Canadian Patent Law: 2015 Year In Review

This article summarizes noteworthy Canadian patent law decisions and developments from 2015.

1. Remedies in patent litigation

   1. Non-infringing alternative defence introduced into Canadian patent law

      A successful patentee in a patent infringement action is entitled to monetary compensation in relation to the acts of infringement. In this regard, the patentee may elect to recover either its damages or the profits made by the infringer as a result of the infringement.

      With respect to damages, the Court will determine the financial harm suffered by the patentee as a result of the infringement. In other words, the Court will consider what position the patentee would have been in but for the infringer's infringement. Traditionally, compensatory damages for a patentee mainly comprise the patentee's lost profits on infringing sales it can prove (on a balance of probabilities) it would have made had the infringing product not been on the market, and a reasonable royalty for all other infringing sales. Until recently, the issue of damages was determined without factoring in what the infringer could or would have done differently. That is, the Court's damages analysis focused solely on the harm suffered by the patentee due to the infringer's acts of infringement. This is in contrast to an accounting of profits analysis, which may take into account any non-infringing alternatives available to an infringer.1

      The law of damages changed in 2015 when the Federal Court of Appeal issued its decision in Apotex Inc. v. Merck & Co., Inc., 2015 FCA 171 (the "FCA Decision"). Prior to the FCA Decision, hypothetical non-infringing alternative (NIA) scenarios of a defendant were not considered when calculating patent infringement damages. However, the FCA Decision provided that, in certain situations, an infringer may now argue that it had an NIA available to it such that, for example, the infringer would have in any event made the sales, thereby defeating a patentee's claim for lost profits.

      In order for an infringer to successfully rely upon the NIA defence, various minimum criteria must be met, including that, at the time of infringement, the infringer had an adequate supply of product such that it could have sold the non-infringing alternative, and the infringer would have actually sold the non-infringing alternative product.

      Although the FCA Decision changes the law of Canada by introducing the NIA defence, Apotex was ultimately not successful in its appeal of the lower Court decision, which granted Merck damages totaling a staggering $119 million plus interest (as discussed in greater detail here). Instead, the Court of Appeal held that Apotex neither could nor would have sold a non-infringing alternative product.

      Leave to appeal to the Supreme Court of Canada has been sought by Apotex. An in-depth review of the FCA Decision and its implications is available here.

   2. Cases addressing damages under section 8 of the PM(NOC) Regulations

      2015 saw further setbacks for generics under section 8 of the PM(NOC) Regulations in their attempts to recover innovator profits rather than their own loss suffered. One case addressing this issue was Apotex v. Eli Lilly, 2015 ONCA 305, where the Ontario Court of Appeal (OCA) held that a generic cannot make a claim for innovator profits under the doctrine of unjust enrichment. The case is discussed further here.

      Apotex argued that it was kept off the market because of a proceeding under the PM(NOC) Regulations commenced by Lilly in which Lilly was ultimately unsuccessful. Section 8 of the PM(NOC) Regulations states that a generic can recover any "loss suffered" from an innovator in this situation. Apotex pursued a claim in the Ontario Courts under the doctrine of unjust enrichment. The three part test to make out a claim for unjust enrichment requires: (a) an enrichment of the defendant; (b) a corresponding deprivation of the plaintiff; and (c) the absence of any juristic reason for the enrichment.

      The OCA held that Apotex could not recover Lilly's profits as Apotex suffered no corresponding...