During May 2012, nearly 20 years after the Patented Medicines (Notice of Compliance) Regulations (the “Regulations”) were passed, the Federal Court released the first decisions assessing the quantification of damages under section 8 of the Regulations. In its simplest terms, section 8 provides for liability by an innovator to a generic manufacturer for the generic manufacturer’s damages if an application for a prohibition Order is unsuccessful.

On May 23, 2012, in two separate but concurrently released decisions assessing section 8 claims advanced by Teva Canada Limited (Teva Canada Limited v. sanofi-aventis Canada Inc. et al., 2012 FC 552) and Apotex Inc. (Apotex Inc. v. sanofi-aventis Canada Inc. et al., 2012 FC 553) against sanofi-aventis Canada Inc. (“Sanofi”) in respect of the drug ramipril (Sanofi’s ALTACE), Justice Snider of the Federal Court made the following key conclusions:

1. The period of liability (the Relevant Period) cannot begin before the date upon which a statutory stay provided for in section 7(1)(e) of the Regulations commences;
2. The Court should have regard to the possibility of multiple generic market entrants during the Relevant Period but is not required to establish a single “but for” world that will apply to all possible section 8 claims; and
3. In assessing damages under section 8, claims for lost business value calculated as of the final day of the Relevant Period and based on future lost profits or duplicate ramp-up are not recoverable on the basis that such recovery is prohibited by the Court of Appeal’s decision in Apotex Inc. v. Merck & Co., 2009 FCA 187 (“Alendronate”).

With respect to the Court’s conclusion in (2) above, Justice Snider noted that “[c]ompetition in the generic market is clearly relevant to a second person’s recovery … [and] [c]onsideration of the market share that would have been captured by competition is relevant to a s. 8 claim, much as it is to any damages claim.” That said, Justice Snider did not go so far as to accept Sanofi’s argument that there ought to be one “but for” world applicable to all cases involving the genericization of ramipril. Rather, Justice Snider noted that “[t]he assessment of damages can and should be made on the facts of each case. To the extent that there are common elements that impact on the quantification of damages, these will more likely than not come forth during the trial.” As a result, on the facts of the cases before her, many of Justice Snider’s findings in the respective ramipril section 8 actions differed, including: the respective entry dates of the generic manufacturers (both authorized and unauthorized generics), overall size of the ramipril market and generic market shares obtained by the various competitors, and the effect of a prohibition Order issued against one of the generic manufacturers.

The Court also released a third decision that same day (2012 FC 551) that deals with allegations of invalidity of section 8 of the Regulations which had been raised as a defence by Sanofi in each of the above-noted section 8 actions.

Validity of section 8. While agreeing that the specific questions raised by Sanofi were not directly addressed by the Court of Appeal in Alendronate, Justice Snider noted that the general validity of section 8 had been determined by the Court of Appeal in Alendronate and that any questions not explicitly addressed in that decision must be considered in a manner that is consistent with its teachings.

With that in mind, Justice Snider went on to interpret section 8 and held that it falls completely within the purpose of section 55.2(4) of the Patent Act and is intra vires. With respect to arguments raised by the parties as to the proper interpretation of the start and end dates for the Relevant Periods under sections 8(1)(a) and (b) of the Regulations and competition in the “but for” hypothetical period, Justice Snider concluded that she need not determine the issues as they did not arise on the particular facts of the section 8 actions before her. Further, Justice Snider indicated that the trial Judge in a section 8 action will be applying well-established principles of damages, including causation, to the facts before him or her. Further, relying on Alendronate, Justice Snider confirmed that the question of infringement is a matter that can be addressed under section 8(5) of the Regulations. Lastly, adopting the reasons of Justice Hughes in Apotex Inc. v. AstraZeneca Canada Inc., 2012 FC 559, Justice Snider held that section 8 is not contrary to Canada’s obligations under TRIPS or NAFTA.

Relevant factors in assessing quantum of damages under section 8. In addition to the Court’s key conclusions expressed above, Justice Snider also held that section 8 does not preclude the consideration of an authorized generic in assessing damages sought by the second person and that, depending on the particular facts of a case, a second person’s recovery of damages may be reduced pursuant to section 8(5) where sales of the generic product are found to have been associated with unapproved indications. 

As of the time of writing, only Teva has filed a notice of appeal from Justice Snider’s judgment (A-147-12).

Andrew Mandlsohn, Toronto