JANSSEN INC. v. DAIICHI SANKYO COMPANY, LIMITED, 2016 FC 593

Date: 20160531 Dockets: T-2175-04 T-2056-11 Citation: 2016 FC 593 Toronto, Ontario, May 31, 2016 PRESENT: The Honourable Mr. Justice Hughes Docket: T-2175-04 BETWEEN: JANSSEN INC. AND DAIICHI SANKYO COMPANY, LIMITED Plaintiffs (Defendants by Counterclaim) and TEVA CANADA LIMITED Defendant (Plaintiff by Counterclaim) Docket: T-2056-11 AND BETWEEN: JANSSEN-ORTHO LLC, JANSSEN PHARMACEUTICALS, INC., and OMJ PHARMACEUTICALS, INC.

Plaintiffs and TEVA CANADA LIMITED and DAIICHI SANKYO COMPANY, LIMITED Defendants PUBLIC JUDGMENT AND REASONS [ 1 ] This decision relates to the determination of damages and quantification thereof arising out of a Judgment of this Court in Action No. T-2175-04 dated October 17, 2006, in which I determined that Claim 4 of Canadian Patent No. 1,304,080 was valid and had been infringed by the Defendant, Novopharm Limited, now Teva Canada Limited. I granted an injunction and damages but not profits. That decision, Reasons cited at 2006 FC 1234 , was affirmed by the Federal Court of Appeal on June 7, 2007 (Docket No.

A-500-06, Reasons cited as 2007 FCA 217 ). Leave to appeal was refused by the Supreme Court of Canada on December 6, 2007 (Docket No. 32200). [ 2 ] For the purposes of this decision, the operative part of my previous Judgment, following a declaration as to validity and infringement of Claim 4 and an award of damages (as subsequently affirmed aforesaid), is as follows: 3. The Defendant may, at its election, do one of the following in respect of levofloxacin containing products in its possession, custody or control as of the date of issue of this Judgment: a.

Sell them in the normal course of business in accordance with paragraph 2 above, provided that all unsold product at the end of the thirty (30) day period shall be treated in the manner provided in one of

b) or

c) below; b. Destroy them and provide an appropriate affidavit of a responsible officer of the Defendant to that effect; or c. Deliver them up to the Plaintiffs at a place and manner as the Plaintiffs may direct provided that if such delivery is to take place outside of the Greater Toronto area it shall be at Plaintiffs’ expense; 4. The Plaintiffs are entitled to receive from the Defendant all damages sustained by them by reason of the activities of the Defendant which infringe claim 4 of the Patent.

A separate trial, preceded by discovery if requested, shall be held as to the quantum of damages and interest as awarded herein. Any monies paid as set out in paragraph 2 above shall be taken into consideration by way of set off or otherwise, in the final calculation of damages. 5. The Plaintiffs are entitled to pre-judgment interest on the award of damages, not compounded, at a rate to be calculated separately for each year since infringing activity began at the average annual bank rate established by the Bank of Canada as the minimum rate at which it makes short term advances to the banks listed in

Schedule 1 of the Bank Act, RSC 1985, c. B-1; 6. The Plaintiffs are entitled to post judgment interest, not compounded, at the rate of five percent (5%) per annum. This interest shall commence upon the final assessment of the monetary damage amount, prior to that, pre-judgment interest shall prevail; [ 3 ] The following is an Index to the topics covered in these Reasons, by paragraph number: TOPIC PARAGRAPH NO.

I . THE PARTIES 4 II . PATENT AT ISSUE 8 III . JANSSEN’S PRODUCTS 11 IV . TEVA/NOVOPHARM PRODUCTS 13 V. THE EVIDENCE / WITNESSES

a) Agreed Evidence

b) Plaintiffs Janssen’s Evidence

c) Defendant Teva’s Evidence 14 15 16 20 VI . GLOSSARY 24 VII . ISSUES 25 VIII . ISSUE NO. 1 – STANDING OF JANSSEN US 26 IX . ISSUE NO. 2 – QUANTUM OF DAMAGES

a) Quantifying Damages Generally

b) Facts, Assumptions and Fun with Numbers

c) Positions and Concessions

d) The Marketplace as it Existed in Fact

e) Scenarios

f) The “But For” Marketplace

i) What Would Have Been the Normal Course of Events ii) Competition – Other Molecules iii) Disruptions in the Market

g) Findings as to What the “But For” World Would have Been

h) Damage Period

i) Hospital Sales – Price Suppression

j) Hospital Sales – Diamond, Non-Diamond and Educational Institution/Government

k) Hospital Sales – Percentage

l) Royalty Paid to Janssen Puerto Rico 69 69 72 74 75 89 91 97 99 101 104 107 116 119 125 132 X . ISSUE NO. 3 – PRE-JUDGMENT INTEREST 133 XI . ISSUE NO. 4 - MITIGATION 139 XII . COSTS 148 XIII . CONCLUSIONS 149 I. THE PARTIES [ 4 ] The Plaintiff in Action No. T-2175-04 is Janssen Inc. (previously Janssen-Ortho Inc.) and is referred to herein as Janssen Canada.

It was found, in my previous Reasons at paragraph 3, to be a Canadian Company which is licensee of the Plaintiff, Daiichi Sankyo Company, Limited, hence is a person claiming under the patent at issue. [ 5 ] Daiichi Sankyo Company, Limited, referred to herein as Daiichi, was found in my previous Reasons at paragraph 2 to be a Japanese company and owner of the patent at issue. Daiichi, as an owner of that patent, is also a named Defendant in Action No. T- 2056-11.

By letter to the Court dated November 9, 2012, Daiichi’s solicitors stated that it does not intend to participate in this proceeding, that it has settled its damage claim against Teva Canada Limited, and that Daiichi will abide by the outcome decided by the

Court herein. [ 6 ] The other Defendant in Action No. T-2056-11, and only Defendant in T-2175-04, is Teva Canada Limited. At the time of my earlier decision in T-2175-04, it was known as Novopharm Limited. I found in my previous Reasons at paragraph 4 that it was a Canadian-based corporation which had, since about December 2004, been marketing and selling levofloxacin products in Canada. I will generally refer to this party as Teva although sometimes it may be referred to as Novopharm. [ 7 ] The Plaintiffs in Action No. T-2056-11, are three Janssen-related companies.

Janssen-Ortho LLC is a Delaware limited liability company and is sometimes referred to in the evidence as JOLLC. Janssen Pharmaceuticals, Inc. is Pennsylvania corporation and is sometimes referred to in the evidence as JPI or Janssen US. OMJ Pharmaceuticals, Inc. is a Delaware corporation and is sometimes referred to in the evidence as OMJ. Collectively, JOLLC and OMJ are sometimes referred to as Janssen Puerto Rico. II. PATENT AT ISSUE [ 8 ] The patent at issue is Canadian Patent No. 1,304,080 which will be referred to as the 080 Patent.

The application for that patent was filed in the Canadian Patent Office on June 19, 1986, thus the patent is governed by the provisions of the “old” (pre-October 1, 1989) Patent Act , RSC 1985, c. P-4 . The patent was issued and granted to Daiichi on June 23, 1992, and expired seventeen (17) years from that date; that is, on June 23, 2009. [ 9 ] Claim 4 of the 080 Patent was held by my previous Judgment to be valid and infringed by Teva by its sale, offering for sale, and other dealings in levofloxacin containing products in Canada.

On October 17, 2006, I enjoined Teva from further sale and other dealings in levofloxacin containing products in Canada subject to a thirty (30) day sell-off period to permit it to dispose of such products subject to payment to Janssen. Teva took advantage of this sell-off period and has already paid Janssen in respect of such products.

The expert witnesses have taken this payment into account in their calculations. [ 10 ] After the patent expired on June 23, 2009, Teva as well as any other person, was able to sell and otherwise deal in levofloxacin containing products in Canada free from a claim for infringement of the 080 Patent. III. JANSSEN’S PRODUCTS [ 11 ] Janssen Inc. has sold and otherwise dealt with levofloxacin containing products in Canada since about 1998.

They have been provided at various times in tablet form having strengths of 250 mg, 500 mg and 750 mg under the name LEVAQUIN. [ 12 ] Janssen Inc. also sold and otherwise dealt with levofloxacin containing intravenous solution products in Canada but is not claiming damages in respect thereof in this action. IV.

TEVA / NOVOPHARM PRODUCTS [ 13 ] The Defendant, Teva/Novopharm, introduced its generic levofloxacin containing tablets into the Canadian market in December 2004, and continued to sell and distribute them until the injunction was granted by this Court on October 17, 2006, subject to the thirty day sell-off period aforesaid. These tablets were sold in 250 mg and 500 mg strengths under the name Novo- levofloxacin. V. THE EVIDENCE / WITNESSES [ 14 ] The evidence adduced at trial is common to both actions, T-2175-04 and T-2056-11.

a) Agreed Evidence [ 15 ] Counsel have done a commendable job in agreeing to many facts. These are set out in Exhibits A1, A2, A3, A40, and A43. They have also agreed as to several documents, the proof of which may be dispensed with, although the truth of the contents of some of them may be disputed. These documents are contained in seven volumes, each document is provided with a numbered tab; these volumes are collectively marked as Exhibit A4 supplemented by electronically recorded documents in a USB key, Exhibit A14. A booklet containing Notices to Admit and Responses thereto served by each party upon the other was entered as Exhibit A66.

b) Plaintiffs Janssen’s Evidence [ 16 ] Janssen called three expert witnesses all of whom submitted Reports which were deemed to have been read into the Record; they were: 1. Dr. Jerry Rosenblatt , Town of Mount Royal, Quebec. His Report and Reply were marked as Exhibits P5 and P6. The parties agreed that he could be called as an expert witness and agreed as to his qualifications as follows: He is an expert in the marketing of pharmaceutical products in Canada and the data analysis and forecasting of pharmaceutical sales and market share in Canada including the impact of generic entry.

I found him to be straightforward and professional in his evidence. Some of his opinions were based on what he was told by Dr. Chan as

to the state of the marketplace in Canada. 2. Farley Cohen , Toronto, Ontario. His reports and schedules to those reports were marked as Exhibits P7, P8, P9, P10 and P11. The parties agreed that he could be called as an expert witness and agreed as to his qualifications as follows: … expert chartered account and chartered business valuator with a specialist designation in investigative and forensic accounting and expertise in the quantification of economic damages, lost profits, and income determination. Again, I found him to be straightforward and professional in his evidence.

Some of his opinions were based on those of Dr. Rosenblatt and Dr. Chan. 3. Dr. Charles Chan , North York, Ontario. His Report and Reply report were marked as Exhibits P19 and P20. The parties agreed that he could be called as an expert witness but disagreed as to his qualifications. Janssen’s Counsel proposed his expertise as follows: …as an expert on the following basis: a medical doctor with a specialist certification in respiratory medicine and expertise regarding respiratory tract diseases, antiinfectives, and prescribing practice including expertise on the Canadian antibiotic guidelines.

Teva’s Counsel did not agree as to his expertise respecting prescribing practice and expertise on Canadian antibiotic guidelines. Having heard Dr. Chan, I accept Janssen’s statement as to his qualifications. I have some difficulties with respect to his evidence. While Dr. Chan has a depth of knowledge and years of experience with respect to many of the drugs at issue, he could not answer even simple questions from his own Counsel or cross-examining Counsel without going into long, complex, and often irrelevant answers.

He is undoubtedly a person not used to being challenged as to his opinions as he frequently accused cross-examining Counsel as trying to deceive him or misstate the facts or his answers. I treat Dr. Chan’s evidence with caution. [ 17 ] Janssen called seven fact witnesses; they were: 1. Rod Curtis , Markham, Ontario. He is Chief Financial Officer of Janssen’s medical operations in Canada. He gave evidence as to the corporate structure of Janssen in Canada and elsewhere in the Western Hemisphere. 2. Jeff Smith , Flemington, New Jersey. He is Vice President, Business Development of Janssen Pharmaceuticals Inc.

He has been with Janssen and its predecessors for about three decades and gave evidence as to the evolution of its corporate structure. He provided a corporate chart, Exhibit P17. While I accept his evidence, for what it was, it was not backed up by any documents. I am not surprised that he could not identify documents such as invoices. However, he could not identify more “high level” documents such as apparent license agreements and letters of agreement. 3. John Stewart , Holland Landing, Ontario.

He is Business Unit Director of Janssen Inc., and has been involved at the senior level in Janssen Inc. and its predecessors in marketing its levofloxacin products in Canada. He gave his evidence in a straightforward manner in dealing with the marketing strategy and decisions of Janssen in respect of its levofloxacin products in Canada. 4. Seth Fischer , Bridgewater, New Jersey. He was with the Johnson & Johnson organization including various Ortho-McNeil entities for many years in the 1990’s and 2000’s.

He has left the Johnson & Johnson organization and is presently employed by a different organization in California. He gave evidence respecting the launch of levofloxacin products in the United States and Canada, and the relationship between various Johnson & Johnson entities and Daiichi. He identified several agreements between these entities and Daiichi and e-mail exchanges in respect thereof. He gave his evidence in a straightforward manner. 5. Lindsey Villacis , Flemington, New Jersey. She is a Senior Financial Analyst with the Johnson & Johnson group.

She gave evidence as to the documents relating to manufacture and sale of the levofloxacin containing products within the Johnson & Johnson group of companies and, in particular, sales to the Canadian organization. She addressed many sales related documents found in Exhibit P37 but was unable to identify certain documents put to her in cross-examination. She was a straightforward, if careful, witness. 6. Carlos Fernandini , Bayamon, Puerto Rico. He is a Senior Finance Manager of Johnson-Ortho Puerto Rico.

He gave evidence as to the shipment of levofloxacin (sometimes called the active pharmaceutical ingredient or API) from Daiichi to the Puerto Rico manufacturing facility and, from there, to Janssen Inc. in Canada. He identified several documents related to these transactions. His evidence was straightforward. He was unable to identify certain documents put to him in cross-examination. 7. Bob Roarty , Flemington, New Jersey. He is Director, Global Finance with the Janssen supply chain division of Johnson & Johnson, New Jersey.

He gave evidence as to the physical flow of goods and related paperwork, from Daiichi through Puerto Rico, and then to Canada. This evidence is illustrated in charts entered as Exhibits P39 and P17. His evidence was straightforward; he identified certain documents in his evidence in chief but could not identify others put to him in cross-examination. [ 18 ] At the conclusion of the evidence of the Plaintiffs’ witnesses, Plaintiffs’ Counsel tendered an affidavit of Cheewooi Lim, a Japanese resident, who is with the Business Development and Licensing Department at Daiichi.

Defendant’s Counsel objected to the filing of this affidavit since Lim was not presented for cross-examination and apparently, is precluded from giving sworn evidence in Japan in a non-Japanese proceeding. I entered the affidavit into evidence as Exhibit P41 but indicated that I would give it little, if any, weight. [ 19 ] The Plaintiffs introduced a portion of their Examination for Discovery of the Defendant as Exhibit P42 which was deemed to have been read into the Record.

c) Defendant Teva’s Evidence [ 20 ] The Defendant Teva did not call any fact witnesses but did call four expert witnesses. The parties agreed that these four

witnesses could be called as experts, and agreed as to the scope of their expertise (Exhibit A45). Their reports were marked as Exhibits and were deemed to be read into the Record. These experts were: 1. Alan Mak , Toronto, Ontario. The parties have agreed as to his expertise: …an expert in litigation and forensic accounting. Mr. Mak was provided with a number of assumptions and data and asked to calculate Janssen’s losses (gains) consequent upon Teva’s entry into the levofloxacin market with a generic product. His reports were marked as Exhibits D46, D47, and D48. Mr.

Mak gave his evidence in a straightforward manner. The opinions and conclusions that he reached however are dependent upon the assumptions that he was asked to make. 2. Dr. Paul Grootendorst , Oakville, Ontario. The parties have agreed as to his expertise: …an expert in health and pharmaceutical economics. Dr. Grootendorst was provided with a number of assumptions and data and asked to provide his opinion as to the market share Janssen’s levofloxacin products, LEVAQUIN, would have had in the “but for” world had Teva not entered with a generic.

His reports were entered as Exhibits D52, D53, with corrections as D54. His opinions are dependent upon the assumptions which he was given and others that he made. His evidence was given in a frank and straightforward manner. 3. Dr. Lea Katsanis , Westmount, Quebec. The parties have agreed as to her expertise: …an expert in pharmaceutical marketing. Her report was marked as Exhibit D55. She gave evidence as to the likely market share that Janssen’s Levaquin would have received in the “but for” world had Teva not entered the marketplace concluding that it would have been a declining share.

I accept that she was endeavouring to give reasonable opinions although, in cross-examination, she tended to be overly loquacious or confused. When I asked her to compare Dr.Grootendorst’s conclusion with hers, she said that they were about the same but that Dr. Grootendorst may have been working with more data than she had. 4. Dr. Andrew Simor , Toronto, Ontario. . The parties have agreed as to his expertise: …an expert in medical microbiology and the treatment of infectious diseases.

He gave evidence as to the use and recommendations for use (guidelines) of anti-infection drugs including macrolides and quinolones. His reports are marked as Exhibits D58 (2 volumes) and D59. He gave his evidence in a straightforward and candid manner. [ 21 ] The Defendant entered into evidence four volumes of excerpts from its discovery of the Plaintiff in Action No. T-2175-04 as Exhibit D61, and a supplemental volume in the same action as Exhibit D62.

Documents referred to in those excerpts were marked as Exhibit D63. [ 22 ] Excerpts from the Defendant’s Examination for Discovery of the Plaintiffs in Action No. T-2056-11 were marked as Exhibit D64, and documents referred to as Exhibit D65. [ 23 ] All of this discovery material was deemed to have been read into the Record and, in accordance with the understanding in both these actions, all of these discovery excerpts and documents are applicable equally to both actions. VI. GLOSSARY [ 24 ] The following is a glossary of some of the terms used in evidence: 1.

Fluoroquinolones were sometimes referred to in the evidence as quinolones . They include medications with generic names ending in –floxacin such as ciprofloxacin (CIPRO), levofloxacin (LEVAQUIN), moxifloxacin (AVELOX), and gatifloxacin (TEQUIN). 2. Respiratory fluoroquinolones are a subset of the fluoroquinolones. These are fluoroquinolones that may be used to treat a range of bacteria that cause Respiratory Tract Infections (RTI’

s) such as S. pneumoniae. Of the fluoroquinolones in the evidence, levofloxacin (LEVAQUIN), moxifloxacin (AVELOX), and gatifloxacin (TEQUIN) are respiratory fluoroquinolones. While ciprofloxacin (CIPRO) is not a respiratory fluoroquinolone, it was used to treat some RTI’s in the 2000’s. 3. Macrolides are a group of antibiotics also used in the treatment of RTI’s. They have generic names ending in –omycin and include erythromycin, clarithromycin (BIAXIN BID or BIAXIN XL), and azithromycin (ZITHROMAX). 4. Beta-lactams or β-lactams are another class of antibiotics. An old example of a beta-lactam is penicillin.

Of the drugs in this class, a common element is a molecular structure known as a beta-lactam ring. During the proceedings, mention was made of several of these antibiotics including amoxicillin, cefuroxime, and ceftriaxone. 5. Combination therapy with beta-lactam and a macrolide is a combination of one drug from each class that can be used together for the treatment of RTI’s.

6. API or active pharmaceutical ingredient is the active medicinal ingredient in a drug. It is combined with other ingredients,often called excipients, to make the final product (e.g., a tablet). Levofloxacin is an API made by Daiichi and shipped to Puerto Ricowhere it is mixed with other ingredients (excipients) and made into tablets. 7. A respiratory tract infection (RTI) is an infection anywhere along the respiratory tract from the nose to the lungs. They areusually caused by a virus or bacteria and include colds, sinusitis, influenza, bronchitis, and pneumonia. 8.

Community-acquired pneumonia or CAP is one of the more common RTI’s. It is a pneumonia developed by someone whohas not had contact with a hospital or other medical institution. Hospital-acquired pneumonia or HAP is a pneumonia developed bysomeone who has had contact with a hospital or other institution. VII. ISSUES [25] There are four issues that the Court must address in these proceedings; the first three are proposed by Janssen, and the fourthby Teva who agrees with the three proposed by Janssen. They are: 1. Does Janssen US have standing to claim damages as a result of Teva’s infringement of the 080 Patent? 2.

What is the quantum of damages suffered by each of Janssen Canada and Janssen US? 3. How is the pre-judgment interest, if any, awarded to Janssen US to be calculated? 4. Should Janssen Canada have taken steps to mitigate its damages and, if so, when and to what extent? VIII. ISSUE NO. 1 – STANDING OF JANSSEN US [26] The 080 Patent is owned by Daiichi and Daiichi has settled its claim against Teva. Janssen Inc., the Plaintiff in Action No.

T-2175-04, has a claim for damages against Teva which claim is contested only as to the quantum of damages, and not its right to damageswhich right was settled in the earlier decision in this case. [27] There are three Plaintiffs in Action No. T-2056-11; of these, two, Janssen-Ortho LLC and OMJ Pharmaceuticals Inc.(collectively known as Janssen Puerto Rico), make no claim for damages.

That leaves only Janssen Pharmaceuticals, Inc. (JPI orJanssen US) as the entity making a claim for damages in that action. [28] The claim by Janssen US for damages rests on the provisions of section 55(1) of the Patent Act (the provisions are the samein the pre- and post- October 1989 versions of that Act) which state that an infringer is liable for all damages sustained not only by apatentee, but also by all persons “claiming under” the patentee. 55

(1) A person who infringes a patent isliable to the patentee and to all personsclaiming under the patentee for all damagesustained by the patentee or by any suchperson, after the grant of the patent, byreason of the infringement. 55

(1) Quiconque contrefait un brevet estresponsable envers le breveté et toutepersonne se réclamant de celui-ci dudommage que cette contrefaçon leur a faitsubir après l’octroi du brevet. [29] Who constitutes a person “claiming under” a patentee has generated a good deal of jurisprudence in Canadian Courts.

By wayof contrast, the United Kingdom Patents Act 1977, c. 37, sections 33, 61, 67 and 68, give a right to take action for infringement and toclaim remedies not only to the proprietor (owner) of a patent but also to an exclusive licensee provided that the licensee has, within sixmonths, registered the particulars of the licence with the Patent Office. This brings a good deal of certainty to the situation. [30] The leading case in Canada is the decision of the Supreme Court in Armstrong Cork Ltd. Canada v Domco Industries Ltd., (SCC), [1982] 1 SCR 907. That case proceeded on an Agreed Statement of Facts.

The patent owner (Congoleum)granted to Domco a restricted non-exclusive licence under a patent directed to etched pattern floor coverings. The licence provided thatthe patentee itself would not enter the Canadian market for three years and would not give a licence to anyone else for five years. Theissue was whether Domco was a person “claiming under” the patentee. Martland J., for the Court, reviewed prior decisions includingthat of the Privy Council in Spun Rock Wools Ltd. v Fiberglas Canada Ltd., [1947] AC 313, and the Federal Court of Appeal inAmerican Cyanamid Co. v Novopharm Ltd., [1972] FC 739.

In Fiberglas, the Privy Council, at pages 320 to 321, stated that “licensees”were entitled to sue for damages under

section 55 of the Patent Act. On the facts of that case, however, the “licensee” was an exclusivelicence and Counsel sought to distinguish that decision on that basis. Martland J. rejected that submission and stated that there was novalid reason to exclude a non-exclusive licensee from the provisions of the Patent Act respecting persons “claiming under” the patentee.

He wrote at pages 917 to 920: While it is true that the licensee actually under consideration in the Fiberglas case was said to be “the exclusive sub-licensee” (or“exclusive licensee”) under the patent, no information is given in any of the judgments as to the precise nature of the licence, andnothing in the reasons for judgment on this point turned on the distinction between an exclusive licensee and a non-exclusive licensee ora bare licensee. Both Mr. Justice Davis in this Court delivering his and Mr.

Justice Taschereau’s judgment and Lord Simonds in theJudicial Committee used the general word “licensee” in delivering their judgments. It cannot be supposed that they did so intending that only an exclusive licensee was being considered,particulary when Lord Simonds defined the issue of law as being: “Here the question is whether a licensee is a person claiming underthe patentee” (p. 320).

Armstrong sought to distinguish an exclusive licence from a non-exclusive licence on the basis that the former was a grant of a part ofthe monopoly and that such a licensee was practically an assignee of the patent for the term of the licence with all the beneficial rights ofthe patentee. It is difficult to reconcile this reasoning with what was said in Heap v. Hartley (supra) (applied by this Court in the ElectricChain Co. case) in the passage which I have already quoted. I repeat from that passage the following portion which is apt in relation toArmstrong’s submission: Now he puts his case in a two-fold manner.

He says: “In the first place, as exclusive licensee, I am in the position of an assign of theletters patent for that district and for that term, and as an assign of letters patent, I have a right to restrain any person who is infringingwithin the district.” That argument appears to be based on an entire error with regard to the nature of a license. An exclusive license isonly a license in one sense; that is to say, the true nature of an exclusive license is this. It is a leave to do a thing, and a contract not togive leave to anybody else to do the same thing.

But it confers like any other license, no interest or property in the thing. In my opinion, the reasons which led this Court and the Privy Council to the conclusion reached in the Fiberglas case are as applicableto a nonexclusive licensee as to an exclusive licensee. If an exclusive licensee is a person claiming under the patentee within s. 57(1),and the Fiberglas case so holds, there is no valid basis, under the wording of the subsection, to exclude its application to a non-exclusivelicensee, and there is no valid basis for interpreting the Fiberglas case as holding otherwise.

It was also contended on behalf of Armstrong that a non-exclusive licensee has no rights which can be infringed and therefore has noclaim against the infringer of a patent. This was the view of Jackett C.J. in the American Cyanamid case. He was of the opinion that thenon-exclusive licensee had only a right to use the patent, which right was not affected by its infringement. This was the legal position, even in respect of an exclusive licensee, prior to the enactment of s. 55 of the 1935 Act.

Section 55 wasenacted to meet this difficulty and, in my opinion, it has overcome the problem. Section 55(1), by its terms, imposes a liability upon theinfringer of a patent to the patentee and also to all persons claiming under him for all damages sustained by the patentee or any suchperson by reason of such infringement. It is the infringement of the patent which gives rise to a liability. If that infringement causesdamage to the patentee or to any person claiming under him, the infringer must compensate for the damage sustained by reason of theinfringement of the patent.

A licensee relying on this subsection is not claiming against the infringer for infringement of his rights underthe licence, he is claiming for the damage he has sustained in consequence of the infringement of the patent. On this point, I adopt the reasons of Sweet D.J. in the American Cyanamid case which have already been quoted.

Armstrong contended that the meaning of the word “damages” in s. 57(1) meant loss resulting from interference with the legal rights ofthe claimant. “Damages”, it was said, refers to pecuniary recompense given by process of law to a person for an actionable wrong thatanother has done to him. The meaning of the word “damages” must be ascertained in respect of its use in this specific statutory provision. In section 57(1) it isprovided in terms that an infringer of a patent is liable for all damages sustained by reason of his infringe- ment by a patentee or by any person claiming under him.

This is a statutory obligation to pay damages and it applies in favour of anyperson who comes within the provisions of the subsection. In my opinion, Domco does come within the terms of the subsection. [31] The Federal Court of Appeal considered whether a party was a person “claiming under” a patentee in Signalisation deMontréal Inc. v Services de Béton Universels Ltée (FCA), [1993] 1 FC 341(CA). In that case, the owner of a patentdirected to machines that moved highway barriers granted an exclusive license to an entity known as Barrier.

In turn, Barrier appointedthe Plaintiff Signalisation as its exclusive representative in Quebec. Hugessen J.A. took a broad view as to who was a person “claimingunder” the patentee. He wrote at paragraphs 24 and 25: 24 In my view, a person "claiming under" the patentee is a person who derives his rights to use the patented invention, at whateverdegree, from the patentee. The right to use an invention is one the monopoly to which is conferred by a patent.9 When a breach of thatright is asserted by a person who can trace his title in a direct line back to the patentee that person is "claiming under" the patentee.

Itmatters not by what technical means the acquisition of the right to use may have taken place. It may be a straightforward assignment ora licence. It may, as I have indicated, be a sale of an

article embodying the invention. It may also be a lease thereof. What matters is thatthe claimant asserts a right in the monopoly and that the source of that right may be traced back to the patentee. That is the case withthe appellant here. 25 In my view, the appellant has the status to assert a claim for damages under

section 55 of the Patent Act and has done so interalia in the paragraphs in the statement of claim reproduced and summarized above.

That statement of claim should not have been struckout. [32] Décary J.A. disagreed, writing at paragraphs 44 to 46: 44 Nor is it impossible that the appellant may have some ground for bringing action itself against the respondent on the basis ofsome form of liability in tort. 45 Whether or not there is, or was, any possibility of a contractual remedy against Energy or Barrier or of a remedy in tort againstthe respondent, it is not for this Court to extend the statutory remedy provided by Parliament. As Judson J. pointed out in Commissionerof Patents v.

Farbwerke Hoechst Aktiengesellschaft Vormals Meister Lucius & Bruning, (SCC), [1964] S.C.R. 49, at page57: There is no inherent common law right to a patent. An inventor gets his patent according to the terms of the Patent Act, no more and noless. The same is true of a person who claims under the patentee. That person is the person whom the Patent Act recognizes as such, and noone else. To accept the appellant's arguments would, in my opinion, be to interpret subsection 55(1) of the Act as if the words "claiming

under the patentee" did not appear, and as if it were sufficient for damages to have been incurred as a result of the infringement of a patent in order for the injured party to have a remedy under that subsection. 46 I therefore conclude that a mere contract of purchase of a patented product does not make the purchaser a person claiming under the patentee within the meaning of subsection 55(1) of the Act. [ 33 ] Létourneau J.A. agreed with Hugessen J.A. and responded to Décary J.A. in writing at paragraph 51: 51 Nor do I believe as my colleague Décary J.A. suggests that the words "persons claiming under the patentee" in subsection 55(1) are more limited than the word "person" in subsections 60(1) and (2) of the Act.

In subsection 60(1), it has to be an interested person and therefore it is not unqualified. In subsection 60(2), it has to be a person who uses or proposes to use a process or a person who makes, uses or sells an

article that might constitute an infringement of a patent.

Likewise in subsection 55(1), it has to be a person who claims under the patentee, that is to say a person who as a user, an assignee, a licensee or a lessee had a title or a right which may be traced back to the patentee. [ 34 ] The final words used by Létourneau J.A. are instructive; a person “claiming under” who, as a user, an assignee, a licensee or lessee, had a title or a right that may be traced back to the patentee, thus can be a person claiming under the patentee. [ 35 ] There have been a number of more recent decisions of the Courts where consideration was given to whether a person was one “claiming under” a patentee.

Some of these decisions dealt with circumstances not unlike those of the present case where it was agreed that, despite the lack of a written agreement, the claimant was part of a family or group of entities all dealing in some way with the patented goods. [ 36 ] In AstraZeneca Canada Inc. v Apotex Inc. , 2014 FC 638 (aff’d 2015 FCA 158 , leave to appeal to SCC granted March 10, 2016), Justice Rennie (as he then was) made a careful review of the evidence and concluded that one of the Plaintiffs, AstraZeneca Canada Inc., had standing as a person “claiming under” .

He wrote at paragraphs 10 and 23 to 24: [10] In my view, AstraZeneca Canada has standing. More specifically, AstraZeneca Canada qualifies as a person claiming under the patentee because there is an implied license between AstraZeneca and AstraZeneca Canada regarding the sale of Nexium. However, prior to elaborating on this finding, it is important to note the factual background underlying Apotex’s surprisingly technical standing defence against its alleged infringement. ... [23] In this case, there is something more.

Indeed, a number of facts support the finding that AstraZeneca Canada’s right of use can be traced back to AstraZeneca Aktiebolag: 1. AstraZeneca Canada and AstraZeneca Aktiebolag are both indirect subsidiaries of a common parent, AstraZeneca PLC, located in Sweden; 2. AstraZeneca Aktiebolag, the owner of the ‘653 patent, is the principal source of supply to AstraZeneca Canada and globally; 3. AstraZeneca Canada sought and obtained regulatory approval to sell Nexium in Canada.

The information in support of the regulatory filing derived from AstraZeneca Aktiebolag – the holder of the master regulatory file for Nexium; 4. AstraZeneca Canada and AstraZeneca Aktiebolag entered into a Formulation, Packaging and Distribution Agreement (Distribution Agreement) in December 2000. In the Distribution Agreement, AstraZeneca Canada is defined as the “ Distributor, ” and is granted non-exclusive rights to the “ Products ” which are defined to include Nexium.

This agreement addresses intellectual property rights in articles 24.1 and 24.2: 24 INTELLECTUAL PROPERTY RIGHTS 24.1 All intellectual property rights relating to the Products shall remain the property of ASTRAZENECA at all times.

The Distributor shall not acquire any intellectual property rights relating to the Products and shall only have permission to use such rights granted to the Distributor under this Agreement. 24.2 The Distributor will inform ASTRAZENECA of any infringement or suspected infringement of any of ASTRAZENECA’s intellectual property rights in the Market which comes to the notice of the Distributor. ASTRAZENECA will take all reasonable steps, at its own expense, to prosecute infringers. The Distributor will give ASTRAZENECA all reasonable assistance in such prosecution [emphasis added]. 5.

From 2001-2008 AstraZeneca Canada packaged Nexium which it received from AstraZeneca Aktiebolag in bulk tablets, prior to sale in Canada. In 2008, AstraZeneca Canada’s packaging facility in Mississauga was closed. The letter agreement between AstraZeneca Canada and AstraZeneca Aktiebolag dated December 12, 2007 stated that after closure, Nexium would be supplied by AstraZeneca Aktiebolag to AstraZeneca Canada in finished packaged form, and that AstraZeneca Canada would continue to act as the distributor.

Accordingly, after 2008, AstraZeneca Canada received pre-packaged Nexium from AstraZeneca Aktiebolag for sale in Canada. Thus, AstraZeneca Canada has always received its supply of Nexium (pre-packaged or in bulk) from AstraZeneca Aktiebolag, except for a three month period in 2001 and a six month period in 2012, during which AstraZeneca UK was the source of supply. 6. According to the evidence of Ms. Elaine Campbell, CEO of AstraZeneca Canada, AstraZeneca Canada has obtained the consent of AstraZeneca Aktiebolag to file Form IV patent lists under the PMNOC Regulations; 7. Ms.

Campbell testified that all of AstraZeneca Canada’s legal costs in respect of this litigation were being paid by AstraZeneca Aktiebolag.

[24] When assessed against this factual landscape, AstraZeneca Canada’s right to use the patent may be traced back to AstraZeneca Aktiebolag, the patentee. All rights of use of Nexium by AstraZeneca Canada are derivative, by an implied agreement, from AstraZeneca Aktiebolag. While there is no express licence and no plea of licence, the conduct of the parties is consistent with a finding of an implied licence granted by AstraZeneca Aktiebolag.

The Distribution Agreement grants AstraZeneca Canada permission to use AstraZeneca Aktiebolag’s intellectual property rights “insofar as is necessary to exercise the rights granted” under the Distribution Agreement. These rights include the right to sell Nexium and the obligation to assist AstraZeneca Aktiebolag in the civil prosecution of possible infringement by others. Commencement of an infringement action by AstraZeneca Canada falls within a reasonable

interpretation of sections 24.1 and 24.2, and implicit to that is an acknowledgment of a right to recover damages on behalf of the patentee for infringement. Consequently, AstraZeneca Canada is a person claiming under the patentee as required by section 55(2) of the Patent Act and has standing in this trial. [ 37 ] In Eli Lilly and Company v Apotex Inc. , 2009 FC 991 (aff’d 2010 FCA 240 ), Justice Gauthier (was she then was) also reviewed the facts thoroughly and concluded that one of the Plaintiffs, Lilly Canada, had standing.

She wrote at paragraphs 76 to 83: [76] Lilly Canada does not disagree with the above-noted statements, it simply says that in this case it has not only established, through the testimony of Mr. Pytynia (Transcript Volume 7, pp. 56-63; 83-84) that Lilly Canada is a wholly owned subsidiary, but also that it had an express licence to both the Lilly and Shionogi Patents at issue in this case. It has also been admitted that Lilly Canada has been selling Ceclor® (cefaclor) in Canada since 1980.

Lilly Canada made specific references to various exhibits filed during the hearing to support its position, particularly an agreement executed and effective as of January 1, 1991 between Lilly U.S. and Lilly Canada (TX-109) where: Lilly represents and warrants that for Canada, it has the exclusive right to grant licenses to enable the licensee to make, have made, use and sell certain products, including the right to use within Canada, certain patents, trademarks […] relating to such products and to their preparation, manufacture, processing and packaging. [77] In the said agreement, Lilly U.S. appoints Lilly Canada as its authorized distributor of all Lilly U.S. products in Canada (which includes Ceclor®) and at s. 1.2: Lilly further grants to Lilly Canada a non-exclusive sublicense (without right of further sublicense except as further granted in writing by Lilly) under the Canadian patent applications and patents listed in

Schedule “A” […] to make, have made, use or sell, and/or import Lilly Products whose preparation is covered by the patent applications and patents. [78] At pp. 8 and 9 of

Schedule A, the four Lilly patents at issue here are listed. Normally, it should thus not be contentious that Lilly Canada has proper standing pursuant to subs. 55(1) of the Patent Act , at least in respect of those patents. [79] Apotex, however, says that on January 1, 1995, the 1991 agreement was amended (TX-110) to delete the various schedules which, according to Mr. Pytynia, was done to avoid having to keep them up to date which was found to be difficult.

According to Apotex, the result of this amendment is simply that licences to the Lilly or Shionogi patents were no longer granted to Lilly Canada. [80] This, according to Apotex, makes particular sense [23] in respect of the Shionogi patents, given that none of the material purchased by Lilly Canada was made by the processes protected thereunder and that Lilly Canada never actually made, purchased or sold any of the actual compounds claimed in the patents in suit.

Apotex also discards the impact of the General Supply and Distribution Agreement, filed as TX-112, on the basis that Lilly Canada’s role as distributor appears to be based on an agreement that says nothing about patent rights, nor does it characterize Lilly Canada as an agent and expressly disclaims any other rights flowing between the parties. [81] The Court agrees with the plaintiff that such an

interpretation of the 1991 agreement as amended through time leads to an absurd result and is simply incorrect.

The January 1, 1995 agreement expressly states: WHEREAS the parties desire to maintain the rights, licenses and sublicenses granted by the AGREEMENT while also recognizing that the parties will receive full compensation under the Master Supply and Distribution and Manufacturing or other Agreements. [82] It is also worth noting that the 1991 agreement was further amended on April 9, 1998 (TX-113) giving Lilly Canada the right to further sub-licence a third party under some of the patents covered by the agreement, in conformity with s. 1.2 of the 1991 agreement.

More particularly, the amendment refers to the licence granted under the 1991 agreement for cefaclor and: grants to Lilly Canada the right to sub-license the following licenses granted to it under the [1991] License Agreement (collectively, the “Licenses”) for cefaclor: (

i) licenses granted under patent rights of Lilly U.S. (including, without limitation, the patents listed in

Schedule A hereto). Said

schedule made specific reference to three of the Lilly Patents in suit (the only ones missing are the ‘007 and ‘026, the latter having expired by that time). [83] Having considered all of the evidence, the Court is satisfied that Lilly Canada has properly established its standing based on an express licence from the patentee. [ 38 ] In Apotex Inc. v Sanofi-Aventis , 2011 FC 1486 (rev’d on other grounds, 2013 FCA 186 ), Justice Boivin (as he then was) reviewed the factual circumstances of the case and concluded that a “Partnership” had standing. He wrote at paragraphs 46 to 48 and 55

to 57: [46] Against this background, the Court now turns to the evidence put before it in connection with the rights conferred to thePartnership. D. The Evidence before the Court [47] During the trial, Dr. Thierry Saugier, Vice-President Alliance and Partnership at Sanofi-Aventis, was called by Sanofi totestify as to the standing of the Partnership. Dr. Saugier testified that, since April 2006, he has managed group of alliances for Sanofi-Aventis, including the alliance referred to the Territory B Partnership and the Territory A Partnership. [48] In particular, Dr.

Saugier testified that, in order to structure the alliance, Sanofi granted an exclusive licence for clopidogrelto the Partnership, as can be seen in the Partnership Agreements which are still in effect today. The various agreements produced intoevidence indeed support Dr. Saugier’s oral testimony as to the rights granted thereunder. … [55] The Court believes that such a list could not, on a practical point of view, be amended each time a development occurred inconnection with products under research or in a process of a patent application.

The terms and scope of the agreement at issue are suchthat […] must be interpreted to encompass newly developed compounds. To conclude otherwise would fly in the face of the very purposeof the Partnership Agreements, which was to allow the Partnership to carry out all activities related to the development, manufacturing,sourcing and commercialization of clopidogrel in the specified territory known as Territory B, would otherwise be defeated. [56] Finally, the Court recalls that counsel for Apotex questioned Dr.

Saugier in connection with the absence of manufacturingfacilities, employees and registered place of business in Canada in order to demonstrate the lack of standing. In light of the breadth ofthe Partnership Agreements, the Court finds this line of questioning to be of no assistance for the purposes of the standing issue. E.

Conclusion on Standing [57] In sum, considering the broad meaning of “persons claiming under” a patentee as referred to under ss 55(1) of the Patent Act,and based on the Court’s review of the Partnership Agreements and the testimony given in that regard, the Court finds that thePartnership has a “credible and legally sufficient basis” for claiming under a patentee in the circumstances.

Indeed, the evidenceclearly shows that the Partnership was granted an exclusive licence for clopidogrel products through the various Agreements as of 1997.It follows that the Partnership has standing to bring the action at issue for any infringement that it alleges to have occurred prior toDecember 6, 2007. [39] In Apotex Inc. v Wellcome Foundation Ltd., (FCA), [2001] 1 FC 495, the Federal Court of Appeal heldthat, since both the patentee and the person “claiming under” were before the Court and both were asserting that the person “claimingunder” had standing, the Court would not deny that standing.

Rothstein J.A. wrote at paragraph 99: [99] It is perhaps not uncalled for to observe that this is not a case in which the alleged licensee is alone in advancing its claim forpatent infringement. Here, the patentee is also before the Court as a co-plaintiff supporting the claim of GWI. It is difficult to conceive ofwhat more is necessary to prove the existence of a licence than to have the licensor and licensee both attesting to the validity of thelicence.

Where both the patentee and the person claiming under the patentee are before the Court, are affiliated as being owned by thesame parent and have an identity of interest in the litigation--with the patentee supporting the person claiming under the patentee--it is,to say the least, surprising that technical questions of status to sue would be advanced as a defence to infringement. [40] In circumstances involving parties who are very similar to those before the Court here, Justice Reed of this Court considered standing in Kirin-Amgen Inc. v Hoffmann-LaRoche Ltd. (1999), (FC), 87 C.P.R. (3d) 1 (aff’d 11 CPR(4th)78).

Shewrote at paragraphs 89 to 94: 89 Kirin-Amgen is the owner of the '047 patent. That patent issued on May 27, 1997, and as noted, was divided from a morecomprehensive patent application that had been filed on December 12, 1984. On September 30, 1985, Kirin-Amgen licensed OrthoPharmaceutical Corporation (now known as Ortho-McNeil Pharmaceutical Inc.) and its affiliates to use and sell in a number ofcountries, including Canada, products made in the United States of America that are within the scope of the broader patent application.A written agreement to that effect exists.

The recombinant EPO used in the EPREX product that is sold in Canada is made in PuertoRico, a commonwealth of the United States. 90 In 1986 Ortho Pharmaceutical Corporation gave Janssen-Ortho's predecessor a mandate to market and sell EPREX in Canada.No written licence documenting that agreement can be found. No written notice to Kirin-Amgen of that sub-licence has been found.Nevertheless, it appears that Kirin-Amgen has had notice that Janssen-Ortho's predecessor and now Janssen-Ortho had been sub-licensed to use and sell the EPREX product in Canada. The EPREX product was launched on the Canadian market in 1990.

Since thattime, Janssen-Ortho has been paying royalties, first to what was then the Ortho Pharmaceutical Corporation, and more recently toOrtho Biotech Inc. The royalties are then paid to Kirin-Amgen. 91 The rights acquired from Kirin-Amgen in 1985 were subsequently assigned by Ortho Pharmaceutical Corporation (renamedOrtho-McNeil Pharmaceutical Inc.) to Ortho Biotech Inc. under an Asset Transfer Agreement effective January 1, 1998.

Kirin-Amgenconsented to this assignment. 92 Since no written document could be found of the 1986 agreement between Ortho Pharmaceutical Corporation and Janssen-Ortho's predecessor, a written licence agreement was signed by Ortho Biotech, Ortho McNeil, and Janssen-Ortho on November 20, 1998confirming that Janssen has been sub-licensed since 1986 by Ortho-McNeil's predecessor Ortho Pharmaceuticals to use and sellproducts containing erythropoietin in Canada.

In the agreement, Ortho Biotech also grants to Janssen-Ortho a non-exclusive right to useand sell licensed products containing erythropoietin as provided in the product licence agreement signed between Kirin-Amgen and

Ortho Pharmaceuticals on September 30, 1985. Written notice of this agreement was given to Kirin-Amgen (Exhibit D-6).[para93] It isalso necessary to note that the Ortho companies are all affiliated. Johnson & Johnson a New Brunswick, New Jersey corporation owns100% of the voting stock of Janssen-Ortho. It also owns either directly or indirectly 100% of the voting stock of Ortho-McNeilPharmaceutical Inc. and Ortho Biotech Inc. 94 Counsel for the plaintiffs argues that applying the test articulated in Apotex Inc. v.

Wellcome Foundation Ltd. (1998), (FC), 79 C.P.R. (3d) 193 (F.C.T.D.) at 300 - 301, (which test is: can the right asserted by the claimant be traced back to thepatentee), leads to the conclusion that Janssen-Ortho is a person "claiming under" the patentee for the purpose of

section 55 of thePatent Act. I agree. [41] In Jay-Lor International Inc. v Penta Farms Systems Ltd., 2007 FC 358, Justice Snider of this Court reviewed the authoritiesand in particular, the Reasons of Justice Wetston of this Court, in Apotex Inc. v Wellcome Foundation Ltd. (1998), (FC), 79 C.P.R (3d) 193, and concluded that the ability of a person to claim under a patentee depends on whether the party can trace aninterest under the patent; it does not necessarily require the existence of an express licensee. She wrote at paragraphs 32 to 38: [32] More recently, in Apotex Inc. v.

Wellcome Foundation Ltd., (FC), 79 C.P.R. (3d) 193, 145 F.T.R. 161, [1998]F.C.J. No. 382 (F.C.T.D.) (QL), aff’d on this point (FCA), 2000, 10 C.P.R. (4th) 65 (F.C.A.), 262 N.R. 137, (referredto as Wellcome), the court considered the relationship between the two related companies who had brought an action for infringementand provided some helpful analysis on the issue of the right to assert rights under s. 55(1) of the Patent Act.

In that case, GlaxoWellcome Inc. (GWI) claimed that it was entitled to bring an infringement action because it was exclusively licensed by the WellcomeFoundation Ltd. to import, manufacture, use and sell the invention described in the patent. Wellcome was listed as the owner of thepatent. Although, no written licence was produced to establish GWI as a licensee, GWI maintained that the licence was implied. [33] The arguments of the plaintiffs in Wellcome were very similar to those made by the Defendants in this case.

The plaintiffsasserted that GWI failed to meet its onus to establish that it had an entitlement to sue under s. 55(1) of the Patent Act. They argued that alicence, like any other contract, must be proven according to its terms and effects. [34] In Wellcome, at paras. 360-361, Justice Wetston provided the following comments on the

interpretation of s. 55(1): Canadian jurisprudence has provided a broad

interpretation of "persons claiming under" the patentee. A range of interests is held tohave been contemplated, including the exclusive licensee, the non-exclusive licensee, the purchaser of a patented articles and salesagents. This

interpretation is embodied in Signalisation de Montréal Inc. v. Services de Béton Universels Ltée et al. (1992), (FCA), 46 C.P.R. (3d) 199 (F.C.A.) per Hugessen J.A. at p. 211: It matters not by what technical means the aquisition of the right to use might have taken place. It may be a straightforward assignmentof a licence. It may, as I have indicated, be a sale of an

article embodying the invention. It may also be a lease thereof. What matters isthat the claimant asserts a right in the monopoly and that the source of that right may be traced back to the patentee. [35] In the Wellcome case, Justice Wetston did not find that a parent/subsidiary relationship exist between GWI and Wellcome.However, the two companies were under the ownership, common care and control of Glaxo Wellcome plc. The evidence was thatlicences were seldom written.

Based upon his review of the facts of the case, Justice Wetston concluded, at para. 367, that “GWI isindeed able to trace an interest under the patent to the patentee in virtue of the corporate practices with respect to implied licensingwithin the group of companies under the care and control of Glaxo Wellcome plc”. [36] In sum, what I can take from the Wellcome case and other jurisprudence is that the ability of a party to claim under a patenteedepends on whether the party can trace an interest under the patent to the patentee and does not necessarily require the existence of anexpress licence.

Where no express licence exists, each case will be determined on its facts. [37] In the case before me, I am satisfied, on a balance of probabilities, that JAY-LOR Fabricating has met the burden ofdemonstrating that it can trace an interest under the patent to JAY-LOR International. The key facts supporting this conclusion can besummarized as follows: • Both JAY-LOR Fabricating and JAY-LOR International are under the same control of Mr.

Tamminga; • No other licence has been granted – either explicitly or by implication – to any third party; and • The two companies have structured their affairs in a manner consistent with a licensee-licensor relationship. [38] In conclusion, I am satisfied on this point that JAY-LOR Fabricating has standing to bring this action. [42] Lastly, I turn to the decision of Justice Snider in Les Laboratories Servier v Apotex Inc., 2008 FC 825 (affirmed withoutdiscussion on this point, 2009 FCA 222).

She determined that the mere existence of a corporate affiliation is not conclusive of a right asa person “claiming under” a patentee; there must be something more. She concluded that an entity which did not operate “in Canada”was not a person “claiming under” the patentee. She wrote at paragraphs 70, 81 and 82 and 88 to 91: [70] The test for who qualifies as a person claiming under a patentee is not simply whether the patentee has consented to the personbeing joined as a plaintiff in an action; nor is it enough to demonstrate that two parties are related.

In each case, the facts mustdemonstrate a credible and legally sufficient basis for claiming under a patentee (Jay-Lor International Inc. v. Penta Farm Systems Ltd.(2007), 2007 FC 358 , 59 C.P.R. (4th) 228 at paras. 31, 36 (F.C.) [Jay-Lor]). … [81] Mr. Langourieux confirmed that none of the non-ADIR Foreign Plaintiffs manufacture, offer for sale or import any of thecompounds claimed in the '196 Patent into Canada. He also agreed that each local affiliate in a particular country has the focus of

promoting, marketing, and registering the product in its specific jurisdiction. For example, Servier UK promotes, markets, sells and distributes the medicines of Groupe Servier in the U.K. market only. I have seen no evidence that Servier Canada sells perindopril in the United Kingdom. For that purpose, Servier UK exists. Servier Australia promotes, markets, sells and distributes the Servier products in the Australian and New Zealand markets. Manufacturing of the active ingredient (the API) in COVERSYL is done by Oril Industries in France.

Thus the evidence shows that the affiliated companies within Groupe Servier do not operate as a single entity; each has its own sphere of operation and its own responsibilities within Groupe Servier. Nevertheless, the non - ADIR Foreign Plaintiffs may still be able to satisfy s. 55(1) of the Patent Act , through a licence or other such arrangement. [82] As noted above, the mere existence of a corporate affiliation is not conclusive evidence of a right under s. 55(1) of the Patent Act . There must be something more.

That something more has consistently been described in the jurisprudence as a “licence” or some other arrangement (for example, a lease, an assignment, or a sale) that would give the affiliate the right to use the patent. … [88] As shown by the evidence, none of the non-ADIR Foreign Plaintiffs operates in Canada.

In final argument, counsel for Servier tried to counter Apotex’s arguments on the use of the patent by the non-ADIR Foreign Plaintiffs through the following hypothetical: It is wholly conceivable that if Servier Australia ran out of perindopril and Servier Canada had too much of it, that Servier Australia would purchase perindopril from Canada, or even in Canada.

My friends' position would either prevent that situation from happening, because Servier Australia would not have a licence in Canada, or would make everybody stop, negotiate a sublicence under the '196 Patent, or bring in Adir to award Servier Australia a licence under the Canadian patent. That is nonsensical . . . when we view the manner in which the Servier group of companies views itself and operates. [89] There are two problems with this line of reasoning. First, this argument is not based on any evidence that this has ever happened in the history of Groupe Servier; it is totally speculative.

Secondly, it is not at all “nonsensical” to require affiliates to enter into some type of document to reflect legal rights. [90] Further, none of these Plaintiffs has ever needed a licence in respect of the '196 Patent because none of their foreign activities relating to the manufacture, use or sale of perindopril can constitute an infringement of the '196 Patent. [91] Quite clearly, the non-ADIR Foreign Plaintiffs do not use the '196 Patent in Canada or elsewhere. They do not need a licence from ADIR in respect of that patent.

It is a stretch to say that the non-ADIR Foreign Plaintiffs are parties to an implied licence for the '196 Patent when no such licence is required. [ 43 ] From all this jurisprudence, I determine that for a Court to conclude that a party is a person “claiming under” the patentee for the purposes of section 55(1) of the Patent Act : • the person must be one who, as a user, an assignee, a licensee or lessee has a title or a right that can be traced back to the patentee ( Signalisation ); • it does not matter whether a licensee is exclusive or non-exclusive ( Domco ); • the licence must be proved but it need not exist in writing ( Jay-Lor ); • the claim must be one in respect of a use in Canada and not elsewhere in the corporate chain ( Servier ). [ 44 ] I will now review the evidence in this case. [ 45 ] The parties agree that Daiichi, the patentee, has entered into a written license agreement with an entity called Johnson & Johnson, a New Jersey corporation [J&J], effective as of May 28, 1991 with respect to levofloxacin.

That agreement is in evidence at Tab 298 of Exhibit 4. It is agreed that this agreement applies to the 080 Patent. That licence,

Article 2.1, grants J&J a licence to manufacture finished products containing levofloxacin and to sell them in Canada, among other countries, in exchange for payment of certain royalties as set out in

Article 6.00.

Article 7 provided that Daiichi will supply all of J&J’s requirements for levofloxacin [the API].

Article 11.00 provides that J&J shall notify Daiichi of any infringement, and Daiichi shall take action in respect thereof assisted by J&J.

Article 21.00 provides that any modification to the agreement shall be confirmed in writing.

Article 2.3 is important in this case and I reproduce it in full since it relates to sublicenses to J&J subsidiaries: 2.3 J&J has the right to sublicense to J&J’s Subsidiaries in each country of the Territory any or all of the license herein granted upon the terms and conditions of this Agreement, provided, however, that the right of sublicense to manufacture the Finished Preparation from the Compound shall be granted to one J&J’s Subsidiaries in each country of the Territory.

No sublicense agreement entered into pursuant to this paragraph shall be deemed to relieve J&J of its responsibility hereunder, including without limitation the responsibility of insuring that proper payment is made to DAIICHI of all amounts that may become due and owing under this Agreement. Furthermore, J&J shall have the right to appoint distributors and to sublicense such distributors in each of the countries in Territory B to sell the Finished Preparation subject to the terms and conditions of this Agreement.

In the event that J&J intends to grant a sublicense pursuant to this paragraph, J & J shall obtain DAIICHI’s prior written consent on the contents of such sublicense agreement, which consent shall not be withheld unreasonably. [ 46 ] A number of written amendments and supplements to the licence agreement have been put in evidence. None of them directly relate to Janssen Pharmaceuticals, Inc. (or its predecessors) nor do any of them deal in any specific way with Canada. [ 47 ] There is no written agreement in evidence directly between Daiichi and Janssen Pharmaceuticals, Inc., or any of its

predecessors. [ 48 ] Through the evidence of Seth Fischer there was introduced Exhibit P35 which included an e-mail from a Daiichi executive to Fischer who was at the time a senior executive at a Johnson & Johnson subsidiary. That e-mail, according to Fischer, was in response to a letter sent by Fischer to Daiichi, a draft of which was, according to Fischer, “something like” Exhibit P36. That draft said, in part: Changes in the U.S. Tax Laws affecting the tax status of our manufacturing operations for Levaquin in Puerto Rico became effective as of today, December 1.

While highly technical in nature, those changes will have no substantive effect on the way we manufacture Levaquin. However, we have concluded that we should document a form of sub-license from Johnson & Johnson to our wholly owned Puerto Rican based subsidiary, Janssen Ortho LLC, so that we have a written record for its rights to manufacture Levaquin. Such sublicenses are contemplated by our License Agreement with you in

Section 2.3 of the 1991 Agreement. I enclose for your review a draft of the proposed manufacturing sub-license from Johnson & Johnson to Janssen Ortho LLC. My people tell me that

Section 2.3 is somewhat ambiguous as to whether a sub-license to our subsidiary requires consent from Daiichi, or whether the consent requirement in

Section 2.3 is limited to agreements for the appointment of third party distributors. I will very appreciate your confirming that you agree that the consent requirement in

Section 2.3 does not apply to a sub-license to our subsidiary, or in any event confirm that you have no objection to the enclosed sub-license. [ 49 ] The responding Daiichi e-mail, Exhibit 35, said in part: Dear Seth, I was forwarded your e-mail addressed to Dr. Une. Our understanding of the Agreement

Section 2.3 is that the consent requirement shall apply to both the sub-license to Johnson & Johnson’s subsidiaries and third party distributers. However, in view of the reality and our previous communication records, it is expressly understood that you have granted a manufacturing sub-license to your subsidiaries (in this case, Janssen Ortho LLC) of Levaquin in the Territory, and we have already agreed with you on such sub-license. Therefore, notwithstanding

Section 2.3, there is no need to give our written consent on a sub-license agreement for Janssen Ortho LLC. Nevertheless, if Daiichi were to comment on the draft of sub-license agreement, I would like to share the same understanding with you that this sub-license agreement dose not seem to fit into the License Agreement (e.g.

Article 1.6 or

Article 2). I simply assume the reason being that this agreement was drafted as an “comprehensive contract” between Johnson & Johnson and its subsideries, in response to the changed Tax Laws, not limited to Levaquin.

In short, as long as Johnson & Johnson’s obligations stipulated in the License Agreement are fulfilled by Johnson & Johnson and its subsideries, we do not think this sub-license agreement should create any problems on our side. [ 50 ] The evidence of Jeff Smith in that he, and others in the Ortho-McNeill branch of the J&J organization, had frequent meetings and communications with Daiichi in Japan and the United States, and that Daiichi was well aware as to how the J&J organization was making and selling levofloxacin finished products through one or more of its related companies. [ 51 ] The affidavit of Lim, Exhibit P41, to which I attach little weight, is largely hearsay and of little assistance in any event. [ 52 ] Addressed in evidence by the witnesses Smith and Roarty were charts, the first of which is Exhibit P17, showing the corporate history of Janssen US, and Exhibit P38, providing an overview of the Levaquin supply chain.

The evidence, as far as it goes, as shown in those charts was not seriously challenged in cross-examination. [ 53 ] Exhibit P17 shows that Janssen Pharmaceuticals, Inc. merged with Ortho-McNeil Inc. on December 31, 2007, with the merged corporation continuing under the name Ortho-McNeil-Janssen Pharmaceuticals, Inc. That entity changed its name on June 22, 2011 to Janssen Pharmaceuticals, Inc., the current Plaintiff that we call Janssen US. [ 54 ] Exhibit P38 shows that Johnson & Johnson [J&J] is the parent company of Janssen Puerto Rico, Janssen U.S. and Janssen Canada.

It shows that Daiichi supplies levofloxacin to Janssen Puerto Rico who manufactures finished levofloxacin tablets in Puerto Rico (Gurabo), and ships them directly to Janssen Canada. However, the paperwork flow showing the sales transactions is one wherein Janssen Puerto Rico sells these tablets to Janssen U.S. who then sells them to Janssen Canada. The price at which Janssen U.S. sells to Janssen Canada is sometimes referred to as the transfer price.

Janssen US’s claim for damages is based on alleged loss of sales to Janssen Canada at the transfer price less costs such as payments to Janssen Puerto Rico for the product and other expenses. [ 55 ] In addition to the documents I have already referred to, there were introduced into evidence several business records reflecting transactions as to the levofloxacin products within the J&J companies as well as to Janssen Canada customers.

Many of these were excerpted from a system called SAP which is a vast computerized programme into which data such as sales and transfer of products can be entered, stored and excerpted. This data does not reflect information such as where title to the product may pass. [ 56 ] Copies of some invoices and the like were entered into evidence such as Exhibit P37 through the witness Lindsey Villacis, an executive with Janssen Supply Group in New Jersey. Neither she, nor any other fact or expert witness, could advise the Court as to when and where title passed in respect of the levofloxacin product.

I provide an excerpt of Ms. Villacis’ cross-examination at page 853 of the transcript:

Q. When you speak of title passing in Gurabo, that is the title passing to Janssen Canada in Gurabo? A. I can’t speak to which specific legal entity that it passes at the point of shipping, but I can speak to the fact that financial ownership changes at the end of the month. At the time, Janssen-Ortho Inc. owns the product. Q. It is just the finances you can speak to, not so much telling this court where title passes? A. True. Yes. Q. You can’t tell me at what point in the process title moved from one party to another, from LEVAQUIN going from Puerto Rico to Canada? A. I cannot tell you that.

I can tell you that it starts in Gurabo, and at the end of the process, it ends with Janssen-Ortho Inc. [ 57 ] Fernandini, an executive with Janssen Puerto Rico, at pages 886 to 888 of his cross-examination, said: Q. You don’t know who had title to the product at any point? A. Title of the product, when this is Janssen-Ortho LLC, we have the burden of the risk of having that API in Gurabo. If material is rejected or damaged, Janssen-Ortho was responsible for the material. Q. They also had title to the finished product there in Gurabo? A. Once it is in Gurabo, it is Gurabo inventory. Q.

When they put it on the plane to ship it to Canada, the title- A. Depending on the terms and conditions, I don’t remember. We need to see the terms and conditions. Q. You can’t tell me who has title after? A. No. It is in transit. It depends on the terms. … Q. You don’t know if it had an impact on the title? A. But the title was Janssen-Ortho. All the time, it was Janssen-Ortho LLC. Q. When you told me that Janssen-Ortho LLC had title to the product in Puerto Rico, it had title at least until it was put on the plane to go to Canada? A.

Yes. [ 58 ] Roarty, an executive with Johnson & Johnson, in cross-examination said at pages 910 to 911: Q. At the time LEVAQUIN – you understand LEVAQUIN was manufactured in Puerto Rico? A. Yes. Q. At the time LEVAQUIN was shipped out the door and put on a plane, it was not owned by Janssen Pharmaceuticals Inc. or any previous incarnation of Janssen Pharmaceutical Inc.; right? A. I don’t believe so. It would have been owned by either OMJ Pharmaceuticals or Janssen-Ortho LLC, depending on when. Q.

They would have owned it as it got onto the plane, and at some point later possibly, the SAP entry is entered into the system? A. I never was involved in those transaction[s]. I don’t know the exact sequence or when title passed or things like that. Q. It was owned by Janssen-Ortho LLC or OMJ Pharmaceuticals Inc. while it is in transit, and then it lands in Canada? A. I am not sure who owned it while it is in transit. Q. You can only tell me who owned it when it got on the plane? A. I believe it would have been owned by the manufacturer. Q. Who is Janssen-Ortho LLC? A. Correct. Q.

That is true in the period of 2005 to 2006, etc.? A. After 2006, I believe, it was Janssen-Ortho LLC. Prior to that, it was OMJ Pharmaceuticals. Q. You wouldn’t be able to tell me who owned the LEVAQUIN when the plane landed in Canada?

A. I am not sure if it was owned by Canada at that point or the U.S. or Puerto Rico. Q. That is because you just don’t know? A. That is correct. [59] Teva argues that Janssen US cannot be a person “claiming under” the patentee, Daiichi, since there is no clear evidence thatJanssen US “used” the patented invention in Canada. Teva argues that Janssen US bears the burden of demonstrating that it had, even iffor a moment, title to the levofloxacin containing tablets in Canada whereby, save for a licence from Daiichi, it would be infringing onthe 080 Patent.

Teva argues that the evidence falls far short of proving, even on a civil burden, that Janssen US had title to the tablets inCanada, hence “used” the invention in Canada. [60] Janssen argues that it is unnecessary to show that Janssen US “used” the invention in Canada whether by having title to thetablets in Canada or otherwise.

It is sufficient, Janssen argues, to demonstrate that Janssen US was part of the chain whereby the tabletsflowed through the licence from Daiichi to J&J through unwritten licences, to Janssen Puerto Rico, then to Janssen US and finally, toJanssen Canada; it was part of a chain licensed, not in writing, but by implication and acquiescence, by Daiichi. [61] In my determination, Janssen’s argument is consistent with the state of the law as it exists in Canada, at least at the level ofthis Court, today.

Janssen US has proven to my satisfaction that it has the licence or permission, by acquiescence, of Daiichi, to beinvolved in the chain of the sale of tablets made in Puerto Rico by Janssen Puerto Rico, through Janssen US to Janssen Canada. It isimmaterial whether Janssen US had title, even momentarily, to the tablets in Canada. [62] The matter was faced squarely by Polowin J. of the Ontario Superior Court in Roche Palo Alto LLC v Apotex Inc. (2005), (ON SC), 44 C.P.R. (4th) 431. She wrote at paragraph 37: 37 Subsection 55(1) of the Patent Act sets out no geographical restriction.

Further, the Signalisation case, supra, supports that thecourt must view broadly those who can claim under a patent. The claim to damages on the part of Allergan Sales and Allergan Irelandarises from the alleged infringement by Apotex of the 614 Patent which is a Canadian patent. The elements of the cause of action ofpatent infringement are set out in the Statement of Claim. Allergan Ireland has been the exclusive manufacturer of ketorolac ophthalmicproducts under the 614 Patent sold to Allergan Canada for sale in Canada.

Allergan Sales is the licensor of technical know-how toAllergan Ireland with respect to these products and has entered into a royalty agreement in this regard. As such, both Allergan Sales andAllergan Ireland allege that they have been damaged by the infringement of the 614 Patent. [63] While not binding upon me, I agree with the

interpretation given by that Court, of section 55(1) of the Patent Act and theSignalisation case. [64] The case of AlliedSignal Inc. v DuPont Canada Inc. (1998), (FC), 78 C.P.R. (3d) 129 (FCTD) (aff’d (FCA), 86 C.P.R. (3d) 324 (FCA)), demonstrates the Canadian Patent Act permits recovery of damages in respect ofactivity outside Canada. A United States patentee selling to customers in the United States could recover damages for loss of saleswhere a Canadian infringer sold Canadian made product to United States customers.

Heald D.J., in determining a reference to damages,wrote at paragraph 33: 33 In conclusion, the right to claim lost profits is not circumscribed by the territorial limitations of the Patent Act to profits made onsales within Canada. The patentee has a right to be compensated for all damages flowing from the infringement of the patent withinCanada, which may include profits lost on sales outside Canada. Furthermore, lost profits are merely a useful measure to helpdetermine an appropriate and fair level of compensation.

In the case at bar, the plaintiff is entitled to lost profits on those sales, whetherin Canada or the United States, that it proves it would have made but for the presence of the defendant's DARTEK (

R) film in the market. [65] The decision of Justice Reed in Kirin Amgen, previously referred to, while not specifically addressing the point, came to thesame result in allowing a US corporation that was part of the J&J chain of companies engaged in the manufacture and sale of goods, toparticipate in a claim for damages without specifically demonstrating that it had title to the product, even for a moment, in Canada. [66] I also rely on the decision of the Federal Court of Appeal in Apotex Inc. v Wellcome Foundation Ltd., previously referred to,where Rothstein J.A. wrote that since the patentee and the person “claiming under” were before the Court both urging that the personhad status, the Court would not deny that status.

The present case is different in that the patentee, Daiichi, has not actually participated inthis proceeding. Nonetheless, Daiichi clearly knows of this proceeding and has taken no steps to object to the status of Janssen US. [67] I distinguish the decision of Justice Snider in Les Laboratories Servier, supra, in that she found particularly at paragraph 81that each of the foreign entities had to own a sphere of operation and its own responsibilities within Group Servier, thus those entities notoperating in a Canadian sphere could not be considered as persons “claiming under” the patentee.

In the case before me, the J&J groupof companies are operating as a team whereby licensed tablets ultimately found their way to Canada. [68] Thus I conclude that, in the circumstances of this case, Janssen US is a person “claiming under” the patentee, Daiichi, for thepurposes of having standing to claim damages for infringement by Teva of the 080 Patent in these proceedings. IX. ISSUE NO. 2 – QUANTUM OF DAMAGES

a) Quantifying Damages Generally [69] The quantification of general damages by a Court is said to be the exercise of a sound imagination and the practice of a broadaxe in seeking to restore a plaintiff by monetary means to the condition that it would have been had the infringement not occurred. Thewords of Lord Shaw in Watson, Laidlaw & Co. Ltd. v Pott Cassels, and Williamson (1914), 31 R.P.C. 104 over a hundred years ago are

still appropriate today. He wrote at pages 117 to 118: In my opinion, the case does raise sharply an important question as to the assessment of damages in patent cases, and with that questionI proceed to deal. It is probably a mistake in language to treat the methods usually adopted in ascertaining the measure of damages inpatent cases as principles. They are the practical working rules which have seemed helpful to Judges in arriving at a true estimate of thecompensation which ought to be aw

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