• Factual Question on Non-Infringing Alternatives Remitted to Federal Court
  • March 24, 2017 | Authors: Jillian Brenner; Adrian J. Howard; Beverley Moore; Chantal Saunders
  • Law Firm: Borden Ladner Gervais LLP - Ottawa Office
  • Apotex Inc. v. ADIR, 2017 FCA 23
    Drug: COVERSYL perindopril

    Canadian Patent 1,341,196 (196 Patent), owned by ADIR, was found to be valid and infringed. This decision was affirmed by the Court of Appeal. Servier, the distributor in Canada, was permitted to elect between an accounting of Apotex's profits, or Servier's damages as a result of Apotex's infringing activities. In reaching a determination of the amount of Apotex's profits attributable to the infringing activity, the Court was required to consider the manufacture and sale of perindopril tablets in Canada and abroad. Apotex conceded that there was no non-infringing alternative available in Canada such that all its Canadian profits must be disgorged but profits for sales to Apotex's affiliates in Australia and the UK were in issue.

    The two issues on appeal related to whether there were non-infringing alternatives available and if so, what profits were attributable to Apotex's use of the patented invention, and was any part of the profit attributable to the provision of an indemnity and related legal services provided to Apotex's affiliates. Any part of the profit that was so attributable would not be attributable to the sale of infringing tablets. The Court found Apotex's profit should neither be reduced by taking into consideration the availability of non-infringing alternatives, nor on the basis of the indemnity or services provided.

    The Court of Appeal found that the Court erred in law by determining that the availability of non-infringing perindopril was not relevant, and did not properly consider the evidence from three suppliers that non-infringing perindopril could have been provided. The Court of Appeal remitted this question to the Court. In conducting its analysis, the Court of Appeal noted that it is settled law that a patentee is only entitled to the portion of profits causally attributable to the invention. Thus, non-infringing alternatives must be considered in order to determine the value of the invention. The Court of Appeal specifically addressed and rejected the reasons relied upon by the Court in reaching its decision.

    The Court of Appeal also reviewed the Court's assessment of the evidence and noted the requirement that the Defendant demonstrate that it "could have" obtained non-infringing product, and "would have" used a non-infringing alternative. After its review, the Court of Appeal remitted the question of "whether Apotex would have and could have obtained quantities of non-infringing perindopril" from the three suppliers identified during the trial, and if so, "whether Apotex would have and could have used non-infringing perindopril" for the sales to its foreign affiliates.

    The Court of Appeal also found that the Court erred in law in its interpretation of the contracts between Apotex and its affiliates, but not in its conclusion that Apotex's profits should not be apportioned on the basis of these contracts. The issue to be considered was whether the revenue obtained pursuant to transfer price agreements for the sale of perindopril to its foreign affiliates at a higher price because it was a "Patent Challenge Product" should be apportioned. The Court of Appeal found that the Court erred in finding that the higher price was paid based only on the indemnity provision but concluded that ""[b]ut for" the infringing qualities of perindopril, Apotex would have earned nothing on its sale, whether attributable to the drug itself or to the indemnity required to protect the affiliates. Thus, the profit resulting from the sale of perindopril was entirely causally attributable to the invention. It follows that no apportionment is warranted." The Court of Appeal also considered the particular factual circumstances in reaching its conclusion.

    As success was divided on the two issues appealed, no costs on the appeal were awarded.