Apotex Inc. v. Merck & Co., Inc., 2015 FCA 171 (Dawson J.A., Stratas J.A., Boivin J.A.)
July 23, 2015
Andrew Brodkin, Harry Radomski, Mark Dunn, Jordan Scopa and John Myers of Goodmans LLP for the Appellants Apotex Inc. and Apotex Fermentation Inc.
Steven Mason, Andrew Reddon, David Tait and Brooke MacKenzie of McCarthy Tétrault LLP for the Respondents Merck & Co., Inc. and Merck Canada Inc.
The principal issue raised on this appeal is whether, when calculating damages for patent infringement, it is relevant to consider the availability of non-infringing alternative products.
The Trial Judge found that Apotex manufactured a batch of lovastatin in violation of Merck’s patent. The Judge also found that, at approximately the same time, Apotex manufactured a different batch of lovastatin following a process that did not violate the patent.
The Federal Court of Appeal framed the legal issue in these terms:
[39] The issue to be resolved on this appeal is whether the requirement that damages be sustained “by reason of the infringement” is, as the Judge found, in some way restricted so that a court is required to disregard legitimate competition from an infringer? In the alternative, is potential legitimate competition from the infringer a legally relevant consideration? This is a question of statutory interpretation subject to review on the correctness standard.
The Court of Appeal held that to respect the balance between encouraging innovation without stifling legitimate competition, section 55(1) of the Patent Act requires “perfect compensation”.
The “but for” test will be used to determine the extent to which the infringer caused damages to the plaintiff. This is a factual enquiry that must consider at least the following questions:
- Is the alleged non-infringing alternative a true substitute and thus a real alternative?
- Is the alleged non-infringing alternative a true alternative in the sense of being economically viable?
- At the time of infringement, does the infringer have a sufficient supply of the noninfringing alternative to replace the non-infringing sales? Another way of framing this inquiry is could the infringer have sold the non-infringing alternative?
- Would the infringer actually have sold the non-infringing alternative?
This approach is consistent with American jurisprudence which seeks to determine the economic value of the exclusive right granted by a particular patent and the impact of infringement. A patented invention for which there are no non-infringing alternatives is more valuable than one for which there are alternatives. In the latter case, the owner would be overcompensated if a damages award supposed that every infringing sale would otherwise have been made by the patentee.
This approach is also consistent with the Supreme Court’s Monsanto decision. Although that case dealt with the “differential approach” to calculating an infringer’s profits, there is no reason to ignore non-infringing alternatives when calculating a patent owner’s lost sales.
Based on the trial evidence, the Federal Court of Appeal held that Apotex failed to prove that it could and would have sold non-infringing lovastatin at the time that it sold the infringing version. Among other things, Apotex’s belief that Merck’s patent was invalid and the scale of the infringing sales lead the Federal Court of Appeal to conclude that Apotex would not have chosen to sell the non-infringing lovastatin.
By: Greg Moore, Joli-Coeur Lacasse LLP