Pleadings (and not Notices of Allegation) Govern Actions Under the PMNOC Regulations

In Sunovion Pharmaceuticals Canada Inc v Taro Pharmaceuticals Inc (2021 FC 37), the Federal Court allowed a generic drug manufacturer to amend its Statement of Defence in an action under the Patented Medicines (Notice of Compliance) Regulations (“PMNOC Regulations”) to include invalidity allegations against an innovator drug manufacturer that were not set out in the Defendant’s Notice of Allegation (“NOA”).

Changes to the PMNOC Regulations

In 2017, the PMNOC Regulations received significant amendments that saw litigation convert from an application process to an action process. As such, matters litigated under the PMNOC Regulations now culminate in a full trial with live witnesses preceded by pleadings and documentary and oral discoveries.

Under the previous rules, the NOA, the document which commences litigation under the PMNOC Regulations, defined the case. It had to list all facts and legal arguments that the party intended to raise, and there were strict limits to new information that could be relied upon. Under the new regime, service of an NOA still prompts the commencement of litigation, however the pleadings define the action.

Until now, while it had been anticipated that the Federal Court would no longer enforce the old, rigid limits on the ability for a generic drug manufacturer to introduce new facts and arguments not raised in its NOA, the issue had not been squarely addressed.

Background

In this motion, Taro Pharmaceuticals Inc. (“ Taro”) sought to amend its Statement of Defence to add allegations that were not included in its NOA. Sunovion Pharmaceuticals Canada Inc. (“ Sunovion”) argued that the PMNOC Regulations continued to restrict allegations to those listed in the NOA. By contrast, Taro contended that, because pleadings now govern actions under the amended PMNOC Regulations, parties should no longer be limited to addressing issues raised in the NOA.

The Federal Court’s Decision

As expected, the Federal Court accepted Taro's argument and applied the standard governing principles regarding pleading amendments to allow the motion.

In finding that parties are no longer strictly bound to the issues raised in the NOA, the Court cited the Regulatory Impact Analysis Statement (“ RIAS”) issued along with the new regime that stated that the NOA is meant to facilitate early consideration of issues likely to be raised in litigation. However, the RIAS noted that the NOA does not circumscribe or otherwise limit the issues and argument that may be raised in a proceeding under the PMNOC Regulations, but that the scope of proceedings under the PMNOC Regulations will now be defined by the pleadings in accordance with prevailing rules and practice.

The general rule regarding amending pleadings is that a document may be amended at any time in order to resolve an issue between parties on such terms as will protect their rights. So long as the amendment has a “reasonable prospect of success”, the Court will consider other factors, such as prejudice to the opposing party (that cannot be compensated with costs), to determine whether the pleadings should be amended.

In this case, the Court found that the amendments were not bereft of a reasonable prospect of success, because they were already in play in parallel litigation involving the same product. In support of its finding that the plaintiffs’ rights were not prejudiced by the amendments, the Court reasoned that the amendments were submitted in a timely fashion, would not alter the course of the litigation or delay the trial and went to the validity of the issues at hand.

Author: Mark Leonard