| Federal Court
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Cour fédérale
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PRESENT: The Honourable Mr. Justice Lemieux
BETWEEN:
ELI LILLY AND COMPANY
Plaintiffs
(Defendants by Counterclaim)
and
HOSPIRA HEALTHCARE CORPORATION
(Plaintiff by Counterclaim)
REASONS FOR JUDGMENT AND JUDGMENT
Introduction and background
[1] Hospira Healthcare Corporation (Hospira) appeals to this Court the June 19, 2009 Order of Prothonotary Tabib (the prothonotary) who is case managing this patent infringement action launched by Eli Lilly Canada Inc. and Eli Lilly and Company (Lilly) on October 4, 2007 and twice subsequently amended claiming Hospira infringed its Canadian Patent 2,098,881 (the “ ‘881 patent”). The ‘881 patent is a process patent for the preparation, through a SN2 chemical reaction known as glycosylation, of a beta anomer enriched nucleoside compound which is the essential component for active pharmaceutical ingredient (API) in the manufacture of the drug gemcitabinehydrochloride which has anti-tumor cancer properties. The prothonotary ordered Hospira to serve upon Lilly a further and better affidavit of documents namely: (1) the open part and the closed part of its Drug Master File (DMF); (2) the relevant parts of its Abbreviated New Drug Submission (ANDS) and amendments to it, filed with the Minister of Health (the Minister), which the Minister based the issuance on August 23, 2007 of an NOC to Hospira authorizing it to sell the drug in Canada; and, (3) the Batch Records relating to the process for manufacturing gemcitabine (the drug or medicinal ingredient) along with the certificates of analysis relating to the medicinal ingredient imported in bulk form and sold in Canada by Hospira (the documents to be produced). She also ordered Hospira to produce to Lilly unredacted and complete copies of the documents.
[2] The documents Hospira had first listed in its initial affidavit of documents on October 6, 2008 were: (1) heavily redacted excerpts of its ANDS; (2) a confidential process description for the manufacture of the drug; and, (3) a batch report for the manufacture of the drug. The last two mentioned documents were obtained by Hospira from Hospira
[3] Lilly’s claim against Hospira has several unique features:
Hospira is not the manufacturer of the gemcitabine it uses to make appropriate dosages of the drug sold in
Both Lilly and Hospira recognize that the ANDS Hospira filed with the Minister to obtain its NOC was based on a glycosylation chemical reaction known as SN1 which is not as efficient in producing beta anomers the central element of gemcitabine’s API. Rather, the SN1 reaction is more efficient in producing alpha anomers which do not have anti-tumor properties.
Both parties agree, if Hospira’s gemcitabine is produced on the basis of a SN1 reaction, the ‘881 patent is not infringed because its process is based upon the SN2 reaction whose effect is to foster the production of the more desirable beta anomers. The SN1 reaction was disclosed prior to the invention of the SN2 process step in the manufacture of the API.
Both parties also agree that either the SN1 or the SN2 reaction is but an intermediary step in the manufacture of the API component of the drug. The ‘881 patent does not claim a monopoly on the steps leading to the preparation of the SN2 reaction (the upstream steps), nor does it claim a monopoly on the separation and purification steps that follow the SN2 reaction (the downstream steps).
In its statement of claim, Lilly asserted “the processes claimed in the ‘881 patent are the only processes that can produce commercial quantities of gemcitabine in an efficient and cost effective manner” and that, inter alia, between August 27, 2007 and December 3, 2007, Hospira imported in Canada commercial quantities of gemcitabine manufactured in China by the SN2 reaction.
[4] Hospira submits Prothonotary Tabib erred in law and/or proceeded on a wrong principle in making the order she did. It asserts her Order enables Lilly to “embark on a fishing expedition by way of discovery, with respect to irrelevant documents falling outside the scope of the process patent at issue, premised only on Lilly’s unpleaded speculation of regulatory fraud on Health
[5] The parties did not fundamentally disagree on the standard of review on this appeal, the legal test for relevance and the nature and the scope of the ‘881 patent.
(1) The standard of review
[6] In their written material, the parties had initially disagreed on the standard of review. Notwithstanding the fact the prothonotary’s order was made upon a motion by Lilly for a further and better affidavit of documents from Hospira, Hospira’s counsel submitted the effect of the prothonotary’s order is to prolong and maintain this action, since in the absence of that order, Lilly’s action would be effectively over. Hospira’s counsel did not press this view in oral argument recognizing, in my view, the recent jurisprudence on the issue did not support her argument of this point.
[7] In my view, Prothonotary Tabib’s order is not vital to the resolution of this action and therefore her decision is not to be reviewed by this Court de novo. This standard of review on appeal was clearly established recently by the Federal Court of Appeal (the FCA) in Eli Lilly Canada Inc. v. Novopharm Ltd., 2008 FCA 287 (Novopharm) in which the FCA upheld a decision of this Court, which in turn, upheld a decision of Prothonotary Tabib to compel a further and better affidavit of documents in a patent infringement case launched by Lilly (see Novopharm, paragraph 53). Consequently, Hospira has the burden of demonstrating on this appeal in making the order Prothonotary Tabib made - compelling a further and better affidavit of documents and the production of those documents in unredacted form - she was clearly wrong, in the sense that the exercise of her discretion to make such an order, was based upon a wrong principle or upon a misapprehension of the facts. (See Merck & Co., Inc. et al v. Apotex Inc., 2003 FCA 488.)
(2) The legal test for relevance
[8] The legal test for relevance for determining what documents a party is entitled to have listed in an affidavit of documents and produced for discovery was also settled by the FCA in the Novopharm case. The test is based on the concept of “a train of inquiry” namely, unless the party producing the affidavit of document intends to rely on a document at trial, that person is not obliged to disclose it “unless it is reasonable to suppose that the document would undermine its own case, advance its opponent’s, or would fairly lead him [a reasonable likelihood of leading] to a train of inquiry which may have either of these two consequences. [My emphasis.]
(3) The nature and scope of the ‘881 patent
[9] The nature and scope of the ‘881 patent is also recognized by the parties. The ‘881 patent is entitled “Stereoselective Glycosylation Process.” As noted, it relates to the manufacture of the drug gemcitabinewhich has anti-tumor cancer properties. The ‘881 patent discloses and claims an intermediate process step used in the overall seven step process to make the API of the drug. Specifically, the ‘881 patent claims a monopoly on step 5 of these intermediate steps, the SN2 reaction at the glycosylation stage in the API’s production process for the drug.
[10] The focus of the ‘881 patent is on the SN2 reaction known as glycosylation. Hospira’s point is that glycosylation can occur by one of two pathways: one through SN1 reaction and the other through the SN2 reaction. As mentioned, Hospira recognized the SN2 reaction yields better beta results but nevertheless the SN1 pathway is acceptable even though it yields more undesirable alpha anomers in the nucleoside compound the result of the glycosylation stage. Hospira also recognizes the drug gemcitabine is a beta anomer and that the alpha anomer is not gemcitabine and does not have the anti cancer properties of that drug.
[11] The crux of this litigation is what chemical reaction actually takes place at the glycosylation stage – the SN1 reaction or the SN2 reaction. Either reaction takes place in Hansen’s plant in
Prothonotary Tabib’s decision
[12] At the beginning of her considerations for Order, she identified the central issue in the patent action:
The central issue in this action is whether the process used by Hospira’s supplier, Jiangsu Hansen Pharmaceutical Co. Ltd. (“Hansen”) to manufacture in China the bulk gemcitabine subsequently imported and sold by Hospira in Canada infringes the claims of the patent at issue, the ‘881 Patent.
[13] She explained: “Hospira alleges that the process used by Hansen is a previously known and disclosed process, known as the SN1 reaction. Both parties agree that if Hospira’s gemcitabine was and is indeed manufactured by Hansen using the SN1 reaction, then there is no infringement, as the patented process is an entirely different process, known as the SN2 reaction.”
[14] She further noted : “Hospira has listed in its affidavit of documents and disclosed to Lilly those portions of its regulatory filings with Health
[15] Prothonotary Tabib next considered Lilly’s additional disclosure request category by category. She indicated the main thrust of Lilly’s motion was on the issue of the Batch production records and its related certificates of analysis for the gemcitabine product actually imported by Hospira and offered for sale. She devoted much of her analysis to that issue because: “Both parties concede that those batch records would constitute direct evidence of the process actually used by Hansen in manufacturing the bulk gemcitabine, and assuming that they are accurate, would constitute direct evidence of whether the process used by Hansen is the SN1 reaction or the SN2 reaction, and therefore, whether or not there is infringement.” [My emphasis.]
(a) The Batch Records
[16] She identified the question on the motion before her, as it related to the batch records, as “whether it is reasonable to suppose that these documents would undermine Hospira’s case or advance Lilly’s; in other words, is it reasonable to suppose that the batch records would show that Hansen uses the SN2 reaction?” [My emphasis.]
[17] She analysed Hospira’s argument such likelihood was negated by the fact that its regulatory filings unequivocally show that the SN1 process is used; that Hospira had an obligation to be accurate and complete, and “dire” consequences would result “if Hospira had represented to Health Canada that it used the SN1 process while it was using in fact the SN2 process.” Hospira urged upon Prothonotary Tabib what was filed with Health
[18] For a number of reasons, Prothonotary Tabib did not accept Hospira’s submission on this point:
Hospira never specified the nature of the “dire” consequences would strike it should its supplier use the SN2 in its manufacturing process and it did not appear from the record any provisions were made in the regulatory scheme for auditing the accuracy of the process information provided.
Unless it contained an admission against Hospira’s interest, she doubted very much a certificate, addressed to Health Canada for the purpose of obtaining an NOC, as to the process that will be carried out by a third party in the future, could be relied upon by Hospira as evidence of the process actually used in the context of an infringement action and “as such [she had] very serious reservations as to Hospira’s proposition the certificate delivered to Health Canada, in the circumstances of this action, is equivalent or tantamount to a sworn statement by a representative of Hospira as to the process carried out by Hansen.” She noted Hospira had tendered no evidence what system it had in place to verify the continued accuracy of the statements made to Health
[19] In any event, she was satisfied Lilly had produced sufficient evidence to demonstrate “the likelihood that the batch records would show that Hansen uses the SN2 reaction instead of the SN1 reaction.” She analyzed two affidavits and related cross examinations thereon. Lilly’s deponent was Dr. Douglas Kjell, an expert in chemical process development in that organization. The thrust of his evidence on using the SN1 process to manufacture bulk gemcitabine was “so inefficient as to not be viable to produce commercial quantities of that ingredient.” Its yield was very low and uses a highly reactive and dangerous reagent and, as well, an inefficient and wasteful method of purification.”
[20] She also considered the affidavit and cross examination of Hospira’s expert, Dr. Robert Adlington. She described his evidence in the following terms: “However, rather than contradicting or impugning the scientific basis on which Dr. Kjell reached his conclusion that the SN1 process is not commercially viable, he suggests, but without citing specific facts, that it is not impossible that these obstacles could be overcome or offset by other efficiencies in other parts of the process. He goes on to state that he has witnessed personally the SN1 process being carried out by Hansen at its premises in
[21] Prothonotary Tabib indicated it was common ground between the parties the batch Dr. Adlington witnessed being made by Hansen in
I therefore accept Dr. Kjell’s evidence to the effect that the SN1 process is extremely inefficient and wasteful and that it is more likely than not that it would not be used in a commercial operation. That is sufficient to create a reasonable basis to suppose that Hansen is not carrying out the SN1 process for the gemcitabine imported and sold by Hospira in
[22] Finally, she remarked that the batch records for the production of gemcitabine made in the presence of Dr. Adlington were eventually produced to Lilly, but in a heavily redacted form. The only rationale she could see for the redactions was on the grounds of relevance i.e. they relate to parts of the process which is not strictly covered by the claims of the patent, and that they are therefore not relevant. She observed Hospira did make an argument relating to confidentiality, but produced no evidence whatsoever showing that the portions it has redacted are “particularly sensitive or confidential”, such that the provisions of the confidentiality order already in place would not adequately protect them.
[23] She concluded:
Hospira’s sole basis for going through the trouble and expense of redacting portions of such documents (therefore producing an obviously incomplete document) is lack of relevance. In my view, the practice of parties redacting portions of documents on no justification whatsoever other than lack of relevance, thus putting the receiving party to the onus of establishing the relevance of the redacted portions, is one to be avoided. Partial productions and redactions should not be permitted unless on grounds of proportionality, onerousness, or convenience or when genuine issues of confidentiality arise. Documents produced pursuant to this order shall therefore not be redacted. [My emphasis.]
(b) The other documents sought
[24] With respect to the other categories of documents requested by Lilly for listing and production, Prothonotary Tabib ruled “the same reasoning applies to Lilly’s request that the entire, unredacted parts of the closed and opened portions of Hospira’s DMF and of the ANDS, as they relate to the manufacture of bulk gemcitabine, be disclosed and produced without redaction.To the extent they are self-contained documents, rather than a collection of independent documents, no reason for redaction has been made out.”
Analysis
(a) The Standard of Review
[25] I have already held that to succeed Hospira must show the Prothonotary erred by exercising her discretion based upon a wrong principle or upon a misapprehension of the facts.
(b) Hospira’s arguments
[26] In her written material, counsel for Hospira prefaced her points stating “the key issue in this appeal is whether Lilly should be permitted to embark on a wide-ranging discovery based on un-pleaded speculation Hospira has misrepresented its manufacturing process to Health
[27] First, Hospira asserted the prothonotary had misconstrued Lilly’s cause of action when she ordered Lilly should have access to Hospira’s entire process for the manufacture of gemcitabine and not merely the intermediate stage (the glycosylation stage that is relevant to the ‘881 patent). Counsel submits prothonotary Tabib erred when she “concluded that “commercial viability” of a defendant’s action is relevant to a determination of possible infringement” and further erred when “finding the entire synthesis is the relevant process for the purposes of an infringement analysis [and] in doing so she effectively redefined the scope of the ‘881 patent providing protection for the production of gemcitabine per se as opposed to the intermediate.”
[28] Second, she argues the prothonotary’s finding “that anSN1 reaction is not “commercially viable” because it requires the use of a dangerous chemical known as TMS-triflate” constitutes a collateral attack on the Minister’s decision to issue an NOC to Hospira, because in so doing, he had to consider whether Hospira’s drug based on gemcitabine was safe and effective.
[29] Third, counsel for Hospira urged upon the Court, the prothonotary erred when she failed to recognize Lilly’s allegation of infringement rests solely on its speculation as to the intentions and/or motive of Hospira/Hansen, i.e. a finding that Hospira was motivated to make and sell gemcitabine on “a commercial basis” under Lilly’s undefined parameters. In other words, the prothonotary erred when she took into account a totally irrelevant factor in assessing infringement – the factor of“commercial viability”.
[30] Fourth, she argues the prothonotary fell into error when she found there was no presumption that the content of Hospira’s ANDS should be presumed true. Counsel for Hospira submits the prothonotary’s conclusion on this point reflects a misinterpretation of the regulatory scheme of the Food and Drug Regulations. She refers to a
[31] Finally, Hospira argued the prothonotary misrepresented the facts when she concluded there was a reasonable likelihood the batch records sought by Lilly would show use by Hansen of the SN2 process and therefore infringement.
[32] In oral argument, counsel for Hospira on the following findings said to have been made in error: (1) ordering the disclosure of the entire seven steps to produce the API when the ‘881 patent only claimed a monopoly on theSN2glycosylation stage; (2) a finding of no presumption that what had been filed with the Minister was true; (3) a finding of an un-pleaded regulatory fraud; and, (4) misapprehension of the facts by giving weight to an old business model of “commercial viability” proffered through the affidavit of Dr. Kjell, a current and longtime employee of Lilly who was neither independent or objective. In reply argument, counsel for Hospira argued the prothonotary made her critical findings when she had insufficient evidence before her to do so. She pointed for example: (1) the yield for the SN1 reaction had not been updated; (2) the prothonotary overplayed the risks of producing gemcitabine using TMS-triflate; and, (3) Lilly’s commercial viability model did not appropriately take into account the changes in labour costs in developed countries versus
Analysis and conclusions
[33] I will quickly dispose of some of the arguments put forward by counsel for Hospira because, with respect, in my view, what is asserted by Hospira as findings made by the prothonotary were in fact not findings at all.
[34] A reading of her decision as a whole clearly tells this Court Prothonotary Tabib was focussed on one issue which is all she decided: whether the evidence presented by the parties assessed in their totality was sufficient to satisfy her the relevancy test and, in particular, the “train of inquiry” test had been met i.e. the evidence was such that it was reasonable to suppose the documents sought in the further and better affidavit of documents would undermine its Hospira’s case, advance by Lilly’s case or would fairly lead to a train of inquiry which may have either of these consequences.
[35] In coming to the conclusion she did that additional disclosure was warranted, the prothonotary carefully weighed the evidence submitted by both sides and the cross-examination on those affidavits.
[36] In this context, in my opinion, the prothonotary made no finding:
That Hospira had made any misrepresentation in its ANDS to the Minister. However, she also found there was no evidence Hansen (as opposed to Hospira in its ANDS) had made any representation whatsoever to the Minister and, in particular, asserting the use of the SN1 reaction at the glycosylation stage.
That Hospira’s ANDS did not have the benefit of truthfulness, but held, in the particular facts of the case before her, where the supplier of the bulk gemcitabine was an offshore supplier who had made no representations to the Minister, where Hospira had not led evidence of any verification system in place to review and verify what glycosylation process was used in the bulk gemcitabine it imported and Lilly’s evidence on the commercial viability of the SN1 reaction, Hospira could not rely on the presumption.
The prothonotary did not make a finding “commercial viability” was a factor in considering whether there was infringement or not. What she decided was there was sufficient evidence before her leading her to be satisfied what she was ordering was relevant to Lilly’s action.
The prothonotary did not find that by ordering the production of the entire process followed to make the API for the gemcitabine, Lilly was expanding the limited claims protected under the ‘881 patent. All she decided was that disclosure of the entire process was relevant to a specific plea in Lilly’s statement of claim, namely, of patent infringement by using the SN2 reaction. Sufficient evidence had been led to convince her the sought after documents by Lilly met the relevancy test in the context of a further affidavit of documents motion.
The prothonotary’s decision was not a collateral attack on the Minister’s finding in terms of the Minister’s statutory duty as to the safety and efficiency of the drug Hospira sold to consumers in
[37] I have had an opportunity to review the affidavits and the cross-examinations of Drs. Kjell and Adlington. I agree with counsel for Lilly there was in the record before her sufficient evidence to support each of her findings made by the prothonotary which were based, in my view, on the application of the correct test for relevance in the context of a motion for a further and better affidavit of documents.
[38] In particular, for example, Dr. Adlington acknowledged that:
All yields of each step in the process to the making of the gemcitabine is important as they all contribute to the overall yield (Adlington’s cross-examination, page 29, question 77).
Knowing the starting material for the process related to an SN2 reaction is important. Such starting material had to be based on an alpha anomer (Adlington’s cross-examination, page 153, question 547).
To determine whether gemcitabine was prepared in a cost effective manner a person with the particular expertise would have to have information on the upstream steps necessary to prepare for the SN2 reaction (Adlington’s cross-examination, pages 86 to 89).
Costs were factors which needed to be considered for a company to be commercially viable i.e. make a profit to support its overall business venture (Adlington’s cross-examination, pages 30 and 87).
[39] Clearly, on the basis of this evidence, the prothonotary had ample evidence to find the upstream and downstream steps from step 5 were relevant and should be produced.
[40] It should be noted the question whether the prothonotary had sufficient evidence or misconstrued the evidence is a finding of fact in respect of which the prothonotary is owed a large measure of deference. See by analogy the Supreme Court of Canada’s recent decisions in Dunsmuir v.
[41] In terms of Dr. Kjell’s affidavit evidence and cross-examination, a review of the record reveals the prothonotary had sufficient un-contradicted evidence to support her finding the use of the SN1 process was inefficient in terms of yields, residual waste and dangers related to its production with TMS-triflate.
[42] She was not persuaded by the argument advanced by Hospira a change of material circumstance had occurred since the early 1990’s when Dr. Kjell worked on the SN1 reaction to determine if commercial quantities of gemcitabine could be made in a viable way. Moreover, I find no error in her appreciation of Dr. Kjell’s evidence the weight she gave to that evidence and the preference she gave to that evidence over the evidence of Dr. Adlington which in any event she found largely corroborative of Dr. Kjell’s.
[43] In the result, Hospira’s appeal must be dismissed as it has not satisfied its heavy onus of demonstrating to the Court the prothonotary clearly erred in making the order under review. On the contrary, I am of the view the order she made was correct and proper.
JUDGMENT
THIS COURT ORDERS AND ADJUDGES that this appeal is dismissed with costs, fixed at the upper range of the units in Column IV of the Tarriff.
“François Lemieux”
_____________________________
Judge
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-1773-07
STYLE OF CAUSE: ELI LILLY CANADA INC. et al v. HOSPIRA
HEALTHCARE CORPORATION
PLACE OF HEARING:
DATE OF HEARING: October 28, 2009
APPEARANCES:
| Patrick Stewart Smith
John Norman
|
Plaintiffs
(Defendants by Counterclaim)
|
| Susan D. Beaubien
Adam M. Tracey
|
Defendant
(Plaintiff by Counterclaim)
|
SOLICITORS OF RECORD:
| Gowling Lafleur Henderson LLP
Barristers & Solicitors
|
Plaintiffs
(Defendants by Counterclaim)
|
| Macera & Jarzyna LLP
|
Defendant
(Plaintiff by Counterclaim)
|