Federal Court of Appeal Decisions

Date: 20041201

Docket: A-91-04

Citation: 2004 FCA 402

CORAM:        ROTHSTEIN J.A.

NOËL J.A.

SHARLOW J.A.

BETWEEN:

                                                    THE MINISTER OF HEALTH

                                                                                                                                            Appellant

                                                                                                                                      (Respondent)

                                                                           and

                                          PFIZER CANADA INC. and PFIZER INC.

                                                                                                                                        Respondent

                                                                                                                                          (Applicant)

                                                                           and

                                                        RHOXALPHARMA INC.

                                                                                                                                        Respondent

                                                                                                                                      (Respondent)

                                         Heard at Ottawa, Ontario on October 27, 2004.

                               Judgment delivered at Toronto, Ontario on December 1, 2004.

REASONS FOR JUDGMENT BY:                                                                           SHARLOW J.A.

CONCURRED IN BY:                                                                              ROTHSTEIN, NOËL JJ.A.

Date: 20041201

Docket: A-91-04

Citation: 2004 FCA 402

CORAM:        ROTHSTEIN J.A.

NOËL J.A.

SHARLOW J.A.

BETWEEN:

                                                    THE MINISTER OF HEALTH

                                                                                                                                            Appellant

                                                                                                                                      (Respondent)

                                                                           and

                                          PFIZER CANADA INC. and PFIZER INC.

                                                                                                                                        Respondent

                                                                                                                                          (Applicant)

                                                                           and

                                                        RHOXALPHARMA INC.

                                                                                                                                        Respondent

                                                                                                                                      (Respondent)

                                                    REASONS FOR JUDGMENT

SHARLOW J.A.

[1]                The Minister of Health is appealing the interlocutory order of a Federal Court Judge rendered on February 11, 2004, without written reasons, requiring the Minister to produce to the respondents Pfizer Canada Inc. and Pfizer Inc. (collectively, "Pfizer") certain confidential information provided to the Minister by Teva Pharmaceutical Industries, Ltd.

[2]                The interlocutory order was made in the context of an application by Pfizer for an order under section 6 of the Patent Medicines (Notice of Compliance) Regulations, SOR/93-133, as amended by SOR/98-166. In that proceeding, Pfizer is seeking an order prohibiting the Minister from issuing a notice of compliance to Rhoxal for its proposed product, 250 mg. azithromycin tablets for oral administration. In the terminology used for prohibition proceedings under the Patented Medicines (Notice of Compliance) Regulations, Pfizer is the "first person" (the holder of a patent for a medicine) and Rhoxal is the "second person" (the person proposing to produce or sell a generic medicine).

[3]                Rhoxal cannot produce or sell its proposed azithromycin product until it obtains approval from the Minister in the form of a notice of compliance under the Food and Drug Regulations, C.R.C. 1978, c. 870. As part of the process set out in the Food and Drug Regulations for the review of its application for approval, Rhoxal filed an abbreviated new drug submission (or an "ANDS") for its proposed azithromycin product. The abbreviated new drug submission must include certain information about the manufacturing process for the proposed product.

[4]                Rhoxal does not propose to manufacture its proposed azithromycin product itself, but proposes to have the manufacturing done by Teva pursuant to a contract. It appears that Teva has provided the necessary information about the manufacturing process directly to the Minister in a "drug master file" (or "DMF") which, with Teva's consent, is incorporated by reference into Rhoxal's abbreviated new drug submission. Consistent with current regulations and practice, Teva submitted its drug master file to the Minister on the understanding that the Minister would not disclose to anyone, even Rhoxal, anything in the "closed portion" of the drug master file.

[5]                The abbreviated new drug submission for Rhoxal's proposed product makes a comparison to a Pfizer product called Zithromax (azithromycin dihydrate 250 mg tablets). Pfizer has filed a patent list under the Patented Medicines (Notice of Compliance) Regulations naming its Canadian Patent No. 1,314,876, entitled "Azithromycin Dehydrate", in respect of that product.

[6]                On March 31, 2003, Rhoxal served Pfizer with a "notice of allegation" under section 5 of the Patented Medicines (Notice of Compliance) Regulations asserting, among other things, that Pfizer's patent covers only crystalline azithromycin that is crystallized in the presence of less than two molar equivalents of water, and that Rhoxal's proposed product will not infringe Pfizer's patent because it will use crystalline azithromycin that is not crystallized in the presence of less than two molar equivalents of water. This is an allegation of non-infringement pursuant to subparagraph 5(1)(b)(iv) of the Patented Medicines (Notice of Compliance) Regulations, which reads as follows:

[7]                Because of the non-infringement allegation in Rhoxal's notice of allegation, information about the manufacturing process for Rhoxal's proposed product may be relevant to the prohibition proceedings.

[8]                It is well settled that, in prohibition proceedings under the Patented Medicines (Notice of Compliance) Regulations, it is the first person, the patent holder (in this case Pfizer), who has the onus of proving that a non-infringement allegation made by the second person is not justified: Eli Lilly and Co. v. Nu-Pharm Inc. (C.A.), [1997] 1 F.C. 3. It is often the case that a non-infringement allegation cannot be disproved without factual information from the second person, in this case Rhoxal. If there were no mechanism for the compulsory disclosure of such information, the first person could be at a disadvantage. However, such a mechanism is found in subsections 6(6) and 6(7) of the Patented Medicines (Notice of Compliance) Regulations, which read as follows:

[9]                Subsection 6(7) of the Patented Medicines (Notice of Compliance) Regulations has been interpreted to apply, not only to information in a new drug submission submitted by the second person, but also to information incorporated by reference into the new drug submission, such as information from a third party manufacturer in the closed portion of a drug master file: Pharmascience Inc. v. Canada (Minister of Health) (F.C.A.), [2004] 2 F.C.R. 349.

[10]            Subsection 6(8) of the Patented Medicines (Notice of Compliance) Regulations require any document produced under subsection 6(7) to be treated confidentially. In this case, there is a confidentiality order in place (dated June 18, 2003) which would cover any document produced under subsection 6(7).

[11]            On August 19, 2003, Pfizer filed a notice of motion seeking, among other things, an order under paragraph 6(7)(a) of the Patented Medicines (Notice of Compliance) Regulations requiring Rhoxal to produce:

[12]            Pfizer also sought an order under paragraph 6(7)(b) of the Patented Medicines (Notice of Compliance) Regulations requiring the Minister to verify that all information produced from Teva's drug master file corresponds fully to the information on file with the Minister.

[13]            After the hearing of Pfizer's August 19, 2003 motion, but before an order was made, this Court issued its reasons in Pharmascience Inc. (cited above), which dealt with a similar motion. The following appears at paragraph 31 of the reasons in that case:

[14]            The Prothonotary hearing Pfizer's August 19, 2003 motion concluded that information from the closed portion of Teva's drug master file would be relevant and, taking the Pharmascience decision into account, made the following order on September 23, 2003:

[15]            On September 29, 2003, Rhoxal wrote to a representative of Teva asking for their consent to the production of the confidential information, and including a copy of the order quoted above. By letter dated October 8, 2003, Teva's representative indicated to Rhoxal that Teva was not willing to produce the requested material "as it is confidential". Rhoxal then informed Teva that there was a confidentiality order in place. By letter dated October 14, 2003, Teva's representative confirmed that it was not willing to produce the requested material "on the grounds that it is confidential, notwithstanding whether it is produced pursuant to a confidentiality order." This information is set out in the affidavit of Len Arsenault sworn October 15, 2003, upon which he was cross-examined on October 28, 2003.

[16]            Pfizer took the position that Rhoxal had not used its best efforts to obtain the Teva information, as it had been ordered to do. On November 3, 2003, Pfizer filed a notice of motion seeking the following:

[17]            Pfizer's November 3, 2003 notice of motion was dealt with by an order of a Prothonotary rendered on November 19, 2003. The relevant parts of the order read as follows:

[18]            The Prothonotary did not specify what steps Rhoxal failed to take, or could and should have taken, to meet its obligation to use its best efforts to obtain the information.

[19]            On January 9, 2004, Rhoxal filed a notice of motion appealing and seeking to quash the Prothonotary's November 19, 2003 order, and also seeking directions to set a schedule for the completion of the steps required to prepare the prohibition matter for hearing despite the absence of the Teva information. That notice of motion was served on the Minister, who chose not to appear at the hearing. The January 9, 2004 notice of motion did not indicate that any relief was being sought against the Minister.

[20]            In support of its January 9, 2004 motion, Rhoxal filed the affidavit of Mr. Len Arsenault sworn January 9, 2004, in which Mr. Arsenault asserts that it is impossible for Rhoxal to comply with the Prothonotary's November 19, 2003 order because it does not have and cannot obtain the required information without the consent of Teva.

[21]            It appears from other material filed by Rhoxal in support of its January 9, 2004 motion that in November of 2003, a request was made by Rhoxal's counsel to Teva's counsel for Teva's consent to the disclosure of information that had already been made in other proceedings, subject to a confidentiality order. That request was refused. Also, it appears that Rhoxal's counsel, at the suggestion of Pfizer's counsel, asked the Minister to produce the information. Counsel for the Minister indicated, by letter dated December 1, 2003, that the Minister could not comply with that request without Teva's written consent. Counsel for Teva wrote to counsel for the Minister on December 3, 2003 indicating that Teva did not consent.

[22]            On February 11, 2004, the Judge made the order now under appeal. The operative part of the order reads as follows (my emphasis):

[23]            There is some confusion as to whether and to what extent the November 19, 2003 order of the Prothonotary survived the February 11, 2004 order of the Judge, which is the subject of this appeal. The difficulty arises because the Judge's February 11, 2004 order does not say whether the appeal of the Prothonotary's November 19, 2003 order is allowed or dismissed, or whether the Prothonotary's November 19, 2003 is quashed in whole or in part. As I interpret the Judge's February 11, 2004 order, it is intended to replace and does replace the obligation of Rhoxal to produce the Teva information with a new obligation, imposed on the Minister alone, to produce the Teva information.

[24]            I infer that the Judge must have reached one or both of the following conclusions: (a) the Prothonotary erred in finding that Rhoxal had not used its best efforts to obtain the information from Teva, or (b) the Prothonotary erred in granting to Pfizer, as a remedy, an order that it was impossible for Rhoxal to fulfil. As long as the Judge's February 11, 2004 order is in effect, Rhoxal has no outstanding obligation under the Prothonotary's November 19, 2003 order.

[25]            The Court was advised at the hearing that there was a conference call as contemplated in part 3 of the February 11, 2004 order, and that all parties, as well as Teva, are content with the arrangements now in place for keeping documents confidential. The Court was also advised that the information referred to in this order has been produced, and the prohibition proceedings are in progress.

[26]            On February 20, 2004, the Minister appealed the February 11, 2004 order on a number of grounds, the most important of which is that the order is not authorized by any relevant regulation.

Whether the Minister can be compelled to provide information from an ANDS

[27]            The Minister argues that, in prohibition proceedings under the Patented Medicines (Notice of Compliance) Regulations, there is no legal authority for an order requiring the Minister to produce information from the abbreviated new drug submission filed by the second person, or third party information from a drug master file that is incorporated into the abbreviated new drug submission. Pfizer concedes that such authority cannot be found in paragraph 6(7)(a) of the Patented Medicines (Notice of Compliance) Regulations, but argues that it can be found in what is now section 317 of the Federal Court Rules, 1998, SOR/98-106. In my view, Pfizer is not correct on this point.

[28]            The Patented Medicines (Notice of Compliance) Regulations were enacted in 1993. One of the first questions that arose was whether prohibition proceedings under the Patented Medicines (Notice of Compliance) Regulations were to be conducted as applications under what is now Part 5 of the Federal Court Rules, 1998, or as actions under what is now Part 4 of the Federal Court Rules, 1998. That dispute was settled in Bayer AG v. Canada (Minister of National Health and Welfare) (1993), 163 N.R. 183, 51 C.P.R. (3d) 329 (F.C.A.), when this Court determined that prohibition proceedings would be conducted as applications under Part 5.

[29]            One result of the Bayer decision is that, in prohibition proceedings under the Patented Medicines (Notice of Compliance) Regulations, there is no documentary discovery or oral examinations for discovery, such as might occur prior to the trial of an action, because the rules for discoveries appear in Part 4 of the Federal Court Rules, 1998, not in Part 5. Another result of the Bayer decision is that section 233 of Federal Court Rules, 1998, which appears in Part 4, does not apply to prohibition proceedings under the Patented Medicines (Notice of Compliance) Regulations. That is the only provision in the Federal Court Rules, 1998 that authorizes the making of an order for the production of documents by a person who is not a party.

[30]            It appears that there were some instances early in the life of the Patented Medicines (Notice of Compliance) Regulations when orders were made under section 1612 of the Federal Court Rules, C.R.C. 1978, c. 663 (the predecessor to subsection 317(1) of the Federal Court Rules, 1998) requiring the Minister to produce information from a new drug submission. However, that practice ended, or should have ended, with the decision in Eli Lilly (cited above).

[31]            In Eli Lilly, Nu-Pharm was the second person, and served a notice of allegation on Eli Lilly, the first person, asserting that a certain product proposed to be made by Nu-Pharm would be made by a process not covered by Eli Lilly's patent. That was a non-infringement allegation similar to the non-infringement allegation in this case. Eli Lilly applied for a prohibition order. Its notice of application asserted that the non-infringement allegation was not justified. The affidavits filed by Eli Lilly in support of its application said nothing about the process by which the proposed Nu-Pharm product would be manufactured, presumably because Eli Lilly did not have the required information. Nu-Pharm filed no evidence at all about the manufacturing process.

[32]            This Court held that it was Eli Lilly, as the party seeking the prohibition order, that had the burden of proving that the allegation of non-infringement was not justified. However, the Court also held that, because Nu-Pharm presented no evidence in support of its non-infringement allegation, and Eli Lilly had no access to the information required to rebut the allegation, it was open to the Judge hearing the prohibition application to draw an inference adverse to Nu-Pharm, and to conclude on that basis that the non-infringement allegation was not justified.

[33]            Nu-Pharm argued that no adverse inference should be made against it, because Eli Lilly could have obtained the necessary information from the Minister by making an application under section 1612 of the former Federal Court Rules. That argument was rejected, for the reasons explained as follows by Justice Stone, writing for the Court, at paragraph 25 (footnotes omitted):

[34]            After the Eli Lilly case, the Patented Medicines (Notice of Compliance) Regulations were amended by SOR/98-166, effective March 11, 1998. One of the changes was the addition of paragraph 6(7)(a), quoted above, which for the first time provided expressly for the making of an order for the compulsory disclosure of information in the second person's new drug submission.

[35]            However, paragraph 6(7)(a) of the Patented Medicines (Notice of Compliance) Regulations has a limited scope. It permits only an order directed at the second person (in this case Rhoxal). It is not broad enough to authorize an order directed at the Minister. The Eli Lilly case teaches that section 317 of the Federal Court Rules, 1998 cannot apply either. In my view, the inescapable conclusion is that the order under appeal is based on an error of law and cannot stand, in so far as it orders the Minister to provide information from Rhoxal's abbreviated new drug submission.

[36]            Pfizer also argued that an order may be made for the disclosure of information by the Minister under section 431 of the Federal Court Rules, 1998, which reads as follows:

[37]            I leave open the question of whether it would ever be appropriate to have recourse to this provision in the context of disclosure orders in prohibition proceedings under the Patented Medicines (Notice of Compliance) Regulations. There is no foundation for its application in this case because, as explained below, it has not been established that anyone has failed to comply with an order.

[38]            Pfizer also argues that the Judge's February 11, 2004 order was simply a convenient device, a short-cut for moving the prohibition proceedings along, because it was apparent from the record that the Teva information had already been disclosed in another proceeding (subject to a confidentiality order), and the Minister had indicated his willingness to make the disclosure with Teva's consent. As the only real controversy related to the contents of the confidentiality order in this case, it was convenient to require the Minister to make the disclosure once the confidentiality issues were addressed by a conference call in which Teva would participate. I can easily accept that such practical considerations were in the Judge's mind, and I have some sympathy for the argument made by Pfizer that significant weight should be given to those considerations. However, I am unable to agree with Pfizer that the apparent desirability of a procedural short-cut in the particular circumstances of this case can justify the making of an order under paragraph 6(7)(a) of the Patented Medicines (Notice of Compliance) Regulations against a party other than the second person, in this case Rhoxal.

Whether the Minister was given proper notice

[39]            Another issue raised by the Minister is whether he was given proper notice that Pfizer was seeking an order requiring the Minister to disclose information in Rhoxal's abbreviated new drug submission. In view of my decision that the order was made without legal authority, it is not necessary to deal with this issue.

The Prothonotary's November 19, 2003 order

[40]            As the Judge's February 11, 2004 order must be set aside for the reasons explained above, the Prothonotary's November 19, 2003 order remains in place. I must now consider anew Rhoxal's appeal of that order.

[41]            I agree with the Judge that the Prothonotary erred in making the November 19, 2003 order. There is nothing in the record that is capable of establishing that Rhoxal has the Teva information, or has access to it. Thus, the Prothonotary's November 19, 2003 order suffers from the same flaw as the order considered in Pharmascience (cited above), which is that it orders Rhoxal to do something that, according to the available evidence, it cannot do. Rhoxal's appeal of the Prothonotary's November 19, 2003 order should have been allowed, and that order should have been set aside.

The Prothonotary's September 23, 2003 order

[42]            Setting aside the Prothonotary's November 19, 2003 order leaves open the question of how the Prothonotary ought to have dealt with Pfizer's November 3, 2003 motion for an order requiring Rhoxal to produce the Teva information. That motion is based on Pfizer's submission that Rhoxal did not comply with the September 23, 2003 order to use its best efforts to obtain the Teva information.

[43]            The Prothonotary found that Rhoxal had not used its best efforts, and said that it could have done more. Those factual conclusions are not explained and, having reviewed the record, I am unable to understand how the Prothonotary reached those conclusions, or what steps Rhoxal could have taken that it failed to take.

[44]            Whether a second person has used its best efforts, or what more it might have done, is a question of fact. In this case, the record contains uncontradicted evidence that Rhoxal does not own or control Teva and has no knowledge of the closed portion of Teva's drug master file, and no means of compelling Teva to disclose those contents. Rhoxal asked Teva several times for its consent to the disclosure of the information but was met with Teva's refusal. While Teva's refusal to consent is difficult to understand given the disclosures that had already been made in the other proceedings (subject to a confidentiality order), the record provides no factual basis for concluding that Teva had any obligation to consent in this case. Teva is entitled to make such decisions in its own interest. If Teva refuses to consent, Rhoxal cannot be faulted.

[45]            I conclude that the Prothonotary erred in finding that Rhoxal had failed to use its best efforts to obtain the Teva information. Therefore, Rhoxal is not in breach of the September 23, 2003 order.

Consequences of a failure to comply with a best efforts order

[46]            I digress at this point to observe that, if a second person fails to comply with an order to use its best efforts to obtain third party information about the manufacturing process for the second person's proposed product, the appropriate remedy is not to order the second person to do something that it cannot do. The appropriate remedy is to deny the second person any advantage it might derive from the fact that the third party information is not available.

[47]            This could be done, for example, by an order preventing the second person from presenting or relying on any evidence at all relating to the third party's manufacturing process. The Judge hearing the prohibition application would then have the second person's bare allegation of non-infringement based on some aspect of the manufacturing process, unsupported by evidence from the second person. The Judge might then be persuaded to find that the non-infringement allegation is not justified, either because an inference adverse to the second person should be drawn, or because of the statutory presumption that the second person's proposed product will be prepared or produced by the method or process claimed in the first person's patent (subsection 6(6) of the Patented Medicines (Notice of Compliance) Regulations, quoted above).

[48]            On the other hand, if the second person uses its best efforts to obtain the third party information and its efforts are unsuccessful, then the second person should suffer no disadvantage because of its lack of success. In that case, the second person should be free to adduce such evidence as it has in support of its non-infringement allegation. The first person will of course adduce such evidence as it may have. The Judge hearing the prohibition application will consider all the evidence in disposing of the application in the ordinary course.

Conclusion

[49]            For these reasons, I would allow the Minister's appeal, and set aside the order of the Judge dated February 11, 2004. Making the order the Judge should have made, I would (1) allow the appeal of Rhoxal from the order of the Prothonotary dated November 19, 2003, and set aside that order, and (2) dismiss Pfizer's motion dated November 3, 2003 for an order requiring Rhoxal to produce the Teva information, and its alternative motion for an order requiring the Minister to do so.

[50]            As the Teva information is now before the Federal Court and all confidentiality issues have been resolved to Teva's satisfaction, it seems to me appropriate to accede to the request of Rhoxal, stated in its memorandum of fact and law in this appeal, for a direction that the prohibition proceedings should be permitted to proceed in the Federal Court with the Teva information in evidence on the terms agreed to by the parties and Teva. That should remove any residual uncertainty about the ability of the Federal Court to consider that evidence.

[51]            The Minister should be entitled to his costs of this appeal. The costs of the other parties in this appeal, and in the Federal Court in respect of the motions below, should be costs in the cause.

                                                                                                                              "Karen R. Sharlow"                

J.A.

"I agree                                                                                                                                                

                Marshall Rothstein"                

                        J.A.

"I agree

                Marc Noël"                               

                       J.A.                            

                                                  FEDERAL COURT of APPEAL

                                     Names of Counsel and Solicitors of Record

DOCKET:                                              A-91-04   

STYLE OF CAUSE:                              THE MINISTER OF HEALTH

                                                                                                                                               Appellant

                                                                                                                                         (Respondent)

and

PFIZER CANADA INC. and PFIZER INC.

                                                                                                                                            Respondent

                                                                                                                                            (Applicant)

and

RHOXALPHARMA INC.

                                                                                                                                            Respondent

                                                                                                                                         (Respondent)

PLACE OF HEARING:                          OTTAWA, ONTARIO

DATE OF HEARING:                            OCTOBER 27, 2004

REASONS FOR JUDGMENT:              SHARLOW J.A.      

CONCURRED IN BY:                           ROTHSTEIN J.A.                      

NOËL J.A.

DATED:                                                 DECEMBER 1, 2004

APPEARANCES BY:                            

Mr. Rick Woyiwada                            FOR THE APPELLANT

                                                                   

Mr. Anthony Creber

Ms. Cristin Wagner                             FOR THE RESPONDENT (Pfizer Canada Inc. and Pfizer Inc.)

Ms. Kimberley Townley-Smith              FOR THE RESPONDENT (Rhoxalpharma Inc.)

SOLICITORS OF RECORD:             

Morris Rosenberg                                                                 

Deputy Attorney General of Canada

Ottawa, Ontario                                   FOR THE APPELLANT

Gowling Lafleur Henderson LLP

Ottawa, Ontario                                   FOR THE RESPONDENT (Pfizer Canada Inc. and Pfizer Inc.)

Hazzard & Hore

Toronto, Ontario                                  FOR THE RESPONDENT (Rhoxalpharma Inc.)