Hypothetical Infringement Cannot Be Set up Against S 8 Claim

Pharmascience Inc v Pfizer Canada ULC 2019 FC 1271 O’Reilly J
            2,255,652 / pregabalin / LYRICA

The recent amendments to the PM(NOC) Regulations converted an NOC proceeding from an application to prohibit the Minister from issuing an NOC into an action for patent infringement. The old regime created some difficult questions as to the relationship between an NOC proceeding and subsequent action between the same parties in respect of the same drug. In particular, a statutory stay on the issuance of an NOC is triggered by NOC proceedings (s 7(1)(d)), and s 8 of the Regulations allows the generic to bring an action to recover damages for sales lost as a result being kept out of the market by the statutory stay. But what if the generic was successful in NOC proceedings, but unsuccessful in a subsequent infringement action in respect of the same drug? The law is now settled that the generic is not barred from bringing a s8 claim, but it is not entitled to recover for sales that it would have made but for the statutory stay if those sales would have been infringing: Apotex v Merck 2011 FCA 364 (here); 2012 FC 620 (here); 2012 FC 559 (here); 2017 FC 726 (here); 2018 FC 181 Locke J (here). The logic is that the generic should not be entitled to recover damages for lost sales which it had no right to make.

This case presents a twist on that issue: what if the patentee never brought a subsequent action? Can that patentee argue as a defence / offset in the s 8 action that the generic’s hypothetical sales would have hypothetically infringed the patent at issue, even though validity and infringement was never established in an infringement action?

Pfizer holds the 652 patent related to the use of pregabalin for treating pain. Pharmascience sought to enter the market with a generic version, and in response Pfizer commenced NOC proceedings under the old Regulations, triggering the statutory stay. Pfizer was unsuccessful in its attempt to obtain an order of prohibition (see 2013 FC 120), and Pharmascience is now seeking damages under s 8 of the NOC Regulations for compensation for the time it was kept off the market [1]. In response, Pfizer alleged that Pharmascience is disentitled to damages because the hypothetical sales of PMS-pregabalin would have hypothetically infringed Pfizer’s patent—even though such infringement had never been established in an infringement action [3].

O’Reilly J pointed out that in all the cases establishing that the generic cannot recover damages for wrongful sales, the wrongfulness of those sales had actually been established in an infringement action:

[17] Pfizer’s authorities suggest to me that infringement is a factor that can and should be taken into account in assessing the quantum of s 8 damages, but only where infringement has been asserted and proved, or is not disputed. Otherwise infringement is not relevant to s 8, even when an infringement action is pending.

He relied on the principle that “the but-for world should reflect, to the extent possible, what happened in the real world,” [23] so that if the patentee did not bring an action in the real world, it must be presumed that it would not have brought an action in the but-for world [21] (citing Apotex v Sanofi [Ramipril (s 8)] 2012 FC 553 (here) var’d 2014 FCA 68 (here)). Consequently, hypothetical infringement cannot be raised to reduce or eliminate the generic’s damages [25].

In my view, O’Reilly J’s holding was correct for the reason he gave. It’s a relief that the new Regulations will render such questions moot.