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Teva can assert Ratiopharm’s EFFEXOR XR section 8 claim

On May 8, 2012, the Federal Court of Appeal allowed an appeal of a judgement of Justice Hughes (2011 FC 1169) that had held that the doctrine of equitable election precluded Teva from advancing a claim under section 8 of the Patented Medicines (Notice of Compliance) Regulations in respect of Ratiopharm’s extended release venlafaxine product. The matter arose as a consequence of Ratiopharm and Novopharm independently seeking to market a generic version of  Wyeth’s EFFEXOR XR product, and the subsequent amalgamation of Ratiopharm and Novopharm into Teva Canada Limited. Briefly, the relevant chronology of events are as follows.

Early 2005Ratiopharm files ANDS for generic version of EFFEXOR XR
December 7, 2005Ratiopharm’s ANDS is approvable from a health and safety perspective (i.e. Ratiopharm’s submission is on patent hold)
December 7, 2005Wyeth grants Novopharm a license to use a number of its patents, including Canadian Patent No. 2,199,778 subject to Novopharm paying a royalty to Wyeth.  Under the terms of the licenses, Wyeth is solely responsible for addressing any infringement and will consult with Novopharm.
December 23, 2005Ratiopharm serves a  Notice of Allegation (NOA) in respect of  EFFEXOR XR and the ‘778 patent on Wyeth. Ratiopharm agrees that it will not receive a Notice of Compliance (NOC)  before the expiry of another listed patent on January 10, 2006
Early 2006Novopharm and Wyeth consult on Ratiopharm’s NOA pursuant to terms of their license agreement
February 10, 2006Wyeth applies for a Prohibition Order under the PM(NOC) Regulations against Ratiopharm in respect of the ‘778 Patent
December 1, 2006Novopharm commences selling its venlafaxine extended release product
August 1, 2007Federal Court of Appeal determines that the ‘778 patent is not eligible for listing on the Patent Register
August 2, 2007Ratiopharm receives a NOC for its venlafaxine extended release product
August 7, 2007Novopharm gives Wyeth notice that it was no longer required to pay royalties in light of  Ratiopharm’s sale of its generic product
October 22, 2007Ratiopharm commences section 8 damages claim against Wyeth under the PM(NOC) Regulations for being kept of the market from January 10, 2006 to August 2, 2007
February 7, 2008Supreme Court of Canada dismisses Wyeth’s application for leave to appeal the decision of the Federal Court of Appeal that the ‘778 patent was ineligible for listing on the Patent Register
March 18, 2010Novopharm completes purchase of Ratiopharm
August 10, 2010Ratiopharm and Novopharm (now Teva Canada Limited) amalgamate under the Canada Business Corporations Act under the name Teva Canada Limited.

Justice Hughes, in a summary trial, had held that the doctrine of equitable election precluded Teva from continuing Ratiopharm’s section 8 damage claim and dismissed Ratiopharm’s action for damages. The Court of Appeal characterized the issues on appeal as follows:

  1. whether the equitable doctrine of election should bar Teva from continuing Ratiopharm’s section 8 claims against Wyeth; and
  2. if Teva is not so barred, whether the claim should be reduced by the gains realized by Novopharm as a consequence of the licence between Wyeth and Novopharm.

The Court of Appeal concluded that the trial judge misapprehended Novopharm’s rights under the Novopharm license. Because Novopharm could not itself commence legal proceedings under the license, it had no right to dictate how Wyeth was to respond to infringement of the ‘778 patent. The most that Novopharm could have done from early 2006 to August 2007 was to consult with Wyeth.  In holding that Teva was entitled to pursue Ratiopharm’s section 8 claims, the Court of Appeal held:

[35] I will assume in Wyeth’s favour, without deciding, that the communications between Novopharm and Wyeth in 2006 and 2007 as summarized above constitute “consultation” within the meaning of section 5.1 of the licence agreement, and that this consultation was an exercise by Novopharm of a contractual right under the licence agreement. For purposes of a potential future application of the equitable doctrine of election, what was the consequence of Novopharm’s decision to exercise this contractual right of consultation? Answer: none.

[36]  Wyeth did not argue in this Court that any consultations between Novopharm and Wyeth gave Wyeth any legal or equitable right that could possibly have affected the potential future right of Ratiopharm to claim section 8 damages. In the circumstances of this case, the consultations could not possibly have had any such effect. In my view, it necessarily follows that the consultations did not affect and could not possibly affect the potential future right of Teva, as Ratiopharm’s successor by amalgamation, to continue Ratiopharm’s section 8 damages claim. I conclude that the equitable doctrine of election does not apply to bar Teva from continuing Ratiopharm’s claim for damages under section 8 of the NOC Regulations.

On the second issue, the Court rejected Wyeth’s argument that Ratiopharm’s section 8 claim should be offset by Novopharm’s profits made as a consequence of the license.  The Court held that Novopharm’s profits as a consequence of the license are not property or a chose in action that survives amalgamation to continue its existence as an asset of the amalgamated corporation. The Court also rejected Wyeth’s second argument that had Ratiopharm not been delayed by the operation of the Regulations and entered the market on January 10, 2006, Teva would have entered the market on that day as well.  While the Novopharm license permitted Novopharm to enter the market on January 10, 2006, the license agreement does not establish that Novopharm could have obtained a NOC or had the practical capacity to enter the market by that date.

While the Court concluded that on the evidence before it Ratiopharm’s section 8 claim could not be set off against Novopharm’s profits, the Court held that Novopharm’s hypothetical market presence could be taken into account by the judge who determines the amount of Ratiopharm’s section 8 claim (assuming evidence of same is presented).

A copy of the Court of Appeal’s Reasons for Judgment may be found here.