Merck Frosst Canada Inc. v. Apotex Inc. (C.A.) [1997] 2 F.C. 561
A-843-96
(T-1305-93)
CORAM: THE CHIEF JUSTICE
STRAYER J.A.
McDONALD J.A.
B E T W E E N:
APOTEX INC.
Appellant
(Respondent)
" and "
MERCK FROSST CANADA INC., and
MERCK & CO., INC.
Respondents
(Applicants)
" and "
THE MINISTER OF NATIONAL HEALTH AND WELFARE
Respondent
(Respondent)
HEARD at Ottawa, Ontario on Wednesday, January 29, 1997
JUDGMENT rendered at Ottawa, Ontario on Monday, February 10, 1997
REASONS FOR JUDGMENT BY: STRAYER J.A.
CONCURRED IN BY: THE CHIEF JUSTICE
McDONALD J.A.
A-843-96
(T-1305-93)
CORAM: THE CHIEF JUSTICE
STRAYER J.A.
McDONALD J.A.
B E T W E E N:
APOTEX INC.
Appellant
(Respondent)
" and "
MERCK FROSST CANADA INC., and
MERCK & CO., INC.
Respondents
(Applicants)
" and "
THE MINISTER OF NATIONAL HEALTH AND WELFARE
Respondent
(Respondent)
REASONS FOR JUDGMENT
STRAYER J.A.
This appeal concerns the scope of the jurisdiction of the Trial Division to extend the interim period in which the Minister of National Health and Welfare ("the Minister") is legislatively prevented from issuing a Notice of Compliance, once an application for prohibition is commenced by a patentee under subsection 6(1) of the Patented Medicines (Notice of Compliance) Regulations1 ("the Regulations"). Paragraph 7(1)(e) of the Regulations provides that the Minister is precluded from issuing such a Notice for a period of 30 months after the making of an application for prohibition. Subsection 7(5) provides as follows:
| 7.(5) A court may shorten or extend the time limit referred to in paragraph (1)(e) in respect of an application where the court has not yet made an order pursuant to subsection 6(1) in respect of that application and where the court finds that a party to the application failed to reasonably cooperate [sic] in expediting the application. |
Facts
On June 1, 1993, Merck-Frosst Canada Inc. and Merck & Co., Inc. ("the respondents") filed an application for prohibition under sub-section 6(1) of the Regulations for an order prohibiting the Minister from issuing a Notice of Compliance to the appellant in respect of its lovastatin tablets. Without such a Notice the appellant is prevented from marketing such tablets. The 30 month period provided in paragraph 7(1)(e) terminated at the end of November, 1995. The respondents were, however, at that time far from completing their preparations for the hearing of the application. It appears that there then remained cross-examinations on affidavits to be carried out (subsequently held in January and February, 1996). Therefore the respondents applied for an extension of the 30 month period. On September 6, 1995 Richard J., of the Trial Division issued an order extending the time for 12 months, to December 1, 1996. According to this order it was granted on a joint application of the parties. No grounds were stated for its grant.
The cross-examinations on affidavits gave rise to more interlocutory proceedings which were not decided until July, 1996. The respondents finally filed their application record on or about August 16, 1996, some 38" months after their originating notice of motion was filed.
The parties then sought a date for the Trial Division to hear the application and were advised that the first 2-day period available was January 8 and 9, 1997. (As of the hearing of this appeal on January 29, 1997, the original application filed in 1993 had yet to be heard). As a result the respondents applied for a further extension of the 30 month period to such time as judgment was rendered on the application for prohibition. The only evidence filed in support of the application for an extension, was the affidavit of one Edward W. Murray, a New Jersey attorney, who after reciting the facts that the extension granted by Richard J. to December 1, 1996, would expire before the hearing of the application, asserted the following.
| 5. An extension of said thirty-month delay until a determination of the merits of the application pursuant to a hearing in early 1997 is necessary to safeguard the rights of the Applicants in this matter. |
| 6. I am advised by Judith Robinson of Ogilvy Renault, and verily believe, that if this thirty-month delay is not extended until judgment is rendered on the merits of the application for prohibition, then the Respondent Minister of National Health and Welfare (the "Minister") will not be enjoined pursuant to the Regulations in respect of Apotex's notice of allegation dated April 19, 1993, from issuing a notice of compliance to Apotex for lovastatin after December 1, 1996. |
| 7. The Applicants would be irreparably prejudiced by a refusal to extend the thirty-month delay. In that the relief sought by the Applicants herein is an order prohibiting the Minister from issuing a notice of compliance for lovastatin to Apotex until after expiry of the patents in issue, failure to extend the thirty-month delay would have the effect of terminating the Applicants' claim without the benefit of a hearing. |
The appellant opposed such an extension on the grounds inter alia that the Court had no jurisdiction to grant it. It was pointed out that paragraph 7(1)(e) only authorizes an extension
| where the court finds that a party to the application failed to reasonably cooperate in expediting the application. |
It is clear that there was no such allegation or evidence of failure to cooperate put before the motions judge who, however, issued the extension of time requested. His reasons merely indicated that he had relied on the Murray affidavit and the representations of the applicant (the respondents here).
The appellant appeals from that decision asserting that it was made without jurisdiction for the reasons mentioned above. It also asserts that even if irreparable harm were relevant the Murray affidavit did not demonstrate such harm. Further, if irreparable harm were a legitimate consideration it was the appellant who would suffer it.
The respondents generally argued before us that the jurisdiction of the Court to grant an extension is not confined to the ground mentioned in subsection 7(5) of the Regulations; and that the Court has such authority in its inherent powers "to control its own process and administer justice", or under section 18.2 of the Federal Court Act (the power to make interim orders in judicial review) or under Rule 1614 (the power to grant extensions of time in judicial review). They contend that as the appellant had consented to the extension order of Richard J. of September 6, 1995 for an extension beyond the 30-month limit, where no finding was specifically made as to the failure of the appellant to cooperate reasonably, it is now estopped from saying that such a finding is a precondition to the grant of an extension by the Court under subsection 7(5) of the Regulations. Other orders of the Trial Division granting such extensions are invoked as authority that such a jurisdiction exists. The respondents plead that a grave injustice will ensue all because, upon being requested on August 16, 1996 (some 38" months after the originating notice of motion was filed) to set a date for the hearing of the application, the Trial Division was not able to provide a two day hearing before January, 1997, some weeks after the termination on December 1, 1996 of the extended period of prohibition. Irreparable "prejudice" is claimed based on the assertions of Attorney Murray of New Jersey as quoted above.
Analysis
It appears to me that the respondents' submissions proceed from a misapprehension as to the nature of the Regulations and their relationship to ordinary patent law. With the abolition of compulsory licenses for patented medicines, it remains open to medical patentees to sue any infringing user of its patents, and to seek interlocutory injunctions pending the trial of such actions.2 In addition to this means for patentees to protect their patents, the Governor in Council in 1993 adopted the Regulations which provide patentees with a more direct and easier method of blocking possible infringement: by seeking an order of prohibition against the Minister preventing him from allowing another alleged user of the patented medicine to market the allegedly infringing product. Thus the Minister's authority to refuse a Notice of Compliance, originally designed to protect the personal health of Canadians, has been harnessed to protect the financial health of drug patentees. Whatever the public policy merits of this, it must be seen as an extraordinary means of providing interim protection to patentees by which a competitor can be blocked from marketing for 30 months by the simple expedient of the patentee filing an application in the Trial Division for prohibition. As was observed by Mahoney J. in this Court in Bayer AG et al v. Minister of National Health and Welfare3
| By merely commencing the proceeding, the applicant obtains what is tantamount to an interlocutory injunction for up to 30 months without having satisfied any of the criteria a court would require before enjoining issuance of a NOC. In particular, no liability as to damages arises from the application as would be imposed by the undertaking any court would require before making an interlocutory injunction. The liability for damages created by s. 8 of the Regulations pertains only to those incurred as a result of the NOC not issuing until after the patent has expired. That is by no means coextensive with the liability that arises on an undertaking exacted when an injunction is issued. |
Thus the 30 month bar to marketing by competitors triggered by the patentee filing an application for prohibition must be seen as a legislative stay, not a judicial injunction. As such it is subject to such terms as are imposed by the legislation " in this case the Regulations. The Regulations in this respect must be seen as a code. It must also be kept in mind that whatever time limits may be imposed upon this legislative stay by the Regulations, the full rights of the patentee under normal patent law at all times remain, including the right to sue and to seek an interlocutory injunction.
Turning then to the terms of the Regulations, it is abundantly clear that only subsection 7(5) authorizes the Trial Division to alter the legislative duration of the 30 month stay directly, and this only "where the court finds that a party to the application failed to reasonably cooperate in expediting the application". No such failure was alleged or proven before the motions judge whose decision is under appeal, nor did he find any such failure to have existed. Basing himself on the submissions and affidavit as he did, he could not have found such a failure because none was asserted in those documents. The extension was thus granted without jurisdiction and must be set aside.
I will deal briefly with the arguments of the respondent. With respect to its invocation of the inherent powers of the Court, or section 18.2 of the Federal Court Act, or Rule 1614, none of those can prevail against the express words of subsection 7(5) which prevent any extension (or contraction) of the legislative stay other than on grounds of failure of a party to expedite. The inherent power of the Court to control its own process is irrelevant: what the respondent seeks is not an order to govern the conduct of a proceeding in court but an order to control the exercise of someone else's powers, namely the Minister's otherwise lawful authority to grant a Notice where health requirements are met. We must also give due effect to section 55.2 of the Patent Act,4 under which the Regulations were made. Subsection 55.2(5) provides:
| 55.2(5) In the event of any inconsistency or conflict between |
| (a) this section or any regulations made under this section, and |
| (b) any Act of Parliament or any regulations made thereunder, |
| this section or the regulations made under this section shall prevail to the extent of the inconsistency or conflict. |
Thus the Regulations, surprising as it may seem, override any other Act or regulation including the Federal Court Act and the Federal Court Rules.
Nor can the respondent successfully invoke the doctrine of estoppel. Firstly, there is no proper evidence on the record establishing the factual preconditions of estoppel. Secondly, estoppel cannot give the Court jurisdiction contrary to limits imposed by legislation.5 Nor can the parties confer such jurisdiction on the Court by consent.6
The respondent perceives a grave injustice to itself because the Trial Division cannot grant it a hearing of its application before the expiration of the legislative stay. It is difficult to assess the merits of this assertion without knowing more precisely why the respondent did not file its application record until 38" months after filing its originating notice of motion and only then ask for a hearing date. There is no evidence in the material filed on appeal as to the cause of this great delay. There are numerous allegations by the respondents of delays caused by the appellant failing to comply with undertakings or delay in complying, delay in making deponents available for cross-examination, and refusals of its witnesses to answer questions. What is clear is that numerous interlocutory applications arose out of the way in which the parties conducted their preparations for a hearing. We cannot assess on the material whether such applications were justified, nor are we called upon to do so. From the time which elapsed, however, there is at least a rebuttable presumption that one or both parties failed to cooperate reasonably. It should thus not be readily inferred that the cause of the respondent's discomfiture is the inability of the Trial Division to give immediate dates when finally asked to do so. It should also be kept in mind that the "prejudice" the respondents will suffer consists of them now being obliged to commence an ordinary action for patent infringement and actually prove the justification for an interlocutory injunction, should the Minister in fact issue a Notice.
As for the arguments by both parties based on irreparable harm, this factor is not, as noted by Mahoney J. in the Bayer case,7 relevant to the grant or dissolution of a legislative stay under the Regulations. In any event, neither party has provided any evidentiary base for such a plea.
In summary, the legislative stay is an extraordinary sanction detracting from the normal rights of a defendant under ordinary patent law. It must be applied strictly according to its terms. The 30 month period was no doubt intended in part to focus the minds of the parties and the Court as to the need for an expeditious prosecution of the application for prohibition. As this Court has said before,8 the Regulations disclose an intention that the proceedings under subsection 6(1) should be conducted expeditiously and are not meant to take on the ponderous character of a patent action. A time limit for the legislative stay was fixed at 30 months, not just as one of many options for the parties but as a time limit which was to be respected unless altered by the Court for the sole reason authorized in subsection 7(5). The message for the parties is clear: they must either so conduct themselves that they cannot be found to have failed to cooperate reasonably to expedite the proceedings or they may face an alteration of the 30 months stay, either a shortening or lengthening depending on which party is at fault. Agreement by the parties to delay will not avail to protract the legislative stay. Unwarranted refusals to make witnesses available, the failure to respect undertakings or to answer questions, or extravagant demands for information on cross-examination, and requests for wasteful adjournments for flimsy reasons, must be viewed as failures to cooperate reasonably. Parties who are the victims of such tactics must not assume the 30 month period will be altered unless they are prepared to document through these tactics a failure by their opponents to cooperate reasonably in the expedition of the application. A party will consent to adjournments at the cost of not being able to blame the other for delay on a subsection 7(5) application. Interlocutory motions indulged in by a party will be assessed by their outcome, to determine whether they were brought or opposed unreasonably. There are also implications for the Court: that it must control or suppress unnecessary interlocutory proceedings and the conduct that gives rise to them; limit the length and frequency of adjournments; insist that matters proceed at a pace likely to allow a hearing of the application before the expiration of the (not unreasonable) period of 30 months; and finally, refuse extensions unless the criteria of subsection 7(5) are strictly met after a careful assessment of the conduct of the parties.
Conclusion
The appeal should therefore be allowed and the order of the Trial Division of October 23, 1996 be set aside. With respect to costs, the Court and counsel for the respondents were obliged to wait for half a day after the appointed time until Mr. H.B. Radomski, counsel for the appellant, and his co-counsel appeared to argue the appeal. An order of Pratte J. of December 20, 1996, granted the appellant an expedited hearing of the appeal and fixed the hearing time at 10 a.m. on January 29, 1997, in Ottawa. Mr. Radomski advised the Court that he had not made himself aware of this term of the Order and was still in Toronto at the appointed time. The Court was obliged to adjourn the hearing until 2:00 p.m., at which time Mr. Radomski appeared. Counsel for the respondents was obliged to wait and the Court to rearrange its work. Argument took approximately one hour. At the end the Chief Justice, acting pursuant to Rule 348, asked Mr. Radomski to show cause why costs of the appeal should not be ordered against him personally, regardless of the outcome. He had no satisfactory explanation for his failure to appear at the time fixed. Costs of the appeal should therefore be awarded to the corporate respondents, to be paid by Mr. Radomski personally.
J.A.
I agree
Julius A. Isaac, C.J.
I agree
F.J. McDonald, J.A.
__________________
1 SOR/93-133, March 12, 1993.
2 See Merck Frosst Canada Inc. v. Minister of National Health and Welfare (1994) 55 C.P.R.(3d) 302 at 319-20. David Bull Laboratories (Canada) Inc. v. Pharmacia Inc. et al (1994) 58 C.P.R.(3d) 209 at 217 (F.C.A.).
3 (1993) 51 C.P.R.(3d) 329 at 337.
4 R.S.C. 1985, c. P-4.
5 See e.g. Mount Royal/Walsh Inc. v. The Ship Jensen Star et al [1990] 1 F.C. 199 at 210-11 (C.A.).
6 See e.g. C.N.R. et al v. C.T.C. et al [1988] 2 F.C. 437 (T.D.); Salibian v. M.E.I. et al [1990] 3 F.C. 250 at 252 (C.A.).
7 Supra note 3.
8 See e.g. David Bull supra note 2 at 215-16.