Pfizer Liable to Apotex for Section 8 Damages: Amount to be Determined

In a judgment pronounced on May 10, 2013, Justice O’Reilly of the Federal Court of Canada, granted Apotex’s claim against Pfizer for section 8 damages under Canada’s Patented Medicines (Notice of Compliance) Regulations, SOR/93-133.  The sole issue before the Court was whether Apotex had a valid claim to damages.  The amount is to be determined in a subsequent proceeding.  For the full written decision see: Apotex v. Pfizer Canada Inc., 2013 FC 493.

The section 8 claim arises out of a failed prohibition proceeding.  In early 2000, Apotex sought approval for its generic version of ZITHROMAX (azithromycin), a significant anti-infective drug product marketed by Pfizer.  In response, Pfizer brought an application to prohibit Apotex from entering the market. Apotex alleged that its generic version of the drug would not infringe on Pfizer’s patent.  Justice Snider agreed with Apotex and held that there was no infringement and dismissed Pfizer’s prohibition proceeding: see Pfizer Canada Inc. v. Apotex Inc., 2003 FC 1428.

Section 8 essentially provides liability for damages when prohibition proceedings fail.  However, a defendant in a section 8 action can argue that damages should be reduced or eliminated because the generic plaintiff would have infringed the patent if the failed prohibition proceeding had never been commenced.  That argument was raised by Pfizer here, but failed.

Three interesting legal points arise from the decision, as follows.

First, Justice O’Reilly considered whether Justice Snider’s earlier construction of the patent was binding on him, even though it was made in the context of a prohibition proceeding and an independent evidentiary record was before the Court in the section 8 action.  Justice O’Reilly found that it was binding based on the doctrine of stare decisis and there was a lack of reason to depart from it.  Given that successful infringement and validity arguments are often predicated upon a winning construction, this ruling and the reasons for it demonstrate the critical importance of formulating, supporting and presenting the best possible claims construction in a prohibition proceeding.

Second, Justice O’Reilly considered whether the Notice of Allegation (NOA) central to the previous prohibition proceeding “continued to shape the issues” under section 8.  Contrary to what may have been common industry thinking, the Court held that section 8 did not create a free-standing right of action, entirely separate from the prohibition proceedings.  More importantly, the Court also held that entirely new allegations of non-infringement and invalidity (new in the sense that they were not contained in the NOA) are not relevant for the purposes of section 8.  Therefore, given that Apotex failed to allege invalidity in its NOA (consistent with what some generics and their lawyers consider to be best practice), the Court refused to entertain Apotex’s submissions about the invalidity of Pfizer’s patent at trial.  This ruling means that the NOA not only casts a long shadow over prohibition proceedings, it will necessarily influence and restrict arguments in subsequent section 8 proceedings.

Third, Justice O’Reilly rejected Apotex’s argument that certain infringement testing conducted by Pfizer in advance of trial was inadmissible because Apotex did not have the opportunity to observe the testing.  Justice O’Reilly distinguished prior jurisprudence relied upon by Apotex (e.g., Omark Industries (1960) Ltd. v Gouger Saw Chain Co. (1964), 45 C.P.R. 169) on the basis that it related to testing conducted at trial, and not prior to trial. Justice O’Reilly held that Apotex’s inability to observe testing did not affect the admissibility of such evidence, but that it may affect its weight.

Pfizer has a right of appeal.  It will be interesting to see how these rulings develop.