Federal Court Decisions

Date : 19990625 Docket: T-366-97

BETWEEN:

SCHERING CANADA INC. and SCHERING CORPORATION

Applicants

- and -

APOTEX INC. and THE MINISTER OF HEALTH

Respondents

REASONS FOR JUDGMENT

McGILLIS J.

INTRODUCTION

[1]         The applicants Schering Canada Inc. and Schering Corporation ("Schering") have applied for an order under subsection 6(1) of the Patented Medicines (Notice of Compliance) Regulations ("Regulations"), SOR/93-133, as amended SOR/98-166, to prohibit the Minister of Health ("Minister") from issuing a notice of compliance to Apotex Inc. ("Apotex") in connection with the medicine loratadine or compositions containing loratadine until after the expiry of Canadian Letters Patent No. 1,160,230 ("'230 patent"). Loratadine is an antihistamine sold by Schering under the

Page: 2 trade-marks CLARITIN, CLARITIN EXTRA and CTP ND. The principal issue to be determined in the application is whether Apotex' allegation of non-infringement in its notice of allegation is justified. However, Schering has also raised preliminary issues relating to the chemical process to be used by Apotex and an alleged abuse of process by Apotex. The three issues are separate and distinct, and each turns on its own unique facts. As a result, there are three discrete parts to this decision.

PART I- THE PROCESS TO BE USED BY APOTEX

FACTS

[2]         Counsel for Schering has submitted that the evidence in the ,record fails to disclose the. ac%a process to be used by Apotex for the manufacture of loratadine. The facts relevant to the question of the process to be used by Apotex are as follows.

[3]         The non-infringing process referred to in Apotex' notice of allegation dated January 14, 1997 was outlined in the first affidavit of Dr. Keshava Murthy, sworn on April 2, 1997, in Exhibit 13, a document entitled "Synthesis of Loratadine". Dr. Murthy is the General Manager of Brantford Chemicals Inc. ("Brantford"), Apotex' manufacturer of the process. Exhibit 13 to Dr. Murthy's affidavit was marked separately as Exhibit 1 in this proceeding, as counsel for Apotex had made explanatory markings on it. That document will therefore be referred to in these Reasons as

Exhibit 1. In his affidavit, Dr. Murthy described Exhibit 1 as "...a copy of the schematic and method

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of manufacture used by Brantford Chemicals Inc. to manufacture loratadineï..".

[4]           The next day, on April 3, 1997, Dr. Murthy swore his second affidavit, to which he attached as Exhibit "A" "...a copy of a document entitled Loratidine [sic] Synthetic Route- Brantford Chemicals Inc. ...", together with the Detailed Process Description of its manufacture which was filed with its new drug submission. The document entitled Loratidine [sic] Synthetic Route- Brantford Chemicals Inc. was marked as Exhibit 2 in this proceeding.

[5]         In his second affidavit, Dr. Murthy stated that Exhibit 2 in this proceeding represented Brantford's process for making -loratadine, and that it was the same as the flow sheet includediaw,. Apotex' new drug submission for loratadine. Furthermore, the process of manufacture depicted in Exhibit 2 was the same process of manufacture as outlined in Exhibit 1, as described in his first affidavit. Any differences between the process in Exhibits 1 and 2 represented "...optimization of the process in [Exhibit 2]". Finally, Dr. Murthy stated that "...the process for making loratadine has not changed. Any changes made relate to maximizing efficiency from a commercial production point of view".

[6]         Following the filing by Apotex of Dr. Murthy's two affidavits, Schering filed an affidavit from Dr. Michael Mitchell, sworn on May 30, 1997 ("Mitchell's second affidavit"). Dr. Mitchell is a chemist who is the Presidential Fellow-Chemical Development of the Schering-Plough Research

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Institute.

[7]         In the portion of his second affidavit entitled "Analysis of the Apotex Process", Dr. Mitchell stated that he had reviewed the Apotex process, as outlined in Exhibit 2, and that he had evaluated it as a commercial process for the production of loratadine. Dr. Mitchell concluded that, in his opinion, the Apotex process was not a viable method of production. He outlined "major difficulties" with the process, including techniques not directly applicable on a plant scale, yield, hazardous emissions and solvents, safety hazard, purity, scale-up problems, and toxicity. Following his review of the "difficulties", he stated that "[b]ased on the above safety, environmental, operational and quality concerns, it is clear ... that Apotex or its suppliers will have to significantly change the process,. in order to make commercial quantities of loratadine". As a result, he concluded that "...Schering has not been provided with Apotex' commercial process".

[8]         In the next section ofhis second affidavit entitled "Infringement", Dr. Mitchell compared the Apotex and Schering processes for loratadine, focussing on the similarity of the processes in the last three of the nine steps. Dr. Mitchell did not indicate anywhere in the "Infringement" section of his affidavit, or anywhere else, that the changes made by Apotex in the optimized version of the process outlined in Exhibit 2 altered the chemistry of the process as depicted in Exhibit 1. At the time that he swore his affidavit, Dr. Mitchell had available to him Exhibits 1 and 2, as well as the Detailed Process Description from Apotex' new drug submission.

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[9]           There were two changes between Apotex' process in Exhibit 1 and its optimized version in Exhibit 2, one in Step 1 and another in Step 3. The change noted in Step 1 merely disclosed the chemical process for reaching the first intermediate. The second change appeared in Step 3 and demonstrated the method for making intermediate 8. Neither of those changes appeared in the last three steps of the process, which were the focus of Dr. Mitchell's infringement analysis. Furthermore, Dr. Mitchell -made no comment on either of those changes in the context of infringement or otherwise. There were some other differences between the two Exhibits, resulting from the provision in Exhibit 2 ofmanufacturing details not reproduced in Exhibit 1. However, those differences may be explained by making reference to the Detailed Process Description from the,, ç.i

,.

drug submission which was disclosed in Dr. Murthy's second affidavit.                                                    ----­

[10]       In reply to the second affidavit of Dr. Mitchell, Apotex filed a third affidavit from Dr. Murthy, sworn on June 16, 1997. In his third affidavit, Dr. Murthy stated that the only differences between Exhibits 1 and 2 related to the "optimization of the process". Dr. Murthy noted that industrial processes are constantly optimized in order "...to increase safety in the plant, address all environmental concerns, improve yields and enhance operational feasibility of the process". Those forms of optimization typically applied to all steps in a process "...without diminishing the final product". Dr. Murthy also stated that the Apotex process for loratadine "...has been subjected to optimization, however the chemistry has been left unchanged". Furthermore, the process will

Page: 6 continue to be optimized. Finally, Dr. Murthy stated that Dr. Mitchell was "...in error when he concluded ... that Apotex or its suppliers will have to significantly change the process in order to make commercial quantities of loratadine. Brantford Chemicals Inc. has a viable process for making loratadine which could be scaled up to produce commercial quantities".

[11]       During the course of his cross-examination, Dr. Murthy reiterated in his testimony that Exhibit 1 and its optimized version in Exhibit 2 were the same process, and that it would be determined "at the end" what changes would be the most efficient. Each step in the process would be "very responsibly" addressed from the point of view of the environment and safety, or the process would not'be scaled tip.-Furthermore,-the changes made in the optimization would "-.:.notchangethe,... essence of the chemistry ... that forms the basis ... of this particular process". The process would be followed, but "operational" changes would be made "...in order to make it safe and environmentally_ viable". As of the date of his cross-examination, the optimization of the process had not been completed.

[12]       Similarly, Dr. Robert Allan McClelland, Apotex' expert witness, testified in cross­examination that the chemistry in Apotex' process to manufacture loratadine had not changed in the optimized version outlined in Exhibit 2.

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ISSUE

[13]          The question to be determined is whether Apotex has changed and continues to change its process.

ANALYSIS

[14]          Counsel for Schering submitted that the allegation of non-infringement made by Apotex in its notice of allegation dated January 14, 1997 is not justified on the basis that "Apotex has admitted that it has changed and continues to change its process". He further submitted that the present proceeding is moot in that Apotex has "admitted" that "its process will be changing". In my opinion, those submissions are ° founded on a misapprehension of the facts established in the.evidence.._..

[15]          The facts relevant to this issue indicate unequivocally that the optimization of the Apotex process, undertaken with a view to making its version of loratadine commercially viable, has not changed the chemistry of its process in any manner. In that regard, the evidence of Dr. Murthy was unequivocal and consistent, and it was not undermined in any manner in cross-examination. Dr. McClelland also testified to that effect in cross-examination. Finally, and perhaps most significantly, Schering's witness Dr. Mitchell was silent in his affidavit on that question, and never stated that the changes in the optimized version affected the chemistry of the process.

[16]       In the circumstances, the facts do not support the contention of counsel for Schering that

Page: 8 Apotex has changed and continues to change its process. Indeed, the facts indicate exactly the "opposite, namely that Apotex has not changed its process, and that it does not intend to do so. As a result counsel for Schering has advanced his submissions in the absence of a factual framework to support them. Furthermore, in making those submissions, counsel for Schering has relied on changes effected for the purposes of optimization to support his contention that the "process" has changed. However, the jurisprudence of the Court has consistently held that matters pertaining to the optimization of a process, such as yield, quantity, purification, safety and efficacy are not relevant in assessing the question of infringement. [See for example Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1994), 55 C.P.R. (3d) 302 at 322 (F.C.A.); MerckFrosst Canada Inc. v: Canada-(Minister ofNational Health and Welfare) (1995),.62.C     ...­(3d) 553 at 555-556 (F.C.T.D.); Apotex Inc. v. Canada (Attorney General) (1993), 48 C.P.R. (3d) 296 at 302-303 (F.C.T.D.); Eli Lilly and Co. v. Novopharm Ltd. (1996), 67 C.P.R. (3d) 362 at 364 (F.C.T.D.).] In the circumstances, counsel for Schering has failed to establish that the chemistry in the process has changed or will be changed.

[17]       I have therefore concluded that the first preliminary question raised by counsel for Schering must be rejected.

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PART 11- ABUSE OF PROCESS

FACTS

[18]          Counsel for Schering has submitted that the Apotex notice of allegation dated January 14, 1997 for the medicine loratadine constitutes an abuse of process on the basis that it was filed in order to circumvent Court orders made in relation to Nu-Pharm Inc. ("Nu-Pharm"), a sister company of Apotex. The facts pertaining to the alleged abuse of process are as follows.

i) Nu-Pharm's notices of allegation and related Court proceedings

[19]       Schering has obtained notices of compliance to market loratadine in Canada in 10 mg tablets and 1 mg/ml^-oral liquid syrup form, as well as its 5 mg loratadine/120 mg,pseudoephedrine tablets,; In accordance with subsection 4(1) of the Regulations, Schering submitted patent lists to the Minister in connection with each of its notices of compliance for loratadine, listing the '230 patent and Canadian Letters Patent No. 1,272,480 ("'480 patent").

[20]       By letter dated August 3, 1993, Nu-Pharm sent a notice of allegation to Schering under paragraph 5(3)(b) of the Regulations alleging non-infringement of the'230 and'480 patents for the medicine loratadine. In its notice of allegation, Nu-Pharm alleged that "...no claim for the medicine itself and no claim for the use of the medicine would be infringed by the making, constructing, using or selling by us of tablets or solution containing loratadine". In the legal and factual basis for the

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allegation, Nu-Pharm stated as follows in relation to the '230 patent:

Patent 1160230

This patent has no claim for the use of the medicine. It has claims for the medicine itself, but such claims are limited to the medicine itself when produced by processes described and claimed or by their obvious chemical equivalents. Until expiry of [the '230 patent], we intend to use and sell only loratadine made by processes not within the scope of [the '230 patent] and hereby so undertake.

[21]          On September 20, 1993, in response to the notice of allegation, Schering filed an application under subsection 6(1) of the Regulations in Court file No. T-2274-93 to prohibit the Minister from issuing a notice of compliance to Nu-Pharm for loratadine. Nu-Pharm failed to file any evidence or an application record in that proceeding. After the expiry of the time periods for filing its evidence and application record, Nu-Pharm brought a motion for an extension of time. On May 10, 1994, Rothstein J. (as he then was) dismissed that motion on the basis that there was no evidence to justify granting an extension of time. Nu-Pharm filed a notice of appeal of that decision on May 20, 1994.

[22]       Two days after Rothstein J. dismissed the motion for an extension of time, Nu-Pharm sent a second notice of allegation to Schering, by letter dated May 12, 1994, alleging non-infringement ofthe'230 and'480 patents for the medicine loratadine. The second notice of allegation was virtually identical to the first notice of allegation in all material respects, save and except for the statement that the process was "now finalized", and that it did not fall within the scope of the'230 patent. Nu­Pharm also stated that it would provide a detailed statement of fact and law once a protective order was in place.

Page: 11 [23]    On June 29, 1994, in response to the second notice of allegation, Schering filed an application in Court file No. T-1528-94 to prohibit the Minister from issuing a notice of compliance to Nu-Pharm for loratadine.

[24]       Shortly thereafter, Schering brought motions in Court files No. T-2274-93 and T-1528-94 seeking an order that the second notice of allegation was not a notice of allegation as contemplated by the Regulations, and that it did not give rise to further prohibition proceedings. In support of his position, counsel for Schering submitted, among other things, that the second notice of allegation was an abuse of process in that its sole purpose was to circumvent the Order of Rothstein J. rendered on May 10, 1994.

[25]       On September 22,1994, Rothstein J. delivered Reasons for Order in which he concluded that the second notice of allegation was not one that was contemplated by the Regulations and that it did not give rise to new prohibition proceedings. In his decision, Rothstein J. characterized the issue of whether Nu-Pharm could file a second notice of allegation, in the circumstances of the case, as being one of fairness. In particular, he found that it would be unfair to permit Nu-Pharm to circumvent the problem caused by its failure to file evidence in the first prohibition proceeding by permitting it to serve a new notice of allegation. He further found that the second notice of allegation was not contemplated by the Regulations on the basis that the decision of the Court on the first prohibition application would render the second prohibition proceeding res judicata. In that respect, he noted

Page: 12 that the decision on the first prohibition application would be a decision on the merits, even though Nu-Pharm had filed no evidence. In short, Rothstein J. concluded that the Regulations did not "...contemplate multiple notices of allegations setting forth the same allegations in order to circumvent time limits in the Rules of the Court and Court orders made in respect of them." However, in noting that his decision was restricted to the facts before him, Rothstein J. stated as follows:

[My decision] is not intended to preclude Nu-Pharm from ever making another submission for a notice of compliance, assuming it is unsuccessful in the [first] prohibition application ... The only thing that it is precluded from doing by this decision, is seeking a new determination on the same allegations which will have been dealt with in [the first prohibition] proceedings ... arising out of its first notice of allegations".

[26]       In other words, Rothstein J. emphasized that Nu-Pharm could seek to obtain a notice:-of­

compliance for loratadine and send a further notice of allegation based on different facts than those underlying the first notice of allegation.

[27]       On October 20, 1994, Rothstein J. issued his Orders in Court files No. T-2274-93 and T-1528-94 and ordered, among other things, that the document dated May 12, 1994 was not a valid notice of allegation. In relation to T-2274-93, he also ordered the hearing of the prohibition application to proceed on the basis of the record in the file.    In T-1528-94, he gave Schering permission to discontinue the proceeding on the basis that the notice of allegation was not valid. In accordance with that Order, Schering discontinued the application for prohibition in T-1528-94.

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[28]       Nu-Pharm appealed the Orders of Rothstein J. issued on October 20, 1994.

[29]                                        On May 8, 1995, Schering's application for prohibition in Court file No. T-2274-93 was scheduled to be heard. On that date, counsel for Nu-Pharm requested an adjournment pending the hearing of the appeals of the Orders of Rothstein J. rendered on May 10, 1994 and October 20, 1994. Pinard J. adjourned the application for prohibition sine die, pending the hearing of the appeals from the Orders of Rothstein J.             -­

[30]       By letter dated June 22, 1995, Nu-Pharm provided a third notice of allegation for loratadine, alleging non-infringement of the 230 and'480 patents. The third notice of allegation was virtue.__ identical to the first and second notices of allegation, save and except for the statement that Nu­Pharm had available to it "...loratadine made by a further new process that does not fall within the scope of [the'230 patent] and this does not infringe. If this allegation is accepted, we will use only this material". Nu-Pharm also indicated that it would provide details of the process once a protective order was in place.

[31]       In response to the third notice of allegation, Schering filed an application in Court file No. T-1708-95 to prohibit the Minister from issuing a notice of compliance to Nu-Pharm. Schering also brought a motion seeking an order that the third notice of allegation was void.

Page: 14 [32]    On June 26, 1996, Muldoon J. issued an order in which he declared that the third notice of allegation was void and of no effect. He also stayed the application for prohibition in Court file No. T-1708-95 until after the final determination of the application for prohibition in T-2274-93, including appeals. In his Reasons for Order, Muldoon J. found that Nu-Pharm had adduced no evidence to indicate that the process referred to in the third notice of allegation was different from that referred to in the first and second notices of allegation. In that regard, he stated as follows, at pages 8-9:

This latest set of allegations, insofar as it does not duplicate the previous two is too coy to be tolerated. It is coy in what it conceals and does not make plain to either the Minister or the patentee, and in pretending to be the first and only notice of allegations made in regard to these two Schering patents. This third notice letter of June, 1995, is almost word-for-word the same as the first notice letter of August, 1993, except only (a) for "we have available to use Loratadine made by a further new process that does not fall within the scope of patent 1160230 and this does not infringe", and (b) "...we will provide details of the process once a protective order is in place". As will be seen, point (b) above is a cogent one.

Point (a) is the intolerably coy one. In saying it has available Loratadine made by a further new process, is Nu-Pharm then acknowledging that it never had Loratadine so available to it at the times of the first two notices in August, 1993 and in May, 1994? How new is this process last mentioned? Mr. Justice Rothstein spoke of fairness; and fairness demands that Nu-Pharm reveal the answers to such questions with considerable specificity in order to justify a second or subsequent notice of allegations. If the Minister will not enforce such basic fairness -- and surely no Court would interfere -- then the Court should, solely on the grounds of unfair harassment and clearly "for the better administration of the laws of Canada", prohibit the Minister from issuing a notice of compliance (NOC) to the harassing seeker of the same.

[33]       Muldoon J. also found that it was "...abusive to have to indulge in a multiplicity of proceedings and to work one's way through each in order to discover if it and each of its companion proceedings has been abusive ab initio". Since he could not strike the notice of allegation, he therefore declared it void.

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[34]       Nu-Pharm appealed the Order of Muldoon J. rendered on June 26, 1996.

[35]       On November 7, 1997, Nu-Pharm discontinued the appeals filed against the Orders of Rothstein J. dated May 10, 1994 and October 20, 1994, and the Order of Muldoon J. dated June 26, 1996.

[36]       On July 3, 1998, Reed J. granted Schering's application for prohibition against Nu-Pharm in file T-2274-93. Nu-Pharm did not appeal that decision.

ii) relationship between Apotex, Nu-Pharm and Brantford

[37]       At some point in time in or about early 1996, the parent company of Apotex bought the shares of Nu-Pharm. Apotex and Nu-Pharm therefore became "sister" companies, having a common parent company. However, Apotex and Nu-Pharm had no common management, and they continued to operate independently as manufacturers of pharmaceuticals, selling products under their own labels. From time to time, Apotex formulated or agreed to formulate drugs for Nu-Pharm and vice versa, and they bought products from each other. Prior to becoming sister companies, they also had an arrangement whereby Apotex manufactured numerous products, and Nu-Pharm made the regulatory submissions. Nu-Pharm also permitted Apotex to cross-reference those submissions in order to enable both companies to sell the products.

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[38]       In August 1996, Apotex acquired ACIC (Canada) Inc. ("ACIC"), and changed the name to Brantford. As a result, Apotex has complete access to the books and records of Brantford.

iii) Apotex' notice of allegation

[39]         At some point in time, Apotex filed a new drug submission with the Minister seeking the issuance of a notice of compliance to market 10 mg tablets of loratadine. Apotex's new drug submission was neither cross-referenced to, nor was it an assigned submission of, Nu-Pharm's new drug submission for loratadine. In short, it was a stand alone, independent abbreviated new drug submission. Furthermore, it made no r erence of any sort to Nu-Pharm's new drug..submissiQ & fQL._a, loratadine.

[40]       By letter dated January 14, 1997, Apotex sent a notice of allegation to Schering alleging non­

infringement of the '230 and '480 patents in relation to the medicine loratadine. The notice of

allegation stated, in part, as follows:

The legal and factual basis for this allegation is as follows:

Patent 1160230

This patent has claims for the medicine (loratadine) itself when made by a process falling within the scope of claim 1. Until expiry of this patent we will use only loratadine obtained from Brantford Chemicals Inc. and made by a process not within the scope of any claim of this patent.

[41]       Apotex offered to provide the details of its process to Schering if a confidentiality agreement

Page: 17 was entered into between them. Schering declined to enter into a confidentiality agreement.

[42]       On March 4, 1997, Schering-filed the present application to prohibit the Minister from issuing a notice of compliance to Apotex in connection with loratadine or compositions containing loratadine until after the expiry of the '230 patent.

iv) Apotex' non-infringing process and its dealings with Farmhispania

[43]          The facts relating to Apotex' development of a non-infringing process for loratadine and its dealings with a Spanish company named Fannhispania.S.A. ("Farmhispania") are revealed principally in the two affidavits and the two cross-examinations of Dr. Bernard Sherman,-the Chief Executive Officer of Apotex.

[44]       In his affidavit affirmed on April 3, 1997, Dr. Sherman stated, among other things, that Brantford was Apotex' supplier of loratadine, as indicated in the notice of allegation. Furthermore, Brantford never supplied or agreed to supply Nu-Pharm with loratadine. Finally, the process alleged by Apotex in the notice of allegation to be non-infringing was developed at Apotex and Brantford. That process was never made available to Nu-Pharm.

[45]       On February 12, 1998, Dr. Sherman was cross-examined on his affidavit affirmed on April 3, 1997. During the course of his cross-examination, Dr. Sherman testified that he did not know the

Page: 18 identity of Nu-Pharm's supplier, but thought that it was a Spanish company, either Farmhispania or Quinteca Sintetica, also known as Chemo-Iberica. In the time period from 1993 to 1995, Apotex made' tablets of loratadine for Nu-Pharm, using material that came from Spain. That product was probably made by an infringing process, as Dr. Sherman did not believe that anyone had perfected a non-infringing process at that time. Indeed, according to Dr. Sherman, neither Apotex nor Farmhispania had developed a non-infringing process by October 1994.

[46]       With respect to the process referred to in the Apotex notice of allegation, Nu-Pharm had no information concerning the new process developed by Brantford. Dr. Sherman did not know what process Nu-Pharm had in its new-drugaubmission, and did not "...know how it- could be the.s,      ";_: [as the Apotex process], unless somebody coincidentally has the same process". Dr. Sherman did not "...see how that would be possible". Indeed, in his view, that would be "impossible", as the Apotex process was developed at Brantford, with the help of some of the Apotex chemists, and was never disclosed to Nu-Pharm. Furthermore, the Apotex process was never disclosed to Nu-Pharm's supplier or manufacturer in Spain by either Apotex or Brantford.

[47]       With respect to the Apotex new drug submission for loratadine, Dr. Sherman testified that it was neither a cross-reference to, nor an assigned submission of, Nu-Pharm's new drug submission. There may be common data in the two new drug submissions, in that Apotex manufactured the tablets for both submissions. However, the information in the Apotex new drug submission would

Page: 19 be "completely different" in all relevant matters, particularly concerning the process, as Nu-Pharm never had that information. The common data would pertain to the formulation of the tablets and the bioequivalency study on the formulation. The raw material source and the process were different from what Nu-Pharm had.

[48]       In relation to the development of the process, Dr. Sherman testified that the process was developed at Brantford with the assistance of some people at the Apotex Fine Chemical Laboratory, and that it was never disclosed to Nu-Pharm. The process was developed in 1996, and was still being optimized. He was "quite sure" that it was not developed in 1994, prior to Apotex and Nu-Pharm becoming sister companies. He did not know the process used for the Nu-Pharm material.

[49]       During the course of the cross-examination, counsel for Schering produced to Dr. Sherman. a copy of a fax transmission dated October 24, 1994 from F. Butelman of Farmhispania. Dr. Sherman stated that he had engaged in discussions with Mr. Butelman, but that no agreement was ever reached for Farmhispania to supply Apotex with loratadine. He reiterated at several points during his cross-examination that Apotex had no agreement with Farmhispania for the supply of loratadine, and that Brantford was the supplier. When counsel for Schering pointed out that the patent application referred to in the fax was filed in Canada in October 1994, Dr. Sherman corrected his earlier evidence that the process was developed in 1996, and stated that "...by October 1994, our chemists had discovered the route that we proposed to use".

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[50]       Counsel for Schering also produced to Dr. Sherman an affidavit filed by him with the Patent Office in which he stated, among other things, that Apotex had entered into a supply agreement. for loratadine with another company, namely Farmhispania. Dr. Sherman stated that there was "...a tentative agreement pursuant to which there were some discussions...", but that it was terminated because they could not agree on the terms of a commercial agreement. In short, he stated that there was no agreement, but that there was a proposal rejected by Apotex.

[51]       Following his cross-examination, Dr. Sherman reviewed his files concerning Farmhispania. On March 18, 1998, he affirmed his second affidavit in these proceedings. In his second affid4yj~, which was filed with leave of the Court, Dr. Sherman stated that he had responded to the questions of Schering's counsel concerning Farmhispania without having previously reviewed his files, as it - was "...the first time the issue had been raised". During his review of the files, Dr. Sherman identified several documents supporting his evidence on his earlier cross-examination that there was never any agreement for the supply of loratadine entered into between Apotex and Farmhispania. In particular, he produced five memoranda between Mr. Butelman of Farmhispania and himself, including the October 24, 1994 memorandum shown to him by counsel for Schering during the cross-examination.

[52]       In a memorandum dated October 11, 1994 to Mr. Butelman, Dr. Sherman indicated that his

Page: 21 understanding was that they "...would work together and jointly own the results. Apotex staff have spent a lot of time on the processes and have contributed significantly". He therefore proposed an arrangement in which, among other things, the results of the work on loratadine would be jointly owned by the two companies. In that regard, they would fully disclose to each other the work done to date on the process for loratadine. Furthermore, Farmhispania would supply Apotex exclusively in Canada, and Apotex would buy exclusively from Farmhispania. Apotex would own the Canadian patent, Farmhispania would own the Spanish patent, and they would jointly own any patent filed in any other country. Finally, Farmhispania, as the manufacturer of the loratadine, would file the drug master file for regulatory purposes in Canada, as required by Apotex.

[53]       By fax memorandum dated October 24, 1994, Mr. Butelman responded to Dr. Sherman's memorandum dated October 11, 1994.' In his memorandum, Mr. Butelman forwarded a proposed­agreement, in which he stated, among other things, that Apotex and Farmhispania would "...share and disclose to each other all the chemical and analytical work performed...". Furthermore, Apotex would contribute to the chemical and analytical research and development at Farmhispania for the period from May 1994 to January 1995. He noted that Farmhispania expected to be in a position, at the end of January 1995, "...if the process is industrially viable to have development quantities from different batches". With respect to process patents, he confirmed that two patents filed in Spain were sent to Apotex, but noted that Apotex had not yet sent the process patents filed in Canada. He

¹ The memorandum dated October 24, 1994 from Mr. Butelman to Dr. Sherman was produced by counsel for Schering to Dr. Sherman in his cross-examination on his first affidavit.

Page: 22 confirmed that Farmhispania would be responsible for supplying the technical package and filing the drug master file with the Department of Health.

[54]       In a memorandum dated October 28, 1994 to Mr. Butelman, Dr. Sherman indicated that Apotex was "...eager to finalize arrangements...", but was concerned that Farmhispania's "price expectations may not be reasonable". He therefore made a counterproposal, and requested Farmhispania to prepare a -draft agreement reflecting his suggestions. He also stated that it was important to "...finalize these details promptly so as not to lose any more time". _.

[55]       By memorandum dated January 25, 1995, Dr. Sherman advised Mr. Butelman that he                 .­waiting to receive Farmhispania's "detailed proposal".

[56]          By memorandum dated February 1, 1995, Dr. Sherman indicated that Apotex was waiting to receive Farmhispania's "new proposal" on loratadine. He stated that "[i]f you still want to make it in Spain, we need to know your proposed terms. If not, we also need to know, so we can make other plans. The lack of response from you is causing a loss of our position at [the Health Protection Branch]".

[57]       By fax transmission dated February 2, 1995, Mr. Butelman advised that the delay in responding was "...entirely due to our technicians and the results of our laboratory tests". He stated

Page: 23 that the results were now available, indicating the "yields have increased", and that he was "...eager to finalize arrangements". He also stated that he wanted to offer Apotex "...the rights to the non­infringing patent...".

[58]       In a response dated the same day, Dr. Sherman expressed his frustration at not knowing the

details of Farmhispania's position. In particular, he stated as follows:

You say only that you are eager to finalize arrangements and to "offer you the Rights to the Non-infringing Patent". What does that mean?

We assumed you wanted to make the loratadine in Spain and sell us the material. That is why we tried to help you with the process.

Do you still want to make the material in Spain, or do you mean that you want to offer us "the rights" to synthesize it ourselves in Canada? Please explain!

I assume you want to make it in Spain and sell it to us. If not, why not? If yes, at what price? When can we have samples? When can you update the Canadian [drug master file]?

[59]       Having produced in his affidavit the abovenoted five memoranda, Dr. Sherman stated in the conclusion of his second affidavit that Apotex "...did not ever enter into..." a supply agreement with Farmhispania for loratadine. At its highest, "...Apotex and Farn1hispania had an understanding of mutual cooperation which did not ever evolve into an agreement for the supply of loratadine. Indeed, Apotex has never received any loratadine from Farmhispania".

[60]       On April 29, 1998, Dr. Sherman was cross-examined on his second affidavit. At the outset of his cross-examination, Dr. Sherman confirmed that he had reviewed his files on loratadine, particularly a file relating to possible sources of supply. That file contained correspondence between

Page: 24 Apotex and Farmhispania, as well as between Apotex-and other potential suppliers, for the period from 1993 to 1996. The Apotex files also contained documents from another supplier who supplied "...a small amount of research material that was, in fact, used to make the tablets..." made by Apotex for Nu-Pharm from 1993 to 1995. That company was not Farmhispania, nor was it a company affiliated with Farmhispania.

[61]       During the course of-his second cross-examination, Dr. Sherman confirmed, once again, that there was no supply agreement with Farmhispania, and that Apotex intended to use material supplied by Brantford and not by Farmhispania. He also testified that Apotex never purchased any loratadine " from Farmhispania, but that it did buy;some from another source.

[62]       Dr. Sherman further testified in his cross-examination that, in 1993, Apotex began to have discussions with Farmhispania concerning a non-infringing process for loratadine. Farmhispania had not done any work on it, but had "...some ideas for non-infringing routes". Farmhispania sent Apotex some "...ideas as to the synthetic pathway", and Apotex did some work to develop those or other ideas. Farmhispania did not send Apotex anything that was "particularly meaningful", but some of its ideas helped the chemists at Apotex come up with a workable idea. Farmhispania had very little input into the process. The bulk of the work on the non-infringing process for loratadine was done at Apotex by Dr. Karimian and people reporting to him. Prior to moving to Apotex, Dr. Karimian had been employed by ACIC, the predecessor of Brantford. Dr. Karimian may have done some of

Page: 25 the development work at ACIC, but the bulk of it was done at Apotex. One of the co-inventors of the non-infringing process is listed as Dr. Jackson, who is not an employee of Apotex or Brantford. Dr. Jackson was listed as a co-inventor simply because he contributed a useful idea, but the process was developed solely at Apotex and Brantford. The process was disclosed to Farmhispania, but never to Nu-Pharm.

[63]       Dr. Sherman also testified in his cross-examination that, in October 1994, the work that was not completed was the "scaling-up" or the "optimization" of the non-infringing process to make it commercially viable. Apotex and Farmhispania had co-operated with one another in order to develop

a process, but had no agreement "for commercialization", or in other words, for the manufactureAnd.- . supply of a commercially viable, non-infringing form of loratadine. It was therefore with respect to the "commercialization" that the two companies attempted to reach an agreement on the matters discussed in the memoranda exchanged between Dr. Sherman and Mr. Butelman between October 1994 and February 1995. In that context, it was contemplated that Apotex would turn over to Farmhispania all of its results from the work done on loratadine. Apotex had already "...proved that there was a workable process...". In that sense, the proposal was that Farmhispania would do the "scale-up work", commercialize it and do the manufacturing, and Apotex would pay for some of the development work. However, no supply agreement was ever concluded between the two companies. Following the failure of Apotex and Farmhispania to conclude an agreement for the supply of loratadine, Apotex gave the process to Brantford to manufacture on its behalf. The "scale-up" work

Page: 26

required to make the product commercially viable was done by Brantford.

[64]          Counsel for Schering questioned Dr. Sherman about his statement in his February 1, 1995 memorandum to Mr. Butleman that the lack of response from Farmhispania was causing Apotex a loss of its "position" at the Health Protection Branch of the Department of Health. In response, Dr. Sherman stated that Farmhispania was "slowing down" the ability of Apotex to obtain regulatory approval and to get to the market. He denied the suggestion that Apotex had filed a new drug submission for loratadine at that time based on the process being developed.

[65]       Finally, counsel for Schering questioned Dr. Sherman on the statement in his,Febr=;X2._... 1995 memorandum to Mr. Butelman "[w]hen can you update the Canadian [drug master file]?" Dr. Sherman indicated that, as he understood it, Farmhispania had previously filed a drug master file for an infringing process for loratadine. Apotex never had access to the original infringing process which was the subject of Farmhispania's drug master file. In the event that Farmhispania was to supply Apotex with loratadine made by the non-infringing process, it would have to file a new or updated drug master file.

[66]       Dr. Keshava Murthy, the General Manager of Brantford, testified in cross-examination that Apotex' non-infringing process for loratadine was developed prior to its acquisition of Brantford.

Page: 27

v) the patent applications by Apotex and Farmhispania

[67]       On July 27, 1994, Farmhispania filed two patent applications in Spain for a non-infringing process for loratadine. In application ES2080699, the inventor was named as Antonio Gracia Egea. In application ES2080700, the inventors were named as William Paul Jackson and Antonio Gracia Egea. The synthetic process disclosed in the two Farmhispania patent applications for the manufacture of loratadine is essentially the same process as that developed by Apotex.

[68]          On October 24, 1994, Apotex filed an application for a patent in Canada, No. 2,134,128, naming as the inventors three of its employees and William Jackson of the United Kingdom. The Canadian patent application has not yet been examined, but has been laid open and is available... public inspection. The petition filed in support of the patent application indicated that all of the inventors had assigned their rights to Apotex, but there was no assignment from Dr. Jackson. Finally, in response to a request from the Patent Office, Dr. Sherman filed an affidavit dated February 14, 1996, indicating that Apotex had entered into an agreement with another company for the supply of loratadine to Apotex. He also indicated that the named co-inventor William Jackson was an employee of the company with which Apotex was co-operating, and that he had made a suggestion concerning the development of the process. The Apotex inventors used that suggestion in their invention. In response to a further request from the Patent Office, Apotex' patent agents provided a copy of the October 24, 1994 fax transmission from Mr. Butelman, and identified it as "the required agreement" between Apotex and Farmhispania, relating to the supply of loratadine to

Page: 28

Apotex.

[69]'         The process outlined in the patent application filed by Apotex on October 24, 1994 is the same process disclosed by Apotex in the present proceeding as being the process that will be used by Brantford to manufacture loratadine for Apotex.

[70]       In short, the processes disclosed in the patent applications filed in Spain by Farmhispania, in the patent application filed in Canada by Apotex, and in the materials filed by Apotex in the present proceeding are all the same process.

ISSUE

[71]       The question to be determined is whether Apotex' notice of allegation is an abuse of process_

ANALYSIS

[72]       The question of whether Apotex' notice of allegation constitutes an abuse of process must be considered in the context of the Orders rendered by Rothstein J. and Muldoon J. in relation to Nu­Pharm's notices of allegation, as well as the facts established in the evidence in this proceeding.

[73]       The Orders of Rothstein J. and Muldoon J. rendered Nu-Pharm's second and third notices of allegation void. The appeals against those Orders were discontinued in 1997. In his decision,

Page: 29 Rothstein J. stated unequivocally that Nu-Pharm was not precluded from making another submission for a notice of compliance for loratadine, but rather was only precluded from seeking a new determination based on the same facts underlying the first notice of allegation. Similarly, Muldoon J., in his analysis, noted that Nu-Pharm had adduced no evidence that the process referred to in_the third notice of allegation was different than the ones in the first and second notices of allegation. In other words, both Rothstein J. and Muldoon J. recognized that Nu-Pharm was entitled to send a further notice of allegation based on a factual underpinning different from that in its first notice of allegation.

[74] ' Counsel for Schering submitted that the notice of allegation. sent by Apotex on JanuaW_J.4, 1997 constitutes an abuse of process in that it was sent for the purpose of circumventing the Orders of the Court requiring Nu-Pharm to proceed to hearing on the basis of its first notice of allegation. I cannot accept that submission. At the time of Nu-Pharm's three notices of allegation, the latest of which was sent on June 22, 1995, Apotex and Nu-Pharm were not related companies, but were competitors in the pharmaceutical market. Their co-operation from time to time in certain matters involving the formulation, manufacture and sale of some medicines cannot alter the fact that they were separate and distinct corporate entities until Apotex' parent company acquired the shares of Nu­Pharm in 1996. Prior to that acquisition, both Apotex and Nu-Pharm were interested in marketing a non-infringing form of loratadine. Nu-Pharm's first notice of allegation was made on August 3, 1993. In the period from 1993 to 1995, Apotex manufactured tablets of loratadine for Nu-Pharm

Page: 30 from material supplied to Nu-Pharm by an unnamed Spanish company which was not Farmhispania or one of its affiliates. During 1993 and -1994, Apotex was involved in its own separate efforts to develop a non-infringing process for loratadine. It co-operated with Farmhispania and engaged -in discussions concerning a non-infringing process for loratadine. Apotex' chemists were assisted-by some ideas given by Farmhispania. At some point in time in 1994, Apotex disclosed to Farmhispania its non-infringing process for loratadine. Farmhispania and Apotex made patent applications, respectively, in Spain in July 1994 and in Canada in October 1994. However, their attempts to negotiate a supply agreement failed in early 1995, and Apotex gave its process to Brantford to manufacture on its behalf Apotex acquired Brantford in 1996. Neither Apotex nor Brantford ever disclosed to Nu-Pharm the non-infringing process developed by Apotex.

[75]       At the time of Nu-Pharm's first notice of allegation, in August 1993, the oral -and documentary evidence establishes that Apotex had not yet developed or completed the development of its non-infringing process. As a result, the notice of allegation sent by Nu-Pharm in August 1993 was necessarily based on a different non-infringing process. In other words, since the Apotex process did not exist in August 1993, it clearly was not the non-infringing process referred to in Nu-Pharm's notice of allegation. The notice of allegation sent by Apotex in 1997, following its lengthy efforts to develop and arrange for the manufacture of a commercially viable non-infringing form of loratadine, cannot therefore in any manner be characterized as an abuse of process. Furthermore, the fact that Apotex and Nu-Pharm became sister companies in 1996 cannot be used to taint activities

Page: 31 of those companies that occurred prior to the change in corporate structure. In short, there is simply no factual foundation to support the assertion that Apotex' notice of allegation constitutes an abuse of process.

[76]    Alternatively, even if Apotex had developed its non-infringing process prior to August 1993, it made no disclosure of that fact to its competitor Nu-Pharm, but rather engaged in its own concerted effort to develop and manufacture its process. In the circumstances, Apotex' process was not the process underlying Nu-Pharm's first notice of allegation.

[77]    Finally, even if Apotex and Nu-Pharm were related companies at all relevant times, Apq.,.. would be entitled, by virtue of the Orders of Rothstein J. and Muldoon J., to seek a notice of compliance for loratadine on the basis that its notice of allegation dated January 14, 1997 has..a, different factual underpinning than Nu-Pharm's first notice of allegation.

[78]    During the course of his submissions, counsel for Schering advanced various speculative theories to support his argument on the abuse of process issue. In particular, he submitted that it was "probable" that Farmhispania was Nu-Pharm's supplier. In my opinion, that submission is speculative and unsupported by the facts.

[79]       Counsel for Schering also suggested, during the course of his submissions, that

Page: 32 Dr. Sherman's evidence was lacking in credibility in certain respects. He provided various examples to support that submission, including Dr. Sherman's initial evidence that the process was developed by Apotex and Brantford and that it was developed in 1996, as well as the incorrect statement in the affidavit filed' in the Patent Office. It is obvious that there were some errors in Dr. Sherman's evidence, during his first cross-examination, in that the process was developed by Apotex in or about early 1994 with some input from Farmhispania. However, after he had an opportunity to review his files on Farmhispania, Dr.-Sherman corrected those errors. When his evidence is read in its totality, in conjunction with the documentary evidence, I am satisfied that it is credible and reliable in all material respects, despite the lack of any explanation in the evidence concerning the Patent Office affidavit.

[80]         For all of these reasons, I have therefore concluded that Apotex' notice of allegation does -not. constitute an abuse of process. It is therefore unnecessary for me to consider the other submissions made by counsel for Schering in connection with this issue.

PART III- INFRINGEMENT

FACTS

i) the present proceeding

[81]       On April 6, 1993, Schering Canada Inc. filed four patent lists under the Regulations in connection with the medicine loratadine for tablet and liquid dosage forms containing loratadine or

Page: 33 loratadine combined with pseudoephedrine. The '230 patent and the '480 patent were listed on each of those patent lists.

[82]       By letter dated January 14, 1997, Apotex provided a notice of allegation pursuant to paragraph 5(3)(b) of the Regulations for the medicine loratadine. In its notice of allegation, Apotex alleged, in connection with the '230 and '480 patents, that no claim for the medicine itself and no claim for the use of the medicine would be infringed by its making, constructing, using or selling of loratadine or compositions containing loratadine. Apotex further alleged that, until the expiry of the'230 patent, it would "::.use only loratadine obtained from [Brantford] and made by a process not within the scope of any claim of this patent".

[83]       On March 4, 1997, Schering instituted the present application to prohibit the Minister frow. issuing a notice of compliance to Apotex in connection with loratadine or compositions containing loratadine until the expiry of the '230 patent.

ii) introduction to loratadine

[84]          Loratadine has the chemical name ll-(N-carboethoxy-4-piperidylidene)-8-chloro-6,11­dihydro-5H-benzo(5,6)cycloheptal(1,2-b)pyridine. The loratadine molecule contains the following

Page: 34

seven component parts:

[85]       The numbered parts of the loratadine molecule are as follows:

(1) pyridine ring

(2) cycloheptane ring (3) benzene ring

(4) piperidine ring

(5) carbon-carbon double bond connecting the piperidine ring to the three ring (tricyclic) system

(6) carboethoxy group (7) chlorine

[86]       Regardless of the process that is used for its manufacture, loratadine must have a pyridine ring (1), a cycloheptane ring (2) and a benzene ring (3) fused together to form a tricyclic ring system, to which a piperidine ring (4) is connected at the cycloheptane ring by a carbon-carbon double bond (5). In addition, a carboethoxy group (6) is connected to the nitrogen of the piperidine group and a

Page: 35

chlorine (7) is attached at position C8 of the benzene ring.

iii) 230 patent

[87]       The '230 patent, entitled "Antihistamines" was issued to Schering Corporation on January 10, 1984. The application for the'230 patent was filed on June 16, 1981, claiming priority based on a United States application filed on June 19, 1980. The inventor named in the patent was Frank J. Villani. The '230 patent generally relates to antihistamine compounds. The '230 patent contains product by process claims, as required at the time of the issuance of the patent by section 41 of the Patent Act, R.S.C. 1970, c. P-4.² One of the compounds described and claimed in the'230 patent is loratadine.

[88]       As' of the priority date of the '230 patent, loratadine was anew substance- and :a..-no a composition of matter not publicly known.

[89]       The '230 patent contains 17 claims. Claims 1 to 14 claim a process of making compounds, including loratadine. Claim 15 claims "[a] compound having the formula I as defined in claim 1,

² Section 41 of the Patent Act, R.S.C. 1970, c. P-4 provided as follows:

41.(1) In the case of inventions relating to substances prepared or produced by chemical processes and intended for food or medicine, the specification shall not include claims for the substance itself, except when prepared or produced by the methods or processes of manufacture particularly described and claimed or by their obvious chemical equivalents.

41.(1) Lorsqu'il s'agit d'inventions couvrant des substances préparées ou produites par des procédés chimiques et destinées à l'alimentation ou à la médication, le mémoire descriptif ne doit pas comprendre les revendications pour la substance même, excepté lorsque la substance est préparée ou produite par les modes ou procédés de fabrication décrits en detail et revendiqués, ou par leurs equivalents chimiques manifestes.

Page: 36 whenever produced by the process of claim 7 or by an obvious chemical equivalent thereof'. Claim 16 claims loratadine whenever produced by the process of claim 13 or by an obvious chemical equivalent.

[90]       For the purposes of the present proceeding, Schering relied only on claims 1, 7 and 15 of the '230 patent.

[91]       As indicated above, claim 15 claims a compound of the general formula as defined in claim 1, whenever produced by the process of claim 7 or by an obvious chemical equivalent.

[92]       Claim 1 claims a process for the preparation of compounds of the general formula I, which includes lorâtadine in the circumstances specified in the claim. In the claim I process fox"Ake preparation of a compound of formula I, a compound of formula III is reacted with a compound TY of formula IV. The reaction involves replacing the group Y' that is substituted on the nitrogen with a group Y. The group Yis defined as a "replaceable group"; T is defined as "a group capable of being eliminated together with Y' "; and Y is defined as being one of two groups, one of which is a carboethoxy group. For the present purposes, the Y' group is replaced on the piperidine nitrogen by the Y carboethoxy group.

Page: 37

[93]       Claim 7 in the '230 patent states as follows:

7.              Process according to claim l characterized in that as a starting compound is used a compound of              ,. the formula 11'

wherein X is as defined in claim 1 and Yis as defined in claim 1.

[94]       In the claim 7 process, the starting compound (II') has the fused or completed tricyclic ring system (containing the pyridine ring, the cycloheptane ring and the benzene ring), with a carbon­carbon double bond attaching the piperidine ring to the cycloheptane ring of the tricyclic ring system. In that specified starting compound, X and Y' are as defined in claim 1. In particular, Y' represents a replaceable group other than carboethoxy. In other words, Y' is not carboethoxy, but rather it is replaced by carboethoxy to produce loratadine.

Page: 38

[95]       The claim 1 process is the same as claim 7, except that the starting compound is a compound of formula III. In other words, claim 1 is broader in scope than claim 7.

[96]       The'230 patent discloses that the compounds of the invention may be prepared by methods generally known in the art, and that "...the preferred process comprises reacting a compound of the general formula III", with the addition of the carboethoxy as the last step in the process. The patent further discloses that "[t]he starting compounds of Formula III are partly known compounds available on the market, such as azaadine", and that other starting compounds may be prepared according to certain methods described in the literature, such as in U.S. Patent No. 3,326,924, Belgian Patent No. 647,043 or other analogous methods.

[97]          The examples outlined in the disclosure of the'230 patent demonstrate the process of adding the carboethoxy group to make the compound to formula I or to make loratadine. In each of those examples, the tricyclic ring system (composed of the pyridine, cycloheptane and benzene rings) is intact and is joined to the piperidine ring by the carbon-carbon double bond before the reaction to add the carboethoxy group is undertaken. In other words, according to the '230 patent, the tricyclic ring system, the piperidine ring and the carbon-carbon double bond j oining these two units are intact when the carboethoxy group is introduced to the molecule. The carboethoxy group is therefore added as the last step.

Page: 39

[98]       In relation to the preparation of loratadine, the processes disclosed in the'230 patent may-be depicted as follows:

0 ,_/C ,Q R

Page: 40 [99]    Each of the processes claimed for the production of loratadine has a precursor in which the piperidine group is already introduced into the molecule. Indeed, the entire framework for loratadine is present in the starting molecule, save and except for the carboethoxy group on the piperidine nitrogen. The reactions claimed in the'230 patent result in the substitution of the carboethoxy group, either directly or in two steps, for the atom or group Y' in the precursor. In other words, the '230 patent only claims the reaction that introduces the carboethoxy group to the intact tricyclic ring system joined to the piperidine ring by the carbon-carbon double bond. The reaction is depicted in the following diagram in which the bold line represents the bonding change in the reaction:           -

'~'^CIDCH~CH₃

[100]     In all of the processes claimed in the '230 patent, the carboethoxy cannot be attached to the piperidine nitrogen at the time the piperidine ring is joined to the tricyclic ring system. Some other

Page: 41 group must be present on the piperidine nitrogen in that reaction step. For that reason, in the processes claimed in the'230 patent, the reaction that introduces the carboethoxy group is the last step. It is-that last step, or an obvious chemical equivalent, that is claimed in the '230 patent.

iv) '480 patent

[101]     Schering applied for the '480 patent on May 13, 1986, approximately two years after the issuance of the '230 patent. The '480 patent relates to an improved process for the manufacture of various products, including loratadine. In particular, it contains six process claims for the manufacture of compounds of general formula I as defined in the patent. The essential feature of the '480 patent is the use of a superacid having a Hammett acidity function of minus 12 or lower to bring about the cyclization. The '480 patent acknowledges that the prior art processes to make compounds of formula I, including loratadine, were deficient.

v) prior art

[102]     As indicated previously, the'230 patent discloses that the compounds of the invention "...may be prepared by methods generally known in the art". The '230 patent also discloses that the starting compounds of formula III are "partly known compounds" available on the market, such as azatadine. Finally, other starting compounds of formula III "...may be prepared according to methods described in the literature", for example U.S. Patent No. 3,326,924 and Belgian Patent No. 647,043, or by analogous methods.

Page: 42

[103]     In the late 1960's, Schering obtained a number of U.S. Patents, including Nos. 3,326;9,24 (referred to in the'230 patent), 3,357,986 and 3,419,565 in respect of a number of compounds. The inventor was Frank J. Villani, the same inventor as in the'230 patent. The compounds in those patents included azatadine, as well as compounds of the same general skeletal formula as loratadine with the chlorine at the C8 position. Those compounds, in which the piperidine nitrogen bore a hydrogen or a lower alkyl group, may be depicted as follows:

R~ H_l Mê, other IOwer alkyl

[104]       In azatadine and loratadine, the substituent attached to the nitrogen of the piperidine ring is different. In azatadine, the methyl group is present. However, in loratadine, the carboethoxy group

Page: 43

replaces the methyl group. Azatadine is an intermediate in the production of loratadine.

[105]     There are also many other prior art references described in the evidence in the record. Those prior art references generally teach the compounds referred to in paragraphs 102-103 above, as well as other related derivatives, and teach the processes for making those compounds.

[106]     In all of the prior art processes, the carboethoxy group could only be added after the joinder of the piperidine ring to the tricyclics ring system. As indicated previously, it is-for that reason that the '230 patent only claims the reaction that introduces the carboethoxy group as the final step in the process. Indeed, that was the strategy employed by the Schering chemists in all of their routes.

[107]     Although a number ofprocesses were known generally in the-art, there were various problems associated with them. For example, the U.S. Patent No. 3,326,924 reveals a problem with the Schering method for placing the chlorine at the desired C8 position on the benzene ring. Furthermore, the inventors of the '480 patent discussed the deficiencies of the earlier processes in an article published in 1989, subsequent to the '230 patent.

vi) Schering's commercial process

[108]        There are nine steps involved in making loratadine. For the purposes of assessing the question of infringement, it is the last three steps in both the Schering and the Apotex processes that are

Page: 44

relevant.

[109]     In the Schering commercial process, the last three steps are the piperidine joinder, the ring closure and the carboethoxy addition. The Schering process may be depicted as follows:'

SCHEME A SCHERING

Pipaddona AddItIon

I Mo

FGng Mum

3

On the depiction, the step of "piperidine joinder" is inaccurately described as "piperidone addition".

Page: 45

[110]        In the Schèring process, the pyridine ring (A) and the benzene ring (C) are joined by- an ethylene bridge, following which the piperidine ring (D) is linked to the pyridine ring (A). The central ring, cycloheptane (B), is closed by making a carbon-carbon double bond between the carbon alpha to the pyridine ring (A) and the benzene ring (C) "...at the position para to the chloro substituent". The final step in the Schering process is the replacement of the N-methyl substituent ("methyl") for the N-ethoxycarbonyl group^-(''carboethoxy"). In the depiction of the Schering process the "COOET" in the last step means "carboethoxy".

[111]     As indicated previously, in the Schering process, the introduction or substitution of the carboethoxy group occurs after everything else has been done in terms of making the loratadine. It is the final step in making loratadine, and it is this final step; or an obvious chemical equivalenUo it, that is claimed in the '230 patent.

vii) Apotex' process

[112]     In the Apotex process, the piperidine ring already contains the carboethoxy group at the time of its joinder to the incomplete tricyclic ring system. The piperidine ring with the carboethoxy group already in place is attached to the rest of the molecule by certain chemical reactions in order to ensure that the carboethoxy group is not destroyed or degraded. The last two steps in the Apotex process, namely the piperidine joinder and the closure of the central cycloheptane ring in the tricyclic ring

Page: 46

system, may be depicted as follow:

[113]     The second last step occurs between the two molecules at the top left side of the abovenoted diagram. In the second last step, the piperidine ring with the carboethoxy group is joined to the incomplete tricyclic ring system by two sequential steps. First, intermediate 12 (i.e. the molecule on the top left side) is reacted with trimethylphosphite to form a phosphonate ester ("Arbuzov reaction"). The phosphonate ester is the molecule depicted at the bottom of the diagram. The chemical name for phosphonate ester is P(OMe),. Second, the phosphonate ester is treated with sodium hydride and N-carboethoxy-4-piperidone in a reaction known as "Homer-Emmons" ("Homer-Emmons reaction"). The Homer-Emmons reaction forms intermediate 13 (i.e. the molecule in the middle at the top

Page: 47 diagram)⁴ by joining the piperidine ring to the rest of the molecule by the required carbon-carbon double bond. The N-carboethoxy-4-piperdone is commercially available.

[114]     The last step occurs between the two molecules at the top right side of the diagram. In the last step, intermediate 13 is treated with palladium acetate to close the central cycloheptane ring of the tricyclic ring system, resulting in the formation of loratadine. The reaction in the last step, in which the central cycloheptane ring is closed by intramolecular cyclization, is known as the Heck reaction ("Heck reaction").

[115]     In short, in the Apotex process, two separate units are joined together and two separate bonds are formed: the piperidine ring with the substituted carboethoxy already in place is joined to the incomplete tricyclic ring system by a carbon-carbon double bond, and the tricyclic ring system-is completed by the closure of the central cycloheptane ring, resulting in the formation of loratadine.

viii) Apotex' evidence comparing the Schering and Apotex processes

[116] The evidence tendered by Apotex consisted of affidavits sworn by Dr. Robert Allan McClelland and Dr. Keshava Murthy.

[117]     Dr. McClelland is a professor in the Department of Chemistry at the University of Toronto.

4

Intermediate 13 is erroneously marked as "(10)" on the diagram.

Page: 48 He is considered an international expert on the mechanisms of organic and bio-organic reactions, and has received prestigious national and international awards for his research. His qualifications reveal, among other things, that his particular areas of expertise are in the area of mechanistic organic chemistry, especiallyintermediates generated in nucleophilic substitution and addition reactions, and in the area of biological and medicinal chemistry. He has published extensively in his field.

[118] `In^-his affidavit, sworn on April 2, 1996,⁵ Dr. McClelland reviewed the Schering and Apotex processes, as well as the prior art, with a view to determining whether the chemistry in the Apotex process was an obvious chemical equivalent of the Schering process. In his analysis of the actual differences in the chemistry employed in the two processes, Dr. McClelland focussed extensively on the reactions used in joining the piperidine ring to the tricyclic ring system and the closure of the central cycloheptane ring. He also raised three other areas > in which differences existed inAhe chemistry of the two processes, namely the formation of the pi or double bond connecting the piperidine ring to the tricyclic ring system, Schering's problem with the "unwanted isomer", and the different piperidine reagents used.

[119]     In analysing the reactions used by Schering and Apotex in the piperidine ring joinder and in the closure of the cycloheptane ring, Dr. McClelland noted that all of the processes successfully employed by Schering chemists to produce systems like loratadine have two common features: first,

⁵ Although the date in the jurat of Dr. McClelland's affidavit appears as "April 2, 1996", it would appear that the affidavit was sworn on April 2, 1997.

Page: 49 a Grignard reaction (a 4-piperidyl Grignard reagent) is used to join the piperidine ring unit to the tricyclic ring system, at some stage in the process; and, second, the central cycloheptane ring in the tricyclic ring system is constructed or closed using a Friedel-Crafts reaction, which is an electrophilic aromatic substitution.

[120] By way of contrast, Dr. McClelland noted that the Apotex process uses the following very different chemical reactions to perform those two transformations: first, an Arbuzov and a Horner­Emmons reaction to join the piperidine ring to the tricyclic ring system; and, second, a Heck reaction to form or close the central cycloheptane ring of the tricyclic ring system.

[121] In Dr. McClelland's opinion, the reactions used in the Schering and in the Apotex processes "function in very different ways" and "...are not chemically equivalent". In support-of his..opinian, Dr. McClelland explained the differences between the two chemical reactions used in each process. In particular, he described differences between the reactions in terms of the joinder of the piperidine ring and the closure of the central cycloheptane ring.

[122]     With respect to the joinder of the piperidine ring to the tricyclic ring system, Dr. McClelland noted that the piperidyl Grignard reagents used in the Schering reactions have a nucleophilic C4 carbon that joins to the tricyclic ring system by "donating its pair of electrons". In contrast, the N-carboethoxy-4-piperdone used by Apotex has an electrophilic C4 carbon that joins to the tricyclic

Page: 50 ring system by "accepting a pair of electrons". In highlighting the difference between the two reactions, Dr. McClelland explained as follows:             _..~~

Organic chemists classify their reagents as "electrophiles" or "nucleophiles". In an electrophilic reagent the atom involved in the bonding changes is fully or partially positively charged so that it is electron seeking. Nucleophilic reagents on the other hand have a full or partial negative charge at the atom involved in the bonding change.

[123]     Dr. McClelland illustrated the difference between the reactions used in the Schering and

Apotex processes for the piperidine ring joinder as follows:

2 - ~ nuclieophils

t

,      - slaclrophiie R

[124 ] With respect to the closure of the central cycloheptane ring in the tricyclic ring system, Dr. McClelland stated in his affidavit that the difference between the Friedel-Crafts reaction used by Schering and the Heck reaction used by Apotex "...is so great that it is difficult to imagine anyone considering these as chemically equivalent". In the Schering process, the acid added in the Friedel­Crafts reaction creates a "positively charged electrophilic center" that joins to the benzene ring. At

Page: 51 that point, the benzene ring "...would be viewed as nucleophilic". Dr. McClelland illustrated the Friedel-Crafts reaction for the process of the '480 patent as follows:             - ,_

ci

I-W Ox

Electrophilic center                N^-Aeophtltc center

X;-- Acid & some sort

[125]     In contrast, Dr. McClelland noted that the Heck reaction used in the Apotex process to close

the central cycloheptane ring "...does not involve nucleophile-electrophile interactions. The chemistry

all takes place by way of what is termed a transition metal complex". He described the chemistry

involved in the Heck reaction as follows:

In the first step of this reaction the palladium inserts into the C-Br bond, joining the carbon to the palladium. The olefin component then inserts into this bond, making the key new bond between the aryl carbon and the olefin carbon. Elimination of H-PdL₂-Br then gives the coupled product. Base is present to react with H-PdL₂-Br to regenerate the catalyst PdL₂.

Page: 52

[126]     Dr. McClelland illustrated the Heck reaction as follows:

PdL₂ + Ar 8r

^-111n^- Ar?dL_L-Br

Ar-PdL.~-Br +

if 7^,P^-~^-Pd L₂-Br t

Ar-- --C -P-d L₂-Br

H-Fd?.₂-Dr } Base .--- ,".       pdL,2 + Ba5t-H^4, * Br.

[127]     In comparing the Friedel-Crafts and the Heck reactions in the context of the closure of the central cycloheptane ring, Dr. McClelland noted two basic differences. First, in the Friedel-Crafts reaction, the catalyst interacts with only one of the reacting components by setting it up as an electrophile. In contrast, the Heck reaction catalyst "...interacts with both components and is intimately involved in the reaction where the new [carbon-carbon double] bond is formed". Second, the Friedel-Crafts reaction "...requires quite acidic conditions", whereas the Heck reaction requires "...basic conditions, usually weakly basic conditions...".

Page: 53 [128] As indicated previously, there were two other areas in which Dr. McClelland found differences in the chemistry used in the two processes, namely the formation of the pi or double.bond connecting the piperidine ring to the tricyclic ring system, and the "unwanted isomer".

[129]     In relation to the formation of the pi or double bond connecting the piperidine ring to the

tricyclic ring system, Dr. McClelland highlighted a significant difference between prior art processes

taught by'Schering and the Apotex process. In particular, he noted that, in the Schering processes that

have actually been employed, the reaction introducing the pi or double bond is carried out under

acidic conditions and "...involves loss of a water molecule...". He further explained as follows:

In the earlier Schering processes the alcohol precursor is the product of the Grignard reaction and the tricyclic ketone...; the alcohol in this case is in fact isolated as a reaction intermediate, and subsequently treated with the acid. In the Schering process "Prior Art Process H", and the improved version in the'480 patent, the alcohol is the product of the initial acid-catalyzed cyclization ofthe ketone, and the dehydration occurs spontaneously because of the reaction conditions.

[130]     In contrast, Dr. McClelland explained that, in the Apotéx process, the pi or double bond forms

in the second step in the Homer-Emmons sequence in basic conditions. Furthermore, the reaction eliminates the dimethyl phosphate anion group.

[131]     In short, he summarized the differences in the two processes in relation to the formation of the pi or the double bond by stating that "...Schering requires acidic conditions, [Apotex] requires basic conditions. Schering eliminates a water molecule, and [Apotex] eliminates dimethyl phosphate anion". Dr. McClelland illustrated the differences between the two processes in the formation of the

Page: 54

pi or double bond as follows:

Schering_process for forming_ pi bond

Page: 55

Apotex process for forming_ pi bond

CppCH p ~

CI

01

CppCH _pCH ~

[132]     In his analysis of the "unwanted isomer", a problem referred to by Schering chemists in `several of their papers, Dr. McClelland stated that there was a "basic difference in the chemistry-' used by Schering and Apotex.

[133]     The "unwanted isomer" is a problem arising "...in sequences aimed at forming the 8-chloro isomer, as is required for loratadine". In other words, the chlorine must be at the C8 point on the benzene ring of the tricyclic ring system in order to form loratadine. However, in an example given by Dr. McClelland to illustrate the problem, he noted that the electrophilic carbon can bond to both carbon a and carbon b on the benzene ring. The products from the two reactions differ as follows: if the electrophilic carbon bonds to carbon a, the chlorine is at C8 on the benzene ring (i.e. the desired

Page: 56 8-chloro isomer), and loratadine is formed; conversely, if the electrophilic carbon bonds to carbon b, the chlorine is at' C10 on the benzene ring (i.e. the unwanted 10-isomer), and loratadine is_. not formed. The problem is illustrated as follows:

PI'#dticgfroMn # Prfetfrern b

[134]     The problem experienced by Schering in relation to the unwanted isomer does not arise in the Apotex process, in that the carbon-carbon double bond formed by the Heck reaction to close the central cycloheptane ring can only form between C_a and C_a,, due to the fact that the reaction occurs specifically at the C-Br of the benzene ring. As a result, only the desired isomer is formed, with the chlorine at the C8 position on the benzene ring. The carbon-carbon double bond formed by the Heck

Page: 57

reaction is depicted below:

[135]     Finally, in dealing with the different piperidine reagents used in the two processes,

Dr. McClelland explained that the strategies adopted by Schering and Apotex were fundamentally different and not chemically equivalent. In particular, he emphasized that the Schering strategy precludes the introduction of the carboethoxy group at the step in the reaction where the piperidine ring is joined to the tricyclic ring system. As a result, it must use a piperidine reagent that contains something other than carboethoxy at the time of the joinder of the piperidine ring to the tricyclic ring system. In contrast, in the Apotex process, the carboethoxy group is already present on the piperidine ring at the time of its joinder to the tricyclic ring system.

Page: 58

[136] Dr. McClelland expressed his conclusion that the two strategies were not chemically

equivalent in the following terms:

33. As I have discussed above, the strategy employed by the Schering chemists in all of their routes is such that the piperidine nitrogen cannot contain a [carboethoxy] at that step in the reaction where the piperidine unit is attached. The piperidine reagent that is employed must have some other group present on this nitrogen in this reaction step. A subsequent reaction, or perhaps set of reactions is then required where the [carboethoxy] unit is attached to the piperidine. The strategy employed by [Apotex] on the other hand is one where the piperidine can and does have the [carboethoxy] at the time that the piperidine unit is first introduced and survives the subsequent cyclization reactions. In other words the Schering chemists must use a piperidine reagent that contains something other than [carboethoxy] and subsequently introduce the [carboethoxy]. [Apotex] starts with this group already present on the piperidine. In my opinion chemically equivalent strategies would permit similar reagents to be employed. The [Apotex] strategy is not chemically equivalent to the strategy employed by the Schering chemists.

[137]        Dr. McClelland also noted that, at the time of the'230 patent, the N-carboethoxy-4-piperidone molecule (i.e. the piperidine ring with the carboethoxy group already attached to it) and other N-carboethoxypiperidines were known compounds. As such, Schering's chemists could have developed synthetic strategies where the carboethoxy group was present on the piperidine ring at the time of its introduction in the process. However, the fact that the Schering chemists did not develop such a strategy led Dr. McClelland to the conclusion that either they did not think about it, or they dimissed it in favour of their other approaches. He therefore stated that "[i]n consequence, the [Apotex] strategy which starts with a N-carboethoxy-4-piperidone unit [piperidine ring with the carboethoxy group attached to it] cannot be a chemical equivalent".

[138]     In the conclusion of his affidavit, Dr. McClelland stated that the Apotex approach was "very

Page: 59 different" from the approach taken in the'230 patent, the'480 patent and the prior art. He expressed the opinion that the Apotex process "...also represents new, non-obvious chemistry, chemistry that is not the obvious chemical equivalent of any of the processes employed by the Schering chemists".

[139]     As indicated previously, Apotex also tendered evidence from Dr. Murthy concerning the two processes. Dr. Murthy is the General Manager of Brantford, a company controlled by Apotex. The evidence of Dr. Murthy was basically the same as the evidence of Dr. McClelland.

ix) Schering's evidence comparing the Schering and Apotex processes

[140] In response to the evidence tendered by Apotex from Dr. McClelland and Dr. Murthy, Schering filed the second affidavit of Dr. Mitchell, sworn on May 30,1997, concerning the chemistry in the Schering and Apotex processes. As indicated previously,-Dr. Mitchell is a chemist employed by one of Schering's related companies as the Presidential Fellow-Chemical Development at the Schering-Plough Research Institute. His affidavit indicates simply that he holds a degree of Doctor of Philosophy in the field of organic chemistry from the University of Exeter. His curriculum vitae was not appended to his affidavit, nor was his experience in the field of chemistry outlined.

[141]     Dr. Mitchell's second affidavit contains two sections, one entitled "Analysis of the Apotex Process", and the other entitled "Infringement". The first part of the affidavit concerning the Apotex process was relevant to the first issue in this proceeding, namely the process to be used by Apotex.

Page: 60 As a result, it is only the second part of the affidavit entitled "Infringement" that is relevant to the present issue.

[142] In comparing the Schering and Apotex processes, Dr. Mitchell described Apotex' process as a "detour process". In support of that assertion, he noted that, in its second last step, Apotex used the N-carboethoxy-4-piperdone (i.e. the piperidine ring with the carboethoxy already attached to it) as starting material. The N-carboethoxy-4-piperdone "...can be prepared in turn from the less expensive precursor N-methyl-4-piperdone", a compound "...prepared by essentially the same conditions described in Villani" (i.e. the inventor of the '230 patent). As a result, in viewing the process as starting from N-methyl-piperdone, the Apotex process "merely represents a detour version of Schering's commercial process", in which the significant difference is the point at which the methyl substituent is replaced by the carboethoxy substituent. Dr. Mitchell attached as exhibits to, his affidavit two articles describing the reaction in which N-carboethoxy-4-piperdone is derived from the N-methyl-4-piperdone.

[143]     In his affidavit, Dr. Mitchell noted that the Schering and Apotex processes "follow the same general synthetic pathway", in that "...the same bonds are formed in the same sequence to construct the skeleton for loratadine". In particular, in both processes, the method of construction of the tricyclic ring system and the joinder of the piperidine ring are effected in the same manner.' In the

'Throughout his affidavit, Dr. Mitchell erroneously referred to the piperidine ring as the "piperidone" ring. He corrected his error during his cross-examination.

Page: 61 Schering process, the last step is the carboethoxy addition in replacement of the methyl substituent on the piperidine ring. However, in the Apotex process the "exchange is done earlier", as the third last step, prior to the joinder of the piperidine ring to the tricyclic ring system. In Dr. Mitchell's opinion, it was "necessary" for Apotex to proceed in that manner; otherwise, if Apotex had used the less expensive N-methyl-4 piperidone in its synthesis, it "...would have generated the corresponding N-methyl derivative of loratadine". In other words, if Apotex had not used the piperidine ring with the carboethoxy already attached to it, it would have been required to add the carboethoxy as the last step to form loratadine. Furthermore, by introducing the carboethoxy earlier in the process, Apotex is "achieving the essence of the ['230] patent", namely, the production of loratadine.

[144]     In comparing the last three steps of each process, Dr. Mitchell described the sequence for Schering as follows: piperidine joinder', ring closing and methyl replaced by carboethoxy-,Ue described the sequence for Apotex as follows: methyl replaced by carboethoxy, piperidine joinder and ring closing. The comparison of the last three steps illustrates, in his opinion, that "the same transformations are employed in each scheme", save and except for the point at which the methyl is replaced by the carboethoxy. Dr. Mitchell depicted the sequence of the last three steps in the two processes as follows:

'In his affidavit, Dr. Mitchell used the expression "piperidone addition". Counsel agreed that the appropriate expression to be used was "piperidine joinder".

ci

I Me

Piperidine Addition

SCHEME A                             SCHEME B APOTEX O

SCHERING

Exhibit E

ci

I COOEt

I Me

COOEt Addition

Piperidine Addition

COOEt Addition

ci

Loratadine

Loratadine

Page: 63

[1451     Following his comparison of the last three steps in' each process, Dr. Mitchell observed that

Apotex had "re-ordered" the steps in the Schering process. In that regard, he stated as follows:

It is common in designing a chemical synthetic pathway to consider re-ordering of steps for a variety of reasons, including improved yields or to avoid unwanted side reactions or impurities. In my opinion, it would be obvious to a skilled chemist to consider re­ordering the sequence of chemical transformations. In essence this is what Apotex has done.

[146]     Dr. Mitchell also observed that the "type of reaction" used to transform the methyl to the carboethoxy group is the same in both processes. In particular, he noted that "[b]oth use. ethyl chloroformate as the reagent. In both cases the nitrogen is acylated to form a quaternary ammonium salt which is followed by attack of chloride on the methyl group to liberate methyl chloride and the required product".

[147]        In his conclusion, Dr. Mitchell expressed the opinion that the Apotex process "...will employ the same type of reaction claimed in the ['230] patent carried out at a different point in the synthetic pathway to make the invention, namely loratadine".

[148]        In his affidavit, Dr. Mitchell did not respond to or address in any manner the detailed analysis of Dr. McClelland concerning the differences between the chemical reactions in the two processes.

Page: 64

x) Apotex' further evidence comparing the Schering and Apotex processes

[149]        In response to the second affidavit of Dr. Mitchell, Apotex filed the second affidavit-of Dr. McClelland, sworn on June 16, 1997.

[150]     In his second affidavit, Dr. McClelland addressed Dr. Mitchell's statement that the Apotex process was a "detour version" of Schering's process, when "viewed as starting from N-methyl-4­piperdone". In particular;--Dr. McClelland referred to the reaction described as "COOET [carboethoxy] Addition" in the depiction "Scheme B Apotex" in Dr. Mitchell's affidavit. That depiction is reproduced in paragraph 144 above.

[151]     Despite the fact that Dr. Mitchell referred to and depicted that reaction as forming part of the Apotex process, Dr. McClelland stated that Apotex never performs such a reaction, as the       ---W; < N-carboethoxy-4-piperdone molecule (i.e. the piperidine ring with the carboethoxy attached to it) is commercially available. Indeed, it was commercially available "as early as 1976".

[152]     Dr. McClelland also addressed Dr. Mitchell's statement that Apotex' starting material, the N-carboethoxy-4-piperdone molecule, was prepared by "essentially the same conditions described in Villani", and the two articles attached by Dr. Mitchell as exhibits to his affidavit in support of this statement. In response, Dr. McClelland noted that Dr. Mitchell had failed to point out that "there are

Page: 65 other very different reactions that can be employed "to make N-carboethoxy-4-piperidone".s Furthermore, Dry McC1elland characterized Dr. Mitchell's statement that the precursor N-methyl-"4­pieridone is "less expensive" as being "highly misleading", and he provided a detailed explanation to support his position.

[153]     In relation to the distinction between "piperidone" and "piperidine ring", Dr. McClelland pointed out that the term "-'[p]pperidone' designates a compound that has a piperidine ring in which one of the carbons is present as C=O". Furthermore, there are "...three piperidone ring systems,-_'A­piperidone','3-piperidone' and'2-piperidone"'. The Apotex process uses a 4-piperidone, to which the carboethoxy is attached, but the Schering process does not use such a compound. Rather, the Schering process uses a "4-chloropiperidine". Those compounds may be depicted as follows:

⁸ Dr. Mitchell agreed in his cross-examination that there were different ways to prepare the N-carboethoxy-4­piperidone other than from the N-methyl-4-piperidone. However, he stated that this was the "most obvious way to prepare that compound".

Page: 66

a'4-Qipeddone` a I-p[peridone" a T-pipkdonem                                a ¹44iorop[pOidiria"

[154]     Dr. McClelland further stated that Dr. Mitchell failed "to recognize" in his analysis other "important differences" between the two processes, and that he failed to consider the actual chemistry involved in the reactions. Dr. McClelland provided the following seven examples in support of that statement.

[155]     First, Dr. McClelland noted, as mentioned previously, that the Apotex process does not perform a reaction introducing the carboethoxy group onto the piperidine ring; rather, it uses a commercially available N-carboethoxy-4-piperdone molecule.

[156]     Second, he stated that Dr. Mitchell failed to compare the reactions in the two processes resulting in the formation of the carbon-carbon double bond between the piperidine ring and the central cycloheptane ring in the tricyclic ring system. The carbon-carbon double bond is depicted as

Page: 67

follows:

[157]     In Dr. McClelland's opinion, the carbon-carbon double bond is "an essential aspect of the structure of loratadine, and^- is introduced in a different way at different steps of the Schering and Apotex processes". To illustrate his point, Dr. McClelland referred to the depiction of the two processes in Dr. Mitchell's affidavit, as reproduced in paragraph 144 above. In the Schering process, the carbon-carbon double bond is introduced in the "ring closure" step; conversely, in the Apotex process, it is introduced in the step "piperidine joinder". In the "ring closure" step of the Apotex process, the carbon-carbon double bond is present "in the starting material and in the product".

[158]       Third, and perhaps most importantly, Dr. Mitchell failed to consider in his analysis "the actual chemistry that is carried out, especially the chemistry involved in the reactions" illustrated in the processes reproduced in paragraph 144 above, which Dr. McClelland found were not chemically

Page: 68 equivalent. In examples four to seven in paragraphs 159 to 162 below, Dr. McClelland summarizes the areas in which, in his opinion, Dr. Mitchell did not consider the actual chemistry,.thereby failing to recognize important differences between the two processes.

[159]     Fourth, in relation to "piperidine joinder", the Schering process uses a Grignard reaction, forming a single bond that is converted to the requisite carbon-carbon double bond at a later stage in the sequence. Conversely, the Apotex process uses a Homer-Emmons reaction, which introduces simultaneously the carbon-carbon double bond. In Dr. McClelland's opinion, those are not equivalent chemical reactions.

[160]     Fifth, in relation to "ring closure", Schering performs the reaction using a Friedel-Crafts reaction, and Apotex uses a Heck reaction. As outlined in the summary of Dr. McClelland's first affidavit, in paragraphs 125 to 128 above, those are "very different" chemical reactions. There is also the "important difference with respect to the manner in which the carbon-carbon double bond is handled", as described in the second example in paragraphs 156-157 above. In the Schering "ring closure" step, the Friedel-Crafts reaction simultaneously forms the carbon-carbon double bond, and in the Apotex process, this double bond is "already present in the starting material".

[161]     Sixth, in relation to the "carboethoxy addition", Schering adds the carboethoxy group as its last step, after the joinder of the piperidine ring to the tricyclic ring system. Apotex does not perform

Page: 69 such a step since the N-carboethoxy-4-piperidone, in which the carboethoxy is already attached to the piperidine ring, is commercially available. However, even if Dr. McClelland were to accept Dr. Mitchell's view that N-methyl-4-piperdone is the precursor of N-carboethoxy-4-piperidone, the reactions used in the two processes "...cannot be considered chemically equivalent in terms ofthe way in which they operate in a consideration of the overall sequence". In that regard, he noted that Schering must add the carboethoxy group "at an advanced stage" in its overall process. However, Apotex can start with the carboethoxy group already on the piperidine ring due to the "very different [chemical]reactions" "that it uses. With respect to Dr. Mitchell's statement that the Apotex process was merely a "detour" route, Dr. McClelland disagreed. In that regard, he stated as follows:

If the Apotex process were merely a detourroute of the Schering process, then surely one could imagine altering the order of the steps in the Schering process, so that the carboethoxy group is introduced to the piperidine ring before the latter is joined to the rest of the molecule. This is not possible, and indeed was recognized as such by the Schering chemists .... In my opinion, chemically equivalent strategies would allow chemically equivalent reactions to be carried out at similar steps in the sequence. This is clearly not the case here.

[162]     Seventh, in relation to the introduction of the carbon-carbon double bond, Dr. McClelland

noted that Dr. Mitchell had failed to consider that the reactions resulting in the formation of the bond in the two processes are "chemically different".

[163] Accordingly, Dr. McClelland concluded, on the basis of those seven examples, that Dr. Mitchell failed to recognize important differences in the chemistry used in the two processes.

Page: 70

[164]     Dr. McClelland also addressed other important matters in his second affidavit.

[165] With respect to Dr. Mitchell's assertion that Apotex substituted the carboethoxy for the methyl at an earlier stage, prior to the joinder of the piperidine ring, Dr. McClelland reiterated that Apotex did not perform such an exchange. However, even if Apotex did perform such a step, "...the overall sequences cannot be considered as equivalent because of the restrictions of the Schering process as to the actual timing of this reaction".

[166]     Dr. McClelland also responded to Dr. Mitchell's related assertion that Apotex was required to substitute the carboethoxy group for the=methyl group-at an early stage, or-that it would have generated, as did Schering, the N-methyl derivative of loratadine. In that regard, he noted that, given the cost, r o chemist would ever use N-methyl-4-piperdone in place of N-carboethoxy-4-piperidone when the final product requires the presence of the carboethoxy group, unless the synthetic route would not tolerate the addition of the carboethoxy group at some stage, as is the case with the Schering process. He also noted that "[w]ith the availability of N-carboethoxy-4-piperidone from a chemical supply house and a synthetic strategy that allows the use of this material, no chemist would consider using a different starting material".

[167]     With respect to Dr. Mitchell's assertion that "the same bonds are formed in the same sequence to construct the skeleton for loratadine", Dr. McClelland labelled this statement as "incorrect" for two

Page: 71 reasons. First, Schering makes the bond between the carboethoxy group and the piperidine nitrogen as the last step in the sequence. Apotex does not make that bond, but rather uses as starting material the commercially available piperidine ring with the carboethoxy already attached to it. However, even if it were to be assumed that Apotex does make that bond, it would not be "in the same sequence" as in the Schering process. Second, the carbon-carbon double bond is formed at different steps in the two processes.

[168]     Dr. McClelland also labelled as "incorrect" Dr. Mitchell's statement that "the Apotex and Schering processes follow the same general synthetic pathway". In particular, he noted that "[i]f the general synthetic pathway employed by Schering were the same as the one employed by Apotex their strategy surely could be adapted to allow an N-carboethoxypiperidine unit to be introduced intact: That is not the case".

[169]     Dr. McClelland also considered Dr. Mitchell's depiction of the two processes, as reproduced in paragraph 144 above, and his statement that "the same transformations are employed in each scheme with the difference being when the exchange of the methyl to carboethoxy is done". In response, Dr. McClelland stated that it "...is not only a vast oversimplification requiring a considerable stretch of the imagination, it is wrong". In support of that statement, Dr. McClelland explained, in relation to the piperidine joinder, that both the Schering and Apotex transformations

Page: 72 "actually involve three chemical operations", summarized as steps (i),(ii) and (iii) as follows:

	Schering	Apotex
Step (i)	Formation of Grignard reagent	Arbuzov reaction
Step (ii)	Addition of Grignard	Deprotonation
	reagent to C=N
Step (iii)	Hydrolysis	Condensation

[170]     Dr. McClelland described the three steps in the two processes as follows:

... In step (ii) this Grignard reagent is added to the carbon-nitrogen triple bond attached to the pyridine ring. This forms the magnesium salt of an imine, and in step (iii) this is hydrolyzed to a ketone. In the Apotex process, step (i) is an Arbuzov reaction in which the CH_IC 1 attached to the pyridine ring is converted to a phosphonate ester. Step (ii) is a deprotonation forming a phosphonate-stabilized carbanion. In step (iii) this carbanion is reacted with N-carboethoxy-4-piperidone, forming in one operation the compound with the C=C and a diethyl phosphonate anion. This transformation would be referred to as a condensation.

[171]     In short, Dr. McClelland stated that the abovenoted sequences are "certainly not equivalent". Furthermore, Dr. McClelland reiterated that Dr. Mitchell had entirely omitted "to consider whether the transformations are occurring with the same chemistry". In that regard, he stated that the Friedel­Crafts reaction used in the ring closure of the Schering process is not the "same transformation" as the Heck reaction used in the ring closure of the Apotex process. Similarly, the Grignard reaction used to join the piperidine ring in the Schering process is not the "same transformation" as the Horner-Emmons reaction employed by Apotex.

Page: 73 [172]    As a "general comment", Dr. McClelland stated that, in his opinion, Dr. Mitchell "...examined the ^-processes superficially and given such superficial examination he concluded that the two processes are equivalent". Furthermore, Dr. Mitchell's conclusion that the "same transformations are employed", in the opinion of Dr. McClelland, "...neglects the fact that the sequences use very different reactions", and that they accomplish other key transformations, such as the carbon-carbon double bond and the carboethoxy placement "in very different ways".

[1731       Finally, Dr. McClelland characterized Dr. Mitchell's statement that Apotex had "re-ordered" the steps in the Schering process as "incorrect", on the basis that it is not possible to re-order the sequence in the Schering process with the carboethoxy group present on the piperidine ring at-the time of joinder to the rest of the molecule. To overcome that problem, Apotex has developed;"a different synthetic strategy" that permits it "to employ as a reagent a piperidine derivative with the carboethoxy group present on the molecule".

[174]     In the concluding portion of his second affidavit, Dr. McClelland provided the following

overview of his response to Dr. Mitchell's affidavit:

Conclusions

23. In arriving at his conclusions that the Apotex process is the same as the Schering process, in particular of the process of Canadian patent [sic];

(i) Dr. Mitchell invents a reaction that is not part of the Apotex process.

(ii) Dr. Mitchell fails to consider the introduction of one of the key bonding arrangements of loratadine, namely the C=C double bond.

Page: 74

(iii) Dr. Mitchell provides broad general labels (some of which are incorrect) for transformations, and makes no attempt to address the actual chemistry that is being done ...

(iv) Dr. Mitchell fails to consider that the Schering process ... and indeed all of the patented and published Schering processes, cannot be reordered so as to have an N-carboethoxypiperidine as a starting material.

(v) Dr. Mitchell fails to consider that Schering obtained a later patent [the '480 patent] for the preparation of loratadine ... Dr. Mitchell's comments with respect to the Apotex process apply equally as well to the process of this patent, and yet Schering must have considered this inventive since they applied for a patent.

[175]     Following that summary, Dr. McClelland reiterated his opinion that the Apotex process

"...represents new, non-obvious chemistry that is not the obvious chemical equivalent of any of the processes employed by the Schering chemists in [the '230 patent]."

[176]     During the course of Dr. McClelland's cross-examination, counsel for Schering presented him with two hypothetical processes, marked as Exhibits 2 and 3 to the cross-examination. For ease of reference, those two hypothetical processes, together with Dr. Mitchell's depiction of the Apotex process, are reproduced as follows:

Page: 75

cl

cl

Carboethoxy                      Piperidine

Substitution                     Joinder

1

Piperidine Joinder

CH 2C'

cl

C1

Piperidine                       Carboethoxy                     Ring

Joinder                          Substitution                    Closure

COOEt

Cl

C1

C1

Ring                           Ring

Closure                        Closure

Carboethoxy Substitution

COOEt

COOEt

COOEt

APOTEX PROCESS                   Exhibit 3                         Exhibit 2

Page: 76

[177]     In his cross-examination, Dr. McClelland agreed that the hypothetical process in Exhibit 2, as depicted above, would literally infi^-inge the '230 patent, in that the last step is the same as that claimed in the patent. He also agreed that the hypothetical process in Exhibit 3 was chemically equivalent to Exhibit 2, and that the types of reactions used for the piperidine joinder and the ring closure are "the same type of reactions" as in the Apotex process. However, in comparing Exhibit 3 with the Apotex process, Dr. McClelland disagreed with the suggestion of Schering's counsel that "the substance of the transformation in each is very similar", and that the "only difference" is the order in which the reactions are done. In that regard, Dr. McClelland noted that Apotex does not do the carboethoxy substitution "at an advanced stage in the synthesis on a complex molecule" (i.e. Apotex uses a commercially available product in which the carboethoxy is already attached to the piperidine ring). However, even if Apotex did the carboethoxy substitution in the manner suggested by Schering's counsel, Dr. McClelland stated that the conversion of the N-methyl-4-piperidine to the carboethoxy "...is not the chemical equivalent of taking a molecule that has got piperidine and double bonds and doing the same reaction. It is not the chemical equivalent". He also characterized the stage at which the carboethoxy substitution is effected as being "a major difference", in that in Dr. Mitchell's depiction of the Apotex process, it is done "on a simple molecule, the N-methyl-4­piperidone", and in Exhibit 3 it is done on a molecule after all of the rest is assembled. In Dr. McClelland's view, "[t]hat is chemically different".

Page: 77 [178]    Counsel for Schering also questioned Dr. McClelland as to whether the bond made in the carboethoxy substitution reaction "ends up being the same bond in loratadine". Dr. McClelland agreed that it is "ultimately that bond in loratadine". However, he noted that the matter cannot be examined only in terms of the "end", but rather that the entire process must be examined in order to assess chemical equivalence. Dr. McClelland agreed with the suggestion that the carboethoxy substitution in Exhibit 3 is the "same type of reaction" as in the Apotex process, if one accepts Dr. Mitchell's position that Apotex performs that reaction in its process.

[179]     During the course of his cross-examination, Dr. McClelland reiterated the importance of

assessing the overall strategy underlying a chemical process. In that regard, he noted that:-. _._.

[w]hen one is talking about general synthetic strategy, one is looking at not just the joining of the various units together, but how those units are joined, so that the synthesis flows. You can join the piperidine to a carbon in that position, and then it would be a dead end, because if you don't have the right other functional groups that are present, you can't go on to the next step.

[180]     He also noted that organic chemists discuss a "synthetic pathway" "...in terms of the functional

groups that are present, and the pathway that is followed to join those functional groups in the appropriate way".

[181] Dr. McClelland was also questioned during his cross-examination concerning "retrosynthetic pathways". In response, Dr. McClelland testified that "retrosynthetic analysis" involves "...looking at the molecule and working backwards, envisaging the type of chemistry..." that can be done to make

Page: 78

a bond. The chemist then imagines the reaction "in a forward direction" to determine whether the chemistry is reasonable; if it is-not reasonable,, that pathway is discarded. In the context._of retrosynthetic analysis, Dr. McClelland explained that chemist must "...look at the whole pathway that emerges..." to determine whether the product can be made.

[ 182]    There is evidence in the record that I have not summarized. However, in arriving at my decision in this matter, I have read and considered all of the evidence tendered by the parties.

ISSUE

[183]     The question to be determined is whether Apotex' allegation of non-infringement i,~01justified.

ANALYSIS

[184]     In determining whether Schering has established, on a balance of probabilities, that Apotex' allegation of non-infringement is not justified, the evidence tendered by Schering and Apotex on the question of infringement must be considered and weighed. As indicated previously, Apotex has relied primarily on the expert evidence of Dr. McClelland to establish that its process for the manufacture of loratadine is not an obvious chemical equivalent of the Schering process in the '230 patent. Dr. McClelland is an internationally recognized expert on the mechanics of organic and bio-organic reactions, with particular expertise in mechanistic organic chemistry, especially intermediates

Page: 79 generated in nucleophilic substitution and addition reactions. Schering has relied on the expert evidence of Dr. Mitchell, an employee of one of its related companies. However, Dr. Mitchell's qualifications are set out in skeletal form in his affidavit, and there is no indication of any of his areas of expertise.

[185]     A review of the evidence in the record indicates that, in all respects, Dr. McClelland's evidence was very detailed and cogent. In his first affidavit, Dr. McClelland outlined in painstaking and technical detail his analysis in support of his conclusion that the Apotex process was "very different" from the Schering process, and that it represented "...new, non-obvious chemistry that is not the obvious chemical equivalent..." of the Schering process. Among other things, Dr. McClell            i explained that the strategies used in the two processes were not chemically equivalent, for various reasons. In particular, he explained that the strategy adopted by Schering precluded the introduction of the carboethoxy group on the piperidine nitrogen at the time of the joinder of the piperidine ring to the tricyclic ring system, as it would be destroyed or degraded by the use of the Grignard reagent. He further explained that the reactions used in the Schering process, namely the Grignard and Friedel­Crafts reactions, were not chemically equivalent to those used in the Apotex process, namely the Arbuzov followed by the Homer-Emmons reaction and the Heck reaction. In all respects, his evidence was compelling, detailed and cogent, and it cried out for a meaningful reply. However, Dr. Mitchell's affidavit in response was superficial in the extreme and failed to address virtually all of the substantive points raised by Dr. McClelland. Furthermore, Dr. McClelland delivered a devastating

Page: 80 reply affidavit to the evidence of Dr. Mitchell in which he rebutted, in a persuasive and convincing manner, all of the points raised. Finally, Dr. McClelland's evidence was not undermined in any significant manner in cross-examination. In the circumstances, I have no hesitation in stating that I prefer the evidence of Dr. McClelland to the evidence of Dr. Mitchell, and I have accorded it much greater weight. In weighing the evidence of the two experts, I have also considered that Dr. McClelland is an independent expert who is internationally recognized in an area of chemistry directly relevant to the-facts-of the present case, whereas Dr. Mitchell is a chemist employed by one of Schering's related companies whose qualifications and expertise are not documented in the record.

[186] - Given my acceptance of the evidence of Dr. McClelland, I have determined that the Apotex process is not chemically equivalent to the Schering process. I have therefore concluded that Schering has failed to establish, on a balance of probabilities, that Apotex' allegation of non-infringement is not justified. In the circumstances, it is unnecessary for me to consider the question of obviousness. In arriving at my decision, I have not relied on the prior art to interpret or limit the scope of the claims of the '230 patent.

DECISION

[187]     The application is dismissed with costs.

D. McGillis

Judge

OTTAWA June 25, 1999

FEDERAL COURT OF CANADA

TRIAL DIVISION

NAMES OF SOLICITORS AND SOLICITORS ON THE RECORD

COURT FILE NO.:                     T-366-97

STYLE OF CAUSE:                    SCHERING     CANADA      INC.     and      SCHERING CORPORATION AND APOTEX INC. and THE MINISTER OF HEALTH

PLACE OF HEARING:                OTTAWA, ONTARIO

DATE OF HEARING:                  April 26, 1999

JUDGMENT:                              The Honourable Madame Justice McGillis

DATED:                                     June 25, 1999

APPEARANCES:

Mr. Anthony Creber

Ms. Jennifer Wilkie                                                            FOR THE APPLICANTS

Mr. Harry Radomski

Mr. Ivor Hughes                                                                FOR APOTEX INC.

SOLICITORS OF RECORD:

Gowling, Straty & Henderson

Ottawa, Ontario                                                                 FOR THE APPLICANTS

Goodman, Phillips & Vineberg

Toronto, Ontario                                         -                       FOR APOTEX INC.