ADIR et al. v Apotex Inc. et al., 2015 FC 721 (Gagné J.)
June 18, 2015
Judith Robinson, Joanne Chriqui, Bryan Capogrosso, Remi Weiss for the Plaintiffs, ADIR and Servier Canada Inc.
Harry Radomski, Nando de Luca, Ben Hackett, Jerry Topolski, Michael Wilson for the Defendants, Apotex Inc. and Apotex Pharmachem Inc.
The Federal Court ordered the Defendants Apotex and Apotex Pharmachem on June 18, 2015 to pay its profits (totaling $56.0M and 5.7M, respectively) due to patent infringement. This reference to quantify the Defendants’ profits followed the Federal Court’s prior determination in 2008 that the Defendants had infringed the Plaintiffs’ patent rights relating to the anti-hypertensive drug perindopril.
The Plaintiffs having elected an accounting of the Defendants’ profits, the Court followed Supreme Court of Canada jurisprudence and focused on the portion of the infringers’ profit which is causally attributable to the invention. The plaintiffs bore the burden of establishing the defendants’ revenues while the defendants were required to establish its costs and any necessary apportionment. The profits to be disgorged would consist of the difference between the defendants’ gross revenues and its current and capital expenses directly attributable to the infringement
While the parties stipulated to Apotex’s gross revenues, they disputed the appropriateness of deducting payments Apotex made to related foreign entities in connection with indemnity and litigation services contemplated by certain transfer pricing agreements. The Court held that such services and indemnities under foreign patents would not constitute an infringement of the Canadian patent. Consequently, the corresponding revenues should be apportioned under the differential profit approach applicable to an accounting of profits if the purchase price paid by the foreign entities was proven to be revenue paid for those services. The Court ultimately held that the evidence did not support the Defendant’ assertion that the price paid was attributable to their litigation services and the indemnity provision rather than the sale of the product. Thus, the Court declined to apportion those revenues.
The Federal Court also refused the Defendants’ request to stay the judgment pending appeals in parallel UK proceedings between an affiliate of the Plaintiffs and the Defendant Apotex. That litigation had been stayed pending the outcome of this reference. In the UK litigation, Apotex had been enjoined from marketing its generic perindopril due to a European patent for a crystalline form of that compound, which was ultimately found invalid. Apotex was then awarded ₤17,5M in damages resulting from the interlocutory injunction, with the UK affiliate’s “illegality” defence (based on manufacture of the UK product in Canada, with corresponding infringement of the Canadian patent) being rejected. However, a transfer pricing agreement required most of that award be paid to Apotex, which conceded in the UK litigation that UK damages award should be reduced to reflect what the Canadian Court would have awarded Apotex entities to pay in Canada had the sales actually been made. However, the Plaintiffs in Canada, which did not include the UK affiliate, chose not to include Apotex’s share of the UK award in its gross revenues. Consequently, the Court left it to the UK Court to determine the impact of its accounting judgment on the UK injunction damages, not vice versa.
The Federal Court also rejected Apotex’s argument that its profit ought to be reduced to reflect the availability of non-infringing alternatives (NIAs). The Court held that it need not consider all non-infringing alternatives, options or scenarios. Rather, the accounting analysis is premised on the notion that “the inventor is only entitled to that portion of the infringer’s profit which is causally attributable to the invention”. Because the asserted patent covered the active pharmaceutical ingredient, the Court found the causal relationship between the infringing products and the patent to be clear. The Court did not find relevant to causation that Apotex could potentially have avoided infringement. The Court was also not satisfied by the extensive evidence that any of the hypothetical scenarios Apotex advanced would have occurred.
The Court also found it appropriate to disgorge Apotex’s return on its profits prior to judgement. The Court applied a rate of prime for Apotex and prime plus 1% for Apotex Pharmachem. The Court also recognized that compound interest is the rule.
By: Kiernan A. Murphy, Gowling Lafleur Henderson LLP