Date: 20050118
Docket: A-411-04
Citation: 2005 FCA 24
CORAM: LÉTOURNEAU J.A.
BETWEEN:
APOTEX INC.
Appellant
(Plaintiff/Defendant by Counterclaim)
and
MERCK & CO. INC. and
MERCK FROSST CANADA INC.
Respondents
(Defendants/Plaintiffs by Counterclaim)
Heard at Ottawa, Ontario, on January 18, 2005.
Judgment delivered from the Bench at Ottawa, Ontario, on January 18, 2005.
REASONS FOR JUDGMENT OF THE COURT BY: LÉTOURNEAU J.A.
Date: 20050118
Docket: A-411-04
Citation: 2005 FCA 24
CORAM: LÉTOURNEAU J.A.
BETWEEN:
APOTEX INC.
Appellant
(Plaintiff/Defendant by Counterclaim)
and
MERCK & CO. INC. and
MERCK FROSST CANADA INC.
Respondents
(Defendants/Plaintiffs by Counterclaim)
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Ottawa, Ontario, on January 18, 2005)
[1] We see no error in the decision of the motions judge who sat on appeal from an Order of the prothonotary who, while allowing in part the appellant's motion, dismissed some of the appellant's documentary requests as irrelevant.
[2] The appellant wants to oppose the respondents' claim to an entitlement to an accounting of the appellant's profits as a result of an infringement of their '349 Patent relating to enalapril and enalapril maleate which the respondents commercialized under the product name Vasotec. The appellant seeks disclosure of documents from the respondents in the following areas:
a) the respondents' delay in prosecuting the '349 Patent;
b) the mislabelling of the respondents' product, Vasotec, whereby the respondents represented to the public that their Vasotec tablets contained enalapril maleate when they did not;
c) the tenuous nature of the '349 Patent; and
d) the respondents' market interference with the appellant's product.
[3] With respect to the first area of disclosure sought, it is obvious, as both the motions judge and the prothonotary found, that the appellant is merely trying to relitigate an issue that was conclusively decided by Justice MacKay's judgment in file T-2408-91 reported as follows: Merck & Co. Inc. et al. v. Apotex Inc. (1994), 59 C.P.R. (3d) 133 (F.C.T.D.).
[4] The motions judge also quoted with approval, and so do we, the following passage, at page 3 of the prothonotary's decision, as regards the allegation that the respondents mislabelled their product:
I fail to see how this issue could possibly be relevant to Merck's entitlement to an accounting of profits.
It is true that an accounting of profits is an equitable remedy, that the Court has discretion not to grant it, and that in exercising this discretion, the Court is entitled to look at whether the holder of the patent acted inequitably towards the infringer. I cannot see how, even if true, the fact that Merck might have misled the public as to the enalapril maleate content of its Vasotec tablets can possibly be construed as an inequity towards Apotex. There is no principle of law to the effect that a plaintiff could be denied an accounting of profits based on inequitable - or even downright dishonest - conduct if that conduct has no relation or bearing on the infringer or the infringer's activities. Apart from attempting to paint Merck black, Apotex has neither pleaded nor even attempted to explain how Merck's labelling had or has anything to do with Apotex's profits and Merck's entitlement thereto.
That issue had also been found to be irrelevant by MacKay J. in file T-2408-91 when the appellant raised it as a ground to have the respondents' '349 Patent declared invalid: see the decision of the motions judge, at paragraph 21 and the decision of MacKay J., supra, at page 182.
[5] The appellant's argument relating to the tenuous nature of the '349 Patent was properly characterized by the prothonotary as an attempt to relitigate an issue conclusively determined by the Federal Court and this Court. We agree with her description of the appellant's attempt found at pages 3 and 4 of her decision:
This issue is no more and no less than a further plea that the '349 Patent is invalid. In effect, what Apotex attempts to do with this argument is to say that even though it has been conclusively found that the '349 Patent is valid, Apotex now has evidence which would show it to be invalid, and that even if that evidence cannot be adduced to dispute Apotex's liability to Merck, it should at least be taken into account in deciding whether Merck should be entitled to an accounting of profits. In other words, Apotex would like the Court to recognize that the patent is valid for the purposes of infringement, but invalid for the purpose of an accounting of profits. This argument is untenable. The factual and legal issues involved in the determination of the validity of the '349 Patent have been conclusively determined by judgments of this Court and of the Court of Appeal. By the application of the doctrine of issue estoppel, it is simply not open for Apotex to bring into question that conclusion, for whatever purpose - including the entitlement issue. Documents pertaining to that issue are therefore irrelevant.
[6] Finally, we are satisfied for the reasons expressed by the prothonotary and the motions judge that there is no merit in the appellant's allegation of market interference by the respondents in the appellant's attempts to sell its own product. To that end, we reproduce paragraphs 24 and 25 of the motions judge's decision:
Regarding the market interference of Merck in respect of Apotex's attempts to sell its product, the prothonotary wrote at page 4-5:
Apotex's motion record fails to define what is meant by Merck's "interference" with Apotex entering the market.
As examples of documents going to that issue, Mr. Radomski's affidavit refers to eight documents or letters dated December 14 to 16, 1994, the period of time for which Apotex and its chairman, Bernard Sherman, were found in contempt of Court for defying the permanent injunction to sell infringing Apo-enalapril tablets. I cannot see how Merck's conduct in preventing or attempting to prevent Apotex to sell infringing products in breach of the injunction during that period could possibly be relevant to an accounting of profits for infringing sales by Apotex. Legitimate actions of a party to prevent infringement cannot, by any stretch of the imagination, be relevant to the issue of entitlement to profits. It is only if these actions cross the line and become abusive that they might be relevant. By any understanding of the law, Merck was, from December 14 onwards, within its rights to take steps to prevent Apotex from selling infringing products, and Apotex was barred from doing so. Any attempt by Apotex to "enter the market" was illegal. How perfectly legal conduct could lead to Merck's loss of entitlement to an accounting of profits is not explained or hinted at by Apotex. Nor are there any allegations, in the pleadings or in the motion record of Apotex, that Merck's conduct was inappropriate in any manner, shape or form.
As recognized by the prothonotary, there is no explanation in Apotex's motion record describing what is meant by "interference". There is no reference in any of Apotex's pleadings in
T- 294-96 to such an allegation. The documents relied upon by Apotex in its so-called Fresh as Amended Affidavit of Documents are documents dated December 14, 15 and 16, 1994, all dated prior to the original award of an accounting of profits to Merck and Merck Frosst in T-2408-91, and prior to any pleadings in the present action. As also recognized by the prothonotary, these documents cited in the Fresh as Amended Affidavit of Documents as going to "Market Interference" relate to Merck's attempts to stop Apotex from defying the permanent injunction and continuing to sell Apo-enalapril tablets, on December 15 and 16, 1994. Indeed, this conduct resulted in a finding of contempt of court, affirmed on appeal, with leave to appeal denied.12 There is no evidence or explanation from Apotex to show how Merck's conduct in seeking to stop Apotex and Dr. Sherman from continuing their illegal and outrageous conduct in contempt of the court's authority could give rise to an allegation of market interference and could constitute a ground for denying Merck entitlement to an accounting of the profits.
(footnote 12 omitted)
[7] We fail to see how this issue is relevant to the respondents' entitlement to an accounting of profits and can justify embarking upon a wasteful and costly discovery amounting to a fishing expedition.
[8] Furthermore, the respondents' claim to an entitlement to an accounting of profits in the present instance finds its cause of action not in the facts and circumstances which led to the successful 1991 action for infringement, but in a different set of facts and circumstances which were asserted as a new cause of action in a counterclaim made in the course of an action brought in 1996 by the appellant. Therefore, the four areas of discovery sought by the appellant, which all relate to the 1991 action, which had its own cause of action, are not relevant to the subsequent 1996 proceedings.
[9] The appellant submits that discovery rights on the first three areas were granted to it by this Court in the appeal against the decision of McKeown J. in the T-294-96 action for infringement (Apotex Inc. v. Merck & Co. et al. (2002), 19 C.P.R. (4th) 460) (F.C.T.D.). It also contends that this Court found the three areas to be relevant areas for discovery: see paragraphs 34 and 59 of the appellant's memorandum of facts and law. With respect, the appellant is greatly overstating the ruling of this Court in Apotex Inc. v. Merck & Co. et al. (2003), 26 C.P.R. (4th) 278 (F.C.A.).
[10] Sitting on appeal of the decision of McKeown J., this Court disagreed with the learned judge's conclusion that the respondents were entitled to make an election for an accounting of profits. That conclusion was based on a finding by the judge that there were no changes in the facts relevant to that entitlement since the respondents were given such entitlement in the 1991 action for infringement which preceded the 1996 proceedings in which, as previously said, the respondents sought, in a counterclaim, a declaration of infringement. This Court was not willing to endorse the judge's conclusion that the facts had not changed. We reproduce the relevant paragraphs (30-33):
The accounting remedy generally is more onerous to the infringing party than an award of damages, because it is intended to do more than merely compensate the patent holder for its loss. It is an equitable remedy, and not an automatic entitlement: Consolboard Inc. v. Macmillan Bloedel (Saskatchewan) Ltd., [1981] 1 S.C.R. 504, 56 C.P.R. (2d) 145. As a matter of fairness, the accounting remedy should not be granted over the objection of the infringing party unless that party is first given a reasonable opportunity to argue that equity should preclude the accounting remedy.
In this case, Apotex wishes to avail itself of the right to make submissions on the matter of Merck's election, but the right is a hollow one if Apotex cannot obtain relevant evidence from Merck. If this case had proceeded in the normal way, without bifurcation, Apotex would have been entitled to the normal discovery process to attempt to uncover such evidence. But because of the shortcuts desired by both parties, the process of discovery did not even begin.
There is considerable force in the argument that if Merck wishes to keep its options open, Apotex should also be entitled to search for evidence to defend itself against an accounting award. However, the motions judge did not give Apotex that right because, in the 1991 action, Merck was held to be entitled to make the election, and the motions judge could not discern any change in the facts relevant to that entitlement.
I respectfully disagree with the motions judge on this point. I am unable to see how the motions judge could determine that the facts relating to entitlement have not changed, when Apotex has not yet had an opportunity to discover evidence of those facts. In my view, the motions judge erred in permitting Merck to make its election after discovering Apotex, without first permitting Apotex to discover Merck on issues of remedy so that it could make appropriate submissions on whether Merck should be entitled to make the election. This error can be corrected by an appropriate amendment to the judgment (refer to "Conclusions", below).
[11] It is obvious to us that this Court did not proceed to delimit the scope of discovery in that case. Nor did it rule on specific requests for discovery. It merely asserted the appellant's right to discovery of relevant evidence on the issue of entitlement to make an election for an accounting of profits. This Court's decision left it to the Federal Court to determine specific issues of relevancy raised by the appellant. It merely issued guidelines in general terms as paragraphs 39 and 40 of the decision reveal:
Upon the continuation of the trial, the procedure for the remedy phase should conform to the following guidelines.
First, if Merck wishes to keep open the possibility that it will ask for an accounting in lieu of damages, both parties should be entitled to examinations for discovery on issues relating to remedy. They should then be entitled to be heard on the question of whether or not Merck should be permitted to make the election.
[12] It is an unfair characterization of the prothonotary's and motions judge's decisions to say, as the appellant does, that the "Courts below effectively decided Apotex's motion by determining that the doctrine of res judicata applied to bar Apotex from questioning entitlement": see appellant's memorandum of facts and law, paragraph 45. This is not what the two decisions stand for. The prothonotary and the motions judge first forbade, as they must do, a relitigation of the previous judicial findings conclusively made. Then, they ruled that the issues that had already been decided by these judicial findings were not relevant to the issue of entitlement.
[13] For these reasons, the appeal will be dismissed.
[14] The respondents seek increased costs in the amount of $12,000. They allege in their memorandum of facts and law that the appellant's motions and appeals are unmeritorious, dilatory and improper. They contend that the appellant's allegations are unsubstantiated and wholly without merit. Finally, they submit that the appellant's attempts to persistently relitigate matters finally and conclusively decided against it are an abuse of the process of the Courts. We heard the representations of both parties on costs.
[15] In our view, the respondents' complaint is not without foundation. The appellant's interpretation of this Court's decision on the right to discovery on an election for an accounting of profits is far-fetched. Its assertion that this Court granted it discovery rights with respect to three of the four areas of contention is preposterous, especially in view of the wording of this Court's conclusion. There is undeniably an attempt to relitigate issues that were decided by MacKay J. in the 1991 action and McKeown J. in the 1996 proceedings.
[16] We cannot overlook the delay created by all these proceedings, the lack of merit of the appellant's contentions and the element of defiance involved in the attempt to relitigate conclusively decided issues.
[17] We are of the view that, in the circumstances of this case, the respondents should be substantially indemnified. Costs in the amount of $12,000 will be granted.
"Gilles Létourneau"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-411-04
APPEAL FROM AN ORDER OF THE FEDERAL COURT DATED JULY 27, 2004 NO. T-294-96
STYLE OF CAUSE: Apotex Inc. v. Merck & co. Inc. and Merck Frosst Canada Inc.
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: January 18, 2005
REASONS FOR JUDGMENT LÉTOURNEAU J.A.
OF THE COURT: SEXTON J.A.
PELLETIER J.A.
DELIVERED FROM THE
BENCH BY: LÉTOURNEAU J.A.
APPEARANCES:
|
Mr. Andrew R. Brodkin Mr. David E. Lederman |
FOR THE APPELLANT |
|
Mr. G. A. Macklin, Q.C. Ms. Constance Too |
FOR THE RESPONDENTS |
SOLICITORS OF RECORD:
|
Goodmans LLP Toronto, Ontario |
FOR THE APPELLANT |
|
Gowling Lafleur Henderson LLP |
FOR THE RESPONDENTS |
Ottawa, Ontario