’s finding that Apotex would not have availed itself of the NIA in the hypothetical world. Apotex alleged that (i) the Court committed a palpable and overriding error in finding that Apotex would have declined to use the NIA, and (ii) the Court erred in law in the framework used to determine whether Apotex would have used the NIA.

Apotex asserted that the Trial Judge’s finding of a “historical preference” for manufacturing in Canada and dealing with its own affiliates outside the country was a palpable and overriding error (resulting in the conclusion that Apotex would not have used the NIA since it would have involved sourcing product from non-affiliated foreign companies). The Court of Appeal  characterized this as an argument “that the Federal Court failed to ascribe sufficient weight to parts of Dr. Sherman’s evidence”, however, “it is not the role of this Court sitting in appeal of a judgment of the Federal Court following a long and complex trial to reweigh the evidence and to come to a different conclusion than did the trial judge.” In any event, the Court of Appeal held that, even if this was an error, it “was not palpable, as the alleged error is not obvious.” The Trial Judge’s finding was not plainly wrong upon reading the testimony in question and the Court of Appeal  pointed to various statements in the testimony which supported the conclusion. It held that “when read in context, Dr. Sherman’s testimony supports the Federal Court’s finding…”

Apotex argued it was improper to focus on Apotex’ real world preferences in the circumstances since there would have been no impediments to using the NIA in the hypothetical world. The Court of Appeal rejected this argument, noting that prior decisions made it “clear that the preferences of a party can be relevant to the ‘would have’ component of the non-infringing alternative test.” Accordingly, the Trial Judge did not err in relying on evidence of Apotex’ real world preferences to conclude that Apotex failed to establish that it would have used the NIA.

Assessment of a NIA requires consideration of at least four questions, as earlier set out by the Court of Appeal in Lovastatin:

• Is the alleged non-infringing alternative a true substitute and thus a real alternative?
• Is the alleged non-infringing alternative a true alternative in the sense of being economically viable?
• Could the infringer have sold the non-infringing alternative?
• Would the infringer actually have sold the non-infringing alternative?

Apotex took issue with the Trial Judge’s observation that obstacles or barriers to use of a NIA should be linked to the “could have” portion of the analysis and not the “would have” portion. The Court of Appeal held that the Lovastatin questions “do not… exist in discrete silos, and there will inevitably be some overlap between them.” Notwithstanding the observations with which Apotex took issue, the Trial Judge went on to consider Apotex’ intentions and preferences in the “would have” analysis. The Court of Appeal noted that the reasons made it clear that the Trial Judge addressed all of the issues required. This was sufficient since “[a]t the end of the day, what is important is that each of the four questions identified in Lovastatin are considered and weighed in determining whether an infringer’s profits should be reduced because of the availability of a non-infringing alternative to the patented invention.”

Apotex also made submissions based on the distinction between damages and an accounting of profits. A number of the NIA cases arose in the context of damages assessments rather than an accounting of profits. The Court of Appeal confirmed that the legal principles regarding NIA defences are equally applicable to accounting of profits cases.

A copy of the decision can be found here.