Remedy decisions 2017/2018

1. Remedy decisions 2017/2018 Urszula Wojtyra

2. Overview • Teva Canada Limited v Janssen Inc, 2018 FCA 33 (LEVAQUIN/levofloxacin) • Update on non-infringing alternatives • You lose, you choose?

3. Teva Canada Limited v Janssen Inc2018 FCA 33 (LEVAQUIN/levofloxacin) • Background: • Janssen lost prohibition application in November 2004 • Janssen won ‘rocket docket’ infringement action in October 2006, appeal dismissed June 2007 • In 2011, previously unnamed Janssen parties commenced infringement action; consolidated with quantification of first action • Issues: • Standing • ‘Broad axe’ approach • Mitigation

4. Standing • s. 55(1) of the Patent Act: • A person who infringes a patent is liable to the patentee and to all persons claiming under the patentee for all damage sustained by the patentee or by any such person, after the grant of the patent, by reason of the infringement. • Question: is a party required to demonstrate that it acquired rights to engage in what would otherwise amount to infringing conduct? I.e., does it have to do something in Canada?

5. The Janssen parties and impact of infringement Janssen Canada LEVAQUIN tablets $ Janssen US $ Janssen Puerto Rico Based on FCA ¶124

6. Standing (cntd) • Janssen US had standing because it suffered a loss and could trace its right back to the patentee • Tracing: Evidence of licence or permission, by acquiescence, of patentee for Janssen US to be in chain of sale of tablets [127] …the purpose of subsection 55(1) of the Patent Act is to provide redress to those who have a right which may be traced back to a patentee and who suffer damage as a result of infringement of the patent. A party need only establish that they enjoy rights under a patent in order to be a person claiming under the patentee.

7. ‘Broad axe’ approach • [36]           The “but for” world is of necessity a hypothetical and theoretical construct. It is not a world where, in the words of Lord Shaw, “the loss is capable of correct appreciation in stated figures.” It follows that the Federal Court did not err in principle by quoting Lord Shaw or by referring in its reasons to a “broad axe”. On a fair reading of its reasons, the Federal Court did not proceed on the basis that what was required was “rough justice”. The Court looked to economic proof of the nature of the levofloxacin market and the likely outcomes in that market when Teva’s infringement was factored out.

8. ‘Broad axe’ approach applied to: • Percent of sales Janssen would have made through a particular channel of sales (indirect hospital sales) • Janssen’s expert had a value admitted to be high, Teva’s expert was provided his value by counsel • ‘Broad axe’ by FC: reduced Janssen’s expert’s value based on counsel’s concession it was too high • FCA: [106] “A court may accept or reject an expert’s opinion as it sees fit…”

9. ‘Broad axe’ approach applied to: $$$$$$$ • Post-expiry damages due to price suppression • Record did not support either parties’ proffered dates for end of damages post-expiry • ‘Broad axe’ by FC: award some damages for one year post-expiry • FCA: • Evidence showed Janssen could not reverse its price reduction for hospitals • [111] “This loss, which occurred while the patent was in force, was therefore in effect a permanent loss that will continue for so long as Janssen sells Levaquin to hospitals.” • No error in FC cutting off such future loss in the ‘but for’ world one year post-expiry

10. Mitigation [54]… a plaintiff is not entitled to recover compensation for loss that could have been avoided by taking reasonable action. Pursuant to this concept, any loss is disallowed when the loss flows from the plaintiff’s inaction, as opposed to the defendant’s wrong. [55]           What constitutes reasonable action is in every case a question of fact, depending on the particular circumstances of the plaintiff and the case. … [57]           In case of doubt, a plaintiff will generally receive the benefit of the doubt on the ground that a defendant should not be overly critical of a plaintiff’s good-faith effort to avoid difficulties caused by the defendant’s wrongful act … [58]           This principle applies equally to cases of patent infringement. A plaintiff’s conduct is not to be weighed against a single standard of objective reasonability.

11. Mitigation (cntd) • Must have evidence: what was actually done, and what patentee ought to have done • FCA observed that none of the experts in the case “were qualified to opine on the reasonableness of Janssen’s business decisions.” [69] • Does not tell us who would be so qualified • One Janssen expert was qualified as “expert in the marketing of pharmaceutical products in Canada and the data analysis and forecasting of pharmaceutical sales and market share in Canada including the impact of generic entry.”

12. Mitigation (cntd) • No error in FC’s finding that Teva did not lead evidence of what Janssen ought to have done • Repeated references by Justice Hughes asking Teva for its evidence on mitigation: • “Where is your marketing guy, your guy? You are looking at stray stuff in cross-examination from people who are outside the field and you saying ah-ha. Give me something you can sink your teeth into.” • “I am looking for some meat and potatoes. I am not looking for some stray crumbs under the table.”

13. Tip • Put into the record any recalculation flowing from Trial Judge’s draft reasons [24]           …Unfortunately, it does not appear that the calculations used to calculate the agreed figures form part of the record. Had this Court found it necessary to intervene in the damage award this absence could have negatively affected this Court’s ability to vary findings that related to counsel’s calculations. We simply do not know how various amounts were calculated.

14. Update on non-infringing alternatives (NIA) • Possibility of NIA in assessing remedy is now being routinely taken into account • As of yet, no Court has found that infringer has met the test of “could have and would have” • Three examples in the last year: • AFD Petroleum Ltd v Frac Shack Inc, 2018 FCA 140 • Grenke v DNOW Canada ULC, 2018 FC 564 • Adir v Apotex Inc, 2018 FC 346

15. AFD Petroleum Ltd v Frac Shack Inc2018 FCA 140 • ¶ 63 “Whether a suggested alternative meets the requirements for being non-infringing typically involves questions of fact or mixed fact and law from which a pure legal issue cannot be extricated… Such determinations are therefore generally reviewable only for palpable and overriding error.” • FC made no such error – asserted NIA was not a true substitute • Patented product had advantages over purported NIA • No evidence infringer’s clients would be willing to use purported NIA

16. Grenke v DNOW Canada ULC2018 FC 564 • Asserted NIA not an alternative • Asserted NIA (hydraulic drive) was not in the same market as that of the infringing product (electric drive) and was therefore not an alternative • “Odd sale here and there” of purported NIA in 10 y period insufficient to establish a ‘real alternative’ • No other evidence defendants “could have” or “would have” produced sufficient asserted NIA

17. Adir v Apotex inc2018 FC 346 • Real world: Apotex manufactured perindopril tablets in Canada and sold to UK and AU • Asserted NIA: no infringement by avoiding manufacture in Canada • “Could have”: foreign third party suppliers could have supplied but not for all real world sales; ‘broad axe’ - one year delay • “Would [not]have”: subjective test; based on real world facts, Apotex would have done exactly what it did in the real world

18. You lose, you choose? • Apotex Inc v Bayer Inc, 2018 FCA 32 (drospirenone) • Facts: • Bayer successfully sued Apotex for patent infringement for a patent related to a contraceptive • FC granted Bayer an entitlement to elect its damages or an accounting of Apotex’s profits • FC dismissed Apotex’s assertion that pursuant to s. 57(1) of the Patent Act the Court may allow an unsuccessful defendant to elect between damages and an accounting of profits • Apotex appealed

19. Patent Act 57. (1) In any action for infringement of a patent, the court, or any judge thereof, may, on the application of the plaintiff or defendant, make such order as the court or judge sees fit, (a) restraining or enjoining the opposite party from further use, manufacture or sale of the subject-matter of the patent, and for his punishment in the event of disobedience of that order, or (b) for and respecting inspection or account, and generally, respecting the proceedings in the action.

20. You lose, you choose? Nope! • Exhaustive historical legislative and jurisprudential review of the language of s. 57(1) [72] “In my view, the inclusion of the word “defendant” in subsection 57(1) of the Act does not give the Court the power to grant an election to a defendant following a finding of infringement. Such a remedy is unknown to equity and, as a result, is not a remedy which, in my respectful view, is envisioned in subsection 57(1). However, as I indicated earlier, when faced with a demand for an interlocutory injunction, a defendant may seek, upon application to the Court, to have the demand dismissed upon an undertaking to keep an account.”

21. Questions? Thank you!