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Date: 20091001
Docket:
Citation: 2009 FC 991
Ottawa, Ontario, October 1, 2009
PRESENT: The Honourable Justice Johanne Gauthier
BETWEEN:
ELI LILLY AND COMPANY and ELI LILLY CANADA INC.
Plaintiffs
and
APOTEX INC.
Defendant
AND BETWEEN:
APOTEX INC.
Plaintiff by Counterclaim (Defendant)
- and -
ELI LILLY AND COMPANY and ELI LILLY CANADA INC.
Defendants by Counterclaim (Plaintiffs)
and
SHIONOGI & CO. LTD.
Defendant by Counterclaim
REASONS FOR JUDGMENT AND JUDGMENT
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[1]The plaintiffs in this action claim that their rights under eight Canadian patents were infringed when Apotex Inc. (Apotex) imported bulk cefaclor into Canada for use in the various
[2]Lilly sold dosage forms of cefaclor in Canada under the registered name of Ceclor®. This medicine was put on the market in 1980.1
[3]The following four patents, all filed on February 1, 1979, were issued to, and were continuously owned by, Lilly U.S. (the Lilly patents):
a.Canadian Letters Patent No. 1,133,007 (“the ‘007 Patent”), issued October 5, 1982, expired October 5, 1999;
b.Canadian Letters Patent No. 1,146,536 (“the ‘536 Patent”), issued May 17, 1983, expired May 17, 2000;
c.Canadian Letters Patent No. 1,133,468 (“the ‘468 Patent”), issued October 12, 1982, expired October 12, 1999; and,
d.Canadian Letters Patent No. 1,150,725 (“the ‘725 Patent”), issued July 26, 1983, expired July 26, 2000.2
The patents referred to in paras. b, c and d will collectively be referred to as “the Lilly process patents”.
1See facts agreed to by the parties, LRTA # 21(a).
2 Ibid., LRTA # 1 and 51.
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[4]The other four relevant patents were issued to Shionogi & Co. Ltd., a Japanese pharmaceutical company, (Shionogi) on the dates indicated below:
a.Canadian Letters Patent No. 1,095,026 (“the ‘026 Patent”), issued February 3, 1981, expired February 3, 1998;
b.Canadian Letters Patent No. 1,132,547 (“the ‘547 Patent”), issued September 28, 1982, expired September 28, 1999;
c.Canadian Letters Patent No. 1,136,132 (“the ‘132 Patent”), issued November 23, 1982, expired November 23, 1999; and,
d.Canadian Letters Patent No. 1,144,924 (“the ‘924 Patent”), issued April 19, 1983, expired April 19, 2000.3
While all have the same filing date of February, 1976 (when the original application was filed in Canada), three of these patents resulted from the filing of divisional applications, which will be further discussed below. These patents will be collectively referred to as the “Shionogi patents”. Lilly U.S. became the owner of the Shionogi patents by way of assignment dated April 27, 1995 which was registered in Canada on August 24, 1995.
[5]Although this action was instituted nearly twelve years ago, the dispute between the parties as to whether or not the sale by Apotex of a generic version of Ceclor® in Canada would infringe the patents at issue started earlier, with the filing of an application under the
Patented Medicines (Notice of Compliance) Regulations,
3Ibid., LRTA # 9 and 50.
4The application was dismissed because the patents did not meet the criteria set out in the PM (NOC) regulations applicable at that time.
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[6]Despite the fact that for the most part of this period, the parties have been intensively litigating the matter, neither the discovery process nor any other steps taken in this long period of time succeeded in significantly reducing the number of issues involved or to focus the debate at trial.
[7]Given the amount of evidence filed and the many issues involved, the parties’ counsel made a real effort in attempting to consign all their arguments in writing. This entails that they filed nearly one thousand pages of submissions (including those filed with respect to the counterclaim), not counting the various submissions filed in respect of a number of objections which had to be taken under reserve to avoid delaying the trial. The Court thanks each counsel involved for their effort in reducing the number of those objections that remained outstanding in the end.
[8]Despite all this goodwill, the Court was left with a daunting task. This is only partially reflected in these reasons which are, unfortunately, too long despite the fact that the Court could not really do justice to all the issues raised. It was simply not possible or even desirable to refer to all the evidence and the hundreds of cases put forth by the parties.5
[9]At the end of the process, one must wonder where the system failed for the Court is convinced that there has to be a better way to achieve the objectives set out in section 3 of
5Having considered all the evidence and the case law submitted, including all the prior art, the Court was guided by the comments of the Supreme Court of Canada in R. v. R.E.M., 2008 SCC 51, [2008] S.C.R. 3, particularly at para. 43.
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the Federal Court Rules,
expeditious and least expensive determination of every proceeding on its merits.
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INDEX |
|
|
Heading |
Para. No. |
1. |
General Background |
10 |
2. |
The Evidence |
16 |
3. |
Lilly Canada’s Lack of Standing |
75 |
4. |
Patent Construction |
87 |
|
4.1. Person Skilled in the Art |
91 |
|
4.2. Common General Knowledge (Principles) |
95 |
|
4.3. The ‘007 Patent |
106 |
|
4.4. The Lilly Process Patents |
144 |
|
4.4.1. The ‘536 Patent |
145 |
|
4.4.2. The ‘725 Patent |
164 |
|
4.4.3. The ‘468 Patent |
170 |
|
4.5. The Shionogi Patents |
175 |
|
4.5.1. Common Disclosure |
177 |
|
4.5.2. The ‘547 Patent |
184 |
|
4.5.3. The ‘924 Patent |
188 |
|
4.5.4. The ‘132 Patent |
192 |
|
4.5.5. The ‘026 Patent |
199 |
5. |
Infringement |
|
|
5.1. Burden |
211 |
|
5.2. Statutory and Common Law Presumptions |
212 |
|
5.3. Lupin Process |
224 |
|
5.4. Kyong Bo Process |
257 |
|
5.4.1. Existence of a License |
263 |
|
5.5. Importation |
270 |
|
5.6. The Exception Under Subsection 55.2(1) of the Patent Act |
342 |
6. |
Invalidity |
347 |
|
6.1. Standard of Review and Burden of Proof |
348 |
7.Inherency and Lack of Subject Matter
7.1. |
Shionogi Patents |
371 |
7.2. |
Lilly Patents |
380 |
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|
Page: 6 |
8. Anticipation |
|
8.1. The Legal Test |
391 |
8.2. The ‘007 Patent |
399 |
8.3. The Lilly Process Patents |
409 |
8.4. The Shionogi Patents |
411 |
9. Obviousness |
|
9.1. The Legal Test |
412 |
9.2. The ‘007 Patent (Claim 17) |
426 |
9.2.1. The Person Skilled in the Art |
428 |
9.2.2. Relevant Common General Knowledge |
429 |
9.2.3. Rydon, Coe and Ramirez |
432 |
9.2.4. The Inventive Concept |
438 |
9.2.5.The Difference Between the Common General Knowledge and
the |
439 |
9.2.6. Would these differences be obvious to the person skilled in |
|
the art? |
441 |
9.3. The Lilly Process Patents |
|
9.3.1. Identify the Skilled Addressee |
476 |
9.3.2. The Relevant Common General Knowledge |
477 |
9.3.3. The Dreux Article and Other Prior Art |
484 |
9.3.4. The Inventive Concept |
489 |
9.3.5. The Differences between the Prior Art Including Common |
|
General Knowledge and the Inventive Concept of the Claims |
491 |
9.3.6. Do these differences constitute steps which would have been |
|
obvious or do they require any degree of invention? |
496 |
9.4. The Shionogi Patents |
512 |
9.4.1. The Person Skilled in the Art |
515 |
9.4.2. Common General Knowledge |
516 |
9.4.3. Contested Art |
532 |
9.4.3.1. Cocker |
533 |
9.4.3.2. Chauvette Application |
538 |
9.4.3.3. Kishi |
539 |
9.4.4. The Inventive Concept |
544 |
9.4.5. The Differences between the Prior Art and the Inventive |
|
Concept |
|
9.4.5.1. The ‘547 Patent |
547 |
9.4.5.2. The ‘924 Patent |
549 |
9.4.5.3. The ‘132 Patent |
552 |
9.4.5.4. The ‘026 Patent |
554 |
9.4.6. Are these differences inventive? |
557 |
10. Lack of Utility – Sound Prediction – Inoperability |
583 |
10.1. The Lilly Patents |
585 |
10.2. The Shionogi Patents |
604 |
10.3. Deficiency of Specification and Ambiguity |
613 |
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11. Remedies and Costs |
|
11.1. Disentitlement and |
626 |
11.2. Remedies |
646 |
11.3. Exemplary/Punitive Damages |
657 |
11.4. Interest |
665 |
11.5. Costs |
676 |
12. Apotex’s Counterclaim |
683 |
12.1. Relevant Statutory Provisions |
718 |
12.2. The Framework of Inquiry into Apotex’s Counterclaim |
720 |
12.3. Is Apotex’s Counterclaim |
728 |
12.4. Apotex’s Claim for Damages |
754 |
12.5. The Applicable Evidentiary Standard |
757 |
12.6. Background |
771 |
12.7. Apotex’s “But For” Scenarios with Respect to Causation |
793 |
12.7.1. Scenarios 1 and 2: Apotex Obtains a Licence from |
|
Shionogi or Lilly |
803 |
12.7.2.Scenario 3: Apotex Practices the Shionogi Process and
is not sued |
835 |
12.7.3.Scenarios 4 and 5: Apotex Practices the Shionogi and
Lilly Processes and is Sued by Shionogi and Lilly |
840 |
12.8.Is there a loss resulting from the assignment under the most
likely “but for” world scenario? |
842 |
12.9. Increased Cost of Legal Bulk Cefaclor |
849 |
12.10. Infringement Liability |
853 |
12.10.1. The Lilly Patents |
855 |
12.10.2. The Shionogi Patents |
861 |
12.11. Costs |
882 |
1.General Background
[10]It is not disputed that penicillin is the oldest of the
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[11]Cephalosporins were first discovered in 1948.
[12]Shortly after it was introduced in the market by Lilly, Ceclor® was a very successful drug. It remained so for several years, however, by 1997, when Apotex came to market, it was definitely in decline, having been overtaken by other antibiotics.
[13]The basic patent on the compound Cefaclor or the class of second generation
cephalosporins to which it belongs
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[14]It is not disputed that although the disclosure of the ‘007 patent directly refers to the preparation of a cephalosporin compound using the kinetically controlled complexes claimed in the patent, the claims do not expressly refer to such use. Also, none of the claims in the Lilly process patents or the Shionogi patents are directly claiming a process to make cefaclor itself. As a matter of fact, and as will be explained in more detail later on, these patents more generally relate to the making of what all experts agree was a key intermediate compound (the
[15]An important part of the debate relates to processes involved in the transformation of a penicillin molecule into a cephalosporin molecule. Penicillin molecules could be synthetically produced at very low cost whereas the original starting material used by Dr. Chauvette to make cefaclor or other second generation cephalosporins described in his patent was very expensive.
2.The Evidence
[16]An important part of the evidence in this trial is a long list of facts agreed to by the parties that are applicable both to the main action and the counterclaim. To avoid excessive duplication, the Court will attempt to avoid repeating those admitted facts which are relevant to both actions, with the understanding that the totality of said facts were considered in the course of the determination of both actions.
6And then the
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[17]In the infringement action Lilly produced six factual witnesses: Dr. Stephanie Parra, Mr. Thomas Lee Pytynia, Ms. Debbie Rassos, Dr. Larry Blaszczak, Dr. Robin Cooper and Mr. John Gardner.
[18]Dr. Parra is acting manager of the general direct quality division one at Health Canada. Her division is responsible for evaluating data submitted to support the quality of drug submissions made to the department including chemistry and manufacturing data. Her testimony mainly served the purpose of entering into evidence, as well as offering a brief explanation of, documents filed in relation to Apotex’s submission for its
[19]Various important exhibits discussed throughout the trial were put into evidence in the course of Dr. Parra’s testimony, such as the Comprehensive Summary regarding Apo- cefaclor
[20]Dr. Parra also explained the meaning of a “notifiable change” and the various levels ascribed thereto, which correspond to greater or lesser regulatory filing requirements. A
7See Facts agreed to by the parties, LRTA # 81.
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change of supplier for example is classified as a level 2 notifiable change and will receive an objection letter if Health Canada has an objection to the proposed change.8 In this matter, before approving the change of supplier notified by Apotex (from Kyong Bo to Lupin), Health Canada requested additional information by way of a document called a “Clarifax”
[21]Mr. Pytynia was
[22]Ms. Rassos is the senior regulatory affairs manager at Lilly Canada, a position she has held for two and a half years. She had no direct knowledge of any of the events relevant to the proceedings and testified only to the documentation she found in Lilly Canada’s regulatory records concerning cefaclor. She introduced in evidence, among other things,
8Transcript of April 21, 2008 contains a typographical error at p. 179, line 2.
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Lilly Canada’s process information filed in relation to its New Drug Submission (NDS)
[23]Dr. Blaszczak is one of the inventors listed in the Lilly patents in suit, with the exception of the ‘536 patent. However, he did not testify in this capacity but rather to explain his relationship with a graduate student in chemistry from the University of Modena, Alberto Spaggiari. This student had solicited Dr. Blaszczak’s supervision in conducting research in
[24]On
9That said, this issue is not relevant to the present findings.
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particularly the de facto merging of the process research and development and discovery groups (he was part of the latter) when Lilly requested that the discovery chemists thoroughly consider the problem posed by the production of cefaclor on a commercial scale.
[25]Dr. Cooper was working with Lilly’s research team at the relevant time. He was already a
[26]Mr. Gardner is a chemist who performed the experiment described in example nine of the ‘007 patent (characterised as a side chain cleavage using the
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relevant.10 That said, in order to avoid further peripheral debates, the Court does not consider this evidence to be necessary to reach its findings.
[27]Subject to what I said about Ms. Rassos and my further comments in respect of Dr. Cooper, I accepted as credible the evidence of these witnesses.
[28]Apotex presented eight fact witnesses in the main action: Ms. Julie Carrière, Mr. Donald Barber, Mr. Gordon Fahner, Dr. Bernard Sherman, Mr. John Hems, Mr. Rajeev Patil, Mr. Vilas Satpute and Mr. Haracharan (Harry) Singh.
[29]Ms. Carrière is Apotex’s director of quality assurance and she testified about the regulatory context which requires Apotex to conduct tests and analyses of the bulk chemicals it uses in making pharmaceutical formulations. Her testimony was put forth in support of Apotex’s defence pursuant to s. 55.2 of the Patent Act, R.S.C. 1985, c.
10See Eli Lilly and Co. v. Apotex Inc. (2000), 8 C.P.R. (4th) 413, 99 A.C.W.S. (3d) 319 (Eli Lilly (2000)), aff’d, 2001 FCA 141, 12 C.P.R. (4th) 127 (Eli Lilly (2001)). Request made by Apotex after these decisions were issued should have been the subject of a motion to obtain an answer if there were valid reasons to argue that there was no res judicata.
11In this case there is no evidence that those responsible for such testing at Apotex were aware of the fact that Lupin allegedly changed its process in 1998 or at any other time.
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regulatory obligation, testing is beneficial to Apotex for it must ensure that the products it puts on the market are safe and of good quality, otherwise its sales might suffer.
[30]Mr. Barber has been the formulation development manager at Apotex since 1998. He provided testimony on product development at Apotex. He explained in detail the various testing required to develop a commercially viable product, which includes the formulation stages, the scaling up of a process or formulation that is thought to be workable on an industrial scale and the testing or evaluation of the formulation so produced. The raw material testing is ongoing throughout the process.
[31]He noted that whenever Apotex switches to a different supplier for an active pharmaceutical ingredient (API), evaluations, both chemical and physical, are repeated and a “good amount” of the formulation development work must also be repeated. Mr. Barber discussed how, with regard to cefaclor, such work started as early as 1991. He identified several exhibits relating to quantities of cefaclor which have not been sold or used for commercial purposes. Again, this testimony was offered in support of Apotex’s defence pursuant to s. 55.2 of the Patent Act. On
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[32]Mr. Fahner has been Apotex’s
[33]On
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[34]Following the testimony of Mr. Singh, which will be discussed below, Apotex re- called Mr. Fahner to testify with regard to certain invoices emanating from Tektrade Ltd. (contained in
Fahner testified that the relevant invoices (#
[35]Mr. Hems is the Director of Regulatory Affairs at Apotex. He testified as to the regulatory requirements which Apotex must meet in order to offer a drug on the market and the process used to meet these requirements. He oversaw the process for seeking approval for cefaclor, which began in 1993 with the filing of the original drug submission
[36]Except for the issue relating to the Tektrade invoices in respect of which the Court will make no finding, the evidence of the aforementioned witnesses was accepted.
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[37]Dr. Sherman is the Chairman and Chief Executive Officer of Apotex. In this phase of the trial, he testified as to Apotex’s practices with regard to the sourcing of APIs, particularly cefaclor. He explained that, around the time where Apotex received its NOC for cefaclor, it hired an in house lawyer named Brigitte Fouillade, who has since passed away. Her role was to advise Dr. Sherman as to intellectual property issues. Referring to correspondence addressed to Ms. Fouillade from Kyong Bo dated October 10, 1997 (TX- 662), Dr. Sherman explained that Kyong Bo represented to Apotex that it had rights to use the Shionogi process.
[38]With regard to Lupin, Dr. Sherman testified that while no formal agreement was entered into at first, it is his understanding that Ms. Fouillade attempted to ensure that the material supplied was not infringing. Ms. Fouillade developed a flow sheet for such a non- infringing process and, relying on correspondence between Ms. Fouillade and Mr. Singh
[39]On
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pertaining to Lupin process information and communications between Lupin and Apotex. Finally, he also attempted to explain price variations for bulk cefaclor purchased, from Lupin and Kyong Bo.
[40]Generally, the Court has no problem with the credibility of Dr. Sherman’s testimony in respect of matters where he was directly involved as opposed to those where others were directly involved such as Ms. Fouillade. It is obvious and understandable that Dr. Sherman did not recall factual details and appeared sometimes to be offering explanations based on common sense and written documentation. The Court was certainly surprised by his candour when he noted that he did not read correspondence from his lawyers (there was simply too much of it) and he entirely relied on them when signing affidavits (it is not clear if he even read them all).12
[41]The testimonies of Mr. Singh, Mr. Patil and Mr. Satpute were heard under reserve of general objections (generally referred to as voir dire by the parties) which will be discussed in the section regarding infringement. Still, it is useful to briefly note what their testimonies relate to.
[42]Mr. Singh is the owner of Glopec International Inc. (Glopec), a company which imports and distributes raw pharmaceutical ingredients in both Canada and the United
12At this point, it must be said that the parties used different versions of the transcripts in their submissions. Also, the Court initially worked using the electronic version of the revised transcripts until it was found that as these were not in PDF format pagination was not reliable. In footnotes to these reasons I refer to the paper version of the revised transcript but there may still be some inaccuracies. See
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States. Glopec represents Indian manufacturers, such as Lupin, taking care not only of selling their products in Canada but also filing their regulatory materials with Health Canada. With regard to cefaclor, a certain amount of such correspondence related thereto was introduced in the course of his testimony (Glopec
[43]Mr. Singh also testified as to a big order of 7,500 kg of cefaclor passed by Apotex to be manufactured using the
[44]Mr. Patil is the
13It should be noted that this should not be described as complete files given that Singh indicated that he did not archive or keep his files intact.
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registration of the companies’ products (DMFs), which include dosage form and API (bulk), the study of regulatory requirements in countries to which Lupin exports and compliance with these requirements. Mr. Patil testified as to how the registration and other requirements were performed at Lupin as well as what they generally entailed, with a particular focus on communications with Health Canada concerning cefaclor both directly from Lupin and via Glopec (which were tendered as Patil
[45]Mr. Patil also testified as to the locations where cefaclor and
[46]Mr. Satpute is the
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ADCA and
[47]He testified that initially, in 1996, Lupin used a process which began with Pen V acid. Sometime in 1997, Lupin did trial batches and a few commercial ones to validate a new process starting with Pen G before reverting in 1998 to Pen V acid but using a third process which was slightly different from the one used in 1996 (particularly at what is described as step V in some of Lupin’s documents) to fulfill what he qualified as a “one of the biggest orders we received”. Mr. Satpute explained the implementation of this third process, the fact that it produced substantially lower yields (about 60 percent of the yields of the previous Pen V acid process used) and the use of chlorine (Cl) gas and TPP. Also when he was asked to find batch records for the
[48]Once this order was filled, Mr. Satpute testified that Lupin reverted to the Pen G process validated in the latter part of 1997. Documents referred to in the course of Mr. Satpute’s
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[49]Finally, the parties filed by consent an affidavit of Leslie Sands, Director of regulatory affairs at Lupin Pharmaceuticals Inc., a subsidiary of Lupin operating in the United States
[50]In the main action, the parties filed 33 expert reports dealing with the infringement and invalidity allegations. They are listed in Chart A14 attached hereto with the names of the experts, dates, subject matter and exhibit numbers, together with their area of expertise and a brief summary of their qualifications.
[51]On the question of infringement of the Shionogi patents by the use of the Kyong Bo process, Lilly called Dr. Anthony Barrett while Apotex responded with the evidence of Dr. Stephen Hanessian who touches on the issue of infringement of all the patents in issue mostly to support Apotex’s arguments with regard to importation
14Chart A also includes under the heading Competition the eight expert reports filed in the counterclaim.
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[52]A much more contentious issue concerns the infringement of the Lilly patents, particularly whether the Lupin process described in the Health Canada file fell within the scope of the monopoly of the plaintiffs. Lilly’s main expert witnesses15 in this respect were Drs. Miller and Baldwin. While Dr. Hunter16 and Mr. Moraski reported and commented on the results of numerous experiments conducted by both sides in relation to this question, particularly with the use of 31P Nuclear Magnetic Resonance (31P NMR) Spectroscopy. Apotex’s experts on this question were Drs. Modro, McClelland and Cowley. Dr. Chase also testified about the tests he performed.
[53]An inordinate amount of time was spent discussing the results of the various
experiments performed by both sides as well as their respective alleged flaws. It is clear that most of these experiments involved a certain amount of subjectivity (for example, what is yellow vs. light or faint yellow, or what is cooled vs. ice cooled or cooled with ice salt, what is room temperature, etc.) and that really none of the tests performed were perfect. For various reasons, choices were made with respect to temperature and equipment. Many things can and do go wrong in laboratories (broken valves, etc.). The Court used considerable caution in assessing the weight to be given to this evidence, but in the end, considering the construction of the claims at issue adopted, most of these experiments and the comments relating thereto became somewhat irrelevant. With respect to those that remain relevant, such as reactions carried out on cephalosporin substrate with or without a
15In reply, Lilly also presented the evidence of Dr. Gorenstein but as will be discussed later on, this expert evidence was not considered by the Court.
16The paragraphs objected to in
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halogen scavenger, individual tests were not considered in isolation, in the sense that the Court always looked to confirm if the results were supported by other evidence on the record.
[54]The one positive aspect of the testing is that it led to the abandon of some of the arguments and helped focus the debate.
[55]There was a lengthy debate about the admissibility of tests performed ex parte and how tests must be introduced in the evidence. In the end, these issues were settled without the need for a ruling. Nevertheless, it is important to note that
[56]Also, with respect to the infringement of the Lilly process patents, the Court granted leave to both parties to file expert evidence on issues arising from the testimony of Mr. Satpute. Dr. Barrett
[57]Turning now to the validity phase of the trial, Apotex relied on the evidence of Drs. McClelland, Hanessian and Martin in respect of the Shionogi patents while Lilly responded
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with the evidence of Dr. Barrett and that of Mr. Murphy, who focused on the prosecution of the Shionogi patents and the unity of invention practice of the Canadian Patent Office.
[58]In respect of the Lilly patents, Drs. Modro, Chivers, Olah and McClelland discussed the validity of the ‘007 patent while Dr. McClelland also addressed issues relating to all the Lilly process patents and Dr. Olah opined in respect of the ‘536 patent. In response, Lilly relied upon the evidence of Dr. Baldwin who discussed all of the Lilly patents and Dr. Hunter who focussed on certain allegations in respect of the ‘007 patent. Mr. Murphy also discussed the prosecution of the Lilly patents and the unity of invention practice in relation thereto.
[59]In respect of infringement by the Lupin process, the Court found the evidence of Dr. Baldwin and Dr. Miller particularly helpful. Despite Apotex’s attempts to challenge their credibility on the basis that they had worked as a consultants for Lilly from time to time and the university where Dr. Miller teaches received some grants from Lilly, the Court is satisfied that they gave their evidence in a straightforward, unbiased manner. In that respect, the Court notes that early in his testimony, Dr. Baldwin readily admitted that the kinetic complex must have formed when one carried out some of the experiments in the prior art.
[60]In respect of the validity of the Lilly patents, like the House of Lords in Synthon BV v. Smithkline Beecham plc, [2005] UKHL 59, [2006] 1 All ER 685 (Synthon), who described him as one of the foremost organic chemists in the world, the Court found Dr. Baldwin to be particularly well qualified to opine on the issues of fact covered in his report.
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In fact, he was the only expert witness that was properly qualified to opine on the common general knowledge of the posita to whom the Lilly process patents were addressed and how said posita would read those patents or the relevant prior art.
[61]Drs. Modro, Olah and McClelland were all properly qualified to opine in respect of the ‘007 patent. Generally the Court had no difficulties with their credibility although, the Court was more cautious with the evidence of Dr. McClelland because of his vast experience acting as an expert in patent cases he was somewhat less spontaneous than other Apotex experts.
[62]It is obvious, and Drs. Modro and Martin readily admitted it, that Ivor Hughes and Dr. Stewart from his office played a very significant role in the drafting of the reports (presumably all of them except maybe for that of Dr. McClelland). Normally there is nothing wrong with being assisted by one’s lawyer in drafting one’s report but despite the Court’s flexibility in that respect, one must not lose sight of the principle expressed in
National Justice Compania Riviera S.A. v. Prudential Assurance Co. (“the Ikarian Reefer”), [1993] 2 Lloyd’s Rep. 68 to the effect that “expert evidence should be seen as the independent product of the expert uninfluenced as to form or content by the exigencies of litigation: Whitehouse v Jordan [1981] 1 WLR 246 at 256, per Lord Wilberforce” (emphasis added). Certainly the more the lawyers are involved the more careful an expert must be in reviewing the text proposed to ensure that it truly reflects his or her views. There was some evidence in this case that the review, by Apotex’s experts particularly, was not as careful as one would expect.
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[63]Although the Court generally accepted the evidence of Dr. Hunter in respect of the testing performed and found his evidence credible in respect of the common general knowledge about 31P NMR and the impact of various factors on the ppm chemical shift at the relevant time, his evidence was not as useful considering the construction of the claims at issue adopted by the Court. With respect to the validity of the ‘007 patent
[64]Again, in view of the construction of the claims at issue, most of the evidence of Dr. Cowley was not particularly useful. In respect of the view he expressed in para. 27 of his report
[65]As mentioned, Dr. Chivers, like Dr. Hunter, has a PhD in inorganic chemistry18 with particular expertise in chemistry involving various elements including phosphorus. He testified in a straightforward, clear and credible manner. It is evident that he had initially also been asked to comment on the validity of the ‘536 patent, a matter in respect of which he was clearly not qualified, but the report he filed when he took the stand was heavily
17A. Spaggiari, L.C. Blaszczak & F. Prati,
18This appears to be in direct contradiction with the description of the addressee of the ‘007 patent adopted by Apotex in their memorandum. But given that neither Apotex nor Lilly raised this issue in respect of both experts maybe because of their particular knowledge of phosphorus compounds, the Court gave some weight to their evidence.
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redacted, probably in response to Lilly’s objection that there was duplication. Only paragraph 6 now deals with the ‘536 patent, it describes the characteristics of the addressee of the patent. His evidence, in respect of the ‘007 patent, like that of Dr. Hunter, did not add much to that of the
[66]Dr. Barrett and Dr. Hanessian are both
[67]My further comments in respect of Drs. Olah, McClelland and Martin’s evidence in respect of the Lilly process patents and the Shionogi patents illustrate difficulties the Court faced in this case and which are unfortunately not uncommon.
[68]Dr. Olah is an imminent scientist. Among his many outstanding achievements, he has won a Nobel Prize in 1994 for his work on positively charged compounds of carbons. However, he has no experience whatsoever with respect to
19Although the Court is not persuaded that either expert qualified as posita in the 1970s, they certainly qualified shortly thereafter. Also, Dr. Barrett was working, as of 1976, under the supervision of a posita – Sir Derek Barton – and he studied cephalosporin chemistry earlier in the 1970s (see examination of Dr. Barrett, April 22, 2009, p. 15, lines
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other experts acting for Apotex, his report includes a description of the addressee of these patents which appear to be meant to fit his credentials.
[69]In
– the type of chemistry discussed in the ‘536 patent. This may explain why he appeared as a reluctant witness who even refused to answer some questions during his
[70]In such a case, it is easy to understand why the Court preferred Dr. Baldwin’s evidence in respect of the ‘536 patent to that of Dr. Olah, and why time spent on examination and
[71]Dr. McClelland’s evidence in respect of the Lilly process patents and the Shionogi patents falls pretty much in the same category especially when one considers that he should know better given his vast experience in litigation.
20
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[72]This is a problem because one’s willingness to offer an opinion without an appropriate basis to do so can impact on the overall credibility of a witness otherwise qualified to opine on another issue for it can raise some doubt as to the existence of a proper basis for the other portion of his opinion or as to whether the expert really understood his role.21
[73]Dr. Martin is another distinguished organic chemist expert in his field which includes lactams but he has no experience whatsoever in
[74]Another issue on which the parties presented expert evidence was on pharmaceutical regulatory affairs, particularly the filing of NDSs and DMFs and the requirements for keeping these filings up to date. For this purpose, Lilly called upon Ms. Azzarello who filed one report
21Given the very special circumstances surrounding the filing of the two reports of Drs. Hanessian and Barrett
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11). This evidence provided some background for the debate on the evidentiary value of the
information provided to Health Canada by the foreign suppliers of Apotex. It also brought to
light that there may be a loophole in the regulations or at least in how they are applied.
According to Ms. Wehner, it is known that foreign suppliers do not always abide by the
regulations and file
sometimes implemented before receiving Health Canada approval. I understand that this
may have an impact on the ultimate safety of the product because the testing performed on
the API by the Canadian sponsor may need to be adapted22 to the process used to
manufacture it. Clearly this is a matter for the regulator, not a Court dealing with an
infringement action. That said, in the end, this evidence was not particularly useful.
3.Lilly Canada’s Lack of Standing
[75]Apotex argues that Lilly Canada has not proven its standing to sue. It alleges that a bare assertion of a corporate relationship is not sufficient. In that respect, it relies on two statements made by Justice Judith Snider in Laboratoires Servier v. Apotex Inc., 2008 FC 825, 67 C.P.R. (4th) 241 (Laboratoires Servier) that read as follows:
The test for who qualifies as a person claiming under a patentee is not simply whether the patentee has consented to the person being joined as a plaintiff in an action; nor is it enough to demonstrate that two parties are related. In each case, the facts must demonstrate a credible and legally sufficient basis for claiming under a patentee
[…]
As noted above, the mere existence of a corporate affiliation is not conclusive evidence of a right under s. 55(1) of the
22Here it appears that nobody at Apotex verified if any such changes were necessary despite the fact that Apotex knew that Lupin was bound to change its process by contract.
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Patent Act. There must be something more. That something more has consistently been described in the jurisprudence as a license or some other arrangement (for example, a lease, an assignment, or a sale) that would give the affiliate the right to use the patent.
[paras. 70 and 82]
[76]Lilly Canada does not disagree with the
Lilly represents and warrants that for Canada, it has the exclusive right to grant licenses to enable the licensee to make, have made, use and sell certain products, including the right to use within Canada, certain patents, trademarks
[…]
relating to such products and to their preparation, manufacture, processing and packaging.
[77]In the said agreement, Lilly U.S. appoints Lilly Canada as its authorized distributor of all Lilly U.S. products in Canada (which includes Ceclor®) and at s. 1.2:
Lilly further grants to Lilly Canada a
[…]
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to make, have made, use or sell, and/or import Lilly Products whose preparation is covered by the patent applications and patents.
[78]At pp. 8 and 9 of Schedule A, the four Lilly patents at issue here are listed. Normally, it should thus not be contentious that Lilly Canada has proper standing pursuant to subs. 55(1) of the Patent Act, at least in respect of those patents.
[79]Apotex, however, says that on January 1, 1995, the 1991 agreement was amended
[80]This, according to Apotex, makes particular sense23 in respect of the Shionogi patents, given that none of the material purchased by Lilly Canada was made by the processes protected thereunder and that Lilly Canada never actually made, purchased or sold any of the actual compounds claimed in the patents in suit. Apotex also discards the impact of the General Supply and Distribution Agreement, filed as
23Apotex did not explain how this would make any sense in respect of the Lilly patents, simply stating that Lilly and Lilly Canada “muffed up” when they made this amendment and must suffer the consequences.
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[81]The Court agrees with the plaintiff that such an interpretation of the 1991 agreement as amended through time leads to an absurd result and is simply incorrect. The January 1,
1995 agreement expressly states:
WHEREAS the parties desire to maintain the rights, licenses and sublicenses granted by the AGREEMENT while also recognizing that the parties will receive full compensation under the Master Supply and Distribution and Manufacturing or other Agreements.
[82]It is also worth noting that the 1991 agreement was further amended on April 9, 1998
grants to Lilly Canada the right to
Said schedule made specific reference to three of the Lilly Patents in suit (the only ones
missing are the ‘007 and ‘026, the latter having expired by that time).
[83]Having considered all of the evidence, the Court is satisfied that Lilly Canada has properly established its standing based on an express licence from the patentee.
[84]Before concluding on this issue, it is worth quoting a passage from the decision of the Federal Court of Appeal in Apotex Inc. v. Wellcome Foundation Ltd., [2001] 1 F.C. 495 (2000), 262 N.R. 137 (Apotex (2000)), where, after observing that the trial judge, Justice
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Howard Wetston, had committed no error in his analysis and conclusion, and that based on
the unwritten licensing practices of the Glaxo Wellcome Inc. group of companies, Glaxo
Wellcome Inc. had an unwritten licence to all the patents held by companies under the
control of Glaxo Wellcome Inc. of the United Kingdom, Justice Marshall Rothstein noted, at
para. 99, that:
It is perhaps not uncalled for to observe that this is not a case in which the alleged licensee is alone in advancing its claim for the patent infringement. Here, the patentee is also before the Court as a
[85]In fact, Lilly Canada argues that in the past, the Federal Court of Appeal has accepted less than an exclusive or
In my view, a person ‘claiming under’ the patentee is a person who derives his rights to use the patented invention, at
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whatever degree, from the patentee. The right to use an invention is one of the monopoly to which is conferred by a patent. When a breach of that right is asserted by a person who can trace his title in direct line back to the patentee that person is ‘claiming under’ the patentee. It matters not by what technical means the acquisition of the right to use may have taken place. It may be a straightforward assignment or a license. It may, as I have indicated, be a sale of an article embodying the invention. It may also be a lease thereof. What matters is that the claimant asserts a right in the monopoly in that the source of that right may be traced back to the patentee. This is the case with the appellant here.
[Footnotes omitted, para. 24]
[86]There is no doubt here that Lilly Canada derives its rights from the patentee, Lilly
U.S.
4.Patent Construction
[87]Before considering the allegations of infringement and invalidity, the Court must construe the claims at issue in this proceeding. The principles of construction are well- established. They are set out in Free World Trust v. Electro Santé Inc. 2000 SCC 66, [2000] 2 S.C.R. 1024 (Free World Trust), and Whirlpool Corp. v. Camco Inc. 2000 SCC 67, [2000] 2 S.C.R. 1067 (Whirlpool). Since those decisions were issued, much has been written by this Court on this topic. Be it sufficient to say that “[t]he key to purposive construction is therefore the identification by the court, with the assistance of the skilled reader, of the particular words and phrases in the claims that describe what the inventor considered to be the “essential” elements of his invention.”24 As to the further details of what date the claims are to be construed, using what criteria, what resources, through whose eyes and what is
24See Whirlpool at para. 45, and Free World Trust at para. 31(e).
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made of the resulting construction, the Court adopts and refers to paras.
Roger Hughes’ decision in Pfizer Canada Inc. v. Canada (Minister of Health), 2005 FC
1725, 285 F.T.R. 1.
[88]As noted in Shire Biochem Inc. v. Canada (Minister of Health), 2008 FC 538, 328 F.T.R. 123, at para. 21 (Shire), the Court “is not to construe a claim without knowing where disputes between the parties lie.” This is particularly important in cases such as this one, where a large number of claims in eight distinct patents are at issue. As previously noted, all of the patents in this case were issued before October 1, 1989 and are thus subject to the pre October 1, 1989 version of the Patent Act (s. 29 of the post October 1, 1989 version of the Patent Act). They are to be construed as of their respective dates of issuance.
[89]To these more general principles, one should also add that the Court adopts and will apply Justice Denis Pelletier’s statement regarding claim differentiation in Halford v. Seed Hawks Inc., 2004 FC 88, 246 F.T.R. 1 (Halford), affirmed, 2006 FCA 275, 275 D.L.R. (4th) 556 at para. 110, where he quoted the following passage from D.M.I., Inc. v. Deere & Co.,
755 F. 2d 1570, 225 U.S.P.Q. (BNA) 236 (U.S. Cir.):
The district Court said ‘As a general rule a limitation cannot be read into a claim to avoid infringement’…Where, as here, the limitation sought to be ‘read into’ a claim already appears in another claim, the rule is far more than ‘general.’ It is fixed. It is long and well established. It enjoys an immutable and universally applicable status comparatively rare among rules of Law.
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[90]The Court will also rely on the following passage from The Canadian Law and Practice Relating to Letters Patent for Inventions by Harold G. Fox (Fox) ,25 which was recently quoted by Justice Snider in
Each part of the specification must be effectively construed and, if it is at all possible, each claim must be construed independently of the others and be given an effective and distinct meaning. The court will not be inclined to construe two claims in a specification as identical, for if one claim bears the same meaning as another it does not bear an effective meaning.
[Emphasis is in the original.]
4.1.Person Skilled in the Art
[91]With respect to the ‘007 patent, although the disclosure discusses, among other things, the utility of the new class of halogenating compounds in the chemistry of cephalosporins, the Court is satisfied that the art to which the patent relates is wider than the chemistry of cephalosporins for the patent covers the kinetic complexes (compound by process claims) and processes to make them. Thus, the Court accepts Apotex’s view that the addressee of the patent would have a Ph.D. in organic or medicinal chemistry with
[92]That said, with respect to the Shionogi patents and the Lilly process patents, the Court finds that the addressee is a person with a Ph.D. in organic or medicinal chemistry,
254th ed. (Toronto: Carswell, 1969) at 219.
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with
[93]Insofar as the Shionogi patents are concerned, there is little dispute between the parties in that respect even if Dr. Hanessian appears to prefer the word “focus” to describe the experience of the person skilled in the art in the
[94]The views of Apotex’s experts such as Dr. Olah (with respect to the ‘536 patent) and Dr. McClelland (who deals with the Lilly process patents as well as the Shionogi patents)28
regarding the particular addressee of the process patents appear to be designed to suit the particular characteristics of their own expertise, rather than that of the true addressee. The Court cannot accept the view that the addressee of the Lilly process patents is the same person to whom the ‘007 patent is addressed, but who “would in addition likely be interested in cephalosporin compounds.”29 That said, this finding will have little impact on the evaluation of their evidence, given that, as mentioned when discussing the weight given to the expert evidence, Apotex’s experts who commented on the Lilly process patents would not meet either description as there is no evidence that any of them had a particular interest
26See, among other things, Affidavit of Dr. Hanessian
27See transcript of April 28, 2008, p. 231 line 23 to p. 232 line 4. Although Dr. Baldwin made these comments while discussing the Lilly process patents, they obviously apply more generally.
28For Dr. Olah, see
29See Apotex memorandum on infringement at para. 120.
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in cephalosporins prior to their involvement in this litigation. They have failed to establish in their affidavit the basis on which they are qualified to comment on how a person skilled in the art (hereinafter posita) at the relevant time would construe the patents and what common general knowledge these persons would possess.
4.2.Common General Knowledge (Principles)
[95]During the trial, the Court noted on several occasions that there was little evidence to establish that the numerous publications, patents, applications relied upon by various experts were part of the common general knowledge of the posita at the relevant time. While this was to a certain extent cured through the
[96]The very general statements made recently by the Supreme Court of Canada that “[c]ommon general knowledge means knowledge generally known by persons skilled in the relevant art at the relevant time” (Apotex Inc. v.
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knowledge “undergoes continuous evolution and growth” (Whirlpool, para. 74) must be
read together with other classic comments that are still applicable.30
[97]As noted in General Tire & Rubber Co. v. Firestone Tyre & Rubber Co. Ltd, [1972] RPC 457, [1971] FSR 417 (U.K.C.A.) (General Tire) at pp.
The common general knowledge imputed to such an addressee must, of course, be carefully distinguished from what in patent law is regarded as public knowledge. This distinction is well explained in Halsbury's Law of England, Vol. 29, para. 63. As regards patent specifications it is the somewhat artificial (see per Lord Reid in the Technograph case [1971] F.S.R. 188 at 193) concept of patent law that each and every specification, of the last 50 years, however unlikely to be looked at and in whatever language written, is part of the relevant public knowledge if it is resting anywhere in the shelves of the Patent Office. On the other hand, common general knowledge is a different concept derived from a commonsense approach to the practical question of what would in fact be known to an appropriately skilled addressee – the sort of man, good at his job, that could be found in real life.
The two classes of documents which call for consideration in relation to common general knowledge in the instant case were individual patent specifications and “widely read publications”.
As to the former, it is clear that individual patent specifications and their contents do not normally form part of the relevant common general knowledge, though there may be specifications which are so well known amongst those versed in the art that upon evidence of that state of affairs they form part of such knowledge, and also there may occasionally be particular industries (such as that of colour photography) in which the evidence may show that all specifications form part of the relevant knowledge.
30In Generics (UK) Ltd. v. Daiichi Pharmaceutical Co. Ltd. & another, [2009] EWCA Civ 646 (Daiichi), at paras.
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As regards scientific papers generally, it was said by Luxmoore, J. in British Acoustic Films (53 R.P.C. 221 at 250):
“In my judgment it is not sufficient to prove common general knowledge that a particular disclosure is made in an article, or series of articles, in a scientific journal, no matter how wide the circulation of that journal may be, in the absence of any evidence that the disclosure is accepted generally by those who are engaged in the art to which the disclosure relates. A piece of particular knowledge as disclosed in a scientific paper does not become common general knowledge merely because it is widely read, and still less because it is widely circulated. Such a piece of knowledge only becomes general knowledge when it is generally known and accepted without question by the bulk of those who are engaged in the particular art; in other words, when it becomes part of their common stock of knowledge relating to the art.” And a little later, distinguishing between what has been written and what has been used, he said:
"It is certainly difficult to appreciate how the use of something which has in fact never been used in a particular art can ever be held to be common general knowledge in the art."
Those passages have often been quoted, and there has not been cited to us any case in which they have been criticised. We accept them as correctly stating in general the law on this point, though reserving for further consideration whether the words “accepted without question” may not be putting the position rather high: for the purposes of this case we are disposed, without wishing to put forward any full definition, to substitute the words “generally regarded as a good basis for further action.”
[98]In Mahurkar v.
In reviewing the prior art I have also been persuaded by counsel for the plaintiff that an objective test should be applied to determine whether the hypothetical skilled workman in the art could be reasonably assumed to have knowledge of such prior art. There appears to be adequate
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authority in the jurisprudence for such a test. No evidence was produced by the defendants to show that the ordinary skilled workman should be assumed to have been aware of all of this prior art. Frankly I find it difficult to believe that several of the items of prior art would have been present to the mind of the ordinary skilled workman in 1981.
[Emphasis added]
[99]Furthermore, as noted by Justice Karen Sharlow in
Not all knowledge is found in print form. On the other hand, not all knowledge that has been written down becomes part of the knowledge that a person of ordinary skill in the art is expected to know or find.
[100]With respect to the proof required to establish common general knowledge, this passage from Simon Thorley et al., Terrell on the Law of Patents, 16th ed. (London: Sweet & Maxwell, 2006) (Terrell), at
Proof of common knowledge is given by witnesses competent to speak upon the matter, who, to supplement their own recollections, may refer to standard works upon the subject which were published at the time and which were known to them. In order to establish whether something is common general knowledge, the first and most important step is to look at the sources from which the skilled addressee could acquire his information.
The publication at or before the relevant date of other documents such as patent specifications may be to some extent prima facie evidence tending to show that the statements contained in them were part of the common knowledge, but is far from complete proof, as the statements may well have been discredited or forgotten or merely
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ignored. Evidence may, however, be given to prove that such statements did become part of the common knowledge.
[Footnotes omitted.]
[101]In the present case, most of the printed information cited by Apotex’s experts was provided to them by the office of Ivor Hughes, one of Apotex’s counsel. Originally, Dr. Sarkis from that office was scheduled to appear as a witness. However, he did not testify31
and no evidence was given as to how the search for this literature was conducted. With the exception of one answer, given during Dr. Barrett’s testimony, that Chemical Abstracts were not available in electronic form at the relevant time, the Court still does not know what research tools, if any, would have been available. This is particularly important when one considers that this information was used by experts, such as Drs. McClelland, Olah and Martin,32 who did not work in the area relevant to the process patents at the relevant time, nor did they have a particular interest or focus on
[102]Even Dr. Hanessian, who was, to some extent, working in that field in the late 1970’s, does not properly address the notion of common general knowledge and what search would normally be done at the time by the skilled addressee. He noted during one of his
31No explanation was given for this, even if the Court had expressed its keen interest in hearing his version of the events that will be discussed when reviewing the evidence in respect of infringement of the Lupin material and voir dire.
32Who only had expertise in lactams, not
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specify when he had become aware of this material during his career. Was it only in the 1980’s when he got more deeply involved with cephalosporins?
[103]Certainly none of these experts describe the beliefs and biases commonly held by such an addressee at the relevant time that could not be expressed in printed form.
[104]The distinction between common general knowledge and prior art which is part of the state of the art for the purpose of assessing anticipation and obviousness tends to diminish in modern times because of the sophistication of search engines and the availability of electronic publications and databases. Nevertheless, the degree to which a particular publication was “generally regarded as a good basis for further action” (General Tire, at p. 483) is still very relevant when one considers issues such as obviousness, where mosaicing is permitted in certain circumstances.
[105]That said, the Court will now turn to the immediate task at hand, which is the construction of the individual patents.
4.3.The ‘007 Patent
[106]The claims of the ‘007 patent that remain at issue are claims 1, 4 (dependent on claims 1, 2 or 3), 13 (dependent on claims 8, 9 or 10), 17 (dependent on claims 8, 9 or 10) and 18 (dependent on claims 8, 9 or 10). Claims 1 and 4 are compound claims, whereas claims 13, 17 and 18 are process claims. It is not necessary to reproduce all of these claims here; an example of each type will suffice.
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[107]The Court will use claims 1 and 17, as their construction has been a subject of dispute between the parties. These claims read as follows:
1.A halogenating compound of the general formula
which is the kinetically controlled product of the reaction of equivalent amounts of a triaryl phosphite of the formula
and chlorine or bromine in a substantially anhydrous inert organic solvent wherein in the above formulas Z is hydrogen, halo,
17.The process of claim 8, 9 or 10 wherein the solvent is an aromatic hydrocarbon or halogenated hydrocarbon.
However, to better understand claim 17, one must look, for example, as to how it would
read if one used the process described in claim 8. It would cover a process for preparing a
halogenating compound of the general formula:
which is the kinetically controlled product of the reaction of equivalent amounts of a triaryl phosphite of the formula:
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and chlorine or bromine in substantially anhydrous inert [aromatic hydrocarbon or halogenated hydrocarbon] wherein the above formulas Z is hydrogen, halo,
[108]It is also useful to reproduce claim 6 which, although not at issue, has been referred to by all parties when discussing the essential elements of claims 1 and 4 in particular.
6.A compound having the empirical formula
which
(a)has a 31P nuclear magnetic resonance signal in methylene chloride at
(b)has in, methylene chloride, an infrared spectrum which exhibits the following characteristic absorptions:
(c)reacts with water to give HCl and triphenyl phosphate; and
(d)reacts with
chloride, and triphenyl phosphate.
[109]The common elements of claims 1, 4, 13, 17 and 18 are (1) a halogenating
compound of the general formula described therein; (2) which is the kinetically controlled
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product; (3) of the reaction; (4) of equivalent amounts; (5) of triaryl phosphite;33 (6) and Cl or bromine (Br);34 (7) in a substantially anhydrous inert organic solvent.35 It is not disputed that these seven elements (in the form covered by each claim) are essential elements of these claims.
[110]The parties disagree, however, on whether or not the specific solvent described in claim 17 is an essential element of that claim. This will be discussed later. They also disagree as to the impact of the words “[a] halogenating compound” at the beginning of claim 1, for example. Is claim 1 a Shell Oil type claim (Shell Oil Co. v. Canada (Commissioner of Patents), [1982] 2 S.C.R. 536, 142 D.L.R. (3d) 117), i.e. a claim for a new use of the kinetically controlled product of the reaction described therein, or is the reference to halogenating compounds simply a description of the nature or class of the compound described by formula I per se? There is also a dispute as to whether or not the term “kinetically controlled product” necessarily and implicitly includes the properties36
described in Table 1 (p. 8 of the disclosure) as an essential element when the reaction is between TPP and Cl (i.e. where Z and X of the formula in claim 1 is H and Cl respectively).
[111]It is undisputed that “substantially anhydrous inert organic solvent” means a solvent that is not going to react with the compound and that is substantially
33In the case of claims 4 and 13, specifically the TPP.
34In the case of claim 4, Cl only.
35In the case of claim 17, specifically an aromatic or halogenated hydrocarbon solvent.
36Although Apotex focused its argument only on the 31P NMR shift given for this kinetically controlled product in methylene chloride (CH2Cl2), its position should in theory apply to all the other characteristics (except
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little water. The term substantially anhydrous, as used in the disclosure and the patent, is
also defined at p. 14 to mean that:
although anhydrous organic solvents are generally preferred, trace amounts of water, such as that often found in commercially available solvents, can be tolerated. Although the kinetic products described herein will react with any water present in the solvent medium, additional amounts of reagents can easily be added to compensate for the loss. It is preferred that conventional laboratory techniques be employed to dry the solvents employed and to exclude moisture from the reaction mixtures.
[112]Although the disclosure describes suitable solvents that can be used in great detail at pp. 14 and 15 it is also stated that the “[p]referred solvents for the preparation of the [claimed] compounds are hydrocarbons, especially aromatic hydrocarbons, and halogenated hydrocarbon solvents”, such as those specifically referred to in claim 17. In addition, “[t]he particular inert organic solvent employed as a medium for the preparation of the […] triaryl
[113]With respect to the nature of the invention, the disclosure states, at p. 1, that it is “directed to a novel class of halogenating agents which are useful in preparing
37See claim 1.
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halogenating agents derived from halogens and phosphorus or phosphorus containing
compounds have been described” in the prior art and that:
[o]f those prior art compounds, those most closely related to the present compounds are the triphenyl phosphite dihalides which have an empirical formula identical to that of the present compounds. See, for example, D. G. Coe, S. R. Landauer, and H. N. Rydon, J. Chem. Soc., 2021 (1954) and H. N. Rydon and B. L. Tonge, J. Chem. Soc., 3043 (1956).[38]
[114]At p. 3, the disclosure acknowledges that “the present halogenating compounds can be described as intermediates, previously unrecognized, in the preparation of the prior art triaryl phosphite dihalides from triaryl phosphites and chlorine or bromine.” (Emphasis added.)
[115]The disclosure also states that, although the prior art triaryl phosphite dihalide and the claimed triaryl
is used simply to designate that equivalent amounts of halogen and phosphite reagent are combined chemically and in a way that can be distinguished from that in the prior art compounds which typically have been drawn without the dot.
[p. 4 of the disclosure]
38This prior art is in evidence here, the proper citations (and exhibit numbers) being D.G. Coe, S.R. Landauer & H.N. Rydon, “The Organic Chemistry of Phosphorous. Part II.* The Action of Triphenyl Phosphite Dihalides on Alcohols: Two Further New Methods for the Preparation of Alkyl Halides.” (1954) J. Chem. Soc. 2281
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The only further information with respect to the molecular form of the claimed compounds
is that
phosphorus center acquires some cationic character.”39
[116] At p. 15, the specification also states that:
the triaryl
More particularly the present halogenating complexes can be used in preparing known
[Emphasis and footnote added; emphasis in the original omitted.]
[117]However, as mentioned earlier, there is no specific reference to this use of the claimed compounds or processes in any of the claims.
[118]The disclosure discusses in some detail how the reaction should be carried out to maximize the formation of the kinetically controlled products and means for stabilizing
39The evidence does not establish that the person skilled in the art would understand the general formula with a ● or this reference to a cationic character to mean that the formula limits the nature of the chemical bonding between the triaryl phosphite and the halogens in any particular way or that it limits itself to a particular covalent form or ionic form or a particular equilibrium mixture, if any.
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those products. However, except for claims 18 and 8, where the reaction temperature for carrying out the process of the claims described therein is stated as “about
[119]The disclosure describes in some detail how the kinetically controlled product converts to a corresponding thermodynamically stable prior art form at varying rates, depending on, among other things, the nature of the triaryl phosphite, the halogen, the solvent and the solution temperature (see pp.
[120]The disclosure of the ‘007 patent includes 10 examples and only examples 1 and 2 provide corresponding 31P NMR data to identify the kinetically controlled product obtained
40See para. 10 of Affidavit of Dr. Baldwin
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in methylene chloride from the reaction of TPP with Br (example 1) and TPP with Cl (example 2). In both instances, it appears that a +3.7 ppm shift was observed.41/42 The 31P NMR for the thermodynamic product was described as
[121]As noted, claim 6 (an independent claim) expressly refers to four properties of the product from the reaction of TPP and Cl listed in Table 1. This includes a 31P NMR shift at +3.7 ppm (in CH2Cl2), IR data,
Claim 7 covers the kinetically controlled product of the reaction of TPP with Br in methylene chloride and only refers to the 31P NMR resonant signal at +3.7 ppm.44 Although these two claims are not at issue, as mentioned in Hoffmann (2005) and Halford, they can be useful in construing the claims at issue.
[122]Each claim is generally to be given a distinct and effective meaning. It is clear that claim 6 is more limited in scope than claim 1 because it covers only a subset of the compound, i.e. when Z = H and X = Cl. In my view, it is also evident that they have different essential elements given that these claims adopt a very different approach to
41See the note at the bottom of Table 1, p. 8 of the ‘007 patent. In the patent and in some of the prior art, such as the articles by Ramirez (F. Ramirez, A.J. Bigler & C.P. Smith, "Pentaphenoxyphosphorane" (1968) 90 J. Am. Chem. Soc. 3507
42Dr. McClelland testified that he was surprised that the 31P NMR shift was the same and felt this to be inconsistent (Examination of Dr. McClelland, May 27, 2008, p. 123, line 18 to p. 124, line 17), see also the affidavit of Dr. Chivers
43Once again Table 1, p. 8 of the patent refers to +22.7 ppm but, as noted above, this convention was changed and the new convention is adopted in these reasons.
44Because the unstable or transient nature of the claimed compound is already conveyed by the reference to the kinetically controlled product, which is defined as the fastest forming compound of the reaction, as well as the ● in the formulas included in various claims, there is no mention of the
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delineate the monopoly they cover. In claim 1, the general formula representing the halogenating compound is only particularized by reference to the kinetically controlled nature of the product and the main features of the reaction producing it (i.e. how it can be obtained). Conversely, claim 6 defines its monopoly by reference to the empirical formula of the compound and the properties that further distinguish it from the prior art dihalides having a similar empirical formula (Table 1, p. 8).
[123]Inasmuch as one could not construe claim 6 as including, as essential elements of the claim, the reaction of equivalent amounts of the materials described in claim 1 without rewriting the claim, one could not construe claim 1 as including as its essential elements the properties described in claim 6. If, by construing the claim, one were to limit or incorporate the elements of one independent claim into the elements of another independent claim, one would disregard the right of the inventors to adopt different ways of defining their monopoly and describing different aspects of an invention, which may or may not be too limited or too wide.45
[124]Having considered the specification as a whole, the Court can now address the main issues raised by the parties (see para. 110, above).
45See William L. Hayhurst, Q.C., “The Art of Claiming and Reading a Claim” in Gordon F. Henderson et al., eds., Patent Laws of Canada (Scarborough: Carswell, 1994) 177 (Hayhurst).
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[125]The Court cannot accept Apotex’s argument (summarized at paras.
[126]Among other things, the Court notes that the disclosure, at pp. 4 and 5, is quite specific as to the meaning of this term:
[H]erein, the terms “kinetic compound,” “kinetic complex,” “triaryl
The term kinetically controlled product is a term of art which, when used in reference to reactions yielding two (or more) products, refers to the product formed faster, regardless of its thermodynamic stability.
[127]There is evidence from Dr. McClelland that a skilled person would understand the meaning of “kinetically controlled product” without even consulting the disclosure preceding the claims.47 In any event, after discussing various criteria contained in the
46Having particularly reviewed and weighed the evidence singled out by Apotex in the footnotes of their memorandum and during their oral arguments, the Court notes, among other things, that not all of this evidence can be given weight or can even be considered for the purpose of construction. Certainly, explanations as to the subjective understanding of the inventor are not relevant. This is particularly so when the Court is not even satisfied that the quotes referred to (see exhibit
47Although this is a somewhat surprising statement, see
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disclosure, such as
This is criteria, but the basic term, “kinetic complex,” as used in the patent, indicates that it’s not stable in regards to what its
[128]This is perfectly in line with the Court’s understanding of the patent.
[129]Given the uncertainty as to the molecular structure, Apotex’s experts appear to focus on the need to better understand and identify the claimed compounds. For this purpose they use the properties described in Table 1 which in fact concern only one such compound. 49
The inventors did not wish to be tied down to a particular molecular structure and they used the formula with a dot (●) only to distinguish the claimed compounds from the thermodynamic compounds described in the prior art.50 It is evident that the information given in Table 1 and elsewhere in the disclosure will enable the posita to more easily identify and use the claimed compounds and processes. This does not however answer the question of law as to whether these elements are included in claim 1 as essential elements of the monopoly described therein.
48
49As did Apotex’s counsel in their
50See p. 5, lines 1 and 2: “are used synonymously and likewise are to be distinguished from those triaryl phosphite dihalides of the prior art”.
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[130]Also, Dr. McClelland clearly adds words to the disclosure when, in para. 15 of his affidavit
[t]he skilled chemist would understand from the patent that these criteria such as the 31P NMR chemical shift and the IR are to be employed to distinguish the novel kinetic product
[…]claimed in the Patent from the prior art, i.e. from the thermodynamic product […] and other previously unrecognized halogenating compounds with the same empirical formula.”[51]
[Emphasis added]
In fact, there is no mention in the specification that the inventors are trying to distinguish their claimed kinetic product from previously unrecognized intermediates made using Rydon. On the contrary, they clearly focus on distinguishing the kinetic products from the prior art dihalides, i.e. the thermodynamic form of the compounds disclosed in the prior art.52
[131]The idea that a posita would try to determine what novel compound was claimed, meaning according to Dr. McClelland, what differentiated the previously made and unrecognized compound in Rydon versus the claimed compound, is not acceptable. Even the Courts had not specified that previously made but unrecognized compounds could prevent Lilly from claiming novelty in the ‘007 patent until the decision of the House of Lords in Merrell Dow Pharmaceuticals Inc. and another v. HN Norton & Co. Ltd. and others, [1997] BMLR 201, [1996] RPC 76 (Merrell Dow Pharmaceuticals Inc.) in 1995 and in Canada until the decision of the Federal Court of Appeal in Abbott Laboratories v. Canada (Minister of Health), 2006 FCA 187, 350 N.R. 242 (Abbott (2006)).
51See also examination
52See ‘007 patent p. 2, line 25 to p. 3, line 14; p. 4, lines
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[132]The Court is not convinced that Apotex has established that Tseng and Michalski’s articles, particularly the information the authors give about 31P NMR shift of the substances discussed therein, were part of the common general knowledge available to the addressee of the patent at the date of issuance. That said, to avoid any collateral debate, the Court did in fact consider this information to determine if it would have any impact on the construction at issue and concluded that it would not. It is therefore not useful to elaborate further on this.
[133]Also in respect of common general knowledge, the Court agrees with Apotex that Dr. Gorenstein’s evidence, to the effect that it was
53His affidavit,
54It is clear from the evidence of Dr. McClelland that in fact a small difference of about 5% in the amount of covalent versus ionic species in the equilibrium represented by the weighted average given by the 31P NMR would explain the distinction between a +3.7 ppm reading and a +7 or +8 ppm reading.
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[134]Turning now to the second element in dispute, the Court must also reject Lilly’s argument that claim 1 is a Shell
[135]There is no mention in the patent that the previously unrecognized intermediate discussed in the disclosure was not a halogenating compound and should be distinguished in any way from the claimed compound on that basis.
[136]However, as mentioned earlier, it is clearly stated in the disclosure that both the thermodynamic products and the kinetically controlled products of the reactions described in the claims are halogenating compounds. The only discussion of a new or distinct use of the kinetically controlled compound is in contradistinction with the prior art triaryl phosphite dihalides and it concerns their ability to efficiently halogenate under mild conditions both enolic groups and their “utility” in preparing known
55Were it not for the (●) in the general formula and the reference to kinetically controlled products, these words, per se, could apply to the thermodynamic compounds or the
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[137]With respect to claim 17, the Court must determine whether or not the particular solvent (an aromatic or halogenated hydrocarbon) is an essential element of the claim. As noted earlier, the disclosure states that the particular inert organic solvent employed is not critical to the making of the claimed compounds so long as it is substantially anhydrous. On the other hand, it is undisputed that an anhydrous solvent is essential for the process to work and the only solvents in claim 17 are the preferred solvents described on p. 15 of the patent.
[138]As a dependent claim, it covers a particular embodiment of the invention described in claim 8, 9 or 10. The solvent is its only distinguishing feature. Here it is worth pointing out again that one of the main purposes of establishing what is essential in that claim is to determine what element cannot be varied in an allegedly infringing product. In other words, could one infringe claim 17 without using an aromatic or halogenated hydrocarbon. To ask the question is to answer it, which answer is obviously no.
[139]To say otherwise would mean that this claim is not distinct at all from claim 8, 9 or 10. As described in Whirlpool and Free World Trust, there are limits to how the Court may use the disclosure to construe the claims. The disclosure cannot be used to rewrite a claim. If an inventor has clearly limited his or her monopoly by making essential what is clearly not necessary to the proper working of the invention, he will suffer the consequences and will not be able to prevent a third party from using his invention for it will be able, with a simple variation, to avoid infringement.
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[140]To adopt Apotex’s position that the solvent in claim 17 is a
[141]It may well be that the claim is invalid for lack of novelty or inventiveness or that it is not patentably distinct but that is not to be decided at this stage.
4.4.The Lilly Process Patents
[142]It is not disputed that the applications for these three process patents were filed on the same day as the ‘007 patent.56
[143]The Lilly process patents relate to the use of the kinetically controlled product discussed in the ‘007 patent, to effect, either alone or in any combination, the following steps: cephalosporin sulfoxide reduction, enol chlorination and imino halide formation. The schematic depictions of these steps are described in para. 18 or Dr. Baldwin’s report
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56Although still included in the final version of the statement of defence, during the trial Apotex abandoned the argument it had initially raised in respect of the filing of improper divisional applications. It would certainly be good practice to amend pleadings before trial to ensure that they truly reflect each party’s position.
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[144]Optionally, included within some of the claims of each of the Lilly process patents, is a subsequent alcoholysis (converting the imino halide intermediate to an amine) and salt formation steps. That said, and given that the construction of the claims in the patents raises no substantial issue, the Court will only discuss the ‘536 patent in some detail, for this is the most comprehensive, and will briefly deal with the other two patents.
4.4.1.The ‘536 Patent
[145]The following are the claims being pursued at trial:
[146]The ‘536 patent is entitled “CEPHALOSPORIN REDUCTION PROCESS”. The specification starts by disclosing that “[c]ephalosporin sulfoxides are widely used intermediates in the synthesis of cephalosporin antibiotics.” Several examples are provided and relevant prior art, such as two patents by Dr. Douglas C. Spry, one by Dr. Stjepan Kukolja and a couple of patents by Dr. Robert R. Chauvette.57 It states in particular at p. 2 that the
57It appears that all these inventors were part of Lilly’s
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the
[147]At p. 3, it is noted that “[p]rior to this invention one preferred method for reducing cephalosporin sulfoxide was that of Murphy et al., U.S. Pat. No. 3,641,014.” It also deals with other reduction methods, disclosed by Drs. Lowell D. Hatfield, Kukolja and Spry in other patents. It continues by saying, at pp.
In view of the usefulness of cephalosporin sulfoxides in the synthesis of cephalosporin antibiotics, more efficient and more economical methods for sulfoxide reduction, have been the object of extensive research efforts. This invention provides a process for the reduction of cephalosporin sulfoxides. More particularly this invention is directed to a process for reducing cephalosporin sulfoxides using a recently discovered class of triaryl
Further, the invention is said to “also be directed to processes wherein the triaryl phosphite-
halogen complex is utilized to effect multiple chemical conversions of the cephalosporin
sulfoxide starting materials in one reaction mixture.”58
58Also referred to later in these reasons as “one pot”.
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[148]On p. 5, the disclosure says that the “products formed in the present process are known antibiotic compounds or intermediates thereto.”
[149]As in the ‘007 patent, at p. 9 one can read that:
The dot (●) in the general formula used to represent the kinetically controlled products employed in the present processes is used simply to designate that equivalent amounts of halogen and triaryl phosphite are combined chemically and in a way that can be distinguished from that in the thermodynamically stable derivatives that have been known in the art and which typically have been drawn without the dot [e.g. (PHO)3PCl2]. The exact molecular form of the triaryl
[150]The specification then discusses in detail the preparation of the kinetically controlled products, the solvents to be used, the reaction conditions, some properties distinguishing the kinetic product and the thermodynamic product when TPP and Cl are reacted in methylene chloride, including the data found in Table 1 of the patent which is identical to the one discussed earlier in respect of the ‘007 patent. It deals with temperatures and preferred conditions for the formation of the kinetically controlled products and their stabilization in a tertiary amine base as well as details of temperatures for carrying out the processes and chemical reactions claimed in the patent. At p. 17, it also mentions that, because the reduction process claimed produces Cl or Br as a
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such scavengers are discussed. Further details (such as quantities, etc.) as to how to use the
kinetic product to effect one or a combination of the reactions claimed are also given.
[151]On p. 35, there is a discussion of how “[t]he triaryl
combining the […]
[152]This is said to be of particular significance, given that the
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[153]After providing 96 examples, the
claims.
[154]For the purpose of considering what aspects of the construction of the claims are at issue here, it is sufficient to reproduce claims, 1, 9, 10 and 11.
[155]Claim 1:
A process for reducing a cephalosporin sulfoxide to the corresponding cephalosporin which comprises reacting said cephalosporin sulfoxide with a triaryl
wherein X is Cl or Br, and Z is hydrogen, halo,
and chlorine or bromine in an inert organic solvent,
in the presence of at least 1 equivalent of a halogen scavenger per equivalent of cephalosporin sulfoxide in a substantially anhydrous inert organic solvent at a temperature of about 30°C. or below;
provided that
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(a)about 1.0 to about 1.3 equivalents of the triarylphosphite- halogen complex per equivalent of cephalosporin sulfoxide are employed when the reduction of the sulfoxide group is the only reaction desired,
(b)about 2 to about 3 equivalents of the triarylphosphite- halogen complex per equivalent of cephalosporin sulfoxide are employed when the cephalosporin sulfoxide is a 3- hydroxy cephalosporin sulfoxide and it is desired to simultaneously reduce the sulfoxide and halogenate the 3- position, or the cephalosporin sulfoxide is a
(c)about 3 to about 5 equivalents of the triaryl phosphite- halogen complex per equivalent of cephalosporin sulfoxide are employed when the cephalosporin sulfoxide is a 3-
[156]There is no dispute as to the meaning of this claim and no issue as to whether or not certain elements described therein are essential. What is clear is that the claim requires the following elements: (i) cephalosporin sulfoxide; (ii) kinetic complex as defined by the formula and the reaction of equivalent amounts of the components described therein; (iii) at least one equivalent of halogen scavenger per equivalent of cephalosporin sulfoxide; (iv) an anhydrous inert organic solvent; (v) a temperature of 30º C or below; and, (vi) that certain quantities of kinetic complex be used depending on how many steps one wishes to perform.
59This is the one pot (one reaction) process where the kinetic complex is used to sequentially modify the groups at positions 1, 3, and 7 of the cephalosporin system (see Affidavit of Dr. Baldwin
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[157]Claim 4 is dependent on claims 1 and 3 and specifies the various substituents on the cephalosporin sulfoxide starting material involved in the reaction. Claim 5 is dependent on claims 1, 2 and 3 and limits the starting material to
[158]Claims 9, 10 and 11 read as follows:
9.The process of claim 1 wherein X is Br.
10.The process of claim 9 wherein Z is hydrogen.
11.The process of claims 1, 2 or 10 wherein X is Cl.
[159]There was an argument raised by Apotex as to how one could construe claim 11, given its reference to claim 10, which itself refers to claim 9, wherein X is Br, whereas according to claim 11, X is Cl. There is little doubt that a person skilled in the art with a mind willing to understand would simply disregard this apparent contradiction and would understand claim 11 to apply only to processes wherein X is Cl. The reference to claim 10 being understood to refer to the process where Z is hydrogen.
[160]Claim 14 is dependent on claims 1, 12, and 13 “wherein the tertiary amine base is pyridine.” Claim 15 is the process of claim 1 where the “solvent is an aromatic or halogenated hydrocarbon.” Claim 16 is dependent on claims 1 and 15 but further limits the solvent to methylene chloride. Claim 17 is dependent on claims 1 and 3 but limits the acyl group R3. Claim 18 covers a one step reduction process only using a TPP and Cl complex
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having the characteristic of +3.7 ppm signal (again, as per the new convention) and specific infrared data described in the claim. While claim 20 (dependent on claims 1 and 19) covers a two step process (reduction of sulfoxide/halogenation of the enol chlorination) using a TPP and Cl complex as a reagent, claim 21 (dependent on claims 1, 19 or 20) deals again with the two steps described above using the TPP and Cl complex but in the presence of a tertiary base. Claim 22 is another claim dependent on claims 1 and 19 which covers specific halogen scavengers.
[161]Claim 27 is dependent on claims 1, 19, 20, or 25, which deals with situations where X is Cl and it appears to be somewhat redundant in respect of claim 20, which already refers to the use of TPP and Cl complexes. Claim 30 is dependent on the process of claim 1 for specific cephalosporins with the use of pyridine as a tertiary amine base. Claim 31 is dependent on claims 1 and 19 for specific cephalosporins wherein the inert organic solvent is an aromatic or halogenated hydrocarbon. Claim 32 (dependent on claims 19, 20, or 31 and thus, claim 1) further limits the solvent to methylene chloride. Claim 33 is dependent on claims 19 or 20 and claim 1, with a specific acyl group. Claim 34,60 like claim 18, includes a description of the characteristics of the TPP and Cl complex to be used in the process such as infrared data and 31P NMR shift. It applies in the context of a two step process (or imino halide formation process).
60The parties did not present any arguments in respect of the construction of claims 18 and 34, particularly as to whether or not the specific characteristics described therein would be essential elements of those claims. The Court does not have to make a determination in that respect, given that the Court only needs to find that one of the claims is infringed for Lilly to succeed. For reasons that will be explained later on, the Court is satisfied that other claims were infringed, there is thus no need to discuss claims 18 and 34 any further.
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[162]As with the construction of claim 1 in the ‘007 patent, the Court does not find that the 31P NMR shift of +3.7 ppm and presumably the IR data described in Table 1 of the ‘536 patent are essential elements of any of the claims which simply refer to the kinetically controlled product of the reaction of a triaryl phosphite and Cl or Br in an inert organic solvent. This is particularly clear when one considers that claim 18 (dependent on claim 1) only has two distinguishing features – these two properties.
[163]From all of the above, the Court concludes that the invention is alternative or improved61 processes as opposed to new processes for transforming cephalosporin sulfoxides. It consists mainly in the use of the kinetically controlled product described therein as the reagent and in the fact that said reagent may be used to make up to three reactions or steps in one pot.
4.4.2.The ‘725 Patent
[164]The claims at issue here are claims 1 (the only independent claim in the patent), 16, 22 to 27 and 30. The patent is entitled “PROCESS FOR HALOGENATION OF β- LACTAM COMPOUNDS”. The ‘725 patent claims a process again requiring the use of the kinetically controlled product of the reaction of equivalent amounts of defined triaryl phosphite and Cl or Br as halogenating agents to convert the
61The expression “improved processes” is used here in the sense of s. 2 of the Patent Act where “invention” is defined. It is not referring to an “improvement” of a patented process dealt with at s. 32 of the Act.
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“[c]ombining the aforedescribed
[165]
[166]Claim 1 covers the process described previously using the kinetic complex made in a substantially anhydrous inert organic solvent at a temperature below about 30º C in a prescribed ratio depending if one desires to simply halogenate the enol of formula V (about 1.0 to about 1.3 equivalents of
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[167]Claim 16 is dependent on claim 15 which covers the process of claim 1 for preparing
[168]Claim 22 covers the process of claim 15 where X is Cl while claim 23 covers the same process but where Z is hydrogen and X can be either Cl or Br. Claims 24 and 25 depend on claim 15 but limit the type of solvents (aromatic or halogenated hydrocarbon and methylene chloride respectively). Claim 26 is dependent on claim 15 or 16 and specifies the acyl group.
[169]For reasons already given in respect of claims 18 and 34 of the ‘536 patent, the Court does not need to determine the essential elements of claim 30, given that it will not deal with the issue of infringement for such claim. Furthermore, as there are no other disagreements as to the construction of any of the other claims at issue, there is little more to say other than this patent also relates to an alternative or improved process (one or two steps in one pot) where the key feature is the use of the kinetically controlled product of the reaction described therein as reagent.
4.4.3.The ‘468 Patent
[170]This process patent is entitled “PROCESS FOR PREPARATION OF PENICILLIN AND CEPHALOSPORIN
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claims, i.e. claims 1 and 8. The claims at issue are dependent claims 2, 7 and
[171]The disclosure starts by making it clear that the process for “the cleavage of the
[172]Here again, and for reasons similar to those expressed in respect of the ‘007 patent, the Court does not consider the 31P NMR shift of the TPP and Cl complex (and the other properties described in Table 1) to be an essential element of claim 1 or its dependent claims that make no reference to such properties when describing the kinetic product to be used in the claimed processes. The only claims at issue that specifically referred to such properties are claim 8 and its dependent claims (one alternative in claims
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essential elements of those claims, there was no argument presented in that respect. There is no need to make a judicial determination of this issue.
[173]Claim 7 is dependent on claim 5 or 6 and includes the optional alcoholysis step discussed earlier. Claims
[174]Once again, it is quite clear that the invention is an alternative or improved process, whose key feature is the use of the triaryl
4.5.The Shionogi Patents
[175]Initially, Shionogi filed an application on February 9, 1976 to obtain a patent covering all the processes described therein, including the compounds obtained from some of these processes. This first application claimed a priority date based on the filing of the Japanese applications (February/March, 1975).
[176]During the patent examination process, the Patent Examiner noted that the application contained more than one invention. He identified four distinct groups of claims and requested amendments. Thereafter, four divisional applications were filed on October 19 and 22, 1979, resulting in the issuance of the four patents at issue. Thus, they all have an
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identical disclosure;62 only their claims vary as each now covers a separate portion of the overall synthetic pathway described in the specification which deals with the overall cyclization of the
4.5.1.Common Disclosure
[177]The disclosure starts with the following: “[t]his invention relates to the cyclization to form cephem ring, and the intermediates therefore. More specifically, it relates to a compound” of the formula:
where “the substituents can be combined to form an azetidinothiazoline bicyclic ring; and their enamine derivatives, and to the processes for the cyclization to form cephem ring
62It appears, however, that Dr. Hanessian failed to realize this even after having examined the patents (cross- examination of Dr. Hanessian, May 15, 2008, p. 76 line 25 to p. 84 line 13).
63Also Apotex did not raise any issue with respect to the sufficiency of the disclosure.
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through the said intermediates shown above by the reactions representable by the following
reaction scheme”:
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[178] At p. 2 it is noted that:
Many trials for synthesizing
Efforts to cyclize a type of compounds of the formula (2) or
(3)where Y is other than hydroxy or a substituted amino resulted in unsatisfactory results. However, when Y is a group which promotes enolization to form a double bond toward the
The
64It should be noted that this is likely a rough translation of the Japanese application.
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(e.g. recently developed
[179] On p. 17, line 23 to p. 18, line 14 of the disclosure, one finds that:
Halogenation of compounds representable by the formula (1) provided Y is other than amino took place smoothly in some cases and with difficulty in other cases. Main difficulty was the position where the halogen atoms was introduced. In other words, the priority of the desired position to other position in the molecule for halogenation was rather small, and it differs from a compound to other. Another factor which restrict Y to the scope given above is found not in the halogenation but in the following reactions, i.e. i) ease of deprotection to give a compound (I) where Y is hydroxy; and
ii)ability to cyclize giving the desired cephem compound (4). The compounds representable by formula (1) provided Y is other than hydroxy cyclized unefficiently or insignificantly. From these observations, Y is restricted to include a hydroxy and substituted amino, as is explained above.
The deprotection 2) of the compound (2) can be carried out by treating the compound (2) with aqueous acid for the
The decomposition of the azetidinothiazoline compound with an aqueous acid is a new generic reaction for obtaining the 4-
[Depicted on the said page.]
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[180] On p. 22 of the disclosure after discussing the reactions claimed in the ‘026 patent,65
one finds that:
[t]he final product is a
[181] And at p. 23, also concerning the ‘026 patent, that:
The halogenation 1), deprotection 2). and cyclization 3) can be carried out in one pot, namely without isolating intermediates, and even without removing each reaction solvents. Therefore, the reactions practically be done as simply as one step reaction (see Examples 2(2) and (3), and Examples 9 to 17 of Part III Cyclization).
[See also p. 33, lines
[182]The disclosure further indicates that the products of the claimed reactions (except for the
65Other parts of this common disclosure in effect concern only one of the patents: p. 8, lines
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[183]One also finds the following statement at p. 33: “this invention provides the higher yielding and simpler process from less expensive penicillins to give valuable key intermediates, the
4.5.2.The ‘547 Patent
[184]This patent, like the other three Shionogi patents, is entitled “CYCLIZATION TO FORM CEPHEM RING AND INTERMEDIATES THEREFORE” and the disclosure ends with eight claims. The claims being pursued at trial are claims 1 (independent claim), 3, 5 and
[185]Those claims are directed to processes66 for preparing hydroxylated compounds from exomethylene compounds (penicillin derived compound, including the Cooper compound), via oxidative cleavage of the unsaturated bond of the exomethylene group and to the resulting compounds.
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66Both the process and compound by process claims include several variants.
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[186]Claim 1 can be summarized as follows:
A process for preparing
By subjecting[67]
To oxidation followed by cleavage of the thus produced ozonide.
[187]The target compound of claim 1 is the compound claimed in claim 8. Claim 3 is dependent on claims 2 and 1 and relates to the specific use of ozone as the oxidizing material. Claim 5 is dependent on claims 1 and 4, and covers the reduction of the ozonide using specific reducing agents described therein. Claim 7 is dependent on claims 6 and 1 and covers the process of claim 1 in the presence of the specific solvents described therein.
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67Certificate of correction was issued to add the dotted line representing the thiazoline.
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4.5.3.The ‘924 Patent
[188]The claims at issue are
[189]Claim 1 can be simplified as follows. A process for preparing:
by reacting
(Enol form)(Keto form)
with an acylating agent to introduce the
[190]Claim 3 is dependent on claims 2 and 1 and covers the process where the selected compound is treated with the sulfonylating reagent mentioned therein. Claim 4 (dependent on claims 2 and 1) covers the process for preparing an acylated or sulfonylated azetidinothiazoline. Claim 8 claims a process of further reacting the acylated or sulfonylated
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compound of claim 1 with dialkylamine, including piperidino and morpholino. Claim 9 is dependent on claim 8 and deals with a specific substituted amino. Claim 12 (dependent on claims 10, 8 and 1) claims the same process wherein R’ is benzyl, X includes the carboxy protecting group benzyhydryloxy and the substituted amine is morpholino.
[191]Claim 27 covers a compound prepared by the process in claim 1 where specific functional groups are as defined in claim 1, whereas claim 31 covers a compound prepared by the process in claim 4 (which is dependent on claims 2 and 1) where specific functional groups are as defined in claim 4. Claim 37 covers a compound prepared by the process in claim 35 (which is dependent on claims 10, 8 and 1) wherein R’ is benzyl; Y” is a morpholino and, when prepared by the process of claim 12 (dependent on claims 10, 8 and 1), X is a
4.5.4.The ‘132 Patent
[192]The parties have agreed that the halogenation described in the ‘132 patent can generally be referred to as an allylic halogenation.
[193]Of the 76 claims in this patent, only claims 15, 22, 29, 34, 38 and 58 are at issue. Claims 15 and 22 are dependent on claim 1. Claim 15 specifies that the halogenating reagent is Cl, Br or iodine, whereas claim 22 is the process of claim 1 but for preparing specific compounds described therein.
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[194]Claim 29 is a compound claim dependent on independent claim 24, which generally describes the compounds made using the process claimed in the previous claims (the formula in claim 24 is the same formula as in claim 1) with the same substituents. Claim 34 is another dependent claim, and, like claim 29, it claims a compound with specific substituents described therein.
[195]Claim 38, which is dependent upon claim 36 (and claim 1), covers a specific process involving treating a compound shown in claim 36 with particular substituents with a halogenating reagent which includes Br. The said compound includes a thiazoline
[196]Finally, claim 58 covers the compound according to claim 56 prepared by the process of claim 38, where Y is a morpholino, Hal is a Br and X is one of three compounds listed therein, which includes benzhydryloxy.
[197]There was some dispute between the parties as to the meaning of “Hal” in the two independent claims, 1 and 24. Although this is not determinative in any way, given the specific wording of claims 29 and 58, which restrict the definition of “Hal” to a specific halogen other than fluorine, the issue is whether or not claims 1 and 24 would include fluorine as “Hal” in the formula described in the said claims. The disclosure is quite clear at p. 8 that “[h]alogen which may be represented by Hal in the formulae can be a chlorine, bromine, iodine, or fluorine, in which chlorine and bromine are most preferable.”
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[198]Having considered the specification as a whole, including the various claims which specify which Hal is covered, the Court concludes that fluorine is included in the halogen (Hal) described in the formulas in claims 1 and 24, although it is evident that this is not the preferred halogen and would be so understood by a posita.
4.5.5.The ‘026 Patent
[199]The ‘026 patent has five claims. Generally, the claims of this patent relate to the two steps described in the disclosure as the deprotection and cyclization. The claims being pursued at trial were claims 1, 2 and 4. Claim 1 covers a process for preparing a
[200]Claim 1 reads as follows:
1.A process for preparing a compound represented by the following formulas:
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68Figures A and B represent the same compound, which are in equilibrium between the enol and keto forms.
69Again, C and D represent the same compound or an equilibrium mixture of the two.
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Wherein A and B are, independently, hydrogen, substituted or unsubstituted alkanoyl, substituted or unsubstituted aralkanoyl or substituted or unsubstituted aroyl, which substituents are such as to not affect the cephem ring formation ability of the compound;
X is a hydroxy or
Hal is halogen; and R is hydrogen, alkoxycarbonyl,
1)treating an enamine of a compound represented by the formula:
wherein A, B, R, X and Hal are defined above and the broken line between A and R constitutes a combining together of A, B and R when R and B are hydrogens and A is a carboxylic acyl with a disbustituted amino containing from 2 to 20 carbon atoms, with the action of an aqueous acid.
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2) cyclizing a compound of the formula:
wherein, A and B are as defined above by treating a selected compound of above formula x with an acid, base, or solvent, if required in the presence of a catalizer to prepare selected compounds of formulas (A) or (B).
[201]The starting compound described therein (keto compound) can have a thiazoline ring present or not. In the absence of the thiazoline ring, the sulfur group is independently protected with a thiol substituent (R). In the disclosure, at p. 8, R is described as a thiol substituent which is “easily removable without adverse effect on the other part of the molecule prior or during cyclization reaction” (emphasis added). “It is needless to use the isolated starting material (3) for the reaction” (p. 20, lines
[202]As a first step, the enamine of the keto compound is treated with an aqueous acid, the result of which is the hydrolysis of the disubstituted enamine group (which is in effect the only reaction expressly described therein). Where a thiazoline ring is present, the experts are in agreement that the first step will also open the thiazoline ring leading to the formation of the compounds represented by C or D where R = H. When a thiazoline ring is not present, depending on the substituent used to independently protect the sulfur group, the first step may or may not result in the deprotection of the sulfur substituent. Where it does, the result is the same as above, that is compound C or D where R = H. Where it does not, R is unchanged.
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[203]The step described in para. 2 of claim 1 is the cyclization of the compound described therein (C or D where R=H). This takes place by reacting the said compound with either an acid, a base or a solvent (and optionally, a catalyst) to produce the key intermediate described in the disclosure, that is the
[204]Dr. Hanessian, who is the only expert for Apotex qualified to opine on how a posita would read this claim, simply describes this as reacting an
[205]Dr. McClelland, whom has no relevant experience with cephem compounds and cephalosporins, noted that Dr. Hanessian’s was the literal interpretation he had first adopted but he felt this was not accurate on closer examination of the substances. Dr. McClelland testified to the effect that this cyclization step, on his interpretation of the claim, would not take place when R is a group that cannot be removed through treatment with an aqueous acid. This would mean that for such compound the ending material of the claimed process would be the compounds represented as C or D.70
[206]Dr. Barrett, in the course of his
70This was confirmed by Dr. Barrett on
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disclosure contains examples where the R substituent in C or D does not equal H but can be removed effectively in a “one pot” or “two pot”71 operation through treatment with acid72 for the purpose of cyclization. This would, as shown in example 2. – III, deprotect the sulfur group (with R becoming H) and allow for cyclization to take place (see also p. 18, lines 7- 10, p. 19, line 28 to p. 21, line 19 of the disclosure).
[207]There is no evidence of any allowed R substituent that would not permit cyclization when one considers the “one pot” or “two pot” method or the fact that the removal of the thiol substituent can be done during cyclization73 as a preliminary reaction that will enable the R substituent to become H and thus arriving at compounds A or B.
[208]Based on the evidentiary record before me and on my review of the patent, I conclude that a posita would understand that in all cases the processes claimed in the ‘026 patent can lead to compounds A or B.
[209]In any event, this particular issue of whether or not the product of the reaction will be compounds A or B need only be determined in relation to Apotex’s argument that the
71Ibid., p. 61, line 9 to p. 62, line 10.
72It is clear that the acids used to cyclicize include the Lewis acids which will remove R substituents other than H described in the disclosure before proceeding to cyclicize the compounds.
73Inasmuch as para. 1 does not expressly refer to the opening of the thiazoline ring when present by the aqueous acid used to treat the enamine, there was no need to refer to the removal of any remaining thiol substituent other than H prior to cyclization through the use of appropriate acid. In my view, both would be understood by the posita, especially given the explicit reference to same in the disclosure.
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Shionogi patents lack subject matter and constitute improper divisional,74 which for the reasons described below, are rejected.
[210]Like the ‘132 patent, the “Hal” is halogen in claim 1 and would be understood by a person skilled in the art to include fluorine because of the definition on p. 8 of the disclosure. Although again it would be readily appreciated by such a person that this is not the preferred halogen to be used (leaving group in the reaction).
5.Infringement
5.1.Burden
[211]It is not disputed that the Plaintiff must establish on a balance of probabilities that the processes used by Apotex’s suppliers included all of the essential elements of one or more claims of the patents at issue.
5.2.Statutory and Common Law Presumptions
[212]Lilly argues that in this particular case, they have the benefit of two presumptions. First, the presumption of infringement arising under s. 55.1 of the Patent Act, which reads as follows:
55.1 In an action for |
55.1 Dans une action en |
infringement of a patent granted |
contrefaçon d’un brevet accordé |
for a process for obtaining a |
pour un procédé relatif à un |
new product, any product that is |
nouveau produit, tout produit |
the same as the new product |
qui est identique au nouveau |
74See correspondence from counsel for Lilly dated November 18, 2008 and its reply from counsel for Apotex dated November 25, 2008; argument in chief of counsel for Apotex, October 31, 2008, p. 161, line
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shall, in the absence of proof to the contrary, be considered to have been produced by the patented process.
[Emphasis added.]
produit est, en l’absence de preuve contraire, réputé avoir été produit par le procédé breveté.
[213]According to Lilly, the word “product” (« produit ») was substituted with the word “substance” (same in French) as a result of an amendment in 199375 in order to give effect to para. 1709(11)(a) of the North American Free Trade Agreement Between the Government of Canada, the Government of Mexico and the Government of the United States, 17 December 1992, Can.T.S. 1994 No. 2, 32 I.L.M 289 (NAFTA). Lilly says that the Courts have yet to interpret the meaning of “new product” and it submits that it is a product that has not been sold on the market before. To that end, it refers to various dictionary definitions of the word “product.” According to Lilly, cefaclor, which was first sold in Canada in 1980,76 was thus not even a product when the Lilly and Shionogi patent applications were filed and they relate to processes for the production of such new products.
[214]The Court cannot accept this argument. As noted by Apotex, the words “product” and “substance” were used interchangeably by the Supreme Court of Canada in (Harvard College v. Canada (Commissioner of Patents), 2002 SCC 76, [2002] 4 S.C.R. 45 (Harvard College (2002)). The word “product” must be given the same meaning as it received throughout the Patent Act. It is used in the definition of “invention.”
75According to s. 78.2 of the Patent Act, it appears that the version of its s. 55.1 amended by s. 193 of the North American Free Trade Agreement Implementation Act, S.C. 1993, c. 44 is applicable to patents issued before 1989.
76See Facts agreed to by the parties, LRTA # 44(e).
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[215]In my view, by changing “substance” to “product”, the legislator was simply ensuring that the Canadian provision would be applied in accordance with its obligations pursuant to NAFTA. “Substance” appears to be a more restrictive expression that could, for example, hardly apply to a new hairdryer, whereas the presumption is meant to apply to any new product.
[216]None of the patents at issue are processes to make cefaclor per se. Thus, the Court could only apply the presumption to the making of the new compounds covered in the Shionogi patents or to the products claimed in the ‘007 patent.
[217]As will be discussed, there is no need to apply this presumption to determine the merits of the infringement allegations in respect of the Kyong Bo process and the Shionogi patents. With respect to the ‘007 patent, for reasons given below under anticipation, the Court finds that these compounds are not new products.
[218]Lilly also asked the Court to apply the common law presumption discussed in
at common law the rule has always been that when the subject matter of an allegation lies particularly within the knowledge of one of the parties that party must prove it, whether it be an affirmative or negative character.
[para. 23]
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[219]In that case, there was evidence that Apotex had written to its supplier, asking it not to voluntarily give information to the plaintiff. Also, it had manoeuvred to ensure that all process information would be sent to its counsel directly with no copy being sent to Apotex.
[220]According to Lilly, Lupin was actually willing to cooperate in this case and Apotex knew this, but did not disclose it to the plaintiffs or to the Court. Moreover, given the special contractual undertaking of Lupin to assist Apotex (see
[221]Had I been satisfied that Lilly had taken reasonable steps to obtain this information, for example by pursuing a motion to obtain further information about the process actually used once
77See para. 239 of Apotex's memorandum on infringement; the Court does not agree that SmithKline Beecham Pharma Inc. v. Apotex Inc. (2001), 267 N.R. 101, 10 C.P.R. (4th) 338 (F.C.A.), at para. 33 or Pfizer Canada Inc. v. Apotex Inc., 2003 FC 1428, 245 F.T.R. 243, at para. 15, stand for this proposition.
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[222]Apotex’s failure to advise Lilly and the Court that Lupin was willing to disclose the details of its process subject to proper protection of the confidentiality of the information contained in the said documentation will be discussed further when assessing costs and the admissibility of certain evidence produced to defend the allegation of infringement.
[223]Needless to say, even if Lilly cannot benefit from this common law presumption, it can still rely on inferences that can reasonably be made based on the evidence produced to establish certain facts. This is perfectly in line with the statement made in Whirlpool.78
5.3.Lupin Process
[224]Apotex received cefaclor made by Lupin from about May 23, 1997 until at least October, 1998. Although the exact amount of material received from that supplier will be ascertained through the reference, it appears that Apotex imported at least 8,650kg and maybe as much as 10,000kg of cefaclor made by Lupin.
[225]Apotex admitted79 that in respect of at least the receiving lot numbers described in the Request to admit, and except for the quantities used for testing and other regulatory purposes pursuant to subs. 55.2(1) of the Patent Act, the bulk cefaclor imported from Lupin was used in the manufacture of its
[226]In light of the Confidentiality Order issued in this matter, the Court will give few details of the processes used by Apotex’s suppliers.
78See Lilly memorandum, para. 102.
79Request to admit LRTA # 115, Trial Record, Tab 24, p. 34.
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[227]In his report
Process “A” – Process described in Lupin’s filing with Health Canada. It is also described in the material filed by Lupin in 1996 with the Federal Drug Administration (FDA) (U.S. health authority). It is a process whereby cefaclor is synthesized from Pen V acid. The manufacturing process described in letters dated June 21, 1997 and August, 20, 1997
Process “B” – A process described in an update filed by Lupin with the FDA in November, 1997. It is a process whereby cefaclor is synthesized from Pen [omitted]. It appears from
Process “C” – Another process described in a further update filed by Lupin with the FDA in 2000, which, according to Dr. Barrett uses both the Shionogi and the Lilly
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processes (a mixture). However, there is no indication that it was used at any time before the expiration of all the patents at issue.
Process “D” – Another process starting from Pen [omitted].
Whereas all those reactions were described simply as step V of Process “A” – they are now shown as step V(a) and step V(b). [Omitted.]
It is described in a document allegedly attached to various versions of a letter dated October 27, 1997 from Mr. Patil to Mr. Singh which was never filed by Mr. Singh with Health Canada. This letter and other documents similar to it were all produced under reserve of Lilly’s objection (voir dire). According to Mr. Satpute, this process (or at least the new process used in 1998) was only used to produce one very large order sometime early in 1998.
Process “E” – A process described in the appendix to the contract for the sale and manufacture of cefaclor between Apotex and Lupin, dated March 15, 1998 (TX- 1656). According to this schematic outline, it starts from Pen [omitted].
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[228]For reasons that follow, the Court has come to the conclusion that Lilly has established on a balance of probabilities that the cefaclor received by Apotex between May 23, 1997 and June 3, 199880 infringes the following claims in the Lilly patents:
1.The ‘007 patent: claims 1, 4,
2.The ‘536 patent: claims 1, 4,81 11, 14 and 16.
3.The ‘728 patent: claims 1, 15, 16, 20, and
4.The ‘468 patent: claims 1, 2 and 7.
[229]However, the plaintiffs have not met their burden in respect of the cefaclor shipped to Apotex as of June 4, 1998.
[230]In respect of the period ending on June 3, 1998, the Court is satisfied that the plaintiffs have established that Lupin was using Process “A”, described above. Having carefully examined the arguments and the evidence referred to in Apotex’s memorandum on infringement (part V) and considering its construction of the claims at issue, the Court is convinced (as was, apparently, Apotex’s
80See
81The Court disregarded the evidence based on the Ladas & Parry letter (June 12, 1996) which was not entered in evidence. Thus, I have decided not to make any conclusions with respect to claim 6 which deals with specific halogen scavengers having a
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and Cl in dichloromethane (methylene chloride)) to perform the reactions described in the Lupin process.82
[231]Although
[232]With respect to Process “B” and Process “C”, there is insufficient evidence for the Court to conclude that either was used to produce the cefaclor shipped to Apotex during the period between May 23, 1997 and October, 1998. The arguments presented by Lilly in that respect are purely speculative.
82An experiment by Dr. Modro also confirms that the thermodynamic product could not perform these reactions.
83See also Dr. Miller’s report
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[233]This conclusion remains true whether or not the Court accepts or rejects all or any of the evidence presented under reserve of Lilly’s objections (voir dire).
[234]It is clear that as of March 15, 1998, Lupin had agreed to change the process it had used until then to make cefaclor for Apotex. Apotex’s position has always been that it presumed that Process “E” was used at least after that date.
[235]I do not intend to refer to all the circumstances referred to in the parties’ submissions. I will simply mention some salient points of the background relevant to this debate (voir dire).
[236]On March 10, 2000, Lilly obtained an Order84 from Justice James Hugessen enjoining Apotex to request from its suppliers and the Minister of Health copies of its suppliers’ DMFs in support of its NDS for
[237]Shortly thereafter, Lilly received an amended affidavit of documents from Apotex which included the 1998 agreement between Apotex and Lupin which expressly stipulates
84Lilly’s motion included a request for the production of a better and further affidavit including documentation regarding the processes by which Apotex’s cefaclor was manufactured but it appears that this request was abandoned upon Apotex’s undertaking to look for whatever additional documentation within its power, possession and control fell in certain categories described in the Order.
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that the said supplier would assist Apotex in providing “information and evidence necessary to show that it has used the process of appendix A”.
[238]On May 4, 2000, Lilly filed another motion seeking an order compelling the Minister of Health to produce all portions of Apotex’s NDS relating to
[239]Upon confirmation that no response had been obtained from Lupin, on July 5, 2000, Justice Hugessen issued an order enjoining the Minister to produce the materials sought by Lilly. As a result, Lilly became aware of the details of Process “A” and of the fact that no update had been filed by Lupin until 1999 (Process “B”).
[240]Thereafter, Lilly asked at each new session85 of its examination for discovery whether Apotex had received any reply to its letter to Lupin and whether it had any information or documentation regarding the process they used. Dr. Sherman continued to say that he had received no response from Lupin and essentially that he assumed that they were using the contract process (Process “E”).
85At one such session, Ivor Hughes was present.
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[241]In 2006 and thereafter, Apotex indicated in their trial chart(s) that they expected to present witnesses from Lupin. Lilly raised no particular issue or objection in that respect. However, it appears that at some stage, it took legal steps in the United States to obtain about the Lupin process from Lupin’s American subsidiary. As a result, and among other things, it obtained copy of a letter from Lupin Laboratories to Ivor Hughes dated July 4, 2000 which indicates that Lupin knew of Lilly’s motion which was set to be heard on July 5, 200086 and understood that Lilly was seeking information concerning the process they used to make cefaclor. It also appears that Lupin thought that Apotex was already in possession of the closed portion of their DMF as well as the information exchanged in 1997 about the manufacture of the
[242]It is in this context that Lilly raised their objections in respect of the admissibility of any viva voce evidence and documentary evidence presented to establish what process was actually used by Lupin after March, 1998 or failed attempts by Lupin to update their Health Canada DMF. Essentially, Lilly relies on paras. 232 and 248 of the Federal Courts Rules as well as on the evidentiary principle of spoliation because the destruction of Lupin’s
86In fact, Lupin’s counsel was present at the hearing on July 5, 2000.
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manufacturing records87 and of the files of Mr. Patil which were lost in a flood in 2005.88
[243]As mentioned, the parties filed extensive submissions in respect of these objections. When the Court pointed out that Apotex could seek leave pursuant to Rule 232 to file the
documents that according to Lilly were under its possession and control, Apotex indicated that it felt no need to do so.89
[244]On the other hand, the Court offered90 to Lilly to suspend the trial so that steps could be taken to obtain evidence in India if necessary. According to Lilly, this would be useless given that the best evidence – the documentation on the manufacturing of individual batches
– were destroyed. Both parties thus remain entrenched in their initial position. It is in that context that leave was granted to file additional expert evidence from Dr. Barrett
[245]The absence of evidence establishing that either Process “D” or Process “E” infringes on any of the patents at issue means that prior to gaining any knowledge of the July 4 letter or of the evidence presented under reserve, Lilly’s only argument, with respect to the period after the signing of the March, 1998 contract, was that Process “E” was too inefficient to be commercially viable. Also, it appears that Lilly thought that the Health
87It appears that Lupin did not keep its manufacturing data for more than two years after the production of the material.
88Some papers were recovered and an attempt was made to reconstruct part of those files.
89Despite the Court urging that they file evidence to explain the
90Although it is clear that the manufacturing plant documentation was destroyed, it has not been established to my satisfaction that there was no relevant documents in the files of the R&D department.
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Canada filing would provide sufficient evidence in this case given that there were, according to them, only two commercially viable processes (the Shionogi and the Lilly patented processes) and Lupin had filed no updates with Health Canada. However, prior to trial, Lilly had not served on Apotex any expert report supporting this position including the inefficiency of Process “E”.91
[246]After learning of Process “D” Lilly’s position remained that Process “E” and Process “D” were inefficient and not commercially viable and that there was no time to implement either processes in the timeframe discussed in
[247]Thus, in my opinion, the main difference for Lilly between the case it thought it had to meet before trial and after it learned of the July 4, 2000 letter and the evidence taken under reserve is that, with respect to Process “D”, which Dr. Barrett described as different from Process “E” while Dr. Hanessian described it simply as an improvement over Process “E”,92 Apotex could now counter Lilly’s allegations of inefficiencies by referring to Lilly’s own NDS documentation submitted to Health Canada on June 23, 1978 to obtain its NOC for Ceclor®
[248]Also, because of Apotex’s failure to disclose the July 4, 2000 letter, Lilly was deprived of an opportunity to change its tactics and to use whatever means were available to obtain or verify what process Lupin effectively used after March, 1998. In that respect,
91For this reason, the Court did not consider the portions of
92Two reagents for
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however, the Court notes that given that it had failed to do so after learning of the contract and the undertaking in it, this remains only a possibility rather than a probability. Also, there is insufficient evidence before me to conclude that the manufacturing documentation, which Mr. Satpute could not find in 2008, would have all been available at that time. Evidently, the files of Mr. Patil should have remained intact until 2005.
[249]Had Lilly lost their action because of this, I would have had no hesitation in awarding them all their costs on a
[250]In effect, having carefully examined the relevant extracts from the transcripts of the examination for discovery, the Court cannot conclude that Rule 248 applies here.
[251]In any event, even if the Court were to apply this rule, it would not mean that all the
viva voce evidence of Mr. Singh, Mr. Satpute and Mr. Patil would become inadmissible. It could only affect the evidence relating to the details of the process used after March 15, 1998 that differs from Process “E”.
[252]In my view, it could not be used to exclude the evidence of Mr. Satpute that sometime in early in 1998 Lupin took the necessary steps to adopt a process different from Process “A” and Process “B”93 to fulfill a very large order of the magnitude provided for in
93Given that it started from Pen V.
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the March 15, 1998 contract of which he had no knowledge. It would not exclude his evidence that such process, although not as efficient as Process “A”, still produced a yield than enabled them to fulfill this order. When the Court heard and saw this witness, it found his testimony very credible. The transcript of this evidence was read several times and this only confirmed my first impression. This evidence is, in itself, sufficient to convince me that the shipments made as of June 4, 1998, were not manufactured using Process “A” or Process “B”. There is no need for the Court to determine which process (Process “D” or Process “E”) was used.
[253]Mr. Patil and Mr. Singh had no personal knowledge of the process actually used by Lupin and even if the documentary evidence they produced was admissible, it would have no probative value in respect of the process used by Lupin during that period. In effect, there is a contradiction between some of the correspondence, particularly the October 27, 1997 letter and Mr. Satpute’s testimony, which I prefer. None of this evidence can have, or would have had, an impact on my findings.
[254]In the circumstances, there is no need to discuss further the application of paras. 232 and 248 of the Rules.
[255]Finally, with respect to spoliation and the residual discretion of the Court in such matters, the law is well summarized by the Alberta Court of Appeal in McDougall v. Black & Decker Canada Inc., 2008 ABCA 353, 62 C.P.C. (6th) 293. As noted at para. 18 of the said decision:
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Spoliation in law does not occur merely because evidence has been destroyed. Rather, it occurs where a party has intentionally destroyed evidence relevant to ongoing or contemplated litigation in circumstances where a reasonable inference can be drawn that the evidence was destroyed to affect the litigation. Once this is demonstrated, a presumption arises that the evidence would have been unfavourable to the party destroying it. This presumption is rebuttable by other evidence through which the alleged spoliator proves that his actions, although intentional, were not aimed at affecting the litigation, or through which the party either proves his case or repels the case against him.
[256]First, it is evident that spoliation could not apply to the destruction of the files of Mr. Patil which was clearly an act of God. With respect to the manufacturing data that was destroyed by Lupin (not Apotex), the Court is not persuaded that in the particular circumstances of this case a reasonable inference can be drawn that the destruction was meant to affect the litigation.94 I have not come to this conclusion lightly for the Court is obviously alive and alert to any tactic meant to revive the old “trial by ambush” concept. However, in this case I truly do not believe that it would be in the best interests of justice to totally put aside the viva voce evidence of Mr. Satpute. I would thus exercise any residual discretion I may have to admit this portion of the evidence if it were necessary.
5.4.Kyong Bo Process
[257]Apotex ordered and received cefaclor from Kyong Bo from at least November, 1996 to at least September, 1997. Once again, there is some discrepancies as to the exact quantity involved, this will be dealt with in the second phase of the trial (reference).
94Given the exculpatory nature of the schematic outline attached to the July 4, 2000 letter, Lilly proposed an explanation that the Court cannot accept for it is purely speculative.
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[258]Also, Apotex admitted95 at least in respect of the receiving lot numbers described in the Request to admit, and except for the quantities used for testing and other regulatory purposes, pursuant to subs. 55.2(1) of the Patent Act, the bulk cefaclor imported from Kyong Bo was used by Apotex for the manufacture for its
[259]Lilly presented expert evidence from Dr. Barrett
[260]Although there is no direct evidence from a Kyong Bo representative that it indeed used the processes described in Health Canada’s file to produce the material shipped to Apotex at the relevant time, the Court is satisfied that in this case, it can reasonably infer that it was so used.97 From the correspondence between Ms. Fouillade and Kyong Bo, it is clear that Kyong Bo used the information and the processes it learned from Shionogi to produce the cefaclor sold to Apotex. In fact, this is why they initially alleged that they had been authorized by Shionogi to use the patented processes. It is also the basis of a defence raised by Apotex, which obviously implies that the processes covered by Shionogi patents were used.
95Request to admit LRTA # 84, Trial Record, Tab 24, p. 33.
96
97In addition to the presumption of good faith, Kyong Bo was legally obliged to disclose the process it used to produce the cefaclor sold in Canada and had to update its file in that respect whenever changes were to be made.
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[261]Having carefully considered the evidence, I am satisfied that the cefaclor made by Kyong Bo for use by Apotex in Canada infringes all the claims in issue in the ‘547 patent. I have come to the same conclusion with respect to claims
[262]In fact, Apotex only raised two particular defences in respect of Lilly’s allegation of infringement: the first one is based on the existence of a licence from Shionogi, implicit or express, and the second on the fact that Canadian law does not provide for infringement by importation and use in Canada and no infringement acts took place in Canada.
5.4.1.Existence of a Licence
[263]With respect to the argument that Kyong Bo was licensed, very scant evidence was produced by Apotex. In fact, the Court expressed its surprise during the final argument that Apotex’s counsel insisted on pursuing this issue.
[264]Apotex relies on the testimony of Dr. Sherman, who said that he was informed by Ms. Fouillade that Kyong Bo’s position was that it had the right to use the processes covered
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by the Shionogi patents because of a licence obtained from Shionogi itself.98 In his
testimony, Dr. Sherman also noted that he had instructed Ms. Fouillade to obtain
clarification and appropriate evidence as to the alleged arrangement.
[265]The only evidence produced as to how Ms. Fouillade obtained this information, i.e. that Kyong Bo would have been authorized by Shionogi to use their process, is a letter from Kyong Bo Senior Managing Director,
We do not have a kind of contract for the technology transfer. I think, a kind of sales contract was made by Mitsubishi with Shionogi in 1992. As a matter of fact, we do not have an authorized document to use specifically CP 1,095,026, CP 1,132,547, CP 1,136,132 and CP 1,144,924.
[266]Shortly after this exchange, Apotex stopped buying cefaclor from Kyong Bo.99
[267]Furthermore, it is an agreed fact that100 “Shionogi did not license the Shionogi patents to any
98Lilly objected to this evidence on the basis that it constitutes double hearsay and, although Ms. Fouillade is deceased, there is no evidence that a person with personal knowledge from Kyong Bo, such as
99Although it would not be sufficient in law to prove that Apotex believed that Kyong Bo had a licence, the Court is not satisfied that Apotex has even established that much.
100See Facts agreed to by the parties, ARTA # 295. All the parties confirmed that these agreed facts applied to both the main action and the counterclaim.
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[268]Without ever explaining or referring to the above admission, Apotex argued that the evidence of Dr. Sherman in
[269]This is one of many arguments that the Court would have expected counsel to put aside at least in their final presentation of the case. Pursuing arguments that have little or no chance of success unduly lengthens the trial process, places an undue burden on the Court and increases costs for all concerned. More will be said in that respect later on.
5.5.Importation
[270]Apotex’s main defence101 in respect of the allegations of infringement of the Shionogi patents102 is that the importation and use of products in Canada which one made abroad by a process patented in Canada cannot constitute infringement under the Canadian
Patent Act. Apotex recognizes that there is Canadian jurisprudence applying the English
101More than 30 pages were devoted to this argument in Apotex’s memorandum and it was the one argument on which Apotex’s counsel spent the most time in its oral argument.
102It also applies to the Lilly patents but as discussed in respect of those patents, Apotex also vigorously contested that its supplier used the patented processes abroad.
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doctrine of “infringement by importation”, but it submits that those cases do not bind the Court and should not be followed.
[271]Not surprisingly, Lilly relies on this Canadian case law, which will be discussed later on, and states that infringement by importation and use in Canada has recently been reinforced by the Supreme Court of Canada’s decision in Monsanto Canada Inc., and that the
[272]The defendant advances two primary arguments as to why the existing case law on “infringement by importation” should be disregarded. First, the Court should conclude that Canadian courts were incorrect in following English precedents such as Elmslie v. Boursier
(1869), [L R] 9 Eq 217 (Elmslie), Von Heyden v. Neustadt (1880), 14 Ch D 230 (C.A.) (Von Heyden), Saccharin Corporation Ltd v.
103The first English case where a Court found that a defendant had infringed an English patent covering a process for making an intermediate compound
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[273]Instead, argues Apotex, given that our Patent Act was modeled on U.S. patent legislation, our Courts should have followed the American case law, which concluded that, in light of the territorial application of patent legislation,104 an American process patent could not be infringed unless the process was actually used in the U.S. To adopt this approach would also be more in line with the Canadian view of the exclusive rights or the monopoly defined by the claims of a process patent, which do not cover the product made by such process unless so claimed.
[274]Second, Apotex submits that, should the Court feel compelled to follow the general principles set out in the Canadian case law, it should at least restrict their application to cases that meet the statutory limitations now applicable in the United Kingdom Patents Act 1977 (U.K.), 1977, c. 37, para. 60(1)(c), and the European Economic Community (EEC) as a result of the European Patent Convention105 (EPC) and in the United States as a result of legislation adopted in 1988.106
[275]This would mean, according to Apotex, that importation and use or sale of cefaclor in Canada could only amount to infringement if cefaclor was a product “obtained directly” by the process covered by the Canadian patents and used overseas or if the chemical compounds made by said patented processes (in this case, the
104To this effect, Apotex cites Brown v. Duchesme, 60 U.S. 183, 15 L. Ed. 595 (1856); Dowagiac Mfg. Co. v. Minnesota Moline Plow Co., 235 U.S. 641, 35 S. Ct. 221 (1915); Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 92 S. Ct. 1700 (1972); and, Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 127 S. Ct. 1746 (2007).
1055 October 1973, subs. 64(2).
106Process Patent Amendment Act, 35 U.S.C. § 271(g).
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by Apotex’s suppliers to make cefaclor and these compounds had not become a trivial or
[276]To come to such conclusion, Apotex recognizes that it must also convince the Court that Justice Snider in Pfizer misread Monsanto Canada Inc.107 and that the “creative compromise” she articulated at para. 90 of her decision was “inadequate and not based upon a sound legal foundation”.108
[277]Given the importance of this issue, and the fact that many of Apotex’s arguments have not been recently canvassed by this Court,109 I will address the issue of infringement by importation in more detail than may normally be required. Specifically, I will address how existing English and Canadian case law dispose of Apotex’s arguments.
[278]While there appears to be only a dozen or so Canadian cases dealing with this issue, the concept of infringement of a process patent (or process claims) by importation and use or sale in Canada of a product manufactured abroad was first described as a settled question of law more than a century ago.
107See footnote 11 of Apotex’s memorandum on infringement.
108See para. 104 and following of Apotex’s memorandum on infringement. The Court notes that Apotex did try to intervene in the appeal of Justice Snider’s decision, however, their motion was dismissed and the appeal was ultimately abandoned.
109Apotex suggests that this has in fact never occurred and that there is a need for a thorough analysis.
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[279]In Auer Incandescent Light Manufacturing Co. v. O'Brien (1897), 5 Ex.C.R. 243 (Auer), the Exchequer Court of Canada, granting an injunction to prevent further infringement of a process patent, noted, at para. 26:
Before leaving this question of infringement I ought, perhaps, to refer to the contention made on behalf of the defendant that under any circumstances he would at least be entitled to import for use or sale illuminant appliances made in a foreign country in accordance with the process protected by the plaintiffs' patent. With that view, however, I cannot agree. I think that the law is well settled to the contrary, and I need only refer for this purpose to the cases cited by Mr. Hellmuth, viz.: Elmslie v. Boursier; Wright v. Hitchcock; Von Heyden
v.Neustadt. [Footnotes omitted.]
[280]The English cases cited above were again applied two years later by the Divisional Court of the Chancery Division of the Ontario High Court of Justice in Toronto Auer Light Company Limited v. Colling (1899), 31 O.R. 18, [1899] O.J. No. 65 (QL) (Toronto Auer Light). In that case, the Court was also dealing with a patent on a method for making incandescent devices (illuminant appliance). It is relevant here to review what passages of
Von Heyden Justice Boyd, speaking for the Court, found to be of particular interest:
In Von Heyden v. Neustadt (1880), 14 Ch. D. 230, James, L.J., said (adopting the conclusion arrived at in Elmslie v. Boursier (1869), L.R. 9 Eq. 217): “That the sole right ... to 'make, use ... and vend the invention' ... includes a monopoly of the sale ... of products made according to the patented process ... A person who ... sells the product here, is surely indirectly making, using, and putting in practice the patented invention. Any other construction,” he adds, “would render ...
the whole privilege ... futile,” p. 233.
[para. 31.]
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[281]Given that Apotex says that this reasoning, if applied in Canada, raises an issue of extraterritorial application of our Patent Act, it is also worth mentioning that this very same issue was considered in England more than a hundred years ago. In Badische Anilin und Soda Fabrik v. Henry Johnson & Co. and Basle Chemical Works, Bindschedler, [1897] 2 Ch. 322 , a patent owner had obtained a declaration of infringement against a trader in England who had ordered goods made in Switzerland using a process protected by an English patent, but which were delivered to the Swiss post office (the Buyer) by whom they were then imported into England. The defendant appealed and the English Court of Appeal reversed the decision. The following passage from p. 342 of Lord Justice Lindley’s brief reasons clearly shows that the Court was alert and alive to the argument now raised by Apotex:
[…]the defendant Bindschedler had done nothing which amounts to making, using, exercising, or vending the invention of the plaintiffs in this country. In other words, Bindschedler has not infringed the plaintiffs’ patent. The patent is confined to this country, and does not extend to Basle, where all the acts done by Bindschedler were committed. It is true that […] no one has a right to use [the goods so made] here. But what the defendants did in Basle was lawful and not unlawful; lawful by the law of Switzerland and not unlawful by the law of England, which has no application there.
[282]But even with territoriality clearly in mind, Lord Justice Smith, with whom Lord Justice Lindley concurred, made it clear, at p. 344, that:
[…]if Bindschedler by himself or his agent had brought the
infringing article into this country, or had it received her[e], he would have been liable, for he would then be, in this country, by himself or his agent, using, exercising or vending
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the infringing article. The cases of Elmslie v. Boursier and Von Heyden v. Neustadt shew this to be so.
[Footnotes omitted.]
This decision was affirmed by the House of Lords at [1898] AC 200; (see to the same effect Badische Anilin und Soda Fabrik v. Hickson, [1905] 2 Ch. 495, affirmed, [1906] AC 419.)
110
[283]As the Saccharin case is at the center of the debate, it is of interest to mention the decision in Saccharin Corporation v. Reitmeyer & Co., [1900] 2 Ch. 659, (1900) 17 R.P.C. 606. There, the patent owner, who had successfully obtained a declaration of infringement against the importer in the first Saccharin case, was seeking a similar declaration against the English commission merchant who had originally bought the saccharin in Germany and sold it to the English importer. The Court refused to do so, on the basis that the principles laid down in Elmslie and Von Heyden and applied in Saccharin could not be extended to a case where the defendant had neither imported into nor sold in England the product made abroad using the patented process. Justice
[284]It could not be clearer that English Courts felt bound by the very principle Apotex seeks to now rely upon. Contrary to Apotex’s assertion, however, they focused only on the
110In this decision, it is interesting to note that Lord Atkinson, while concurring with the majority, wrote separate reasons with respect to whether to construe the exclusive right or privilege of the patentee in a process patent, as to include the exclusive right to sell articles made by others situated elsewhere. This entails that the arguments now proposed by Apotex were considered by the Lordships before they rendered their majority decision confirming the Court of Appeal.
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acts taking place within their jurisdiction to determine if there was any conduct which constituted infringement.
[285] There are three other English decisions that must be briefly mentioned. The first, Pfizer Corporation v. Ministry of Health, [1965] AC 512, [1965] 1 All ER 450 (H.L.), simply because it was referred to in Monsanto Canada Inc. (albeit in a different context) and indicates that Lord Upjohn, after
[…]where an importer imports into this country, articles manufactured abroad but in accordance with a British patent for the purpose of distributing them and selling them in this country, he quite plainly is using and exercising the patent, and he thereby infringes the appellant’s patent […]
[p. 469(D) of the All ER]
[286]The other two decisions are Beecham Group Limited v. Bristol Laboratories Limited and another, [1967] RPC 406, [1967] FSR 283 (CA.) and the final decision on the merits rendered nearly ten years later by the House of Lords ([1978] RPC 153) (Beecham Group). The latter is probably the last decision to apply the principles at issue given that, shortly after it was rendered, the Patents Act, 1977 was adopted.
[287]The English Court of Appeal (Lord Justice Alfred Thompson Denning writing the main reasons) reversed the decision of the High Court judge and issued an interlocutory injunction to prevent the importation of hetacillin. In the Court of Appeal’s view, the plaintiff had established a prima facie case of infringement of his English patents protecting, in particular, the process for making ampicillin, an intermediate compound which was then
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transformed into hetacillin by the addition of acetone (see particularly the concurring reasons of Lord Justice Russell, at p. 417 of the RPC).
[288]The reasoning in this case is, in my view, particularly instructive because the defendants vigorously contested that the Saccharin case was still good law in light of the amendments to the Patents Act, 1949 (U.K.), 12, 13 & 14 Geo. VI, c. 87, which clearly required that the claims define the scope of the invention. Thus, the defendants argued, only patents claiming a product could be infringed by importation of such products into England. As in the present case, it was also argued that the “Saccharin doctrine”, if followed, had the potential to yield extraordinary results111 and uncertainty, leaving competitors uncertain as to what they are entitled to do.
[289]These arguments are remarkably similar to those made before me by Apotex; they were ultimately rejected on the merits, by Justice Falconer in the first instance, by the Court of Appeal and by the House of Lords.
[290]Apotex noted that this case is not helpful because the Courts were really dealing with a colourable imitation of the patented product, ampicillin. That is true. The plaintiffs in
Beecham Group also raised an argument based on the fact that hetacillin was a colourable imitation because once it was used by a potential patient as an antibiotic it reverted to ampicillin in the stomach. However, this was treated by all judges as a separate ground. In
111The example referred to at trial was the use of a hammer made according to a patented process for the assembly of a railway car could be found to be infringing. In Pfizer, Justice Snider referred to the use of patented scissors to cut the cloth of an Italian suit imported into Canada.
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the decision of the House of Lords, Lord Diplock also made it clear that the doctrine of
infringement by importation, applied in Saccharin, was not an extension of the pith and
marrow doctrine. It was a distinct concept standing on its own (see p.
[291]The House of Lords also confirmed that the Patents Act, 1949 did not contain any changes that justified setting aside the principles applied in Saccharin and Wilderman. Lord Diplock noted that the need to describe and ascertain the nature of the invention in the letters patent was made a condition of the grant from 1700 onwards. To end the specification with a distinct statement of the invention claimed was made statutory in 1883, at which point Lord Diplock noted the practice to have already become widespread (p.198).
[292]Lord Diplock describes the reasoning behind Elmslie and Von Heyden as follows at
p. 199:
The monopoly granted by a patent is limited territorially to the United Kingdom and the Isle of Man and the corresponding prohibition is limited to acts done within those territorial limits. The wide words of the grant and prohibition[112] were, however, treated as entitling the patentee to prohibit the obtaining from abroad and selling in this country an article manufactured abroad by the patented process, even though the article was of a kind that was not new and consequently of itself could not be, and was not, claimed as an invention in the specification.
[Emphasis added.]
112The grant and prohibition is summarized by Lord Diplock as follows: “The grant is of “full power, sole privilege and authority” to “make, use, exercise and vend the said invention within our United Kingdom…” and to “have and enjoy the whole profit and advantage from time to time accruing by reason of the said invention.” The corresponding prohibition is the observation of the grant. It is expressed to be imposed “that the patentee may have and enjoy the sole use and exercise and the full benefit of the invention…”; and commands all Her Majesty’s subjects in the United Kingdom “that they do not at any time … either directly or indirectly make use of or put in practice the said invention nor in anywise imitate the same.”” (p.198).
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[293]With respect to the extraordinary results which would flow from the unbridled application of the “Saccharin doctrine”, it appears that the House of Lords, like Lord Justice Denning in 1967, found comfort in the application of the limitations set out in Wilderman. Lord Diplock explained, at p. 201:
My Lords, if logic were the sole guide to the law of patents such an extension of the doctrine of infringing importation might be difficult to resist. In effect it would mean that in respect of any article sold in this country, anything done in the course of its manufacture which would constitute an infringement of a United Kingdom patent if done in this country would constitute a like infringement if before importation it had been done abroad. This extreme extension of the doctrine was, however, rejected by Tomlin, J. in Wilderman v. F.W. Berk & Co. Ltd. (1925) 42 R.P.C. 79, where in relation to a claim for the infringing importation of an article in the course of whose manufacture abroad a patented apparatus had been used, he expressed the view that the use of the patented process or apparatus must have played an important part in the manufacture of the imported article.
[294]Finally, it is interesting to note that in that case, the House of Lords refused to decide if the doctrine should also apply to pure product claims, which extension had been accepted by the trial judge and the Court of Appeal. The Court felt that it did not have the benefit of full arguments (see also the reasons of Lord Simon of Glaisdale on this point, p. 204).
[295]Turning back now to Canadian jurisprudence on the matter. In 1955, in Hoffmann- LaRoche & Co. v. Canada (Commissioner of Patents), [1955] S.C.R. 414; 23 C.P.R. 1
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appeal in respect of a decision of the Commissioner of Patents refusing to allow the proposed product by process claims, the Supreme Court of Canada was not required to discuss the issue of infringement of a pure process patent or process claims, by the importation of a product (not covered by the patent) made abroad using the patented process. Nevertheless, while dealing with the main issue before it, Chief Justice Patrick Kerwin, writing for the majority, considered the decision of the Court of Appeal of England and Wales in Von Heyden, as well as two Canadian decisions, Auer and Toronto Auer Light and expressly noted that “there seems to be no reason to doubt the correctness of these decisions.”113
[296]While accepting that Canadian patent law differs from British legislation, and that Canadian patent law was originally modeled on U.S. legislation, Apotex’s argument that the distinctions between Canadian and British law should render British jurisprudence of little assistance on this issue is unpersuasive. Put plainly, notwithstanding the differences between Canadian and British patent laws, our Courts continue to look to British jurisprudence to inform the analysis of our intellectual property laws.
[297]There is also little doubt that the Exchequer Court of Canada and the Supreme Court of Canada were fully aware of these differences between English and Canadian legislation. The best example of this is Union Carbide Canada Ltd. v.
113This was very clearly interpreted by Justice Noël in American Cyanamid Co. c. Charles E. Frosst & Co., [1965] 2 Ex.C.R. 355, 47 C.P.R. 215 (American Cyanamid Co.), at para. 40, as meaning that the sale of a product made in accordance with a patented process would infringe a process patent even though the patent contained no claim to the product.
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[1966] Ex.C.R. 884 (Union Carbide), where President Wilbur Jackett,114 having reviewed the cases of Elmslie and Von Heyden, said at para. 13:
I have been able to discover no such difference between the ambit of an English patent for an invention and the ambit of the monopoly granted under the Canadian Patent Act as would warrant reaching a conclusion when this question arises under the Canadian Act different from that reached in respect of an English patent.
[298]The learned judge also noted that he was unable to ascertain any relevant difference between the Canadian legislation that was under consideration in Auer and he concluded based on comity that he should follow Auer, noting that it had also been the subject of the obiter mentioned above in
[299]President Jackett appeared unaware of the then recent decision of Justice Noël in
[300]The term “Saccharin doctrine” per se came to the forefront in American Cyanamid Co.. In that case, the Court had to determine if the “Saccharin doctrine” should be applied to
114It should be noted that among all the judges confronted with these issues, President Jackett appears to have been the most sympathetic to arguments similar to those raised by Apotex in respect of territoriality and the limited monopoly granted by a process claim.
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the importation of tetracycline in Canada. This particular product was not covered by the patent at issue but it was made using a patented process for making chlortetracycline,115 to which a dechlorination method was then applied to obtain tetracycline. Thus, the patented process was not the last step in making the product ultimately imported and used in Canada. The learned judge does not specifically refer to the decision in Wilderman (he says simply “there are also a number of cases”, para. 41). But having expressed some concern in respect of the application of the doctrine to processes that are merely incidental, the learned judge did apply the “Saccharin doctrine”, as he found that the product used as an intermediary was of importance.
[301]Between 1966 and 1991, it appears that the Exchequer Court of Canada and the Federal Court of Canada considered the issue quite settled. In
(1967), 35 Fox Pat. C. 174 (aff’d, [1968] S.C.R. 950, 69 D.L.R. (2d) 353) (Gilbert), Justice Arthur Thurlow, after referring to the decision of President Jackett in Union Carbide, stated that in the absence of any expression of opinion to the contrary by the Supreme Court of Canada, he regarded the point as settled in this Court.
[302]In Leesona Corp. v. Giltex Hosiery Ltd. (1971), 2 C.P.R. (2d) 211, [1971] F.C.J. No. 1006 (QL), Justice Roderick Kerr followed Justice Thurlow’s decision in Gilbert and even issued an interlocutory injunction to prevent the importation into Canada of certain products made abroad according to patented processes. Reference was also made to the then recent decision of Lord Justice Denning in Beecham Group.
115This was the only product covered by a Canadian patent. But, by the time it was imported into Canada, it had been transformed into tetracycline.
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[303]Nevertheless, three years later in Farbwerke Hoechst Aktiengesellschaft, vormals Meister Lucius & Bruning v. Halocarbon (Ontario) Ltd., [1974] 2 F.C. 266, 15 C.P.R. (2d) 105, Justice Frank Collier again faced the same issue, where the Canadian defendant imported isohalothane, a product made in the United States by a process patented in Canada. It was then used to manufacture another product at the defendant’s plant in Ontario. Although Justice Collier did not go into the details of the arguments presented, he notes in his reasons, at para. 10, that the Court “was invited by Mr. Hughes [as he then was] to distinguish, on a number of grounds, the Union Carbide case and the cases referred to by Jackett P.” but concludes that he does not “see any reasonable grounds for so doing.” It is important to mention that in his decision, Justice Collier specifically echoed the comments of Justice Thurlow in Gilbert and stated that in the absence of any expression of opinion to the contrary by the Supreme Court of Canada, he regarded the point as settled.
[304]This decision was reversed by the Federal Court of Appeal and the plaintiff appealed to the Supreme Court of Canada, which allowed the appeal ([1979] 2 S.C.R. 929, 104 D.L.R. (3d) 51) and specifically reinstated the decision of Justice Collier in respect of the impugned process claim. At p. 941 (of the S.C.R.), Justice
At the hearing in this Court, counsel for the respondent raised the contention that the importation of a product manufactured outside Canada did not infringe a Canadian patent for the process whereby it is manufactured elsewhere, but counsel for the appellant was informed that no reply to that submission was required. It will therefore not be dealt with.
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This strongly suggests that the Supreme Court considered the issue of infringement by
importation settled by the existing jurisprudence.
[305] Undeterred, Apotex mounted a new charge before Justice Andrew MacKay in
Wellcome Foundation Ltd. v. Apotex Inc., 47 F.T.R. 81, 39 C.P.R. (3d) 289 (Wellcome
(1991)), raising arguments very similar to those discussed at length in its memorandum
before this Court. It contested the validity of the “Saccharin doctrine” per se, based among
other things on the differences between the English and Canadian patent statutes.116 It also
contested the findings of Justice Noël in American Cyanamid Co., which it found
questionable because of the absence of a direct reference to the limitation of the doctrine as
set out in Wilderman.
[306]Prompted by these arguments and the fact that this was indeed only the second reported case involving a process patent for an intermediate compound
I also reject the defendant's submission that the differences in the Canadian Act from the English statute do not support the application of the Saccharin doctrine. The “exclusive right” of “vending” seems to me to be broad enough to encompass situations such as that in this case. This point as well was noted in American Cyanamid, at 168. The effect of the granting provision, now section 44 of the Patent Act, may be summarized, as it was by O'Halloran J.A. in Skelding v.
116See paras.
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Daly, (1941), 1 C.P.R. 266 at 273 (B.C.C.A.), as intending that “... any act which interferes with the full enjoyment of the monopoly granted to the patentee is an infringement”.
[Emphasis added.]
[307]Applying the “Saccharin doctrine” as qualified by Wilderman, the Court concluded that there was infringement of the process claims by the importation of trimethoprim. As mentioned by Apotex, there was evidence in that case that traces of MTBP and TAA (the intermediate compounds) were found in the final product sold by the defendant in Canada.
[308]It is worth noting that Apotex appealed the decision of Justice MacKay, which was varied on an unrelated issue ((1995), 100 F.T.R. 320 n, 60 C.P.R. 3(d) 135). Surprisingly, it seems that Apotex did not contest the application of the doctrine by Justice MacKay before the Court of Appeal even though this point was clearly determinative in respect of the findings of infringement.
[309]These Canadian decisions are, in my view, sufficient for this Court to conclude that the “Saccharin doctrine” as qualified by Wilderman is applicable to the case at bar. However, more recent jurisprudence further undermines the argument advanced by Apotex.
[310]In Monsanto Canada Inc., the Supreme Court of Canada articulated broad principles related to the interpretation of the rights granted under the Patent Act. At para. 58, Chief Justice Beverly McLachlin and Justice Morris Fish, speaking for the majority, summarize seven such principles:
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1."Use" or "exploiter", in their ordinary dictionary meaning, denote utilization with a view to production or advantage.
2.The basic principle in determining whether the defendant has "used" a patented invention is whether the inventor has been deprived, in whole or in part, directly or indirectly, of the full enjoyment of the monopoly conferred by the patent.
3.If there is a commercial benefit to be derived from the invention, it belongs to the patent holder.
4.It is no bar to a finding of infringement that the patented object or process is a part of or composes a broader unpatented structure or process, provided the patented invention is significant or important to the defendant's activities that involve the unpatented structure.
5.Possession of a patented object or an object incorporating a patented feature may constitute "use" of the object's stand- by or insurance utility and thus constitute infringement.
6.Possession, at least in commercial circumstances, raises a rebuttable presumption of "use".
7.While intention is generally irrelevant to determining whether there has been "use" and hence infringement, the absence of intention to employ or gain any advantage from the invention may be relevant to rebutting the presumption of use raised by possession.
[Emphasis added.]
[311]Several of these principles are relevant to the issue of infringement by importation. First, with regards to the question of “use”, the Court must ask itself: “did the defendant’s activity deprive the inventor in whole or in part, directly or indirectly, of full enjoyment of the monopoly conferred by law?” (Emphasis omitted, Monsanto Canada Inc., para. 35; see also Free World Trust, para. 43). This is exactly the question all the British cases cited above, going back to Elmslie, Von Heyden and Saccharin, meant to answer when they
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concluded that the importation, use or sale of products made abroad by way of the patented
process constitutes infringement.
[312]Moreover, the meaning and purpose of s. 42 of the Patent Act, as described at para. 34 of the Monsanto Canada Inc. decision, is perfectly in line with the views adopted by Justice MacKay in Wellcome (1991):
[t]he purpose of s. 42 is to define the exclusive rights granted to the patent holder. These rights are the rights to full enjoyment of the monopoly granted by the patent. Therefore, what is prohibited is "any act that interferes with the full enjoyment of the monopoly granted to the patentee": H. G. Fox, The Canadian Law and Practice Relating to Letters Patent for Inventions (4th ed. 1969), at p. 349;
[Monsanto Canada Inc., para. 34.]
[313]This approach to a patent’s monopoly was discussed by the majority in Monsanto Canada Inc. with reference to British jurisprudence:
Thus, in Saccharin Corp. v.
By the sale of saccharin, in the course of the production of which the patented process is used, the Patentee is deprived of some part of the whole profit and advantage of the invention, and the importer is indirectly making use of the invention.
[para. 44]
[314]It is also worth nothing that even the minority in Monsanto Canada Inc. appear to be in agreement with the “Saccharin doctrine”. As Justice Louise Arbour stated, at para. 155:
It is well established that the use or sale of unpatented subject matter may still infringe a patent where the unpatented
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subject matter is made employing a patented process: Saccharin Corp. v.
[Emphasis in the original.]
[315]While mindful that Monsanto Canada Inc. did not specifically address the issue of territoriality, the principles laid out therein are of assistance in evaluating Apotex’s argument.
[316]Both Lilly and Apotex have raised various policy reasons in support of their respective positions with respect to the question of infringement by importation. There is no need to discuss them here except to say such arguments are matters for Parliament to consider, not this Court.
[317]Apotex’s argument that the U.S. approach to this issue should be preferred is not convincing. It is worth noting that much of the U.S. jurisprudence regarding this issue (which were considered by the Court), was followed by legislative changes seeking to close significant gaps resulting from these decisions.
[318]In sum, the Court agrees with Lilly that it is now too late to turn back the clock on the application of the general principles set out in the
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Importation of products made abroad that are the subject of patented process claims in
Canada is prohibited. This prohibition is widely recognized and is
Canada.
[319]Apotex’s second argument with respect to infringement by importation seeks to limit the application of the “Saccharin doctrine” as qualified by Wilderman based on the U.S.
Process Patent Amendment Act and/or the EPC, as well as the jurisprudence that has
interpreted these instruments.
[320]First, it is worth mentioning that even though Parliament has had opportunities to intervene in this respect, it appears never to have felt the need to do so even after Canada became a party to the NAFTA and the Agreement on
[321]In NAFTA, para. 1709(5)(b) reads:
where the subject matter of a patent is a process, the patent shall confer on the patent owner the right to prevent other persons from using that process and from using, selling, or importing at least the product obtained directly by that process, without the patent owner's consent.
[Emphasis added.]
Para. 28(1)(b) of TRIPS is nearly identical. It reads:
where the subject matter of a patent is a process,
[a patent shall confer on its owner the exclusive right] to prevent third parties not having the owner’s consent from the act of using the process, and from the acts of: using,
117Annex 1C of the Marrakesh Agreement Establishing the World Trade Organization, 15 April 1994.
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offering for sale, selling, or importing for these purposes at least the product obtained directly by that process.
[Emphasis added.]
[322]Parliament adopted two bills with respect to the implementation of these agreements. The first, An Act to Implement the North American Free Trade Agreement, S.C. 1993, c. 44, sets out at s. 189 and following, the changes to the Patent Act made necessary by this agreement. The second, An Act to Implement the Agreement Establishing the World Trade Organization, S.C. 1994, c. 47, deals with necessary modifications to the Patent Act at ss. 141 and 142. None of these changes address the issue before the Court.
[323]It can be reasonably assumed that the legislator was well aware of the state of patent law in Canada before it presented these bills. The relevant law at that time was summarized in Fox, at pp. 391 and 392, as follows:
In considering infringement it is well to remember that it is not only manufacture that is forbidden to others than the patentee, but use and sale as well. For this reason infringement is committed by the importation of infringing articles made abroad, as well as importation and use in the country of articles or products made abroad on a patented machine or by a patented process. This principle applies also where the process used abroad has not produced the finished product that is imported but an intermediate that falls within the claims of the patent. In other words, it is none the less an infringement that the article or substance produced and sold which is manufactured by the use of the patented process is subjected to certain other processes. But this concept must be considered with care: it does not apply in a case of de minimis. If there is an act committed in Canada by the defendant in derogation of the patentee’s rights there is infringement.
[Footnotes omitted.]
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[324]It is also reasonable to assume that Parliament was well aware of the relevant statutory provisions referred to by Apotex.
[325]What Apotex seeks in this Court is a
[326]As mentioned earlier, Justice Snider, in Pfizer, made a very useful summary of factors that a Court should consider to determine whether or not the patented process plays an important part in the manufacture of the imported products:
-The importance of the product or process to the final product sold into Canada. Where the use is incidental, non- essential or could readily be substituted (such as the Italian scissors example), a Court might be less inclined to find infringement.
-Whether the final product actually contains all or part of the patented product. Where the patented product can actually be identified in the product sold into Canada, there may be a strong case for a finding of infringement.
-The stage at which the patented product or process is used. For example, use of a process as a preliminary step of a lengthy production process may lead to a conclusion that the patentee has suffered little deprivation.
-The number of instances of use made of the patented product or process. Where the same patented product is used repetitively through the production of the non- patented end product, there may be clearer evidence that the advantage of the patentee has been impaired.
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-The strength of the evidence demonstrating that, if carried out or used in Canada, the product or process would constitute infringement. On this point, my opinion would be that, where there is ambiguity in the evidence, the benefit of the doubt should go to the party using the product or process. This is, perhaps, simply another way of expressing the established principle that the patentee bears the burden of proving infringement.
[para. 90]
Justice Snider concludes that “[i]n sum, there must be a strong link established between
the use of the patented process or product and the product sold into Canada.” (para. 91.)
[327]I do not take Justice Snider’s list to be exhaustive or to limit in any way the test applicable in Canada. There is nothing in what she proposed that prevents the Court from also considering whether the imported product was obtained directly from the patented process or whether the compound made by the patented process was materially changed or has become a trivial or
[328]The value of our approach is that it can be adapted to new circumstances. The Courts in Beecham Group were able to conclude to infringement despite the fact that the final ingredient imported in England no longer contained the compound made using the patented processes. It was the flexibility of the test that enabled them to do so and to look at what happened in the stomachs of the patients who actually bought and used the pills made by the defendant.
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[329]For these reasons, not only do I conclude that the Court cannot redefine and limit the test applicable in Canada with respect to infringement by importation and use, but also that I should not do so. On this basis, I will now proceed to apply these principles to the facts of this case.
[330]In respect of the Shionogi patents, it is not disputed that if the Kyong Bo process had been carried out in Canada, it would have infringed the Shionogi patents.118
[331]It was also clear, in my view, that Lupin used the process covered by the Lilly patents until 1998.119
[332]The only real difficulty in applying the test in this case arises from the fact that making cefaclor is a very complex process120, involving more steps than what was required to make the various compounds previously discussed in the case law. But this alone should not prevent the application of the doctrine. Certainly technical complexity should not enable a party to deprive in whole or in part, directly or indirectly, of the full enjoyment of the monopoly conferred by a patent.
118Given that Kyong Bo infringed at least one claim in each of the Shionogi patents, the Court will simply use the expression “Shionogi process” to refer to all these infringed claims in each of the patents.
119Here again the Court will use the expression “the Lilly process” given that the Lupin process infringes all of the Lilly process patents including particularly the ‘536 patent (triple combination). It is important to note here that although the Court is satisfied that claim 17 of the ‘007 patent was infringed, this finding is not very relevant here given that the infringement of the process patents per se is sufficient. In fact, infringement of the ‘536 patent would be sufficient to support the Court’s reasoning here.
120Both the Kyong Bo and Lupin processes have been described by the experts in a variety of depictions, more or less grouping various chemical reactions. For example, see, for the Kyong Bo process,
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[333]It is not disputed that there are other steps (chemical reactions) that take place after Lupin and Kyong Bo obtained either the
[334]All the experts agreed that there was no known method to make cefaclor without going through the
[335]None of the experts opine that either patented process was a trivial or unessential part of the processes used by Kyong Bo or Lupin (Process “A”) to produce the cefaclor used by Apotex in Canada.
[336]On the whole of the evidence, it is clear that the Shionogi and Lilly processes were more efficient (and therefore less costly) than any other alternative discussed in any of the publications referred to by the experts or used by Lupin.121
[337]In fact, in respect of the Lilly process, there is clear evidence that to change what is described in Lupin’s documentation simply as step V (although it involves three distinct reactions) resulted in an increase of almost 50% of the price of cefaclor.122
121To make the cefaclor shipped to Apotex as of June, 1998.
122Using either the prices of $840 and $1250 per kg or the disputed invoice prices of $1070 versus $1500 per kg (see
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[338]As discussed, the disclosure of the Lilly process patents expressly states that the inventions are particularly useful to make cefaclor. This is the very purpose for which their teachings were used here.
[339]Apotex relied heavily on a 1978 progress report from Lilly’s research team working on cefaclor
The two most difficult steps in the cefaclor synthesis, in terms of time and effort expended, are the exomethylene ring expansion (Dr. T.S. Chou) and the enol chlorination (79284
→112069). Very few processes have been as extensively investigated as these two synthetic steps for cefaclor.
[340]Having considered and weighed all the evidence, I conclude that, as a matter of fact, Lilly’s patented process was an “important” part of the method used by Lupin to make the cefaclor that was used by Apotex in Canada.
[341]I have also concluded that the Shionogi process was a crucial, thus obviously important, part of the Kyong Bo process for making cefaclor. Without it, Kyong Bo could not have used the total synthetic pathway described in its technical documentation filed with Health Canada.
5.6.The Exemption Under Subsection 55.2(1) of the Patent Act
[342]Subsection 55.2(1) provides:
55.2(1) It is not an infringement |
55.2(1) Il n’y a pas contrefaçon |
of a patent for any person to |
de brevet lorsque l’utilisation, la |
make, construct, use or sell the |
fabrication, la construction ou |
patented invention solely for |
la vente d’une invention |
uses reasonably related to the |
brevetée se justifie dans la seule |
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|
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development and submission of |
mesure nécessaire à la |
information required under any |
préparation et à la production |
law of Canada, a province or a |
du dossier d’information |
country other than Canada that |
qu’oblige à fournir une loi |
regulates the manufacture, |
fédérale, provinciale ou |
construction, use or sale of any |
étrangère réglementant la |
product. |
fabrication, la construction, |
|
l’utilisation ou la vente d’un |
|
produit. |
It is admitted that this defence was included in the particulars filed by Apotex but Lilly argues that the statement of defence was never amended and thus it was not properly pleaded. There is no dispute that Lilly was fully aware that Apotex would rely on this exemption. Although strictly speaking Lilly is correct, it is obvious that in the present circumstances there is no good reason to deprive Apotex of the right to raise this defence.
[343]The only substantive argument advanced by Lilly is that, based on Ms. Carrière’s testimony, the
Patent Act.
[344]The argument that this exemption should be strictly construed has been rejected by the Federal Court of Appeal in Merck & Co. v. Apotex Inc., 2006 FCA 323, [2007] 3 F.C.R. 588 (Merck & Co. (FCA)) (paras.
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Courts did not limit the exemption solely to material actually provided to a regulator. What is critical here is that the Court is satisfied that the materials purported to have been used for research and development formulation, reserve samples and
[345]As for the actual amount of bulk cefaclor covered by the exemption, the Court agrees that the exact quantities described in the document prepared by Mr. Fahner124 as a result of his
[346]Both parties recognize that this is not a major issue in this case and thus there is nothing more to say.
6.Invalidity
[347]It has been agreed that as all of the patents in suit have now expired, there is no need to deal with the portion of the
123Such as samples to pharmacists or doctors.
124The Court is not satisfied that the details of the quantities were sufficiently explored during the trial for it to make a final determination in this respect.
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6.1.Standard of Review and Burden of Proof
[348]It is common ground between the parties that Apotex, as the party attacking the validity of Lilly’s patents, bears the burden of proof with respect to invalidity. Such is the effect of subs. 43(2) and s. 59 of the Patent Act.
[349]Nor do the parties disagree on the applicable standard of proof. As the Supreme Court of Canada recently confirmed, “there is only one civil standard of proof at common law and that is proof on a balance of probabilities.” (F.H. v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41, at para. 40).
[350]While agreeing on the onus and the standard of proof with respect to invalidity, Lilly and Apotex disagree on what a party asserting invalidity must prove. Lilly argues that Apotex must prove that the decision of the Commissioner of Patents to approve the patents at issue was unreasonable. In support of this proposition, Lilly relies on the following passage from Apotex Inc. v. Wellcome Foundation Ltd., 2002 SCC 77, [2002] 4 S.C.R. 153 (Wellcome (2002)):
Unlike the Harvard Mouse case (Harvard College v. Canada (Commissioner of Patents), [2002] 4 S.C.R. 45, 2002 SCC 76), released concurrently, these appeals are not limited to a question of law (i.e., the statutory limits of patentable subject matter). On that issue, the standard is correctness. The issue here is one of mixed fact and law, namely, was the Commissioner properly satisfied the claimed invention met the statutory test of utility? Fact finding generally commands deference, but here Parliament has provided an unfettered right of appeal to the Federal Court (Patent Act, s. 42).
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[…]
In the circumstances, I think the appropriate standard of review of these issues, which largely raise mixed questions of law and fact, is reasonableness simpliciter, i.e., that the Commissioner's decision must withstand a somewhat probing examination (Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, at para. 56).
[Emphasis added. Paras. 42 and 44.125]
[351] In effect, relying on Wellcome (2002), Lilly argues that s. 59 of the Patent Act
requires a party asserting invalidity to engage in a form of judicial review of the
Commissioner’s “decision” to grant an impugned patent. Furthermore, Lilly argues that
deference is owed, and that the standard of reasonableness should apply.
[352]In Whirlpool, the Supreme Court of Canada put plainly the task faced by a party asserting invalidity: “The burden was on the appellants to prove on a balance of probabilities, that the patent was invalid” (para. 92). In so doing, the party attacking validity must establish that the patent, or claims within a patent, do not meet the requirements for patentability under the Patent Act (i.e. obviousness, utility, etc.). This requires one to examine the claims of a patent, properly constructed, against the requirements of the Patent Act (see Free World Trust at paras.
125See also Monsanto Canada Inc., where the Supreme Court of Canada held: “Monsanto’s patent has already been issued, and the onus is thus on Schmeiser to show that the Commissioner erred in allowing the patent: Apotex Inc. v. Wellcome Foundation Ltd., [2002] 4 S.C.R. 153, 2002 SCC 77, at paras.
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[353]This is perfectly in line with the wording in s. 59 of the Patent Act which speaks of “any fact or default which by this Act or by law renders the patent void” and directs the Court to “take cognizance of that pleading and of the facts and decide accordingly.”
[354]The approach to validity, assessing claims against the requirements of the Patent Act, without reference to principles of administrative law, has been the standard judicial practice for more than a hundred years.
[355]It cannot be presumed that just two years after Free World Trust and Whirlpool, the Supreme Court of Canada sought to drastically modify the law with respect to invalidity in an implicit fashion with its decision in Wellcome (2002). One would expect such a shift to be done clearly and in express terms. The fact that the bulk of the jurisprudence since
Wellcome (2002) has considered invalidity without resort to administrative law principles buttresses this conclusion. (See Laboratoires Servier, para. 225; M.K. Plastics Corp. v. Plasticair Inc., 2007 FC 574, 61 C.P.R. (4th) 1, para. 105.)
[356]Although it is clear that in Wellcome (2002), the Court was dealing with an action of infringement and a defence of invalidity in its administrative law analysis, the Supreme Court references s. 42126 (now s. 41) of the Patent Act, which deals with the right to appeal from a decision of the Commissioner to refuse the grant of a patent to the Federal Court.
126It is worth mentioning that none of the parties in Wellcome (2002) presented any arguments on this issue. On the other hand, the standard of review applicable to an appeal under s. 42 was the subject of debate in Harvard College (2002). It was an issue on which the majority of the Federal Court of Appeal and the dissenting Chief Justice Julius Isaac disagreed. (Harvard College v. Canada (Commissioner of Patents) [2000] 4 F.C. 528, 223 F.T.R. 320, (Harvard College (2000)) see paras.
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The defence of invalidity and appeal from a refusal by the Commissioner to grant a patent
implicates different actors (putative patentee v. alleged infringer) raising similar issues but
in very different contexts.
[357]Furthermore, despite having imported administrative law principles into the invalidity analysis, neither Wellcome (2002) and Monsanto Canada Inc. actually applies concepts such as the degree of deference owed to the decision of the Commissioner to grant the patents at issue. In fact, notwithstanding the above referenced paragraphs of these decisions, the term “reasonableness” is not even used in assessing invalidity.
[358]A telling example of the unease created by those decisions can be found in
Once a patent is issued, there is a presumption that, in the absence of evidence to the contrary, the patent is valid (Patent Act, s. 43(2)). The onus is thus on the Defendants to show that the Commissioner of Patents erred in allowing the patent (Monsanto Canada Inc. v. Schmeiser, 2004 SCC 34 at para. 24, [2004] 1 S.C.R. 902; Apotex Inc. v. Wellcome Foundation Ltd., 2002 SCC 77, [2002] 4 S.C.R. 153 at paras.
[para. 72]
Having made this observation, however, nowhere in her reasons does Justice Snider engage
in anything resembling a reasonableness review akin to that which was set out in Dunsmuir
v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 (Dunsmuir). In fact, the words
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“deference” and “reasonableness” (in an administrative law sense) appear nowhere in the decision, nor is there any reference (beyond the above quote) to the decision of the Commissioner to grant the patent at issue.127
[359]Such an attitude is understandable for there are a number of reasons why an administrative law approach to invalidity is almost impossible to apply without further guidance from Canada’s highest Court.
[360]In effect, it is unclear what would be the subject of this judicial review. A decision by the Commissioner to grant a patent comes with no reasons, no explanation, and no context. Indeed, a patent’s prosecution history cannot be reviewed in construing the claims of a patent (Merck & Co. (FCA), para. 53).
[361]A reasonableness review involves determining whether a decision falls within a range of possible acceptable outcomes on the basis of the evidence before the original decision maker (Dunsmuir, para. 47). If, as Wellcome (2002) suggests, the Commissioner’s decision to grant a patent is owed some matter of deference, how would a reviewing court assess reasonableness without access to the material considered by the
127More recently, in
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the grant of the monopoly, it has never been used for the purpose of deciphering the Commissioner’s reasons for granting a patent.
[362]A court engaged in judicial review, regardless of the standard applied, is usually limited to only considering the evidence that was before the
[363]There is no statutory requirement that the evidence before the Commissioner of Patents be provided to the Federal Court in the context of an infringement action. Furthermore, nothing in s. 59 of the Patent Act limits a party challenging the validity of a patent to the evidence that was put before the Commissioner of Patents.
[364]Parties challenging validity have always been free, subject to the applicable rules of evidence, to put forth any evidence that may serve to undermine the validity of a patent’s claims. Standards of review are neither useful nor designed to address situations where the evidentiary record before the Court is different than the one before another
[365]In the Harvard College (2000) decision, Chief Justice Isaac referred by analogy to appeals from decisions of the Registrar of
R.S.C. 1985, c.
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noted that the Registrar of
[366]To be certain, administrative law principles have been applied to certain decisions of the Commissioner of Patents (See e.g. Genencor International, Inc. v. Canada (Commissioner of Patents), 2008 FC 608, [2009] 1 F.C.R. 361 (reviewing a decision of the Commissioner on a
Patent Act); and, Dow Chemical Co. v. Canada (Attorney General), 2007 FC 1236, 63 C.P.R. (4th) 89).
[367]With respect of some of the decisions of the Commissioner, a statutory right of appeal to the Federal Court is provided (see s. 19.2, subs. 20(15) and s. 41 of the Patent Act). However, where administrative law principles have been applied to decisions of the Commissioner of Patents, it has been in the context where these are amenable to judicial review and not pursuant to s. 59 and subs. 60(1) of the Patent Act.
[368]It may very well be that the material effect or consequence of a finding of invalidity is that the Commissioner “erred” in granting a patent. But, in the context of an action for infringement where a defence of invalidity is raised, that is not the essential point of departure: the claims stand alone to determine if the monopoly granted meets the test set out in the Act, for example in respect of utility, novelty and inventiveness.
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[369]In sum, the importation of administrative law principles into the assessment of invalidity has not been thoroughly canvassed by appellate authorities and would constitute a significant departure from the Supreme Court of Canada’s
[370]Thus, in these proceedings, the merits of Apotex’s defence will be assessed on the basis that the defendant must establish on a balance of probabilities any fact which by virtue of the Patent Act or by law renders invalid the patents at issue, keeping in mind the applicable presumption as to their validity.
7.Inherency and Lack of Subject Matter
7.1.Shionogi Patents
[371]Apotex argues that the Commissioner of Patents did not force Shionogi to file divisional applications during the prosecution of these patents. It also submits that the Shionogi patents lack subject matter and that if there is anything novel and inventive in the
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original application, it would be the overall synthetic pathway that was not claimed in any of
the Shionogi patents under review.128
[372]However, during the final argument, Apotex’s counsel made it clear that if the Court concluded that as in Consolboard Inc. v. MacMillan Bloedel (Saskatchewan) Ltd., [1981] 1 S.C.R. 504, 122 D.L.R. (3d) 203 (Consolboard (1981)), Shionogi was required by the Commissioner of Patents to divide this application, none of these divisional applications should be open to attack by reason only of the granting of the original patent, that is, for lack of subject matter for more than one patent (see Consolboard (1981), at pp.
[373]That said, it is not disputed that Shionogi’s patent agent received an Examiner’s Report (also referred to as an “Office Action”) dated February 28, 1979, from the Patent Office where the Examiner indicated that:
The claims of this application are directed to four possible different subject matters as follows:
(1)Claims 1 to 10, 13 to16, 21 to 23, 38, 39 and 54 to 73.
(2)Claims 11, 12, 31 to 34 and 45 to 53.
(3)Claims 17 to 20 and 40 to 44, and
(4)Claims 24 to 30, 35 and 36.
128In respect of Dr. McClelland’s views that there exists a disconnect between the various patents, as mentioned, there is no need to discuss it in any detail. I note, however, that the Court is satisfied that the target compounds of the ‘547 patent can be used as starting compounds for the ‘924 patent, which is not disputed. The Court is also satisfied that the target compounds of claims 31 and 37 (claims 4 and 12 cover the first step) of the ‘924 patent can be used as starting compounds for the process in the ‘132 patent. The compounds of claim 58 (made using the process of claim 38) of the ‘132 patent can be used as starting compounds to carry out the reactions covered in the ‘026 patent, which, as mentioned, lead to
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Applicant must restrict his claims to a single subject matter under section 38 of the Act.
Amendment is required.
[374]The exact wording of the Commissioner’s letter in Consolboard (1981) is not reproduced in the Supreme Court of Canada’s judgment. Apotex did bring to the Court’s attention that in the trial decision, Consolboard Inc. v. MacMillan Bloedel (Saskatchewan) Ltd. (1978), 39 C.P.R. (2d) 191, [1978] F.C.J. No. 305 (QL) (Consolboard (1978)), the said letter is described as follows:
The Commissioner of Patents took the view the application described and claimed more than one invention. He directed the applicant limit the claims to one invention only.
Accordingly, on February 25, 1957, a divisional application was filed.
[para. 49]
[375]It is not disputed that such description appears to support the view of Lilly’s expert, Mr. Murphy, that like in the above case, the filing of divisional applications here was made at the direction of the Commissioner of Patents. In his report, Mr. Murphy also notes, at para. 37, that “[u]pon filing of a divisional application, the application is checked in the Patent Office to ensure that it is entitled to divisional status.”129 The expert concluded from his review of the relevant patent files that the Patent Office properly accepted the divisional status of these applications. (See also para. 40 of Mr. Murphy’s affidavit
129See Canada (Commissioner of Patents) v. Farbwerke Hoechst
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[376]Apotex did not file any expert affidavits on this subject and relies solely on its cross- examination of Mr. Murphy. The Court has considered the said
[377]Beyond the issue of whether or not the Shionogi applications resulted from a proper divisional, there was some dispute between the parties as to what it means for a patent to “lack subject matter”131. Fox teaches that in a wider sense, the question of subject matter is directed to ascertaining whether a device or process “falls within those classes of things designed to be protected by the patent law.” (p. 15) This was the main issue faced by the Supreme Court of Canada, for example, in Harvard College. According to Lilly, this is the way it understood Apotex’s pleadings.
[378]However, Fox also speaks of a more restrictive meaning which in sum directs the inquiry as to whether the production of the device or process “was obvious or involved the exercise of the inventive faculty. […] This enquiry, in the English cases usually discussed under the heading of obviousness, is directed to ascertaining whether […] its production was sufficiently important and worthy to entitle it to the grant of monopoly rights.” (pp.
130Although Shionogi could have chosen to claim all of the steps in a single application and restrict itself to one patent only, it is evident that it would not have been able to claim the compounds produced by processes that it claims in its divisional applications or to include dependent claims covering each of the steps. It would have been left with a limited monopoly that could easily be designed around. As always, this is the difficult choice that all applicants face when filing amendments required by the Manual of Patent Office Practice (MOPOD) (see Ch. 10 of its 1979 version, discussed in Mr. Murphy’s affidavit
131See correspondence from counsel for Lilly dated November 18, 2008 and its reply from counsel for Apotex dated November 25, 2008.
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claimed was not inventive132 but the Court finds that this expression should now be avoided. Even though it may be correct, strictly speaking, to say that there is no patentable subject matter if there is no invention, it is better to address the following aspects of a patentable invention – novelty, inventiveness, utility – under more specific headings and to reserve “lack of subject matter” as the heading under which one deals with whether or not the invention falls between those classes of things designed to be protected by the patent law.
[379]Certainly, the heading which one chooses to present one’s argument cannot change the fact that one cannot have “two kicks at the can”133 by simply presenting its position under distinct headings. The Court has already reviewed the Apotex argument in respect of obviousness.134 As indicated when discussing obviousness, the Court is satisfied that there is at least one valid (unobvious)135 claim at issue in each patent that is infringed. Thus, in my opinion, there is no need to say more here.
7.2.Lilly Patents
[380]Apotex argues that the Lilly process patents lack “subject matter” as they claim nothing more than the inherent properties of a known compound. Also, as the usefulness of the kinetic complex in cephalosporin chemistry was disclosed in detail in the ‘007 patent
132As noted, there was no specific statutory provision dealing with obviousness in the old act and Courts used the definition of “invention” to add inventiveness as a requirement to qualify as an invention.
133Albeit in a different context, see Laboratoires Servier v. Apotex Inc., 2009 FCA 222, [2009] F.C.J. No. 821 (QL) (Servier (2009)) at para. 69.
134In my view, Consolboard (1981) teaches that patents resulting from the forced filing of divisional applications cannot be challenged on the basis of double patenting. This may explain why Apotex abandoned its allegations of double patenting.
135No case law was cited to support the principle that two inventions are identical simply because they derive their inventiveness from the same idea.
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(disclosure or specification only), there is no distinct “subject matter” supporting these process patents.
[381]In respect of the first argument, having reviewed the case law submitted by Apotex,136 the Court has no hesitation to conclude that it has no application whatsoever here. These cases were dealing with very different sets of facts.
[382]Also, given that the only claim found valid in the ‘007 patent (claim 17) is a process claim, this argument appears to be moot.
[383]The second point is also unsound. In effect, as explained earlier, although Apotex uses the expression “subject matter”, to refer to the inventiveness, what Apotex is really saying is that there is only one invention, the allegedly new kinetic compound, and, by claiming it in the ‘007 patent, Lilly was not entitled to the Lilly process patents. In short, it should have put all the claims in a single patent. As mentioned, it is clear that the discovery of the kinetic complex itself is not the invention in any of the process patents.
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136Riello Canada, Inc. v Lambert (1986), 3 F.T.R. 23, 8 C.I.P.R. 286; Scott Paper Co. v. Minnesota Mining and Manufacturing Co. (1981), 53 C.P.R. (2d) 26, [1981] F.C.J. No. 5 (QL) (T.D.); and, Pfizer Canada Inc. v. Apotex Inc., 2005 FC 1421, 282 F.T.R. 8.
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[384]In any event, the Court agrees with Lilly that this sounds like a modified double patenting argument coupled with an improper divisional argument. In my view, it also calls into question longstanding Patent Office practices.137
[385]I say “modified double patenting” because Apotex ought to know that the ‘007 patent application, which was filed on the same day as the applications for the process patents (presumed date of the invention claimed given the absence of evidence in respect of an earlier date), is not prior art that can be used to support an argument of double patenting (obviousness). The defendant also ought to know that, as indicated by the Supreme Court of Canada in Whirlpool and Sanofi, the inquiry of double patenting is directed to the claims and not to the disclosure of the various patents under review. Comparing the claims of all the Lilly patents, it is evident that they do not overlap (anticipation). It is also clear, in my opinion, based on the evidence before me, that the process covered by claim 17 in the ‘007 patent (the only valid claim) does not render the use of the kinetic complex in each of the reactions claimed in the Lilly process patent obvious, nor, as mentioned in discussing obviousness, does the fact that the kinetic complex can be used for any one such reaction make it obvious that it can be used for the other two, or in “one pot”.
[386]There is uncontradicted expert evidence (Affidavit of Mr. Murphy
137For example, Rule 60(1) of the Patent Regulations (as in force at the time) provided that a patent that does not contain a claim broader in scope than any other claim in the application was deemed to be directed at more than one invention.
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patents. This would have been contrary to the unity of invention rule as defined and described in the MOPOP. Thus to accept Apotex’s argument would mean that, because Lilly complied with this practice, instead of filing an application that would necessarily raise an objection and result in a request for amendment – the filing of divisional applications, its process patents can now be challenged on a basis that would not have otherwise been open to Apotex (Consolboard (1981)).
[387]The Court notes that in Merck & Co. (FCA), the Federal Court of Appeal reviewed, albeit in a different context, the question of an improper divisional and its consequences at paras.
[388]At trial, Apotex confirmed that it was not arguing that there was double patenting in this case.138
[389]There is no good reason why there should be a different remedy against patents issued following the Patent Office practices than when there is an improper divisional as is examined in Merck (2006).
[390]The valid claims of these patents do not overlap and as discussed under obviousness, there is at least one unobvious claim at issue in each of them.
138Opening statement on validity of counsel for Apotex, June 2, 2008, p. 32 lines
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8.Anticipation
8.1.The Legal Test
[391]The law in respect of anticipation has been recently clarified by the Supreme Court of Canada in Sanofi, particularly at paras. 18 to 50.
[392]In order to anticipate, a prior art document that is considered must meet both the requirements of disclosure and enablement. In that respect, the Supreme Court of Canada approved and endorsed the decision of the House of Lords in Synthon.
[393]With respect to disclosure, Justice Rothstein made it clear that the prior art document must disclose subject matter which, if performed, would necessarily result in infringement of the patent being challenged.
[394]That prior art document must be read by the person skilled in the art with an open mind, trying to understand what that prior art document meant. However, at this stage of the inquiry (disclosure), the skilled person is not allowed to conduct experimentation as there is no room for trial and error, the prior art is simply to be read for the purposes of understanding it. (see Sanofi at para. 25; Abbott Laboratories v. Canada (Minister of Health), 2008 FC 1359, 71 C.P.R. (4th) 237 (Abbott (2008)), para. 67).
[395]The Court also understands that the law, as discussed in Beloit Canada Ltd. v. Valmet Oy (1986), 64 N.R. 287, 7 C.I.P.R. 205 (Beloit), General Tire and Free World Trust
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is still relevant on the issue of disclosure, but the Beloit test has been refined in respect of enablement (see Sanofi paras.
[396]Surprisingly, there was a controversy at trial as to what exactly the prior art document must disclose. Must it reveal all the advantages or the details as to how to best use the patented invention disclosed in the patent or should it only describe the claimed invention? If the latter, should the prior disclosure include only the essential elements of the claim at issue or all of the elements described in the said claim? The parties wrote detailed submissions on this particular issue. Although these were duly considered, there is no need for a lengthy review of the authorities cited therein.
[397]As mentioned, the inquiry the Court must carry out seeks to determine whether or not the matter performed in the prior art would necessarily constitute infringement. Such inquiry is thus necessarily directed at the invention as claimed, and only to the essential elements of the claim, properly construed. In that respect, the Court notes that this also appears to be the understanding of Justice Hughes in Abbott (2008), at para. 76.
[398]In line with its argument that the inquiry is directed to the patented invention only, Apotex also argued that once the patented invention (distinct from what is claimed) is disclosed in the prior art, all claims in the patent must fall for there is only one such
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invention and if it is not novel,139 there should be no patent. This argument must also be rejected, not only because it is not in line with the inquiry at hand, but also because it leads to an absurd result. For example, if the broadest claim (such as claim 1) is invalid because it is too broad, having included a specific embodiment that has been made in the prior art,140 the inventor would not be entitled to claim another aspect of the invention in a dependent claim which covers only a compound that has never been disclosed or made. This would render obsolete what has been described as “the art of claiming” (see Hayhurst) and is also contrary to the approach now mandated by subs. 27(5) of the Patent Act as amended.
8.2.The ‘007 Patent
[399]The Court is satisfied that Apotex has established on a balance of probabilities that when one carries out the process disclosed at p. 3053
139In Merrell Dow Pharmaceuticals Inc., even though there was only one invention, it is evident that the Court was prepared to invalidate the product claims but not the process claims. The Court even granted a certain delay to the applicant to amend its process claims to take into account what it had decided in respect of the product claims. See also the comments in Servier (2009) at para. 63.
140Claim 1 includes all triaryl phosphites mixed with Br or Cl while the prior art document on which Apotex relies only deals with triphenyl phosphite and Cl.
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[400]By the end of the trial, this fact was no longer disputed by Lilly. It was admitted by Dr. Baldwin quite early in his testimony that the kinetic complex would necessarily have been formed when Rydon did this particular experiment.141
[401]Whether one knew that the kinetic compound was formed or not is irrelevant, as is the fact that this compound would disappear if not stabilized or used quickly. This is a perfect analogy and direct application of the principles established and applied by the Federal Court of Appeal in Abbott (2006) 142 at para. 22 and Merrell Dow Pharmaceuticals Inc. mentioned above.
[402]There was a debate as to whether or not the claims could be anticipated if the prior art did not clearly disclose the fact that the fastest forming compound of this reaction was a halogenating compound. As mentioned, I do not construe claim 1 as a “use claim”. But even if I were wrong in this regard, I would apply the principles stated and applied by my colleague Justice Hughes in Abbott (2008) at paras.
[403]It is also relevant to further discuss what is disclosed in Coe and in Rydon in respect of halogenation. The Court finds that on the whole of the evidence (with particular consideration of the testimony of Dr. Baldwin), Apotex has not established that a compound covered by the claims of the ‘007 patent would necessarily participate in the halogenation
141
142As in Abbott (2006), stabilization or maintenance of the compound in solution is not an essential element of any of the claims of the ‘007 patent.
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process described in this prior art (particularly at p. 2285 of Coe and at p. 3049 of Rydon) if one were to follow the instructions given in those documents to prepare alkyl halides from the reaction of TPP, Cl and alcohol without solution (neat) and this even if the reaction was carried out in situ.
[404]Despite this, the Court is also convinced that the kinetic complex formed using the process described in Rydon at p. 3053 (Example B), is as a matter of fact a halogenating compound.
[405]The Court notes that in Abbott (2006), the claims under review also described the compound found to have been anticipated as an antibiotic. This was not viewed as sufficient to save the claim. This, I believe, is because the claims in Abbott (2006), like the claim here, are not “use” claims and the reference to halogen compounds or antibiotics is simply descriptive of the claimed compound.
[406]The parties are agreed that if claims 1 and 8 are anticipated, the only other claim of the ‘007 patent which requires a determination is claim 17. I do not believe that Apotex disputes the fact that neither Coe nor Rydon disclose subject matter, which if performed, would infringe claim 17. In effect, it appears undisputable that one could not infringe that particular claim without using an aromatic or halogenated hydrocarbon solvent.
[407]There is only one experiment in Rydon (at p. 3052) where chlorobenzene (an
aromatic or halogenated hydrocarbon solvent) is used to carry out a reaction between Cl and
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TPP. However, in that experiment, the ratio of Cl to TPP was 1:2, and as such this process could not infringe the process described in claim 17, which requires the use of equivalent amounts of those two substances.
[408]Apotex argued that the use of an aromatic of halogenated solvent is not inventive and that therefore, “there is no distinct patentable subject matter.” It may well be that this essential element of claim 17 is not inventive, but that inquiry is distinct from the one being carried out to determine if the invention as claimed therein is novel. I conclude that this claim is not anticipated by what is disclosed in Coe or Rydon.
8.3.The Lilly Process Patents
[409]In its memorandum on invalidity, at p. 57, Apotex appears to argue that the Lilly process patents were anticipated simply because the triaryl
However, in its additional submissions dealing specifically with the implications of Sanofi, Apotex does not discuss at all these patents under the heading of anticipation. The Court understands from this that the argument that these process patents were anticipated has been abandoned.
[410]In the event that this is not so, the Court has carefully reviewed all of the prior art cited in respect of the Lilly process patents as well as Apotex’s expert reports and finds that there is not one single prior art document that discloses all the essential elements of the
143Again, this appears to be based on the notion that the inquiry in respect of anticipation is directed to the patented invention or inventive concept as opposed to what is covered by the claims at issue.
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claims at issue in these process patents. Thus, none of the subject matter disclosed in any
one single document, if performed, would necessarily infringe these patents.
8.4.The Shionogi Patents
[411]Apotex has not argued that the Shionogi patents are not novel. It is acknowledged that the compound by process claims in three of those patents are indeed novel and that none of the processes described therein were ever carried out on the specific compounds described in the claims.
9.Obviousness
9.1.The Legal Test
[412]We are dealing with patents subject to the
[413]In Sanofi, the Supreme Court of Canada reviewed the legal principles applicable to obviousness and took the opportunity to provide practical guidelines as to the approach that should be adopted in an obviousness inquiry. At para. 67, Justice Rothstein explains that:
It will be useful in an obviousness inquiry to follow the four- step approach first outlined by Oliver L.J. in Windsurfing International Inc. v. Tabur Marine (Great Britain) Ltd., [1985] R.P.C. 59 (C.A.). This approach should bring better structure to the obviousness inquiry and more objectivity and clarity to the analysis. The Windsurfing approach was recently updated by Jacob L.J. in Pozzoli SPA v. BDMO SA,
[2007] F.S.R. 37, [2007] EWCA Civ 588, at para. 23:
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In the result I would restate the Windsurfing questions thus:
(1) (a) Identify the notional "person skilled in the art";
(b)Identify the relevant common general knowledge of that person;
(2)Identify the inventive concept of the claim in question or if that cannot readily be done, construe it;
(3)Identify what, if any, differences exist between the
matter cited as forming part of the "state of the art" and the inventive concept of the claim or the claim as construed;
(4)Viewed without any knowledge of the alleged invention as claimed, do those differences constitute steps which would have been obvious to the person skilled in the art or do they require any degree of invention? […]
It will be at the fourth step of the Windsurfing/Pozzoli approach to obviousness that the issue of “obvious to try” will arise.
[Emphasis in the original.]
When there is some difficulty in identifying the inventive concept or step, the English Court
of Appeal’s comments in Pozzoli SPA v. BDMO SA, [2007] EWCA Civ 588 are useful,
particularly at paras.
19.In some cases the parties cannot agree on what the concept is. If one is not careful such a disagreement can develop into an unnecessary satellite debate. In the end what matters is/are the difference(s) between what is claimed and the prior art. It is those differences which form the ‘step’ to be considered at stage (4). So if a disagreement about the inventive concept of a claim starts getting too involved, the sensible way to proceed is to forget it and simply to work on the features of the claim.
20.In other cases, however, one need not get into finer points of construction – even without them the concept is fairly apparent – in Windsurfing, for instance, it was the ‘free sail’ concept. In yet other cases it is not even practical
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to try to identify a concept – a chemical class claim would often be a good example of this.
21.There is one other point to note. Identification of the concept is not the place where one takes into account the prior art. You are not at this point asking what was new. Of course the claim may identify that which was old (often by a
[414]In Sanofi, the Supreme Court of Canada also closed the debate as to whether the “obvious to try” test should be applied in Canada and if so, in what circumstances (generally paras.
[415]The Court has already discussed the concept of common general knowledge which is relevant to the construction of the claim as well as to the obviousness inquiry. A claim can be obvious based on common general knowledge alone or by a publication read by a posita in the light of the common general knowledge.
[416]Before turning to the application of the law to the patents at issue, it is worth saying a few words about “mosaicing” as this illustrates what one needs to establish before the Court can consider together individual prior art publications that are not necessarily part of the common general knowledge.
144See also Pfizer Canada Inc. v. Apotex Inc., 2008 FCA 8, 72 C.P.R. (4th) 141 at para. 29.
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[417] In Terrell,145 at
The “mosaicing” of individual documents or prior uses is not permissible, unless it can be shown that the skilled person, confronted with a particular citation, would turn to some other citation to supplement the information provided by the first. Whether he would do so is a question of fact.
[418]It is also worth reproducing Justice Hugh Laddie’s comment in Lilly ICOS LLC v. Pfizer Ltd. (2000), 59 BMLR 123 (Ch. Pat.), [2001] F.S.R. 16 at para. 66:
When any piece of prior art is considered for the purposes of an obviousness attack, the question asked is ‘what would the skilled addressee think and do on the basis of this disclosure’?’ He will consider the disclosure in the light of the common general knowledge and it may be that in some cases he will also think it obvious to supplement the disclosure by consulting other readily accessible publicly available information. This will be particularly likely where the pleaded prior art encourages him to do so because it expressly
[419]More recently, Justice David Kitchin, who was twice cited by the Supreme Court of Canada in Sanofi,146 said, at paras. 83 and 84 of Scinopharm Taiwan Ltd v. Eli Lilly & Co., [2009] EWHC 631 (Pat.), [2009] All ER (D) 282 (Mar):147
145This
146For his review of the law of enablement in Webber v.
147See also the Court of Appeal of England and Wales’ comments in Daiichi (at paras.
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83.There is one other matter it is convenient to mention at this stage. Scinopharm's case depends, in part, upon reading various items of prior art together. It contends it is permissible to do this if they are in the same technical field. I do not agree. In my judgment it is only permissible to read two documents together if it is obvious to do so, as the Court of Appeal made clear in Smithkline Beecham v Apotex Europe [2005] FSR 23 at [96]:
"96. I think the Judge erred in principle here. The skilled man has his common general knowledge — the mental tools of his trade — but no more. The law of obviousness supposes that he can be given any individual piece of prior art and read it with that knowledge. The piece of prior art forms part of the "state of the art". What he cannot do is to just link one piece of prior art with another, unless so to do would itself be uninventive.
"In dealing with obviousness, unlike novelty, it is permissible to make a 'mosaic' out of the relevant documents, but it must be a mosaic which can be put together by an unimaginative man with no inventive capacity.""
84.The question whether it is obvious to read two documents together is one to be considered in the light of the particular circumstances of each case. Relevant factors may include whether one document refers to the other or whether one or both documents would be found on a literature search of the kind the skilled person would routinely carry out before attempting to find a solution to the problem the patent addresses.
[420]There was also some debate as to the use of post art, which warrants some comments.
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[421]It is evident that in certain specific circumstances, literature published after the filing date148 can be considered as evidence of what was commonly known or what was part of the state of the art at the relevant time. For instance, the Sammes article,149 which purports to review recent chemistry of the
[422]Apotex argues that Tseng and Michalski can be used to show what the posita would have learned from reproducing the experiments set out in Rydon and in Coe, with the benefit of 31P NMR spectroscopy.
[423]The Court agrees that this may constitute admissible evidence if introduced by an expert, but one must be careful not to cross the line and treat such art on the same footing as
148In the
149Peter G. Sammes, “Recent Chemistry of the
150Obviously, that does not mean that anything not found in Sammes would necessarily be excluded from the common general knowledge or from the state of the art.
151However, an addendum was added. It is clear that the article now refers to publications in 1974, with some even dated 1975, presumably published before the revised manuscript was received on January 28, 1975.
152This included Edwin H. Flynn, ed., Cephalosporins and Penicillins; Chemistry and Biology, (New York: Academic Press, 1972), although some chapters were attached to Dr. Barrett’s report
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prior art. For example, one cannot simply assume that because there is no mention of the invention under review in the article, its author was unaware of such developments. Once a patent application is filed, inventors will often more freely discuss their findings with colleagues and friends outside of their institution and not necessarily in the context of public conferences. Thus, it may be very difficult to ascertain if indeed the author of a post art publication really did his work without knowledge of the invention. This was obviously one of the main considerations for setting the date of the invention as the relevant date for the obviousness inquiry in the
[424]Also, in the absence of evidence from or about the authors, how is the Court to know whether what they did was what a posita (objective test) would have done before the filing date? Were the authors super skilled? Were they inventive? Did they go beyond what would be routinely done by a posita? Did they have a special motivation to do the things they did? All this to say that the probative weight of this evidence will depend on the circumstances, particularly on the evidence of the expert using it and often on whether it is used simply to corroborate an opinion reached independently by an expert available for
[425]The Court will now apply these principles to the patents under review.
153Again, the filing date (including that of the priority application, if any) is just a presumed date of the invention in the absence of evidence to the contrary.
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9.2.The ‘007 Patent (Claim 17)
[426]Apotex submits that it has established that the kinetic complex would necessarily be produced using the method described in Rydon, reacting one to one equivalents of Cl and TPP.154 Thus, a posita practising the method of the prior art or routine variations of it with the benefit of 31P NMR spectroscopy155 would easily discover that it produces the
[427]Apotex adds that it would be more or less
9.2.1.The Person Skilled in the Art
[428]I shall use the definition of the posita found at para. 92.
9.2.2.Relevant Common General Knowledge
[429]The Court is satisfied that it has been established that the posita would be familiar with the aromatic and hydrocarbon solvents discussed in claim 17, including methylene chloride and chlorobenzene. The posita would equally be aware of the properties of such solvents.156
154One must remember that a claim can be anticipated but not obvious. See for example SmithKline Beecham Pharma Inc. v. Apotex Inc., 2001 FC 770, [2001] 4 F.C. 518, aff’d 2002 FCA 216, [2003] 1 F.C. 118 (C.A.) particularly at para. 22 of the FCA.
155Lilly noted that it was not clear that experimentation was allowed in this context. The Court need not address this issue here given the findings made on the overall issue.
156As the posita does not have to have any particular knowledge of
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[430]A posita would also be familiar with 31P NMR spectroscopy and would have a working knowledge of how to use it to identify phosphorus compounds, if and when necessary.
[431]Disproportionation is a general type of chemical process which would be known to the posita.
9.2.3.Rydon, Coe and Ramirez
[432]It is clear that Rydon and Coe are part of the relevant prior art, for these publications are expressly acknowledged as such in the patent.157 Lilly, however, contests that they form part of the posita’s common general knowledge because of the differences of opinion between the experts as to their meaning and exactly what they teach. The plaintiffs also argued that Apotex failed to provide any direct evidence in that respect. Given the admission contained in the patent, such debate is futile and it can have no impact on my conclusion regarding the obviousness inquiry.
[433]Apotex and its experts spent much time explaining why they believe that what is called the thermodynamic product and described as a dihalide ((PhO)3PCl2) in the ‘007 patent is in fact, in their view, the monohalide ((PhO)4PCl) discussed in Rydon, while the kinetic compound would be the dihalide. Drs. Modro and Olah also explained how they
157Shire, at para. 24: “[t]he patent begins by acknowledging that certain things are already known and constitute, in patent language, prior art. Such an acknowledgement by the patentee is considered a binding admission as to prior art […].”
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understood the various reactions taking place including how, in their view, the thermodynamic product resulted from a disproportionation of the kinetic product.
[434]For our purposes, determining the stoichiometry of the thermodynamic product is a debate that need not be settled, especially when one considers that Dr. McClelland did not appear to agree with the views of Drs. Modro, Chivers and Olah and testified during his
[435]It is acknowledged by all that Rydon, Coe, Ramirez or any other publication that will be discussed in relation to the ‘007 patent, do not refer to, or even mention, disproportionation to explain the relationship between the monohalide and the dihalide described in Rydon. With respect to the various mechanisms at play, including the reaction between Cl and TPP, Dr. Hunter noted that one would need to do a Ph.D. on the subject to fully understand them.
[436]For our purposes, it is sufficient to say that Rydon and Coe teach at least the following:158
158The Court will include here all information that could be relevant not only to the ‘007 patent but to the Lilly process patents in order to review these publications only once.
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•The reaction between Cl and TPP is quite complex and some mechanisms are still regarded as obscure or not well understood. (Rydon, p. 3044)
•Theoretically, 159 the system may contain as many as 45 species, most of which would be in equilibrium (covalent form/ionic form).160 Depending on the conditions used for the reaction, including temperature, concentration and solvents, different species will be produced “while solubility will play a major role in determining the nature of the solid phase separating from solution.” (Rydon, p. 3045)
•The authors reported on and tested nine crystalline solids, six of which were described in Coe as dihalides (see Rydon, p. 3043). Certain compounds prepared by the authors could not be prepared as purified specimens.161
•Whatever their true nature or stoichiometry, Rydon indicates that:
i.The reaction of Cl/TPP in a ratio of 1 to 2 in chlorobenzene produces
ii.The reaction of Cl/TPP in a ratio of 1 to 1 without solvent produces
159Dr. Olah noted however that this was speculative and was never established.
160For example, “the covalent triphenoxy dihalide may be expected to be in equilibrium with all or any of the six possible ionic forms.” (Rydon, p. 3045)
161None of the experts who tested the reaction of TPP and Cl succeeded in crystallizing pure specimens of the kinetic complex. The ‘007 patent indicates that the kinetic complex could not be isolated.
162The method used by the authors to mix Cl and TPP in all their experiments was to slowly pass Cl gas through TPP (bubbling through).
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iii.The reaction of Cl/TPP in a ratio of 1 to 1 in hexane produces triphenoxy- dichloride – a dihalide. (p. 3053, Example B)
iv.The reaction of Cl/TPP in a 1 to 1 ratio in acetonitrite produces triphenoxy- dichloride – a dihalide. (p. 3053,
•With respect to halogenation, Coe only tested the product(s) from the reaction of Cl and TPP without solvent.163 Rydon notes that the “monohalides may have some advantages over the dihalides previously employed for the preparation of alkyl halides.”164 (Footnote omitted, p. 3044)
[437] I turn now to the article by Ramirez, who was described by Dr. Olah as a pioneer in 31P NMR spectroscopy. In that article, it appears that the authors were trying to obtain an authentic sample of pentaphenoxyphosphorane and analyze it. In that respect, they were following work that started in 1927 and was pursued by other authors in 1959. Apparently, these attempts produced mixtures of dichlorotriphenoxyphosphorane and other materials, leading the authors to reinvestigate the previously reported mechanisms in Rydon. Though they give few details about their experiments, the Court finds that one can reasonably165 infer from the reference to the addition of Cl to TPP in hexane solution for the purpose of reinvestigating previously reported synthesis of a triphenylphosphite dichloride
163One experiment was performed in situ, diluting TPP in alcohol.
164According to Dr. Modro, this teaching is contrary to what is taught in the ‘007 patent.
165See Dr. Hunter report
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(dichlorotriphenoxyphosphorane)166 that they followed the procedure of Example B on p.
3053 of Rydon, which is the only synthesis known in hexane in evidence before the Court. The authors dried the precipitate obtained and tried in vain to purify it (not part of procedure in Example B). They note that:
All that can be said about this substance is that, in CH2Cl2 solution, it gives only one signal in the 31P nmr spectrum. The chemical shift does not vary significantly in several solvents.
[p. 3509]
The said shift was at
9.2.4.The Inventive Concept
[438]The inventive concept of claim 17 is that the reaction of equimolar amounts of triaryl phosphate and Cl or Br in a halogenated or aromatic hydrocarbon solvent produces an intermediate that is the faster forming product of the reaction: the
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166Apotex did not point to any experiment in Richard Anschütz & William O. Emery, “Ueber die Einwirkung von Phosphortichlorid auf Salicylsäure und auf Phenol” (1889) 253 Annalen der Chemie 105, which is cited (in German only) where Cl and TPP are mixed in a hexane solution. The Court infers from this that there was no such experiment.
167Following the new convention.
168A form of triphenylphosphite dichloride,
15.
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9.2.5.The Differences between the Common General Knowledge and the
[439]In respect of equimolar quantities of Cl and TPP169, the only solvent used in Rydon and Coe was hexane, which is not an aromatic or halogenated hydrocarbon solvent.
[440]Although, as mentioned, it is evident that the reaction performed in Rydon and Ramirez produced a first formed intermediate, there is no recognition therein that the above- mentioned reaction produces such an intermediate or that such intermediate (first compound) will transform over time into a second compound (final compound).
9.2.6.Would These Differences be Obvious to the Person Skilled in the Art?
[441]Apotex argues that the use of chlorobenzene or methylene chloride (aromatic or halogenated hydrocarbon solvent) was a worthwhile option and that it was
[442]According to the defendant, Rydon taught the use of chlorobenzene and the fact that the method used involved
[443]At first, the Court was sympathetic to this argument, but on a closer review of the evidence, the Court realized that it may well have been influenced by knowledge gained
169The order of addition is not relevant to claim 17, although for the purpose of enablement, one can gather from the disclosure that the preferred method is to add TPP to Cl.
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from the ‘007 patent. Hindsight is the one thing that is particularly important to avoid at this stage of the inquiry.
[444]Uncharacteristically, Apotex’s oral and written arguments were extremely brief on this point (see para. 112 of their memorandum on validity; p. 7 of their representations on reply; and, paras.
[445]They rely essentially on their
[446]First, with respect to the skilled addressee’s knowledge of solvents suitable for cephalosporin chemistry, given the definition of the skilled addressee in the ‘007 patent, it is not clear how this evidence would be relevant. How and why would a posita, as defined, would come to use the kinetic product to perform chemistry on cephalosporins? Such use, according to the evidence of Dr. Baldwin, was inventive (see below discussion of Lilly process patents).
[447]One would think that, if a solvent is obvious for any reason, it is sufficient to conclude the present inquiry in respect of this element of the inventive concept. Thus, Apotex did not need to show that the use of such solvents was obvious for this type of chemistry.
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[448]With respect to the second argument based on Ramirez, the Court notes that the actual reaction between Cl and TPP was carried out in hexane and that none of the experts testified that this publication taught them that the dihalide discussed in Rydon would be produced by carrying out the reaction in methylene chloride.
[449]Apotex certainly did not explain how the Court should deal with the evidence of Dr. Modro, who commented on claim 17 in a manner that appears to contradict Apotex’s current argument that Rydon taught the use of chlorobenzene or an aromatic hydrocarbon solvent to prepare a dihalide. In effect, with full knowledge of what was disclosed in Ramirez and Tseng, Dr. Modro said, at paras. 76 and 77 of his report
[450]Having carefully examined the evidence and considered the motivation for as well as the details of how the inventors made their discovery, the Court concludes that Apotex has not established on a balance of probabilities that it would be more or less
170The Court notes that Dr. Chivers’ original report was amended to address Lilly’s objection about duplicate evidence. In particular, paras. 49 and 50, which were to the same effect as those Dr. Modro referred to above were deleted. Dr. Chivers had apparently reached that conclusion with full knowledge of Tseng and Michalski’s work.
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described in at p. 3053 of Rydon (Example B) ought to produce the same compound as when done in hexane, particularly that it would produce the dihalide described in Rydon.
[451]In my view, this is sufficient to conclude that claim 17 is not obvious. For whether or not one could actually identify the compound formed through the use of 31P NMR spectroscopy is irrelevant if Rydon in fact taught away from the use of the claimed solvent.
[452]However, as this matter may go further, it is worth reviewing the evidence in respect of what the posita would learn through the allegedly routine use of such technology. This is especially so considering that this evidence and my findings in this respect will be relevant to the inquiry into the obviousness of the Lilly process patents, particularly the aspect of the claimed invention relating to the stabilization of the kinetic product through the use of a tertiary base.
[453]Obviously, Apotex’s first hurdle is to explain the conclusion in Ramirez, which contradicts their argument that one could quickly identify the first formed intermediate of the reaction simply by using the 31P NMR technology.171
[454]For that purpose, they rely on the experiments carried out by Dr. Modro, as well as the experiments carried out in Tseng and Michalski.
171As mentioned, the Court did not accept Apotex’s proposed construction that all claims were limited to a complex exhibiting a +3.7 ppm shift. However, the Court did not understand that this argument applied only if the ppm shift of the kinetic complex was an essential element of the claim properly construed.
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[455]To determine what weight should be attributed to such evidence (particularly the post art) the Court will quickly review how Apotex’s experts used this information.
[456]Dr. Chivers concluded that a posita would be able to understand and identify the kinetic compound on the basis of the experiments done by Dr. Modro, who performed 31P NMR tests and analyzed the evolution of the spectral information about the products in solution over 23 hours (see
[457]Dr. Modro uses Tseng to confirm his view that: 1) the tetraphenoxyphosphorane (monochloride) is the thermodynamic product described in the ‘007 patent (by comparing the ppm shift obtained by Tseng and the ppm shift disclosed in the ‘007 patent for the thermodynamic product); and, 2) the equilibrium mechanism involved (ionic form versus covalent form which is quite distinct from the disproportionation mechanism discussed earlier). He refers to neither Michalski nor Ramirez.173
[458]Dr. Olah is the only expert who refers to Ramirez. He affirms that based on the conclusion of Tseng and Michalski the authors of Ramirez were wrong. Dr. Olah does not
172Again, this shows that this expert did not carry out research in that respect and simply acted on the basis of documents provided to him (listed at para. 3(d) of his affidavit). There is no explanation for why Apotex did not give him that publication which was obviously available to Dr. Olah.
173Again, these were not among the publications provided to him by Apotex’s counsel.
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explain why, without using the knowledge gained from the ‘007 patent,174 it would be so evident that both Rydon and Ramirez were wrong in identifying the product of the experiment described at p. 3053 of Rydon (Example B) as a dihalide. As I said, in any event, the stoichiometry of the compounds is not particularly relevant here.
[459]Dr. McClelland refers to the rapid equilibrium phenomenon which was disclosed in Rydon, further explained in Tseng and perfected in Michalski. This phenomenon explains, in his view, the difference in ppm shifts reported for the kinetic product. Again, this relates to the equilibrium between the ionic and the covalent form of the kinetic product, not to its transition to the thermodynamic form (disproportionation).
[460]This evidence is not particularly helpful to determine if, through the use of this technology and by simply repeating the process set out in Rydon (Example B, p. 3053), one would have come to the conclusion that the reaction produces two products (a first, faster forming intermediate and a final product).
[461]Dr. McClelland did say on
174There is no indication that Dr. Olah was told not to use such knowledge.
175
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[462]However, there is no similar evidence in respect of the method and the temperature used by the authors of Michalski when they reacted the TPP with the halogen. This was clearly very different from the process disclosed in Rydon and there is no evidence that it was simply a variation that would routinely be carried out by a posita176 before the date of filing. The Court is not prepared to assume that what was done in Michalski was what a posita would be expected to do if he simply wanted to identify the product formed by the
Rydon method, as opposed to embarking on a full research project to elucidate the reaction mechanism of TPP and halogen.177
[463]That said, there is no evidence that the method used (31P NMR) for the experiments performed in Ramirez was not in accordance with the practice of positas as of the filing date. In fact, there is no evidence that there was any accepted practice as to when a spectra should be taken – such as before or after attempts to purify a product or within a certain time of having prepared a product.
[464]Certainly, there is no evidence that a posita would, as a matter of routine, take and analyze 31P NMR spectras of the product of the reaction over a period of 23 hours. In fact, this was not done in any of the publications before the Court.
[465]As mentioned earlier, Dr. Modro did carry out this type of experiment on behalf of Apotex. These were done with full knowledge of the teachings of the ‘007 patent. The Court
176Dr. Chivers was careful to describe the work in Michalski as simply being “similar” to the Rydon process.
177See other publications which also bear Dr. Michalski’s name, listed in footnotes 3a) and b) of
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does not accept these experiments as proof of what a posita carrying out routine experimentation at the relevant time would have done.
[466]In fact, it appears that, to attribute a particular ppm shift to a specific compound, one needs to know with some certainty what species is in the sample being tested.
[467]Ramirez, having failed to obtain a purified specimen, tentatively attributed the shift of
[468]There is also no evidence that Ramirez or Tseng178 discuss the disproportionation mechanism referred to by Drs. Modro and Olah. There is no indication that they clearly and easily understood what these two experts suggested was obvious.
[469]In fact, it is telling that Tseng, who reported a shift of +7.7 ppm for the compound resulting from the reaction of equivalent amounts of TPP and Cl, attributed the other two
178The authors confirmed Rydon’s views with respect to equilibria (ionic versus covalent forms) of species involved in the reaction.
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shifts he obtained (one of which was the
[470]With respect to motivation, although the work of Ramirez, Tseng and Michalski do support the view that there was an interest in identifying the compounds reported in Rydon, it is not clear that these authors were looking for a halogenating compound. None of their experiments are directed to halogenation or to the properties of the Rydon compounds as halogenating reagents. They more likely resemble those carried out by theoretical chemists interested in the mechanistical reaction of Cl and TPP reported in Coe and Rydon. That said, the Court is ready to assume a certain degree of motivation.
[471]Sanofi teaches that in some circumstances, the means by which the inventor reached the invention may provide evidence in support of a particular conclusion on obviousness.
[472]Such a review will indeed be useful when inquiring into the obviousness of the Lilly process patents. However, the path followed by the inventor does not shed much new light in respect of claim 17 of the ‘007 patent. It mostly corroborates Dr. Baldwin’s view that, contrary to theoretical chemists, practicing synthesis chemists are more interested in the reactivity of compounds than using techniques such as 31P NMR spectroscopy to characterize and identify compounds unless they are motivated to do so by reasons other than just looking for a halogenating compound.
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[473]In effect, it appears the inventors were not motivated to use 31P NMR spectroscopy to characterize the products of the reaction of TPP and Cl until they encountered a problem reproducing the experiment where they had successfully chlorinated the enol on which they were working.179 Until then, they were satisfied to work with whatever product resulted from reacting equivalent amounts of TPP and Cl in the solvent in which they were working on their cephalosporin substrate. Thus, it is the discovery that in certain circumstances the reagent produced by the reaction worked while it was inactive in others, which led to an in- depth study of the products, their stability, method of formation and
[474]Moreover, the use of TPP and Cl was not a step undertaken on the basis of knowledge gained from Coe and Rydon. In effect, the idea to try phosphite as a possible reagent came to a Lilly chemist working in a different department180 after a discussion with a graduate student at Harvard, who was working on a totally different project but had noted that phosphites were more reactive than phosphines in his hands.
[475]In view of the foregoing, Apotex has not established that by practicing the method described in Example B, p. 3053 of Rydon with the benefit of 31P NMR spectroscopy, it would be more or less evident that the faster forming product of the reaction was an
179See Lilly Process Research and Development Division Progress Report
180In 1976, a general request for help and suggestions of possible reagents to try was sent by Dr. Hatfield’s team (see
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intermediate (of transient nature). It would thus not be more or less evident to the posita that it would be beneficial to stabilize this compound by using a tertiary base.181
9.3.The Lilly Process Patents
9.3.1.Identify the Skilled Addressee
[476]I shall use the definition of the posita found at para. 92.
9.3.2.The Relevant Common General Knowledge
[477]The common general knowledge described in respect of the ‘007 patent would be available to the skilled addressee of the Lilly process patents.
[478]The disclosures of these process patents make it very clear that the particular steps or chemistry intended to be performed, i.e. the cephalosporin sulfoxide reduction, the enol chlorination and the imino halide formation were known in the prior art but were performed using other reagents.
[479]It was also known in 1978 that various phosphorus compounds (including PCl5) could reduce sulfoxides in general (as opposed to the more complex cephem cephalosporin sulfoxides under review).
[480]There was a known reagent called the Vilsmeier reagent which was typically made by using PCl3 to transform dimethylformamide. It was also known that PCl5 as well as other
181As mentioned, these findings are relevant to the next inquiry in respect of the Lilly process patents.
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compounds such as phosphine, oxalyl chloride and thionyl chloride could be used with dimethylformamide to generate the Vilsmeier reagent. The Vilsmeier reagent is a non phosphorus reagent.
[481]In respect of cephalosporin synthesis, the posita generally knew how to change an OH at the
[482]The Court is also satisfied that at the relevant time, the posita would naturally view
[483]With respect to sulfoxide reduction in particular, the natural caution described in Dr. Baldwin’s affidavit would be heightened by the fact that the literature reported that usual methods for reducing sulfoxides would not work with cephalosporins. Dr. Baldwin’s views in that respect are corroborated by a statement found in U.S. Patent No. 3,641,014.182 This document indicates that:
[t]here is a claim in the literature (J. Chem. Soc. (C), 1966, No. 13, p. 1142) that the usual methods for reducing sulfoxides will not reduce ∆3
182“Reduction of ∆3 Cephalosporin Sulfoxides”, (3 October 1968)
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∆3
[p. 2, lines
9.3.3.The Dreux Article and Other Prior Art
[484]This article, entitled “Deoxygenation of Sulfoxides under Mild Conditions with a New Reducing Agent:
[485]Having carefully considered the content of these publications, the Court need not deal with this particular issue further, given that even if they were part of the common general knowledge, it would have no impact whatsoever on the final determination of the issue of obviousness as the Court accepts Dr. Baldwin’s testimony regarding how it would be understood and used by the posita at the time.
183The only two other phosphites mentioned in this review are TPP (used alone), which was found to reduce the dimethyl sulfoxides at elevated temperatures and chlorophospholane.
184Although Drabowicz is cited in “Cephalosporin Reduction Process”, U.S. Patent No. 4223133 (1 February 1979)
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[486]As mentioned in Drabowicz, Dreux shows that dialkyl, alkyl, aryl and diaryl sulfoxides can be reduced with cyclic phospholane used with a catalytic amount of iodine.185
[487]It is worth noting that Dreux specifically mentions that the cyclic phospholane “seems to be a better reducing agent than triphenyl phosphite, which according to the available data,[186] is itself an efficient reducing agent.” (p. 506)
[488]With respect to Drabowicz,187 it is acknowledged that the only method described therein that applied directly to penicillins or cephalosporins is found at p. 78. It refers to a
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185One crystal.
186This was established by E.H.
187
188(1976) Tetrahedron Lett. 971.
189
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9.3.4.The Inventive Concept
[489]The inventive concept in each of the claims at issue190 was the use of the kinetic complex – the fastest forming intermediate of the reaction of equivalent amounts of triaryl phosphite and Cl or Br – to execute the steps described in these various patents, i.e. the cephalosporin sulfoxide reduction, enol chlorination and imino halide formation.
[490]In addition to this, some of the claims of the ‘468 patent (for example, claim 20) and the ‘536 patent (for example, claim 14), include the use of a tertiary amine base (including pyridine) to stabilize the kinetic complex. Also, with respect to the claims of the ‘536 patent, the inventive concept includes the use of a halogen scavenger to dispose of the halogen released during the formation of the kinetic complex to allow the reduction to take place.
9.3.5.The Differences between the Prior Art Including Common General Knowledge and the Inventive Concept of the Claims
[491]There is no disclosure that any compound resulting from the reaction of equivalent amounts of TPP (or any other triaryl phosphite) and Cl or Br in a solvent – let alone the first formed intermediate compound191 – is or would be useful in cephalosporin chemistry, including particularly cephalosporin enol halogenation.192
190Rather than going through each claim individually, the Court describes the general inventive concept of the claims in the process patents. It is well understood that the exercise should normally be carried out for each claim at issue but the Court is satisfied having done the exercise that the results here would be the same.
191Dr. Modro’s experiments confirmed that the thermodynamic compound or final product of this reaction cannot perform the three steps covered in the ‘536 patent. The disclosure of the patents also makes it clear that the thermodynamic cannot perform the other reactions set out in the ‘725 and the ‘468 patents.
192Coe and Rydon only discuss halogenation of simple alcohols.
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[492]There is no disclosure in the prior art that a phosphorus containing reagent will halogenate a cephalosporin enol (the ‘725 patent), nor is there prior disclosure of the use of a pentavalent phosphorus reagent to effect sulfoxide reduction in cephalosporins (the ‘536 patent).
[493]There is no prior disclosure of the use of the kinetic complex in sulfoxide reduction requiring concomitant use of a halogen scavenger.
[494]There was no known or disclosed reagent that could perform all the steps described in the ‘536 patent – separately or in one pot (without the need to isolate).
[495]There was no disclosure of the value of stabilizing or maintaining the first formed product of the
9.3.6.Do these Differences Constitute Steps which would have been Obvious or Do they Require Any Degree of Invention?
[496]It is here, according to Sanofi, that the “obvious to try” test might be appropriate. Apotex argues that, having regard to the type of reagent used to execute those transformations in the past, either in cephalosporin chemistry or in general organic chemistry, it would have been obvious to the posita to try the pentavalent phosphorus compound resulting from the reaction of TPP and Br or Cl disclosed in Rydon. It would
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have been more or less
[497]As noted by Dr. McClelland during one of his
[498]Here again, the expert evidence adduced by Apotex to support its position in respect of the Lilly process patents has very little probative value, given that none of the experts who opined on these patents were qualified to discuss what a posita would have found obvious to try.
[499]As noted previously when discussing Rydon, Coe, Ramirez and what one would learn through the use of 31P NMR spectroscopy, the Court is not persuaded that the posita would know that the first formed product of the reaction disclosed in Rydon is an intermediate that transforms over time. The stabilization of the kinetic complex through the use of a tertiary base could not be
[500]Dr. Modro, when discussing the ‘007 patent observed that Rydon expressly taught the contrary (see para. 24(3) of his affidavit,
193Although this comment appears to apply to general organic chemistry (Dr. McClelland has no experience in
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would know or find it evident to use the (first formed) kinetic complex instead of the thermodynamic compound (final compound).194
[501]The Court has very carefully considered Dr. Baldwin’s
[502]The Court was not persuaded by the expert evidence that either the thermodynamic or the kinetic product would be on the list of possible reagents to try.
[503]The Court has assumed here that there was motivation to find an appropriate reagent to execute those steps given that there was vigorous research in the relevant field
[504]Certainly, Lilly was particularly motivated to find such a reagent, given that it wanted to commercialize cefaclor.
194Dr. Modro’s own experiment confirmed that the thermodynamic cannot be used instead of the kinetic complex in the cephalosporin chemistry described in the process patents.
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[505]As mentioned, despite this, Dr. Hatfield and his team (particularly his lab technician, Mr. Fisher),195 who were actively trying to improve the Chauvette process (particularly the chlorination of the enol), after trying several potential candidates on what Dr. Blaszczak called their “laundry list”196 over a period of approximately two years, felt the need to send a general request to all research chemists in the
[506]As noted earlier, Dr. Blaszczak (one of the inventors) conceived the idea of trying “phosphite” after a discussion with a Harvard graduate student who was experimenting with them in a completely different context. The idea did not come to him because of what was generally known or disclosed in the literature.198
[507]When he mentioned it to Dr. Hatfield and Mr. Fisher, they were experimenting with triphenyl phosphine in carbon tetrachloride and triphenyl phosphine in chloride. This suggestion led them to change the phosphine in the reactions they were testing for a phosphite to see what would happen.199
[508]Again, it is worth noting that the inventor of the ‘536 patent (sulfoxide reduction and the
195These scientists were very experienced in the chemistry of cephalosporins.
2.)
196See
197See
198See
199See
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used to effect sulfoxide reduction. This is particularly significant when one considers that these inventors knew what the posita did not know at that time – that the kinetic complex could effect the enol halogenation and the imino halide formation. Clearly, they also did not appreciate that such reduction could only work in the presence of a halogen scavenger.
[509]As mentioned, given that there was no other reagent known to be efficient enough to perform all three of these steps let alone in one pot, the Court is at a loss to understand how Apotex could say that the posita ought to expect that the said reagent would work to perform those three chemical reactions, that there is no synergistic result flowing from the possibility of carrying them all in one pot and that it was a mere aggregation of known steps. None of the experts contested the added value of being able to perform those three reactions in one pot. This evidently improved the cost and yields obtained. Even Dr. Hanessian referred to the kinetic complex as the “magic reagent.” This echoed the comments of Dr. Baldwin, who noted that he had many ways of listing new discoveries and this one was in the highest category; the one that he wishes he had thought of.200
[510]What happened at Lilly in reality certainly supports Dr. Baldwin’s opinion. It points to a conclusion that: i) it was not obvious to try the product of the reaction of TPP and Cl, let alone the first formed intermediate; and, ii) it was not
200
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[511]In view of the foregoing, Apotex has failed to persuade the Court that the claims at issue were obvious.
9.4.The Shionogi Patents
[512]Apotex’s experts (Drs. Hanessian, Martin and McClelland) relied on various publications to opine that the chemistry disclosed in each of the Shionogi patents was well- known and obvious.
[513]The Court acknowledges that the common general knowledge of organic chemists would be part of the common general knowledge of the posita. It is in that respect only that the evidence of Drs. McClelland and Martin was given weight. As noted earlier, because of their lack of expertise, or even focus on
[514]Hence, the Court will only comment here on the prior art and common general knowledge relied upon by Dr. Hanessian. These would include the following:
i.The ‘547 patent
a.Ricardo Scartazzini & Hans Bickel, “Neue
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Modifikationer van Antibiotika, 10 Meitteilung” (1974) 57 Helvetica
Chimica Acta 1919
b.Robert R. Chauvette & Pamela A. Pennington, “Chemistry of Cephalosporin Antibiotics XXIX.
c.R.D.G. Cooper, & F.L. José, “Structural Studies on Penicillin Derivatives. IX. Synthesis of
ii.The ‘924 patent
a.Robert Thornton Morrison & Robert Neilson Boyd, Organic Chemistry, 2nd ed., (Boston: Allyn and Bacon, 1966) at 667.
b.
iii.The ‘132 patent
a.
b.Douglas O. Spry, “Synthesis of
201This is only relevant to the choice of base employed in the claimed reaction. As this is not controversial, it will not be discussed further.
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iv.The ‘026 patent
a.R.B. Woodward et al., “The Total Synthesis of Cephalosporin C1” (1966) 88 Journal of the American Chemical Society 852
b.“Antibiotika”, German Patent App. No. 2400165, published July 18, 1974
c.W. Maas et al., “Mechanism of Enamine Reactions. IV. The Hydrolysis of Tertiary Enamines in Acidic Medium” (1959) 32 Journal of Organic Chemistry IIII 5089
9.4.1.The Person Skilled in the Art
[515]The posita to whom these patents are addressed was described earlier (see para 75).
9.4.2.Common General Knowledge
[516]The parties are agreed202 that all the publications discussed in Sammes were part of the literature that would have been commonly known to, and generally accepted by, the posita at the relevant time. This means that most of the
202As per their final written submissions.
203See affidavit of Dr. Barrett
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knowledge. However, the experts disagree as to what some of these publications taught the posita. This will be discussed later on.
[517]
[518]It was known to the posita that the most advantageous and economical method for producing a cephalosporin was to synthesize it from penicillin.
[519]Such synthesis had been done for cephalexin, another cephalosporin antibiotic, which was a
arrangement or chemistry (conversion of a penicillin sulfoxide ester). This Morin arrangement, discovered in the mid 1960’s, was the commonly used method to open the 5- membered ring of the penicillin molecule to transform it into a
[520]In the early 1970s, Dr. Cooper, building on the work of Dr. Morin, developed another method for opening the penicillin ring and made what has been referred to as the Cooper thiazoline compound.206 However, at the relevant date, this compound, which is a penicillin derivative, had never been converted to a
204See
205Dr. Morin, like Dr. Cooper, was a research chemist at Lilly.
206See patent,
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[521]The
Shionogi synthetic pathway,207 had been disclosed in two then relatively recent publications, Chauvette and Scartazzini. At the time of these publications the patent on cefaclor (product by process) had not yet been published, the only known way of making this
[522]Ozonolysis, sulfonylations, aminations, allylic halogenations208, acylations, hydrolysis and bonds forming through nucleophilic substitution were known chemical processes, commonly used in general organic chemistry in 1975.
[523]Both Drs. Chauvette and Scartazzini used ozonolysis on a cephalosporin compound (a fully cyclicized
[524]In Cooper 1 at p. 1019, Dr. Cooper indicates that ring closure to a cephem from his thiazoline azetidinone would involve an oxidative cyclization. Consequently, he had investigated the oxidation of compound 4 (which is compound 7 in Cooper 2) under various conditions in an effort to chemically duplicate this biosynthetic postulate. He explicitly notes that “[t]he isopropenyl double bond of 4 is generally inert to electrophilic reagents, [209] it
207Common disclosure p. 2.
208Allylic bromination is a specific type of allylic halogenation.
209Ozone is a electrophilic agent.
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being recovered in high yield from reactions with bromine and permaleic acid.” He then went on to report on the isomerisation of the double bond of the Cooper thiazoline compound, followed by ozonolysis, which resulted in the formation of a new compound described therein.210
[525]In Cooper 2, (the reference used by Dr. Hanessian), Drs. Cooper and José discussed other chemistry but refer to their earlier reported ozonolysis of the isomerized version of the Cooper thiazoline.
[526]There is no evidence from Dr. Hanessian on how a posita would construe the comment found in Cooper 1 with respect to the isopropenyl double bond. There is in fact no evidence that this expert was even aware of, or remembered (assuming he had read it sometime before in his career), this comment given that the article he uses in his report was provided to him by Apotex’s counsel (see
[527]Having carefully considered the extensive
210Dr. Barrett indicated that this compound was not suitable for the type of chemistry described in the Shionogi process. It could only be used to make a compound that did not require a side chain.
211See
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[528]It was also known that Dr. Spry used a
[529]It was also known and generally accepted that, in the context of transforming a penicillin molecule into a cephalosporin, Dr. Webber performed an allylic bromination after migrating the double bond from ∆3 to ∆2. Dr. Webber worked on a compound with a methyl (CH3) at the
[530]Also part of the common general knowledge was the fact that in 1966, Dr. Woodward had opened a thiazolidine ring through hydrolysis in an acid.
[531]Retrosynthesis213 was used in 1975 as a general method for planning chemical synthesis in general organic chemistry. The Court accepts Dr. Barrett’s evidence that this
212See Sammes, p. 143.
213It is generally agreed that retrosynthesis means moving backward from the desired molecule by sequentially breaking key bonds and/or changing functionality in a stepwise process that ultimately leads to the desired precursor molecule.
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was not commonly used in the field of cephalosporin chemistry and research related thereto at the relevant time.214
9.4.3.Contested Art
[532]Lilly disputes the assertion that the three following publications would have been found by a diligent posita. It contends that these were not part of the common general knowledge and that no evidence was presented as to why they would be considered either alone or together by a posita, when faced with the problem solved in the Shionogi patents.
9.4.3.1.Cocker
[533]This document is a German patent application, of which there was no available English translation at the relevant time.215 However, it was established that a short English abstract (number 120652H) was published in volume 81 of the 1974 Chemical Abstracts.
[534]Lilly notes that Cocker is not described in the Sammes review, despite the fact that it was published in July, 1974 with the abstract being published sometime in December, 1974. As the Sammes review refers to some patents, this could indeed indicate that this was not considered to be part of the relevant art; however, it may also be that it was simply not
214Apotex objected to this evidence on the basis that it constituted hearsay. The Court rejects this for it is exactly what expert evidence, in this context, seeks to provide. In any event, if Dr. Barrett’s views were not considered, the Court would be left with a void as there would be insufficient evidence for me to conclude that retrosynthesis was commonly used by the posita in this context. Dr. McClelland’s views were given no weight in that respect.
215Apotex did not provide a translation of this document or of the two other German publications its experts relied upon. Obviously, this is contrary to the rules of the Court and to an express direction given at one of the trial management conferences. The weight of the experts’ opinion based on those documents is diminished by the fact that the Court could not properly review the documents. The English documents used by Dr. Barrett are not the same as the German ones.
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reviewed because of the language of the original and the fact that the English abstract was published at a date which was too close to the date on which the revised draft was submitted for publishing.
[535]Also, Lilly submits that the compound described in Cocker is not a cephalosporin (it lacks the
[536]As mentioned earlier, the lack of evidence on Apotex’s part as to how, and through what means, this document was found is troubling. However, the Court is prepared to consider that at least what was described in the abstract was part of the relevant state of the art. That said, it has not been established that this would be part of the common general knowledge.
[537]The Court will consider that a posita reviewing Cocker would understand that its author performed a hydrolysis of a thiazoline ring in acidic conditions with the resulting compound being transformed into a cephem derivative through a nucleophilic substitution where the sulfur attacks the
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9.4.3.2.Chauvette application
[538]This is another German patent application that was allegedly published in September, 1974 with no English version being provided to the Court. Although Apotex tried to establish through
Chemical Abstracts, its failure to refer to such an abstract in the evidence of its experts raises a reasonable inference that it was not
9.4.3.3.Kishi
[539]On June
216From the evidence presented, it appears that there could be a delay of 5 months, if not more, between the publication of an application for a patent and its reporting in Chemical Abstracts, depending on the amount of material to be abstracted in the given period.
217Dr. Chauvette reacted a
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published in the Journal of the American Chemical Society in 1975 as well as in two IUPAC publications, also in 1975.218 It was admitted by Dr. Martin, who was asked to find details of the presentation given at the conference, that the above mentioned publications could not have been found at the relevant time. The particular sections used by Apotex’s experts as a basis for their opinions are found well into the paper (drawings relating to the allylic bromination of compound 54 as well as the conversion of compounds 67 to 72).
[540]All Apotex’s experts who commented on the Shionogi patents initially relied on the work of Dr. Yoshito Kishi described above to conclude that the claims of the ‘132 patent and the ‘026 patent were obvious.
[541]When Dr. Hanessian testified, the paragraphs dealing with this art were deleted and he indicated that this deletion had no impact on his conclusion. Given that I have found the evidence of Drs. McClelland and Martin in respect of the Lilly process patents to be of little weight given their lack of experience in
[542]During his
218See
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mentioned by Dr. Kishi during his presentations.219 None of Apotex’s experts attended those conferences or reviewed slides, (if any were actually used at the conferences) or other information.
[543]In the circumstances, the Court is not satisfied that Apotex has established that the information used by its experts was indeed available to the public at the relevant time and should be considered for the purpose of assessing the obviousness of the Shionogi patents.
9.4.4.The Inventive Concept
[544]Although it is very clear that the inventive concept is to be assessed in respect of each claim at issue for each patent under review, the Court is satisfied that the issues raised by Apotex can be properly addressed without a full description of the inventive concept of each of the claims. It suffices to describe the relevant elements of the inventive concept of most of the claims at issue in each patent. As mentioned, infringement of one valid claim is sufficient for Lilly to succeed in this action.
[545]Apotex agreed that if there is any inventive concept in these patents (which it denied), it would be the overall synthetic pathway which is not claimed per se. However, even if it is clear from the disclosure220 of each patent that the overall synthetic pathway, which enables the addressee of each patent to cyclicize a penicillin derivative compound
219The content of footnote 22 in
220See Servier (2009) (at para. 58) which confirms that the Court can refer to the disclosure to determine the inventive concept when same is not readily discernable from the claims.
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(the Cooper thiazoline compound) into a
[546]In effect, the inventive concept of the claims at issue in the following patents also includes:
i.The ‘547 patent
a.The conversion of the Cooper thiazoline compound (an exomethylene compound) to new hydroxyl derivatives through ozonolysis.
ii.The ‘924 patent
a.That the new hydroxyl derivatives described therein can be activated (in claims 8 and 9, this is done by sulfonylation), that this process can be followed by amination (in claims 12 and 37, the amine is morpholino) to produce useful novel compounds.221
iii.The ‘132 patent
a.That the new compounds described therein can be halogenated to produce other new useful compounds.
iv.The ‘026 patent
a.That the new halogenated compounds described therein (still penicillin derivatives) can be deprotected (hydrolysis) to form an azetidinone enol (or its ketotautomer) and that the new compounds can be
221The usefulness or utility of the new compounds referred to in all the Shionogi patents, including compounds A, B, C, and D of the ‘026 patent is not contested, except for certain substituents that will be discussed in a distinct section.
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cyclicized to form a
9.4.5.The Differences between the Prior Art and the Inventive Concept
9.4.5.1.The ‘547 Patent
[547]There was no prior disclosure as to how the claimed reaction or process and the resulting compounds are useful in the synthesis of the desired
[548]There is no prior disclosure of the ozonolysis of the isopropenyl bond in the Cooper thiazoline, which is one of the main starting compounds of the Shionogi process.
9.4.5.2.The ‘924 Patent
[549]With respect to the ‘924 patent, both the starting material and the final product of the claimed reaction were unknown.
[550]There was no prior disclosure as to how the claimed transformation could be useful in the synthesis of
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[551]There was no prior disclosure of a
9.4.5.3.The ‘132 Patent
[552]With respect to the ‘132 patent, there was no prior disclosure of the starting material or the final product of the claimed reaction.
[553]There was no prior disclosure as to how the claimed reaction could be useful in the synthesis of
9.4.5.4.The ‘026 Patent
[554]With respect to the ‘026 patent, there was no disclosure of the starting material of the claimed reaction or the intermediate species formed after the first step.
[555]There was no prior disclosure of the ring closure of a thiazoline to form a cephalosporin (a
222If one had to consider the Chauvette application, for reasons given when discussing Dr. Hanessian’s evidence, the Court prefers Dr. Barrett’s evidence that the
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[556]There was no prior disclosure of a
9.4.6.Are these Differences Inventive?
[557]I will first deal with the inventiveness of at least one of the claims at issue in each patent, based on the idea of the overall Shionogi synthetic process described in the disclosure.223 Apotex has not met its burden of establishing that this overall pathway was obvious. Dr. Hanessian, the only expert Apotex qualified to comment on what a posita would have known or would have found
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223It is not disputed that said disclosure gives sufficient detail to enable the posita to use each claimed step in the context of this overall pathway. See also footnote 128.
224During his
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[558]Only Dr. McClelland225, who, as mentioned earlier, outside of the present proceedings has no real experience, focus or particular interest with regard to
[559]As mentioned, the opinion of Dr. McClelland has no probative weight in order to establish that a posita would have used retrosynthesis for this purpose in 1975.
[560]Furthermore, Dr. McClelland’s discussion of retrosynthesis is based on the premise that the posita would know that the process should go from the target
[561]However, here again, Dr. McClelland was not qualified to say that the Cooper compound (compound B) would be the obvious way to get from compound D to compound A. This is especially so when one considers that at that time, the only known method to
225Interestingly even if it presumably relates to his field of expertise, Dr. McClelland admitted that he was not aware of any of the Lilly patents (or the kinetic complex) before getting involved in a litigation for Apotex sometime in 1996/1997.
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make the
[562]Dr. Barrett testified that, at the relevant time, it was more likely that the posita would start with, or go through, the Morin arrangement, which was the reliable method used for opening the penicillin ring to make a cephalosporin.
[563]That one could go through the exomethylene (compound 4 in
[564]Retrosynthesis is a purely visual thought process which would have produced many possible pathways. Although the fact that very many options were open is obviously not in and of itself sufficient to conclude that an invention is not obvious. It is still an element to consider in the overall analysis. In his
a better chance of success than others. Interestingly, he added that “[t]here may be even more.” 226
226
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[565]Moreover, retrosynthesis does nothing more than provide a list of avenues to try. Execution, that is testing, is the next step. Thus, as noted in Sanofi, Apotex also had to establish that it would be more or less evident to the posita that the overall Shionogi pathway (assuming here that it would be part of the various retrosynthesis pathways one would have thought of) ought to work. The Defendant has simply not met its burden in this respect either, which is especially evident when one considers other factors relevant to the obviousness inquiry.
[566]There is little doubt that there was a general motivation in the industry to find methods to make cephalosporins from penicillin. Lilly chemists were particularly motivated to find a synthetic pathway that would enable them to make cefaclor from penicillin.227 As of February, 1975, Lilly had yet to find a way to efficiently produce its new antibiotic on a large scale.
[567]Dr. Cooper, one of the most prominent chemists in the field of cephalosporins and the inventor of the compound used as starting material for the Shionogi process, testified that he tried in earnest to close the ring of this thiazoline but simply could not do it. Thus, the Cooper compound was at the bottom of the list when looking for a way to make cefaclor from penicillin.
227This is evident from the fact, among other things, that Dr. Kukolja continued to search for a solution even after Shionogi had developed its process at Lilly’s request and expense.
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[568]Apotex argued that this evidence has little weight because Dr. Cooper’s job at Lilly was to find new compounds (he was on the
[569]Despite these arguments and an effort to challenge Dr. Cooper’s credibility in the course of his
[570]Although there is no evidence on which the Court could conclude that cefaclor was “the” priority at Lilly, it was certainly important enough for Lilly to go to Shionogi for help. Lilly was willing to pay for this research and to disclose its private information. Dr. Cooper met with Shionogi scientists; this provided him with another opportunity to turn his skilled mind to the problem. There is no evidence that the solution disclosed in the Shionogi patents became evident to him during that process.
[571]In view of the foregoing, and having considered all the evidence presented, the Court concludes that the Shionogi synthetic pathway was not obvious.
228As was Dr. Blaszczak.
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[572]It is not disputed that the compounds by process claims in the various Shionogi patents constitute an invention, only if their utility was disclosed in the patent. In that respect, the overall Shionogi process provides the inventiveness supporting at least one such claim in each patent (except the ‘026 patent which contains no such claim).229 The case law is clear that in such a case, there is no need to claim the utility of the compounds in the claims.230
[573]Here, the overall Shionogi process also provides inventiveness to at least one process claim at issue in each of the patents. The concept that an idea (overall synthetic pathway) can provide inventiveness to a claimed process or claimed product is not new. It is a basic tenet of patent law. (See Terrell, at paras.
[574]That said, it is worth mentioning that in any event, Apotex has not met its burden of establishing that each individual step disclosed in the patent was obvious per se.
[575]It is here that Dr. Barrett and Dr. Hanessian are at opposite ends. Dr. Hanessian’s approach is quite simple – Lilly referred to it as simplistic. Reduced to its most basic expression, Dr. Hanessian’s position can be summarized as follows: the chemical reactions
229See footnote 128.
230See Canada (Commissioner of Patents) v. Ciba Ltd., [1959] S.C.R. 378 where the reasoning applied to product claims was applied to process claims. In the same manner, a compound that was not made, although it was disclosed as part of a class, can be subsequently claimed if the patent discloses in its regard a certain advantage over the other members of the class. Such advantage need not be claimed in order for it to support the inventiveness of what is actually claimed (Sanofi, para. 31).
231That very same principle was applied in a modified way in Shell Oil (at pp.
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claimed in the Shionogi patents were generally known in organic chemistry. They each had been used at least once on similar compounds without destroying the
[576]Dr. Barrett also acknowledges that these generic reactions (except maybe for one) were known and often used in general organic chemistry but he says that this would provide no comfort to the posita because of the delicate nature of the compounds at issue and the serious issues of selectivity they raised. Also, for Dr. Barrett to focus on some isolated examples which involved, according to him, compounds quite different from the ones at issue, ignores all the prior art references dealing with failures or unsatisfactory results obtained in other
[577]As mentioned earlier, Dr. Hanessian was a credible witness but the weight of his evidence was diminished by the fact that his opinion only refers to publications given to him by Apotex’s counsel. There is no specific reference or mention in his opinion of any bias or beliefs held at the time by the posita. There is no reference to the
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Sammes.232 In fact, there is no real evidence that he took into account any art outside that which was provided to him. It appears that he was given no specific instructions in this case against the use of hindsight and despite him mentioning that he had heard of the concept in a previous case, the Court is uncertain about his methodology. In
[578]On the other hand, Dr. Barrett was subjected to more than one long and skilful cross- examination and the weight of his evidence was diminished by the fact that some of the points made in his report were shown to have been somewhat overstated (see for example the evidence in respect of para. 115 of
such that the Court could not conclude that there was a preponderance of evidence in favour of Apotex.234
[579]This is especially true when one considers that the common general knowledge – Cooper 1, properly understood by the posita235 – would lead away from the process claimed in the ‘547 patent. Although the Court acknowledges that this paper shows that the Cooper thiazoline was stable in the conditions described therein, the Court does not agree that this
232In contrast, see for example the answer given by Dr. Barrett in his
233
234I truly believe that the use of hot tubbing would have been particularly useful here.
235The Court accepts here the views of Dr. Barrett.
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would have been the only concern for the skilled person. The Court is simply not persuaded by Apotex’s evidence that the posita would be motivated to try this process on the Cooper compound236 and certainly not that the ozonolysis of this
[580]In respect of the ‘924 and the ‘132 patents, none of Apotex’s experts explained how one would be motivated to even try such a process given that all the compounds involved were not known. It is also difficult to accept the proposition that these chemical reactions would be expected to work on compounds that were not even known.
[581]Apotex argued that the Court must assume that the posita knows of the overall Shionogi process so that it is placed in the same position as the inventor. I disagree. When considering obviousness, the posita is only assumed to possess common general knowledge and the public information disclosed in the prior art. The Shionogi process was not part of this. It was a solution only known to the inventors.
[582]In respect of the ‘026 patent, after reviewing the evidence several times, the Court had to conclude that it was equally unconvinced by both sides. The Court is simply not persuaded that even if a posita had been motivated to carry out this process (which is doubtful given that the starting compound was not known) it would have been evident that it would succeed. Thus the party bearing the burden on this issue fails.
236As opposed to the isomerized compound described in Cooper 2.
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10.Lack of Utility – Sound Prediction – Inoperability
[583]Apotex argues that several of the claims in the patents at issue are overbroad; they allegedly include claimed embodiments that are inoperable. Although the defendant argues in its memorandum that the patentee had to establish utility at the relevant time or that he could soundly predict that all the embodiments claimed would be useful, it is evident that, as with any other arguments presented to invalidate the patents, the burden of proof here is on the defendant.
[584]With respect to sound prediction, the tripartite test to be applied was set out by the Supreme Court of Canada in Wellcome (2002), at para. 70. More particularly there must be: i) a factual basis for the prediction; ii) an articulable sound line of reasoning; and, iii) proper disclosure.
10.1.The Lilly Patents
[585]In their affidavits, Drs. Modro and McClelland237 stated that the ‘007 patent discloses and claims reaction conditions for the formation of a kinetic complex of the general formula where X is Cl or Br and Z is hydrogen, halo,
alkoxy.238 As there are no restrictions on the position of the Z substituent on the benzene
237Dr. McClelland’s argument also appears to apply to the Lilly process patents but, as mentioned earlier, little weight, if any, was given to this portion of his evidence. The Court also agrees with Lilly that this argument was not properly pleaded in the defence in respect of the Lilly process patents. See para. 61 of his affidavit (A- 12), when he refers to the quantities of reactants or the reaction conditions under which they are combined. In this context, it is evident that what Dr. McClelland is referring to is the nature of the reactant not what he refers to in para. 61. However, his para. 62 which deals with sound prediction i.e. for the compounds which are not the subject of examples in the patent the wording of 62 is wide enough to encompass this argument.
238With respect to Dr. Modro’s opinion, one must note that the ‘007 patent in addition to the examples discussed earlier, contains examples in respect of all the Z variants – Z = H, see examples 1, 2, 3, 4, 6,
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ring [ortho
[586]Given that many of the claims at issue are limited to Z = H,241 such as claims 20, 21, 27, and 11 (the alternative based on claim 10) of the ‘536 patent, claims 16, 23, 26, 27 and 30 of the ‘725 patent, and claims 8, 17, 19 and 20 of the ‘468 patent, it was not clear at all how such argument could be determinative. The Court sought Apotex’s counsel’s views on this point and as appears from the transcript of November 11, 2008, after reflecting upon it for quite some time, the said counsel advised the Court that “it is really complex to try to discern if such argument could be determinative” and thus noted the Court should decide the issue.
[587]In an abundance of caution, the Court has thus decided to review the evidence on this issue but this should not be taken as implying that such argument could be determinative in any way of the findings in respect of all the claims which were found to be infringed. In fact, I do not believe that it is.
239According to Dr. Modro, those substituents could introduce new effects because of their close proximity to the reaction centre. They could “block the reaction centre, slow down the reaction, or even trigger some completely new reactions.”
240The Z equals OCH3 in para position.
241See para. 275 of Lilly’s memorandum on validity. From this it seems that the validity of claim 17 of the ‘007 patent could be impacted.
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[588]Apotex’s experts’ views are not based on any experiment done by Dr. Modro242 or anybody else on behalf of Apotex. Except in respect of variants at the ortho position,243
these views are mostly based244 on what was reported in
which states:
The complexes formed from triphenyl phosphite and
[Emphasis added pp.
[589]As mentioned,
242Even if, since 2001, Dr. Modro did perform about 60 experiments in respect of those patents.
243In that respect, Dr. Modro particularly referred to an article from Dr. Gloede published in 1994 (J. Gloede, “Halogenation of
244Dr. Modro said that he had concerns that were confirmed by what was reported in
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personally involved in the experiments discussed, particularly those at the passages referred to by Apotex’s experts.
[590]The ‘007 patent, as well as the Lilly process patents, do contain examples where the
[591]The weight of Apotex’s experts’ opinions were greatly diminished by way of cross- examination.245 It became clear that, in respect of the para and meta substituents, Dr. Modro was expressing mere concerns as to the yields that would be obtained using some of these substituents rather than the fact that said compounds would be inactive. It also became clear that the said experts had no more reason to rely on what was reported in
245For Dr. McClelland, see June 9, 2008, p.
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[592]In his affidavit
[593]When Lilly attempted to introduce direct evidence of the work carried out in the patent in respect of example 9 of the ‘007 patent, Apotex objected to the evidence of Mr. Gardner on the basis that Lilly had refused to reply to questions relating to all the experiments disclosed in the patents based on Justice Hugessen’s decision in these proceedings dated August 9, 2000 reported in Eli Lilly (2000), particularly where he stated, at para. 4:
I equally accept the plaintiffs’ position with respect to the plea that there was no sound basis for prediction of utility of the claims or some of them as pleaded in the defence. Inutility as pleaded here is a form of overclaiming and, equally in my view, must be tested against an objective standard, namely do the claims go beyond what could have been predicted, thereby claiming more than what was invented; I accept that what was said by Mr. Justice MacGuigan in Merck v. Apotex:
... section 34 is not concerned with the sufficiency of the inventor’s knowledge. Rather, the issue is whether the information provided in the specification is sufficient to
246Although Dr. Baldwin acknowledged that the
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explain the functioning of the invention to a person skilled in the art. In other words, the analysis centres on what the inventor expressed in the specification, not on what the inventor knew.
[Footnote omitted; emphasis added.]
This description of the law was expressly confirmed by the Federal Court of Appeal in Eli Lilly (2001) where Justice Rothstein indicated that the Court was not persuaded of any error of law in his reasons.
[594]In my view, there is no need to even rule on this objection for, after carefully reviewing the evidence, the Court is simply not satisfied that Apotex has met its burden of establishing on a balance of probability that any of the above mentioned compounds were inactive or that their ability to perform the claimed reactions could not be soundly predicted247 based on the factual data (the examples) disclosed in the patents and the common general knowledge of the posita at the relevant time.248
[595]The Court finds that there was no positive burden on Lilly to independently prove the experiments disclosed in its patents for Apotex abandoned its challenge of their accuracy
247Although Drs. Modro and McClelland questioned the operability of some of the compounds, they never directly addressed the issue of whether or not, at the relevant time, on the basis of the examples found in the patents, the inventors could objectively predict the utility of all the meta, para, and ortho Z substituents claimed in the patents.
248It is worth noting that throughout these proceedings, Apotex argues that the higher yields provided by the preferred compounds were not to be considered by the Court as these higher yields were not claimed. The defendant cannot here state that the compounds were inoperable if they provided yields lower than the preferred embodiments.
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pursuant to s. 53 of the Patent Act. Obviously, the evidence of Mr. Gardner would have strengthened Lilly’s case but it does not improve Apotex’s.249
[596]This leaves two further issues to be discussed – the orthomethoxy derivative and para. 111 of Dr. McClelland’s affidavit
[597]Dr. McClelland indicates, at para. 111 of his affidavit
[598]In the course of
The complex must be formed at
249The evidence provided by Apotex’s experts may have been sufficient to put an allegation of invalidity in play in the context of an NOC proceeding but it is certainly not sufficient to meet the burden of proving on a preponderance of evidence that these compounds were not useful or that their usefulness could not be soundly predicted. Many of the cases referred to by Apotex were decisions made in the context of NOC proceedings.
250The argument with respect to the reversed order of addition will not be dealt with given that the Court has found that the kinetic complex would form using the process described in Coe and Rydon and Dr. McClelland indicated during his
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[599]Dr. McClelland agreed that, read in context, this sentence means simply that the kinetic complex must be used before it transforms after sitting at room temperature for several hours.251 Dr. McClelland acknowledged that it is clear that a kinetic complex can be formed at room temperature but still questioned how it would react with cephalosporins at such temperature. He noted that he didn’t know because there were no experiments, at least that he recalled. In fact, example 8(B), on p. 27 at the ‘007 patent used a kinetic complex at
room temperature to perform
[600]Turning to the last argument, here again, it is to be noted that Dr. Modro does not opine on whether, based on the experiment disclosed in the ‘007 patent (7(F) using
[601]Dr. Baldwin indicated in his report that in an earlier article (exhibit
251See
252Dr. McClelland has agreed that there is no reason to believe that the kinetic complex cannot be prepared at room temperature. This was further corroborated by the evidence of Mr. Moraski who introduced experiments performed where the kinetic complex was actually prepared at room temperature and 0º Celsius. (Examination-
253In any event, Dr. Modro admitted during his
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Gloede. There is no evidence before the Court that the allegedly competing reaction shown
in Gloede (OZ = OCH3) was known to the inventor or to a posita at the relevant time.254
[602] In respect of both of these issues the following comments of Justice MacKay in
Wellcome (1991) are particularly apposite:
The Defendant raises doubt about the operability of certain of the reactions when particular reactants are utilized; however, there is no clear proof that any of the reactions will not proceed. That might have been demonstrated by attempting to carry out the claimed processes for particular reactions and documenting those which were found inoperable. I appreciate that there is no obligation on the Defendant to undertake any such experimental work to support a submission that processes claimed are inoperable, but the Defendant does have the onus of establishing invalidity of a registered patent. Despite doubts the Defendant raises I am not persuaded that the onus on the Defendant is met. I find that the Defendant has not established that any of the process claims are simply inoperable.
[603]In this case the Court is not satisfied that Apotex has provided evidence of sufficient weight to support its allegation that the ‘007 patent or the Lilly process patents contain embodiments that are not useful or whose usefulness could not be soundly predicted by the inventor on the basis of the various experiments described in the patents and the relevant common general knowledge. They have simply not met their burden.
254Dr. Baldwin noted that considering the data disclosed in Gloede without testing, one could not say for certain which reaction would happen first but this presumes that one knows that this further reaction takes place. (See
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10.2.The Shionogi Patents
[604]Apotex raises no issue under this heading with respect to the ‘547 patent. In respect of the ‘924 patent, Dr. McClelland raises certain issues with respect to some compounds in which both A and B or R are hydrogen atoms.255 However, this is only relevant to claims 3, 8, 9, and 27. Thus, even if the Court were to accept Apotex’s point of view, this would not be sufficient to avoid the findings of infringement made in respect of the Kyong Bo process.256
[605]In respect of the ‘132 patent, Drs. McClelland and Martin (see paras.
255See paras.
12).
256As noted during the examination of Dr. Barrett, there is no issue with respect to the argument when thiazoline is in place such as in claims 4, 10, 12, 31, 35, and 37. See also
257Apotex, in its memorandum on invalidity, at para. 363, refers to claims 22 and 34 but there appears to be no evidence from their experts in relation to these two claims.
258Affidavit of Dr. McClelland
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[606]As noted above, the Kyong Bo process infringes claims 38, 58 and 15, the validity of which cannot be affected by these arguments.259
[607]It is not clear why Apotex’s counsel insisted on arguing all of the above mentioned issues given that it was clear that certain claims at issue, which would obviously be infringed if their argument with respect to importation was not accepted, would not be affected by such arguments.
[608]This brings us to the last patent, the ‘026 patent where all the claims at issue would be affected by the matters raised by Drs. Hanessian (para.
[W]hen “Hal” is equal to fluorine, the cyclization reaction (step two of the claimed process) will not occur since fluorine is a poor leaving group in all substitution reactions.
[Footnote omitted.]
In that respect, both Drs. McClelland and Hanessian rely on Jerry March’s 1968 book Advanced Organic Chemistry provided to them by Apotex’s counsel.260 During his testimony, Dr. Hanessian said that he himself had noted that the patent contained only examples with Br and few with Cl261 but that there were no examples where iodine or fluorine were used.
259See
260Jerry March, Advanced Organic Chemistry: Reactions, Mechanisms, and Structure (New York: McGraw- Hill, 1968) at 294
261
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[609]Both experts confirmed that Apotex never tried fluorine in the many experiments performed by Dr. Modro or Dr. Chase. However, despite the lack of examples in respect of iodine and fluorine and the lack of detailed information about chlorine, Dr. McClelland indicated in the course of his
[610]Although Dr. McClelland263 indicated that the cyclization through substitution discussed in step two of claim 1 was an easy reaction, Dr. Hanessian states in his affidavit that it requires a good leaving group. In fact, it is on that basis and that Dr. Hanessian concludes that fluorine, which is not a good leaving group, would not work. Dr. Hanessian does not discuss why the use of a catalizer would not assist cyclization in this case even if he found it doubtful that fluorine alone would be an appropriate leaving group for this type of reaction.
[611]Dr. McClelland said “I can’t say unequivocally that it’s not going to work. I can say that it is not a reaction that a chemist would view as particularly facile.”264 At para.
262
263Ibid., p. 38, lines
264
265
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a cyclicized
[612]Having carefully considered all of the evidence, the Court is not satisfied that Apotex has established on a balance of probability that the use of fluorine in claim 1, particularly with the use of a catalizer267 to assist cyclization, would not work or that such process could not be soundly predicted on the basis of the experiments described in the patent and the common general knowledge about fluorine as a leaving group.
10.3.Deficiency of Specification and Ambiguity
[613]Under this heading, Apotex raises several complaints to support its argument that the disclosure of the ‘007 patent (the only patent to which this argument applies) is deficient and does not contain all the information necessary to enable the posita to practice and use the invention claimed. These complaints and all the evidence on which Apotex relies are fully described in its memorandum on validity at paras.
[614]As the Court has already indicated that the only valid claim left at issue at this stage is claim 17, these arguments will only be considered in respect of the invention claimed therein, that is, the process to make the kinetic complex in an aromatic hydrocarbon or halogenated hydrocarbon solvent.
266The Court understands here that normally only persons having specialized knowledge of fluorine would use such product. Such persons would know how to manipulate the product to avoid its inherent danger.
267See claim 1 as well as the disclosure, p. 20, line 21 to p. 21, line 8.
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[615]The applicable principles are
[616]The case law (including those cases cited by Apotex at para. 122) is clear that the patent must “disclose everything that is essential for the invention to function properly”.
[617]In a nutshell, Apotex argues that the ‘007 patent fails to disclose the need i) to avoid excess TPP, ii) to make the kinetic complex or use it at
[618]During its final presentation, Apotex conceded that this line of defence is not a major argument. In fact, the Court is somewhat surprised that it was pursued given the paucity of the evidence supporting it and the fact that all the experts who tried to make the kinetic complex, following the instructions of the ‘007 patent, succeeded the very first time they
268It is not clear if this last issue is now moot given that only one process claim remains.
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tried (such as Dr. Modro and Dr. Chase on behalf of Apotex) and had no difficulty differentiating the kinetic complex from the thermodynamic product.269
[619]There is thus no need to say much more than that Apotex has failed to convince the Court that a posita armed with all the information contained in the ‘007 patent and its common general knowledge would not be able to use the process described at claim 17 successfully to make kinetic complexes. In other words, the evidence relied upon is simply insufficient to meet that burden.
[620]For example, the passage of
[621]The examples 3, 4, 5 and 8 do not teach the use of excess TPP of the magnitude discussed in
269Considering the construction adopted by the Court, this is the only differentiation that remains relevant.
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yellow colour, indicative of excess Cl persisted, which colour is then discharged by the
addition of further TPP. This is in line with the preferred mode described at p. 11, line 30 to
p. 12, line 7. The ‘007 patent makes it clear at p. 11, lines
some extent with its kinetic reaction product with Cl or Br effectively increasing the rate of
conversion to the corresponding thermodynamic product (see also p. 6, lines
[622]Obviously one must never lose sight of the fact that claim 17 expressly covers the use of equivalent amounts of triaryl phosphite and Cl or Br and in one of its alternatives (claim 10) it covers wherein an excess of Cl is maintained during the reaction of the triaryl phosphite and Cl.270 Clearly, a posita using a 2(TPP):1(Cl)271 ratio or an excess of TPP of similar magnitude would not be practicing the invention.
[623]With respect to the need to use the kinetic complex quickly and to make it or use it at
[624]On p. 5, line 24 of the disclosure, the posita is told that:
To maximize the production and stability of the kinetically controlled product, reaction conditions are selected so as to minimize the potential for thermodynamic equilibrium of the initial product of the reaction. Most simply conditions for kinetic control are achieved both by lowering the reaction temperature and the temperature of the kinetic product after it is formed, and by minimizing [the] time allowed for
270As mentioned earlier, the one alternative in claim 17 referring to claim 10 is to be considered a
271In Rydon, which is discussed in the disclosure, the authors report that such a 2:1 ratio will only produce a monochloride.
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thermodynamic equilibrium, such as by utilizing the kinetic product in a subsequent reaction immediately after it has been prepared.
[Emphasis added.]
It is difficult to see how a posita would not fully understand how to practice the invention.
[625]Finally, with respect to the need to further identify the kinetic complex by reference, for example, to a specific or more precise chemical formula. Given the construction adopted by the Court and the Court’s previous findings, the Court accepts Dr. Baldwin’s views on the matter. He was very clear that the specification easily provides sufficient chemical information to distinguish the kinetic complex from the latter formed product, that is, the thermodynamic product.272 The Court certainly agrees with Lilly’s submissions that there is a preponderance of evidence that with knowledge of what is disclosed in the ‘007 patent, it is relatively simple to observe the conversion of the kinetic complex to the thermodynamic product using 31P NMR analysis.
11.Remedies and Costs
11.1.Disentitlement and
[626]In its written submissions and at oral argument, Apotex argues that Lilly’s conduct in respect of the Shionogi patents should disentitle Lilly from any relief (equitable or otherwise) from its claim of infringement in respect of all the patents at issue. Apotex also argues that, even if its claims under the Competition Act, R.S.C. 1985, c.
272See paras.
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barred, Lilly’s otherwise anticompetitive acts should excuse Apotex from liability for patent infringement under the doctrine of equitable
[627]First, it is important to note that although the defence in the main action does include an allegation with respect to disentitlement, there is no allegation with respect to equitable
[628]When Lilly raised the absence of such allegation in the defence, Apotex argued that this was simply a procedural error which caused no prejudice to Lilly for they knew from the allegation at para. 112 of the counterclaim273 that the defendant was seeking
[629]That said, even if it were possible for the Court to import, as suggested, the evidence filed in the counterclaim, which includes evidence by Shionogi who is not a party to the main action, the Court is of the view that Apotex’s counterclaim is without merit because it is
273Para. 112(b) reads as follows: “The Defendant, Plaintiff by Counterclaim therefore claims: […] b) damages pursuant to section 36 of the Competition Act to be paid to Apotex and/or in the alternative to be
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[630]If Apotex’s competition claim cannot stand in the context of its counterclaim, it cannot stand as a defence to Lilly’s claim in the main action.
[631]However, in the event I have erred with respect to the merits of Apotex’s counterclaim, but am correct in respect of my conclusion that the competition counterclaim is
[632]The assertion of equitable
[633]The nature of disentitlement was discussed by Justice Sharlow in Volkswagen Canada Inc. v. Access International Automotive Ltd., 2001 FCA 79, [2001] 3 F.C. 311, where she concluded that, in order for disentitlement to be operative a defendant must establish a link between "the alleged unlawful behaviour and the equitable remedy sought by the patent holder that could support an unclean hands defence." (at para. 25; emphasis
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added, see also
paras.
Co. v.
(QL) (F.C.A.):
For past conduct to be relevant to a refusal of equitable relief under the "clean hands" doctrine, relief to which the party would otherwise be entitled, such conduct must relate directly to the subject matter of the plaintiff's claim, in this case their patent.
[At 546; emphasis added.]
[634]Justice Rothstein (as he then was), framed the relevant inquiry into disentitlement as follows:
It is apparent that it is not any alleged inappropriate conduct of a party that may be relevant in the consideration of whether or not to grant equitable relief. The inappropriate conduct must relate directly to the subject matter of the plaintiff's claim.
[Visx Inc. v. Nidek Co., (1994), 87 F.T.R. 96, 58 C.P.R. (3d) 51 (F.C.) (Visx), para. 5, emphasis added.]
[635]Thus, the Court cannot agree with Apotex that the defence of disentitlement could be a total bar to the claim of Lilly given that its rights to sue for infringement are based on a statute and not solely on equity. In my view, it could only be considered in respect of Lilly’s right to elect as this is an equitable form of relief.
[636]In contrast, equitable
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paras.
(per Lord Justice Denning)).
[637]The principles underlying equitable
The starting point is Holt v. Telford where Wilson J., for the Court, quoted a statement of the applicable principles for equitable
1.The party relying on a
2.The equitable ground must go to the very root of the plaintiff's claim before a
3.A
4.The plaintiff's claim and the
5.Unliquidated claims are on the same footing as liquidated claims: the Newfoundland case.
[Footnotes omitted, emphasis added.]
[638]The Saskatchewan Court of Appeal went on to cite Lord Justice Denning in Federal Commerce & Navigation Co. Ltd. v. Molena Alpha Inc., [1978] 3 All E.R. 1066 (C.A.)
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(Federal Commerce), aff'd on other grounds [1979] A.C. 757 (H.L.), where the following
test was articulated in respect of claims of equitable
This question must be asked in each case as it arises for decision; and then, from case to case, we shall build up a series of precedents to guide those who come after us. But one thing is quite clear: it is not every
[Emphasis added.]
(at 1078; see also Old Mac's Pty. Ltd. v. Cavallo Horse & Rider Inc., 2007 BCSC 726, 157
A.C.W.S. (3d) 944, para. 39;
BCCA 751, 182 D.L.R. (4th) 436, paras.
[639]While the scope of disentitlement and equitable
[640]There is no dispute in this litigation that Lilly is the owner of all eight patents at issue. Nothing in the Patent Act prevents a patent holder from assigning their rights to another party. While such an assignment can give rise to
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assignment of patent rights do not in and of themselves undermine or undo a lawful assignment of patent rights. Obviously, they can have no effect on the ownership of the Lilly patents.
[641]While Apotex’s allegations of anticompetitive behaviour against Lilly are related to the assignment of Shionogi’s patent rights, they do not in my view impeach Lilly’s title to any of these patents.
[642]The Court is convinced that there is no relationship between the infringing acts of Apotex, which are the subject of the main action, and the alleged unlawful behaviour. Apotex would have infringed the Shionogi patents, whoever owned them. This will be explained in more detail in my reasons dealing with the counterclaim.
[643]Even assuming that an anticompetitive act could go to the root of a patent infringement claim, I would decline in this case to exercise my discretion to allow Apotex access to the equitable
[644]Thirdly, it cannot go unstated that the Patent Act and the Competition Act are distinct statutory regimes. What Apotex seeks to do
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claims is resurrect its
[645]To reiterate, an assignment of patent rights may give rise to
11.2. Remedies
[646]I will now examine the appropriate remedy. Lilly has requested the following:
•An election between its damages or an accounting of Apotex’s profits
•Exemplary/punitive damages
•Pre and post judgment interest at a rate of 9% per year, compounded
[647]With regard to the remedy of an accounting of profits, the Federal Court of Appeal has recently reiterated the well established principle that “a trial judge has complete discretion in deciding whether or not to grant this equitable remedy” (Merck & Co. (FCA)). It is equally well established that a successful plaintiff in a patent case does not automatically benefit from this remedy. In AlliedSignal Inc. v. Du Pont Canada Inc. (1995),
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95 F.T.R. 320 n, 184 N.R. 113 (F.C.A.), Justice Alice Desjardins held that “the choice between the two remedies [damages or accounting of profits] cannot be left entirely to the successful plaintiff.” (para. 77)
[648]In past cases, the right to elect has been denied for a variety of reasons; delay in bringing forward the action for infringement (Consolboard (1978)); “misconduct on the part of the patentee” and “the good faith of an infringer” (Beloit Canada Ltd. v. Valmet- Dominion Inc., [1997] 3 F.C. 497, 214 N.R. 85 (F.C.A.), paras. 111 and 119); and, where “the Plaintiffs essentially threw in the towel and left this action to proceed in a leisurely fashion” (Merck & Co. v. Apotex Inc., 2006 FC 524, 282 F.T.R. 161, (Merck & Co. (FC)) para. 229). Obviously, all of these cases are very fact specific and quite distinguishable from the present situation. Still, they are useful with respect to factors to be considered in the course of the exercise of this Court’s discretion.
[649]Apotex submits that Lilly does not come before this Court with clean hands, given the evidence of its
Fundamentally, Apotex also argues that the right to elect should be denied as Lilly has not diligently prosecuted this action, which took nearly eleven years to come to trial and is inherently complex. Finally, Apotex submits that the fact that the type of infringement, that is by importation, should be considered by this Court and lead it to deny the right to elect.
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[650]Apotex argues forcefully against the awarding of the right to elect and advocated that damages be assessed only in accordance with a reasonable royalty. Then Apotex performs an intellectual
[651]Although Apotex does not appear to make a distinction between the infringement of the Lilly and the Shionogi patents, the issue of royalties can only apply to the Shionogi patents. Also, a reasonable royalty is only acceptable as a measure of damages for sales made by the infringer that would not have been made by the plaintiff.274 Although Lilly was not practicing the Shionogi patents per say, it had a product on the market, the sale of which was allegedly harmed by Apotex’s entry with an infringing product.
[652]In such circumstances, the Court sees no good reason to limit Lilly’s damages to a reasonable royalty. Having considered and evaluated the circumstances of this case overall, the Court is satisfied that the proper exercise of its discretion is to afford Lilly the right to elect between an accounting of profits and damages. Should Lilly elect for damages, it should be clear that they will have to establish what sales were directly lost as a result of Apotex’s infringement.
274See AlliedSignal Inc. v. Du Pont Canada Inc. (1998), 142 F.T.R. 241, 78 C.P.R. (3d) 129, at paras. 21 and
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[653]With respect to the alleged
[654]As for the alleged delay, while this action did indeed take nearly eleven years to get to trial, the Court is not of the opinion that this constitutes an excessive delay in the circumstances275 and does not find elements of misbehaviour in the course of the conduct of the action by Lilly that would justify denying the remedy sought. It should also be noted that in this case, the last of the patents at issue expired on July 26, 2000. As such, any delay in getting the present action to trial after this date is somewhat irrelevant for the purposes of an accounting for profits as no infringing act occurred thereafter.276
[655]In addition, Apotex was aware that Lilly and Shionogi opposed the issuance of an NOC for
[656]Rather, Apotex’s insistence that the Court deny Lilly the right to elect and limit damages to a reasonable royalty is consistent with its assertion that it has the right to infringe
275This matter proceeded twice before the Federal Court of Appeal on summary judgment motions as well as once with regard to an appeal of an order of a Prothonotary.
276In fact, two of the Lilly patents expired after all of the Shionogi patents had expired.
277see
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at the lowest possible cost. As will be reiterated in the reasons dismissing Apotex’s counterclaim, the Court cannot endorse such an approach.
11.3.Exemplary/Punitive Damages
[657]In Lubrizol Corp. v. Imperial Oil Ltd., [1996] 3 F.C. 40, 197 N.R. 241 the Federal Court of Appeal, citing the Supreme Court of Canada in Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, (1995), 24 O.R. (3d) 865, held that “the Court cannot decide whether exemplary damages are required until after it decides whether the general damages were insufficient for punishment and deterrent purposes. In other words, the Court must first assess the general damages.” (para. 36) Therefore, the Court cannot award punitive damages at this stage as the question of general damages has been bifurcated.
[658]However, the Court may rationally determine if the circumstances here “warrant the addition of punishment to compensation in a civil action” (Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, para. 67 (Whiten)). In this case, the addition of punishment is not warranted and punitive damages will not be awarded, irrespective of the result arrived at concerning the quantification of damages or the amount of profits.
[659]In crafting the appropriate remedy, Lord Diplock in Broome v. Cassell & Co.,
[1972] A.C. 1027 opined that Courts must strive to determine “how, in particular, an award would further one or other of the objectives of the law” (emphasis in the original, para. 71). The objectives of punitive damages have been established as “punishment (in the sense of retribution), deterrence of the wrongdoer and others, and denunciation” (Whiten, para. 68).
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[660]Given that punitive damages are used to attain these objectives when general damages are insufficient to do so, the conduct which attracts such an award must be rationally connected to the conduct for which compensation is awarded. Lilly bases its claim for punitive damages on Apotex’s conduct in the course of the prosecution of this action. This has nothing to do with the conduct for which compensation is awarded, which is infringement. Applying these principles, the Court concludes that this conduct is more properly dealt with in the context of an award for costs.
[661]This position is consistent with that taken by Prothonotary Roza Aronovitch in a decision dealing with proposed amendments to Lilly’s statement of claim in 2003. At the time, Lilly sought to add allegations pertaining to Apotex’s conduct in prosecuting the action as a basis for its claim of punitive damages. Leave in this regard was denied as the conduct alleged in the amended plea, which is of the same nature than that which is advanced today, “is not conduct that can ground an award of punitive or exemplary damages.” (Eli Lilly and Co. v. Apotex Inc., 2003 FC 978, [2004] 1 F.C.R. 360, para. 14)
[662]In support of this conclusion, Prothonotary Aronovitch explains that:
The underlying action, is on account of patent infringement. Apotex’s alleged failure to disclose relevant documents such as to needlessly prolong the prosecution of this action and cause the plaintiffs to incur expense, is not a means, aggravation or continuation, of the alleged infringement. Any delay and additional expense Lilly incurred in prosecuting the action can be compensated by an award of costs.
[para. 14]
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[663]There is some basis for arguing that since Apotex had full knowledge of all the facts and nonetheless chose to engage in conduct which infringed on Lilly’s patent rights, its conduct is in fact particularly egregious, warranting an award of punitive damages. However, this element has already been weighted in affording Lilly with the right to elect for an accounting of Apotex’s profits. Thus, the comments of the Supreme Court of Canada in Whiten to the effect that “it is rational to use punitive damages to relieve a wrongdoer of its profit where compensatory damages would amount to nothing more than a licence fee to earn greater profits through outrageous disregard of the legal or equitable rights of others” (para. 72) do not apply to the case at bar.
[664]While the awarding of punitive damages to Lilly was contested on the merits by Apotex, it was also submitted that Lilly’s statement of claim did not adequately support its claim in this respect. In order to remedy this situation, Lilly sought leave to amend its statement of claim on December 19, 2008. Lilly’s motion raises concerns with regards to whether it constitutes a collateral attack on the 2003 decision of Prothonotary Aronovitch cited above. Despite this, the Court has examined the merits of Lilly’s claim for punitive damages without regard to the question as to whether or not such claim was properly pleaded. Given the Court’s conclusion on the merits in this respect, Lilly’s motion is entirely academic. The claim for punitive damages would fail irrespective of whether leave to amend was granted or not.
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11.4.Interest
[665]When a cause of action arises outside of, or in more than one, province, subs. 36(2) of the Federal Courts Act, R.S.C. 1985, c.
[666]By operation of para. 36(4)(b) of the Federal Courts Act, interest cannot be awarded by virtue of subs. 36(2) on interest accruing under s. 36. This, the Courts have determined, precludes prejudgment compound interest from being awarded on damages (Merck & Co. (FCA)).
[667]However, that is not to say that the reference which will deal with the quantification of damages or profits (depending on Lilly’s election) cannot award compounded pre- judgment interest (even at an elevated rate) as an element of compensation, provided it is adequately proven by Lilly. When so awarded, interest becomes part of a damage award and is not itself an award of interest.
[668]In Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, [2002] 2 S.C.R. 601 (Bank of America Canada), Justice John Major held that “[c]ompound interest is now
278See subs. 36(7) of the Federal Courts Act.
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commonplace. […] It is for reasons such as these that the common law now incorporates the economic reality of compound interest. The restrictions of the past should not be used today to separate the legal system from the world at large.” (para. 44)
[669]Justice Major recognized that “the court has the jurisdiction to award compound interest under the court’s general equitable jurisdiction” (para. 42). This right is such as what is covered by para. 128(4)(g) of the Courts of Justice Act, R.S.O. 1990, c. C.43, the equivalent of para. 36(4)(f) of the Federal Courts Act, which is also mirrored at para. 2(2)(i) of Alberta’s Judgment Interest Act, R.S.A. 2000, c.
[670]Bank of America Canada is a contract case and on that basis the Ontario Court of Appeal had concluded that equity did not apply and thus there was no interest payable “by a right other than under [s. 128]” and the prohibition of an award of interest on interest provided for at para. 128(4)(b) of the Courts of Justice Act279 applied. However, the Supreme Court of Canada held that para. 128(4)(g) of the Courts of Justice Act does not exist purely to provide for the right to receive compound interest in equity. A common law right of interest can be an “other right” which avoids the application of the
[671]For example, the Alberta Court of Appeal in Alberta (Minister of Infrastructure) v. Nilsson, 2002 ABCA 283, 220 D.L.R. (4th) 474 concluded that “Bank of America mandates
279The equivalent of para. 36(4)(b) of the Federal Courts Act, para. 2(2)(b) of the Judgment Interest Act and subs. 2(c) of the Court Order Interest Act.
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a common law availability where compound interest is necessary to compensate accurately for the proven damages.” (para. 185)280 This is justified in its view as:
[N]otions of commercial fairness favoured an award of compound interest, as did the principle of restitutio in integrum. It recognized that if the plaintiffs were not awarded compound interest, they would suffer incompensable loss […]
[para. 183]
[672]What is more, the reasoning of Bank of America Canada has even been applied in British Columbia, where the relevant legislation, the Court Order Interest Act, R.S.B.C. 1996, c. 79, s. 2, does not have a proviso for the exemption of the statute where interest is payable by virtue of an “other right”. For example, in Morriss v. British Columbia, 2007 BCCA 337, 281 D.L.R. (4th) 702, the British Columbia Court of Appeal held that “where compound interest is required to provide full compensation, an award of compound interest generally should not be discretionary. In that context, the plaintiff is entitled to compound interest as a matter of law.” (para. 37)
[673]In the present circumstances, the Court is not in a position to evaluate whether or not Lilly is entitled to
280See also Sands Motor Hotel Ltd. v. Edmonton (City), 2005 ABCA 402, 376 A.R. 365, paras.
281See its para. 1(b).
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established, the interest so payable is by a right other than under subs. 36(2) of the Federal Courts Act and para. 36(4)(f) of this Act would prevent the Court from awarding pre- judgment interest under its subs. 36(2).
[674]There is not real doubt that
Federal Courts Act.
[675]As for the question of
11.5.Costs
[676]Lilly made detailed representations seeking to establish that Apotex’s conduct in the course of this action warrants the grant of
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cites the failure to provide proper documents relating to manufacturing processes, late discovery productions, wasteful experiments rendered necessary by Apotex’s failure to provide proper discovery, lack of notice for testing conducted by Apotex, deficient pleadings, lack of
[677]In respect of the failure to disclose Lupin information and communications, Apotex has chosen not to present any evidence as to how it happened and why this failure was not or could not have been discovered earlier. It is difficult to imagine that the file would not have been closely revised in preparation for trial, regardless of whether the July 4, 2000 letter from Lupin was inadvertently filed by a clerk without bringing it to the attention of the lawyers concerned. No good explanation was given as to why the documents in possession of Mr. Singh, as well as the case of documents sent to Lilly mere weeks before the trial could not have been obtained in a timelier manner.
[678]There is also no doubt that the pleadings, including the list of prior art, should have been revised before trial and that Apotex’s failure to produce translations of some of its prior art and to come to an agreement on a joint book of documents comprising most of the documents used at trial resulted in a loss of time and efforts by all involved, including the
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Court. Also, as mentioned earlier, Apotex has chosen to pursue many arguments which should, in my view, have been abandoned, at the very least during final arguments.
[679]On the whole, and after considering Apotex’s arguments, the Court finds that Apotex acted in a way which unnecessarily lengthened the duration of the proceedings and there is no doubt that an elevated award of costs is appropriate here. However, the personal sanctions against counsel for Apotex sought by Lilly are not.
[680]That said, how much more is the real question. While costs on a
[681]At this stage, there is simply not enough information before the Court to give detailed directions as to costs. For this reason, the Court will issue a more detailed order after giving an opportunity to the parties to make further submissions in respect of the amount of costs only. Lilly’s submissions should include a ballpark figure of costs assessed in accordance with the top of the scale of column V of Tariff B as well as
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[682]In any event, the plaintiffs shall be entitled to assess costs of two counsel as well as reasonable expert witness fees and disbursements for the expert witnesses who testified at trial except for Dr. Gorenstein.
12.Apotex’s Counterclaim
[683]On March 9, 2001, Apotex brought a counterclaim against Lilly, seeking damages pursuant to s. 36 of the Competition Act. On November 25, 2002, Apotex amended this counterclaim, adding Shionogi as a defendant. Apotex alleges that:
Shionogi knowingly conspired, combined, agreed, or arranged with Eli Lilly and Company, Eli Lilly Canada, Inc. (collectively, “Lilly”) or both, to allow Eli Lilly and Company to acquire the Canadian patents and patent rights granted to Shionogi under Canadian Letters Patent Nos. 1,095,026, 1,132,547, 1,136,132 and 1,144,924 (the “Shionogi Patents”) for the purpose, and with the result, of preventing or impeding other manufacturers from producing or acquiring cefaclor, and so prevent or impede competition in the Canadian market for cefaclor.282
Such conduct is alleged to be contrary to s. 45 of the Competition Act.
[684]At trial, Apotex called 4 fact witnesses. The first of these witnesses was Dr.
Sherman, who as mentioned is and was at the relevant time the Chairman of the Board and Chief Executive Officer of Apotex. He testified as to his knowledge of the Canadian pharmaceutical industry, Apotex’s practices and strategies generally as well as specifically in relation to cefaclor. He also testified about two meetings he allegedly had with representatives of Lilly Canada in July, 1994 and February, 1996. Dr. Sherman could not remember the name of the people he met except for that of Terry McCool. The parties to the
282Apotex’s second fresh as amended statement of defence and counterclaim, para. 110
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counterclaim also agreed to include the transcript of Dr. Sherman’s testimony in the main action as part of the evidence in the counterclaim.283
[685]Dr. Sherman’s testimony was supplemented by that of two other Apotex employees, Mr. Jack Kay and Mr. Gordon Fahner. Since 1995, Mr. Kay has been the President and Chief Operating Officer of Apotex, having previously held the position of Executive Vice- President. Mr. Fahner has been Apotex’s
[686]Mr. Kay, like Dr. Sherman, testified as to his knowledge of the Canadian pharmaceutical industry generally as well as the competitive landscape for cefaclor particularly. He also testified about the meetings he had with Lilly Canada representatives. Mr. Fahner, meanwhile, testified as to accounting practices at Apotex, its financial systems as well as costing practices. The last point was the subject of an objection but it is not instrumental in any way to the points upon which this decision turns. Mr. Fahner also touched on Apotex’s rebate practices and the transcript of his testimony in the main action was also included as evidence in the counterclaim by consent of the parties.
[687]The last fact witness called by Apotex was Mr. Barry Fishman, who is the President and Chief Executive Officer of Novopharm but was, from 1992 to 1997,
283This agreement was consigned in a letter addressed to the Court from counsel for Apotex, dated October 22, 2008.
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formulated with regard to his testimony. The Court did not find any of his evidence determinative or even particularly relevant with regard to any of the issues dealt with in these reasons and thus these objections need not be considered further.
[688]Lilly and Shionogi called 6 fact witnesses. The first Lilly witness was Mr. Thomas L. Pytinia, a former Lilly employee who started with the company in 1974. Among other things, Mr. Pytinia served as general counsel for Lilly’s pharmaceutical division between 1994 and 1998. From 1989 to 1994 he was counsel and secretary for Lilly International Corporation.
[689]Mr. Pytinia’s testimony consisted of identifying documents from Lilly’s records, including the agreements of 1975 and 1995 between Lilly and Shionogi. Also, he testified as to the timing of negotiations between Shionogi and Lilly leading up to the assignment of the Shionogi patents and to his belief that prior to this assignment Lilly held an exclusive licence under these patents. He also testified as to the agreements entered into by Lilly with suppliers of bulk cefaclor, including confidentiality agreements, with respect to which he was involved in negotiations and draftings.
[690]Shionogi’s first witness was Mr. Takayuki Wada, who testified with the help of an interpreter. Mr. Wada is a retired Shionogi employee, who worked there from 1955 to 1992. At retirement, he was a member of Shionogi’s patent department, having previously been a researcher within its research department up until 1965, when he was transferred to the patent department.
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[691]He testified as to his involvement with the research team working on the
development of three halo cephalosporins from penicillin. He appears to have been a de facto leader of the group and as such he met with Shionogi scientists on a daily basis. He also stated that Shionogi became involved in this research as a result of a visit from Dr.
Marvin Gorman of Lilly in July, 1974. He testified that the Shionogi scientists (not identified particularly) had conveyed the results of their research to Lilly with respect to the subject matter of the Shionogi process starting in November, 1974. He explained his understanding of the 1975 agreement that was circulated within the patent department at the relevant time. He also indicated that he was personally involved in the matter when the joint research project was terminated in 1976.
[692]Objections were formulated with respect to this testimony, particularly in respect of matters where Mr. Wada was not personally involved such as the June, 1974 meeting and the alleged telephone conversation between the Shionogi and Lilly scientists. The Court agrees with Shionogi’s arguments as expressed in their submission dated October 28, 2008,284 except in respect of the communication of their research results to Lilly. To determine whether more detailed reasons about this conclusion were necessary, the Court considered the issues on which this decision is based with and without the benefit of Mr. Wada’s testimony. As the result would remain unchanged, it is not necessary to comment further on the objection.
284Among other things, those present at the meeting in June, 1974 were deceased and this fact was conveyed to Mr. Wada contemporaneously and in the course of his employment.
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[693]Mr. Wada, who drafted the Shionogi patent applications filed in Japan, also testified as to the patent filings both in Japan and abroad and the input provided by Lilly in this regard. Despite the fact that Apotex challenged Mr. Wada’s credibility based on the fact that he was still receiving a pension from Shionogi and had also acted as a consultant for Lilly in respect of Japanese patent filings after his retirement, the Court finds Dr. Wada to be a very credible witness.
[694]Lilly’s next witness was Ms. Mary Anne Tucker, a former employee of Lilly (U.S.), now an attorney at Tucker Law Offices in Brownsburg, Indiana. Ms. Tucker started her career at Lilly in 1967 as a chemist. After obtaining her law degree, she worked as a tax attorney (1973) and then in the International Patent Group of Lilly’s patent law department beginning in or around 1976. She testified as to the communications that she had in the latter capacity with Dr. Kanazawa and Mr. Wada at Shionogi in the course of the cooperation between Lilly and Shionogi regarding the filing of the foreign patent applications for the 3-
[695]Lilly then called Mr. Terry McCool,285 director of corporate affairs at Lilly Canada since 1991. He testified as to the meetings he had with Mr. Kay when Lilly was attempting to deal with the impending loss of patent protection on a number of molecules (including cefaclor) by seeking partnership with generic drug companies in Canada. This testimony is
285Because of the late disclosure of the allegation of meetings between Lilly and Apotex, and the fact that no other participant was clearly identified, Lilly was not in a position to call witnesses other than Mr. McCool to rebut Apotex’s evidence in this regard (i.e. the testimony of Dr. Sherman and Mr. Kay).
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in direct contradiction with that of Dr. Sherman given that Mr. McCool denied having ever met Dr. Sherman. On the other hand he acknowledged meeting with Mr. Kay and his recollections were more in line with the latter’s description of the events.
[696]It is worth mentioning that the meetings between Apotex and Lilly, discussed by Mr. Kay and Mr. McCool, were first alluded to in the testimony of Dr. Sherman. Those facts were not pleaded and no discovery took place in that respect. Apotex argues that this was not necessary as the evidence of the meetings only served to establish Lilly’s intent to lessen competition. In the Court’s view, all relevant facts must be pleaded whatever they are meant to establish. In any event, and even if this evidence was admissible, in light of the contradictory evidence in this regard, including as to what exactly was said at this (or these) meetings, the Court would not have been prepared to draw any conclusion on this basis.
[697]The second witness for Shionogi was Mr. Sachio Tokaji, the senior executive officer of the company. As for Mr. Wada, Mr. Tokaji was aided in his testimony by an interpreter. Mr. Tokaji joined Shionogi’s marketing department in 1970, moving to the accounting department in 1975 and rising through the ranks to eventually become a director of the company. In 2007, he was promoted to the position of executive officer before being appointed to his current position in April, 2008.
[698]Mr. Tokaji had little personal knowledge of the relevant events. He testified as to Shionogi’s marketing of
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arrangements, particularly with Lilly and
[699]Again none of the contested evidence is determinative. To avoid any further debate the Court disregarded the evidence that was the subject of the objection particularly in respect of the factors which were considered by Shionogi in decisions concerning licensing (those were made by the board of directors of the company at the time when Mr. Tokaji was not involved).
[700]In the course of the
[701]The last witness for Lilly was Mr. Peter Stringer, who in 1994 was the Director of International Patents at Lilly (U.S.) in charge particularly of the enforcement of said patents outside of the U.S. Mr. Stringer indicated how and why it was at his request that the Canadian patent be included in a 1995 agreement. The sole purpose of his testimony was to shed light on the context of correspondence between Lilly and Shionogi just prior to the
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assignment which Apotex sought to enter as evidence in the course of the
of Mr. Tokaji
Shionogi and Mr. Stringer’s evidence was heard under reserve pending the determination of
these objections.
[702]With regard to
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(2)In any proceedings before the Tribunal or in any prosecution or proceedings before a court under or pursuant to this Act,
(c) a record proved to have been in the possession of a participant or on premises used or occupied by a participant or in the possession of an agent of a participant shall be admitted in evidence without further proof thereof and is prima facie proof
(i)that the participant had knowledge of the record and its contents,
(ii)that anything recorded in or by the record as having been done, said or agreed on by any participant or by an agent of a participant was done, said or agreed on as recorded and, where anything is recorded in or by the record as having been done, said or agreed on by an agent of a participant, that it was done,
(2)Dans toute procédure engagée devant le Tribunal ou dans toute poursuite ou procédure engagée devant un tribunal en vertu ou en application de la présente loi :
c) s’il est prouvé qu’un document a été en la possession d’un participant, ou dans un lieu utilisé ou occupé par un participant, ou en la possession d’un agent d’un participant, il fait foi sans autre preuve et atteste :
(i)que le participant connaissait le document et son contenu,
(ii)que toute chose inscrite
dans le document ou par celui- ci enregistrée comme ayant été accomplie, dite ou convenue par un participant ou par l’agent d’un participant, l’a été ainsi que le document le mentionne, et, si une chose est inscrite dans le document ou par
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said or agreed on with the authority of that participant, and
(iii)that the record, where it appears to have been written by any participant or by an agent of a participant, was so written and, where it appears to have been written by an agent of a participant, that it was written with the authority of that participant.
convenue par l’agent d’un participant, qu’elle l’a été avec l’autorisation de ce participant,
(iii)que le document, s’il paraît avoir été écrit par un participant ou par l’agent d’un participant, l’a ainsi été, et, s’il paraît avoir été écrit par l’agent d’un participant, qu’il a été écrit avec l’autorisation de ce participant.
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[703]The Court is of the view that this provision only applies to evidence tendered in the course of a party’s case in chief. Here, Apotex sought to tender the evidence after having closed its case in chief and in the course of the
[704]Indeed, these documents were known to Apotex well before it attempted to have them entered into evidence on September 22, 2008. The documents were a subject of examinations for discovery. Apotex and Shionogi had agreed as to
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[705]Taking into account the totality of these circumstances, the Court finds the authorities cited by Apotex in support of its attempt to tender the documents to be readily distinguishable. The documents marked
[706]Turning now to the experts, Apotex called six expert witnesses and Lilly and Shionogi collectively called two experts witnesses.286 Among the experts testifying on Apotex’s behalf, three of them, Aidan Hollis, Jeffrey Church and Thomas Ross, were economists (see details of their qualifications in Chart A). Although it is clear that these experts have experience in applying tests with respect to
[707]The first, Dr. Hollis, was tasked with defining the relevant market for bulk cefaclor in order to determine whether or not the assignment of the Shionogi patents to Lilly would have had an effect on Lilly’s market power. Dr. Church and Dr. Ross then sought to establish the competitive effects of the transfer of Shionogi’s patent rights to Lilly and the harm suffered by Apotex as a result of this transfer given its position as a bulk purchaser of cefaclor.
286Apotex agreed that Shionogi would not have to call its own expert economists and could rely on Dr. Cockburn even if this expert was originally appointed only by Lilly. This had the impact of shortening the trial.
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[708]A part of the proposed qualification of Dr. Hollis, which included expertise in prescribing practices, elicited an objection. As the herein decision does not turn in any way on evidence of physician prescribing practices in Canada, this issue need not be decided.
[709]Other experts testifying on Apotex’s behalf included Dr. Robert McClelland, a chemist; Mr. Stephen Cole, a chartered accountant and business valuator; and, Dr. Marvin Gans, a physician specialised in paediatrics. Dr. McClelland, who had testified in the main action, filed a report explaining the distinction between the Lilly and Shionogi patents and processes and as to whether or not, as of 2003, there existed other publicly known commercially viable processes that could be used to make bulk cefaclor. His testimony sought to establish one of the main, if not the most important, premises for the economists’ opinions, particularly those of Dr. Church,287 which is that only two processes were known to exist for making cefaclor.
[710]At first the Court was somewhat puzzled by Apotex’s position in the counterclaim given that in the main action it had adamantly defended its position that it used a non- infringing process. Dr. McClelland also indicated in
287See transcript of October 6, 2008, p. 183, line 18 to p. 184, line 3.
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[711]Mr. Cole filed a report on how the damages of Apotex should be calculated and gave some indication as to the licensing rate that should have applied had Shionogi licensed Apotex for the use of its patented processes. Lilly objected to the qualification of Mr. Cole as an expert on the grounds that his opinion did not offer an estimate of damages, which is all an accountant may do in an expert report. Further, Lilly objected to Mr. Cole providing an opinion as to the setting of royalty rates, as Mr. Cole had no expertise in this regard. Indeed, the portion of Mr. Cole’s evidence dealing with royalty rates would have had very little weight, for the comparables he used were questionable and insufficient, and he has little expertise dealing with such matters. That said, the level of royalties was not an issue on which the Court reached a conclusion.
[712]Finally, Dr. Gans offered evidence as to how physicians select the medicines they prescribe to patients, particularly antibiotic medication. This evidence was put forth by Apotex to contest the defendants by counterclaim’s position that the relevant market for the purpose of a s. 45 inquiry was that of dosage form antibiotics of the same class as cefaclor, as opposed to that of bulk cefaclor. Given the basis of my decision this question has not been considered at all; nor has Dr. Gans’ evidence.
[713]Experts testifying on Lilly and Shionogi’s behalf included one economist, Dr. Iain Cockburn and a physician specialised in microbiology, Dr. Donald Low. Dr. Cockburn, who has more expertise than Apotex’s experts with respect to certain pharmaceutical products and licensing practices in the pharmaceutical industry, set out to provide an opinion on the impact of the 1995 Assignment Agreement between Lilly and Shionogi on competition and
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on Apotex particularly. Dr. Cockburn commented on the main reports of Apotex’s three experts on economics.
[714]Dr. Low provided an opinion concerning antibiotics, particularly cefaclor and its related or competing products and their use in Canada in the treatment of bacterial infections. Once again this evidence was not relevant to the matters on which this decision stands.
[715]The expert evidence was the subject of many objections. The Court will only comment on those that were relevant to the findings on which this decision turns.
[716]In weighing this expert evidence, the Court applied the factors set out by the Supreme Court of Canada in R. v. Mohan, [1994] 2 S.C.R. 9, (1994), 114 D.L.R. (4th) 419 (Mohan). As explained by Justice John Sopinka, speaking for the Court, “[a]dmission of expert evidence depends on the application of the following criteria: (a) relevance; (b) necessity in assisting the trier of fact; (c) the absence of any exclusionary rule; (d) a properly qualified expert.” (para. 17) For example, the Court does not need expert evidence on issues such as the proper interpretation of the 1975 agreement based on an expert’s analysis of the circumstantial evidence. Nor were any of those expert economists qualified to opine on such matters.
[717]Much of the “expert” evidence given by the economists was really no more than arguments presented in the form of expert evidence. The three economists testifying on
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behalf of Apotex seemed particularly anxious to ensure that this be the first case
substantively putting into play the Intellectual Property Enforcement Guidelines recently
developed by the Competition Bureau. For reasons that follow there will be no need in this
case to comment on the appropriate test to be used in the course of a s. 45 analysis nor on
said guidelines.
12.1. Relevant Statutory Provisions
[718]The right of Apotex to seek a remedy before the Federal Court arises under s. 36 of
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the Competition Act, which reads as follows:
36.(1) Any person who has suffered loss or damage as a result of
(a) conduct that is contrary to any provision of Part VI, or
(b) the failure of any person to comply with an order of the Tribunal or another court under this Act, may, in any court of competent jurisdiction, sue for and recover from the person who engaged in the conduct or failed to comply with the order an amount equal to the loss or damage proved to have been suffered by him, together with any additional amount that the court may allow not exceeding the full cost to him of any investigation in connection with the matter and of proceedings under this section.
36. (1) Toute personne qui a subi une perte ou des dommages par suite :
a) soit d’un comportement allant à l’encontre d’une disposition de la partie VI;
b) soit du défaut d’une personne d’obtempérer à une ordonnance rendue par le Tribunal ou un autre tribunal en vertu de la présente loi, peut, devant tout tribunal compétent, réclamer et recouvrer de la personne qui a eu un tel comportement ou n’a pas obtempéré à l’ordonnance une somme égale au montant de la perte ou des dommages qu’elle est reconnue avoir subis, ainsi que toute somme supplémentaire que le tribunal peut fixer et qui n’excède pas le coût total, pour elle, de toute enquête relativement à l’affaire et des procédures engagées en vertu du présent article.
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[…][…]
(3)For the purposes of any action under subsection (1), the Federal Court is a court of competent jurisdiction.
(4)No action may be brought under subsection (1),
(a) in the case of an action based on conduct that is contrary to any provision of Part VI, after two years from
(3)La Cour fédérale a compétence sur les actions prévues au paragraphe (1).
(4)Les actions visées au paragraphe (1) se prescrivent : a) dans le cas de celles qui sont fondées sur un comportement qui va à l’encontre d’une disposition de la partie VI, dans les deux ans qui suivent la dernière des dates suivantes :
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(i)a day on which the conduct was engaged in, or
(ii)the day on which any criminal proceedings relating thereto were finally disposed of, whichever is the later;
(i)soit la date du comportement en question,
(ii)soit la date où il est statué de façon définitive sur la poursuite;
[719] The only other relevant provision of the Competition Act (particularly part VI) is s.
45 which reads as follows:
45.(1) Every one who conspires, combines, agrees or arranges with another person
45.(1) Commet un acte criminel et encourt un emprisonnement maximal de cinq ans et une amende maximale de dix millions de dollars, ou l’une de ces peines, quiconque complote, se coalise ou conclut un accord ou arrangement avec une autre personne :
(a)to limit unduly the facilities for transporting, producing, manufacturing, supplying, storing or dealing in any product,
a)soit pour limiter, indûment, les facilités de transport, de production, de fabrication, de fourniture, d’emmagasinage ou de négoce d’un produit quelconque;
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(b)to prevent, limit or lessen, unduly, the manufacture or production of a product or to enhance unreasonably the price thereof,
(c)to prevent or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, storage, rental, transportation or supply of a product, or in the price of insurance on persons or property, or
b)soit pour empêcher, limiter ou réduire, indûment, la fabrication ou production d’un produit ou pour en élever déraisonnablement le prix;
c)soit pour empêcher ou réduire, indûment, la concurrence dans la production, la fabrication, l’achat, le troc, la vente, l’entreposage, la location, le transport ou la fourniture d’un produit, ou dans le prix d’assurances sur les personnes ou les biens;
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(d)to otherwise restrain or injure competition unduly, is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years or to a fine not exceeding ten million dollars or to both.
d)soit, de toute autre façon, pour restreindre, indûment, la concurrence ou lui causer un préjudice indu.
12.2.The Framework of Inquiry into Apotex’s Counterclaim
[720]Apotex’s counterclaim was the subject of summary judgment proceedings before trial, resulting in two decisions by the Federal Court of Appeal, which ultimately dismissed the motions for summary judgment.288 The main conclusions discussed by the Federal Court of Appeal in its reasons can be summarized as follows:
1.An assignment of patent rights can implicate s. 45 of the Competition Act;
2882003 FC 1171, (2003), 28 C.P.R. (4th) 37, reversed on appeal (2004 FCA 232, (2004), 240 D.L.R. (4th) 679) and sent back before the Federal Court: 2004 FC 1445, [2005] 2 F.C.R. 225, decision again reversed on appeal (2005 FCA 361, [2006] 2 F.C.R. 477).
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2.The question of whether Apotex’s counterclaim is
3.The issue of whether Apotex suffered damages under s. 36 of the Competition Act was a matter to be determined at trial;
4.The assignment of the Shionogi patents to Lilly lessened competition, though whether such lessening was “undue” was a matter for trial;289
[721]In arguing its counterclaim at trial, Apotex focused first and foremost on proving that the assignment of Shionogi’s process patents to Lilly constituted a violation of s. 45 of the Act. In response, Lilly and Shionogi contested this assertion and continued to assert that Lilly had an exclusive licence under the Shionogi patents under the terms of the 1975 research and development agreement between them. All of this is perhaps understandable given this passage of the reasons of the Federal Court of Appeal, delivered by Justice John Evans:
The question for trial is whether the lessening of competition resulting from the assignment is sufficiently significant as to be undue: see R. v. Nova Scotia Pharmaceutical Society, supra at 646 and following.[290]
[722]As a consequence, and despite extensive evidence presented by Apotex as to
elements establishing lessening of competition in itself, let alone undue lessening, a full day of argument was entertained by the Court on the impact of this decision. The dispute centered on whether a judgment totally dismissing a motion for summary judgment can
289This was in fact held to have been a finding of Justice James Hugessen in the decision being appealed to the Federal Court of Appeal (2004 FC 1445, [2005] 2 F.C.R. 225, para. 22) that was presumed by the Court of Appeal to have been made in light of both the 1995 and 1975 agreements, despite the comments of Justice Hugessen to the effect that there was both conflict and lack of clarity in the evidence as to the forseeability and reach of the 1975 agreement which could only be resolved after a full trial (2004 FC 1445, [2005] 2 F.C.R. 225, para. 25)
2902005 FCA 361, [2006] 2 F.C.R. 477, para. 39.
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nevertheless be dispositive in part of the issues to be determined at trial, especially when such determination is not part of the order.
[723]Nevertheless, nothing in the Federal Court of Appeal’s decision suggests that determining whether or not Lilly and Shionogi’s conduct would unduly lessen competition is either the logical or natural starting point for assessing the merits of Apotex’s counterclaim. In the Court’s view, assessing the s. 45 element of Apotex’s counterclaim first is neither desirable, logical, nor in keeping with the framework of the Competition Act.
[724]The administration and enforcement of the Competition Act is the responsibility of the Commissioner of Competition (the Commissioner).291 The Commissioner causes an inquiry to be made in relation to an alleged breach of s. 45 where: i) six persons apply for such an inquiry, based on the belief that such an offence has or is about to committed;292 or, ii) the Commissioner has reason to believe the same.293
[725]The right of action for recovery of damages provided for in s. 36 of the Competition Act is a special remedy, contained in a part so labelled. Inquiries into the actions of third parties in the context of applying the substantive provisions of the Act, which is usually the purview of the Commissioner, are thus to take place only in cases where it is clear that
291Competition Act, para. 7(1)(a).
292Ibid., paras. 9(1)(c) and 10(1)(a).
293Ibid., c. 10(1)(b)(iii); In this case it is under the latter provision that an investigation could have been prompted following a complaint which was filed by Apotex in September, 2002. In addition, one of the experts testifying on Apotex’s behalf, Dr. Church, contacted the Competition Bureau following the first decision of Justice Hugessen on the summary judgment motions to alert them of this decision which he felt was inconsistent with the positions expressed by the Competition Bureau in its Intellectual Property Enforcement Guidelines
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allegedly
purpose of s. 36 of the Act is not to encourage persons to take the place of the
Commissioner and provoke inquiries into the conduct of others. Rather, its serves the
purpose of providing a means of indemnification to victims of
[726]Hence, Apotex must first prove, in accordance with s. 36 of the Competition Act, that it has suffered loss or damage as a result of the conduct which it alleges to be in violation of s. 45 of the Act. If Apotex cannot do so, the Court has no reason, nor jurisdiction, to inquire as to whether or not Lilly and Shionogi have conspired to unduly lessen competition. As noted by Prothonotary Roza Aronovitch:
As a matter of law, proof of loss or damages is an essential element of the cause of action to fix civil liability for breaches of the Competition Act: Price v. Panasonic Canada Inc. (2002) 22 C.P.C. (5th) 379 at paras.
[Emphasis added]
294This is in addition to other remedies available to such a plaintiff at common law and which are subject to different time limitations. It is important to be reminded that for proceedings conducted under the Competition Act, somewhat exceptional tools are provided for under that Act (see subs. 69(2)). The central role of the Commissioner is also demonstrated by the fact that the
295Eli Lilly and Co. et al. v. Apotex Inc. (December 21, 2006), Ottawa
51and A.P.I. Alarm Inc. v. D’Arterio, [2009] O.J. No. 1599 (QL) (On. Sup. Ct.), para. 20.
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[727]Thus, before assessing the merits of Apotex’s counterclaim, the Court must first be satisfied that the counterclaim is not
12.3.Is Apotex’s Counterclaim
[728]As no criminal proceedings have been brought in relation to Lilly and Shionogi’s alleged
[729]Lilly and Shionogi both rely on the decision of Justice Judith Snider in Laboratoires Servier where she held that “when we come to the limitation set out in s. 36(4), the provision refers to the day on which the agreement or conspiracy was entered into.” (para. 482). Thus, given that Lilly and Shionogi entered into an agreement for the assignment of patent rights on April 27, 1995, the applicable limitation period expired in 1997.296
296Written submission of Eli Lilly and Company and Eli Lilly Canada, Inc. (Competition Phase), paras. 292,
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[730]Even if the discoverability principle, which Lilly and Shionogi argue does not apply to subs. 36(4) of the Competition Act, were applied in the present case, Apotex was aware of the assignment no later than 1997, at which point the agreement was pleaded in Lilly’s
statement of claim. Therefore, the limitation period cannot have expired any later than 1999.297
[731]Apotex counters that the Court must consider the elements of the offence proscribed by subs. 45(1) of the Competition Act when interpreting its subs. 36(4), an exercise which Justice Snider failed to embark upon in Laboratoires Servier and which leads to the conclusion “that the two year limitation period will run, at the earliest, from conduct flowing from the agreement which constitutes an undue lessening of competition.”298
[732]In Apotex’s view, the limitation period should run only from the moment when “Apotex was provided notice that every alternate process that Apotex had employed was asserted by Lilly to be infringing.”299 This, in its view, occurred only in January, 2001, when Lilly amended its statement of claim to add allegations of infringement of the Lilly patents with regards to bulk cefaclor obtained from Lupin.300
[733]Alternatively, Apotex submits that subs. 36(4) of the Competition Act contemplates ongoing conduct. For Apotex, “Lilly’s impugned conduct continues to occur on every day
297Ibid., Lilly paras.
298Memorandum of argument of the defendant, Apotex Inc. (Re : Competition), para. 302.
299Ibid., para. 306.
300Lilly amended statement of claim, January 11, 2001, para. 28.
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thereafter that Lilly asserted against Apotex patent rights obtained pursuant to the agreement
between Shionogi and Lilly and when competition was unduly lessened thereby.”301 As
Lilly continues to assert rights under the Shionogi patents in the main action, the conduct
contrary to s. 45 of the Competition Act is ongoing to this day and thus the limitation period
has not expired.
[734]This position was explained by Justice Evans in the context of the Federal Court of Appeal’s second decision concerning a motion for summary judgment in respect of Apotex’s counterclaim:
Apotex’s case is that the assignment must be seen in its context: its enhancement of Lilly’s market power, that is, Lilly’s additional ability to act independently of the market by virtue of its ownership of the patents for all known, commercially viable processes for manufacturing cefaclor. On this view, the conspiracy continued as long as the assignment had
[735]The assertion that
[736]This being said, the Court is prepared to accept that conduct contrary to Part VI of the Competition Act may “be an isolated incident or can be ongoing”,303 depending on
301Memorandum of argument of the defendant, Apotex Inc. (Re: Competition), para. 313.
3022005 FCA 361, [2006] 2 F.C.R. 477, para. 52.
303See 351694 Ontario Ltd. v. Paccar of Canada Ltd., 2004 FC 1565, (2004), 264 F.T.R. 12, para. 18.
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which offence is in play in the circumstances. However, in the Court’s view, ongoing
conduct can only be qualified as ongoing for the purposes of subs. 36(4) so long as it
continues to constitute an offence under Part VI of the Competition Act.
[737]Thus, crucial to the determination of the applicable limitation period is the question of what conduct may form the basis of the offence which is complained of by Apotex, in this case the offence of conspiracy to unduly lessen competition provided for in s. 45 of the
Competition Act.
[738]In R. v. Nova Scotia Pharmaceutical Society, [1992] 2 S.C.R. 606, (1992), 93 D.L.R. (4th) 36 (Nova Scotia Pharmaceutical Society), Justice Charles Gonthier, writing for the Court, held that an offence under the predecessor to s. 45 of the Competition Act (para. 32(1)(c) of the Combines Investigation Act, R.S.C. 1970, c.
(1)an agreement entered into by the accused (“Every one who conspires, combines, agrees or arranges with another person”); and
(2)an undue prevention or lessening of competition flowing from this agreement (“to prevent, or lessen, unduly, competition in the production, manufacture, purchase, barter, sale, storage, rental, transportation or supply of a product, or in the price of insurance upon persons or property…”).[304]
[739]The inquiry that must be conducted to ascertain whether the elements of the offence are met is twofold: (i) market structure, “to ascertain the degree of market power of the
304Nova Scotia Pharmaceutical Society, para. 72.
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parties to the agreement”;305 and, (ii) behaviour of the firms. Given that for the purposes of
determining the starting point of the limitation period the Court is concerned with conduct, it
is the latter element which is of interest here.
[740]The question of behaviour, however, is not examined from the standpoint of what effects an agreement actually has, but rather what, at the time at which it is entered into, is its object and what are the likely effects of that object on competition. As Justice Gonthier explains, “[t]he object of the agreement is without doubt the most important behavioural element of the inquiry”.306
[741]Justice Gonthier approvingly cites an earlier decision of the Ontario High Court, R. v. Northern Electric Co., [1955] 3 D.L.R. 449, in which Chief Justice James McRuer held that:
[i]n considering whether the agreement or conspiracy comes within the statute, one does not judge the unlawfulness by what was done pursuant to the agreement (although this may be evidence of the agreement) but, as I have said, one examines the nature and scope of the agreement as proved and decides whether that agreement, if carried into effect, would prejudice the public interest in free competition to a degree that in fact would be undue. To paraphrase what was said by Duff C.J.C. in the Container Materials case, [1942],
1 D.L.R. 529, S.C.R. 147, 77 Can.C.C. 129, and to adapt the language of Kerwin J., one examines the agreement arrived at, no matter whether anything was done under it or not, and determines as a question of fact upon a common sense view the direct object of the arrangement complained of and determines whether that object, if put into effect, would result in an undue prevention or lessening of competition. Persons or corporations might well enter into an unlawful agreement
305Ibid., para. 99.
306Ibid., para. 106.
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which by reason of enforced circumstances they could not carry out; it would nevertheless be an indictable offence.
[Emphasis added, p.
[742]Chief Justice McRuer relies on the decision of the Supreme Court of Canada in R. v. Container Materials Ltd., [1942] S.C.R. 147, [1942] 1 D.L.R. 529, where Justice Kerwin held that:
[o]nce an agreement is arrived at, whether anything be done to carry it out or not, the matter must be looked at in each case as a question of fact to be determined by the tribunal of fact upon a common sense view as to the direct object of the arrangement complained of. The evidence in these cases of what was done is merely better evidence of that object than would exist where no act in furtherance of the common design had been committed.
[Emphasis added, p. 159.]
[743]These cases stand for the proposition that the conduct does not include anything subsequent to the actual conclusion of the agreement, which in this case is nothing other than the assignment concluded by Lilly and Shionogi on April 27, 1995. Effects may be examined for the purposes of determining whether or not this agreement was likely to unduly lessen competition, but it does not extend the period during which such conduct occurred. The strongest evidence of this is that, even if no subsequent actions had been taken pursuant to an agreement, the act of entering into it would still constitute an offence if the other requirements were met.
[744]The Supreme Court of Canada’s decision in R v. Aetna Insurance Co., [1978] 1 S.C.R. 731, (1977), 75 D.L.R. (3d) 332 (Aetna) does not contradict this. Writing for the
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majority, Justice Roland Ritchie held that the burden that fell upon the crown was to prove
“that that conspiracy, combination, agreement or arrangement if it were carried into effect
would prevent or lessen competition unduly” (emphasis in the original, p. 748).
[745]The question therefore is not whether the conspiracy indeed had this effect but rather only whether or not this conspiracy would have this effect. Behaviour subsequent to the agreement is of no relevance in determining whether there has been an offence and thus cannot be of any relevance for the purposes of limitations under subs. 36(4) of the
Competition Act.
[746]The dissenting reasons of Chief Justice Bora Laskin in Aetna make this point in a perhaps more forceful fashion:
[the trial judge] asserted that in order to determine whether the offence charged against the appellants had been committed he was obliged to determine “whether or not there has been any undue lessening of competition”. This ignores the fact that the charge is one of conspiracy. It is not an ingredient of the offence that proof must be made that competition was in fact lessened unduly. Even assuming (although the judge nowhere says so) that proof of an actual lessening of competition might provide support for a finding that there was a conspiracy to that end and that it was directed to an undue lessening, the absence of any proof of actual lessening of competition, let alone of an undue lessening, does not conclude the matter against the Crown.
[Emphasis added, p. 739.]
[747]Thus, for the purposes of evaluating the limitation period under subs. 36(4), the Court need not be concerned with the effects of any alleged conspiracy. This approach was recently adopted by the Supreme Court of British Columbia in No. 1 Collision Repair &
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Painting (1982) Ltd. v. Insurance Corporation of British Columbia (1998), 4 C.C.L.I. (3d) 135, 78 A.C.W.S. (3d) 834, where Justice Alexander Henderson held that “[a] claim for damages under s. 45 of the Competition Act must be brought within two years from the day upon which the conduct was engaged in: Competition Act, supra, s. 36(4)(a)(i). The conspiracy alleged here was at an end by April 1, 1993.”307
[748]The significance of this is ascertained by examining the facts underlying this decision. April 1, 1993 was the date upon which the defendant, the Insurance Corporation of British Columbia, altered a procedure in a way which was fatal to the plaintiff’s business. All of the
[749]There is absolutely no evidence that suggests that Shionogi took part in any decision with regard to the enforcement of its patents in the present proceedings. Apotex does not allege any actions on Shionogi’s part following the assignment which could be properly described as forming the basis for an allegation of a conspiracy.
[750]The Court is satisfied that, in this case, the relevant conduct took place on April 27, 1995. Even assuming arguendo that the concept of discoverability was to operate in the context of subs. 36(4) of the Competition Act, Apotex was aware of the assignment (the
307Varied on appeal but not on this point as it was not pursued by the appellant, 2000 BCCA 463, (2000), B.C.A.C 1.
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conduct) no later than 1997 and the limitation period would have thus expired well before it instituted its counterclaim.
[751]Even if I were wrong, as noted earlier, Apotex has raised only one discoverability issue here. It is that it did not know that Lilly asserted every alternate process employed by Apotex to be infringing until Lilly filed its amended statement of claim. Apotex has filed no evidence as to how it construed the amendments made in January, 2001 and how they had come to the vague conclusion referred to in their submission.308 It is apparent from the correspondence of Ms. Fouillade with Lupin that Apotex had on its own come to the conclusion in September, 1997 that the Lupin process described in the Health Canada material infringed the Lilly patents. How could Apotex doubt at that time that Lilly would enforce its patents? Is that not the very reason why they tried to develop a
[752]If the argument is meant to refer to the third process (“contract process”), there is no mention of that process in the amended statement of claim. Moreover, the argument is surprising, given that Lilly’s position has always been that there were only two methods309
actually used by Apotex’s suppliers to make cefaclor. Lilly never alleged or asserted that the “contract process” was infringing. Apotex has thus not established that it could only have discovered the relevant elements of the offence in January, 2001.
308Memorandum of argument of the defendant, Apotex Inc. (Re: Competition) para. 306.
309Lilly’s information as to the process actually used by Lupin was based on the closed portion of the Health Canada file it had received pursuant to an order of Justice Hugessen.
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[753]As mentioned in my reasons in the main action, Apotex argued that time limitations do not affect its right to claim equitable
12.4.Apotex’s Claim for Damages
[754]In its Reply to demand for particulars, dated December 10, 2002, Apotex pleaded
that:
[t]he injuries sustained by Apotex as a consequence of the Plaintiffs’
[755]Very late in the course of the trial, Apotex sought and obtained leave to amend these pleadings with respect to item (a), in order to add any monetary liability in respect of the Lilly patents. 310 At trial, Apotex did not pursue its claim for the litigation costs incurred in the proceeding under the PM (NOC) Regulations, nor with respect to the claim under item (d), given that it is an admitted fact that Apotex faced no such delay.311
310See ruling contained in the transcript of the hearing held December 9, 2008.
311See Facts admitted to by the parties, LRTA # 82.
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[756]Pursuant to the bifurcation order of Justice Hughes dated May 8, 2007, Apotex is not required to quantify its loss with respect to potential infringement liability. As mentioned in the judgment on the main action, such liability is to be quantified at a later stage. Apotex must nonetheless prove its entitlement to a
12.5.The Applicable Evidentiary Standard
[757]Apotex argues that assessing damages and causation requires application of an evidentiary standard that assigns probabilities of occurrence to all events which “are not merely speculative”312 and for which only the sum of the probabilities assigned to each need cross the balance of probabilities threshold of more than 50%.
[758]This, Apotex argues, is necessary because the determination of causality and quantification of loss requires a comparison between occurrences in the actual world and a hypothetical “but for world”. For Apotex, this “but for world” encompasses a number of scenarios in which the Shionogi patents have not been assigned to Lilly.313
[759]In support of its position, Apotex relies on the decision of the Supreme Court of Canada in Athey v. Leonati, [1996] 3 S.C.R. 458, [1996] S.C.J. No. 102 (QL) (Athey), where Justice Major, at para. 27 of the judgment of the Court, held that:
[h]ypothetical events (such as how the plaintiff’s life would have proceeded without the tortious injury) or future events need not be proven on a balance of probabilities. Instead,
312Memorandum of argument of the defendant, Apotex Inc. (Re: Competition), para. 155.
313Ibid., para. 273.
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they are simply given weight according to their relative likelihood
[760]The
[761]None of the losses complained of by Apotex are potential or hypothetical events in that sense. First, infringement liability has been assessed in the main action and the fact that the quantum will be assessed at a future date does not render this a future and uncertain development. Second, the cost differential for bulk cefaclor concerns only purchases made in the past, more precisely from November, 1996 to October, 1998. As explained by Justice Major in Athey, past events “cannot be addressed in terms of probabilities” (para. 30). As such, this passage cannot apply to Apotex’s alleged injuries, for which there is no relevant future event.
[762]Instead of standing for the proposition that the Court should apply a relaxed evidentiary standard, Athey stands for the proposition that the
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[763]There is an alternative, but it is not what Apotex argues that the Court should apply here. It is the “material contribution” test, defined in Athey as where the plaintiff must show, again on a balance of probabilities, that an act was a contributing factor, outside the de minimis range, to an injury. Although this is the most relaxed standard of proof for causation which is recognized at law, its application is limited to very particular circumstances.
[764]As explained by Chief Justice McLachlin, speaking for the Court in Resurfice Corp. v. Hanke, 2007 SCC 7, [2007] 1 S.C.R. 333 (Resurfice Corp.), its application is only open to plaintiffs for which it is impossible, due to factors that are outside their control, to prove causation by way of the “but for” test. Further:
it must be clear that the defendant breached a duty of care owed to the plaintiff, thereby exposing the plaintiff to an unreasonable risk of injury, and the plaintiff must have suffered that form of injury.[314]
[765]As Chief Justice McLachlin concludes, its application is exceptional, and is limited to cases where “it would offend basic notions of fairness and justice to deny liability by applying a “but for” approach.” (para. 25)
[766]Such special circumstances are not present here. The impossibility of proving the required elements for the application of s. 36 of the Competition Act has not been established by Apotex, who bears the burden of doing so (Barker v. Montfort Hospital, 2007 ONCA 282, (2007), 278 D.L.R. (4th) 215, para. 53). Again, Apotex has not argued that this should be applied here.
314Resurfice Corp., at para. 25
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[767] Further, as will be discussed below, the fundamental evidentiary problem (see Bowes v. Edmonton (City), 2007 ABCA 347, (2007), 42 M.P.L.R. (4th) 192, para. 235) in this case concerns Apotex’s conduct in the “but for world”, which, even if it constitutes an impossibility, is clearly not one outside Apotex’s control.
[768]Relying on Schwarzkopf v. McLaughlin, 2008 BCSC 730, (2008), 168 A.C.W.S. (3d) 787, Ticketnet Corp. v. Air Canada (1997), 154 D.L.R. (4th) 271, 105 O.A.C. 87 and
Les Laboratoires Servier v. Apotex Inc., [2008] EWHC 2347 (Ch), Apotex argues “that if the nature of the harm results in it being hard to prove, that should not redound to the detriment of the harmed party. The court has to do the best it can, with what it has, to come to the findings.”315
[769]By relying on these cases, Apotex is putting the cart before the horse. These cases all deal exclusively with assessment of damages, causation having already been established. They grapple with the question of assessing the level of compensation required to restore the plaintiff to the position it would have been in the “but for world”. The Court here is concerned with a different question, which is the impact of the assignment on Apotex’s position, in order to determine whether such restorative action is even warranted. These authorities do not assist the Court in the present circumstances.
315Oral submissions of counsel for Apotex, November 6, 2008, p. 20 lines
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[770] Therefore, the Court will apply the normal test for causation, keeping in mind the comments on the breadth of the burden to be satisfied as articulated by Justice Major in Athey:316
Causation need not be determined by scientific precision; as Lord Salmon stated in Alphacell Ltd. v. Woodward, [1972] 2 All E.R. 475, at p. 490, and as was quoted by Sopinka J. at p. 328, it is “essentially a practical question of fact which can best be answered ordinary common sense”.
12.6.Background
[771]As noted above, Apotex’s arguments in respect of causation focus on a comparison between the actual conduct of the parties, and a “but for world” as encompassed in a number of hypothetical scenarios, in all of which Shionogi has not assigned its patents rights to Lilly. In order to assess these various “but for world” scenarios, the Court will first look at the actions of the parties in the actual world which are relevant to these scenarios (as opposed to damages or the s. 45 offence proper).
[772]As early as 1986, Apotex appears to have had an interest in producing the drug cefaclor. In March, 1986, Apotex applied for a compulsory licence with respect to three Lilly Canadian patents, ‘537; ‘532; and ‘725.317 The ‘725 patent is one of the four Lilly patents that was still in force at the date of the assignment.318 As such, it forms part of what Apotex alleges as Lilly’s
316At para. 16.
317See Facts agreed to by the parties, LRTA # 150 and SRTA # 15(a);
318Ibid., LRTA # 51.
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[773]In 1988, Apotex is granted a compulsory licence, the terms of which provide for a royalty of 4% of the net selling price to be paid by Apotex to Lilly.319 In granting the licence, the then Commissioner of Patents specifically references an objection by Lilly to the granting of the licence, as Apotex did not request the inclusion of patents which Lilly deemed essential for the manufacture of the drug cefaclor, particularly, but presumably not limited to, the ‘536 patent, another of the four Lilly patents which comprised Lilly’s alleged monopoly.
[774]This objection is dealt with by the Commissioner of Patents with reference to arguments advanced by Apotex. According to Apotex, the other patents were not essential for the manufacture of cefaclor, which implied that Apotex was content with the patents that it had chosen in its licence application. What is intriguing from this fact is that Apotex, in 1986, had the opportunity to request a compulsory licence for all four of the Lilly patents at issue in this case.
[775]Apotex specifically chose to obtain a licence that did not include all of Lilly’s patents related to the production of bulk cefaclor.320 It did so notwithstanding Lilly’s objection. Had it done so, the assignment of the Shionogi patents would have had absolutely no effect on Apotex’s ability to lawfully obtain bulk cefaclor for formulation and eventual
319Ibid., LRTA # 151, SRTA 15(b);
320Dr. Sherman testified that this choice was probably made by Apotex’s counsel at the time. (Cross- examination of Dr. Sherman, May 6, 2008 p. 125, lines
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sale in the form of
[776]In May, 1993, Apotex served on Lilly a Notice of Allegation (NOA) pursuant to s. 5 of the PM (NOC) Regulations in which it alleged that it would not infringe any of the patents listed in the Form IV Patent List submitted by Lilly as Apotex: (i) held a compulsory licence with respect to certain patents listed; and, (ii) it would not infringe the others by making, constructing, using or selling cefaclor capsules or oral suspensions as these patents contain no claim for cefaclor itself nor for its use.322 It is important to note that in this Form IV Patent List,323 referred to by Apotex in its NOA, Lilly had listed the Shionogi patents that were assigned to Lilly in 1995.
[777]Following this NOA, Lilly and Shionogi instituted proceedings against Apotex seeking an order prohibiting the Minister of National Health and Welfare from issuing Notices of Compliance (NOC) to Apotex in connection with a variety of cefaclor capsules and oral suspension dosages until the expiration of both the Lilly and Shionogi process patents (the PM (NOC) proceedings).324
[778]The PM (NOC) application was dismissed by Justice Sandra Simpson on September 12, 1995 (Eli Lilly and Co. v. Apotex Inc. (1995), 101 F.T.R. 33, 63 C.P.R. (3d) 245).325 In
321See Facts agreed to by the parties, LRTA # 155, SRTA 15(c);
322Ibid., SRTA # 17(b);
323Ibid., LRTA 156;
324Ibid., SRTA # 19(a); LRTA 160;
325Ibid., SRTA # 19(c); confirmed on appeal, (1996), 199 N.R. 4, 68 C.P.R. (3d) 126.
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essence, the application was dismissed because the listing of the process patents in the Form IV Patent List was not in accordance with s. 2 of the Regulations as they do not contain claims for a medicine or a new use for a medicine.
[779]In the course of the PM (NOC) proceedings, Lilly and Shionogi asserted,326 relying on expert evidence,327 that it was not possible for Apotex to manufacture cefaclor without infringing the patents that had been listed in Lilly’s Form IV Patent List and for which Apotex did not hold a compulsory licence. At para. 9 of her decision, Justice Simpson notes that this evidence is uncontradicted and that as such it is “reasonable to infer that Apotex plans to infringe the Patents by copying Lilly’s production methodology” and that if this did transpire “it [would] be open to Lilly to seek remedies for infringement at common law.”
[780]On April 27, 1995, just prior to the determination of Lilly and Shionogi’s application for a prohibition order, Lilly and Shionogi concluded the assignment of Shionogi’s process patents to Lilly, along with a concurrent
[781]In light of the decision of Justice Simpson and its confirmation by the Federal Court of Appeal, Harry B. Radomski, counsel for Apotex, indicated in an affidavit that, as of late 1996, it was expected that Apotex would obtain an NOC with respect to cefaclor and
326The applicant in these proceedings was Eli Lilly Canada Inc. Eli Lilly and Company and Shionogi & Co. Ltd, the owners of the Lilly and Shionogi patents, were joined to the proceedings pursuant to subs. 6(4) of the Regulations, having previously consented to the inclusion of their patents on the Form IV patent lists filed by Eli Lilly Canada Inc. pursuant to subs. 4(1) of the Regulations.
327See Facts agreed to by the parties, SRTA # 19(b);
328Ibid., ARTA # 220, LRTA # 205, SRTA # 48;
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advised that it would have to be prepared to face an infringement action brought by Lilly should it enter the market.329
[782]At some point in time between the institution of these proceedings and its final resolution, somebody at Lilly met with representatives of Apotex330 to extend the offer of entering into a relationship in respect of cefaclor as well as other products. Although the terms and conditions are not clear, this would probably have been an arrangement similar to the one Lilly entered into with Pharmascience on June 30, 1995, which concerned the distribution by Pharmascience of
[783]On December 6, 1996, Dr. Sherman wrote to Lilly to provide the required three- months notice of termination of its compulsory licence.333
[784]Kyong Bo had represented to Apotex, by way of letter dated December 16, 1996 addressed to its intermediary, Pacific High Tech Canada, that its process for manufacturing
329See Affidavit of Harry B. Radomski, sworn November 13, 2003
330Although there is a controversy as to whether or not Dr. Sherman ever met with Mr. McCool, it is uncontradicted that at least one such meeting took place between Mr. McCool and Mr. Kay.
331See
332See
333The Court notes that Dr. Sherman testified that presumably it is assurances from Kyong Bo that it did not use the Lilly process that prompted Apotex to terminate the compulsory licence.
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bulk cefaclor did not use the teachings of Canadian patents ‘611, ‘536 and ‘725, all of which belonged to Lilly.334 This letter is seemingly a result of investigations carried out by Apotex starting, at the latest, in December, 1996 into the processes used by its suppliers of bulk cefaclor and whether said processes infringed the Lilly or Shionogi patents.335
[785]On January 17, 1997, Apotex obtained its NOC336 and promptly began selling
already received two shipments of commercial quantities of bulk cefaclor from Kyong Bo.338
[786]As predicted, Lilly quickly commenced an infringement action. Its first action was launched on January 23, 1997 but was subsequently discontinued.339 The present action was commenced on June 18, 1997. In both actions, Lilly alleged infringement of the Shionogi patents.340 The latter action specifically referred to the Kyong Bo process.341
334See
335See Facts agreed to by the parties, SRTA # 83(a) and (b).
336Ibid., LRTA 46;
337Ibid, LRTA # 82;
338Ibid., LRTA # 83, SRTA # 31;
339See
340See Facts agreed to by the parties, SRTA # 70(a) and (c).
341See Statement of Claim dated June 18, 1997, para. 26.
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[787]In May, 1997, Apotex began sourcing commercial quantities of bulk cefaclor from another supplier, Lupin.342 The evidence before the Court indicates that shortly thereafter, in July, 1997, Apotex began inquiring with Lupin as to the processes used to manufacture bulk cefaclor delivered to Apotex.343 As mentioned earlier, based on Lupin’s responses to these inquiries, Brigitte Fouillade, Apotex’s legal counsel for intellectual property, appears to have come to the conclusion, by September, 1997, that the process employed by Lupin infringed the Lilly patents.344
[788]Accordingly, discussions began between Apotex and Lupin with the aim of modifying the process employed by Lupin to avoid infringement of the Lilly patents. Ms. Fouillade suggested that Lupin employ the teachings of a series of expired patents.345 Lupin agreed that this was indeed feasible, and had in some respects already been done on an experimental scale, but would result in lower yields and thus bulk cefaclor produced in this fashion would be more expensive.346
[789]By October 1997, a new process had been worked out by Lupin and Apotex and, accepting that it would be more costly, Apotex asked Glopec, the intermediary between Apotex and Lupin, to provide a price estimate for bulk cefaclor made according to this
342See Facts agreed to by the parties, LRTA # 83, SRTA # 31;
343See
344See
345Ibid.;
346See
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process.347 A supply agreement regarding the use of this new process was concluded between Apotex and Lupin in March, 1998.348
[790]By October, 1997, at the latest, Apotex appears to have made additional inquiries as to the process employed by Kyong Bo to produce bulk cefaclor delivered to Apotex, particularly in respect of the Shionogi patents. In response, Kyong Bo represented that it employed the Shionogi process, technology which it acquired from Shionogi in 1992 for the production of HCA, an intermediate which is used to produce Ceftibuten, another drug.
Kyong Bo also represented that its rights to use the Shionogi process had not been affected by the assignment.349
[791]Apotex requested that Kyong Bo provide evidence of the authorization to use the Shionogi patents,350 which Kyong Bo was not able to provide.351 Apotex, who had not
received supply from Kyong Bo since September, 1997, never again sourced bulk cefaclor from Kyong Bo.352
347See
348See
349See
350See
351See
352See
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[792]It is an admitted fact that Apotex, aside from its compulsory licence application in the 1980’s, never sought any form of licence for bulk cefaclor from either Shionogi or Lilly, nor has it ever requested its suppliers to do so.353 Shionogi never licensed any
12.7.Apotex’s “But For” Scenarios with Respect to Causation
[793]Against this factual background, Apotex asserts six possible scenarios in a “but for world” where Shionogi did not assign its patents to Lilly:
1.Apotex is licensed, directly or indirectly, by Shionogi;
2.Apotex is licensed, directly or indirectly, by Lilly;
3.Apotex practises the Shionogi patents, without a licence, and is not sued for infringement;
4.Apotex practises the Shionogi patents, without a licence, and is sued for infringement;
5.Apotex practises the Lilly patents, without a licence, and is sued for infringement;
6.Apotex practises the Lilly patents, without a licence, and is not sued for infringement
[794]Apotex argues that scenarios 1 and 2 together would have been most likely in a “but for world”.355 The other four options, while possible, would not therefore, in Apotex’s view, cross the “but for” threshold. Finally, Apotex argues that scenarios 3 and 4 were more likely
353See Facts agreed to by the parties, LRTA # 93, 94, 95, 96, 100, 101, 103, 104, 108; SRTA # 72, 73, 74(b), 74(f), 75(a), 75(c), 76(a), 77(a).
354Ibid., ARTA 295.
355Submissions of Counsel for Apotex, November 6, 2008, p. 39 lines
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than scenarios 5 and 6, the latter being the least likely.356 At the outset, the Court finds that the need for so many scenarios, which each have various
[795]Before getting into the actual assessment of these proposed scenarios, it is important to note that one must exercise caution when presented with expert evidence based on assumptions provided by counsel and first ensure that these have been fully established independently and that general economic theories are applicable to the factual scenario at bar. One such general theory relied upon by Apotex’s expert is that firms will normally not reject opportunities to make profits.
[796]The assumptions upon which Apotex’s experts rely can be challenged on at least three counts. First, they assume that Apotex would be seeking a licensed source of bulk cefaclor before taking any risk of entering the market with infringing material. For reasons that will be explained, based on the evidence presented by Apotex’s own Chief Executive Officer, this is not a correct assumption in this case.
[797]Second, with respect to the applicability of general economic theory, Mr. Kay made it clear that Apotex’s general corporate policy was to shun what is commonly referred to as “authorized generics” agreements. In the course of his
356Ibid., p. 39 line 14 – p. 40 line 21.
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asked whether this attitude would prevail no matter how much profit could be had and his answer was “[m]ore likely than not”.357
[798]Thirdly, Dr. Church made it clear, and this also appears from the written reports of Apotex’s experts, that a fundamental assumption was that there were only two publicly known legal sources for bulk cefaclor and that all players, including potential buyers (i.e. generic manufacturers) would be aware of that fact.358 Again such an assumption doesn’t appear to be borne out by the actual facts. Indeed, Dr. Sherman testified that, despite the fact that Apotex was arguably best informed of the situation in the marketplace given its early involvement in attempting to come to market and the obstacles it had faced in this attempt,359 he didn’t know that he needed a licence and was not looking for licensed supply or even inquiring about which process was being used by its supplier initially.
[799]The Court also notes that Apotex’s expert’s own evaluation of the duopoly price in the “but for world”360 includes an assumption that the $1,500.00 paid by Apotex was the price of potentially
357
358See transcript of October 6, 2008, p. 183, line 12 to p. 184, line 3.
359Such as the PMNOC proceeding and the opinion of Mr. Radomski that an infringement suit would be imminent upon market entry.
360A price reflecting competition between Lilly and Shionogi in the bulk cefaclor market.
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[800]It also appears that the experts were not made aware of the fact that Apotex also argued in the main action that Lilly itself knew of the existence of a third viable process given that it had included it in its own NDS file.361 It is also important to note that, despite Dr. McClelland’s opinion in the present counterclaim, once Apotex’s own
[801]Even so, as will be explained, the Court does not agree with Apotex’s evaluation of the likelihood of occurrence of the proposed scenarios. The evidence does not support that it is more likely than not that Apotex would have been licensed by either Shionogi or Lilly in the “but for world”. Nor does the evidence support the assertion that scenario 3, Apotex practising the Shionogi process without being sued, is the next most likely scenario. These scenarios are nothing more than mere possibilities; they do not amount, even taken together, to a real or substantial possibility.
[802]At best, the evidence supports a conclusion that an amalgam of scenarios 4 and 5, which is to say that Apotex, in the “but for world”, would have practised both the Shionogi and Lilly processes and would have been sued by both companies. Furthermore, the Court agrees with Apotex that scenario 6 on its own is so unlikely that it does not merit examination.362
361See memorandum of the defendant Apotex Inc. (Re: infringement), para. 453.
362Submissions of Counsel for Apotex, November 6, 2008, p. 36 lines
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12.7.1.Scenarios 1 and 2: Apotex Obtains a Licence from Shionogi or Lilly
[803]Scenarios 1 and 2 are simply two alternatives under a single hypothesis, which is that Apotex would have been licensed in some way in the “but for world”. Dr. Church testified that, “[i]n the absence of the transfer of patent rights, there would have been competition between Lilly and Shionogi, or more accurately its licensee, to supply bulk cefaclor into Canada.”363
[804]Dr. Thomas Ross also opines that such competition would occur because, following the expiry of the Canadian patent covering the compound cefaclor, in August, 1994, “Shionogi would have had a strong financial incentive to licence another firm to use its patents to produce bulk cefaclor for the Canadian market.”364 In response to Shionogi’s entry into this market, Lilly would also proceed with licensing, resulting in profit- maximizing behaviour by each of these players whom “would find it profitable to licence/supply all licensees who request a licence.”365
[805]Dr. Cockburn disagreed with the competitive licensing scenario advanced by Apotex’s experts, countering that, even if one assumed that Shionogi would have licensed a third party, which was not admitted,366 “Shionogi and Lilly would have powerful incentives
363
364
365Reply report of Dr. Church, dated March 28, 2008 (Exhibit
366It should be noted that the assignment concerns only Shionogi’s Canadian and U.S. patents
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to limit the number of competitors in the finished dosage form market. […] [T]hey would have licensed or supplied at most one generic each.”367 In such a scenario, it is uncertain that Apotex would be one of the two beneficiaries of such a licence.
[806]While contesting this position, Apotex’s experts counter that, should Shionogi and Lilly each have licensed only one generic in the “but for world”, Apotex would have been the most likely recipient of such a licence:
As the leading distributor of generics, Apotex would easily have been the most attractive partner for Shionogi to licence. Consequently, even if Shionogi restricted itself to a single licence, it could easily have been to supply Apotex.[368]
[807]It should be noted that neither Dr. Ross nor Dr. Church have any expertise with regard to Japanese firms in general and had very limited information as to Shionogi’s business practices in particular. In addition, no evidence was presented to the effect that anyone was interested in offering Shionogi any such financial incentive. Presumably Shionogi would not offer licences unless there was a demand for them.
[808]In that respect Dr. Sherman, who can be expected to know a lot more about the industry and this particular market than expert economists unfamiliar with the pharmaceutical industry, testified that cefaclor was a less competitive drug than others “because Novopharm would be the only other one with the capability to make it in
367Responding affidavit of Dr. Cockburn, sworn February 27, 2008
368Reply report of Dr. Church, dated March 28, 2008 (Exhibit
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Canada”.369 Also, it was not a major product.370 There is no evidence that Novopharm was interested in making this product at any time prior to the conclusion of its licensing and supply agreement with Lilly in 1998.
[809]Further, as explained by Dr. Sherman, companies such as Pharmascience would not be in the market for bulk cefaclor for want of manufacturing capacity. If Pharmascience had been interested in any way to this drug, they would have needed a supplier of dosage form cefaclor.371
[810]Dr. Sherman certainly indicates that, had Apotex not entered the market, it may well have been that, regardless of the patent situation,372 no other generic would have been interested in manufacturing dosage form cefaclor. In the circumstances, one cannot simply assume that what Lilly did to counteract the “illegal” entry of Apotex in the market for dosage form cefaclor is a simple reflection of what it would have done had there been competition from Shionogi in the bulk cefaclor market.
[811]In effect, Lilly’s active marketing and their willingness to enter into authorized generic agreements for several drugs (cefaclor being only one of them) may well explain delayed entry of other generics into the market. It appears that Apotex’s experts never considered these issues as they did not even seem to have been aware of these facts and
369
370The demand for dosage form cefaclor, by the time generic entry occurred, was in decline.
371This is not the market that Apotex experts thought was relevant nor is it the basis of their opinion.
372In his view, “[t]he patents were irrelevant.”
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certainly did not acknowledge in their reports that there was limited capacity to manufacture or even interest in offering that drug for sale in Canada.
[812]That said, there are two major reasons why the Court cannot conclude that these scenarios are anything other than a mere possibility: (i) Shionogi’s belief that it was bound by an exclusive licence arrangement with Lilly; and, (ii) the fact that Apotex was not seeking to obtain a lawful source of supply.
[813]In assessing the evidence in respect of Shionogi’s beliefs, the Court does not need the assistance of an expert for a trier of fact is obviously capable of evaluating the relevant circumstantial evidence.373 (Mohan) It must also be noted that Dr. Church, for example, offers such an evaluation which is based on selective information and as such is incomplete in any event.
[814]Shionogi says that it would not have licensed anyone in the “but for world” because it is a
373In the same manner, even if the experts had the necessary expertise, which is contested, no such expert evidence is necessary to construe the decision of the Federal Court of Appeal in these proceedings or the 1975 agreement.
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[815]These are indeed reasons that could well lead the Court to conclude that it is unlikely that Shionogi would have licensed anyone in the “but for world” unless it was actively solicited and offered significant financial incentive to do so.374
[816]What is of greater significance here is the fact that Dr. Hollis acknowledged that it would indeed be difficult for Shionogi to licence anyone even if it had a mere belief that it was already bound by an exclusive licence agreement with Lilly.375
[817]At this stage and for the purpose of assessing the likelihood of the present scenario, it is not necessary to settle the debate between the parties as to how one should construe the 1975 agreement. The Court’s analysis focuses on the subjective state of mind of Shionogi in the “but for world”. Once again, Shionogi’s beliefs in the actual world can be used to inform what such belief would have been in the “but for world”.
[818]The Court carefully examined all of the admissible evidence put forth by the parties to establish the facts they rely upon in their arguments.376 There are many such facts, and it is not useful to list them all here. It is sufficient to say that in the actual world, there is evidence that Shionogi held such a belief and acted upon it within months of the signature of the agreement.
374One must not forget that their business for selling dosage cefaclor in Japan was worth approximately US$
900million annually.
375
376See memorandum of argument of the defendant, Apotex Inc. (Re: competition) paras.
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[819]In effect, Dr. Kanazawa, who personally negotiated the 1975 agreement on behalf of Shionogi, wrote to Lilly, asking them where the patent applications regarding the “3- Halocephem Project” should be filed. Apotex, when asked by the Court how this could mean anything other than that Shionogi believed that Lilly had rights in respect of these patents, suggested that Lilly’s advice could have been sought simply because of its longstanding relationship with Shionogi and Lilly’s expertise in this area. The evidence of Dr. Wada, which the Court accepts as credible and who was particularly knowledgeable in that respect, having personally drafted the letter signed by Dr. Kanazawa, does not support Apotex’s views that it would have been Shionogi’s general practice to seek such advice.
[820]It is also quite significant that Shionogi actually went to court on the basis of that belief. In its letter to Gowlings LLP, dated June 22, 1993,377 authorizing the latter to act on its behalf in the PM (NOC) proceedings in respect of the Shionogi patents listed on Lilly’s Form IV patent list, Shionogi mentions that the patents at issue were “licensed to Eli Lilly & Co. in respect of intermediates to cefaclor”.378
[821]In an abundance of caution, although the Court has ruled that
377
378Ibid.
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[822]There is no good reason to conclude that in the “but for world” Shionogi’s belief would have been any different than the belief it held in the actual world. Presumably the only thing that would be different is that there would have been no correspondence between Lilly and Shionogi in respect of the potential assignment.
[823]Although this is more relevant to other scenarios that will be discussed later on, the Court is also convinced that this belief was held by Lilly in the actual world. The evidence in that respect is particularly strong.379
[824]The Court also considered whether or not Apotex would have accepted a licence if one were available. In effect, Lilly and Shionogi argued that the evidence shows that in any event, Apotex was not interested in obtaining licensed supply. The Court shares this view.
[825]In effect, it is worth noting that Apotex’s experts never inquired with Apotex as to its past licensing practices. As noted earlier, they have simply assumed that Apotex would seek such a licence if it was available from Shionogi.
[826]Apotex’s experts also tried to explain the fact that they had not considered that Shionogi had not licensed any
379See, for example, the examination of Mr. Pytynia, September 15, 2008, p. 17, lines
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patents in 1995, by arguing that the cefaclor patent itself was a barrier to entry.380 Obviously, they failed to consider that Apotex held a compulsory licence under the ‘536 patent, the patent on the compound cefaclor, from 1988. That is to say that for roughly six years prior to the expiry of this patent, Apotex could have sought to obtain licensed supply of bulk cefaclor from Shionogi, or even Lilly for that matter, but never did so.
[827]Apotex did not present any evidence that outside of the compulsory licence system, it ever sought a licence in respect of process patents that might apply to a product it wished to commercialise in the Canadian market.381 Additionally, there is no evidence that Apotex was even genuinely concerned with obtaining lawful supply with respect to bulk cefaclor.
[828]It is true that Apotex made inquiries of its various suppliers to determine whether these suppliers were making use of processes patented in Canada.382 However, there is little evidence as to discussions with Kyong Bo aside from a letter dated December 16, 1996 addressed to Pacific High Tech Canada (a Kyong Bo agent), which discloses Apotex’s concerns about infringing the Lilly patents, and the correspondence of October, 1997, exchanged in the context of defending the infringement suit already instituted by Lilly. That in December, 1996 Apotex would only inquire with Kyong Bo as to infringement of the
380Thereafter Dr. Ross simply assumed that Shionogi immediately pursued the opportunity offered by Lilly to assign its patents. If one accepts the assumption that Shionogi would be eager to commercialize its patents, it would have made good sense for Shionogi to start planning or to take steps before the expiration of the cefaclor patent and certainly immediately upon its expiration. In fact, Lilly approached Shionogi only several months later.
381Obviously, this comment applies to patents owned by parties other than the originator or innovator, who was on the Canadian market with a competing product, given that, “[t]he corporate policy at Apotex was not in favour of licensing in branded generics because our success was predicated on our ability to develop all of these generics independently.” (Examination of Jack Kay, September 3, 2008, p. 183 lines
382See Facts agreed to by the parties, SRTA # 83(a) and (b).
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Lilly patents is surprising given that Apotex knew of the Shionogi patents and the fact that Lilly was asserting rights under them since 1993, when the PM (NOC) proceedings were commenced.
[829]Be that as it may, when Apotex chose Kyong Bo as its supplier, its choice was not predicated on Kyong Bo’s use of the Shionogi process. As Dr. Sherman testified, Apotex made this choice “not because we were specifically looking for material made by Shionogi’s process.”383
[830]Nor was it made on the belief that Kyong Bo had a licence:
THE COURT: Did you choose that supplier because it had a licence?
[DR. SHERMAN]: No. […]
THE COURT: […] Were you looking for a manufacturer that had a licence?
[DR. SHERMAN]: No. […]
[W]e were not looking for a manufacturer with a licence. At the time we were simply looking for sources that could
383Examination of Dr. Sherman, September 3, 2008, p. 30 lines
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supply. We did not know that one was needed.384 At the time we were simply looking for sources that could supply. This particular source appeared to be a good supplier and was offering material and told us that they had an arrangement with Shionogi, but it is not because we were specifically looking for material made by Shionogi's process.385
[831]The Court notes that Dr. Sherman’s recollection about having been told that they had an arrangement with Shionogi appears to be slightly out of synch. In effect, the correspondence and Dr. Sherman’s own previous testimony indicates that such representations were made much later, that is in October, 1997. As soon as it was further investigated by Mrs. Fouillade, at the request of Dr. Sherman, it was quickly realized that this was not so.
[832]In any event, the approach that would have been taken by Apotex at the time is described by Dr. Sherman, when he testified on discovery that “[t]he most likely scenario would be that we simply would have used the [Shionogi] processes without any royalty at all or any discussion.”386 While this was not as eloquently repeated by Dr. Sherman at trial, it was not contradicted. In fact, Dr. Sherman testified that:
to the extent that there were other patentees with other processes, there would generally not be a need to deal with them, because one would expect they would not be enforced in Canada or would be available for licensing.387
[Emphasis added]
384It is worth mentioning that Dr. Church, when asked to explain why and if it was truly important for his opinion that there would be only two known commercial processes, made it clear that it was crucial in the scenario he assumed as a basis for his opinion that all buyers of cefaclor know that there were only two commercially viable processes to make bulk cefaclor. (See Transcript of October 6, 2008, p. 183, line 18 to p. 184, line 2.)
385Examination of Dr. Sherman, September 3, 2008, p. 29 line 5 – p. 30 line 8.
386Discovery of Dr. Sherman, July 11, 2006, p. 342 line 24 - p. 343 line 1.
387
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Again this defies the fact that, independently of the assignment, Lilly was asserting rights under these patents, which is a fact which Dr. Sherman should have been aware of.
[833]In any event, it appears that Apotex was not prepared to pay much for such a licence. Dr. Sherman explained that if Shionogi would have tried to charge Apotex more than a few percent, Apotex would have resisted, sending the parties to litigation:388
if they wanted to enforce the patent to try and get a higher royalty, they would have been faced with the prospect of litigation with us and perhaps having their patents invalidated at litigation, and it wouldn’t have been worth very much to them under those circumstances.[389]
[834]This evidence suggests that for Apotex, obtaining a licence for bulk cefaclor was an option of last resort. At trial, Dr. Sherman testified that “[i]f and when it became necessary, we could get a license, if that were appropriate.”390 This evidence is simply not sufficient for the Court to conclude that “but for” the assignment of the Shionogi patents, Apotex would have sought licensed supply.
12.7.2.Scenario 3: Apotex Practises the Shionogi Process and is not sued
[835]This scenario poses a number of evidentiary difficulties. First, and most obvious, Apotex’s conduct demonstrates that it was willing to obtain bulk cefaclor without regard to the method used to produce it. As noted above, the decision to source Kyong Bo was not dependent on the fact that it was practising a particular method. In addition, there is little
388This seems to diminish the value of Dr. Ross’s theory as to Shionogi’s financial incentives to licence companies like Apotex. It is certainly clear that Dr. Ross did not consider this.
389Discovery of Dr. Sherman, July 11, 2006, p. 343 lines
390Examination of Dr. Sherman, September 3, 2008, p. 33 lines
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evidence before the Court as to what led Apotex to begin sourcing bulk cefaclor from Lupin in May, 1997 other than because they had likely been approached by Lupin.391
[836]It is clear that Apotex inquired about Lupin’s process in July, 1997, at which point it had already received at least three shipments of bulk cefaclor. The Court cannot conclude that Apotex believed Lupin to be using the Shionogi process or again that such facts had become important or relevant in Apotex’s mind.
[837]The Court does not find it credible that, absent the assignment, Apotex would have made a conscious effort to source only bulk cefaclor made using the Shionogi process. The evidence supports the conclusion that Apotex was interested in supply, not supply manufactured using a particular process.
[838]Had the Court concluded differently in this respect, this scenario would still not be deemed more likely than not as the Court is not convinced that the evidence supports Apotex’s claim that the exclusive use of the Shionogi process would not attract an action for infringement.
[839]Specifically, there is absolutely no evidence or explanation offered to support the proposition that, in the “but for world”, enforcement of Shionogi’s patent rights would have not proceeded in precisely the same fashion as it did in the course of the PM (NOC) proceedings. As mentioned, the evidence is overwhelming that Lilly believed (again, rightly
391Along with many other suppliers whom had also submitted samples to Apotex (see Facts agreed to by the parties, LRTA #82).
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or wrongly) that it had an exclusive licence to the patents at issue and no good reason was offered to assert that Shionogi would be any less of a willing partner in their enforcement. The Court can only conclude that in the “but for world”, Apotex would have also faced an action for infringement, the only difference being that this action would be brought by both Lilly and Shionogi, just as with the PM (NOC) proceedings.
12.7.3.Scenarios 4 and 5: Apotex Practises the Shionogi and Lilly Processes and is Sued by Shionogi and Lilly
[840]As explained above, the Court cannot conclude that in the “but for world” it would be likely that Apotex would have sourced bulk cefaclor manufactured using only one process, be it Shionogi’s or Lilly’s. Thus, scenarios four or five cannot represent what would have occurred in the “but for world” as they are premised on Apotex practising only one of the processes.
[841]Most likely is a “but for world” where Apotex practised both the Shionogi and Lilly processes to varying degrees, exactly as what has transpired in the actual world. Apotex has admitted that it is very unlikely that in the “but for world” Lilly would not seek to enforce its patent rights. As explained above, there is no evidence that would lead the Court to conclude that such an action would not be conducted in the same fashion as the PM (NOC) proceedings with regard to infringement of the Shionogi patents.
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12.8.Is there a loss resulting from the assignment under the most likely “but for world” scenario?
[842]Based on the foregoing, the only difference between the actual world and the only likely “but for world” scenario is that Shionogi is also a party to the action for infringement. Apotex’s submissions in respect of its loss in such a scenario (see scenarios 4 and 5 in Chart B) are not particularly clear.392 When read together with paras 282 and 283 of its memorandum, it appears that Apotex alleges:
i) That should the Court set the “but for” price for bulk cefaclor at anything less than US$1,500.00393, it paid more for its bulk cefaclor in the actual world than in the “but for world”; and,
ii) That its potential liabilities as a result of infringement are greater in the actual world than in the “but for world”;
For the reasons that follow, the Court cannot conclude that Apotex suffered any damage as a result of this assignment.
[843]Before looking specifically at the evidence relied upon by Apotex to support the above allegations, it is important to look at what Apotex’s experts had to say in cross- examination about potential losses in a scenario where Apotex did not seek or obtain a licence in the “but for world” from Shionogi (directly or indirectly).
392Counsel for Apotex, November 6, 2008 p. 114, line 15 to p. 134, line 6.
393See the tables at para. 294 of Apotex’s memorandum.
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[844]First, Dr. Church said “[…] what I would agree with is that [if] you can establish that in the “but for” world, Apotex would not have received supply from either Shionogi or from Lilly then Apotex would not have been harmed.”394
[845]This was also the view of Dr. Ross:
[Counsel for Lilly]: You will agree with me that if it chose another company to license and not Apotex then there would have been no impact on Apotex as a result of the 1995 agreement?
[Dr. Ross]: I think that is right. Let us just be clear. Absent the ’95 agreement, they would have licensed someone else?
[Counsel for Lilly]: Right.
[Dr. Ross]: Now you bring in the ’95 agreement so there is nobody licensed, what is the effect of Apotex. That is correct.
[Counsel for Lilly]: So you agree there would have been no impact on Apotex?
[Dr. Ross]: Right.[395]
[846]As for Mr. Cole, he was asked to assume that the Court found that there was anti- competitive conduct and that Apotex had infringed and as such was liable to pay damages. He was then asked to consider the scenario where this Court also held that in the “but for world”, Apotex would not enter into a licensing agreement. In his view, “under that logic or that assumption, there would be no damages, I think. There would be no damages. […] That is a fair assumption.”396
394
395
396
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[847]Despite this evidence, Apotex nonetheless maintains that it has suffered a loss measured against scenarios 4 and 5, where it is evident that it would not be a licensee of either Shionogi or Lilly.
[848]The court will first examine whether or not Apotex has established a loss in respect of the costs paid for the bulk cefaclor, given that, in accordance with Justice Hughes’ judgment referred to earlier, the Court must be in a position to quantify Apotex’s loss in that respect.
12.9.Increased Cost of Legal Bulk Cefaclor
[849]The Court is not satisfied that Apotex has established by any standard that it would have contracted for its bulk cefaclor in the “but for world” at any price less than it paid in the actual world. In effect the price it paid for infringing material (all but the cefaclor produced by Lupin in 1998) could not be affected by the prices for legal bulk cefaclor whatever they may have been in the “but for world”. The Court understands that it is exactly for that reason that Apotex’s experts made the admissions referred to above and concluded that Apotex suffered no loss in said context.
[850]The Court knows that in any event even if the price of the legal bulk cefaclor in the “but for world” was relevant here, Apotex has failed to provide the Court with sufficient evidence to conclude that it has suffered a loss.
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[851]Apotex’s experts only address the issue of price differential between the monopoly price397 and the duopoly price in the “but for world”. It appears that they were never asked to precisely determine if there was a difference between the actual price paid and the duopoly price in the “but for world” for they appear content with a mere range of possible prices for legal bulk cefaclor in the “but for world”: US$ 860.00 to US$ 1,500.00.398
[852]While in reply to the testimony of Dr. Cockburn, Dr. Church and Dr. Hollis submitted that the price of US$ 1,150.00 charged by Lilly to Novopharm could be a more precise estimate, they did not renege on their initial proposition. During oral argument, Apotex’s counsel suggested that the Court should adopt the price of $1,150.00 which is very near the
12.10.Infringement Liability
[853]Apotex argues399 that allowing Lilly to retain damages that it could only recover by virtue of rights that were unlawfully obtained would amount to an unjust enrichment or unjustified benefit. However, it is crucial to remember that, pursuant to s. 36, the inquiry is
397A price Apotex never had to pay given that it bought infringing bulk cefaclor until 1998 at which time the legal bulk cefaclor was obtained from a third source (Lupin).
398Examination of Dr. Church, September 9, 2008, p. 31, lines
399See memorandum of argument of the defendant, Apotex Inc. (Re: Competition), para. 287.
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directed to the actual damage suffered by the plaintiff, who can only recover “an amount equal to the loss or damage proved to have been suffered by him.”400
[854]In respect of the Shionogi patents, Apotex says that in the “but for world” it would only be liable to pay damages that would be “no greater than a reasonable royalty rate.”401
Apotex also argues that in respect of the Lilly patents, although they were not the subject of the assignment, its potential liability would still have been less in the “but for world” given that Lilly would have faced competition from Shionogi. Thus, the lost profit Lilly would be claiming would be less.402
12.10.1.The Lilly Patents
[855]Little evidence was presented to support Apotex’s argument aside from a single page from a single report of a single expert, Dr. Church,403 which is barely answered by Shionogi and Lilly. Therein, Dr. Church offers a formula, [pm – p]qA, wherein pm “is the price Lilly lost as a monopolist”;404 p “is the price Lilly would have charged for bulk cefaclor had there been competition”;405 and, qA is Apotex’s quantity of sales (dosage form).
400Other common law remedies exist where unjust enrichment may be more relevant.
401Ibid., para. 282.
402This would obviously only apply if Lilly elected to seek damages based on its own profits instead of seeking an accounting of Apotex’s profits.
403
404Ibid.
405Ibid.
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[856]When asked by the Court to explain the relevance of this formula and how it could be used, Dr. Church volunteered what the Court has come to realize are some very serious limitations to his approach:
[The Court]: So you are telling me you could have calculated this precisely but you didn’t because you weren’t asked.
[Dr. Church]: No, I was not asked and I couldn’t – you know, perhaps I might have been able to calculate these things, but you know, it was not part of the remit. It was just what I was asked to do is come up with a framework.
[The Court]: Why do you say “might”? It is just, you know, you might? How will I do it if you say you might?
[Dr. Church]: My lady, I apologize. I mean, I wasn’t asked to do that.
[The Court]: Okay, that is fine. So your answer is you haven’t, you could have or you might have been able to do it, but you weren’t asked.
[Dr. Church]: Right, right. I mean, what I have is a framework to show that they could have been damaged.[406]
[Emphasis added]
[857]First, the Court finds this to be a particularly obscure part of the evidence of this expert and Apotex made no effort whatsoever to explain para. 283 of its memorandum. It appears to be predicated on an assumption that Lilly’s profit on bulk cefaclor is relevant to the quantification of the infringement damages in the main action.
[858]Second, as mentioned earlier, this framework is inconsistent with positions taken at trial by Dr. Church himself as well as other Apotex experts. It therefore cannot have been
406
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intended to apply in the only plausible “but for world” scenario here, which does not involve any licensing by Shionogi.
[859]In any event, Dr. Church’s proposed framework only serves the purpose of establishing that Apotex could have been harmed, not that it was in fact the case. Even though the assessment of the quantum was bifurcated, Apotex still had the burden of establishing that it did suffer damages, not simply that it “could” have suffered damages. Apotex has done nothing more than offer speculation to the Court in that respect.
[860]The Court is not ready to reach any conclusion based on this evidence.
12.10.2.The Shionogi Patents
[861]In the “but for world” Shionogi and Lilly would be
[862]The Court has not been persuaded that there is even a real or substantial possibility that Shionogi, in such a scenario, would agree to settle for the low royalty fee alluded to by Dr. Sherman in his testimony and this in the eventuality that Apotex deemed it appropriate to present such an offer.407
407The Court infers from Dr. Sherman’s qualified statement in that respect that Apotex would make an assessment at that stage.
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[863]This means that the only argument left is the same one that was raised in the actual world against Lilly. That is, Apotex should only pay a reasonable royalty because the Shionogi patents were not used or commercialized in Canada.408 It was rejected despite a thoroughly developed presentation.
[864]Presumably, although this was not argued, for Apotex, it has more strength in the “but for world” because Lilly would have had to establish that it indeed had rights under the patentee.
[865]This brings us back to the 1975 agreement and the relationship between the two plaintiffs in a “but for world” and requires that the Court speculate as to what decision a Court would render in the “but for world”.
[866]I say “speculate” because, had there not been an assignment, the evidence before the Court would probably be very different. For example, there would likely not exist any correspondence between Lilly and Shionogi in respect of a possible assignment.409 Shionogi could well have been involved in the U.S. proceedings with Lilly and there could even be a judgment dealing with the issue. There would also likely be little evidence, if any, with respect to agreement(s) entered into by Shionogi and Lilly with third parties, as in the “but for world” Apotex would probably not have been entitled to make inquiries in that respect.410
408Memorandum of argument of the defendant, Apotex Inc. (Re: competition), para. 282.
409Such as the correspondence Apotex sought to have admitted as evidence
410There would be no counterclaim under the Competition Act in the “but for world”.
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[867]Although this also calls for speculation, one could assume that the Court in the “but for world” would have the benefit of an evidentiary record similar to the one in the main action but adding elements of the counterclaim. For example, there would also be evidence in the “but for world” that Dr. Gorman of Lilly sought Shionogi’s help in developing “a method to economically synthesize the
[868]The Court in the “but for world” would apply the general principles discussed in the main reasons, including the following comments of Justice Rothstein in Apotex (2000), at para. 99:
It is perhaps not uncalled for to observe that this is not a case in which the alleged licensee is alone in advancing its claim for patent infringement. Here, the patentee is also before the Court as a
[869]In the context of such an infringement action it is, in my view, as likely as not that the Court would conclude that Lilly does indeed have rights under the patentee.
411Examination of Mr. Wada, September 15, 2008, p. 165, lines
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[870]Thus, even if the Court was entitled to speculate as much as Apotex suggests it should, the Court has not been persuaded that Apotex would not be exposed to exactly the same conclusions that were reached in the main action.
[871]Moreover, even if one were to assume that Lilly had no such rights, Shionogi could very well be entitled to an accounting of profits from Apotex. In such a case, the measure of restitution is the defendant’s gain, rather than the plaintiff’s loss (Monsanto Canada Inc. v.
Rivett, 2009 FC 317, [2009] F.C.J. No. 410 (QL) , para. 21 (Monsanto Canada Inc. v. Rivett) and Bayer Aktiengesellschaft v. Apotex Inc. (2001), 10 C.P.R. (4th) 151 (Ont. S.C.J.); aff’d (2002), 16 C.P.R. (4th) 417 (Ont. C.A., where the Court rejected Apotex’s argument that the wronged party should not be unjustly enriched by awarding it a sum in excess of its actual loss).
[872]As noted by Justice Russel Zinn in Monsanto Canada Inc. v. Rivett, if this option was not open to Shionogi “it would be too easy for a defendant to say “Catch me if you can.” If caught, the defendant would be required to pay the sum he would have paid to use the patent in any event. When not caught, he is left with a windfall”. (para. 23) When one considers Dr. Sherman’s evidence, this reasoning rings particularly true in the case at hand.
[873]Furthermore, Apotex has not provided any evidence whatsoever indicating that the profits it would have had to disgorge would likely be less than the damages which could be awarded to Lilly had it elected to seek damages instead of an accounting of profits.
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[874]In sum, even if the Court was satisfied that any part of Apotex’s infringement liability is the result of the assignment which will now be discussed, Apotex has not met its burden of establishing that its infringement liability in the “but for world” would likely be different than in the actual world.
[875]The Court now turns to Shionogi and Lilly’s argument that Apotex is seeking to “have its cake and eat it too”. In addition, they submit that to recognize the type of argument put forth here by Apotex would amount to providing it with an insurance policy covering its acts of infringement. This, according to Lilly and Shionogi, would be unconscionable given that such liability is in fact the result of Apotex’s decision to infringe rather than the result of the assignment of the patents. In reply,412 Apotex notes that these concerns fail to take into account the fact that Apotex only had to enter the market at risk because of the unlawful arrangement between Shionogi and Lilly. The Court does not accept this last statement.
[876]Indeed, the evidence established that Apotex made a business decision to purchase its bulk cefaclor without inquiring into whether or not it infringed any patent it knew, or ought to have known, was being asserted by Lilly and Shionogi as relevant to the manufacture of bulk cefaclor. This decision was not based on the fact that the Shionogi process would be less costly to infringe. Had Apotex turned its mind to this, given that the Shionogi patents were on Lilly’s patent list, it could only have concluded that it was likely that Lilly would assert rights in respect of those patents.
412Memorandum of argument of the defendant, Apotex Inc. (Re: competition), para. 287.
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[877]Thus, even if Apotex had established a loss in respect of its infringement liability, the Court would not have been persuaded that it arose as a result of the assignment.413
[878]Finally, one must not lose sight of the fact that the Competition Act was adopted to protect the public interest. Its goal is not to protect the rights of those who choose to act in a manner contrary to the law. What Apotex argues here is that it has the right to infringe at the lowest possible cost.
[879]It was made very clear when the Court, trying to clarify Apotex’s position, solicited its view on the following hypothetical scenario: what if a patentee, a small company with little means to enforce its patents, decides to sell at
[880]This simply cannot be right.
[881]After careful consideration, I have come to the conclusion that it would be inappropriate to comment on the other issues raised in this case, particularly whether or not
413In fact, albeit in a different context, Apotex’s decision is analogous to what was characterized by Justice Goff in Koch Marine Inc. v. D’Amica Societa di Navigazione A.R.L. ( The “Elena D’Amico”), [1980] 1 Lloyd’s L.R. 75 (Q.B. Comm. Div.) as a decision which results in the rupture of the causal link between a breach and a loss: “an independent decision, independent of the breach, made by the buyer on his assessment of the market. It is perfectly true that his decision is made in the context of a
414Transcript of November 13, 2008, p. 201 line
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there was a violation of s. 45 of the Competition Act. This raises some important novel questions that should not be answered by way of obiter comments.415
12.11.Costs
[882]Lilly and Shionogi made extensive representations to support their claim for
[883]The defendants by counterclaim are entitled to assess costs of two counsel as well as reasonable expert witness fees and disbursements for the expert witnesses who testified at trial.
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415The Court will keep all the material necessary to determine these issues until the rights of appeal have been exhausted in order to stand ready to determine them should it become necessary to do so.
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JUDGMENT
For the Reasons set out herein, following the trial of this action, this Court adjudges and declares as follows:
1.At least one valid claim in each of the following patents:
a.Canadian Letters Patent No. 1,133,007;
b.Canadian Letters Patent No. 1,146,536;
c.Canadian Letters Patent No. 1,133,468 ;
d.Canadian Letters Patent No. 1,150,725;
e.Canadian Letters Patent No. 1,095,026;
f.Canadian Letters Patent No. 1,132,547;
g.Canadian Letters Patent No. 1,136,132;
h.Canadian Letters Patent No. 1,144,924;
have been infringed by the defendant, Apotex Inc. by their importation, manufacture, export, sale and offers for sale of cefaclor in Canada;
2.The plaintiffs are entitled to elect either an accounting of profits of the defendant or all damages sustained by reason of sales directly lost as a result of the infringement by the defendant of the
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3.The defendant shall be entitled to deduct up to a maximum of 187 kilos of bulk cefaclor pursuant to subs. 55.2(1) of the Patent Act. The exact quantity to be assessed by reference in accordance with my reasons;
4.The plaintiffs are entitled to
5.In the event that the plaintiffs elect an accounting of profits, interest shall be determined by the reference judge;
6.The plaintiffs are entitled to
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7.The plaintiffs are entitled to their costs which will be the subject of a distinct order. The parties shall within thirty (30) days hereof make submissions as to the amount of said costs in the manner set out in my reasons;
8.The defendant’s counterclaim is hereby dismissed, with costs to be assessed in accordance with my reasons.
“Johanne Gauthier”
Judge
2009 FC 991 (*)
CHART “A”
INFRINGEMENT
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Name |
Subject Matter |
Date |
Exhibit |
Terms of qualification |
Brief Bio Note |
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number |
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Expert in chemistry, organic |
Dr. Anthony Barrett is Professor of |
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chemistry, in particular beta- |
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organic chemistry and synthetic |
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lactam chemistry including |
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chemistry at Imperial College of |
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cephalosporins and penicillins; |
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Science, Technology and Medicine |
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chemistry research techniques, |
(UK). He obtained his PhD in 1975. |
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organic and medicinal |
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Over the course of his career, he has |
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compound synthesis, |
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Lilly |
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also taught at Northwestern |
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manufacturing, manipulation |
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Anthony G.M. |
infringement in |
October |
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University and Colorado State. He |
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1 |
and antibiotic mechanisms and |
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Barrett |
chief – Kyong |
19, 2007 |
was named a Fellow of the Royal |
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Bo process |
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activity; experimental and |
Society (UK) in 2003. He is a |
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analytical chemistry testing, |
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specialist in the synthesis of beta- |
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techniques and interpretation, |
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lactams and has studied penicillins |
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including analysis and |
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and cephalosporins since the 1970’s. |
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interpretation and chemical |
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He has published extensively in this |
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compound properties, |
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field over three decades. He is the |
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compound and structure |
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author of over 330 publications. |
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analysis and identification. |
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Expert in: 1) chemistry, |
Professor and former Chair of the |
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organic chemistry, medicinal |
Department of Chemistry and |
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chemistry, in particular beta- |
Biochemistry at the University of |
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Lilly |
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lactam chemistry including |
Notre Dame, Indiana. PhD in bio- |
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cephalosporins and penicillins; |
organic chemistry, Cornell |
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infringement in |
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October 8, |
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2) chemistry research |
University, 1976. |
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2 |
Marvin Miller |
chief – Lupin |
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2007 |
techniques, organic and |
research at UC Berkeley. Extensive |
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process |
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medicinal compound |
experience in the organic chemistry |
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(experiments) |
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synthesis, manufacturing, |
and synthesis of |
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manipulation and antibiotic |
been Editor for a variety of research |
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mechanisms and activity; 3) |
journals. Author or |
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experimental and analytical |
225 |
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2009 FC 991 (*)
Page:328
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chemistry testing, techniques |
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and interpretation, including |
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NMR, IR and LC/MS, |
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analysis and interpretation and |
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chemical compound |
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properties, compound and |
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structure analysis and |
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identification. |
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Lilly |
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3 |
Marvin Miller |
infringement in |
October |
See above. |
See above. |
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chief – Lupin |
19, 2007 |
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process |
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Hold a B.Sc in chemistry (1997) |
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from the University of Notre Dame. |
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He is currently Research Technician |
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Lilly |
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Expert in experimental and |
and Lab Manager in the laboratory |
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of Dr. Miller at the University of |
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infringement in |
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analytical chemistry research |
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Notre Dame. Four years experience |
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chief – Lupin |
October |
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techniques, practices, |
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4 |
Garrett Moraski |
as a research assistant at Pfizer and |
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process – |
19, 2007 |
instruments and |
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several more years as a researcher at |
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experiments |
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documentation, and NMR and |
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a pharmaceutical |
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(Testing) |
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IR analysis. |
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actively participated in Dr. Miller’s |
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research activities and been listed as |
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publications. |
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Lilly |
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Emeritus professor of chemistry and |
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chemical engineering at Queen’s |
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infringement in |
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A chemist with a focus on the |
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University, Kingston. Ret’d 2001. |
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chief – Lupin |
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utilization of nuclear magnetic |
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PhD obtained from University of |
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5 |
Brian Hunter |
process – P |
October |
resonance and infrared |
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Western Ontario, 1969. National |
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NMR and IR |
22, 2007 |
spectroscopy to study |
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Research Council Fellow at |
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spectra data |
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molecular behaviour in a |
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University College in London 1969- |
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regarding kinetic |
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variety of systems. |
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1971. Research and teaching |
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complex |
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specialty in the utilization of nuclear |
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2009 FC 991 (*)
Page:329
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magnetic resonance (NMR) |
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spectroscopy, including |
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phosphorous NMR, to study |
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molecular behavior. Has provided |
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advice in the interpretation of NMR |
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spectra across all fields of chemistry. |
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Author of a textbook entitled |
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Modern NMR Spectroscopy: a |
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Guide for Chemists (2nd ed. 1993). |
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Expert in: 1) chemistry, |
Sir Baldwin is Professor of |
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organic chemistry, medicinal |
Chemistry at Oxford University |
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chemistry, in particular beta- |
(ret’d. 2005) and was Professor of |
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lactam chemistry including |
Chemistry at the Massachusetts |
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cephalosporins and penicillins; |
Institute of Technology from 1972- |
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Lilly |
|
|
2) chemistry research |
1978. He obtained his PhD from |
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techniques, organic and |
Imperial College in 1964. He has |
||
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infringement in |
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|||
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|
October |
|
medicinal compound |
been a Fellow of the Royal Society |
||
|
|
chief – Lupin |
|
||||
6 |
Jack Baldwin |
synthesis, in particular beta- |
since 1978, and was recognized for |
||||
process |
19, 2007 |
||||||
|
|
|
lactam synthesis, |
contribution to chemistry with a |
|||
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manufacturing, manipulation |
Knighthood in 1997. Throughout his |
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and antibiotic mechanisms and |
distinguished career he has been |
|
|
|
|
|
|
activity; 3) experimental |
particularly interested in the |
|
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|
|
|
techniques and interpretation |
synthesis of |
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|
|
as used by chemists in this |
especially penicillins and |
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|
|
|
field in the course of their |
cephalosporins, and is familiar with |
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work. |
industrial work in this area. |
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Ms. Azzarello is an |
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Lilly |
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Expert in regulatory affairs, |
pharmacist with over two decades |
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|
experience in the pharmaceutical |
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infringement in |
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including preparation and |
industry in clinical research, sales, |
||
|
|
chief – Health |
October |
|
|||
7 |
Diane Azzarello |
filing of new drug submissions |
and regulatory affairs. She is a past |
||||
|
|
Canada |
19, 2007 |
|
and any other matter covered |
Director of regulatory affairs for |
|
|
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regulatory |
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|||
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|
within her report. |
Upjohn Canada, and has acted since |
||
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requirements |
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1996 as President of Market Access |
||
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Strategic Regulatory Services Inc., a |
2009 FC 991 (*)
Page:330
|
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consultancy, where she advises |
|
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innovator and generic companies on |
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the filing of drug submissions with |
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Health Canada. |
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Lilly |
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infringement |
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reply – testing of |
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February 21, |
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Garrett C. |
2008 in response |
February |
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|
|
|
8 |
to Dr. Cowley |
See above. |
See above. |
||||
Moraski |
28, 2008 |
||||||
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and Dr. |
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McClelland |
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(Under reserve |
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of a general |
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objection) |
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Lilly |
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infringement |
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reply – Dr. |
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|
9 |
Garrett C. |
Hunter and |
January 18, |
See above. |
See above. |
||
|
Moraski |
Miller testing. |
2008 |
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Completed by |
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new exhibit |
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on June 20, 2008 |
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Lilly |
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10 |
Garrett C. |
infringement |
April 19, |
See above. |
See above. |
||
Moraski |
reply – Re Dr. |
2008 |
|||||
|
|
Chase testing |
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2009 FC 991 (*)
Page:331
11
David Gorenstein
Lilly infringement reply – Lupin process (Under reserve of a general objection)
March 19, 2008
Expert with respect to the development and application of NMR spectroscopy to biological systems, and an expert chemist who has carried out extensive research in the chemistry of phosphorous compounds and organophosphorous chemistry.
Dr. Gorenstein is Associate Dean of Research at the School of Medicine of the University of Texas. He is also a Professor in the Departments of Biochemistry and Molecular Biology, and Neurosciences and Cell Biology. His research interests include the development and application of NMR spectroscopy to biological systems (including 31P NMR), and he is Director of the Gulf Coast Consortium in Magnetic Resonance, an NMR facility shared by several regional universities and Dow Chemical. For nearly two decades he has served as editor of the journal published by the International Society of Magnetic Resonance and also edits on online NMR textbook. He is the author of over 245 publications including a 1984 article entitled “Phosphorous- 31 NMR Principles and Applications,” and has extensive teaching and training experience in NMR spectroscopy. He has also conducted extensive research into the chemistry of phosphorous compounds over the past 40 years.
2009 FC 991 (*)
Page:332
|
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Lilly |
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infringement – |
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Lupin process – |
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12 |
Anthony G.M. |
(by leave but |
June 15, |
See above. |
See above. |
||
Barrett |
under reserve of |
2008 |
|||||
|
|
objection – with |
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respect to certain |
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paragraphs) |
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Lilly reply – |
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infringement |
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Lilly patents – |
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reply to |
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McClelland |
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report of January |
March 20, |
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|
13 |
Brian K. Hunter |
18, 2008 and |
See above. |
See above. |
|||
2008 |
|||||||
|
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Cowley report of |
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January 17, 2008 |
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(Under reserve |
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of objection: see |
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344) |
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Lilly |
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supplemental |
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reply – |
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infringement – |
April 20, |
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14 |
Brian K. Hunter |
Apotex April |
See above. |
See above. |
|||
2008 |
|||||||
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2008 testing at |
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University of |
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Toronto (Dr. |
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Chase) |
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2009 FC 991 (*)
Page:333
15
Tomasz A. Modro
Apotex infringement responding – P NMR spectra testing in South Africa
May 7, 2008
An expert in organic chemistry of phosphorous, sulfur and silicon, as well as in the area of physical organic chemistry, and an expert in carrying out experimental reactions involving the chemistry of phosphorous.
Dr. Tomasz Modro received his PhD in Organophosphorous Chemistry in 1962 from the Polish Academy of Sciences and his Habilitation from the University of Lodz in 1969. In 1974, he joined the Department of Chemistry of the University of Toronto, as Lecturer and later Assistant Professor. In 1979, he joined the Department of Chemistry at the University of Cape Town and in 1987 he joined the University of Pretoria as Professor of Chemistry and Director of the Centre for Heteroatom Chemistry, where he has been Professor Emeritus since 2002.
Dr. Modro specializes in the area of heteroatom chemistry involving the organic chemistry of phosphorous, sulfur and silicon, and the synthesis and use of novel organophosphorous compounds in chemical transformations. He has been recognized as an international leader in his field by the National Research Foundation (South Africa) and is a member of both the Royal Society (South Africa) and the South African Academy of Sciences. He has published over 210 papers.
2009 FC 991 (*)
Page:334
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Dr. Chase is a Research Associate at |
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the University of Toronto. He |
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received PhD in April 2003 from the |
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University of Calgary and is past |
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NSERC fellowship holder. After |
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obtaining his PhD, he undertook |
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Apotex |
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||
|
|
infringement |
April 11 |
TX- |
An expert in |
University of Utrecht (Netherlands). |
|
|
Preston Allen |
responding - |
1626 C, |
organophosphorous chemistry, |
From 2006 to 2008, he has been at |
||
16 |
and 17, |
||||||
Chase |
Testing at the |
D, E, F, |
the chemistry of reactions |
the University of Windsor, where he |
|||
|
|
University of |
2008 |
G, H. |
involving organic compounds. |
focuses on chemistry related to his |
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|||||
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Toronto |
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PhD work as well as phosphorous |
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and nitrogen chemistry. He has |
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extensive experience carrying out |
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reactions involving |
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organophosphorous compounds and |
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has published a number of papers |
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dealing with such compounds. |
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Dr. McClelland is Professor |
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Emeritus at the University of |
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Toronto. He obtained his PhD in |
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chemistry from the University of |
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Expert in physical, organic, |
Toronto in 1969 and has been a |
|
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|
Apotex |
|
|
biological and medicinal |
faculty member there since 1973. |
|
17 |
Robert A. |
infringement |
January 18, |
TX- |
chemistry including the |
His research activities are in the |
|
McClelland |
responding – |
2008 |
1764 |
synthesis properties and use of |
areas of physical organic, biological |
||
|
|
Lupin process |
|
|
organophosphorus compounds |
and medicinal chemistry. He is a |
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in chemical reactions. |
Fellow of the Royal Society |
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(Canada) and has received awards |
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from the Canadian Society for |
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Chemistry for his work in organic |
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chemistry. |
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2009 FC 991 (*)
Page:335
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Apotex |
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infringement |
|
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|
18 |
Robert A. |
responding – |
May 6, |
TX- |
See above. |
See above. |
|
McClelland |
Testing at the |
2008 |
1765 |
||||
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|
University of |
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Toronto |
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Dr. Cowley is a Fellow of the Royal |
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Society (UK) and occupies the |
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Robert J. Welch Chair in Chemistry |
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|
Research chemist with |
at the University of Texas at Austin. |
|
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|
He was awarded a PhD in inorganic |
||
|
|
Apotex |
|
|
expertise in the preparation, |
||
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|
|
chemistry from the University of |
|||
|
|
infringement |
|
|
structures and patterns of |
||
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|
|
|
Manchester, UK, in 1958. He joined |
|||
|
|
responding – |
January 17, |
|
reactivity of compounds of the |
||
19 |
Alan H. Cowley |
the faculty at the University of |
|||||
‘007 patent and |
2008 |
||||||
|
|
addressee of |
|
|
phosphorous chemistry and |
Texas (Austin) in 1962 and was |
|
|
|
|
|
made full professor in 1970. His |
|||
|
|
‘536 patent |
|
|
the use and evaluation of 31P |
||
|
|
|
|
|
NMR spectroscopy. |
major research interests have been |
|
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|
|
the preparation, structure and |
||
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||
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patterns of reactivity of compounds |
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of the |
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focus on phosphorous chemistry. |
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Dr. Stephen Hanessian is the |
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McConnell Professor of Chemistry |
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Expert in organic, |
at the University of Montreal, where |
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he joined the Faculty in 1969, and |
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Apotex |
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and medicinal chemistry, |
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has been since 2000 Adjunct |
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including specifically the |
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infringement |
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Professor in Chemistry and |
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Stephen |
January 22, |
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chemistry of synthetic |
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20 |
responding – |
Chemical Biology at the University |
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Hanessian |
General |
2008 |
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penicillins and |
of California, Irvine, where he |
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antibiotic compounds and the |
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comments |
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directs a graduate program in |
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development of synthetic |
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pharmaceutical sciences and |
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chemical processes. |
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medicinal chemistry. |
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Dr. Hanessian’s research interests |
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are in the total synthesis of natural |
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products, including the synthesis of |
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amonoglycoside antibiotics and |
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synthetic penicillins, as well as |
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medicinal chemistry, drug design |
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and the development of new |
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synthetic methods. He has |
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published over 465 papers in these |
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fields. His contributions have been |
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recognized by a Fellowship in the |
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Royal Society (Canada) and |
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membership in the Order of Canada. |
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Apotex |
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Stephen |
responding to E- |
July 2, |
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21 |
15 – (by leave) - |
See above. |
See above. |
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Hanessian |
infringement – |
2008 |
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Lupin processes |
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Expert in pharmaceutical |
Ms. Wehner is the founder and |
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regulatory affairs, including |
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President of |
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the preparation and filing of |
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Apotex |
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a consultancy specializing in |
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new drug submissions; the |
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infringement |
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regulatory affairs in Canada, the US, |
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evaluation of drug master |
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responding – |
January 22, |
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and Europe, as well as R&D in |
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22 |
Sue E. Wehner |
files; and the regulatory |
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Health Canada |
2008 |
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practices and procedures, |
product development and clinical |
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regulatory |
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and bioequivalence studies. She has |
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guidelines, policies and |
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requirements |
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over 30 years experience in this area |
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requirements of Health |
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and has filed new and abbreviated |
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Canada regarding |
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drug submissions for many drugs. |
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pharmaceutical practice. |
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VALIDITY |
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23 |
Robert A. |
Apotex in chief – |
October |
See above. |
See above. |
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McClelland |
validity |
19, 2007 |
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2009 FC 991 (*)
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Tomasz A. |
Apotex in chief – |
October |
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24 |
validity of ‘007 |
See above. |
See above. |
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Modro |
patent |
19, 2007 |
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Apotex in chief – |
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validity – |
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affidavit |
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Tomasz A. |
concerning |
June 2, |
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25 |
testing |
See above. |
See above. |
|||
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Modro |
A to M, L and M |
2008 |
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being under |
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reserve of |
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objection) |
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Stephen |
Apotex in chief – |
October |
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26 |
validity – |
See above. |
See above. |
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Hanessian |
Shionogi patents |
19, 2007 |
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Dr. Martin is the M. June and J. |
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Virgil Waggoner regents Chair of |
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Chemistry at the University of Texas |
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Expert in synthetic organic |
at Austin, where he has been on |
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faculty since 1974. He is also |
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chemistry, heterocyclic |
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Adjunct Professor at the University |
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chemistry and |
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of Texas School of Medicine. He |
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chemistry, including |
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obtained a PhD from Princeton |
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|
Stephen F. |
Apotex in chief – |
October |
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specifically the design and |
|
27 |
University in 1972, where he |
|||||
Martin |
validity – |
19, 2007 |
development of synthetic |
specialized in heterocyclic |
||
|
Shionogi patents |
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models and their application to |
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the synthesis of heterocyclic |
chemistry. Over the course of his |
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career Dr. Martin has been |
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compounds including lactams |
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extensively engaged in the design |
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and the total synthesis of |
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and development of synthetic |
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complex natural products. |
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methods and their application to the |
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synthesis of heterocyclic compounds |
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and the total synthesis of natural |
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products. He is the author of over |
2009 FC 991 (*)
Page:338
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250 publications in the fields of |
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synthetic organic chemistry and |
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heterocyclic chemistry, some of |
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which deal with lactams (not |
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including |
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1975. |
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Dr. Chivers obtained his PhD in |
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chemistry from the University of |
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Durham (UK) in 1964 and has been |
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Expert in inorganic synthetic |
a faculty member in the Department |
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of Chemistry, University of Calgary, |
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chemistry, particularly the |
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since 1969. His research has focused |
|
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|
Apotex in chief – |
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|
chemistry involving the |
|
|
Tristram |
October |
|
on inorganic chemistry, particularly |
||
28 |
validity – Lilly |
elements sulfur and |
||||
|
Chivers |
‘007 patent |
19, 2007 |
|
phosphorous, and in the use of |
as it involves the elements sulfur, |
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|
selenium, tellurium, boron, and |
||
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|
31P NMR spectroscopic |
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techniques. |
phosphorous. He is the author of |
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|
over 300 journal articles. His work |
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has been recognized through various |
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awards and he was made a Fellow of |
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the Royal Society (Canada) in 1991. |
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Dr. Olah is Director of the Loker |
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Expert in the area of organic |
Hydrocarbon Research Institute and |
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Distinguished Professor of Organic |
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|
and organosulfur chemistry as |
Chemistry at the University of |
|
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|
well as the area of physical |
Southern California, Los Angeles, |
|
|
Apotex in chief – |
|
|
organic chemistry including |
where he has been a faculty member |
|
|
|
|
the synthesis of novel ionic |
since 1977. He obtained his PhD in |
|
|
George Andrew |
invalidity of |
October |
|
||
29 |
organic compounds and their |
chemistry from the Technical |
||||
|
Olah |
Lilly ‘536 and |
18, 2007 |
|
use in other chemical |
University in Budapest (1949) and is |
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|
‘007 patents |
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||
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|
transformations, as well as |
a past head of the Department of |
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hydrocarbon chemistry and |
Organic Chemistry at the Institute of |
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|
synthetic reagents and |
the Hungarian Academy of |
|
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methods. |
Sciences, past Professor at the |
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Western Reserve University (now |
|
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|
|
Case Western). He was also a |
2009 FC 991 (*)
Page:339
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|
research scientist with Dow for 7 |
|
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|
|
years. His research activities are in |
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|
the areas of organic and |
|
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|
|
organosulfur chemistry and the |
|
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|
|
|
synthesis of novel ionic organic |
|
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|
|
compounds and their use in other |
|
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|
|
chemical transformations, as well as |
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|
hydrocarbon chemistry and synthetic |
|
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|
reagents and methods. He has |
|
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|
published over 1300 |
|
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|
articles and is a member of |
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numerous learned societies. He was |
|
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|
awarded a Nobel Prize in 1994 for |
|
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|
his work on positively charged |
|
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|
|
compounds of carbons. |
|
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|
|
Anthony G.M. |
Lilly responding |
January 21, |
|
|
|
30 |
– validity – |
See above. |
See above. |
|||
|
Barrett |
Shionogi patents |
2008 |
|
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|
Lilly responding |
|
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|
|
– validity of |
|
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|
|
Lilly patents – |
January 21, |
|
|
|
31 |
Brian K. Hunter |
reply to Drs. |
See above. |
See above. |
||
|
|
Modro, |
2008 |
|
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|
McClelland, |
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|
Olah and Chivers |
|
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|
Lilly responding |
January 18, |
|
|
|
32 |
Jack Baldwin |
– validity of |
See above. |
See above. |
||
|
|
Lilly patents |
2008 |
|
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|
2009 FC 991 (*)
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Page:340 |
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Expert in Canadian patent |
|
Mr. Murphy is a patent agent and |
|
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|
prosecution, in particular |
|
senior partner with the firm Ogilvy |
|
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|
|
chemical, pharmaceutical and |
|
Renault in Montreal. He became a |
|
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|
materials science patents, and |
|
registered Canadian and United |
|
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|
|
Lilly responding |
|
|
|
|
the analysis of contents of |
|
States patent agent in 1972. Prior to |
|
|
|
|
– validity of |
|
|
|
|
Canadian patents, patent |
|
that he was a patent agent in the UK, |
|
|
Kevin P. |
|
Lilly and |
|
January 21, |
|
|
applications, and file histories, |
|
where he obtained a B.Sc. in |
33 |
|
|
Shionogi patents |
|
|
in particular chemical, |
|
chemistry (1968) from the |
|||
|
|
Murphy |
|
– improper |
2008 |
|
|
pharmaceutical and material |
|
University of Southampton. He has |
|
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|||
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divisional |
|
|
|
|
science patents as well as in |
|
prosecuted thousands of Canadian |
|
|
|
|
allegation |
|
|
|
|
the practice, procedures, rules |
|
patent application through the |
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|
|
and requirements of the |
|
Canadian Patent Office and |
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|
|
Canadian patent office, |
|
specializes in chemical, |
|
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|
|
including the Manual of Patent |
|
pharmaceutical, and materials |
|
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|
Office Practice. |
|
sciences patents. |
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|
COMPETITION |
|
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Dr. Hollis is an Associate Professor |
|
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|
|
of Economic at the University of |
|
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|
|
Expert in microeconomics, |
|
Calgary. He obtained his PhD in |
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|
Economics from the University of |
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|
and the economics of |
|
Toronto in 1996. He is a Research |
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|
competition law and policy, |
|
Fellow of the Institute for Advanced |
|
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|
|
with particular expertise in the |
|
Policy Research and has been a |
|
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|
|
Apotex in chief – |
|
|
|
|
structure and economics of |
|
Research Fellow of the Institute of |
|
|
Aidan Michael |
|
|
December |
|
|
pharmaceutical markets and |
|
Health Economics. Dr. Hollis has |
|
34 |
|
Hollis |
|
competition |
7, 2007 |
|
the Canadian pharmaceutical |
|
previously held the T.D MacDonald |
||
|
|
|
|
market |
|
|
|
|
industry, drug pricing, |
|
Chair in industrial economics at the |
|
|
|
|
|
|
|
|
|
prescribing practices (under |
|
Competition Bureau, from 2003 to |
|
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|
|
|
|
|
|
|
objection), and the competitive |
|
2004. His major research interest is |
|
|
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|
|
|
effects associated with drug |
|
the economics of pharmaceutical |
|
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|
|
genericization. |
|
markets. He has also published |
|
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|
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|
|
articles on pharmaceutical market |
|
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|
|
and has acted as referee for many |
|
|
|
|
|
|
|
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|
|
|
journals. He has consulted in the |
2009 FC 991 (*)
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|
Page:341 |
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|
pharmaceutical industry mainly with |
|
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|
respect to issues in Canada. |
|
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|
|
|
Apotex in chief – |
|
|
|
|
|
|
|
Existence of |
|
|
|
|
|
35 |
Robert A. |
other |
December |
See above. |
See above. |
||
McClelland |
commercially |
14, 2007 |
|||||
|
|
viable processes |
|
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|
|
to make cefaclor |
|
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|
Dr. Church is currently a Professor |
|
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|
|
in the Department of Economics and |
|
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|
|
the Institute for Advanced Policy |
|
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|
|
|
Research at the University of |
|
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|
Calgary. He obtained his PhD from |
|
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|
|
|
Expert in microeconomics, |
University of California, Berkeley in |
|
|
|
|
|
|
industrial organization, |
1989. Dr. Church has previously |
|
|
|
|
|
|
strategic competition, network |
held the T.D MacDonald Chair in |
|
|
|
Apotex in chief – |
|
|
economics, and entry |
industrial economics at the |
|
|
|
|
|
deterrence, with particular |
Competition Bureau, from 1995 to |
||
|
|
Effect of the |
|
|
|||
|
|
April 19, |
|
expertise in the economics of |
1996. He participated, as one of the |
||
36 |
Jeffrey Church |
transfer of |
|||||
2008 |
competition law and policy, |
three external drafters, to the |
|||||
|
|
Shionogi’s patent |
|
||||
|
|
rights to Lilly |
|
|
including the interaction of |
drafting of the Intellectual Property |
|
|
|
|
|
competition law and |
Enforcement Guidelines. His |
||
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|
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|
|||
|
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|
|
intellectual property rights, |
research interests are focused on |
|
|
|
|
|
|
and has studied the economics |
industrial organization, economics |
|
|
|
|
|
|
of various markets. |
of regulation and competition |
|
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|
|
|
policy. Since its incorporation in |
|
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|
1992, he is also president of Church |
|
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Economic Consultants Ltd., a firm |
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which provides economic consulting |
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services. |
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Page:342 |
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Dr. Cole is the principal of Cole |
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Expert in business valuation |
Valuation Partners Limited, a |
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and forensic accountancy, with |
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particular expertise in the |
exclusively in the following fields: |
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computation and |
business valuation, financial damage |
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quantification of damages |
quantification, investigative and |
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associated with the assertion |
forensic accounting as well as |
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of intellectual property rights |
transfer pricing. He has a BA from |
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under reserve of an objection |
the University of Toronto. He |
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Apotex in chief – |
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given that he has no |
became a Chartered Accountant in |
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37 |
Stephen Cole |
Determination of |
December |
experience with regards to |
1975 and a Chartered Business |
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recoverable |
14, 2007 |
royalty rates, which equates to |
Valuator in 1979. He is a Fellow of |
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damages |
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the fact that he has no |
the Canadian Institute of Chartered |
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experience with the assertion |
Accountants since 1996 and a |
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of intellectual property rights, |
Fellow of the Canadian Institute of |
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and that while the expert is |
Chartered Business Valuators since |
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qualified as an accountant to |
2000. He also |
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estimate damages, as he does |
publications on damages |
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not provide an estimate in this |
calculations and accounting of |
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report he is not qualified to |
profits calculations in Intellectual |
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give any opinions. |
Property cases and acted as lecturer |
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at professional organizations. |
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Dr. Gans is a professor of pediatrics |
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at the University of Toronto and |
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practices pediatrics in private |
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Apotex in chief – |
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Physician and educator with |
practice. He obtained his medical |
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degree from the University of |
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extensive experience in the |
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Prescribing |
December |
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Toronto in 1963 and was admitted to |
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Marvin Gans |
treatment of pediatric patients |
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practices of |
13, 2007 |
the Royal College of Physicians as a |
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with infectious diseases, and |
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physicians |
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specialist in pediatrics in 1969. He |
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clinical prescribing practices. |
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has been an active staff and |
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attending staff physician to the |
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infectious disease unit |
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had a major part time appointment to |
2009 FC 991 (*)
Page:343
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the department of pediatrics (1997- |
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2005) and was Director of Post- |
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graduate medical education at the |
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department of pediatrics (2005- |
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2006) at the Hospital for Sick |
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Children of Toronto. He was a |
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consultant pediatrician from 1969- |
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1997. He authored or |
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six publications on subjects relating |
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to: infant development, parents |
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reactions to children’s illness, child |
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advocacy and parenting. |
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Dr. Ross is the Associate Dean |
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(Research) and UPS Foundation |
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Expert in microeconomics, |
Professor of Regulation and |
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Competition Policy at the Sauder |
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industrial organization, the |
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Apotex in chief – |
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School of Business of the University |
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economics of competition law |
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Effect of the |
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of British Columbia. He obtained his |
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December |
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and policy, and the evaluation |
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Thomas Ross |
transfer of |
PhD in Economics from the |
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14, 2007 |
and assessment of the |
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Shionogi’s patent |
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University of Pennsylvania in 1981. |
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rights to Lilly |
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economic harm associated |
Dr. Ross has previously held the T.D |
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with various |
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MacDonald Chair in industrial |
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activities. |
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economics at the Competition |
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Bureau, from 1990 to 1991. He has |
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published over 70 papers. |
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Apotex reply – |
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Reply to |
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affidavits of Dr. |
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40 |
Aidan Michael |
Cockburn of |
March 28, |
See above. |
See above. |
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Hollis |
February 27, |
2008 |
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2008, Dr. Low of |
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February 28, |
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2008 |
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Page:344
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Apotex reply – |
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Reply to |
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41 |
Jeffrey Church |
affidavits of Dr. |
March 31, |
See above. |
See above. |
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Cockburn of |
2008 |
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February 27, |
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2008 |
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Dr. Low is |
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at Mount Sinai Hospital in Toronto. |
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He is also Head of the Department |
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of Laboratory Medicine and |
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Pathobiology and teaches at the |
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Department of Medical Genetics and |
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Lilly and |
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Expert medical doctor with |
Microbiology of the University of |
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Toronto. He obtained his medical |
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Shionogi |
February |
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particular expertise in relation |
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42 |
Donald E. Low |
degree from the University of |
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responding – Use |
28, 2008 |
to the use of antibiotics |
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Manitoba in 1972. He is a fellow of |
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of antibiotics |
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including cefaclor. |
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the Royal College of Physicians and |
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Surgeons of Canada and a fellow of |
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the American Academy of |
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Microbiology. He is the author or |
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and contributed to over 700 |
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presentations worldwide. |
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Expert in economics, with a |
Dr. Cockburn is Professor of |
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Finance and Economics at the |
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Lilly and |
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particular focus on the |
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School of Management of the |
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Shionogi |
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economics of pharmaceutical |
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Boston University. He obtained his |
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responding – |
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and health sciences; of |
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PhD in Economics from Harvard |
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43 |
Iain Cockburn |
Impact of the |
February |
intellectual property including |
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University in 1990. His research |
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1995 |
27, 2008 |
licensing and partnering, and |
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interests include economics of |
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Assignment |
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the competition issues related |
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technical change, competitive |
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between Lilly |
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thereto as well as the |
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strategy, industrial organization, |
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and Shionogi |
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economics of technological |
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pharmaceutical and health |
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change. |
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economics and applied |
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2009 FC 991 (*)
Page:345
econometrics. He has been a co- editor or referee for academic journals in economics and management. He acted as an expert in 25 cases before various courts in Canada in United States. He published over 25 articles and contributed to over 15 edited volumes.
2009 FC 991 (*)
Page:346
CHART “B”
2009 FC 991 (*)
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2009 FC 991 (*)
Page:348
2009 FC 991 (*)
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2009 FC 991 (*)
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2009 FC 991 (*)
|
FEDERAL COURT |
SOLICITORS OF RECORD |
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DOCKET: |
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STYLE OF CAUSE: |
ELI LILLY AND COMPANY and ELI LILLY CANADA |
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INC. v. APOTEX INC. AND BETWEEN: APOTEX INC. v. |
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ELI LILLY AND COMPANY and ELI LILLY CANADA |
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INC. and SHIONOGI & CO. LTD. |
PLACE OF HEARING: |
Ottawa, Ontario |
DATE OF HEARING: |
The trial started on April 21, 2008 and continued, with |
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various interruptions, until November 13, 2008 with final |
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representations being heard on December 9, 2008. |
REASONS FOR JUDGMENT: |
GAUTHIER J. |
DATED: |
October 1, 2009 |
APPEARANCES: |
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Mr. Anthony Creber |
FOR THE PLAINTIFFS |
Mr. Patrick Smith |
(DEFENDANTS BY COUNTERCLAIM) |
Mr. John Norman |
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Mr. William Vanveen |
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Ms. Isabel Raasch |
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Mr. Harry Radomski |
FOR THE DEFENDANT |
Mr. David Scrimger |
(PLAINTIFF BY COUNTERCLAIM) |
Mr. Miles Hastie |
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Mr. Sandon Shogilev |
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Mr. Ben Hackett |
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Ms. Belle Van |
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Mr. Steven Garland |
FOR THE DEFENDANT BY |
Mr. Timothy Stevenson |
COUNTERCLAIM |
Mr. Colin Ingram |
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Mr. A. David Morreau |
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SOLICITORS OF RECORD: |
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Gowling Lafleur Henderson LLP |
FOR THE PLAINTIFFS |
Barristers & Solicitors |
(DEFENDANTS BY COUNTERCLAIM) |
Goodmans LLP |
FOR THE DEFENDANT |
Barristers & Solicitors |
(PLAINTIFF BY COUNTERCLAIM) |
Smart & Biggar |
FOR THE DEFENDANT BY |
Barristers & Solicitors |
COUNTERCLAIM |
2009 FC 991 (*)
|