Implementation of CETA in Canada

Transcription

1 Implementation of CETA in Canada An Opportunity to Improve Pharmaceutical Patent Litigation March 2017 Julie Desrosiers VANCOUVER CALGARY TORONTO OTTAWA MONTRÉAL QUÉBEC CITY LONDON JOHANNESBURG

2 Introduction With the recent approval of the Comprehensive Economic and Trade Agreement ( CETA ) by the European Union, we are now closer than ever to the shaping of a new patent litigation system for Canada. In this regard, the introduction of Bill C-30 in Canada is a positive first step towards a new balanced and efficient patent linkage system. This article introduces Canada s patent linkage system under the Patented Medicines (Notice of Compliance) Regulations as it was first adopted in We provide a detailed analysis of the current system and suggestions as to the form the system may take following the amendments proposed in Bill C I. The Advent of the Patented Medicines (Notice of Compliance) Regulations Pharmaceutical products provide customers with treatments and cures for various illnesses and increase life quality and expectancy. It is critical that incentives for the development of new products be maintained in Canada since research and development is arduous, risky, costly and unpredictable. Innovations in the pharmaceutical field often bring important benefits to Canadians. Pharmaceutical companies must be encouraged to spend money and time to seek approval for new products in Canada. They will only do so if they feel that their innovations are protected by Canadian laws and that the judicial system in place is fair in its determination of patent infringement and validity. On the other hand, the prices of the drugs sold by innovators are sometimes considered high. These prices impact not only customers in general but also provincial and federal governments, private health plans, employers, patients, and others. Generic manufacturers can be part of the solution to this problem since their products can provide costs savings. The introduction of generic products to the market must be done fairly and only when the patent of the innovator is expired or successfully challenged in a just manner. In 1993, to meet its obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights 2 and the North American Free Trade Agreement 3, Canada repealed its compulsory licensing regime in favour of a new patent linkage system inspired by the American system under the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act. This Canadian patent linkage system ( the Canadian system ) was structured under the Patented Medicines (Notice of Compliance) Regulations, 4 as amended from time to time ( the Regulations ). 5 At its core, the Canadian system was created with the purpose of balancing the patent rights of pharmaceutical innovators and the rights to market entry of generic manufacturers. Put differently, the linkage mechanism between the patent status of a drug and approval of a generic version of the drug was to give effective enforcement of patent rights, while at the same time ensuring that generic drugs can 1 This is an update to the article first published in June U.N.T.S Can. T.S No. 2. (SOR/93-133). See Bristol-Myers Squibb Co. v. Canada (Attorney General), [2005] 1 SCR 533, 2005 SCC 26. 2

3 enter the market as soon as possible. 6 This was to be achieved through an early working exception for the generic drug manufacturer combined with a statutory stay to ensure that this exception was not abused. However, this mechanism failed to deliver. The early working exception was abused and the statutory stay did little as a safeguard against that abuse. Despite their competing policy objectives, neither innovators nor generics can be considered in isolation since the intended policy objective is only achieved when the two operate in a balanced fashion. 7 This has been described as somewhat of an unhappy union. 8 The Canadian system is somewhat unique compared to patent linkage systems in other jurisdictions, such as the United States and South Korea. In Canada, proceedings under the Regulations are summary in nature and the resulting decision is limited to prohibiting the Minister of Health from issuing a notice of compliance to the generic drug manufacturer. It is not an action for patent infringement or impeachment, unlike in most other jurisdictions. Therefore, the remedy is essentially administrative in nature and is in addition to those set forth in the Patent Act for infringement/impeachment. The Canadian system has often been criticized by many of its stakeholders. The innovative pharmaceutical industry, the generic manufacturing industry, Canadian courts and legal practitioners have all identified numerous failings within the Canadian system. Some of these failings include: 1. Summary nature of proceedings. 2. No predictability and stability. 3. No res judicata. 4. No right of appeal for the innovator. 5. Multiple proceedings concerning the same patent(s). 6. Dual litigation. 7. Risk of contradictory judgments. 8. Reversal of the usual order of the evidence. 9. No right of reply. 10. Evidence presented out-of-court. 11. Presumption of validity not always considered to its full extent. 12. Excessive award of damages based on Section Limitation on the type of patents that can be put on the patent list Regulatory Impact Analysis Statement, Canada Gazette Part II, Vol. 132, No. 7, p. 1057(1998). Regulatory Impact Analysis Statement, Canada Gazette Part II, Vol. 140, No. 21, p (2006); Regulatory Impact Analysis Statement, Canada Gazette Part II, Vol. 132, No. 7, p (1998); Regulatory Impact Analysis Statement, Canada Gazette Part II, Vol. 127, No. 6, p (2006). Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare)(1994), 55 C.P.R. (3d) 302 (FCA) at

4 A few of these issues have been addressed by CETA, namely the right of appeal of innovative companies. In light of the Canadian government s ratification of CETA, we hope that the government will take this opportunity to review the Canadian system. We want to provide a new perspective for a better patent linkage system in Canada. In trying to elaborate a better patent linkage system, we have proposed solutions that take into consideration the following: 1. Increase predictability and consistency in the way proceedings are tried. 2. Reduce cost of litigation. 3. Provide a legitimate right of appeal to innovators. 4. Eliminate dual litigation. 5. The proposed solutions should be easily implemented within our existing judicial system. 6. Some if not all of the proposed changes should be somehow acceptable to both innovators and generic companies. II. The Failings of the Current Canadian System A. Ineffective Adjudication of Patent Rights The Canadian system was originally influenced by the American system described in the Drug Price Competition and Patent Term Restoration Act of 1984 (commonly known as the Hatch-Waxman Act). 9 While an automatic stay is provided under both the Regulations and the Hatch-Waxman Act, the similarities end there. The Canadian system lacks some of the important features of an efficient balancing regime, such as finality and predictability. The system in its current state does not fulfill its purpose, which is to provide a balance between the enforcement of pharmaceutical innovator s patent rights and generic market access. The failings of the Canadian system are readily apparent. It is the only regime in the world where the decisions are rendered as a result of proceedings which are intended to be summary in nature with all the limits inherent thereto. For example, the summary nature of the proceedings severely limits the reach of the evidence presented before the Court. Moreover, proceedings under the Regulations have evolved to become all but summary. They are best described as summary trials or mini-trials in which the Court is asked to decide complex scientific, factual and legal issues, consider the opposing views of sophisticated experts, deal with complex issues of law in an expedited fashion, all this without having the benefit of hearing the witnesses and assessing their credibility. 10 This is done on the basis of evidence with limited reach, resulting in decisions that sometimes have little to no predictability or finality. Canadian courts have commented on the lack of finality and predictability resulting from decisions made under the Regulations. 11 In the proceedings under the Regulations, the usual order of the evidence is often reversed, at least partly. For example, in these proceedings, the innovator presents its evidence 9 The Drug Price Competition and Patent Term Restoration Act (Public Law ). 10 Amgen Canada Inc. v. Apotex Inc., 2015 FC 1261 at para Sanofi-Aventis Canada Inc. v. Novopharm Ltd., [2008] 1 FCR 174, 2007 FCA

5 first, even if the allegation is one of invalidity. In actions, the generic drug manufacturer who attacks the patent presents its evidence first as it bears the burden of proof, which makes more sense. Furthermore, in proceedings under the Regulations, the evidence is limited to affidavits and cross-examinations which occur out-of-court, severely impairing the parties and the Court s ability to gather relevant evidence and to properly adjudicate complex issues. The direct cause of dual litigation is the fact that judgments rendered under the Regulations seek only to prohibit the Minister of Health from issuing a notice of compliance to the generic drug manufacturer. They do not determine the validity of the patents at issue. This plagues the Canadian system, results in inefficacy and is very costly for all stakeholders and burdensome to the Court. The system fails to provide a predictable and effective adjudication of patent rights. B. Overflow and Spread of Unnecessary Litigation The Canadian system was initially designed to streamline the litigation process. 12 It actually has had the opposite effect. The Canadian system has, in fact, created a ripe litigation arena where pharmaceutical innovators and generic drug manufacturers engage in an endless stream of litigation before Federal and Provincial courts. The same patent can give rise to at least three rounds of litigation before the Federal courts (s. 6 applications, s. 8 actions and infringement/impeachment actions). The Canadian system has also resulted in litigation before the Provincial courts in Ontario and British Columbia on an outstanding number of issues, including treble damages, unjust enrichment, accounting of profits and consumer class actions. 13 The Federal Court has stated that the sheer number of cases under the Regulations and related actions under the Patent Act have put enormous pressure on the Court s resources. 14 The Courts, both Federal and Provincial, describe the Canadian system as a minefield for litigants and counsel creating litigation wars between pharmaceutical innovators and generic drug manufacturers. 15 In one particular section 8 case, the Court remarked that the just, most expeditious and least expensive determination of proceedings was simply not a realistic objective. 16 Approximately 160 different pharmaceutical drugs have been subject to litigation under the Regulations since their inception. 17 At least thirty of these drugs have also been subject to further litigation under the Patent Act. The dual litigation cases involved, on average, at least four generic manufacturers. 18 Since 12 Regulatory Impact Analysis Statement, Canada Gazette Part II, Vol. 132, No. 7, p (1998). 13 See for example: Apotex Inc. v Schering Corporation, 2016 ONSC 3407; Apotex Inc. v Eli Lilly and Company et al., 2015 ONSC 5396; Apotex Inc. v. Eli Lily and Company, 2015 ONCA 305; Low v. Pfizer Canada Inc., 2015 BCCA 506, leave to appeal to SCC refused (Docket No ). 14 See Sanofi-Aventis Canada Inc. v. Novopharm Ltd., [2008] 1 FCR 174, 2007 FCA 163 at para 37; Amgen Canada Inc. v. Apotex Inc., 2015 FC 1261 at para 15; Pfizer Canada Inc. v. Canada (Health), 2008 FC 500 at para Apotex Inc. v. Merck & Co. Inc., 2008 FC 1185 at para 39, varied in part 2009 FCA 187 Pfizer Canada Inc. v. Canada (Minister of Health), 2008 FC 500 at para 19; Apotex Inc. v. Schering Corporation et al., 2016 ONSC 3407 at para Apotex Inc. v. Pfizer Canada Inc., 2014 FC 876 at para Based on the information compiled at 18 Based on the information compiled at 5

6 the adoption of the Regulations, more than 800 files have been opened in the Federal Court. 19 The system is a nightmare for judges who have to consider conflicting judgments concerning the same patent in proceedings under the Regulations and the Patent Act as well as multiple patents. 20 Moreover, judges often have to consider thousands of pages of transcripts and exhibits without having the benefit of hearing witnesses and assessing their credibility. In terms of the duration of hearings in multiple litigation cases, a complete cycle of litigation for a given molecule before the Federal Courts required on average more than 30 days of hearing in addition to the time spent out-of-court to cross-examine witnesses in these summary PM(NOC) applications. In these cases, the section 8 portion accounted for half that duration (at 15 days). A selection of cases is listed below: 21 Docket Parties to the Litigation Molecule Days Proceedings T T T T T T A T T T T T AstraZeneca Canada Inc. Apotex Inc. AstraZeneca Canada Inc. Apotex Inc. Pfizer Canada Inc. Apotex Inc. Abbott Laboratories Limited Apotex Inc. Pfizer Canada Inc. Apotex Inc. Sanofi-Aventis Canada Inc. Teva Canada Limited Omeprazole 30+ PM(NOC) Patent Section 8 Esomeprazole 30+ PM(NOC) Patent Section 8 Latanoprost 30+ PM(NOC) Patent Section 8 Clarithromycin 30+ PM(NOC) Patent Section 8 Atorvastatin 35+ PM(NOC) Section 8 Ramipril 30+ PM(NOC) Patent Section 8 Another example illustrating the burden of litigation is the case commonly known as Plavix. This patent case was subject to two appeals to the Supreme Court of Canada pertaining to: (1) an application for prohibition filed in 2003; and (2) a patent action filed in Some judgments found that the patent was 19 Based on the information compiled at 20 See Sanofi-Aventis Canada Inc. v. Novopharm Ltd., [2008] 1 FCR 174, 2007 FCA 163 at paras ; Sildenafil (Pfizer Canada Inc. v. Apotex Inc., [2009] 4 FCR 223, 2009 FCA 8; Teva Canada Ltd. v. Pfizer Canada Inc., [2012] 3 SCR 625, 2012 SCC 60); Combigan (Allergan Inc. v. Canada (Health), 2011 FC 1316; Allergan Inc. c. Canada (Health), 2012 FC 767 rev d 2012 FCA 308); Plavix (Apotex Inc. v. Sanofi-Synthelabo Canada Inc., [2008] 3 SCR 265, 2008 SCC 61; Apotex Inc. v. Sanofi-Aventis, 2011 FC 1486 rev d 2013 FCA 186); Latanoprost (Apotex Inc. v. Pfizer Canada Inc., 2011 FCA 236; Pharmascience Inc. v. Pfizer Canada Inc., 2011 FCA 102). 21 Based on the information compiled at 6

7 valid while in another the patent was found to be invalid. 22 All in all, the Plavix case took 11 years to resolve, ending with Apotex s discontinuance of its appeal before the Supreme Court on November 3, C. Undue Statutory Damages Against the Legitimate Enforcement of Patent Rights The statutory damages scheme prescribed under section 8 of the Regulations is available to generic drug manufacturers following, inter alia, the successful outcome of the summary proceedings. Specifically, section 8(1) reads as follows: If an application made under subsection 6(1) [Right of Action] is withdrawn or discontinued by the first person or is dismissed by the court hearing the application or if an order preventing the Minister from issuing a notice of compliance, made pursuant to that subsection, is reversed on appeal, the first person is liable to the second person for any loss suffered during the [specified] period [ ]. Section 8 was introduced in the original version of the Regulations in However, section 8 matters were properly put before the courts only recently, after the section was materially amended in 1998 and The first decisions awarding damages were issued in The Supreme Court of Canada ruled on the first section 8 matter on April 20, 2015, but the decision from the bench on the day of the hearing left many issues unresolved. 24 The 1998 amendments to section 8 were designed to specify the circumstances in which the generics could be awarded damages or profits and the relevant factors that might be taken into account in this assessment. 25 The 2006 amendments removed the term profits from the wording of section 8. The scheme under section 8 has been described by the Court as a reflection of the normal rules in civil litigation governing the operation of interlocutory injunctions. 26 The purpose of section 8, as is the case with injunctions, is to return the enjoined party to the position it would have been in had the injunction not been granted, nothing more (assuming the enjoined party is ultimately successful). 27 Its purpose is only to compensate the generic drug manufacturer for the loss suffered. 28 This necessarily implies that there is no room for punitive damages. 29 This was confirmed by the Court: a generic drug manufacturer is to be compensated for its provable loss, if any, no more and no less Apotex Inc., et al. v. Sanofi-Aventis, et al., SCC Docket No (Discontinued Nov. 3, 2014); Sanofi-Aventis v. Apotex Inc., 2013 FCA 186 rev g 2011 FC 1486; Apotex Inc. v. Sanofi-Synthelabo Canada Inc., 2008 SCC 61 aff g 2006 FCA 421 aff g 2005 FC Sanofi-Aventis Canada Inc v Teva Canada Limited, 2012 FC 552; Apotex Inc. v. Takeda Canada Inc., 2013 FC 1237; Apotex Inc. v. Merck Canada Inc., 2012 FC Sanofi-Aventis v. Apotex Inc., 2015 SCC Regulatory Impact Analysis Statement, Canada Gazette Part II, Vol. 132, No. 7, p (1998). 26 Apotex Inc. v. Takeda Canada Inc., 2013 FC 1237 at para Ibid. 28 Regulatory Impact Analysis Statement, Canada Gazette Part II, Vol. 132, No. 7, p. 1056(1998); Apotex Inc. v. Merck & Co. Inc., 2009 FCA 187 at para Teva Canada Limited v. Pfizer Canada Inc, 2014 FCA AstraZeneca Canada Inc. v. Apotex Inc., 2013 FCA 77 at para 7; Pfizer Canada Inc. v. Teva Canada Limited, 2016 FCA 161 at para 47. 7

8 The assessment is made on the basis of the construction of a but-for hypothetical world. A generic drug manufacturer must show on a balance of probabilities that but for the pharmaceutical innovator s application for prohibition, it would not have suffered this loss. 31 This is a factual inquiry to be established by the evidence. The but for test for causation is to be applied in a robust common sense fashion. 32 However, in the real world and as a result of the courts decisions, pharmaceutical innovators have been found liable to pay more than the loss suffered by generic drug manufacturers. In fact, the compensation awarded based on section 8 can and does go above and beyond 100% of the total market value for a generic drug due to the case-by-case methodology taken by the courts (whereby each case is determined on its own merits, based on the evidence presented in respect of that claim without consideration to other section 8 claims by other generic drug manufacturers in the market for a given drug). The Federal Court of Appeal raised that the only way to remedy this inconsistency was through Parliament or the Governorin-Council, not the Court. 33 Ultimately, the Supreme Court of Canada decided not to intervene in that matter, and upheld the methodology and the inconsistencies inherent to section For all intents and purposes, the application of section 8 as interpreted by the Court inherently leads to a windfall due to the fact that inconsistency is inherent in the scheme of section While, historically, the Federal Court had not assessed damages other than those resulting from infringement, it now has to consider the various commercial and business aspects relating to the pharmaceutical industry, such as the supply of a drug, as well as market dynamics, such as the effect of being first to market, matters usually analyzed by courts of general jurisdiction. Unfortunately, it has done so in a way that sometimes does not reflect actual market realities. The Canadian system as applied by the Courts has essentially given generic drug manufacturers an unprecedented remedy. As a consequence, the balance has been skewed in favor of the generic drug industry. It is important that Parliament restore the balance by adopting clear and specific limitations to the damage awards under the Regulations. III. Need for Legislative Reform by Parliament To put it bluntly, the Canadian system is broken and in need of legislative reform. As noted, the Court has, in several instances, raised the need for Parliament to rectify and address the numerous procedural complexities, inconsistencies and absurdities developed in the jurisprudence under the Regulations. 36 Only Parliament can re-establish the delicate balance intended by section 55.2 of the Patent Act. In this regard, the introduction of Bill C-30 for the implementation of CETA is most welcome. On December 13, 2016, the bill passed to second reading. 31 Pfizer Canada Inc. v. Teva Canada Limited, 2016 FCA 161 at para Ibid at para 47; Apotex Inc. v. Merck & Co., Inc., 2015 FCA 171 at para Apotex Inc. v. Sanofi-Aventis, 2014 FCA 68 at para Sanofi-Aventis v. Apotex Inc., 2015 SCC Reason for judgement delivered by Sharlow, J.A in Apotex Inc. v. Sanofi-Aventis, 2014 FCA 68 at para Pfizer Canada Inc. v. Canada (Health), 2008 FC 500 at para 19; Apotex Inc. v. Sanofi-Aventis, 2014 FCA 68 at para 164 aff d 2015 SCC 20. 8

9 Most notably, the summary of Bill C-30 provides some information as to how a new Canadian system may be structured since s. 55.2(4) will be amended to provide for: [ ] the replacement of the current summary proceedings in patent litigation arising under regulations made under that subsection with full actions that will result in final determinations of patent infringement and validity; 37 Moreover, in light of the proposed wording of the amendments to s. 55.2(4), we can expect that the following elements may form part of the amended Regulations: a right of appeal, a joinder and consolidation of proceedings, rights to discovery, and a decision that is determinative and final. However, there seems to be little regarding a possible amendment to section 8 of the Regulations. While the extent of the amendments to the Regulations remains to be seen, the wording of the amendments to s. 55.2(4) of the Patent Act is definitely a strong sign of Canada s willingness to provide for a better linkage system. We hope that our proposal will assist in shaping the new Canadian system. IV. Examples from Other Jurisdictions In our view, to determine the essential features of a balanced and efficient patent linkage system, other major patent linkage systems and patent litigation regimes around the world must be looked at. Many of the failings of the Canadian system are present neither in other patent linkage systems nor traditional patent litigation regimes in other jurisdictions. We provide a general exposé of some of these systems and regimes below. A. The United States Pharmaceutical patent litigation in the United States is typically pursued through proceedings under the Hatch-Waxman Act ( the American system ), the Biologics Price Competition and Innovation Act (sui generis regime for biologics and biosimilars), section 337 investigations before the United States International Trade Commission ( the ITC ), the Leahy-Smith America Invents Act (inter partes review) and traditional patent litigation under Title 35 of the United States Code. Except for section 337 investigations before the ITC, all decisions rendered under these regimes and systems are final and determinative of the issues between the parties, including the infringement and validity of patents. At the end of the day, the patents are either valid or invalid. There is, in effect, res judicata. American Courts are also efficient in screening for meritorious claims and dismissing irrelevant ones through strict case management and limited trial time. This approach to case management allows for shorter hearings and quicker decisions. In the US, the hearing of a matter concerning a pharmaceutical patent rarely exceeds one week. 38 In addition, the evidence is presented in court instead of out-of-court and witnesses are challenged in the courtroom. The judge is thus well equipped to adjudicate the matter and render a decision that will be determinative of the validity of a patent. This is important given that, as is the case in Canada, many judges have no scientific background. Moreover, the American system provides for a 30-month stay. As in Canada, the stay can be extended only if the abbreviated new drug application (ANDA) filer fails to cooperate to expedite the litigation, as is required by statute. In very rare Unlike in Canada, where traditional patent litigation proceedings can go from one to over ten weeks of trial. 9

10 instances, the stay could be extended for other reasons. More specifically, if the 30-month stay expires prior to a judgment by the district court, then the patentee can request a preliminary injunction to prevent the ANDA filer from marketing the generic drug during the pendency of the appeal. But such extensions are by no means granted as a matter of course. Time to trial is approximately months from the receipt of a paragraph 4 certification letter, with a decision approximately 30 months later. It takes about another 1.5 years to get a decision by the Court of Appeals. There are additional incentives for generic manufacturers to step forward, namely by way of an 180 days exclusivity period granted to the first successful generic to sue under the Hatch-Waxman Act. The exclusivity period serves as a remedy for the successful party, and there is no equivalent to Canada s section 8 damages. In essence, there is efficiency and finality under the different American systems and regimes. However, US patent litigation has an onerous discovery process that remains very costly and burdensome for the parties. B. The United Kingdom In the UK, pharmaceutical patent litigation is pursued as a traditional action under the UK Patent Act. 39 There is no automatic stay upon initiation of the proceedings. However, preliminary/interim injunctions are available and often granted to restrain generic drug manufacturers from carrying out allegedly infringing acts during the period before trial. Most importantly, the resulting decisions under the Act are final and determinative of the issues raised in the matter. The notion of disclosure is also interesting. Disclosure in a UK patent action is equivalent to documentary discovery in Canada. It is limited to documents relevant to the litigation. There are no oral discovery or depositions. Witness statements and expert reports are filed in the months prior to trial in lieu of testimony in chief. Fact and expert witnesses are cross-examined extensively before the Court. This allows the case to move quickly and efficiently to trial. In fact, a typical UK patent action is ready to proceed to trial within 12 to 16 months. The hearing takes one to two weeks. The number of prior art documents cited against the patent at issue is limited. It is only in very rare instances that more than one or two prior art documents are considered by the Court. Only one expert per party is allowed to testify on one issue. And, when many generics attack the same patent, cases are often consolidated and the generics share the same experts and Court time. UK courts also have the discretion to grant a preliminary injunction in exchange for a cross-undertaking as to damages. The cross-undertaking is enforced according to its terms. The approach is essentially compensatory and not punitive. Damages are assessed on the same basis as they would be in the case of a breach of contract. Accordingly, a principled approach to assessing the damages payable under a cross-undertaking requires that: The plaintiff first establishes, on the balance of probabilities, that the chance of making a profit was real and not fanciful. This requires an evaluation of the degree of success achieved and the profits made but for the injunction (UK), c

11 If that threshold is crossed, the second stage of the inquiry is to evaluate that substantial chance. There is a rigid adherence to common law rules. 40 The cross-undertaking ensures that, if the preliminary injunction is granted but the patentee does not succeed at trial, the patentee will only be liable for those damages necessary to compensate the defendant for the loss suffered as a result of the grant of the injunction. C. Australia In Australia, patent litigation is pursued under the Patent Act. 41 There is no automatic stay upon initiation of the proceedings. However, the approach is very similar to that of the UK and preliminary/interim injunctions are often granted. As in the UK, the resulting decisions are final and determinative of the issues raised in the matter. The Federal Court of Australia has an active case management approach. A judge is assigned to the matter at the time it is commenced and manages the case until it is determined. A number of specialist judges with expertise in IP have dockets to deal with IP cases as they arise. This generates an overall consistency of approach among the judges. Generally, active case management in the Federal Court results in patent disputes coming to a final hearing relatively quickly and, in most cases, within 2 to 3 years. In Australia, discovery principally involves documentary discovery. There is no deposition procedure in Australia and interrogatories are rarely administered. As stated above, Australian courts also have the discretion to grant a preliminary injunction in exchange for an undertaking as to damages, which may lead to an order for the payment of compensation to a person affected by the operation of the interlocutory proceeding. D. South Korea South Korea is the newest jurisdiction to adopt a patent linkage system (the Korean system). Following the ratification of the U.S.- Korea Free Trade Agreement, 42 South Korea agreed to enact a patent linkage system akin to the American system. In force since March 2015, it does not have the flaws of the Canadian system in that judgments are final and determinative. Importantly, the Korean system ensures that all determinations are final. Patents eligible for listing on the Green List (equivalent to the Canadian Patent Register) are limited to those covering substances, formulations, compositions, or medical uses. Patents relating to methods, devices, processes, or intermediates of an active pharmaceutical ingredients (API) are not eligible for listing. The Ministry of Food & Drug Safety strictly requires a direct relationship between the approved product and the claims. The patents must be "directly related" to the approved product for listing. Since the Korean patent linkage system has only recently been introduced, it is difficult to ascertain at this time how the Korean courts will approach the matter. 40 Les Laboratoires Servier v Apotex Inc [2008] EWC 2347, [2009] FSR 3 cited in AstraZeneca AB & Anor v KRKA dd Novo Mesto & Anor, [2015] EWCA Civ 484 (21 May 2015) Cth. 42 Free trade agreement between the United States of America and the Republic of Korea, in force since March

12 V. The Imperatives of a Canadian System In light of what is done in other jurisdictions and Canada s own experience, we are of the view that a balanced and efficient patent linkage system must at least comprise the following features: 1. The proceedings are to be conducted as an action, not as an application, which means that: a) The innovator who receives a notice of allegation would have 45 days to bring an action seeking a permanent injunction (quia timet) 43 for patent infringement. Upon service of the action, a stay for a period of time sufficient to include an appeal by the innovator would begin (30 months minimum). The generic manufacturer could bring a defence and counterclaim for invalidity of the patent (s) at issue. b) The order of the evidence would be the same as the one applicable in every case and before every court: the party that bears the burden goes first, the other party responds and a right to reply is allowed de facto. c) Fact and expert witnesses would testify before the judge. d) The usual standard of proof would apply and the presumption of validity of a patent would be considered. e) Determination of all issues would be final and subject to an appeal by the losing party. f) The stay would be long enough to allow the innovative company to benefit from an effective right of appeal (at least 30 months). 2. Discovery should be conducted but must be restricted. a) The discovery process must allow the parties to have access to all the relevant evidence to assess and prove infringement and/or validity of the patent at issue The discovery and disclosure would include the chemistry and manufacturing portion of the ANDS of the generic manufacturer subject to the execution of a Non-Disclosure Agreement, prepared by Health Canada and available to the public in order to avoid endless discussions about the NDA content (via its website). The information should be provided by Health Canada as soon as it receives a signed NDA. Innovators will be able to have access to samples via discovery. 44 b) The discovery must be limited in terms of number of witnesses and duration in order to avoid any fishing expedition. In the US, discovery is limited to seven (7) hours per witness. It should be similar in Canada. Only one inventor plus one representative of the party should be deposed and one round of discovery should be allowed. 3. The length of the trial should be limited to one or two weeks in order to force a debate on limited and relevant issues and eliminate all side issues (if it can be done in the US, the UK, and Australia, it can 43 The Court allowed a quia timet infringement action to continue based on the generic drug manufacturer s intention to market its product upon receiving its notice of compliance (see Gilead Sciences, Inc. v. Teva Canada Limited, 2016 FC 336). 44 The Court understands that discovery may not suffice and welcomes disclosure of samples in pharmaceutical cases (see Apotex Inc. v. Eli Lilly Canada Inc., 2013 FCA 45 at para 15). 12

13 also be done in Canada). The number of experts should be limited to one per issue. Case management should be done early in the process by the judge who will preside the trial. Case management should be used to limit the issues at trial and circumscribe the debate. 4. The length of the statutory stay should take into account any appeal as of right by the innovator. It is our view that the stay should not be less than 30 months. Pharmaceutical patent cases take a substantial proportion of the Court s docket. In other major jurisdictions similar to Canada, such as the United States, United Kingdom, and Australia, pharmaceutical patent proceedings require at least between 2.5 and 3 years for resolution and subsequent appeals. It is impossible in Canada to give to the innovator a real right of appeal in a context where the stay is less than 30 months. 5. The involvement of multiple generic drug manufacturers should be structured as follows: a) Any Statement of Claim served and filed as a result of a subsequent notice of allegation by a different generic for the same patent should be stayed with respect to any validity issue pending the outcome of the first action; or b) If the parties agree, the Court will have the option of consolidating all proceedings in relation to the same patent. This consolidation should not have the effect of allowing additional resources. The trial will still be limited to five to ten days, there will still be one expert per issue and one set of representations per issue. The generic drug manufacturers will share half of the court time allocated for the entire hearing. c) Following the determination on the merits of the first action, the rule of stare decisis and comity will govern the determination of any other proceeding concerning the same patent. A subsequent second person will be barred from raising issues already determined in the first action in relation to the same patent. 6. An effective right of appeal should be given to the innovator as of right, combined with an automatic extension of the stay for a maximum period to be determined but that should not be shorter than 30 months. a) An effective right of appeal requires an automatic extension of the stay in order for Canada to properly comply with its obligations under the CETA. b) The new Canadian system should provide a statutory mechanism in this regard. c) This statutory mechanism for the stay on an appeal should operate as follows: i) Upon final judgment from the first instance court, the statutory stay remains in force between the parties until the expiry of the time to appeal. ii) The statutory stay ends on the expiry of the time to appeal if no notice of appeal is served. iii) Upon serving and filing of a notice of appeal, the statutory stay remains in force between the parties until a final decision is rendered on the merits by an appellate court or until the discontinuance of the appeal. 13

14 iv) Appellate courts must render a final decision on the merits prior to the expiry of 30 month period. d) This mechanism should extend to all appeals as of right, but exclude appeals to the Supreme Court of Canada. Statutory Damages 1. Unless eliminated entirely in favor of a period of generic exclusivity similar to the United States, the framework of section 8 of the Regulations should account for the following: a) A generic manufacturer may, by action, apply to the Court in order to be compensated for the loss suffered as result of proceedings under the Regulations. b) The loss suffered is limited to compensatory damages. It does not include profits, unjust enrichment, treble damages or any other remedy available in equity or at common law or under any other act. c) The start date is the date of the patent hold letter which should be disclosed to the innovator as soon as it is received by the generic drug manufacturer. d) The end date is the earliest date of: (1) the date of withdrawal, the discontinuance, the dismissal or the reversal of a prohibition application or (2) the date when the generic receives its Notice of Compliance. e) Proceedings for the same patent and the same drug should be joined. f) The Minister should not be liable for damages. 2. The assessment of the quantum of damages for each successful generic should account for the following: a) The sum of the damages awarded to more than one generic should not exceed 100% of the actual generic market for a given drug. If there is more than one generic on patent hold during a given period, the market should be shared. b) Subsection 8(5) should further include the following non-exhaustive elements: i) the infringement of issued patents by the generic drug manufacturer. ii) the operational capacity to manufacture of the generic drug manufacturer. c) Punitive damages should be explicitly excluded. 14

15 VI. Conclusion We believe that our proposal addresses most of the issues plaguing the Canadian system. We trust that our proposal for a new balanced and efficient patent linkage system will ensure predictability and finality of outcomes for both the innovative pharmaceutical industry and generic drug manufacturers. At the very least, we hope that our proposal will invite further debate for crafting a better patent linkage system in Canada. The implementation of CETA provides Parliament and all stakeholders in the pharmaceutical industry an opportunity for change towards a better patent linkage system for Canada. Bill C-30 is a promising first step. We look to the future with much optimism. 15

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