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Old statute resurfaces in case with big implications for drug patents

|Written By Tali Folkins

A nearly 400-year-old statute could conceivably end up meaning triple the damages in a lawsuit over drug patents and have serious implications for patent law after a recent Superior Court judge ruled against striking out a cause of action based on it.

The ruling is part of an ongoing lawsuit, Apotex Inc. v. Eli Lilly and Co., launched in 2011. According to its statement of claim, as summarized in Justice Sean Dunphy’s decision on Aug. 27, Apotex, a Canadian generic drug manufacturer, is suing Eli Lilly on the grounds that the improper issue of a patent for a drug to treat attention deficit hyperactivity disorder prevented it from marketing its own generic version.

Eli Lilly, according to the decision, obtained its patent for the drug, atomoxetine, in 2001 and started marketing it under the trade name Strattera in 2004. By 2008, Apotex had developed its own version of the drug. In the same year, Eli Lilly sought an order of prohibition that would prevent Apotex from obtaining the notice of compliance necessary to market the drug. According to regulations governing notices of compliance, they can’t be granted for two years to companies subject to orders of prohibition.

In order to obtain a notice of compliance to market a patented drug, a generic company has to wait for the patent to expire unless the patent has been proven to be invalid. In 2010, another generic drug company succeeded in proving that Eli Lilly’s patent for atomoxetine was invalid.

Apotex succeeded in getting its notice of compliance after Eli Lilly’s attempt to block the generic company from obtaining it was dismissed the same year.

The regulations also allow generics such as Apotex to sue for any losses they’ve suffered as a result of dismissed orders of prohibition. In 2011, Apotex sought damages under those regulations as well as Ontario’s Statute of Monopolies, an 1897 re-enactment of an English law dating from 1624 and the reign of King James I.

It was an interesting move, says Donald MacOdrum, a partner at Bereskin & Parr LLP, given that the statute is “a very hoary old thing” with almost no decisions made under it.

The original English law, as quoted in the decision, forbids monopolies and allows parties who have been “hindered greeved disturbed or disquieted” by them to sue and “recover three tymes soe much as the damages which he or they susteyned by means or occasion of being soe hindered greeved disturbed or disquieted.” It also allows double costs.

While the notice of compliance regulations do allow companies in Apotex’ situation to sue, they don’t seem to clearly preclude them from making a claim under other legislation as well, says Chris Heer, founder of intellectual property firm Heer Law.

“I think probably the feeling at the time when it was drafted was that probably there was no other legislation that would apply, but I guess there was this 1897 enactment there that no one was really looking at,” he says. “The thing I find, I guess, most unusual about the provision in the Statute of Monopolies is the treble damages and double costs. That’s something, at least in terms of awards, that would now be reserved for cases in which there was some sort of fraud or some sort of wilful infringement or something with real intent to do the wrongdoing.”

In March 2014, Eli Lilly issued a notice of motion seeking to strike Apotex’ claim under the monopolies statute that led to last month’s ruling.

The notice of motion, MacOdrum and Heer say, had very little chance of succeeding as the burden was on Eli Lilly to prove it was “plain and obvious” that the claim couldn’t succeed.

In reaching his decision, Dunphy considered an argument advanced by Eli Lilly that the notice of compliance regulations constitute a “‘complete code’ of rights and responsibilities arising from delay to market claims in the area of patents” and that he should, therefore, throw out Apotex’ additional claim under the Statute of Monopolies. It was an argument he didn’t find convincing given a judgment in an earlier Ontario Court of Appeal case that he said didn’t settle the matter. “There being no binding decision from that Court here, I cannot view the matter as settled,” he wrote.

Dunphy was also skeptical of several arguments that the old law and its hoary predecessor shouldn’t apply to the case before him.

“Having concluded that it is premature to consign these statutes to the history books before Parliament or a court have had an opportunity to consider them in detail upon a proper factual background, I am dismissing this motion and permitting the plaintiff to proceed to trial with its claims based upon these statutes,” he wrote.

If the case proceeds to trial, it could potentially have far-reaching implications for patent law, according to Heer and MacOdrum. Both say they know of no decisions under the Ontario Statute of Monopolies — at least when it comes to patents — meaning the case could set a precedent.

If Apotex’ claim under the old act is successful, says Heer, “there’s going to need to be some way to distinguish what . . . the Statute of Monopolies actually means and how it should apply because suddenly awarding parties triple damages to the extent that they were held off the market in pharmaceutical cases, that would be a big change to the regime.”

At issue, says MacOdrum, is what kind of right a future decision might give to companies like Apotex that have been defendants in orders of prohibition under the notice of compliance regulations and have then won patent actions because the patent in question has been found to be invalid.

“Is this going to give a general right to defendants who are successful in showing a patent is invalid to claim damages because they suffered because there was an invalid patent?” he asks. “Who knows what the scope of the thing could be?”

  • Restraint of Trade

    John Legge
    Treble damages for an erroneous monopoly has absolutely nothing to do with fraud. Monopolies are by definition in restraint of trade and inherently against public policy. That treble damages flow to those "... hindered, greeved, disturbed, or disquieted” in trade is sensible policy to protect internal domestic free trade from monopolistic obstruction. The Statute in question is old and has had little if any use as so few plaintiffs could fall within its ambit. Dozens of treble damages Statutes exist in common law jurisdictions. The statute merely empowers private enforcement of the public policy against restraint of trade by the powerful. Hoary? Hardly. Though it might lead to public singing of Happy Birthday.
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