Transcript Title, Arial bold 30 points

The Patented Medicines (Notice of
Compliance) Regulations;
Litigation Procedure and
Remedies
University of Toronto
IP298HS
Andy Radhakant ([email protected]; 416 216 6628)
March 8, 2005
2481-0304
© Andy Radhakant, 2005
Outline
1. Background:


Why special rules for pharma patentees?
Evolution of pharmaceutical patent legislation
2. PM(NOC) Regulations



Drug Regulation 101
Rationale for linkage regulations
Procedure and issues; pros and cons for each side
3. Litigation Procedures and Remedies
2
Why special rules for pharmaceutical
patentees?
 Two irreconcilable goals:
• Encourage invention and development of new medicines by
promising a limited period of market exclusivity
• Ensure that new medicines become as widely available as
possible, as quickly as possible, at the lowest prices
possible
3
Why special rules for pharmaceutical
patentees?
 Exceptionally wide gap between investment (time, money and
risk) required to bring a new drug to market and ease with
which it can be copied
 Automatic substitution of generic drugs for brand-name drugs
without regard to doctor’s instructions
 Unwillingness of Canadian courts, especially Federal Court, to
grant remedies to prevent patent infringement in pharma
context
• No interlocutory injunctions
• No quia timet relief (see VIAGRA v. CIALIS, 2003 FCT 753)
4
The Evolution of Pharmaceutical Patent
Legislation
1923-1969
 Impossible to obtain a patent for a medicine
 Patents available for processes to make medicines
 Patents available for medicines when made by the patented
process (“product-by-process” claim)
 Compulsory licences (to make the medicine in Canada) were
available as of right
 Not many companies were interested (Canadian market too
small); only 22 compulsory licences issued
5
The Evolution of Pharmaceutical Patent
Legislation
1969: Party Time for Generics in Canada
 The Patent Act was amended to allow the issuance
of compulsory licences to import patented medicines
 Between 1969 and 1985, 400 licences were granted for
importation of drugs (royalty was 4% of net selling price of drug
in final form)
 Once a licence was granted, Courts would not interfere
 Several high-profile Canadian drug research centres (especially
in Quebec) shut down
6
The Evolution of Pharmaceutical Patent
Legislation
1987: Bill C-22: encourage multinationals to do
R&D in Canada
 Patents now available for medicines, not limited to
process patents or product-by-process patents
 Establishment of Patented Medicine Prices Review
Board to ensure prices of patented medicines are not
“excessive”
• Regulates the prices of patented medicines, new and
existing, sold in Canada, by prescription or not
• Has no authority to regulate prices of non-patented drugs
(including generic drugs), price mark-ups by retailers or
pharmacists’ dispensing fees
7
The Evolution of Pharmaceutical Patent
Legislation
1993: Bill C-91
 All compulsory licences granted after December 20, 1991
are retroactively abolished
 Generics are given the right to infringe patents for uses
reasonably related to development of regulatory
submissions (“early working” / “Bolar” exception)
 Generics are given right to stockpile drugs for release
immediately after patent expiry (repealed 2001)
 Governor-in-Council is given power to make regulations
linking the patent system with Health Canada’s generic
drug approval system:  PM(NOC) Regulations, March
12, 1993
8
The PM(NOC) Regulations
Overview
• Created to prevent the infringement of patents
pertaining to medicines
• Minister of Health is required to maintain a register of
patents (“Patent Register”, www.patentregister.ca)
relating to medicines
• Innovative drug companies that have submitted an
application for marketing approval (a “notice of
compliance” or NOC) may request that relevant
patents be listed on the Patent Register
9
The PM(NOC) Regulations
Overview
• A generic manufacturer submits an abbreviated new
drug submission comparing its drug to an innovator’s
drug. If the Patent Register lists patents for that
innovative drug, the generic must address those
patents by
 Accepting that the generic will not receive a notice of
compliance until the patents expire (this almost never
happens), or
 Delivering a notice of allegation to the innovator stating
that the patents are invalid, or would not be infringed, or
both (and legal and factual basis for allegations).
10
The PM(NOC) Regulations
Overview
• Service of an NOA on an innovator gives the innovator the right to
apply (within 45 days) to Federal Court for an order prohibiting
the Minister of Health from granting an NOC to the generic
until the patents expire.
• While this application is underway, the Minister of Health is
prohibited from granting an NOC to the generic for up to two
years.
• If innovator wins, Court orders that Minister of Health is prohibited
from issuing the NOC until the patents expire.
11
The PM(NOC) Regulations
Overview
• The scheme “links” private patent rights with a public
health protection system (generic drug approval
system at Health Canada)
• Why linkage?
• U.S.: Hatch-Waxman Act (Drug Price Competition and
Patent Term Restoration Act, 1984)
12
The PM(NOC) Regulations
Overview
• “In this appeal this Court is again called upon to
struggle with the difficult task of interpreting the newly
adopted Patented Medicines (Notice of Compliance)
Regulations. In large measure, the difficulty is due to
the fact that those regulations, whose clear intention is
to facilitate the protection of private commercial patent
rights, have been grafted onto a regulatory scheme,
the Food and Drug Regulations, whose sole purpose is
the protection of public health and safety. The union
is not a happy one.” (Hugessen J.A.)
13
The PM(NOC) Regulations
Pros & Cons for Innovators
Pros
• Automatic deferral of generic NOC for up to 24 months while court
application is underway
• Possibility of multiple consecutive 24-month deferrals of generic
NOC by appropriate timing of listing of patents on the Patent
Register
• Even if innovator loses, it retains right to commence patent
infringement action
14
The PM(NOC) Regulations
Pros & Cons for Innovators
Cons (Compare to Hatch-Waxman)
• No right of appeal for innovators (generics retain full rights of
appeal)
• Innovator is applicant and bears the burden of disproving generic’s
allegations as stated in an unsworn NOA
• No right of discovery (leads to shadow-boxing on infringement
issues if Court declines to order generic to produce samples)
• Section 8: possibility of requirement to disgorge worldwide profits
15
The PM(NOC) Regulations
Pros & Cons for Generics
Pros
• Can attack patents on multiple grounds in a summary way in an
unsworn notice of allegation that is presumed to be true
• Generic is respondent; can “wait and see” what evidence
innovator comes up with regarding validity and infringement
• Full rights of appeal (no right of appeal for innovators)
• Section 8: Possibility of winning disgorgement of innovators’
worldwide profits during period generic was wrongfully kept off the
market
• Generics retain right to commence action for patent impeachment
if they lose PM(NOC) application
16
The PM(NOC) Regulations
Pros & Cons for Generics
Cons
• Loss of business confidentiality
 patentees informed when generic has filed an abbreviated new
drug submission (generic must send NOA to patentee)
 entire world (i.e, other generics) is informed of generic’s NOA
when innovator launches court proceeding
• Automatic deferral of generic NOC for up to 24 months
• Possibility of multiple, sequential 24-month deferrals as a result of
strategic timing of listing of patents on the Patent Register
17
The PM(NOC) Regulations
The Way Forward
Canada Gazette, Part I, December 11, 2004
• Proposed amendments to PM(NOC) Regulations, if brought into
force in their current form, will make the Regulations significantly
more generic-friendly
• Amendments are intended to reduce scope for multiple, sequential
24-month automatic deferrals of generic NOCs
• Comment period expired February 24, 2005
18
Litigation Procedures and Remedies
Where?
Federal Court (considered to have IP expertise)
• A statutory court with only the jurisdiction given to it by statute (in
this context, see Patent Act and Federal Courts Act)
• Exclusive jurisdiction to impeach a patent (Federal Courts Act,
para. 20(1)(b)
• Exclusive jurisdiction in case of patent “conflicts” (Federal Courts
Act, para. 20(1)(a)
• Exclusive jurisdiction over appeals from a refusal of the
Commissioner of Patents to grant a patent (Patent Act, s. 41)
19
Litigation Procedures and Remedies
Actions (infringement, impeachment)
• Pleadings  motions (strike pleadings; provide particulars; Anton
Piller order)
• Discovery of documents  motions (confidentiality; better affidavit
of documents; documents from parents/subsidiaries/affiliates or
third parties)
• Examination for discovery (including examination of inventors as
“assignors”)  motions (undertakings, refusals, questions taken
“under advisement”; examination for discovery of third parties;
summary judgment)
• Trial
20
Litigation Procedures and Remedies
Actions (infringement, impeachment)
• Patent actions will often turn on experiments
 Experiments to show claimed processes or compounds won’t
work
 Experiments to show that a skilled person following the prior art
inevitably produces something within the claim
 Experiments to show infringer’s supposedly non-infringing
process doesn’t work
 Notice required? Notice not required? Other side to be
invited?
21
Litigation Procedures and Remedies
Actions (infringement, impeachment)
• Patent actions will turn on expert evidence
• Selection criteria:
 Expertise (strong credentials; independence; experience in the
trenches)
 Good teacher
 Experience/inexperience as a witness (danger of coming
across as a “professional witness” reduced for professionals
like accountants)
22
Litigation Procedures and Remedies
Remedies
• Permanent injunction
• Delivery up and destruction of infringing articles
• Damages or accounting of profits
23
Litigation Procedures and Remedies
Damages
• If patentee sells articles, measure of damages will be profits lost
on sales patentee would have made if the infringer had acted
properly. Factors to be considered (expert evidence –
economists, marketing experts):
 Presence of competing products
 Advantages of patented product over competitors
 Market positions of patentee and infringer
 Market shares before/after entry of infringer
24
Litigation Procedures and Remedies
Damages
• Other contributors to damages:
 “Springboard” advantage (accelerated market entry) accruing
to infringer
 Convoyed sales (patented article is merely a component of a
more complex article, or is sold in association with other
articles)
 Profits lost due to price reduction forced by competition with
infringer
 Loss of economies of scale
25
Litigation Procedures and Remedies
Damages
• If patentee doesn’t sell articles but allows others to use the
invention in exchange for royalty, measure of damages is
reasonable royalty. Factors to be considered (expert evidence –
economists, marketing experts):
 Royalty rate in actual prior licences
 Novelty of the invention
 Royalty negotiated in other trades
 Profitability of the invention
26
Litigation Procedures and Remedies
Accounting of Profits
• Goal: to deprive infringer of benefit accruing from the
infringement
• Rarely used for almost a century until 1982 (Teledyne v. Lido)
27
Litigation Procedures and Remedies
Accounting of Profits
• Equitable remedy (cf. damages, which are a legal remedy) 
equitable factors may disentitle you from asking for profits
 Delay (in commencing or prosecuting proceedings)
 Misconduct (unclean hands)
 Failure to work the patented invention in Canada
• Big advantage for patentee: infringer has to throw open its books
in an accounting of profits (infringer has burden to justify every
deduction that would reduce profits)
28
Litigation Procedures and Remedies
Accounting of Profits
• Profit = revenue – expenses, but devil is in the details
• “The litigation is enormous, the expense is great, and the time
consumed is out of all proportion to the advantage ultimately
obtained; so much so that in partnership cases I confess I never
knew of an account in that form worked out with satisfaction to
anybody. I believe that in almost every case people get tired of it
and get disgusted.”
Siddell v. Vickers (1892)
29
Litigation Procedures and Remedies
Accounting of Profits
• Devil is in the details (profit = revenues – expenses)
 Which revenues arise from the infringement? (Beware:
Monsanto v. Schmeiser, [2004] 1 S.C.R. 902: patentee only
entitled to the portion infringer’s profits which is causally
attributable to the invention, i.e., nothing)
 Combination products: which profits arise from the patented
part of the final combination?
 Which expenses are allowed? (not legal costs, nor expenses
which would have been incurred had infringing operation not
taken place)
 GAAP not designed for this kind of inquiry (isolating the
contribution of a single product)
30
Litigation Procedures and Remedies
Bifurcation
• Patentee will normally find it attractive to defer damages/profits
inquiry until after trial on liability
• Federal Courts Rules, Rule 107: trial of an issue/order that issues
be separately determined
• Possibly a trend away from automatically separating quantum
issues from liability issues where parties do not consent to
bifurcation
31
The Patented Medicines (Notice of
Compliance) Regulations;
Litigation Procedures and
Remedies
University of Toronto
IP298HS
Andy Radhakant ([email protected]; 416 216 6628)
March 8, 2005
2481-0304
© Andy Radhakant, 2005