Madam Justice Gauthier of the Federal Court has rendered judgment in the longstanding Canadian patent litigation between Eli Lilly and Apotex concerning the antibiotic cefaclor (sold by Eli Lilly in Canada as CECLOR): Eli Lilly and Company v. Apotex Inc., 2009 FC 991. Apotex was found to have infringed at least one valid claim of each of the eight patents in issue by its importation, manufacture, export, sale and offers for sale of cefaclor in Canada (although it will be noted that infringement was not found in respect of all of the cefaclor in issue).
Apotex commenced sale of cefaclor in Canada in 1997 and was sued by Eli Lilly shortly thereafter. The action finally proceeded to trial in 2008, the hearing of which commenced in April and finally concluded in December (with various breaks in the proceeding in between). Justice Gauthier's lengthy and detailed reasons reflect the length and complexity of the proceedings leading up to and including trial.
In the action, Eli Lilly alleged infringement by Apotex of eight patents covering processes and intermediates useful in the manufacture of cefaclor. Four of the patents originally issued to Eli Lilly (the "Lilly Patents") and pertained to a first process for manufacturing cefaclor (the "Lilly Process"). The remaining patents issued to Shionogi, a Japanese company (the "Shionogi Patents") and pertained to a second process for manufacturing cefaclor (the "Shionogi Process"). The Shionogi Patents were assigned to Eli Lilly in 1995. Apotex was alleged to have infringed the patents by the sale in Canada of finished dosage form cefaclor manufactured from bulk cefaclor purchased from third parties in India and Korea who manufactured the bulk using either the Lilly or Shionogi Process.
Given the length of the proceedings and resultant judgment, it is not surprising that many infringement and validity issues are canvassed in the Reasons for Judgment.
Several issues addressed by the Court are worthy of note.
First, Apotex argued vigorously that its importation and use in Canada of cefaclor manufactured abroad using the patented processes was not infringement of the Canadian patents in issue. In this regard, Apotex argued that the Canadian courts had improperly accepted the "Saccharin doctrine" as being applicable in Canada or that the Saccharin doctrine should be restricted in its application in Canada in a manner similar to restrictions imposed on infringement by importation in Europe and the United States as a result of legislation adopted in those jurisdictions.
The Saccharin doctrine (which derives its name from a UK decision involving the artificial sweetener) permits a finding of infringement of a Canadian patent pertaining to a process or intermediate which has been practiced abroad in the manufacture of a product which is imported for use and sale in Canada. Following a detailed review of the Canadian and UK authorities, Justice Gauthier concluded that it is too late to "turn back the clock" on the application of the principles concerning infringement by importation stated in the Canadian jurisprudence and that it would be inappropriate to re-write the Canadian law based on the statutes adopted in foreign jurisdictions. Justice Gauthier further accepted that the Saccharin doctrine applied to Apotex's conduct in this case.
Another notable aspect of this case is the Court's consideration of Apotex's allegations concerning violations of the Competition Act.
Apotex counterclaimed against Eli Lilly and Shionogi, alleging that the assignment of the Shionogi Patents to Eli Lilly (which occurred in 1995) was a conspiracy to unduly lessen competition contrary to section 45 of the Competition Act and that Apotex was entitled to recover its damages in accordance with section 36 of the Competition Act. The Court dismissed Apotex's counterclaim, finding that it was barred by the limitation period provided in section 36(4) and that Apotex had failed to establish that it had suffered any damage. Apotex also relied upon the violations of the Competition Act as a basis for the defences of disentitlement and equitable set-off in respect of Eli Lilly's patent infringement action. Apotex's defences were also dismissed.
Overall, the Court's affirmation of the Saccharin doctrine will be of significance to patentees in the pharmaceutical industry for whom process patents will frequently be practiced in foreign jurisdictions where generic bulk pharmaceuticals are most often manufactured. Moreover, the Court's rejection of Apotex's counterclaim and associated defences based on the Competition Act may constitute further evidence of the Court's reluctance to assess liability for conduct involving patents other than in cases where a party is able to clearly demonstrate it has been damaged by anti-competitive conduct. Eli Lilly has appealed.
Colin B. Ingram, Ottawa
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