In Apotex v. Eli Lilly, 2023 ONSC 1968, the Ontario Superior Court of Justice (“Court”) dismissed Apotex’s s. 8 damages claim under the Patented Medicines (Notice of Compliance) Regulations (“Regulations”). The Court found section 8 liability had not been triggered in the circumstances. Moreover, the Court ruled Apotex had not sustained any damages because it would not have entered into the market any sooner in the hypothetical damages world than it did in the real world.

Apotex’s Claim

Apotex filed its generic drug submission for Apo-Atomoxetine on February 29, 2008. Apotex initially agreed to await expiry of the 735 Patent[1] before receiving its marketing authorization (“Notice of Compliance” or “NOC”). Apotex reversed course in July 2008, after its competitor, Teva, brought an action impeaching the 735 Patent (the “Teva Action”). Apotex then served a Notice of Allegation (“NOA”) challenging the validity of the 735 Patent. In response, Eli Lilly commenced a prohibition proceeding under the Regulations in October 2008. Lilly’s prohibition proceeding instituted a 24-month stay prohibiting Health Canada from issuing a NOC to Apotex during the pendency of the case.

Justice Barnes of the Federal Court heard the prohibition proceeding against Apotex immediately before he heard the Teva impeachment action. He released the Teva decision first (2010 FC 915), and declared the 735 Patent invalid. Following the invalidity declaration in the Teva Action, Health Canada issued Apotex and Teva their NOCs in September 2010.

In October 2010, Justice Barnes released his decision in the Apotex prohibition proceeding (2010 FC 1065, “Apo-Atomoxetine”). Based on the evidence in the Apotex case, he found that the allegations of invalidity made by Apotex in its NOA were not justified. However, since Apotex had already received its NOC after the 735 Patent had been impeached, Justice Barnes dismissed the prohibition proceeding for being moot.

At that time, section 8 of the Regulations permitted generics to seek “compensation” for “any loss suffered” if the application “is dismissed by the court”.

Relying on the wording of section 8, and Justice Barnes’ dismissal of Apo-Atomoxetine, Apotex commenced an action for damages in the Ontario Superior Court of Justice.

No Section 8 Liability Where Generic’s Allegations are Unsuccessful

The Court denied Apotex’s claim, finding that the underlying circumstances did not trigger section 8 liability for three primary reasons:

First, the Court rejected Apotex’s “narrow” reading of section 8 and its argument that the mere dismissal of a PM(NOC) proceeding in and of itself is sufficient to trigger liability. Justice Koehnen interpreted the fundamental object of section 8 as allowing generics to seek compensation for market delay arising from the “unjustified imposition” of a PM(NOC) proceeding.[2] In this regard, the Court found that “only an unsuccessful, withdrawn, or discontinued prohibition application gives rise to s. 8 damages”.[3] In Apo-Atomoxetine, Eli Lilly’s prohibition application was successful on the merits and would have been granted, absent the Teva Action. The Court held that permitting Apotex to seek damages in these circumstances would allow it to be a “free rider”, a result not connected with the objective of section 8:

“In effect, allowing Apotex to claim damages would allow it to be a free rider.  Apotex wants damages not for anything that occurred as a result of its Notice of Allegations or the prohibition proceeding that followed.  It wants damages for something that Teva accomplished in a different action even though Teva is not entitled to damages for what it had accomplished.”[4]

Second, the Court found that the case law on section 8 suggested that Apotex was not “entitled to damages in circumstances like the ones before me”.[5] In those cases,[6] section 8 damages had been denied where the innovator prevailed in the prohibition proceeding, even though the patent was later held invalid. Despite the order of events occurring in reverse (i.e., the patent was first held invalid in the Teva Action), Justice Koehnen did not find that to be a substantive difference to materially distinguish those prior section 8 decisions.[7]

Third, the Court noted the Regulations conferred discretion on the Court to consider all matters relevant to the assessment of compensation. The Court found Apotex’s failed claims should lead to an assessment of damages at zero:

Two critical matters to take into account in assessing the amount of compensation to which Apotex might be entitled here are the fact that Apotex’s claims failed and the fact that the court would have issued a prohibition order until 2016 in the absence of the Teva action. Those elements are so core to the damages scheme under the Regulations that they should lead to an assessment of damages at zero.[8]

Conclusion

In summary, Justice Koehnen’s decision is a reminder that the right to claim for section 8 damages is not absolute. In circumstances where the generic’s allegations are not successful on the merits, section 8 liability will likely not accrue, even where the PM(NOC) proceeding is dismissed or discontinued.

[1] Canadian Patent No. 2,209,735.

[2] Apotex v. Eli Lilly, 2023 ONSC 1968 at para. 30.

[3] Ibid, at para. 31.

[4] Ibid at para. 34.

[5] Ibid at paras. 39-48.

[6] Apotex Inc. v. Syntex Pharmaceuticals International Inc., 2010 FCA 155; Eli Lilly Canada Inc. v. Apotex Inc., 2010 FC 952 (Gauthier J.); Pfizer Canada Inc. v. Canada (Health), 2009 FC 1165 (Hughes J.).

[7] Apotex v. Eli Lilly, 2023 ONSC 1968 at para. 48.

[8] Ibid at para. 38.