Canada’s Intellectual Property Firm

Apotex fails to establish it would have obtained non-infringing perindopril from foreign third-party suppliers; original $61+ million profits award stands

Authored byUrszula Wojtyra

Servier and its related company ADIR were successful in another chapter of patent litigation relating to perindopril (Servier’s COVERSYL): the Federal Court again dismissed Apotex’s non-infringing alternative defence, finding that Apotex would not have called on foreign third parties to manufacture perindopril to supply Apotex affiliates in the UK and Australia. The Court thereby re-affirmed its original judgment that Apotex Inc. and Apotex Pharmachem Inc. (collectively Apotex) must pay all their profits attributable to infringement of ADIR’s patent: ADIR v Apotex Inc, 2018 FC 346.

Background: Starting in 2006, Apotex manufactured perindopril tablets in Canada, and sold these in Canada and to its UK and Australian affiliates. As previously reported, in 2008, the Federal Court found these activities infringed ADIR’s Canadian Patent No. 1,341,196 (“196 patent”): 2008 FC 825, aff’d 2009 FCA 222 and enjoined Apotex from infringing the patent. The plaintiffs elected an accounting of Apotex’s profits as their remedy.

Initial reference decision and appeal: While Apotex did not dispute it was required to disgorge profits from its domestic sales, Apotex argued that its profits from sales to its UK and Australian affiliates were not attributable to infringement of the 196 patent. Apotex asserted it could have avoided infringement, and made the same or higher profits, by enlisting third-parties in foreign countries to manufacture the perindopril.

In 2015, the Federal Court dismissed the legal relevance of Apotex’s alleged non-infringing alternative defence, but the Federal Court of Appeal held that was an error (as reported previously, ADIR v Apotex Inc, 2015 FC 721, overturned 2017 FCA 23). The Federal Court of Appeal thereby remitted back to the Federal Court the factual issue of whether, in a hypothetical world where Apotex did not infringe, Apotex could and would have obtained non-infringing perindopril from three specific third-party suppliers, and, if so, whether Apotex could and would have sold this material to its UK and Australian affiliates.

The “could have” analysis: In order to succeed on this branch of the test, Apotex had to establish that it could have transferred the required technology to the third-party suppliers, obtained the required marketing approvals, and manufactured the required quantities of the perindopril active pharmaceutical ingredient and tablets, all in the relevant timeframe. On the basis that it was the ‘fastest means’ for Apotex to obtain non-infringing perindopril, the Court proceeded on the theory that the third-party suppliers would have been included in Apotex’s original RxIP - Regulatory applications.  

The Court found that each of the three third-party suppliers could have supplied the necessary perindopril but rejected Apotex’s proposed timeline for replacement of all real world sales as ‘utopic’, requiring all events in the hypothetical world to occur perfectly, which the Court found unrealistic. Instead, using the ‘broad axe’ principle, the Court concluded Apotex could have started selling non-infringing perindopril one year after it had started selling in the real world.

The “would have” analysis: The Court concluded that this branch of the test is largely subjective, and that the “intentions, motivations and preferences of an infringing party must be considered.” Therefore, inferences must be drawn from objective evidence led at trial and from what transpired in the real world in order to make a conclusion on this branch.

The Court held that Apotex did not establish it would have used a third-party supplier to produce non-infringing perindopril, relying on real world facts, including that:

  • Apotex chose to manufacture perindopril in Canada even though the evidence established it could have made more profits outsourcing to third-party suppliers,
  • Apotex had a preference for doing everything in Canada,
  • Apotex preferred to manufacture products at its own sites rather than contracting to non-affiliated third parties, and
  • Apotex only enlisted its foreign affiliates to manufacture perindopril product and ultimately sold that non-infringing product to its UK and Australian affiliates after it was enjoined from manufacturing in Canada.

The Court held that in the hypothetical world, Apotex would have done exactly what it did in the real world, pursued its technology transfers to its own foreign affiliates rather than third-party suppliers, and would have entered the foreign markets at a later date than it did in the real world.

The Court therefore re-affirmed the quantum of profits from its original judgment, holding that Apotex and Apotex Pharmachem must collectively pay over $61 million.

Apotex may appeal as of right.

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