"Plain and obvious” that innovators’ profits are not available to generics in Ontario

On 12th September 2013 the Ontario Court of Appeal upheld the Ontario Superior Court’s dismissal of Apotex’s claim for disgorgement of Takeda and Abbott’s profits in the context of the Patented Medicines (Notice of Compliance) Regulations. The Ontario court had previously dismissed motions to strike such claims on the basis that it was not “plain and obvious” that they could not succeed. In contrast, by upholding the underlying summary judgment, the Ontario Court of Appeal has confirmed and clarified the law. 

The divisional court was swift to apply the appeal court’s decision. In a case decided on 19th September 2013 involving another Apotex claim for disgorgement, the divisional court followed Takeda and, in a decision delivered from the bench, reversed the court below and struck Apotex’s claim for disgorgement of profits against Eli Lilly.

As a result of these decisions, Ontario’s jurisprudence now closely tracks that of the Federal Court of Appeal (Apotex v Eli Lilly Canada Inc, 2011 FCA 358), which bars claims for unjust enrichment arising out of the operation of the regulations.  In so doing, the Ontario courts have resolved the uncertainty surrounding the availability of this remedy in Ontario, lessening their appeal to generic drug manufacturers.

Apotex v Takeda 

In the underlying summary judgment motion, Justice Quigley dismissed Apotex’s allegation that Takeda and Abbott had wrongfully invoked the regulations, and that such wrongful invocation entitled Apotex to disgorgement of Takeda and Abbott’s profits on the basis of unjust enrichment. Quigley noted the delicate balance struck by Parliament in crafting Canada’s laws concerning pharmaceutical inventions. He was persuaded by the Federal Court of Appeal’s finding in Eli Lilly that its jurisdiction to grant equitable relief cannot be used to grant a remedy that the regulations were intended to exclude. Quigley also found that there were two juristic reasons for the alleged unjust enrichment: the regulations and an existing settlement agreement between the parties.

The appeal court unanimously affirmed Quigley's decision, rejecting all arguments raised by Apotex on appeal. The appeal court held that regardless of the enforceability of a settlement agreement between the parties to the proceeding, “the deprivation that the appellant suffered could be no more than their damages for that period calculated according to s. 8 of the Patent Regulations”. The appeal court found that such deprivation could not extend to the innovator’s profits.

The appeal court also rejected Apotex’s argument that it should be entitled to pursue an unjust enrichment claim, separate from the regulations:

"In our view, the simple answer to that argument is that the profits or revenues earned by the respondents for which the appellant claims disgorgement are due to the operation of the regulatory scheme of the Patent Regulations. The respondents' right to be in the market to the exclusion of the appellant and therefore to earn its profits or revenues is that provided for by the Patent Regulations. Those Regulations constitute a valid juristic reason for the respondents' profits and revenues for the period in question. This precludes the appellant's claim for disgorgement." (Paragraph 6.)

Apotex v Eli Lilly

In the lower court, the motions judge declined to strike Apotex’s claim for disgorgement of Eli Lilly’s profits. On appeal, the divisional court noted at the outset that the motions judge “did not have the benefit of the thorough reasons... in [Quigley's decision] which was recently affirmed by the Court of Appeal”.

The court recognised that Quigley's decision was decided in the context of a motion for summary judgment rather than a motion to strike. However, the court rejected Apotex’s attempts to distinguish that decision on grounds which it held “arise from the Regulations which are a part of a complete statutory code governing patent law”.

The court held that it was plain and obvious that Apotex’s statement of claim disclosed no claim totally independent from the regulations.