A-211-04
2004 FCA 358
Apotex Inc. (Appellant) (Plaintiff)
v.
Eli Lilly and Company and Eli Lilly Canada Inc. (Respondents) (Defendants)
Indexed as: Apotex Inc. v. Eli Lilly and Co. (F.C.A.)
Federal Court of Appeal, Linden, Sexton and Evans JJ.A.-- Toronto, October 4; Ottawa, October 27, 2004.
Patents -- Appeal from Motion Judge's finding extent of Eli Lilly and Company's (Lilly U.S.) control over Eli Lilly Canada Inc. (Lilly Canada) irrelevant to determining whether Lilly U.S. "first person" for purpose of Patented Medicines (Notice of Compliance) Regulations, s. 8 -- "First person" person who files for, has been issued, notice of compliance -- Apotex commencing action against Lilly U.S., Lilly Canada for damages/profits under Regulations, s. 8 -- Lilly U.S. bringing motion for summary judgment on basis not "first person" -- Motions Judge erred -- No authority advanced for proposition common law concepts (e.g. agency) never relevant to interpretation of legislation -- Possible Lilly U.S.' degree of control over Lilly Canada sufficient to make it "first person" -- In light of Interpretation Act presumption singular includes plural, possible both Lilly U.S., Lilly Canada "first person" -- Legal question (whether parent company "first person") sufficiently difficult to require trial -- Appeal allowed.
This was an appeal from a decision of a Motions Judge that the extent of control exercised by Eli Lilly and Company (Lilly U.S.) over Eli Lilly Canada Inc. (Lilly Canada) in respect of applications by Lilly Canada for regulatory approval to market drugs in Canada, and the associated litigation, was irrelevant to determining whether Lilly U.S. was a "first person" for the purpose of section 8 of the Patented Medicines (Notice of Compliance) Regulations. This was so because the action brought by Apotex Inc. (Apotex) was based on legislation, rather than on the common law.
In February 2001, Apotex commenced an action against Lilly U.S. and Lilly Canada for damages and/or profits under section 8 of the Regulations. Section 8 provides that when an application for prohibition (made under section 6 of the Regulations) is withdrawn, dismissed, or reversed on appeal, "the first person is liable to the second person for any loss suffered during the period." The claim was based on the delay in the Minister's issuing a notice of compliance (NOC) to Apotex for its formulation of nizatidine as a result of the statutory stay imposed when Lilly Canada instituted its ultimately unsuccessful application for prohibition. Lilly U.S. brought a motion for summary judgment on the basis that it was not a "first person" for the purpose of section 8. It is in the context of that motion that the decision under appeal was rendered.
A "first person" is defined in the Regulations as "[a] person who files or has filed a submission for, or has been issued, a notice of compliance in respect of a drug that contains a medicine." The question was whether Lilly U.S. could be said to have submitted the patent list to the Minister, even though the list was submitted by Lilly Canada.
Held, the appeal should be allowed.
The very broad proposition that common law concepts, such as agency, are never relevant to the interpretation of legislation was not supported by authority. In the case at bar, it may emerge on discovery that the degree of control exercised by Lilly U.S. over Lilly Canada was such as to make Lilly U.S. a "first person". If so, actions taken in the name of Lilly Canada, including the submission of a patent list, might be regarded as actions taken by both Lilly Canada and Lilly U.S., and in light of the Interpretation Act presumption that "[w]ords in the singular include the plural", the fact that section 8 speaks of a "first person" does not preclude the possibility that both Lilly U.S. and Lilly Canada could be found to be a "first person" in this context. Thus the Motions Judge erred when she said that whether Lilly U.S. controlled Lilly Canada was irrelevant. Whether, for the purpose of section 8, a "first person" includes the corporation who directed the submission of the patent in the name of its subsidiary is a sufficiently difficult legal question to require a trial.
statutes and regulations judicially
considered
Interpretation Act, R.S.C., 1985, c. I-21, s. 33(2).
Patented Medicines (Notice of Compliance) Regulations, SOR/93-133, ss. 4 (as am. by SOR/98-166, s. 3), 5 (as am. idem, s. 4; SOR/99-379, s. 2), 6(1) (as am. by SOR/98-166, s. 5), (4), 8 (as am. by SOR/98-166, s. 8).
cases judicially considered
considered:
Eli Lilly and Co. v. Novopharm Ltd.; Eli Lilly & Co. v. Apotex Inc., [1998] 2 S.C.R. 129; (1998), 161 D.L.R. (4th) 1; 80 C.P.R. (3d) 321; 227 N.R. 201.
referred to:
Aluminum Company of Canada Ltd. v. The Corporation of the City of Toronto, [1944] S.C.R. 267; [1944] 3 D.L.R. 609; [1944] C.T.C. 155.
APPEAL from a decision of the Federal Court ((2004), 32 C.P.R. (4th) 97; 251 F.T.R. 1) wherein the Motions Judge found that the extent of control exercised by Eli Lilly and Company (Lilly U.S.) over Eli Lilly Canada Inc. was irrelevant to determining whether Lilly U.S. was a "first person" for the purpose of section 8 of the Patented Medicines (Notice of Compliance) Regulations. Appeal allowed.
appearances:
Andrew R. Brodkin and David E. Lederman for appellant.
Anthony George Creber and Patrick S. Smith for respondents.
solicitors of record:
Goodmans LLP, Toronto, for appellant.
Gowling Lafleur Henderson LLP, Ottawa, for respondents.
The following are the reasons for judgment rendered in English by
[1]Evans J.A.: This appeal concerns the latest of numerous motions brought to obtain rulings on various legal issues arising from section 8 [as am. by SOR/98-166, s. 8] of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 (the Regulations). The decision under appeal, Apotex Inc. v. Eli Lilly and Co., (2004), 32 C.P.R. (4th) 97 (F.C.) is significant because it is the first in which a judge has granted a motion to determine the meaning of any aspect of section 8.
[2]The background to this litigation can be described briefly. In 1993, Eli Lilly Canada Inc. (Lilly Canada) listed patents on the patent register respecting its nizatidine products in accordance with section 4 [as am. by SOR/98-166, s. 3] of the Regulations. In the same year, Apotex applied to the Minister of Health and Welfare for a notice of compliance (NOC) for its formulation of nizatidine, and filed a notice of allegation (NOA) under section 5 [as am. idem, s. 4; SOR/99-379, s. 2] saying that its product did not infringe any of the patents listed on the register submitted by Lilly Canada. In the arcane language of the Regulations, Lilly Canada, as the "innovator" company that had submitted a patent list, is a "first person" and Apotex, the "generic" manufacturer, is the "second person".
[3]In response to Apotex' NOA, Lilly Canada applied to the Federal Court, Trial Division (as the Federal Court then was) for an order of prohibition under subsection 6(1) [as am. by SOR/98-166, s. 5] of the Regulations to restrain the Minister from issuing an NOC to Apotex until Lilly U.S.'s patents for nizatidine expired. Eli Lilly and Company (Lilly U.S.), Lilly Canada's sole shareholder, was joined as a party to the application as the holder of the patent for nizatidine, as required by subsection 6(4) of the Regulations. The application for prohibition automatically stayed the issue of an NOC.
[4]An order of prohibition was granted. However, an appeal to the Supreme Court of Canada was successful and Lilly Canada's application for prohibition was dismissed: Eli Lilly & Co. v. Novopharm Ltd.; Eli Lilly & Co. v. Apotex Inc., [1998] 2 S.C.R. 129. Meanwhile, on April 30, 1997, the Minister had issued an NOC to Apotex for its nizatidine formulation.
[5]In February 2001, Apotex commenced an action against Lilly U.S. and Lilly Canada for damages and/or profits under section 8. The claim was based on the delay in the Minister's issuing an NOC to Apotex for its nizatidine as a result of the statutory stay imposed when Lilly Canada instituted its ultimately unsuccessful application for prohibition. This is the action that underlies the present motion.
[6]Section 8 of the Regulations provides as follows:
8. (1) If an application made under subsection 6(1) is withdrawn or discontinued by the first person or is dismissed by the court hearing the application or if an order preventing the Minister from issuing a notice of compliance, made pursuant to that subsection, is reversed on appeal, the first person is liable to the second person for any loss suffered during the period
(a) beginning on the date, as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations, unless the court is satisfied on the evidence that another date is more appropriate; and
(b) ending on the date of the withdrawal, the discontinuance, the dismissal or the reversal.
(2) A second person may, by action against a first person, apply to the court for an order requiring the first person to compensate the second person for the loss referred to in subsection (1).
. . .
(4) The court may make such order for relief by way of damages or profits as the circumstances require in respect of any loss referred to in subsection (1).
(5) In assessing the amount of compensation the court shall take into account all matters that it considers relevant to the assessment of the amount, including any conduct of the first or second person which contributed to delay the disposition of the application under subsection 6(1).
[7]The basis of Lilly U.S.'s motion for summary judgment is that it was not properly joined as a defendant to Apotex' claim because it is not a "first person" for the purpose of section 8 of the Regulations. Lilly U.S. says that Apotex' claim is based on section 8 and that, since Lilly Canada had listed the patents pursuant to section 4, Lilly Canada is the "first person", not Lilly U.S.
[8]The Regulations define "first person" as follows:
2. In these Regulations,
. . .
"first person" means the person referred to in subsection 4(1);
. . .
4. (1) A person who files or has filed a submission for, or has been issued, a notice of compliance in respect of a drug that contains a medicine may submit to the Minister a patent list certified in accordance with subsection (7) in respect of the drug.
[9]The question in dispute, therefore, is whether Lilly U.S. can be said to have submitted the patent list to the Minister pursuant to subsection 4(1), even though the list was submitted in the name of Lilly Canada. In its pleadings, Apotex asserts that Lilly Canada is a wholly owned subsidiary of Lilly U.S. and continues:
Lilly U.S. exercises complete control over the operations of Lilly Canada including:
(a) whether and when Lilly Canada will apply for and obtain a Notice of Compliance ("NOC") in respect of a particular drug product and, if so, what the contents of the New Drug Submission ("NDS") should comprise;
(b) whether and when Lilly Canada will be permitted to list Lilly U.S. patents on a patent list submitted to the Minister by Lilly Canada in respect of an NOC;
(c) whether, upon receipt of a Notice of Allegation, Lilly Canada will seek a prohibition order pursuant to the Patent Regulations;
(d) how such a proceeding will be prosecuted including whether, at any point, it will be discontinued or otherwise abandoned; and
(e) how Lilly Canada will market and sell its drug products, and in particular, whether and how "pseudo-generic" products should be launched.
These assertions are not contradicted in the statement of defence.
[10]In exercising her discretion to determine on a motion for summary judgment whether Lilly U.S. is a "first person", the Motions Judge held (at paragraph 67) that the extent of the control exercised by Lilly U.S. over Lilly Canada in respect of applications by Lilly Canada for regulatory approval to market drugs in Canada, and the associated litigation, was irrelevant to determining whether Lilly U.S. was a "first person". In her view, this was because Apotex' action was based on legislation (section 8 of the Regulations), rather than on the common law.
[11]That common law concepts, such as agency, for example, are never relevant to the interpretation of legislation is a very broad proposition, for which no supporting authority was advanced. Indeed, it is clear from the cases relied upon by Apotex that, in some circumstances at least, whether a wholly owned subsidiary has acted, in effect, as the agent of its shareholder corporation may be relevant in determining the liability of the parent under a taxing statute: see, in particular, Aluminum Company of Canada Ltd. v.The Corporation of the City of Toronto, [1944] S.C.R. 267, at pages 271-272.
[12]In my opinion, the assertions of complete corporate control in Apotex' pleadings go beyond asserting the kind of relationship between Lilly U.S. and Lilly Canada that inevitably exists between a corporation and its sole shareholder. It might emerge on discovery that the degree of control exercised by Lilly U.S. over Lilly Canada was such as to make Lilly U.S. a "first person".
[13]If this were so, actions taken in the name of Lilly Canada, including the submission of a patent list with respect to nizatidine, might be regarded as actions taken by both Lilly Canada and Lilly U.S. Thus, Lilly U.S. might be a "first person", and therefore a proper defendant to Apotex' claim under section 8, a question that involves issues of law and fact that cannot be determined without a trial. Further, since the Interpretation Act, R.S.C., 1985, c. I-21, subsection 33(2), presumes that "[w]ords in the singular include the plural", the fact that section 8 speaks of a "first person" does not necessarily preclude the possibility that both Lilly U.S. and Lilly Canada could be found to be a "first person" in this context.
[14]In my respectful opinion, therefore, the Motions Judge erred in law in the exercise of her discretion when she said that whether Lilly U.S. controlled Lilly Canada as alleged in Apotex' pleadings could not be relevant to whether Lilly U.S. was a "first person" because of the statutory nature of Apotex' cause of action. Whether, for the purpose of section 8, a "first person" includes the corporation who directed the submission of the patent list in the name of its subsidiary is a sufficiently difficult legal question to require a trial.
[15]Its resolution may depend, for example, on whether the "profits" recoverable under section 8 are the profits from the drug in question made by the "first person" during the period of the delay or the profits not made during that period by the "second person" from its version of the drug. If the intent of section 8 is to enable the "second person" to elect to recover the "first person's" profits, rather than merely its own lost profits, that might support an interpretation of "first person" which includes the corporation that controlled all relevant actions of the corporation in whose name the application for an NOC was made, the patent list was submitted and an NOC was issued. Otherwise, the second person may be unable to recover the innovator's profits and, if the statutory purpose is to enable the recovery of the profits of the directing mind of the person whose name appears on the documents listed in subsection 4(1), that statutory purpose will have been thwarted. This is because it is conceivable that intercorporate arrangements may have ensured that profits from the sale of the drug in Canada show up on the books of the parent company, not its Canadian subsidiary.
[16]However, as I have already said, these and the other difficult questions involving the interpretation of section 8 can only be satisfactorily resolved in the context of a trial. Moreover, if notions of agency or control are relevant to determining whether Lilly U.S. was a "first person" for the purpose of section 8, findings of fact will be required that can only properly be made in the context of a trial in order to determine whether Lilly U.S. exercised the degree of control over Lilly Canada as to make it a "first person".
[17]For these reasons, I would allow the appeal, set aside the order below, and dismiss Lilly U.S.'s motion for summary judgment, with costs in this Court and in the Federal Court.
Linden J.A.: I agree.
Sexton J.A.: I agree.