An Action under the PM(NOC) Regs Has the Same Effect as an Action under the Act

Janssen Inc v Apotex Inc 2023 FCA 253 Locke JA: de Montigny CJ, Goyette JA revg 2023 FC 912 Manson J

2,655,335 / paliperidone regimens / INVEGA SUSTENNA / NOC

This decision addresses two issues of interest: abuse of process under the PM(NOC) Regs and the kinds of activities that may properly be enjoined. This post deals with each in turn.

Apotex sought to launch a generic version of Janssen’s INVEGA SUSTENNA. To that end, Apotex served an NOA alleging non-infringement. Janssen responded by bringing an action pursuant to s 6 of the PM(NOC) Regulations. Apotex lost: 2022 FC 107 discussed here. (An appeal has been heard and the FCA decision is pending [4]). After losing that action, Apotex served a second NOA in respect of the same product, this time alleging invalidity instead of non-infringement. Janssen again brought an action pursuant to s 6, which Apotex defended on the same invalidity basis as in its NOA. Janssen moved for summary judgment on the basis that this is an abuse of process by relitigation. Manson J held it was not, and dismissed Janssen’s motion for summary judgment. The FCA has now reversed.

The overarching point emerging from Locke JA’s decision is that “an action under section 6 of the Regulations is to proceed and have an effect much like a normal patent infringement action” [46]. In the absence of special circumstances, a defendant in a normal patent infringement action that defended itself on the basis of non-infringement, without challenging the validity of the patent, would not be allowed to commence a separate impeachment action concerning the same patent [47]. The same reasoning applies to actions under the Regulations [47]. That follows from the general principles of “judicial economy, consistency, finality and the integrity of the administration of justice” which underpin the law related to abuse of process by relitigation: [10]–[11], citing C.U.P.E. 2003 SCC 63 [37]. While Manson J’s decision relied on a rather technical reading of the Regulations (see here) to distinguish actions under the Regulations from actions under the Act, this distinction is not sound. There is no tension between general principles of abuse of process and the principles applicable under the Regulations. On the contrary, the RIAS to the 2017 amendments “makes it clear that a principal aim was to avoid multiple proceedings concerning patents on medicines, regardless of whether those proceedings are within or outside the Regulations” [44]; moreover, “the aim of avoiding multiple proceedings was front and centre” [45].

Under the old Regs, the second person was held strictly to its NOA, and this might have provided a reason for distinguishing NOC proceedings from a regular action. But Locke JA noted that under the new Regs, it is now established that it is permissible to amend the pleadings in an action under s 6 so as to introduce issues not raised in the underlying NOA: [46], citing Sunovion v Taro 2021 FCA 113 (see here).

Locke JA pointed out that the other arguments made by Apotex as to why there are good reasons to permit sequential NOAs can equally be made in the context of normal patent infringement actions, and are no more persausive in the NOA context [48]. Consequently:

[53] In my view, it was intended that the second person should raise all of its allegations in its NOA, and it should not to keep some in reserve in the event that it is not initially successful. Though this might lead to more complicated proceedings, it would meet the explicit goal of addressing all issues in a single action.

Locke JA therefore held that Manson J had erred in law by not recognizing that the same principle applies in the context of an action under the Regs as in an action under the Act [43]. Neither party asked that the matter be remitted, and Locke JA consequently considered Janssen’s motion anew [59] and declared that Apotex’s invalidity defence to be an abuse of process [60]. If Apotex wished to raise an invalidity argument, it should have done so in the first action [60]. Janssen was accordingly granted the relief it sought [71].

An entirely separate point of interest was raised regarding the remedy. Janssen requested an injunction prohibiting Apotex from making, selling or using the invention; these are the patentee’s express rights under s 42. This much was uncontroversial. But the injunction sought by Janssen also included prohibitions on “(i) offering for sale, (ii) marketing, (iii) having marketed, (iv) importing, (v) exporting, (vi) distributing, or (vii) having distributed” [64]. The exclusive right to engage in these activities is not explicitly granted by the Act. Apotex objected to the inclusion of these acts in the injunction on the basis that they fall outside the scope of the patentee’s rights.

Locke JA dismissed Apotex’ objection. He noted that injunctions in such terms had been granted in other cases [65]–[66] — though I don’t think much weight can be put on that unless the terms were contested. More significantly, he noted that “[w]hile section 42 of the Patent Act refers specifically to the patentee having ‘the exclusive right, privilege and liberty of making, constructing and using the invention and selling it to others to be used’, it is well understood that this does not constitute a definition of infringement” [67]. The SCC in Monsanto v Schmeiser 2004 SCC 34 [34] defined infringement as being “any act that interferes with the full enjoyment of the monopoly granted to the patentee.” As Locke JA noted [68], the SCC in Schmeiser [58] also held that “[i]f there is a commercial benefit to be derived from the invention, it belongs to the patent holder.” Consequently, Locke JA held that

[69] I am satisfied that the wording proposed by Janssen for the injunctive relief is appropriate. All of the activities that Apotex objects to including in the injunction are commercial in nature, and would presumably be done for a commercial benefit. The activities of distributing and having distributed are essentially sales and are thus clearly infringing. The other activities involve commercial use of the patented invention as contemplated in Schmeiser, and would therefore presumably also be infringing. The principle goal of the injunction is to prevent future infringement of the exclusive rights granted by the 335 Patent. In my view, the proposed injunction achieves this, and in clear terms.

Locke JA is of course quite right to say that the rights of the patentee are not limited to the rights enumerated in s 42, per Schmeiser. But there remains a question as which specific non-enumerated rights are exclusive to the patentee. Locke JA’s discussion might well be taken as holding that the activities listed in the injunction and objected to by Apotex — (i) offering for sale, (ii) marketing, (iii) having marketed, (iv) importing, (v) exporting, (vi) distributing, or (vii) having distributed — are per se infringement, at least when done for commercial purposes. While there is caselaw that comes close to saying that activities such as importing and exporting are infringing, I don’t think the point is quite settled. While it would certainly be consistent with Schmeiser to hold that these activities are infringing, it does not flow inexorably from Schmeiser, and there are some issues with so holding that were not addressed in this brief paragraph.

So, Locke JA stated that “distributing and having distributed,” are “clearly infringing” because they are “essentially sales.” This strikes me as potentially problematic, depending on what is meant by “distributing.” Does this mean that the common carrier which transports infringing goods from the manufacturer’s warehouse to a retailer is an infringer? Is a logistics company which organizes distribution of infringing goods on behalf of the manufacturer an infringer which can be named as a defendant in an infringement action? These activities do not seem to me to be “essentially sales.” Perhaps these activities should be considered infringing, but this is a different question from whether Apotex, which has been found to infringe on the enumerated grounds, should be prohibited from engaging in distribution.

Locke JA also said that the other activities are “presumably” also infringing. There is some difficulty with “offering for sale” in particular. In Domco Industries v Mannington Mills (1990) 29 CPR(3d) 481 (FCA) 492, the FCA held that a sale was not established even though “[t]here is no doubt that [the defendant] offered infringing goods in Canada” (491). It might be argued that Domco, which predates Canada’s accession to TRIPS, is no longer good law in light of TRIPS Art 28, which requires that a patent shall confer on its owner the exclusive right of “offering for sale.” On the other hand, a treaty such as TRIPS has to be implemented in legislation, and the statutory language defining the patentee’s exclusive rights has not changed since Domco. It might also be argued that Domco is no longer good law because it is inconsistent with Schmeiser. Or Domco might be distinguished because of the cross-border nature of the activity in that case. But it is difficult to accept that Locke JA intended to hold definitively that “offering for sale” is infringing in a decision that didn’t even mention Domco. I don’t mean to comment on the scope or continued vitality of Domco, one way or the other, but I don’t think Locke JA meant to either.

Consequently, I think it is probably better to read Locke JA’s decision more conservatively, as holding only that an injunction is properly granted to prohibit these activities, even if they are not infringing per se, essentially on a quia timet basis. That does not imply any change in the law. Even under Domco it is clear that once infringement has been established, the infringer may be enjoined from offering to sell: see eg AlliedSignal (1995) 61 CPR(3d) 417 (FCA) 446. And in appropriate circumstances offering to sell or marketing may form the basis for a quia timet injunction: see eg No-Fume (1935) 52 RPC 231 (CA) 251–52. This interpretation implies that an infringer, like Apotex, which has been found to infringe on the basis of the enumerated grounds, might properly be enjoined from “distributing and having distributed,” while leaving open the question of whether a logistics company or common carrier engaged in distribution would itself be an infringer.