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PATENTS - Remedies - Damages

Wednesday, April 11, 2018 @ 8:32 AM  

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Appeal by Eli Lilly Canada Inc. (Lilly) from a Federal Court decision awarding the respondent Teva Canada Ltd. (Teva) damages under s. 8 of the Patented Medicines (Notice of Compliance) Regulations for loss suffered when it was kept out of the market for olanzapine by the appellant’s unsuccessful prohibition application under the Regulations. Cross-appeal by Teva from the assessment of damages. In 2004, Teva was seeking to bring to market a generic version of olanzapine and served a Notice of Allegation (NOA) alleging that Lilly’s patent for olanzapine was invalid. Lilly applied for prohibition. In 2005, Teva served a second NOA and withdrew its first NOA 11 and one-half months after it had served it. In response to the second NOA, Lilly brought a further application for prohibition which was dismissed. On the dismissal of the application, Lilly commenced an infringement action against Teva in the Federal Court. Teva counterclaimed for a declaration of invalidity and for damages. Lilly’s patent was found invalid. Damages were assessed in a separate proceeding. Lilly argued that the trial judge erred in failing to find that Teva abandoned its s. 8 claim when it withdrew its first NOA, and that, as a result of the June 2017 Supreme Court of Canada decision in AstraZeneca Canada (issued five months after the trial decision was rendered), Teva suffered no compensable loss. The AstraZeneca decision rendered legally untenable the sole basis on which Lilly’s patent for olanzapine was found invalid. In its cross-appeal, Teva argued that the trial judge erred in denying it recovery for pipefill sales, in failing to provide for an adjustment to take into account systemic under-reporting of sales and in determining the price at which Teva’s olanzapine products would have been listed on the Ontario formulary as of January 1, 2007.

HELD: Appeal dismissed. Cross-appeal allowed in part. The trial judge did not err in finding that Teva’s representation that it had abandoned its s. 8 damages claim did not encompass its claim flowing from the second application for prohibition. Issue estoppel barred Lilly from relying on its argument relating to the AstraZeneca case. The validity of Lilly’s patent which Lilly now sought to raise as a defence to the s. 8 claim was decided at trial. The trial judge determined that Lilly’s patent was invalid. His decision was affirmed on appeal. The parties to the proceeding in which invalidity was determined and the parties in the current proceeding were the same. It would not work an injustice to apply issue estoppel in this case. There was no presumptive right to relitigate an issue on account of a change in the law. The trial judge did not err in the assessment of damages by ignoring the 11 and one-half months delay caused by Teva withdrawing its first NOA and serving a second, and in failing to find that serving two NOAs was an abuse of process. Teva’s damages were to be recalculated, however, to account for any lost pipefill sales during the liability period and to take account of under-reporting. The trial judge failed to recognize that product leaving the manufacturer’s factories and moved into the distribution stream was product that the manufacturer had sold. The fact that the sales were to distributors or wholesalers rather than directly to retail customers did not take them outside of s. 8. The fact that sales of that product further down the distribution stream, sales to retail customers, would have taken place beyond the liability period, also did not take these sales outside s. 8. The trial judge made a further extricable error of law in failing to include as an element in calculating Teva’s damages an adjustment to take account of under-reporting, thereby depriving Teva of a portion of its legal entitlement.

Eli Lilly Canada Inc. v. Teva Canada Ltd., [2018] F.C.J. No. 312, Federal Court of Appeal, D.J. Rennie, M.J.L. Gleason and J.B. Laskin JJ.A., Confidential reasons: February 22, 2018; Public reasons: March 20, 2018. Digest No. TLD-April92018006