ADIR, ORIL INDUSTRIES,
SERVIER CANADA INC.,
SERVIER LABORATORIES (AUSTRALIA) PTY LTD
and SERVIER LABORATORIES LIMITED
and
and
APOTEX PHARMACHEM INC.
Defendants
Restriction on publication:
“These are the public version of sealed reasons, dated December 13, 2006, pursuant to the Order dated January 3, 2007.”
REASONS FOR ORDER
Snider J.
[1] The Plaintiffs (collectively referred to as Servier or the Plaintiffs) have brought a motion for an interlocutory injunction against the Defendants (collectively Apotex or the Defendants) to restrain them from using, making, selling, distributing, exporting, supplying and in any other way dealing with the compound perindopril and any pharmaceutically acceptable salts thereof, in the United Kingdom, Canada and Australia, on the basis that these activities allegedly infringe Canadian patent no. 1,341, 196 (the 196 Patent). The Plaintiffs sell the compound under the registered trademark name of COVERSYL. By Order dated November 29, 2006 (2006 FC 1443), Justice Simon Noël granted the Plaintiffs an interim injunction in relation to perindopril products destined for the Australian market.
Issues
[2] The overarching question before me is whether the Plaintiffs are entitled to the equitable remedy of an interlocutory injunction. As well-established in relevant jurisprudence (RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311; American Cyanamid v. Ethicon Ltd., [1975] A.C. 396) entitlement to injunctive relief is based on establishing all elements of a tri-partite test.
[3] Thus the issues before me are:
1. Is there a serious question to be tried?
2. Will the Plaintiffs suffer irreparable harm if the injunctive relief is not granted?
3. Does the balance of convenience favour the Plaintiffs?
[4] In addition, the Defendants raise the issue of whether the motion should be denied because: (a) the Plaintiffs do not come to this Court with clean hands; and (b) the Plaintiffs have delayed bringing this motion.
[5] For the reasons that follow, I have determined that the motion should be dismissed.
BACKGROUND
[6] The Plaintiffs are affiliated companies. ADIR is the owner of the 196 Patent. Oril Industries is the manufacturer of perindopril, an inhibitor used to treat hypertension and related cardiovascular disease, which is sold worldwide under the trademark COVERSYL. COVERSYL is Servier’s most important product worldwide; it is registered in over 120 countries and has over 500 marketing authorizations.
[7] The 196 Patent, entitled “Procédé de Préparation d’Imino Diacides Substitués” was granted on March 6, 2001 and will expire on March 6, 2018.
[8] The Defendants are both located in Ontario and are affiliated companies and members of the Apotex group of companies. Apotex is manufacturing perindopril tablets at its facilities in Ontario and there is evidence that some of its production is exported.
[9] On October 26, 2006, the Plaintiffs obtained a copy of the Australian Pharmaceutical Benefits Schedule (“PBC”), the Australian reimbursement formulary for medicines to take effect on December 1, 2006, which listed generic perindopril for the first time. On the PBC for December 1, 2006, three generic perindopril brands were listed. For all three listings, GenRx Ltd Pty (GenRx), an Australian company, who exclusively sells perindopril manufactured by Apotex, was named as the seller.
[10] Although the Australian patent for perindopril expired October 1, 2006, in an action against GenRx, the Plaintiffs assert rights to the patent process. GenRx, a distributor and seller of generic pharmaceutical products and a company affiliated with Apotex, has received marketing authorization from the Australian regulatory authorities to market and sell generic perindopril erbumine in 2, 4, and 8 mg tablets beginning December 1, 2006. All perindopril tablets that will be sold by GenRx are manufactured by Apotex in Canada, allegedly in breach of the Plaintiffs’ Canadian 196 Patent. As it stands, GenRx has received three shipments of perindopril from Apotex and has already shipped over 1.6 million tablets of perindopril to the two other private labels listed as selling perindopril in the December 1, 2006 PBC. The evidence shows that GenRx proposes to sell generic perindopril at a 45% discount. Also, perindopril tablets have been distributed to over 39 warehouses across Australia and will subsequently be distributed to over 5000 pharmacies in the country.
[11] In Canada, Apotex is seeking regulatory approval to market and sell generic perindopril in 2, 4, and 8 mg tablets. According to the patent list submitted by Servier Canada Inc. (Servier Canada) to Health Canada pursuant to the Patented Medicines (Notice of Compliance) Regulations,
SOR/93-133 (NOC Regulations), the 196 Patent is listed in respect of the 2 and 4 mg dosage form of COVERSYL but not the 8 mg dosage form. Thus, for the 8 mg tablets, Health Canada has apparently taken the position that the NOC Regulations do not apply. It is unclear when this separate litigation will be resolved. Consequently, Apotex will be in a position to market and sell 8 mg perindopril tablets in Canada, perhaps as early as four to six months from now. However, it is unlikely that Apotex will be able to sell 2 and 4 mg tablets for some time.
[12] A summary of the procedural steps taken by the Plaintiffs follows to assist in understanding the context in which this motion has been brought.
[13] In the United Kingdom, two of the Plaintiffs – Les Laboratoires Servier (LLS) and Servier Laboratories Limited (Servier UK) – have commenced a patent infringement action against the Defendants (and other affiliated companies) in respect of UK patents for COVERSYL. LLS and Servier UK obtained an interlocutory injunction on August 8, 2006 enjoining the Defendants in the UK action from selling generic perindopril erbumine in the UK. A trial is set to begin February 21, 2007.
[14] On August 25, 2006, LLS, ADIR and ORIL Industries instituted an action in Canada against the Defendants for infringement of the 196 Patent. The Statement of Claim plead that Apotex was making perindopril in Canada for supply to the United Kingdom, thus infringing the 196 Patent. This action underlies this motion for injunctive relief.
[15] On September 12, 2006, French regulatory authorities obtained a document entitled “Perindopril Erbumine Summary of Physico-chemical Analyses”, dated 2004, after conducting a “saisie contrefaçon” (seizure for infringement). This document stated that the generic perindopril that was to enter the French market was manufactured by Apotex Pharmachem Inc. in Brantford, Ontario. Given the information obtained in France, an amended Statement of Claim dated November 3, 2006 was filed adding Servier Canada, Servier Laboratories (Australia) Pty. Ltd. (Servier Australia) and Servier UK as co-Plaintiffs. The amended Statement of Claim plead new material facts, including that Apotex was infringing the 196 Patent by supplying perindopril that was made in Canada to various markets.
[16] On November 8, 2006, the Plaintiffs filed a Notice of Motion for an interlocutory injunction restraining the Defendants from using, making, selling, distributing, exporting, supplying and in any way dealing with the compound perindopril and asked that a judgment on the interlocutory injunction motion be issued before December 1, 2006. In the event that the interlocutory injunction could not be heard and a judgment issued before December 1, 2006, the Plaintiffs asked the Court for an interim injunction.
[17] On November 21, 2006, the Statement of Claim was amended for a third time. A paragraph related to the situation in Australia was varied and augmented.
[18] The Plaintiffs’ interim injunction motion was heard on November 24, 2006 in Ottawa. As noted above, Justice Noël granted the motion. The interim injunction expires on December 13, 2006.
ANALYSIS
(a) Serious Issue
[19] The first question to be asked on the tri-partite test is whether the pleadings of the Plaintiffs raise a serious issue. With respect to the seriousness of the issue to be tried, the Supreme Court of Canada in RJR-MacDonald, above at 337-338, held:
The threshold is a low one. ... Once satisfied that the application is neither vexatious nor frivolous, the motions judge should proceed to consider the second and third tests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neither necessary nor desirable.
[20] The threshold to be met on the matter of serious issue is very low. Other cases, where interlocutory injunctions have been sought in pharmaceutical matters, have also adopted the “frivolous or vexatious” standard (see, for example Merck & Co. Inc. v. Apotex Inc. (1993), 51 C.P.R. (3d) 170 at 181 (F.C.T.D.).
[21] The substance of the claim of the Plaintiffs is that the Defendants are infringing the 196 Patent by the making, selling and exporting of a generic form of perindopril. On the question of serious issue, the Plaintiffs rely on the presumption of validity contained in s. 45 of the former Patent Act (which Act governs this patent). They also point to the fact that this particular patent has had significant scrutiny during the conflict proceedings that preceded the grant of the 196 Patent. Further, they refer to the Order of Justice Nadon that, in their view, confirms that the subject matter of the 196 Patent was invented by the named inventors. Finally, they submit that Dr. Bernard Sherman, the controlling mind of Apotex, effectively conceded, during cross-examination on his affidavit, that Apotex is infringing the 196 Patent. The Plaintiffs assert that they have a “strong serious issue”.
[22] The Defendants produced significant affidavit evidence that, they submit, demonstrates that the Plaintiffs do not satisfy the requirement for a serious issue. They raise a number of concerns with the Plaintiffs’ claim. One of the first arguments that they make is that, because the Plaintiffs are seeking orders that are mandatory (a requirement to account for perindopril products and an order to effect the return of any shipment of product exported from Canada), the applicable standard is “strong prima facie case” (Aetna Financial Services Ltd. v. Feigelman, [1985] 1 S.C.R. 2).
[23] In general terms, other arguments made by the Defendants include the following:
- Some of the Plaintiffs have no standing to bring the action, since they are not operating in Canada and have no express licence from the patentee, ADIR, upon which rights in Canada are created;
- The claim is premature, particularly in Canada, where Apotex, at this time, holds no approvals to sell the generic drug; and
- The patent is invalid on at least three different grounds, described as “Overbreadth: Lack of Utility”, “Overbreadth: Lack of Sound Prediction” and “Inventorship”.
[24] The Defendants note that the Plaintiffs submitted no expert evidence to rebut the affidavit or other evidence they advanced. Accordingly, they submit that the Plaintiffs’ claim is without merit and that there is no serious issue.
[25] It is clear from the jurisprudence that the hearing of an interlocutory injunction is not the time to finally determine the merits of a claim. Certainly, there may be situations where the claim advanced is so devoid of logic or merit that it can be characterized as frivolous and vexatious. That, in my view, is not the case here. A question on the validity of a patent that has undergone scrutiny in the past and where inventorship has been confirmed by this Court is a serious matter. Only after a much deeper consideration of all of the evidence that will come forward in the context of a trial should such a determination be made.
[26] Further, I do not accept that the Plaintiffs must meet a higher standard of “strong prima facie case”. I acknowledge that there has been some jurisprudence that accepts this notion. However, I believe that the most recent determination of the issue was in Sawridge Band v. Canada, 2004 FCA 16, [2004] 3 F.C.R. 274 at paras. 43-46, 316 N.R. 332, where the Federal Court of Appeal rejected a higher standard in the context of an interlocutory injunction. In my mind, for cases such as this, the standard remains that set out in RJR-MacDonald.
[27] On the basis of the record before me, I am satisfied that there is a serious issue. However, I am not persuaded (nor need I be) that there is a “strong serious issue”.
[28] Having said that, I must be clear that this, in no way, is a judgment of the quantity or quality of the evidence produced by either side. I need not conclude that the Plaintiffs have raised a “strong serious issue” (or a weak one). All I am saying is that the Plaintiffs have raised issues that satisfy the threshold of serious issue in the context of an application for injunctive relief.
(b) Irreparable Harm
[29] The second branch of the tri-partite test requires that the Plaintiffs demonstrate that they would suffer irreparable harm if the injunctive relief is not granted. Justice James Russell provided a helpful overview of the nature of irreparable harm in the recent case of Aventis Pharma S.A. v. Novopharm Ltd., 2005 FC 815; aff’d 2005 F.C.A. 390, 40 C.P.R. (4th) 210 at paras. 59-61 (F.C.):
As Mr. Justice Kelen pointed out in Pfizer Ireland Pharmaceuticals, at para. 25, it is well established in the jurisprudence that an interlocutory or interim injunction should only be granted in cases where there is clear evidence of irreparable harm. The Plaintiffs must adduce "clear and not speculative" evidence that irreparable harm will follow the entry of Novopharm's Novo-enoxaparin into the market.
It is also well understood that irreparable harm refers to the nature of the harm suffered rather than its magnitude. As the Supreme Court of Canada pointed out in RJR-MacDonald, it is "harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other." (p. 341)
Furthermore, difficulty in precisely calculating damages does not constitute irreparable harm, provided there is some reasonably accurate way of measuring those damages. See Merck & Co. v. Nu-Pharm Inc. (2000), 4 C.P.R. (4th) 464 at 476 para. 32 (F.C.T.D.).
[30] As noted, the Plaintiffs seek an injunction for all of Canada, Australia and the UK. They must establish irreparable harm for each jurisdiction as each turns on its own facts. However, even if I conclude that irreparable harm has not been demonstrated for one or two jurisdictions, an injunction limited to the remaining jurisdictions may issue.
(i) Irreparable Harm in the UK
[31] I will begin with the situation in the United Kingdom.
[32] The Plaintiffs, in my view, have failed to demonstrate irreparable harm related to the UK. As discussed earlier, an injunction has been in place in the UK, issued by the High Court of Justice, Chancery Division, Patents Court, since August 8, 2006. The injunction orders that the four affiliated Apotex companies named as Defendants in the action described earlier not “dispose of, offer to dispose of, or import into the United Kingdom their generic perindopril erbumine product”. As I understand it, this injunction will be in place until the trial into the alleged patent infringement, which trial is scheduled to begin February 21, 2007.
[33] For so long as the injunction is in place, the Plaintiffs cannot suffer any harm in the UK from actions of Apotex in Canada. Should LLS and Servier UK be successful at trial in the UK, the injunction will become permanent. Should they lose at trial, the situation will, obviously, change and there will be no UK prohibition against Apotex selling Canadian-produced perindopril into that market. However, we do not know what the Defendants would do. Apotex may choose to manufacture the drug in India, where it apparently has manufacturing facilities. Or, it may choose to forego the UK market. In my view, it is premature to assume that Servier UK, if unsuccessful at trial, would suffer harm attributable to the manufacturing of perindopril in Canada by Apotex, allegedly in breach of the 196 Patent. It is certainly not necessary or equitable to put in place an injunction, at this time, to address that hypothetical situation.
[34] The balance of the discussion on this determinative issue relates to the situation in the Canadian and Australian markets.
(ii) Plaintiffs’ Evidence
[35] The Plaintiffs submit that the irreparable harm to them following Apotex’s launch and subsequent withdrawal in Australia and Canada of its generic perindopril is clear and not speculative. The damages, they assert, will not be quantifiable, as there is no reasonable way of measuring their damages, particularly in respect of the losses after the trial. In these arguments, they rely, almost exclusively, on the evidence of Dr. Jerry Hausman, Professor of Economics at M.I.T.
[36] Dr. Hausman’s academic specialties are econometrics and applied microeconomics. As he states, “One of the major things that econometrics does is the analysis of data to predict how consumers and companies will behave in a certain market.” There can be no question that Dr. Hausman is eminently qualified in the area. Dr. Hausman was asked by the Plaintiffs to consider the economic outcomes if Apotex were to introduce a generic version of COVERSYL into the UK, Australian and Canadian marketplaces and are subsequently required to withdraw the generic product because of the Plaintiffs’ success at trial. He was asked to consider whether such economic outcomes will result in the Plaintiffs suffering irreparable harm.
[37] In general terms, Dr. Hausman found the following economic outcomes of Apotex’s marketing and sale of generic perindopril into the three countries:
- The Plaintiffs would lose a large percentage of COVERSYL market share;
- If Apotex’s generic drug were subsequently withdrawn from the market, the Plaintiffs would not recover COVERSYL’s full pre-generic market share due to competition from other generic ACE inhibitors;
- Servier would immediately be forced to decrease its price of COVERSYL and, upon Apotex’s withdrawal, would not be able to increase its price to the level it would have been absent the generic entry;
- The Plaintiffs would be forced to reduce their sales forces and promotional activities significantly in each of the countries; and
- The Plaintiffs would reduce research and development activities.
[38] Dr. Hausman concluded, after reviewing the situation for each of the jurisdictions affected, that “the damages suffered by Servier will not be quantifiable, as there is, and will be, no reasonably accurate way of measuring damages using econometric or statistical methods.” In forming this opinion, Dr. Hausman pointed frequently to the difficulty in predicting damages over the remaining 12 years to expiry of the 196 Patent.
[39] The Plaintiffs’ only other evidence relevant to the issue of irreparable harm in Canada and Australia, was from Mr. Yves Langourieux, Managing Director of International Operations of Servier International (responsible for Canada, the United States and Europe), and Mr. Michael Sumpter, Chief Executive Officer of Servier Canada Inc. (Servier Canada).
[40] In response to the evidence of the Plaintiffs on this issue, the Defendants presented expert affidavit evidence from Stephen R. Cole (Canada), Aidan M. Hollis (Canada), David Matthew (UK) and Philip Williams (Australia). All of these experts hold significant qualifications in regard to the subject matter of their evidence. In general, these experts considered the assumptions underlying Dr. Hausman’s conclusions. To the extent that they are successful in convincing me that those assumptions are flawed, the Plaintiffs’ claim that their damages cannot be monetarily quantified or cannot be cured is seriously undermined. Rather than summarizing their testimony, I will refer to it, as necessary, throughout my analysis.
(iii) Vulnerability of Servier
[41] The Plaintiffs point out the importance of COVERSYL to their companies and argue that this separates them from the other pharmaceutical companies who have failed to meet the threshold of irreparable harm. Indeed, in oral submissions, counsel described the Plaintiffs as being “overly dependent” on COVERSYL. Let me review the numbers set out in the evidence for Canada and Australia.
|
Market |
% of all Servier Products |
% of growth of Servier |
Predicted diminution after entry of generic
|
|
Australia |
XXX |
XXX |
XXXXX in 1 to 2 years |
|
Canada |
XXX |
XXX |
XXXXX in 18 months |
[redacted pursuant to the Order dated January 3, 2007]
[42] In cross-examination, Mr. Millichamp, an affiant put forward by Apotex, acknowledged that GenRx is expected to capture 17% of the Australian market in perindopril within 1 year. The size of market drop of 50 to 90% was put forward by Dr. Hollis, another of Apotex’s experts, who described this drop as “fairly drastic”. Counsel for the Plaintiffs described the potential market loss in Canada as a “catastrophic collapse”. The Plaintiffs also submit that the loss in the Canadian market would leave Servier Canada, who operates on a stand alone basis, financially unable to carry out any promotional activities.
[43] I do not think that the Defendants are disputing the percentages set out above. In fact, at least two of their experts acknowledged the loss. Both Dr. Hollis and Dr. Cole ran their calculations on the basis of market losses in these ranges. I find that the market loss figures set out above are likely to occur upon entry to the markets by Apotex’s generic perindopril. However, the question before me is not whether the percentage market loss is high but whether the effects of this market loss are irreparable.
[44] The Plaintiffs refer to jurisprudence where injunctions have been issued in situations where the sales of a patented product represented a significant proportion of the plaintiff’s total sales. In Chic Optic Inc. v. Safilo Canada Inc. (2004), 35 C.P.R. (4th) 396 (Qc. Sup. Ct.), the patented product accounted for 80% of plaintiff’s sales. In Alkot Industries Inc. v. Consumers Distributing Co. Ltd. (1986), 4 F.T.R. 270, 11 C.P.R. (3d) 276 (F.C.T.D.), 30% of sales were attributable to the patented product. Finally, in Allergan Pharmaceuticals Inc. et al v. Bausch & Lomb Inc. et al (1985), 7 C.P.R. (3d) 209, 35 A.C.W.S. (2d) 342 (F.C.T.D.), the defendant was enjoined in a situation where a “significant” market share was held by the plaintiff’s patented product. Given the Plaintiffs’ dependence on COVERSYL, the Plaintiffs submit that loss of this market will be permanent. In turn, the Plaintiffs refer to jurisprudence that establishes that injunctions should be granted where the plaintiff is able to demonstrate that it will suffer permanent market loss (see, for example, Procter & Gamble Inc. et al v. Colgate-Palmolive Canada Inc. (1995), 61 C.P.R. (3d) 160 (F.C.T.D.), Lubrizol Corp. v. Imperial Oil Ltd. (1989), 22 C.P.R. (3d) 493 (F.C.T.D.), varied as to costs (1989), 26 C.P.R. (3d) 461 (F.C.A.), Cabot Corp. et al v. 3M Canada Inc. (1987), 15 C.P.R. (3d) 247 (F.C.T.D.).
[45] It is difficult to assess the impact of the foregoing percentages in the abstract. While the percentages seem high, are the Plaintiffs financially able to absorb the temporary market loss and to finance actions that could mitigate their losses? Absent this information, I would find it very difficult to conclude that harm to the Plaintiffs would be irreparable or that they will suffer permanent market loss. Clearly, the full impact of such losses on an organization can only be made in the context of its financial situation. While not all harm can be measured in financial terms, in this case, the financial position of the Plaintiffs is a key element of the analysis. Indeed, I find it very strange that Dr. Hausman was not provided with the financial records and yet still managed to opine that the Plaintiffs would suffer irreparable harm.
[46] For obvious reasons, Apotex sought access to the financial records of the Plaintiffs during cross-examination of Mr. Langourieux. When Apotex filed its final Memorandum of Fact and Law for this motion, they still did not have the requested information. The records were provided to the Defendants’ counsel after the deadline for submitting their final Memorandum and to me on the morning of the hearing of the motion. There was no opportunity to cross-examine Mr. Langourieux (or an appropriate company representative) on the contents of the financial records. In spite of the delay in producing the information and because of the importance of this information to the issue of irreparable harm, I allowed the financial records to be submitted at this late date.
[47] Having reviewed the financial records, I cannot characterize the Servier group of companies as an unsophisticated “Mom and Pop” organization. A simple reading of the financials on a consolidated basis as of September 30, 2005 shows that the liquid assets of the Servier group of companies were over [redacted pursuant to the Order dated January 3, 2007].
[48] The financials, quite simply, do not support the allegation of “catastrophic collapse”. In particular, they disclose two weaknesses in the position of the Plaintiffs. Firstly, I cannot accept, on the basis of the financial information finally and reluctantly provided, that the Plaintiffs are unable to afford to continue promotional activities for COVERSYL for the three to four years until trial. Given the Plaintiffs’ overall financial resources, continued payment of sales personnel in Australia and Canada would not leave them destitute. The matter of whether they choose to continue to carry out promotional activities is another question addressed below.
[49] Secondly, the financial records contain information that undermines the Plaintiffs’ assertions that each of their affiliated companies is required to stand on its own two feet financially. Since COVERSYL forms such a dominant portion of their sales in Canada and Australia, they submit that loss of revenues from sales of COVERSYL would make it financially difficult, if not impossible, to continue to fund promotional activities. [redacted pursuant to the Order dated January 3, 2007] This diminishes the reliance that I place on any declaration of financial independence and impacts negatively on the testimony of Dr. Hausman where he has made such assumptions.
[50] In light of the financial information before me and having reviewed the cases of Chic, Alkot or Allergan, above, I cannot find that the situation faced by the Plaintiffs will approach that of the plaintiffs in those cases.
(iv) Price Reduction and Calculation of Damages
[51] The jurisprudence is clear that difficulty in precisely calculating damages does not constitute irreparable harm, provided there is some reasonable methodology that could, at the time damages would be assessed, measure those damages (Merck, above at 186; Merck & Co. v. Nu-Pharm Inc. (2000), 4 C.P.R. (4th) 464 at para. 32 (F.C.T.D.); Aventis Pharma S.A. v. Novopharm Ltd., above at para. 61).
[52] It is important to note that the Court is not being called upon to measure the damages at the time of granting the injunction. Damages are calculated only after success at trial. At that time, there would be two time periods. Firstly, there would be a period, from the date of the entry of the generic perindopril into the market to issuance of the permanent injunction, where the Court would assess “retrospective” damages. Secondly, there would be a calculation of “prospective” damages from the date of judgment forward to the end of the patent. Courts are frequently called upon to make these types of assessments. Dr. Hausman, in cross-examination, acknowledged that the most difficult calculations, in terms of predicting the future, would be at the end of the trial. Implicit in this statement is an admission that the Plaintiffs’ retrospective damages would be calculable.
[53] Thus, the question of the ability to quantify damages boils down to whether the Plaintiffs will suffer any harm beyond trial that cannot be quantified in a reasonable manner so as to provide a sufficient remedy in damages. Dr. Hausman says that the Plaintiffs will suffer such irreparable harm.
[54] The Plaintiffs submit that much of the difficulty in assessing damages will result from a reduction in the price of COVERSYL upon entry of the generic perindopril. They assert they will be forced to reduce the price of COVERSYL to continue to compete in the Canadian market. Once the price is reduced, it will not be possible to subsequently raise the price back to the level prior to the entry of Apotex’s generic product. As a patented medicine, the price of COVERSYL is controlled by the Patented Medicines Prices Review Board (PMPRB), and the PMPRB typically limits price increases to the consumer price index (CPI). Thus, they argue, even if successful at trial, the PMPRB will not permit the Plaintiffs to increase the price of COVERSYL back to its previous level. Over the remaining term of the patent (until 2018), the amount attributable to this permanent price reduction cannot be calculated. Similar arguments are made in respect of Australia.
[55] One of Dr. Hausman’s basic conclusions – from which flowed much of the harm to be suffered by the Plaintiffs – was that the Plaintiffs would reduce the price of COVERSYL upon entry into the market of generic perindopril.
[56] For Canada, both Dr. Cole and Dr. Hollis assert that the Plaintiffs could enter the market with their own pseudo-generic brand of perindopril. Rather than reducing the price of COVERSYL to compete with Apotex’s generic perindopril, the pseudo-generic could be priced to compete. As I understand it, from reviewing the evidence, such strategy would have two impacts. First, the Plaintiffs would maintain at least a share of the perindopril market. Secondly – and critical in this case – the use of a pseudo-generic as opposed to reducing the price of COVERSYL would avoid the result that the Plaintiffs would not be able to increase its price to the level it would have been absent the generic entry. It is true that drug prices in Canada can only be increased in moderate annual increments pursuant to the PMPRB. It follows that, if the price of COVERSYL is reduced during the time prior to trial, the Plaintiffs will be unable to immediately raise the price of the branded drug to pre-generic entry levels. However, if Servier Canada obtains approval for and competes on price with its own pseudo-generic, the price of COVERSYL will not be any different than if Apotex had not been in the market.
[57] The situation in Australia, as described by Dr. Williams, is more complicated. Nevertheless, I conclude that similar protective pricing strategies could be pursued in that jurisdiction.
[58] While Dr. Hausman makes passing reference to this possibility, he appears to have rejected the possibility of this alternative strategy with little or no reasoning.
[59] I have no evidence before me that this strategy – which, on its face, and according to the Apotex experts, is logical – would not assist the Plaintiffs. Indeed, there is some evidence that Servier Australia has taken at least some steps to begin selling a pseudo-generic in Australia, named PERINDO. While there was disagreement as to whether Servier Australia could immediately begin to sell PERINDO, its pseudo-generic brand, there is sufficient evidence to show that it has taken steps that would enable it to do so.
[60] I also have no evidence on why Servier Canada could not enter into the Canadian market with its own branded pseudo-generic.
[61] Dr. Hollis, one of the Defendants’ experts, is an economist who is currently an Associate Professor of Economics at the University of Calgary. A review of his curriculum vitae shows that he has substantial experience in the operation of pharmaceutical markets, including acting as a witness in three cases relating to pharmaceutical patents. While the quantity of his experience does not match that of Dr. Hausman, his overall credibility is enhanced by the fact that his experience is in the Canadian market. Dr. Hollis disagrees with Dr. Hausman’s key assumptions; specifically, he does not agree that:
- Servier would reduce the price of COVERSYL if Apotex introduces a generic perindopril;
- Servier would reduce its promotional expenditures in the absence of an interlocutory injunction; or
- The shortfall in cashflow caused by the generic competition will be so large as to imperil Servier’s continued operations in Canada.
[62] Of particular relevance at this point of my analysis was Dr. Hollis’ research into the prices of cardio-vascular drugs in the Ontario Drug Benefit Formulary. He found that, in all but one case, the branded drug retained exactly the same price after generic competition as before. During cross-examination, Dr. Hollis restated his findings that “for almost every other product in the cardio-vascular category in Ontario, price of the brand-name drug did not decrease upon generic entry”. Dr. Hollis, also in cross-examination, expressed the view that “Servier would likely maintain its price on COVERSYL for the entire five years [to trial] and continue to sell it at that price.” This conclusion, based on an actual study of the Ontario market, runs in direct contradiction of the hypothetical view of Dr. Hausman. I prefer the testimony of Dr. Hollis on this point.
(v) Promotional Activities and the Preservation Mode
[63] The Plaintiffs maintain that, in the face of market entry by Apotex’s generic perindopril, they will drastically reduce active marketing of COVERSYL. This was another fact that was accepted and relied on by Dr. Hausman. As stated by Dr. Hausman, “Faced with the irreversible loss of market, branded companies typically significantly reduce or almost eliminate marketing of their product after generic entry because of the changed economic situation, and the prescribing patterns of physicians …”. The effects of this diminution of promotional activities, he posits, would be irreparable.
[64] Above, I have addressed the issue of whether the Plaintiffs could afford to continue to fund these activities; I am not persuaded that they cannot. But, this leaves the issue raised by Dr. Hausman of whether, regardless of financial viability, a company would reduce promotional activities in the face of the entry of a generic into the market.
[65] The Defendants’ experts do not agree with this assumption. In particular, Dr. Cole carefully laid out a scenario under which Servier Canada would maintain the price of COVERSYL, introduce a pseudo-generic and continue promotional activities at current levels. Dr. Cole referred to this model as the “Preservation Mode”. In his view, “it makes eminent common and business sense for the Plaintiffs to adopt the Preservation Mode even if, in the time period pending trial, it will mean promoting their product at the doctor level which may result in sales to Apotex at the pharmacy level”.
[66] The Plaintiffs submit that I should prefer the “model” put forward by Dr. Hausman, where promotional activities cease and the companies reduce the price of the branded drug rather than introducing a pseudo-generic. In part, they rely on what they term the better qualifications of Dr. Hausman. They also point out the examples raised by Dr. Hausman of other drugs (ZESTRIL and TRITACE in the UK; RENITEC in Autralia; and MONOPRIL in Canada) and that Dr. Cole was unable to provide any examples that had followed his Preservation Mode.
[67] I do not accept the first argument of relevant qualifications of the experts. Dr. Hausman, while eminently qualified, has limited experience with Canadian and Australian markets and litigation. During cross-examination, he was unable to answer some basic questions about the regulatory schemes in both jurisdictions. Dr. Cole’s practice, on the other hand, is in Canada and his experience is extensive on matters directly relevant to the issues before me. Similarly, Dr. Williams has direct experience in Australia (albeit somewhat limited in matters of intellectual property).
[68] In my view, the more important concern that I have with Dr. Hausman’s testimony relates to his underlying assumptions and failure to address some key questions. As discussed above, Dr. Hausman dismisses the potential for continued promotional activities, coupled with the introduction of a pseudo-generic; in short, he does not address the Preservation Mode described by Dr. Cole.
[69] The Plaintiffs criticize Dr. Cole for not having examples of a successful Preservation Mode in action. However, let me consider the examples offered by Dr. Hausman. The Defendants point out that, in each of these cases, the patent for the branded drug was close to its expiry when the generic entered the market. The situation faced by the Plaintiffs is critically different in that its patent is not set to expire until 2018. From a trial in three to four years, the Plaintiffs would have eight or nine years of continued monopoly for COVERSYL.
[70] With respect to the possibility of a reduction in promotional activities, Dr. Hollis accepts that brand name companies typically reduce their promotional expenditures following generic entry. However, he opines that this pattern can only be applied to companies who are anticipating permanent generic competition, due to the permanent loss of exclusivity.
[71] In my view, this opinion carries a great deal of common sense. I agree that it would be reasonable to reduce or eliminate promotional activities in the face of an expiring patent. Why would a patent holder continue to market a product to which it will soon lose the exclusive rights? Much of the benefit of such activities would logically accrue to the generic companies poised to leap into the market at the expiry. Thus, for example, the reduction of promotional activities by MONOPRIL, whose patent rights in Canada were about to expire, was logical. But, the same cannot be said if the generics will be unable to access the market for several years. That is the situation faced by the Plaintiffs. Given that the Plaintiffs are expecting an additional nine or ten years of exclusivity for COVERSYL after the trial, any elimination of its promotional efforts may not be rational business behaviour.
[72] Thus, I conclude that Dr. Hausman’s conclusion as to market loss is based on an incomplete and flawed assumption of the elimination of promotional activities. Consequently, his conclusion of irreparable harm is seriously undermined.
(vi) Summary on Irreparable Harm
[73] In sum, the Plaintiffs have failed to persuade me that they will suffer irreparable harm if the injunction applied for is not granted. There is no question that Dr. Hausman has provided a fulsome analysis of this issue. Without anything further, his opinion formed the basis of the interim injunction granted by Justice Noël. However, when viewed in the light of the opinions offered by the Defendants’ experts, I have serious concerns about some of Dr. Hausman’s assumptions and, thus, on his conclusions. For the reasons that I have described, I prefer the opinions expressed by the Defendants’ experts.
[74] In this conclusion, I am assisted by many decisions of this Court and the Federal Court of Appeal where many of the same arguments have been presented. In particular, I refer to the decision of Justice Russell in Aventis Pharma, above, where the plaintiff put forward many of the same arguments as were made before me. Justice Russell, on similar facts and – at least to some extent, the same arguments – did not find irreparable harm.
(c) Balance of Convenience
[75] Having concluded that the Plaintiffs have failed to satisfy the irreparable harm branch of the test, there is no need for me to consider the balance of convenience.
(d) TRIPS
[76] The Plaintiffs raised an interesting argument related to the World Trade Organization (WTO) agreement entitled Trade Related Aspects of Intellectual Property Agreement (TRIPS), 1869 U.N.T.S. 299. Canada is a signatory to TRIPS, which is the subject of the World Trade Organization Agreement Implementation Act, S.C. 1994, c. 47. Under Article 41 of TRIPS, Canada is obliged to ensure that enforcement procedures are available to permit effective action against any act of infringement of a patent, including expeditious remedies which constitute a deterrent to further infringement. Pursuant to Article 50, judicial authorities are to be given the authority to order prompt and effective provisional measures to prevent infringement. The Plaintiffs submit that the practice of Canadian courts to refuse interlocutory injunctions in nearly all cases is inconsistent with TRIPS. Of particular concern to the Plaintiffs is the length of time that plaintiffs must wait for a decision on the merits of a patent infringement claim and, afterwards, for a determination on damages.
[77] I cannot see any application for TRIPS in this motion. I am not persuaded that the failure of this Court to enjoin the Defendants is in breach of Article 41 obligations. Nowhere in TRIPS does Canada commit to immediate injunctive action where a party claims patent infringement. Surely, TRIPS is not intended to obviate the necessity for hearing from the defendants in a motion for injunctive relief. While I will concede that some patent actions have proceeded slowly through our courts, once a trial is completed and infringement has been found, the usual remedy of permanent injunction and damage awards are in compliance with the TRIPS obligations.
[78] Secondly, I question the reference by the Plaintiffs to the “practice” of refusing interlocutory injunctions. For clearly described reasons, Canadian courts have established a high standard for plaintiffs to meet the test for granting an injunction. In each case where injunctions have been considered, the court has taken care to assess the evidence against the test established in our jurisprudence. I cannot believe that TRIPS requires anything further.
[79] Neither of the two cases referred to by the Plaintiffs is of assistance. In Merck & Co. v. Apotex Inc., 2006 FCA 323 at paras. 117-124, 152 A.C.W.S. (3d) 142, the Federal Court of Appeal ordered that an infringing product be delivered up for destruction “in order to comply with Canada’s obligations under TRIPS”. In Apotex Inc. v. Wellcome Foundation Ltd. [2001] 1 F.C. 495, 10 C.P.R. (4th) 65, the reference to TRIPS by the Federal Court of Appeal was to the prohibition of discrimination based on a field of technology. I do not regard either of these cases as having application to or modifying the test set out in RJR-MacDonald.
(e) Other Issues
[80] Given my determination that the Plaintiffs do not meet the requirements of the tri-partite test, there is no need to consider the other issues raised by the Defendants. Specifically, I decline to decide whether the Plaintiffs came to their Canadian litigation and this motion with “clean hands” and, if not, whether this should be an equitable bar to the injunctive relief they seek.
[81] I also do not need to consider whether the Plaintiffs delayed in bringing this motion to the point that such delay should also be considered a bar to bringing this motion.
CONCLUSION
[82] At various times, the Plaintiffs and their affiants, including Dr. Hausman, assumed that commencement of the trial of this matter in Canada would take somewhere between 3 and 7 years. As I advised the parties at the commencement of their oral submissions, the Court is prepared to set a trial date of February 2008 and to assist, as far as possible, in realizing that date. Assuming that this trial date can be met, the assumptions of the Plaintiffs overstate the length of time that the generic perindopril would be on the market and likely would impact on the evidence as to irreparable harm.
[83] In spite of this, I wish to make it clear that my analysis in these reasons does not rely on an early 2008 trial. For purposes of this motion, I have accepted the Plaintiffs’ assumption of three to four years to trial (but not longer). While I am optimistic that motivated parties could meet the early 2008 trial date, I believe that it would be imprudent of me to assess the issue of irreparable harm on that basis.
[84] For these reasons, an order dismissing the motion for an interlocutory injunction will issue.
“Judith A. Snider”
__________________________
Judge
Ottawa, Ontario
January 3, 2007
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1548-06
STYLE OF CAUSE: LES LABORATOIRES SERVIER ET AL
v. APOTEX INC. ET AL
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: December 6 and 7, 2006
APPEARANCES:
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Judith Robinson Daniel A. Artola Joanne Chriqui Jonathan J. Cullen
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Harry B. Radomski Andrew Brodkin Ben Hackett Nando De Luca Lindsay Hill
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SOLICITORS OF RECORD:
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Ogilvy Renault LLP Montreal, Quebec
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Goodmans LLP Toronto, Ontario |