Federal Court Decisions

Date: 19971124

Docket: T-2528-96

BETWEEN:

     SMITHKLINE BEECHAM PHARMA INC.

     and SMITHKLINE BEECHAM p.l.c.

     Applicants

     - AND -

     THE MINISTER OF HEALTH AND WELFARE

     and APOTEX INC.

     Respondents

     REASONS FOR ORDER

McKEOWN, J.

[1]      The respondent Apotex Inc. (Apotex) sent what it purported to be a Notice of Allegation to the applicants under section 5 of the Patented Medicines (Notice of Compliance) Regulations (the Regulations) on October 15, 1996. Apotex has filed no Notice of Compliance (NOC) under section C.08.004 of the Food and Drug Regulations. On November 19, 1996, the applicants sought judicial review for an Order declaring that the letter of October 15, 1996, sent by Apotex to the applicants, was not an allegation under section 5 of the Regulations and that the forwarding of the letter by Apotex is not service on the applicants of the Notice of Allegation. The applicants also seek an Order prohibiting the respondent Minister of Health and Welfare (the Minister) from treating and accepting the letter as an allegation under section 5 of the Regulations and from issuing any NOC to Apotex that directly or indirectly relies or treats the letter as an allegation within section 5 of the Regulations.

[2]      The issue is whether Eli Lilly & Company v. Apotex Inc., September 29, 1997, Court File A-339-97 (F.C.A.) is dispositive of this application for judicial review. In particular the question is whether the three requirements under section 5 must be met before the expiration of the 45 day period after service of an allegation.

[3]      On November 20, 1996, the respondent Minister consented to the Order sought by the applicants; however, in April 1997, the Minister wrote to the parties and indicated that he proposed to seek leave to withdraw his consent. He was granted leave to withdraw the consent at the commencement of this hearing. The Minister took no position with respect to this matter.

[4]      The applicants take the position that it is plain and obvious that, in the absence of a new drug submission (NDS), one cannot have compliance with the statutory requirements of the Regulations. The applicants submitted that the person who serves the allegation cannot be the second person referred to in the Regulations. In the absence of fulfilment of the statutory requirements by the alleged second person there is nothing to give the Federal Court of Canada jurisdiction. The applicants further submitted that the distinction between this case and the Eli Lilly case, supra, is that the statutory requirements have not been met here whereas they were met in the Eli Lilly case and it was strictly a question of whether they were met in sequence. I cannot agree with the applicants' submission in light of Eli Lilly, supra. I must look at what the allegation is in the application before me and what the Court is asked to consider in prohibition proceedings. In my view, these matters are distinguishable from the matters that the Minister must consider in issuing a NOC.

[5]      In the present case, the allegation is one of non-infringement of the applicants' patents by the respondents. The question that the Court will have to determine is whether or not there shall be infringement by the respondents and whether the infringement is justified. This is a totally separate matter from the Minister's considerations after receiving the NDS. In my view, giving the details of the non-infringement by the respondents gives the patentee everything it needs to know. The only linkage that exists between the non-infringement allegation and the NDS is that the allegation must be included as part of the NDS. The respondent is not alleging that there is something in its intended NDS that is non-infringing. The only allegation the respondent made is non-infringement and the allegation can be considered in a non-infringement proceeding. The patentee under subsection 6(1) has 45 days after being served with a Notice of Allegation to apply to the Court for an Order prohibiting the Minister from issuing a NOC until after the expiration of one or more patents that are the subject of an allegation. Subsection 6(2) of the Regulations makes it clear that the relief sought depends on whether the Court finds that "none of those allegations is justified". Accordingly, it is not a hypothetical case so long as there is an allegation. All section 6 requires is that there be an allegation and there is no mention of it in the NDS. It is the allegation, not the NDS, which forms the factual underpinning for any subsequent prohibition proceeding under the Regulations.

[6]      Let us now look at this case in light of Eli Lilly, supra. In Eli Lilly, supra, the issue was that, at the time the allegation was given, it was not a good allegation because the NDS did not contain the allegation and the new process which the applicant said was non-infringing. In Eli Lilly, supra, there had been a first allegation given by Apotex. McGillis, J. heard the prohibition application and issued an Order pursuant to the Regulations on February 9, 1995. Following McGillis, J.'s Order, which was appealed, Apotex submitted a second Notice of Allegation and served a copy on Eli Lilly on February 13, 1995:

... In this second notice, Apotex stated that, in the formulation of its nizatidine capsules, it will use only nizatidine manufactured by means of a process that would not infringe the processes claimed in the Eli Lilly patents. Eli Lilly did not respond. In May, 1995, as Eli Lilly had not applied, under subsection 6(1) of the Regulations, for an order of prohibition within the 45 day limitation period, Apotex requested confirmation from the Minister that its application for an NOC in respect of its own brand of nizatidine would be processed. Being left without comment from the Minister, Apotex applied to the Trial Division of this Court for declaratory relief and an order in the nature of mandamus compelling the Minister to process Apotex's new drug submission unconstrained by the Regulations and the prohibition order of Madame Justice McGillis.

[7]      At this stage in the present case, I should note that at some point, Apotex is going to have to file a NDS. When that NDS is filed, the Minister will have to look to see whether the allegation filed with the NDS is identical to the one filed on October 15, 1996.

[8]      The Federal Court of Appeal stated that it was not a novelty to give Notice of Allegation before the NDS. The Court of Appeal found that the second allegation was distinctive from the first one and, therefore, must be treated independently of the first allegation. Marceau, J.A. then went on to deal with the second argument in support of the appeal in Eli Lilly, supra, which was that "the second allegation was not made by Apotex in the manner prescribed by the Regulations, so that it could not attract the effects attached to valid allegations by those Regulations". It is important to note that in the Memorandum of Fact and Law filed by the appellants in Eli Lilly, supra, it is pointed out that the original NDS filed by Apotex had not been amended even though Apotex had added a second synthetic process to the existing synthetic process before the Minister without removing the first process. This was not done until June 22, 1995 - well after the date of the second Notice of Allegation and after the mandamus proceeding was commenced. The appellants also argued that the February 10, 1995 letter was not a valid Notice of Allegation because:

(i)      Apotex failed to comply with section 5(3)(a) of the Regulations by not providing a detailed statement of the legal and factual basis for the allegation;

(ii)      Apotex failed to comply with sections 5(1) and 5(3) of the Regulations by serving its Second Notice of Allegation before it filed its Second Allegation with the Minister; and

(iii)      Either

a)      Apotex failed to comply with section 5(1)(b)(iv) of the Regulations in that the Second Notice of Allegation related to a synthetic process which was not part of Apotex' NDS at the date of the Second Notice of Allegation; or

b)      Apotex failed to provide a valid Second Notice of Allegation in that at the relevant date for considering the Second Notice of Allegation, the synthetic Process before the Minister was the same process as at the date of the first Notice.

[9]      In my view, there is not an important distinction in the case before me. There is no NDS before the Minister in the present case whereas there was no amended NDS before the Minister in Eli Lilly, supra. I now set out paragraph 64 of the appellants' submissions in Eli Lilly, supra, because the same arguments were made here and I do not see how I can distinguish Eli Lilly, supra, in the present case:

64.      In summary,

(i)      an allegation of non-infringement is to relate to the method of manufacture set out in the New Drug submission;

(ii)      the allegation is to be filed with the filing of the submission or at least after the submission is filed;

(iii)      after the filing of the allegation, a Notice of the allegation and a Detailed Statement is to be provided to the patentee; and

(iv)      in determining the question of infringement, the relevant date is the date of the Notice of Allegation or 45 days thereafter.

[10]      Marceau, J.A. went on to deal with the second argument as follows (see pages 12-13):

According to subsection 5(3) of the Regulations, an allegation with respect to a patented medicine must be attached to a new drug submission, must be completed by a detailed statement as to its legal and factual basis and must be served on the patent holder. The three requirements were met here, albeit in an order different from the one that was used to enumerate them in the provision. Indeed, the allegation was served before the NDS could be updated to refer to it, and prior to the filing with the Minister of a detailed statement as to its factual and legal basis. Apotex explained that, in abstaining from making full disclosure of its non-infringing process in the allegation itself, it was merely acting in accordance with the teachings of the Court in Bayer, supra, where it was said:

An applicant for a NOC alleging a different process cannot be expected to make full disclosure without a protective order. Confidentiality cannot be assured until there is a proceeding in court.

[11]      In the case before me, the Affidavit of Bernard Sherman for Apotex gives the following reasons for serving the Notice of Allegation prior to the filing of NDS:

(a)      The Minister's Drugs Directorate will not accept for filing an NDS unless the submission includes a copy of the Notice of Allegation together with proof of service. Accordingly, if the Notice of Allegation with proof of service must be included in the NDS, the Notice of Allegation must be served before the NDS is filed. Otherwise, no NDS would be acceptable; and

(b)      It is Apotex's experience that proceedings under the Regulations take up to and, in some cases, more than 30 months to be determined ... Given that the proceeding would take longer to be determined than it would take for the NOC to be granted, Apotex gave its Notice of Allegation in advance of filing its NDS so as to minimize the overall delay that would be caused to Apotex by having the prohibition proceeding commenced as early as possible.

[12]      His latter submission is not as strong an argument as the need for a protective order but it is a reason for filing the Notice of Allegation first. Marceau, J.A. then goes on to deal with the question of whether the three-step sequence under section 5 is merely directory or mandatory. Marceau, J.A. states at 13:

The only position taken by the Minister on this appeal was with respect to this procedural argument which incidentally Eli Lilly had not raised as such before the motions judge. In the Minister's submission, the three step sequence as set out in section 5 is merely directory, not mandatory. The Minister argues that the process cannot be vitiated by the sole fact that the requirements of section 5 were complied with in an out-of-sequence manner. I fully agree. The basic purpose of the Regulations is to provide a means by which patents are noted and protected from possible infringement at the instance of the patent-holder. The Regulations thus ensure that an NOC is not issued without a patent-holder having the opportunity to defend its patent. This opportunity is not diminished by the fact that the notice of allegation is given first, if, as here, it contains sufficient information for the patent-holder to determine whether to seek a prohibition order and the Court can immediately proceed to determine its justification. If the sequence is held to be mandatory, the process would simply have to be commenced anew and this would cause a purposeless delay in the marketing of a drug in cases where the allegation proves to have been justified. The intent of the Regulations shows that compliance with section 5 in a manner inconsistent with the sequence set out should not be considered a defect sufficient to vitiate the process.

[13]      Since Apotex alleges non-infringement, it is a live issue that can be dealt with by the courts. Certainly in this case, if the allegation proves to have been justified, then the NDS had to be filed first or prior to the expiry of the 45 day period, as provided in section 6. It would cause a delay in the marketing of a drug. I note that with respect to the timing of the justification of the allegation, Muldoon, J. found that the relevant time was the time of the hearing of the motion for prohibition. He stated at page 147 of Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1997), 74 C.P.R. (3d) 131 (F.C.T.D.):

... Clearly, if time be the critical consideration, however, the time of the allegations "prematurity" or "ripeness" is the time at which the Court "finds that none of those allegations is justified", which at earliest is the hearing of the prohibition motion and at latest is the date of the Court's order and reasons for order, if reasons there be ...

[14]      That decision was followed by two other decisions in the Trial Division: Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1997), 74 C.P.R. (3d) 307 and Glaxo Wellcome Inc. et al. v. The Minister of National Health and Welfare et al., August 19, 1997, Court Files T-388-96 and T-793-96 (F.C.T.D.). Compare Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1995), 65 C.P.R. (3d) 483 (F.C.T.D.). Therefore, whether the allegation is justified should be determined at the hearing and not now. For all the foregoing reasons, the application is dismissed. In light of the fact that the respondent Apotex Inc. put the applicants on notice in October with respect to the Eli Lilly case, I am awarding costs to the respondents from November 1, 1997, payable by the applicants. There will be no costs prior to November 1, 1997.

                             ____________________________________

                             JUDGE

OTTAWA, ONTARIO

November 24, 1997