Federal Court grants interlocutory stay in IP dispute

On June 12 2015 the Federal Court issued an interlocutory stay in the context of a data protection application in Horizon Pharma plc v The Minister of Health (2015 FC 744).

The proceeding underlying the Horizon decision was an application for judicial review of the minister of health’s decision to deny data protection for a new orphan drug called Ravicti for the treatment of urea cycle disorders (UCDs). Horizon’s request for an interlocutory stay arose because the minister was on the verge of issuing a notice of compliance for Ravicti. If the notice of compliance were to issue, without data protection, Ravicti would immediately be available for generic drug manufacturers to create their own copied version and seek regulatory approval in Canada.  

During discussions with the minister regarding data protection for Ravicti, Horizon consistently stated that, without data protection, it would withdraw its new drug submission before the notice of compliance issued. To maintain its ability to withdraw the  new drug submission, and still proceed with its challenge to the minister’s refusal of data protection, Horizon brought a motion to stay the issuance of the notice of compliance for Ravicti pending the outcome of its judicial review application.

The court granted the stay based on the RJR MacDonald three-part test.

Serious issue to be tried
The court noted that the threshold for a 'serious issue' is a low one that will be satisfied “unless it can be shown that the arguments put forth are frivolous or vexatious”. Relying on Reckitt Benchiser LLC v Jamieson Laboratories Ltd (2015 FC 215, aff’d 2015 FCA 104), the court noted that the question is to be answered on no more than an extremely limited review of the case.  Notwithstanding, the court examined the law and affidavit evidence supporting Horizon’s case, including whether Ravicti was an ester of sodium phenylbutyrate, whether a “second minor variation” existed as a legal basis to deny data protection and whether the minister properly interpreted and applied the meaning of 'variation' in the data protection regulations.

On examining the evidence, the court found that Horizon’s judicial review application raised a serious issue to be tried.

Irreparable harm
Horizon asserted two separate types of irreparable harm: non-compensable harm to Horizon and irreparable harm to patients suffering from UCDs.

Regarding non-compensable harm, Horizon argued that if the stay were not granted, Horizon would withdraw its new drug submission and would not market Ravicti in Canada. Accordingly, it would lose profits that it otherwise would have generated and would have no recourse to recover those lost profits.

Although Horizon was not yet in the marketplace, the court noted that it could draw inferences that logically flowed from the evidence. In this case, the evidence established that in an early-genericised market Horizon would be unable to recoup its investments into developing Ravicti and would therefore withdraw its new drug submission for Ravicti without the stay. In turn, Horizon would have no recourse or means to be compensated in respect of lost sales. This non-compensable harm alone was sufficient to satisfy the irreparable harm requirement.

Regarding harm to patients, the evidence established that Ravicti was a clinical improvement over other drugs to treat UCDs. Horizon argued that if the new drug submission for Ravicti were to be withdrawn, UCD patients would be denied a life-changing and life-saving drug. These patients would be irreparably harmed.

The court considered the legal question of whether third-party harm can be considered at this stage of the test. The court noted that this same question was before the Federal Court of Appeal in Janssen Inc v AbbVie Corporation (2014 FCA 112), but the court in that case did not resolve the issue in light of its findings that the harm to patients was speculative.

In this case, the Federal Court noted that the harm to patients was not speculative. However, since the court found that Horizon would be irreparably harmed by a refusal to grant the requested stay, it did not need to consider third-party irreparable harm and left such harm to be examined in the context of balance of convenience.

Balance of convenience
At the balance of convenience stage of the test, the court did consider harm to the public and found that “there is a compelling public interest in granting the stay”. The court, citing RJR Macdonald, found that “public interest concerns both the concerns of society generally and the particular interests of identifiable groups”.  The court’s finding that the balance of convenience favoured a stay was reinforced by the fact that the minister of health took no position on the motion.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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