Federal Court Decisions

                                                                                                                                          Date:    20020213

                                                                                                                                     Docket:    T-2078-00

                                                                                                                Neutral citation: 2002 FCT 161

Ottawa, Ontario, this 13^th day of February, 2002

PRESENT: THE HONOURABLE MR. JUSTICE BLANCHARD

BETWEEN:

                                           BRISTOL-MYERS SQUIBB COMPANY and

                                                   BRISTOL-MYERS CANADA INC.

                                                                                                                                                        Plaintiffs

                                                                                                                   (Defendants by counterclaim)

                                                                              - and -

                                                                       APOTEX INC.

                                                                                                                                                      Defendant

                                                                                                                          (Plaintiff by counterclaim)

                                               REASONS FOR ORDER AND ORDER

[1]                 This motion, brought by the plaintiffs pursuant to Rule 51 of the Federal Court Rules, 1998, SOR/98-106, seeks to set aside the orders of Prothonotary Aronovitch dated November 8 and 28, 2001, which granted leave to the defendant to further amend its statement of defence and counterclaim and which required the plaintiffs to serve a further affidavit of documents.

[2]                 The plaintiffs assert that the Prothonotary erred in exercising her discretion in two respects. First, by allowing the defendant to include a defence of obviousness in paragraphs 25 and 41 of the defence based on "prior art" that is admittedly not prior art. The plaintiffs consequently argue that these amendments are clearly irrelevant, frivolous and vexatious, and should not have been allowed. Second, with respect to the plaintiffs' claim for damages, by ordering that the plaintiffs produce all of their costing documents, on a full accounting basis, and not on the accepted basis of differential cost accounting. The plaintiffs argue that the effect of this order is to delay the hearing of this matter and to increase considerably the costs associated with trial preparation.

(1)         Amendments to paragraphs 25 and 41 of the statement of defence:

[3]                 In paragraphs 25 and 41 of the proposed amended defence, the defendant alleges that claims 7 and 8 are invalid on the grounds of obviousness. The basis for the plea is that the conversion of nefazodone base to nefazodone salt (nefazodone hydrochloride) is obvious to one skilled in the art. The plaintiffs argue that such a plea must be based upon publicly available prior art references that were known at the date of the invention. According to the plaintiffs, the only piece of prior art referred to in the impugned paragraphs is nefazodone base, which was not publicly known at any time prior to the priority filing date, or even the Canadian filing date of the ‘436 patent. The plaintiffs therefore maintain that nefazodone base is not prior art.

[4]                 The plaintiffs further contend that the defendant admitted on its discovery that the earliest public disclosure of nefazodone or nefazodone hydrochloride was after the filing of the patent of July 5, 1982. From this, the plaintiffs say that the defendant has admitted that nefazodone base is not prior art to nefazodone hydrochloride.

[5]                 The plaintiff contends that the defendant has admitted that the foundation of its plea is unsubstantiated and that the Court should not grant leave to a party to include such a plea in its defence since it is beyond doubt that such a plea will fail at trial. The position of the plaintiffs is that the Prothonotary therefore erred in allowing the motion to amend, particularly in accepting the facts alleged in the plea as proven, despite the admission by the defendant already made on discovery. The plaintiff argues that the Prothonotary failed to consider the provisions of Rule 221(1)(b) and (c) of the Federal Court Rules, 1998, SOR/98-106, and incorrectly felt constrained by Rule 221(1)(a).

[6]                 The essence of the plaintiffs argument is that the allegations of obviousness in paragraphs 25 and 41 are irrelevant, frivolous, vexatious, and abusive of the Court's process and that leave to introduce these pleas, which have virtually no chance of success at trial, should not have been granted and should be struck pursuant to Rule 221(1)(b) of the Federal Court Rules, 1998.

[7]                 The defendant adopts the contrary view arguing that the plaintiffs' objections are improperly advanced procedurally and, substantially, are unfounded.

[8]                 The Prothonotary in allowing the proposed amendments relating to obviousness stated:

The amendment at paragraph 25 will stand as it is not plain and obvious that it discloses no cause of action. For that purpose, the facts as alleged, have to be taken as proven. Evidence, such as Mr. Rodomski's[sic] statement on discovery, may not be adduced in the regard.

[9]                 There is authority in the jurisprudence to support the Prothonotary's determination on this issue. In Canderel Ltd. v. Canada, [1994] 1 F.C. 3 (F.C.A.) at page 10, Mr. Justice Décary stated:

...the general rule is that an amendment should be allowed at any stage of an action for the purpose of determining the real questions in controversy between the parties, provided, notably, that the allowance would not result in an injustice to the other party not capable of being compensated by an award of costs and that it would serve the interests of justice.

[10]            Further, the Court of Appeal in Nidek Co., Ltd. et al. v. Visx Inc.(1996), 72 C.P.R. (3d) 19 at page 24 (F.C.A.) stated the following:

...Procedurally, the Court will not receive any evidence where the basis for striking out paragraphs in a statement of defence is alleged to be that they disclose no reasonable defence (Rule 419(1)(a)). Rule 419(2) expressly prohibits the use of evidence on a Rule 419(1)(a) motion. In similar fashion, the Court should not accept any evidence in support of an application for leave to amend pleadings under rule 420, unless evidence is required in order to clarify the nature of the proposed amendments. Rather, the Court must assume that the facts pleaded in the amendments are true for the purposes of considering whether or not to grant leave to amend.

[11]            The Court will only deny amendments in plain and obvious cases where the matter in dispute is beyond doubt. I am of the view that the Prothonotary did not err at law in allowing the impugned amendments nor was she clearly wrong in exercising her discretion as she did.

[12]            The defendant contends that even if the evidence were considered it would not assist the plaintiffs, since their case is premised on the flawed assumption that the prior art being relied upon is nefazodone base. The defendant argues that the prior art being relied upon for its plea of obviousness is the common general knowledge in the field and not nefazodone base itself. I am of the view consideration of such evidence and the determination of such issues are best left for the hearing judge. Having concluded that the Prothonotary was not wrong in the exercise of her discretion in allowing the amendments, it is not necessary for me to further consider this issue.

(2)        Production of Evidence for Cost Accounting Basis:

[13]            With respect to the plaintiffs' second ground of appeal, namely that the Prothonotary erred in ordering that the plaintiffs produce all of their costing documents on a full accounting basis, and not on the accepted basis of differential cost accounting, I am of the view that the Prothonotary did not err at law in concluding as she did. I have carefully reviewed the arguments and the authorities submitted to me by both parties on this issue and conclude that the jurisprudence does not, as a matter of law, impose the differential cost method as the only approach that a Court may adopt in a damages calculation. Rather, each situation must be looked at in the light of its own particular facts and circumstances. [Domco Industries Ltd. v. Armstrong Cork Canada Ltd. (1986), 10 C.P.R. (3d) 53 at 65 (F.C.T.D.)].

[14]            For the purpose of this appeal, having determined that the Prothonotary did not make an error of law on this issue, I must determine whether the Prothonotary was clearly wrong in the exercise of her discretion by ordering that the plaintiffs produce the documents ordered to be produced and I conclude she was not. Whatever accounting basis is ultimately adopted will be up to the hearing judge or referee.

[15]            For the above reasons this motion will be dismissed.

                                                                            ORDER

THIS COURT ORDERS that:

1.         This motion appealing the orders of Prothonotary Aronovitch, dated November 8 and November 28, 2001, is dismissed.

2.         The defendant will have its costs.

                                                                                                                                 "Edmond P. Blanchard"                     

                                                                                                                                                               Judge