Importation of Products Made Abroad by a Process Patented in Canada is Prohibited
Eli Lilly and Company v. Apotex Inc., 2009 FC 991 (Gauthier, J.)

October 1, 2009

Anthony Creber, Patrick Smith, John Norman, William Vanveen and Isabel Raasch for Eli Lilly and Company and Eli Lilly Canada Inc. (Eli Lilly)
Steven Garland, Timothy Stevenson, Colin Ingram and A. David Morreau for Shionogi and Co. Ltd. (Shionogi) (Defendant by Counterclaim)
Harry Radomski, David Scrimger, Miles Hastie, Sandon Shogilev, Ben Hackett and Belle Van for Apotex Inc. (Apotex)

Eli Lilly brought an action for infringement against Apotex alleging that its bulk importation of cefaclor infringed its eight patents, four of which were assigned from Shionogi.

Apotex counterclaimed under ss. 36 and 45 of the Competition Act alleging that the assignment of the Shionogi patents to Eli Lilly impeded competition.

The case took 12 years to reach trial and was decided in a 326 page decision not including the appendices. The Court provided considerable analysis of the suitability of the testifying experts, and provided commentary explaining why some experts were preferred over others.

Apotex’s main non-infringement defence was that the importation and use of a product made abroad by a process patented in Canada is not an infringement in Canada. Justice Gauthier reviewed the relevant case law on infringement of a process patent by importation and held that the importation of products made abroad that are the subject of patented process claims in Canada is prohibited.

Apotex also argued that the imported cefaclor was made by a non-infringing process abroad. The Court found that Eli Lilly had established the manufacturer was using an infringing process, at least as of June 4, 1998, from Health Canada and FDA filings made by the manufacturer.

Justice Gauthier considered common general knowledge, and commented that there was little evidence provided to establish that the prior art relied upon by various experts were part of the common general knowledge of the posita at the relevant time. Since many of the experts did not work in the relevant area at the relevant time, they could only opine on the basis of the written material provided to them, and not testify whether they had been aware of the materials at that time. The degree to which a particular publication was generally regarded by a posita as a good basis for further action is still very relevant to obviousness where mosaicing of references may be permitted.

Regarding anticipation, the Court noted the Supreme Court of Canada decision in Sanofi, and stated that in order to anticipate, a prior art document must meet both the requirements of disclosure and enablement. The prior disclosure must disclose all the essential elements of the claim at issue, properly construed.

Apotex raised the issue of lack of utility on the basis that the claims were overbroad in that the patentee had to establish at the relevant time that all claimed embodiments would be useful. Upon review of the evidence, the Court found that Apotex had failed to establish that any of the compounds were inactive or that their ability to perform the claimed reactions could not be soundly predicted based on the factual data disclosed in the patents and the common general knowledge at the relevant time.

Justice Gauthier held that at least one valid claim in each of the eight patents were infringed by Apotex by their importation, manufacture, expert, sale and offers for sale of cefaclor in Canada. Eli Lilly was entitled to elect either an accounting of profits or damages by reason of lost sales.

Apotex’s counterclaim essentially alleged that the assignment of the Shionogi Patents to Eli Lilly violated Section 45 of the Competition Act.  The assignment lessened competition in that Eli Lilly subsequently held patents covering the only two processes known to exist for making cefaclor. Justice Gauthier noted that this allegation was somewhat puzzling as Apotex had adamantly argued non-infringement on the basis that it used a non-infringing process. The Court found that much of the expert evidence supplied by economists on this issue were actually arguments presented in the form of expert evidence.

Justice Gauthier held that the correct application of the Competition Act is to first prove under s. 36 that a party has suffered loss or damage as a result of the conduct, which it alleges to be in violation of Section 45 of the Act. Without proof of loss or damage, the Court has no reason to inquire as to whether Eli Lilly and Shionogi conspired to unduly lessen competition.

Apotex’s argument focused on the assessment of damages, based upon a “but for” analysis for a case with no assignment of patent rights. The Court held that this analysis focused solely on the level of compensation, but failed to determine whether there was a loss caused by the assignment.

The Court rejected the counterclaim and held that Apotex had failed to establish a loss that arose as a result of the assignment of the patents from Shionogi to Eli Lilly. The Court also commented that the goal of the Competition Act is not to protect the rights of those who choose to act in a manner contrary to law. Apotex does not have the right to infringe at the lowest possible cost.

Justice Gauthier considered a request to award compound interest. Upon reviewing the case law, it was held that simple interest should be granted, calculated separately for each year since the infringing activity began at the Bank of Canada minimum rate. This award was contingent upon the reference judge not awarding interest. Post-judgment interest was awarded at 5%, not compounded.

Eli Lilly sought punitive damages, which were denied, on the basis that Apotex had full knowledge of all the facts but nonetheless chose to engage in conduct which infringed on Lilly’s patent rights. Apotex’s conduct was considered when affording Lilly the right to elect for an accounting of profits.

Eli Lilly was awarded costs at the top of column V of Tariff B as well as solicitor-client costs for specific activities that unnecessarily lengthened the duration of the proceedings. The Court specifically cited as examples: Apotex seeking leave to amend its pleadings during trial to add prior art references that were relied upon by its own experts and late disclosure of information and communications between Apotex and its foreign supplier.

By: Etienne de Villiers, Dimock Stratton LLP