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PAGE 10 FOCUS February 9/16, 2009 • Law Times Apotex provides no 'clear winner' BY JULIUS MELNITZER For Law Times ket, brand name drugmakers have a huge investment to recoup. But generic companies don't W ith costs of $100 mil- lion to $1 billion to bring a drug to mar- have to make that investment. They can piggyback on the inno- vators' successful drugs and ob- tain regulatory approval for the safety and effi cacy of their own versions while the innovators' patents are still extant. They can then either wait for the patent to expire and market their own drug immediately, or use the Pat- ent Medicines Notice of Compli- ance Regulation procedure in an attempt to get to market before the innovator's patents expire. Generally speaking, generic drugs have the same biological effect as the original drug but are manufactured in a different way. In order to market their products before the innovator's patent expires, the generic must serve documents explaining why the generic's process does not in- fringe on the innovator's patents or why they are invalid. If the innovator wants to de- lay the generic's marketing, it must serve an application seek- ing to prevent the generic from releasing its product until the in- novator's patent expires. Under the current version of When it comes to IP in Canada, We're Well Read Ridout & Maybee LLP: Editors of the Canadian Patent Reporter it all starts somewhere www.ridoutmaybee.com the regulations, the court must hear the application within 24 months. But until the court makes its decision, the generic can't go to market. As their devel- opment costs are relatively low, however, it pays the generics to take on PMNOC litigation — even litigation with slim chances of success — in the hope that one suit will pay off in spades. The diffi culty, from the gener- ics' perspective, is that the PM- NOC offers little incentive to settle. Because the system creates a stay on the introduction of the generic drug during the two years it allows a case to get to trial, it's almost always in the interest of the brands to maintain the mo- nopoly during the entire period. Making it even more worth- while for the brands to delay is the fact that the right of successful ge- neric litigants to seek losses occa- sioned by the delay has been very much in question since the PM- NOC's inception: until the recent ruling in Apotex Inc. v. Merck & Co. Inc., decided by Justice Roger Hughes of the Federal Court on Oct. 21, 2008, there was not a single trial decision that dealt with s. 8 of the PMNOC, which gives generics the right to recover losses occasioned by brands who have been unsuccessful in PMNOC Ridout_LT_Feb9-16_09.indd 1 2/5/09 10:52:55 AM applications seeking to prevent ge- nerics from marketing their drug before the brands' patents expire. Apotex presented the oppor- tunity for a major victory to both sides. The result, however, was a split decision. "You can't pick a clear winner in Apotex, because each of the parties won on a major point," says Tony Prenol of Blake Cas- sels & Graydon LLP. The brands' success was in limiting the damages available to the generics. Apotex had argued that it could choose between its own losses or Merck's profi ts as the measure of the damages it had sustained through its inability to market its product while the litigation was pending. Andrew Brodkin of Goodmans LLP, counsel for Apotex, pointed out that the applicable version of s. 8 spoke of "damages or profi ts" as relief, and that "profi ts" re- ferred to Merck's profi ts. Merck's lawyers, Patrick Kierans and Ja- son Markwell of Ogilvy Renault LLP's Toronto offi ce, countered with the successful argument that s. 8 made the brand liable to the generic "for any loss suf- fered" — and that clearly re- ferred to the generic's loss. In the end, Hughes decided that s. 8 was intended to "com- pensate" generics, meaning that the courts had no power to go beyond an award of damages. (This aspect of the decision ap- plies only to PMNOC cases fi led before Oct. 5, 2006 as subse- quent amendments clearly limit generics' relief to "damages.") On the other hand, Hughes Canadian Patent Reporter eReports (weekly electronic pdf version) Includes agreed with Apotex that the calcu- lation of damages was not limited to actual losses suffered during the delay period, but could include any damages attributable to a per- manent loss of market share. Here, two other generic manufacturers took advantage of the 16-month delay to enter the market at about the same time as Apotex — which, but for the delay, would have been fi rst to market. "While it might be diffi cult to quantify the damages caused by market share loss, the per- manent nature of these dam- ages could make for some large awards," Prenol says. The generics, however, were successful in maintaining their core right to sue for damages. The brands struck at the very Let the experts help you to narrow your search and save you research time. Canadian Patent Reporter has been Canada's leading law report since 1942. This renowned resource, available online and in print, includes leading precedent-setting intellectual property law judicial and board decisions from across Canada. This publication has a long-standing tradition of providing practitioners with the leading decisions on patent, industrial design, copyright and trade-mark law. Topical catchlines in bold print show the key issues involved. Expert case selection, editing and headnoting are a tradition with Canadian Patent Reporter. Weekly updates via email and in print, plus an annual cumulative index volume, ensure that this publication continues to be the prime reference source for intellectual property case law. Includes eReports Stay current as cases are issued with eReports e-mailed weekly to your desktop, with topically indexed case summaries linked to the full text judgments. Full service subscription (parts and bound volume) • $399 • 9 vol/yr • P/C 0325094999 • ISSN 0008-4689 existence of s. 8, arguing that it was unconstitutional. But Hughes dismissed Mer- ck's argument that the Patent Act did not give the Federal Court jurisdiction to hear s. 8 claims. He concluded that the PMNOC, including s. 8, was properly authorized by the act and conferred appropriate juris- diction on the Federal Court. Merck also maintained that the regulation-making powers granted under the Patent Act, which permit the government to make regulations "necessary for the preventing of the infringe- ment of a patent," did not au- thorize the enactment of s. 8. Kierans and Markwell rea- For a 30-day, no-risk evaluation call: 1.800.263.2037 Canada Law Book is a Division of The Cartwright Group Ltd. Prices subject to change without notice, to applicable taxes and shipping & handling. www.lawtimesnews.com CPR (LT 1-3x4).indd 1 2/4/09 3:12:16 PM LT0209 soned that s. 8 did not pre- vent infringement but merely See Section 8, page 13 Edited by Marcus Gallie, Ridout & Maybee LLP Fourth Series (Volumes 1 to 65): Edited by Glen Bloom, Osler, H First, S Founding Editor: Gordon F. H econd and Third Series: Edited by Gowling, Strathy & H enderson, C.C., Q.C., LL.D. oskin & H arcourt LLP enderson

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