A patentee cannot assert “hypothetical infringement” when it never asserted actual infringement

The Federal Court’s decision in Pharmascience Inc. v. Pfizer Canada ULC, 2019 FC 1271 reiterates the principle that conduct by parties in the real world is the best predictor of how the same parties could have and would have behaved in the “but-for” world that a Court is required to construct to assess damages.

In numerous claims for damages pursuant to section 8 of the Patented Medicines (Notice of Compliance) Regulations (the “Regulations”), defendant pharmaceutical patentees assert that the claim ought to be barred or diminished on account of hypothetical infringement by generic manufacturers in the “but-for” world. In other words, patentees assert that, in the absence of having commenced applications pursuant to the Regulations (which enjoin generic manufacturers from coming to market during their pendency), they could have and would have commenced and pursued successful patent infringement actions such that any hypothetical sales would have been infringing (and unrecoverable).

On Pharmascience’s motion, the Federal Court determined that, because Pfizer did not commence a patent infringement action in the real world (after Pharmascience actually entered the market), it did not lie in Pfizer’s mouth to assert that it could have and would have commenced and pursued a successful patent infringement action against Pharmascience in the “but-for” world.

Background

In 2011, Pharmascience attempted to enter the pregabalin market, but was prevented from doing so as a result of Pfizer’s application for an order prohibiting the Minister of Health from issuing a Notice of Compliance (“NOC”) to Pharmascience, which would have allowed Pharmascience to market a generic version of the drug.

Pfizer failed in its attempt to obtain that order. However, Pharmascience was barred from selling its generic version of pregabalin during the pendency of Pfizer’s application.

Pharmascience subsequently received a NOC permitting it to market a generic version of the drug. Importantly, even though Pharmascience started selling its generic version of pregabalin as a result of receiving this NOC, Pfizer did not commence a patent infringement action against Pharmascience.

Pharmascience then launched a lawsuit against Pfizer for damages, pursuant to section 8 of the Regulations, on account of the hypothetical sales that it lost during the period that it was kept off the market by Pfizer’s application.

In its defence, Pfizer argued that Pharmascience’s hypothetical sales of pregabalin would have infringed Pfizer’s patent, and that Pharmascience should not be allowed to collect damages for improper conduct — being Pharmascience’s hypothetical infringement of Pfizer’s patent — on the basis of the doctrine of ex turpi causa, which states that a claim founded on a claimant’s own wrongdoing should not be allowed to succeed.

Pharmascience disagreed, arguing that Pfizer’s defence of ex turpi causa was not relevant to an assessment of damages, and brought a motion seeking a summary trial on the issue.

Federal Court's Decision

The first issue that faced the Court was whether Pfizer could rely upon the hypothetical infringement of a patent as a basis to reduce or eliminate Pharmascience’s damages.

Pfizer argued that, even though it had not brought a patent infringement claim against Pharmascience in the real world, that ought not diminish the fact that it held the exclusive right to sell the drug by way of its patent. Given this, Pfizer argued that Pharmascience’s hypothetical sales would have still amounted to hypothetical patent infringement — in other words, they were sales that Pharmascience had no legal right to make — and therefore Pharmascience was barred from claiming damages for such sales by reason of ex turpi causa.

Pfizer relied on extensive case law to support its position. However, the Court found that the case law “[did] not buttress Pfizer’s position” because the patentee in each of the cases relied on had already successfully brought a patent infringement claim. This is in contrast to the instant case, where Pfizer had not brought a patent infringement claim against Pharmascience.

The Court thus distinguished the case law from the facts at hand, and instead equated Pfizer’s circumstances to those of Apotex Inc. v Sanofi-Aventis, 2012 FC 553, which stands for the proposition that “the absence of obstacles to market entry in the real world should prevail in the but-for world; if a generic manufacturer could have made sales without objection from the patentee, those sales should be considered in the calculation of the generic’s losses.”

Applying Sanofi-Aventis to the present facts, the Court found that, in the “but-for” world, “Pharmascience would have entered the market, made sales and earned profits. Pfizer would not have intervened by way of an infringement action. The hypothetical patent infringement, therefore, should not now stand in the way of Pharmascience’s claim for damages.”

The second issue that faced the Court was whether a summary trial was appropriate to determine this issue. Pfizer had argued that the calculation of damages must be conducted by way of a full trial. However, the Court’s firm answer to the previous issue debunked Pfizer’s argument.

Author: Jordyn Benattar, 2019/2020 Articling Student-at-law