New practice direction is a 'winner'

By all accounts, generic drug litigation in the Federal Court is a mess, claiming a disproportionate amount of judicial resources because of a labour and paper-intensive procedure that seems to make less and less sense over time.

Some observers believe, however, that a new Federal Court practice direction that went into effect on Jan. 7 will at least partially relieve the malaise.

“The new practice direction is an attempt by the judiciary to grab the throat of this beast and shake it until they can make sense of it,” says William Richardson of McCarthy Tétrault LLP’s Toronto office. “They’re saying that if this is the regime under which they have to operate, they’re going to push back on counsel and clients to bring some order that gives judges a fairer shot at providing real justice. That will make everyone a winner.”

Generic drug litigation has been problematic since the formulation in 1993 of the Patented Medicines (Notice of Compliance) Regulations. The authors sought to strike a balance between preventing infringement and facilitating the marketing of generic drugs where no infringement existed.

Under the regulation, a generic drug manufacturer who wishes to go to market must obtain a notice of compliance by filing a document that compares its generic version with the innovator’s drug. The Ministry of Health will issue the NOC if it is satisfied that the generic version is the equivalent of the brand version in safety and effectiveness.

If the generic wishes to go to market before the brand’s patent lapses, the generic must serve the innovator with a notice of allegation asserting either the patent is not valid or, if it is, the generic drug will not infringe it. A detailed statement of the factual and legal basis for the allegations must accompany the notice.

The innovator can challenge allegations of invalidity or non-infringement by applying to the Federal Court for an order prohibiting the minister from issuing an NOC before the expiry of the patent. Once the innovator files, the minister cannot issue the NOC for 24 months. The upshot is that the courts have 24 months to decide whether invalidity or infringement has occurred.

To some counsel, the PMNOC scenario looks familiar - but uncomfortably so. They say it is akin to an interlocutory injunction obtained without proof of a prima facie case of infringement or irreparable harm, followed by a summary-judgment-like proceeding based on affidavit evidence.

Except there’s nothing summary about PMNOC proceedings in practice. Indeed, no less an authority than former Supreme Court of Canada justice Frank Iacobucci wrote a 1998 judgment in which he lambasted the regulation as “draconian.”

Some observers say the difficulties begin with the Federal Court’s refusal to allow amendments to notices of allegation, forcing the generics to file voluminous notices, up to 100 pages long, and follow up with evidence dealing with every point in the document.

Compounding the problem further is the fact that the complex issues involved are invariably addressed with expert evidence. Making sense of expert evidence given by affidavit, however, is no small challenge: in many PMNOC cases, experts’ opinions are diametrically opposed, requiring judges to make credibility findings without an opportunity to assess witnesses in person.

Finally, the judges only get the voluminous material, including lengthy cross-examination transcripts, shortly before the expiry of the two-year period. This has created a great deal of pressure to the point where jurists have been complaining about the amount of material and the short time they have to explore it.

For their part, innovators complain the deck is stacked against them because the rules require them to file evidence first, even though it is the generic seeking a declaration of non-infringement or invalidity.

The generics don’t buy it. They point out that the notice of application filed by the brands is a bare-bones document, diametrically opposed to the detailed notice of allegation from which the generics may not depart.

What is clear is that virtually all stakeholders are dissatisfied with the PMNOC process. Many say the scheme is incoherent and has many procedural pitfalls and complications, and they’re fed up with a system that bears no resemblance to the summary, preliminary procedure it is intended to be.

“I don’t recall a hearing that was done in a day,” says Harry Radomski of Toronto’s Goodmans LLP. “Most last four or five days or even longer and involve a mountain of expert evidence. One of our cases involved filings from 28 experts.”

And by all accounts, things have been getting worse over time. Hence the practice direction, described by the court as a response to the challenges raised by the increasing number of IP cases in general and PMNOC proceedings in particular.

More specifically, the practice direction changes the way NOC proceedings are case managed. They will now be “specially managed.”

This means that the court will assign a case management judge or prothonotary to each new proceeding. Once all parties have entered appearances, the judge or prothonotary will convene a conference to address key issues.

These include deciding whether the generic should file some or all of its evidence before the innovator does, fixing a schedule for filing evidence, conducting cross-examination and other interlocutory matters, fixing a date for filing a requisition for hearing, and “any other matters useful to ensure the just, most expeditious and least expensive disposition of the proceeding.”

As well, the presiding judge may convene a hearing management conference six weeks before the hearing to discuss, among other things, the content of the application record, the preparation of a compendium and materials in electronic format for submission to the hearing judge, the identification and settlement of issues, and any agreed facts and documents.

As all counsel know, some practice directions work and some don’t.
“It’s hard to say what all this means and whether it will make things more efficient,” Radomski says. “To begin with, there are all the arguments about the efficacy of changing the order in which the evidence is presented.”

If nothing else, everyone agrees that the court is taking a newly proactive approach. In the past, the court might have let parties determine the pace of the litigation, bearing in mind only the 24-month time limit. But now it appears that judges will be making every effort to reduce the time a hearing takes by demanding realistic time estimates and putting limits on what parties can do.

Among the most successful of these restraints is limiting the number of experts by strictly applying the provisions of the Canada Evidence Act that hold parties to five experts without leave of the court. Virtually everyone favours this approach.

For his part, Radomski lauds any measure that will shorten and simplify the proceedings.

“The Federal Court of Appeal has emphasized that PMNOC litigation produces a preliminary determination rather than a final determination of rights,” he says. “So we should need only enough to give the court a sense of what the real story is, much like what happens on a summary judgment motion in civil proceedings generally.”

But not everyone believes the changes are necessary. Some critics argue that, absent a complete overhaul, the present system should remain in place. Others believe the current system works well enough, achieving its goal of allowing generics to enter the market only after a preliminary review of validity and infringement.

However that may be, salvation may come from an unexpected source. Increasing numbers of innovators and generics could be turning to full impeachment or infringement proceedings as their primary approach.

The reason is the Federal Court has been streamlining its trial procedures even as it is working on PMNOC challenges. The court has implemented a fast-track process that promises a hearing within two years, potentially making final determinations as expeditious as PMNOC proceedings.

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