When is an application for an order of prohibition “pending”?

Apotex Inc. v. Merck Frosst Canada Ltd. / lovastatin (NOC) 2010 FC 1264, Snider J

Section 8 of the PM(NOC), provides for compensation to a generic who has been denied entry as a result of a statutory stay. It was notoriously obscure as enacted in 1993, and  was amended and clarified in 1998. Because the change was substantial, it has been a matter of some contention as to which version applies (though it is not entirely clear which version is favourable to which party). The transitional provision says that the 1998 version applies to an application that is “pending” when the 1998 Regulations came into force (March 11, 1998). The leading case is Syntex / naproxen (NOC) 2010 FCA 155 affm’g 2009 FC 494, in which a prohibition order had been granted, but subsequently set aside after the patent was held to be invalid in separate proceedings. The Court of Appeal held that the application was not pending, so the 1993 provisions applied.

Merck Frosst / lovastatin (NOC) 2010 FC 1264 required Snider J to interpret and apply Syntex. Proceedings on the application for prohibition had been delayed, and ultimately, after various motions seeking extensions, Rothstein J (FCTD), denied Merck’s application for an extension of the statutory stay, and held that he was without jurisdiction to issue the prohibition order after the expiry of the stay. Consequently, the NOC had issued in 1997, almost a year before the crucial transition date. Finally, in 1999, the FCA dismissed Merck’s appeal from Rothstein J’s decision on the grounds of mootness. (The application was never heard on the merits.)

Snider J held that the application was not pending on the transitional date. Relying on Syntex she held at [20] that “an application judge’s decision in a prohibition application is “final”; subsequent appeals or motions do not alter the finality of that decision.” However, in Syntex the FCA said “a final order had been pronounced in the prohibition proceeding. . . .That decision was affirmed on appeal.” Thus Syntex was not entirely clear as to whether the fact that the order had been appealed was relevant. While Snider J’s decision is consistent with Syntex, strictly Snider J was facing a new issue.

Snider J’s interpretation of “pending” is very reasonable in its own right. However, there is some difficulty in reconciling it with O’Reilly J’s decision in Merck / norfloxacin (NOC) 2010 FC 287. In that case, on the crucial date the parties were awaiting judgment of the Supreme Court of Canada which overturned the prohibition order in question ([1998] 2 SCR 193). O’Reilly J held that the matter was pending, notwithstanding that a final order had been pronounced in the prohibition proceeding, and affirmed by the Court of Appeal. Snider J distinguished Merck / norfloxacin (NOC) at [23] on the basis that “[t]he determination of Justice Rothstein in Merck FCTD 1997, above, as affirmed by the Court of Appeal in Merck FCA 1999, above, leaves me with no doubt that Merck’s application could not proceed any further once the statutory stay had expired,” particularly in light of Rothstein J’s holding that the court had no jurisdiction.

This distinction undermines Snider J’s clear holding that subsequent appeals or motions do not alter the finality of the application judge’s decision. It implies that whether a matter is pending depends on whether the appeal is likely to succeed, or perhaps the basis on which it succeeds. It is one thing to say in hindsight that a matter was unlikely to succeed, but it is a difficult test to apply before the appeal decision has been rendered. Even in the lovastatin case, how would we know whether Rothstein J was right that there was no jurisdiction until the matter had been heard by the FCA (which decided on the basis of mootness, not jurisdiction)?

My own view is that Snider J’s first point, that subsequent appeals or motions do not alter the finality of that decision, is the best approach. It is consistent with the most straightforward reading of Syntex and it is the only approach which allows for a clear determination of whether a matter is “pending” before all possible avenues of appeal or review have been exhausted. The distinction drawn by Snider J between her decision and that of O’Reilly J clouds her otherwise clear holding.

Of course, the ultimate question is not which Regulations apply, but whether the generic is entitled to damages. Because the 1993 version is so obscure, it is unclear as to whether there is any substantive difference between the two versions. In Syntex / naproxen (NOC) 2009 FC 494 Hughes J held that damages were not available under the 1993 version [76], but he indicated that damages would have been available under the 1998 version [49]; however, the Court of Appeal at [19] expressly reserved judgment on the question of the result under the 1998 regularions, and some comments of principle at [36] suggest that had it addressed the point, it might have come to the contrary conclusion. In Merck / norfloxacin (NOC) O’Reilly J indicated at [14], albeit in obiter, that the result would have been the same under the 1993 version as the effect of the 1998 amendments was simply to clarify the original intent of the Regulations. O’Reilly J’s logic is attractive, and such a holding would have the practical advantage of rendering moot the debate as to which version applies.