AstraZeneca succeeds in omeprazole patent infringement profits case

by Smart & Biggar
Contact

Smart & Biggar

The Federal Court has issued its Public Judgment and Reasons concerning the financial compensation to be paid to AstraZeneca as a result of Apotex’s infringement of the omeprazole formulation patent (AstraZeneca’s LOSEC) in AstraZeneca v Apotex Inc, 2017 FC 726.

AstraZeneca elected an accounting of Apotex’s profits after Justice Barnes found the omeprazole formulation patent valid and infringed during the liability phase (reported here). The parties had substantially settled many of the quantification issues relating to Apotex’s profits, leaving four issues for the Court to decide following a 28-day trial – all of which were decided in AstraZeneca’s favour.

AstraZeneca was successfully represented by a trial team from Smart & Biggar, including Nancy Pei, Mark Biernacki, J. Sheldon Hamilton, Urszula Wojtyra, Abigail Smith, Paul Jorgenson and Brandon Heard.

1.     Apotex did not have a viable Non-Infringing Alternative

Apotex failed to prove on a balance of probabilities that it could and would have sold a non-infringing alternative (NIA) at any time during infringement (spanning 2003-2008). Apotex’s NIA defence was based on a number of formulations it designed for the purpose of the quantification trial (“in-house NIAs”), and in the alternative, product from third party foreign suppliers (“third-party NIAs”).

Justice Barnes held that an infringer’s failure to produce a viable NIA formulation in the real world is not a threshold bar to the NIA defence, and rejected AstraZeneca’s argument that a NIA must be perceived by, or foreseeable to, the infringer at the time of infringement. Rather, the question to be answered is: could the infringer have made the product had it attempted to do so at the relevant time and would the infringer have sold the product on some reasonable financial basis in substitution for the infringing product?

Justice Barnes also held that where there is brazen infringement, an inference may arise that no viable substitute was available – if it were otherwise, the rational choice would always be to employ the NIA and not the infringing product. Here, the suggestion that the development and commercial exploitation of the asserted NIAs would have been simple, cost-effective and speedy was belied by the historical facts relating to Apotex’s development of the infringing formulation.  

In determining whether the NIAs were available to Apotex and were true non-infringing substitutes, the Court assessed whether the in-house NIAs would be bioequivalent to LOSEC, had sufficient stability, and would have obtained regulatory approval. While Justice Barnes found the in-house formulations were not infringing and, with one exception, Apotex could have made them on a commercial scale, he found that there were “serious problems of proof” regarding Apotex’s in-house NIAs, including incomplete/inconclusive data. As such, not one of the asserted NIAs was shown to be approvable or commercially viable.

Regarding the third-party NIAs, Justice Barnes found that these would only have been pursued after Apotex had tried and failed to produce and commercialize any in-house formulation. The Court accepted that, in theory, NIAs were potentially available from Kudco and Estevé. These formulations were held non-infringing in US litigation of the US counterpart patent. While potentially available, Apotex failed to establish that Apotex would have been able to obtain a supply agreement from Estevé or Kudco on a balance of probabilities. However, if a probabilistic approach were applicable (which Justice Barnes did not accept), Justice Barnes would have fixed the possibility for a Kudco supply for the Canadian market only, at 15% at a royalty rate of 35% on Apotex’s net sales.

2.     Reconciling the s. 8 Judgment with the infringement Judgment

Prior to the 2015 infringement judgment, Apotex obtained a section 8 Judgment against AstraZeneca (previously reported). The infringement and section 8 quantification references were consolidated for hearing before the same Judge. The question therefore arose as to how the section 8 and infringement Judgments should be reconciled. Justice Barnes held that since Apotex necessarily had to infringe the formulation patent had it launched in the section 8 period, its claim to section 8 losses is offset by the profits it would have been required to disgorge to AstraZeneca. Therefore, Apotex was not entitled to recover pursuant to section 8 because it suffered no loss.

3.     Profits on profits should be calculated at prime rate, compounded annually

While both parties agreed that a profits on profits allowance was appropriate, they disagreed as to the appropriate rate and whether it ought to be compounded. Justice Barnes held that profits on profits should be calculated at prime, compounded annually, citing evidence regarding Apotex’s cost of borrowing from third-party lenders and Apotex’s use of its profits to successfully build its business and existing jurisprudence, including the decision in ADIR v Apotex Inc, 2015 FC 721, rev’d in part 2017 FCA 23. While there was evidence that a deduction or income tax would normally be warranted when interest is compounded, no such deduction was allowed as Apotex had declined to produce its tax returns.

4.     US damages paid by Apotex is a deduction from Apotex’s profits

Apotex had paid damages to AstraZeneca in satisfaction of a US judgment stemming from Apotex’s infringement of the US omeprazole formulation patent. Relying on cause of action estoppel (including the doctrine of election), issue estoppel and abuse of process, Apotex argued that AstraZeneca should not recover any of Apotex’s profits from its export sales to the US. AstraZeneca submitted that provided the US damages award is deducted from Apotex’s profits, any form of double recovery would be eliminated.

Justice Barnes agreed with AstraZeneca, reasoning that concurrent patent infringement actions are permissible in more than one jurisdiction and even necessary to ensure complete recovery across jurisdictions. As a result, there are no concerns of forum shopping, finality and multiplicity of proceedings. Therefore, none of the estoppel or abuse of process principles apply, so long as there is no double recovery for the same loss.

The final quantum of Apotex’s profits remains to be determined.  Apotex may appeal as of right.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Smart & Biggar | Attorney Advertising

Written by:

Smart & Biggar
Contact
more
less

Smart & Biggar on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.