Recent Decisions August 2005
I. FEDERAL COURT DECISIONS
(a) Patents
1. Apotex v. Synthex and Hoffman-LaRoche; Synthex and Hoffman-LaRoche v. Canada (Attorney General), January 27, 2005 FCTD (Aronovitch P.) Section 8/Damages/Patented Medicines (Notice of Compliance) Regulations/Third Party Claims/Crown Liability Act/Negligence Act/Breach of Statutory Duty/Statutory Damages
Motion by Crown to strike out third party claims made by the defendants against Minister of Health for part of the damages for which they may be liable to Apotex pursuant to s. 8(2) of the Regulations. The defendants assert that if they are found liable to Apotex, then the Minister is in turn liable to them (for the period between the date on which defendants' patent was declared invalid and the date on which the Minister issued NOC) for breaching her duty in refusing “without lawful justification” to issue an NOC to Apotex immediately. The Crown argued that there is no cause of action against the Minister arising out of s. 8 of the Regulations since nothing in s. 8 creates a right of recovery against anyone other than a first person. The defendants also argued that the third party claims for indemnity and contribution are grounded in the Negligence Act thereby raising a reasonable cause of action against the Crown.
Held: Motion dismissed. Although the Court held that there was no cause of action arising out of s. 8 of the Regulations, the third party pleas may be sufficient to support an action for negligent breach of statute. The third party claims allege only the existence of a statutory duty which the Minister is said to have breached “without lawful jurisdiction”. Statutory negligence is an intentional or negligent failure to comply with a statutory duty. Civil consequences of a breach of statute are subsumed in the law of negligence. Notwithstanding that proof of the breach of the statute does not itself give rise to damages, proof of a statutory breach that causes damages can constitute evidence of common law negligence.
2. Merck v. Brantford Chemicals and Commissioner of Patents and Canada (Attorney General), February 2, 2005 FCA (Rothstein, Evans, Malone JJ.A.) Compulsory Licence/Patent Act/Res Judicata/Functus Officio/Final Decisions
Appeal by Merck from von Finckenstein J.'s decision to dismiss Merck's appeal of the Commissioner's dismissal of its motion for a declaration that Brantford was barred from proceeding with its application for a compulsory licence pursuant to s. 65(2)(c) and (d) of the Patent Act on the grounds of issue estoppel (estoppel per rem judicatam) and functus officio. The Commissioner directed Brantford to serve the application on Merck after it filed a new application with the Commissioner. However, the Commissioner had previously refused Brantford's first application and dismissed its reconsideration application prior to acceptance of this new application. Merck argued that a Commissioner's decision to refuse to entertain an application is a final decision. Merck's functus officio argument relied on the characterization of the Commissioner's decision as final.
Held: Appeal dismissed. Merck has not demonstrated that the doctrines of res judicata or functus officio are applicable. von Finckenstein J. did not err when he concluded that the decision of the Commissioner under s. 68(2) was not a final decision. Unlike many administrative tribunal statutes, there are no express words in s. 68 suggesting that a decision under that section is a final one. The decision under s. 68 is made on an ex parte application. A patentee becomes a party to the proceedings to determine whether the applicant should receive a compulsory licence only after the Commissioner decides that a case for relief has been made. The only effect of the “screening” decision in favour of an applicant under s. 68(2) is to require the patentee, if it desires to do so, to oppose the application. It will only be after the Commissioner considers the opposition and the submissions of both the applicant and the patentee that a decision will be made that may result in an order for the granting of a compulsory licence. There is no mutuality of parties in respect of the Commissioner's decision under s. 68(2). The doctrine of functus officio only applies in the case of final decisions.
3. Rhoxalpharma v. Novartis Pharmaceuticals Canada et al., February 14, 2005 FCA (Desjardins, Nadon, Pelletier JJ.A.) Appeal from Prohibition Order/Claim Construction/Patented Medicines (Notice of Compliance) Regulations
Appeal by Rhoxalpharma from Lemieux J.'s decision allowing a prohibition order. Novartis owns a patent, which covers a pharmaceutical preparation of cyclosporine containing a hydrosol, i.e. a dispersion of small solid particles in a liquid. Rhoxalpharma sold a cyclosporine capsule which was not a hydrosol, but as Novartis argued, forms a hydrosol in the patient's body, once the capsule is ingested. At trial, the patent was construed to cover post-ingestion hydrosols.
Held: Appeal allowed. Claim construction is a question of law for the judge, who is even entitled to adopt a construction of the claims that differs from that put forward by the parties. Lemieux J. erred in letting Novartis' experts dictate the conclusion that the patent covered post-ingestion hydrosols. Lemieux J. should not have blindly accepted the conclusions of Novartis' experts, but should have interpreted the claims of the patent himself, and only then could he have come to his conclusion.
4. AB Hassle et al. v. Apotex, February 14, 2005 FCTD (Layden-Stevenson J.) Notice of Allegation/Sufficient Information/Issue Estoppel/Patented Medicines (Notice of Compliance) Regulations
Applicant requests a declaration that Apotex's letter of September 26, 2002 is not a NOA and, in the alternative, a prohibition order. AstraZeneca is the owner of a patent, in respect of which Apotex had sent NOAs in April 1993, December 1997 and August 2000. The August 2000 NOA alleged that no claim for the medicine itself and no claim for the use of the medicine would be infringed. In the current NOA, Apotex alleged both non-infringement and invalidity of the patent. AstraZeneca argued in this proceeding that Apotex's NOA is not sufficient as the arguments Apotex raised during the proceeding were not contained in the NOA. In addition, AstraZeneca also raised issue estoppel, arguing that since Apotex had already alleged non-infringement in another NOA, it could not do so again. Moreover, as Apotex had not argued invalidity in the previous NOA, they could not do so now.
Held: Application granted. Apotex cannot add to the contents of its NOA and try to establish non-infringement by evidence for which no basis is stated in the NOA. The NOA was deficient because it contained an allegation of non-infringement which relied on what was proven to be an incorrect construction of the patent. Therefore, Apotex's further allegation was not allowed to be raised by way of evidence or argument. In regards to issue estoppel, because Apotex had already asserted non-infringement of the patent in another NOA, it is estopped from arguing it in this proceeding. In addition, Apotex is not allowed to assert invalidity in this NOA, as invalidity should also have been argued in the first NOA. Therefore, issue estoppel applies to both allegations of non-infringement and invalidity.
(b) Trade Marks
1. AG Canada v. Effigi, May 10, 2005 FCA (Décary, Létourneau, Pelletier JJ.A.) Section 16/Section 37(1)(c)/First to File Examination Procedure
Appeal from FCTD's decision that overturned the Registrar's refusal of a trade mark application on the basis of confusion with another trade mark that was the subject of an application that was filed subsequently but claimed prior use.
Held: Appeal dismissed. The question posed is one of pure law. The Registrar's past practice of refusing applications under s. 37 based on prior use is not lawful, as was already decided in Unitel International Inc. v. Reg. TMs, (2000) 9 C.P.R. (4th) 127 (F.C.A.) (the discussion of this issue in Unitel was not, as submitted by the Registrar, mere obiter). Section 37 is a complete code and does not provide for refusal during examination on the basis of prior use. A third party who claims prior use of a confusingly similar trade mark may file an opposition. Examination is a “first come, first served” process.
2. Marks & Clerk v. Sparkles Photo, July 21, 2005 FCTD (Mosley J.) Section 45 Appeal/Changes Made to Mark in Response to Government's Request/Compliance with Other Legislation
Appeal from Registrar's decision that maintained a registration for NATURE'S CHOICE & Design even though the mark as used differed from the registered mark in several respects. The registrant removed a maple leaf design from its mark pursuant to a request from the Ministry of Agriculture and added ® Co. after the words NATURE'S CHOICE.
Held: Appeal dismissed. The Court agreed with the Registrar's decision that the dominant features of the mark had been maintained. Complying with federal regulations should not be held against a party. The validity of a business registration is not the sort of issue that should be addressed in s. 45 proceedings and, although the Registrar may take judicial notice of other legislation, he is not obliged to do so. Considerable deference should be given to the Registrar's decision in cases such as this.
(c) Practice
1. Merck et al. v. Apotex, April 28, 2005 FCTD (Mosley J.) Compelling Answers During Discovery/Relevance
Appeal by Apotex of Moreau P.'s decision that Merck's representatives need not re-attend for discovery, or provide written answers to Apotex' questions that were refused on discovery. In 1996, Apotex was granted a notice of compliance (NOC) to market lisinopril tablets from an inventory acquired before the issuance of Merck's '350 patent. Merck subsequently brought an action for infringement alleging that Apotex exhausted its pre-patent inventory and has been acquiring and selling lisinopril beyond what was permitted in the NOC.
Held: Appeal allowed in part. Merck was ordered to disclose the chemical structures of compounds that it had not disclosed to Apotex, but the remainder of Apotex' appeal motion was dismissed. Mosley J. stated that Moreau P. committed no fundamental error of principle and therefore the Court was not to review the matter de novo. Moreau P.'s decision to dismiss the motion to compel was not made in a vacuum. It arose in the context of proceedings in which there had been many days of discovery and the production of 20,000 pages of documents. However, Merck had supplied its expert witness with additional information about a number of chemical structures in order to allow him to give evidence about the classification of those compounds. This was vital information, based on Merck's intention to use extrapolations founded on this information in the invalidity hearing. The evidence was clear that producing this particular information would not impose a burden on Merck. Mosley J. therefore ordered that Apotex should have disclosure of these documents.
2. Merck et al. v. Apotex, May 25, 2005 FCTD (Morneau P.) Federal Court Rules 53(2), 221(1)(c) to (f), and 385/Motion to Strike Out Defendant's Fresh as Amended Statement of Defence and Counterclaim
Motion by the plaintiffs for an order striking out the defendant's Fresh as Amended Statement of Defence and Counterclaim dated May 13, 2002 (Apotex' defence of May 2002). By order of the court dated May 2, 2002, Apotex was permitted to amend its Amended Statement of Defence and Counterclaim dated November 17, 2000 (Apotex' defence of November 2000). Consequently, Apotex' defence of May 2002 was filed. However, in December 22, 2003, the Federal Court of Appeal set aside these Orders insofar as they relate to amendments concerning the compound lisinopril dihydrate. As a result, Apotex was granted leave to serve and file an amended pleading consistent with this judgment within ten days, which they have not done.
Held: Motion granted. Apotex' amended pleading does not comply with the Order of May 2, 2002 as varied by the Federal Court of Appeal Judgment dated December 22, 2003. Pursuant to r. 221(1)(c) to (f) and 385, Apotex' defence of May 2002 is struck out. Further, by r. 53(2), Apotex' Amended Fresh as Amended Statement of Defence and Counterclaim is such that paragraphs 1 to 8 of said pleading corresponds to paragraphs 1 to 8 of Apotex' defence of November 2000.
3. ITV Technologies v. WIC Television, May 25, 2005 FCTD (Tremblay-Lamer J.) Injunctions/Damages/“Special Circumstances”
Motion by ITV seeking an order against WIC for compensation for damages suffered as a result of the interim injunction that shut down its website. WIC argued that this is not the proper forum to determine whether leave to follow up should be granted and that the matter should be dealt with at trial. WIC also argued that the evidence of loss provided by Ms. Blome should be given little weight since it is hearsay. Further, WIC submits that ITV does not have "clean hands" and is not entitled to relief because it did not defend itself on the injunction, it failed to comply with the injunction and it established a company to avoid the Court's jurisdiction.
Held: Motion granted. The appropriate procedure is for the party subject to the injunction to apply to the trial judge for an order directing an inquiry into the damages. In the past, courts have declined to allow parties to follow up on undertakings to damages where the trial on merit has not taken place or the proceedings were not at an end. However, where the merits of an action have effectively been decided, as in the present case, an application for trial or reference to follow up is the normal course. Further, where the party who obtained the injunction was not successful at trial, it is typical for an order directing inquiry into the damages to be issued unless it is demonstrated that there are “special circumstances”. Such "special circumstances" are extraordinary and highly unusual. Since the admissibility of Ms. Blome's evidence, even if questionable, would not trigger the "special circumstances" application and the "clean hands" allegation is unfounded, WIC has failed to show the case at bar presents "special circumstances". ITV is granted leave to follow up on WIC's undertaking.
4. ITV Technologies v. WIC Television, May 25, 2005 FCTD (Tremblay-Lamer J.) Costs/Rule 420(1) Offers to Settle /Appropriate Scale
Motion by ITV seeking an order awarding ITV costs for the proceedings until the date of service of ITV's offer to settle, and double the costs for the proceedings after that date. WIC argues that the agreement lacks the element of compromise to invoke the double costs rule. ITV is also seeking an order directing the assessment officer to award WIC costs of the claim for a period to (a) the date of filing; or (b) the date when WIC found unacceptable ITV's suggestion to resolve the dispute by relocating its corporate offices from Vancouver to the U.S; or (c) the date when ITV sought a settlement meeting conceding that WIC possessed a trade mark for ITV in Canada; or (d) the date when WIC abandoned its ITV trade marks in any event of the claim; or (e) the date of service of ITV's offer to settle. ITV is also seeking an order that the high end of Column IV of Tariff B be used in assessing costs. WIC argue that the Court is not empowered to vary its order relating to costs.
Held: Motion granted in part. Rule 420(1) establishes that when a plaintiff makes a written offer that is not revoked and obtains an order more favourable than the terms of the offer to settle, the plaintiff is entitled to double costs from the date of the offer. While an element of compromise is necessary to invoke r. 420(1), what really is required is that the benefits of the offer are not wholly one-sided. Costs are awarded to ITV for the counterclaim until the date of the offer, and double costs thereafter.
Provided the special direction for the assessment of costs are not inconsistent with the original order, this Court has the jurisdiction to make the same. Nevertheless, in these circumstances WIC's award of costs in relation to ITV's dismissed claim should not be limited to any of the timeframes proposed by ITV. So long as adjusting the scale of costs from column III to column IV is not inconsistent with the Court's order then the Court has jurisdiction to consider a motion for such directions. In this case it is appropriate to do so. The questions of law and the evidentiary issues were novel and similarly complex. Costs to both WIC and ITV should be assessed pursuant to Column IV of Tariff B.
5. ITV Technologies v. WIC Television, May 25, 2005 FCTD (Tremblay-Lamer J.) Costs
Motion by WIC seeking an order directing the assessment officer that WIC be permitted to recover the following costs: counsel fees for second counsel, counsel fees for the preparation and filing of written arguments at trial, travel by counsel to attend examinations for discovery and trial, professional consulting fees paid to the witness Mr. Kirk, and all costs of the dismissed claim.
Held: Motion granted in part with costs. WIC should not be entitled to costs for second counsel as the second counsel was not retained because they were needed in order for WIC to present and defend its case, but because WIC believed ITV had obtained second counsel. Since both parties submitted written arguments and they were useful in reaching a decision, both parties are granted costs for written arguments. WIC is free to choose counsel and ITV should have known that its request to have the trial in Vancouver would result in travel costs for WIC's counsel. Costs are awarded for WIC's counsel's travel costs. While Mr. Kirk was not an expert witness, only a factual witness, he should be compensated for his time. Costs are awarded for half of Mr. Kirk's witness fee. All costs are to be assessed pursuant to the high end of column IV of Tariff B.
6. Remo Imports v. Jaguar Canada, June 17, 2005, FCTD (Shore J.) Expungement of Registered Trade Mark/Laches/Acquiescence/Federal Court Rule 75
Motion by Remo seeking an order pursuant to Federal Court Rule 75 authorizing it to amend its reply and to allege the defence of estoppel by acquiescence and laches. Remo has a trade mark registration for JAGUAR, which Jaguar Canada is seeking to expunge.
Held: Motion dismissed. Remo knew of the facts on which it based its motion for at least 8 years. If the motion were allowed, Jaguar would suffer an injustice that could not be compensated by an award for costs, and would further delay the trial of a 14 year old file, thus frustrating the course of justice. Furthermore, Remo will ultimately be unable to prove acquiescence or laches. Laches cannot be made out as Jaguar asserted its rights within the requisite statutory limitation period, which precludes an argument based on the doctrine of laches. Acquiescence cannot be established because Remo has admitted that it did not rely on the encouragement of Jaguar to use the JAGUAR trade mark.
7. Netbored v. Avery Holdings et al., June 30, 2005 FCTD (Heneghan J.) Federal Court Rules 51, 400(1) and 400(3)/Motion to Review the Prothonotary's Order/Costs
Appeal by the plaintiff from an order of the Prothonotary striking parts of the Amended Statement of Claim. Defendants argued that the appeal should be refused on grounds of res judicata, since the order did not strike the impugned paragraphs but only required the plaintiff to comply with the outstanding Orders, or alternatively, that the Prothonotary correctly struck out the purported amendments to the Statement of Claim as those paragraphs relate to causes of action arising from control, not copyright, and do not come within the statutory jurisdiction of the Federal Court. Further, the defendants argued that an award of costs is wholly within the discretion of the Prothonotary and there is no basis for reversing that order.
Held: Appeal dismissed. Rule 51 governs appeals from orders of prothonotaries. The Court disagreed with the defendant's argument that the subject matter of this appeal is res judicata. When viewed in the context of the entire Statement of Claim, the essence of paragraph 36 raises allegations of contract and breach of fiduciary duty, of which there is no inherent jurisdiction in this Court. Paragraph 36 serves only to link together the allegations in the Statement of Claim and to clarify the basis upon which the relief described in paragraphs 1(a)(i) and 1(a)(ii) is sought, and it flows that this Court lacks jurisdiction to grant the relief sought. There was no error in the manner in which the Prothonotary dealt with these paragraphs. Further, the Rules accord a high degree of discretion in the matter of costs. The Prothonotary did not refer to any particular factor as identified in r. 400(3) in making the costs award in favour of the defendants, but did say that the plaintiff was trying to do indirectly that which it could not do directly, which may be relevant to sub(k) and sub(i).
II. OTHER COURT DECISIONS
1. Ridgewood Electric v. Robbie et al., February 18, 2005 OSCJ (Corbett J.) Anton Piller Order Versus Search Warrant
Motion by defendants to set aside an Anton Piller order, which was issued to search the homes of former employees who were alleged to have taken various property belonging to their former employer for the purpose of use to the employer's detriment.
Held: Motion dismissed. The problems with the execution of the search were technical and did not prejudice the defendants. The search proceeded before the defendant could obtain legal counsel but this was justified given that the order required that the search begin before a certain time. Although the plaintiff's lawyer should have watched the search rather than sit in the kitchen talking to the homeowners, any impression that this was done to keep the owners away from the search was not a sufficient basis for concluding that there was a fatal want of supervision of the search.
The theoretical distinction between an Anton Piller Order and a search warrant ought to be abolished in order to protect privacy and property rights. Safeguards applying to an Anton Piller order should now include: 1) prior judicial authorization; 2) execution by a peace officer properly trained in the execution of search warrants; 3) safe retention and listing of materials seized in a manner that respects claims of privilege that may be asserted subsequently; and 4) careful judicial scrutiny of the execution of the Anton Piller order to balance the interests of both sides to ensure a fair disposition of the substantive issues in the case in a process that is fair to both sides.
2. Roche Palo Alto v. Apotex, April 4, 2005 OSCJ (Beaudoin M.) Patent Infringement/ Patent Act Sections 54(1) and 55(1)/Location of Proceedings/Territorial Limits on Federal Court/Whether Must Transfer Proceedings When Patent Infringement Added to Another Action/Additional Parties
Motion by the plaintiff to add new parties to the action. Cross-motion by defendant to transfer proceedings now that a claim of patent infringement has been added, and seeking leave to amend its statement of defence and counterclaim. The defendant submits that under s. 54(1) of the Patent Act, the proceedings must be transferred to the court closest to the defendant's place of business. The plaintiff submits that there is no requirement that proceedings be commenced in Federal Court in any particular location.
Held: The plaintiff's motion to add new parties is allowed. The new parties have clearly been given permission to use the patent, and thus have rights as persons claiming under the patentee, under s. 55(1). The defendant's motion to transfer proceedings is denied. There is a clear separation of Federal and Superior courts under s. 54(1), and there is nothing limiting where an action for patent infringement may be brought in Federal Court. If Parliament had wanted to limit which Federal Court could hear a claim for patent infringement, it would have been much clearer with its language. Furthermore, this is not exclusively a claim of patent infringement, and requiring transfer here would require a transfer anytime a patent infringement action was added to another action. This would discourage plaintiffs from combining actions, and promote a multiplicity of proceedings, which runs against existing jurisprudence. Finally, the defendant's motion to amend is allowed. The amendments do not amount to the withdrawal of an admission, as there was no clear admission made by the defendant.
3. Biolyse Pharma v. Bristol-Myers Squibb et al., May 19, 2005 SCC (Binnie J.) Interpretation of Regulations/Patented Medicines (Notice of Compliance)/New Drug Submissions
Appeal of the FCA's decision to quash the NOC issued to Biolyse by the Minister of Health in respect of an NDS for paclitaxel under the Regulations. Biolyse discovered a novel botanical source for paclitaxel and performed its own independent clinical studies that were submitted to the Minister. BMS currently markets Taxol, a drug that is listed on the Patent Register and contains the same medicine as Biolyse's paclitaxel. BMS holds patents for new and useful formulations and methods of administration of the drug, but these patents do not cover paclitaxel itself, which is in the public domain. The FCA held that s. 5(1.1) of the Regulations was triggered by Biolyse's submission for an NOC, and that Biolyse was therefore required to serve an NOA on BMS.
Held: Appeal allowed. The Minister was entitled to issue the NOC to Biolyse on the basis of its NDS application. Section 5(1.1) of the NOC Regulations does not apply to innovative drugs and should be confined to the circumstances contemplated by the regulator (i.e. when a manufacturer applies for an NOC on the basis of a comparison with another generic drug, but in fact copies from an innovator company). Biolyse did not rely on proving bioequivalence with Taxol, and therefore its submission does not fall within the scope of s. 5(1) of the Regulations such as to be required to serve an NOA on BMS. Regulations must be interpreted in the proper context and the scope of a regulation is constrained by its enabling legislation. Section 55.2(1) of the Patent Act, which enables the Regulations, only authorizes regulations "necessary for preventing the infringement of a patent by any person who makes, constructs, uses or sells a patented invention in accordance with subsection (1) [the 'early working exception'] or (2) [the 'stockpiling' exception now repealed]". The use of the word "submission" in s. 4(1) of the Regulations has been repeatedly held not to include SNDS in order to preserve the regulatory intent of the scheme. A similar purposive interpretation of "submission" in s. 5(1.1) must be construed in order to fulfill the purposes laid out in s. 55.2(4) of the Patent Act.
