Federal Court Of Appeal Updates The Law Of Section 8 Damages

On March 14, 2014, the Federal Court of Appeal issued its highly anticipated decisions1 concerning claims by Teva and Apotex for damages pursuant to section 8 of the Patented Medicines (Notice of Compliance) Regulations. These claims followed prohibition proceedings involving Apotex and Teva related to generic versions of ramipril, marketed by Sanofi as ALTACE®.

Section 8 damages are calculated by considering the generic manufacturer's loss in a hypothetical world where it starts selling without the delay occasioned by the Regulations. In a trilogy of trial judgments issued in May 2012,2 the trial judge provided guidance for the hypothetical world calculation and addressed Sanofi's challenges to the validity of section 8.

The Court of Appeal grappled with the unique facts presented by the appeals and ultimately dismissed all but one appeal. The successful appeal varied one trial judgment to exclude a generic competitor from Apotex's hypothetical market and thus increase Apotex's claim. The appellate decisions are summarized below. Among the Court's more notable findings are the following:

both generic claimants and generic competitors are subject to the Regulations in the hypothetical world, except for the sole purpose of determining the start date of the period of liability. Majority and dissenting reasons on this issue recognized that this approach could serve to inflate each generic claimant's hypothetical market share thus providing a potential windfall to the generics beyond the loss they suffered during the period of liability; as they are subject to the Regulations, generic claimants will send Notices of Allegation to address patents listed against the drugs they seek to copy thus providing notice to innovators of their impending market entry. In reaching this conclusion, the Court of Appeal has largely done away with the notion that the innovator would be taken by surprise by a generic launch in the usual circumstances; generic claimants will be subject to a reduction in revenues for "ramp-up" in the hypothetical world. Such ramp-up cannot be discounted on the basis that the generic also suffered a ramp-up in the real world; and section 8 maypermit generic claimants to be compensated for sales directed to indications for which they did not seek approval notwithstanding patents which the generics did not address. The Court noted that such sales may be precluded where the facts so justify. The Apotex Liability Appeal: Apotex Inc v Sanofi-Aventis et al, 2014 FCA 68

In the Apotex Liability Appeal, the...