On March 11, 2020, the Federal Court of Appeal dismissed Apotex’s appeal of the Federal Court’s decision ordering Apotex to pay over $61M from an accounting of profits from Apotex’s infringement of ADIR’s perindopril patent (Apotex Inc v ADIR 2020 FCA 60, aff’g 2018 FC 346, previously reported).
Starting in 2006, Apotex manufactured perindopril tablets in Canada, and sold these in Canada and to its U.K. 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) and enjoined Apotex from infringing the patent. The plaintiffs elected an accounting of Apotex’s profits as their remedy.
While Apotex did not dispute it was required to disgorge profits from its domestic sales, Apotex argued that its profits from sales to its U.K. 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 tablets.
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, rev’d 2017 FCA 23). The Federal Court of Appeal therefore remitted 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 U.K. and Australian affiliates.
In 2018, following a further hearing, the Federal Court re-affirmed the quantum of profits from its original judgment, holding that Apotex and Apotex Pharmachem must collectively pay over $61 million (ADIR v Apotex Inc, 2018 FC 346, previously reported). In so holding, 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. As such, Apotex had not established it would have had a non-infringing alternative, and was required to disgorge all of its profits.
No palpable and overriding error
The Court of Appeal disagreed with Apotex’s contention that the Federal Court made a palpable and overriding error in holding that Apotex would not have used a non-infringing alternative from any of the third-party manufacturers. It was open to the Federal Court to consider Apotex’s intentions and preferences in the real world when assessing the likelihood that Apotex would have used third-party manufacturers, and there was evidence that supported the Federal Court’s decision that potential time delays and loss of profits did not trump Apotex’s stated desire and historical preference for manufacturing perindopril in Canada or at one of its own sites outside of Canada.
No error in law
Apotex also appealed on the basis that the Federal Court erred in law in the framework that it used to determine whether, in the but-for world, Apotex would have acquired non-infringing perindopril from third-party manufacturers. The Court of Appeal dismissed all of Apotex’s grounds of appeal, and made the following findings:
- Questions assessed in the determination of whether an infringer “could have” and “would have” sold a non-infringing alternative do not exist in discrete silos. Apotex’s intentions and preferences were properly found to be relevant to the “would have” component of the test.
- The “could have” and “would have” analysis developed by the Court of Appeal in the context of an assessment of damages applies to accounting of profits.
- Since an accounting of profits is an equitable remedy, the conduct of the infringing party may well be relevant to the exercise of the Court’s discretion, and the behaviour of an infringer should inform the construction of the hypothetical “but-for” world. Whether the infringement was “brazen” was previously identified by the jurisprudence as a principle that may be relevant to the inquiry of whether a non-infringing alternative was established. There is no articulated standard of “brazen infringement,” and prior use of the word suggests the normal, dictionary meaning of “obvious, without any attempt to be hidden.” Apotex’s intentional infringement was “brazen”, and the Federal Court did not err in taking it into account.
Any appeal by Apotex would require the grant of leave by the Supreme Court of Canada.
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