Court of Appeal Finds That Claims Future Losses Inappropriate Under Section 8 of the PM(NOC) Regulations
Merck Frosst Canada Ltd. v. Apotex Inc. 2009 FCA 187 (Noël, J.A., Layden-Stevenson, J.A. and Ryer, J.A.)

June 4, 2009

Patrick E. Kierans, Jason C. Markwell, Kristin E. Wall, and Andres Garin for the Applellant, Merck Frosst Canada Ltd. (“Merck”)
Kenneth Crofoot and Andrew Brodkin for the Respondent, Apotex Inc. (“Apotex”)

This was an appeal of Hughes, J.’s findings, firstly, that Section 8 of the PM(NOC) Regulations was intra vires the Patent Act, within the competence of the Federal Court, and constitutionally appropriate; and secondly, that a remedy under Section 8 can extend to compensation for future losses.

With regards to jurisdictional issues, the Appellant, Merck, argued that the authority of the Governor-in-Council is limited to the making of regulations for the prevention of infringement. Since a regulation that imposes liability on the first person for unsuccessfully asserting their patent rights cannot be said to prevent infringement, it is thus is ultra vires. The Court of Appeal disagreed, finding that Section 8 was intra vires as it alleviates concerns that the first person would continuously delay the progress of the proceeding, and maintains the balance the Patent Act seeks to achieve between effective patent enforcement and the timely market entry of lower-price generic drugs. The Court of Appeal further found that the Section 8 right of action lies under Federal jurisdiction and should be heard in Federal Court.

With regards to the remedy itself, the Court of Appeal agreed with Hughes J. reading down the provision to read “damages or lost profits,” and thus not allowing for disgorgement. The Court of Appeal further reasoned that the second person should not be entitled to all the remedies available to a patentee who’s patent has been infringed, and thus concluded that Section 8 of the PM(NOC) Regulations does not allow for the disgorgement of the first person’s profits.

At the same time, however, the Court disagreed with Hughes J. with regards to what was characterized as “future losses” – the decrease in Apotex’s sales which occurred due to its not being first on the market as a result of the prohibition application. The Court of Appeal found that the Governor-in-Council in drafting Section 8 deliberately chose to limit the measure of damages to a specified period time period, one which ends on the date of the dismissal or discontinuance of the prohibition order, and thus did not intend to include future losses.

By: James G. Kosa, Deeth Williams Wall LLP