Date: 19980724
Docket: A-294-98
A-295-98
A-310-98
CORAM:
MARCEAU J.A.
LINDEN J.A.
ROBERTSON J.A.
BETWEEN:
APOTEX INC.
-and-
NOVOPHARM LTD.
Co-appellants
- and -
THE WELLCOME FOUNDATION LIMITED,
GLAXO WELLCOME INC.,
INTERPHARM INC. and
ALLEN BARRY SHECHTMAN
Respondents
REASONS FOR JUDGMENT
MARCEAU J.A.
[1] On March 25, 1998, Mr. Justice Wetston of the Trial Division delivered a judgment disposing of three consolidated actions, commenced in 1990, 1991 and 1993 respectively, in relation to the validity and infringement of a patent for the medicine zidovudine in pharmaceutical dosage form. By his judgment, Wetston J. inter alia granted a permanent injunction enjoining the appellants from manufacturing and distributing any pharmaceutical composition containing zidovudine and ordered the delivery up for destruction of both manufacturers' existing inventory of zidovudine capsules. The appellants filed separate appeals against the judgment and at the same time brought a motion for a stay of execution of the injunction and delivery up orders. The motion was dismissed by Mr. Justice Campbell of the Trial Division on April 24, 1998. Before this Court are the consolidated appeals launched by each of the appellants against the decision of Mr. Justice Campbell.
[2] I have come to the view that these appeals are well taken. Given the urgency of the matter, I will briefly go through the reasoning that led me to that conclusion.
[3] Both appellants have been manufacturing and distributing zidovudine capsules for many years, Apotex Inc. since 1992 when it received a Notice of Compliance pursuant to the Patented Medicines (Notice of Compliance) Regulations1 giving it leave to sell its zidovudine composition, and Novopharm, since even before 1990, in association with its trade mark NOVO.AZT. Both generic drug manufacturers have built up a favourable reputation for their products. Novopharm has already obtained listing of its formulation on the formulary established by the government of the province of Quebec where it controls 60% of the generic market for zidovudine. Apotex is on the verge of obtaining listing of its own product on the Quebec and Ontario formularies, from which it can expect a considerable increase of its share of the market. Both manufacturers also have negotiated long-term contracts for their products with several Canadian hospitals and have developed significant export sales.
[4] There is now an injunction in force ordering both appellants to immediately cease all marketing activities involving zidovudine products. If the appeal is successful, it will become clear then that this injunction was issued erroneously and that the important loss of profits suffered by both appellants for having been excluded from the market would have been imposed on them without real justification and only as a result of a judicial error. There being no undertaking as to damages offered by the respondents, there will be no way then for the appellants to recover their losses. No cause of action could support a claim against the respondents or any other potential defendant.
[5] If those non-compensable damages were limited to the loss of inventories and the deprivation of profits by not being able to make any sales during the time of the pending appeal, a deprivation that would come to an end with a favourable appeal judgment, the appellants' unfortunate situation would have to be considered seriously, but it would not be determinative. The sole fact that a defendant to a patent infringement action would suffer some financial harm during the time of appeal of an unfavourable judgment cannot, in itself, be sufficient to be the basis for a stay of the injunction pronounced against him. Otherwise, a stay in such a case would have to be automatic regardless of the other circumstances and the trial judgment would be devoid of any effect. The granting of the stay should always remain a discretionary decision to be made on the basis of all the factors involved and in the sole perspective of preserving justice to all parties.
[6] I believe, however, that the non-compensable losses that the appellants here will sustain for having been forced to leave the market temporarily will not only be considerable but will exceed the value of inventories and the deprivation of sales-profits for a limited time. As mentioned above, both appellants have been in the market for many years, they have achieved a good reputation for their products, they have acquired a substantial market share in the industry. The evidence appears to me to be that a loss of that market share, because of the nature of that market, is bound to have serious repercussions that will extend way after a favourable appeal judgment. In my view, the appellants have shown that they are bound to sustain a severe and irreparable harm.
[7] Since there is no doubt that the appeals against Wetston J.'s judgment raise serious questions, as the finding of validity of the patent on which it is founded raises difficult issues, as conceded by Wetston J. himself and after him by the motions judge, under the principles developed by the case law and reiterated recently by the Supreme Court in RJR " MacDonald Inc.,2 there is only one basis on which the stay of execution could be refused. It could be refused if the postponement of the injunctive orders would be susceptible of causing the respondents an equally irreparable harm in the eventuality of an unfounded appeal and the balance of convenience would not favour the stay. That eventuality is to be discarded since no finding of a possible irreparable harm to the respondents was made by the motions judge and, in any event, no such finding would have been warranted. The evidence does not support the contention that any other significant damage than loss of sales to the appellants would be suffered by the respondents, and such a damage could be totally compensated by a payment equivalent to the sales revenue that they would have earned in the absence of a stay. I fail to see how the monopoly right attached to the holding of a patent can be seen as having a value independent of the profits that may be derived from marketing the patented invention.
[8] The refusal of the motions judge to order a stay was due, in my respectful opinion, to his misunderstanding of the notion of irreparable harm as being necessarily one that could threaten the very viability of the business concerned and his unwarranted application of the idea that the loss was merely a foreseeable normal business risk. In my judgment, he exercised his discretion unjudicially. His decision should not be allowed to stand.
[9] I am of the view that the appeal should succeed and the judgment of Mr. Justice Wetston, dated March 25, 1998, as it relates to the issuing of a permanent injunction and the delivery up of inventories, should be stayed pending disposition of the appeal therefrom and the respondents should be directed to return the zidovudine capsules previously seized from the appellants.
"Louis Marceau" J.A.
"I concur
A.M. Linden
J.A."
Date: 19980724
Docket: A-294-98
A-295-98
A-310-98
CORAM: MARCEAU J.A.
LINDEN J.A.
ROBERTSON J.A.
BETWEEN:
APOTEX INC.
-and-
NOVOPHARM LTD.
Co-appellants
- and -
THE WELLCOME FOUNDATION LIMITED,
GLAXO WELLCOME INC.,
INTERPHARM INC. and
ALLEN BARRY SHECHTMAN
Respondents
Heard at Ottawa, Ontario, on Wednesday, July 22, 1998.
Judgment rendered at Ottawa, Ontario, on Friday, July 24, 1998.
REASONS FOR JUDGMENT: MARCEAU J.A.
CONCURRED IN BY: LINDEN J.A.
CONCURRING REASONS BY: ROBERTSON J.A.
Date: 19980724
Docket: A-294-98
A-295-98
A-310-98
OTTAWA, Ontario, Friday, July 24, 1998.
CORAM: MARCEAU J.A.
LINDEN J.A.
ROBERTSON J.A.
BETWEEN:
APOTEX INC.
-and-
NOVOPHARM LTD.
Co-appellants
- and -
THE WELLCOME FOUNDATION LIMITED,
GLAXO WELLCOME INC.,
INTERPHARM INC. and
ALLEN BARRY SHECHTMAN
Respondents
J U D G M E N T
[1] The appeals are allowed with costs. The judgment of Mr. Justice Wetston, dated March 25, 1998, insofar as it issues a permanent injunction and an order for the delivery up of inventories is stayed pending disposition of the appeal therefrom and the respondents shall return the zidovudine capsules previously seized from the appellants.
"Louis Marceau"
J.A.
Date: 19980724
Docket: A-294-98
A-295-98
A-310-98
CORAM: MARCEAU J.A.
LINDEN J.A.
ROBERTSON J.A.
BETWEEN:
APOTEX INC.
-and-
NOVOPHARM LTD.
Co-appellants
- and -
THE WELLCOME FOUNDATION LIMITED,
GLAXO WELLCOME INC.,
INTERPHARM INC. and
ALLEN BARRY SCHECHTMAN
Respondents
REASONS FOR JUDGMENT
ROBERTSON J.A.
[1] It appears to me that the line of cases beginning with Laboratoire Pentagone Ltee v. Parke, Davis & Co. (1968), 55 C.P.R. 105 (S.C.C.), and on which the Motions Judge based his decision not to grant the requested stays, has been largely overtaken by the Supreme Court's decisions in R.J.R. MacDonald Inc. v. Canada (Attorney-General) (1994), 54 C.P.R. (3d) 114, and Re: Attorney General of Manitoba v. Metropolitan Stores (MTS) et al. (1987), 38 D.L.R. (4th) 321 (S.C.C.). For this reason the Motions Judge must be deemed to have erred in principle. That being said I am also of the view that the fact that an injunction has already issued following a trial on the merits is a relevant factor to be taken into account when addressing the third part of the tri-partite test: balance of convenience. However, that factor cannot be taken as imposing an onus on an applicant seeking a stay to establish that it will suffer "loss[es] which cause very significant impact threatening the very viability of the business concerned", as was held by the Motions Judge.
[2] Like Justice Marceau, I am of the view that the appeals raise serious issues of both pure law and mixed law and fact. I am also of the view that the appellants will suffer irreparable harm if a stay is not granted and that that harm is likely to persist long after a successful appeal: see also Allen & Hamburys Ltd. v. Torpharm Inc. et al. (April 3, 1998), unreported, No. M22216 (Ont. C.A.). The harm is irreparable because there is no one against whom losses may be recovered, assuming them to be quantifiable. By contrast, I note that at the outset of the litigation, it was determined that the respondents would not suffer irreparable harm if the appellants were allowed to market their respective products and, consequently, their application for an interlocutory injunction was refused. But in the end the balance of convenience tips in favour of the appellants having regard, inter alia, to the refusal of the respondents to give an undertaking to pay damages for the losses caused by the continued imposition of the injunction through to a successful appeal.
[3] The respondents' argument that such an undertaking would expose them to unlimited liability is not persuasive, if only for the reason that such an undertaking would have been required had they been successful in obtaining an interlocutory injunction at the outset. The only other reason advanced for refusing to give an undertaking was that the law does not require such. That is true, but that reason, by itself, is not persuasive. This is a case where it is in the interests of justice that the "status quo" be maintained pending disposition of the appeals. Having regard to all of the relevant factors, including the fact that the stays relate to a judgment on the merits, I am of the respectful view that the relief sought should be granted.
[4] I would dispose of the appeals in the manner proposed by my colleague.
"J.T. Robertson"
J.A.
[5]
[6]
__________________
1 SOR/93-133.
2 RJR " MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311.