APOTEX INC. Plaintiff v. ASTRAZENECA CANADA INC., 2012 FC 559

Federal Court Cour fédérale 2012 0511 Docket: T-2300-05 Citation: 2012 FC 559 Ottawa, Ontario, May 11, 2012 PRESENT: The Honourable Mr. Justice Hughes BETWEEN: APOTEX INC. Plaintiff and ASTRAZENECA CANADA INC. Defendant REASONS FOR JUDGMENT AND JUDGMENT [ 1 ] This is an action for the recovery of loss under the provisions of

section 8 of the Patented Medicines (Notice of Compliance) Regulations , SOR/93-133 ( NOC Regulations ). There has been a Reference ordered. Therefore this part of the proceeding is limited to addressing certain issues only with a Reference to follow if needed. [ 2 ] The Plaintiff Apotex Inc. is an Ontario corporation and claims to be the largest Canadian-owned pharmaceutical manufacturer. It carries on business largely as a manufacturer and distributor of generic drugs; that is, copies of drugs made and developed by others.

The Defendant AstraZeneca Canada Inc. is an Ontario corporation carrying on business in Canada as a distributor of drugs. These drugs include those developed by associated AstraZeneca corporations outside Canada. In the parlance of the trade, Apotex is a “generic” and AstraZeneca is a “brand” or “innovator”. [ 3 ] The claim made by Apotex under

section 8 of the NOC Regulations arises from the dismissal of an application for prohibition brought in this Court by AstraZeneca and a related company against Apotex under the provisions of those Regulations . That application, identified as T-2311-01, was commenced by a Notice of Application filed by AstraZeneca and a related company on December 31, 2001.

By an Order dated 30 th of December 2003, Justice O’Keefe dismissed that application. He provided reasons on the 2 nd of March 2004, cited as 2004 FC 313 . That decision is final. [ 4 ] In general, the application T-2311-01 dealt with a drug known as omeprazole, sold by AstraZeneca in Canada under the brand name LOSEC and Canadian Patent No. 2,133,762 (the '762 patent) listed by AstraZeneca with the Minister of Health under the provisions of the NOC Regulations . [ 5 ] The trial was divided into two parts. The first was an evidentiary part with argument addressing certain of the issues.

The second part took place a few weeks later with argument directed to AstraZeneca’s challenges to the validity of

section 8. This second part, on consent of all parties, was argued in common before me and Justice Snider who was seized with many of the same validity challenges in proceedings before her in cases numbered T-1161-07 and T-1357-09. THE EVIDENCE [ 6 ] The evidentiary portion of the trial of this action took place over five (5) days. In all, four (4) fact witnesses were called; two (2) for each party and, two (2) expert witnesses were called, one for each of Apotex and AstraZeneca. These experts were examined in a “hot tubbing” format after each had been examined and cross-examined by Counsel in the usual way.

In addition, the parties filed an agreement stipulating that certain documents could be put in evidence without formal proof, without, however, any concession as to the truth of the contents of those documents. [ 7 ] The Plaintiff Apotex provided the evidence of the following persons in its case in chief: 1. Dr. Bernard Sherman , a fact witness. He is the founder and Chairman of Apotex. He testified as to the efforts made by Apotex to obtain regulatory approval in Canada to make and sell its generic version (Apo-omeprazole) of AstraZeneca’s omeprazole drug, LOSEC, in 20 mg capsule format.

He testified as to events prior to, during and subsequent to receiving approval. He also testified as to manufacturing facilities of Apotex at sites known as Signet and Torpharm, and the capacity of those facilities to manufacture this generic drug. I accept his evidence as credible. 2. Mr. Gordon Fahner , a fact witness. He is Vice President, business operations and finance, of Apotex. He provided particularization as to the ability of Apotex to manufacture the generic omeprazole drug at its Signet and Torpharm facilities.

He provided data which he derived from Apotex business records kept in a computerized system known as SAP. I accept his evidence as credible. 3. Ms. Sue Wehner , an expert witness. She provided two reports marked as exhibits P-12 and P-13. After cross-examination as to her qualifications, Counsel for AstraZeneca agreed that Ms.

Wehner could be qualified as an expert in the manner proposed by Apotex as follows: Expert in regulatory affairs relating to the pharmaceutical industry, including the preparation and management of submissions to Health Canada, including new and abbreviated new drug submissions, supplemental new drug submissions and notifiable change submissions.

I accept her evidence as credible. [ 8 ] In addition, Apotex tendered portions of AstraZeneca’s discovery and documents referred to; exhibits P-24 and P-25, and a bundle of documents submitted pursuant to the Agreement of Documents, exhibit P-23. [ 9 ] The Defendant AstraZeneca provided the evidence of the following persons in its defence: 1. Dr. Sheila Garven , an expert witness. She provided a report marked as Exhibit D-26. After cross-examination as to qualifications,

Counsel for Apotex agreed that she could be qualified as an expert on the basis of paragraph 18 of her report, modified as follows: . . . …as an expert in Canadian regulatory practice (“regulatory practice”) (…) including regulatory practice as it relates to the filing of new drug submissions, supplemental new drug submissions and notifiable change submissions. I accept her evidence as credible. 2. Dr. Alison Ingham , a fact witness. She appeared pursuant to a subpoena from AstraZeneca. She is a senior advisor with the Bureau of Pharmaceutical Sciences at the Therapeutic Products Directorate of Health Canada.

She testified generally as to certain practices at Health Canada relating to evaluation of new and abbreviated drug submissions and notifiable changes. I accept her evidence as credible. 3. Harvey Wasiuta , a fact witness. He testified pursuant to a subpoena from AstraZeneca. He is Director of Access to Information and Privacy for Health Canada. He is ultimately responsible for responses given by Health Canada to requests for Access to Information made to Health Canada.

He testified as to the general practices of Health Canada in respect of Access to Information (ATI) requests and gave specific evidence as to requests made, including by AstraZeneca, as to files relating to Apotex’s omeprazole submissions to Health Canada. I accept his evidence as credible. [ 10 ] At the end of the testimony of Ms Wehner and Dr Garven I conducted a “hot tubbing” examination in which each of them took the stand at the same time, remaining under oath. They answered questions put to them by me and responded to the answers given by each other.

At the end of this process, each Counsel was invited to put follow-up questions to these witnesses. I will repeat part of the dialogue at the beginning (page 773) and at the end of the “hot tubbing” session (pages 779 - 780): JUSTICE HUGHES: Where are you different, if at all, Ms. Wehner? MS. WEHNER: I think the primary difference is the

interpretation of whether a notifiable change is part of the regulations or apart from the regulations. I think it really boils down to that. JUSTICE HUGHES: Dr. Garven, where do you say the two of you are apart? MS. GARVEN: From a regulatory practice perspective I believe that the difference is whether a notifiable change is required or not and would require approval from Health Canada prior to implementing the change . . . JUSTICE HUGHES: They would carry on manufacturing any way? MS.

GARVEN: From a regulatory perspective I would say they shouldn’t be manufacturing for sale until they received that letter of no objection. JUSTICE HUGHES: Anything to add to that, Ms. Wehner? MS. WEHNER: This is a bit of an unusual situation but, in my experience, Health Canada would tend to work with the company

in order to expedite the change, especially in this situation there would be a lengthy patent hold. It may be a moot point. I’ve seen Health Canada on a number of occasions working in close association with the companies to work things out. JUSTICE HUGHES: Dr. Garven, what do you say about that? MS. GARVEN: They do tend to work with the companies to work things out, but they would want it worked out in the sense that they would have to file that notifiable change and get the letter of no objection. JUSTICE HUGHES: Have we then discussed the areas in which you were apart?

Any other areas you were significantly apart? MS. WEHNER: I don’t believe so. MS. GARVEN: No, I don’t believe so either. [ 11 ] AstraZeneca filed as part of its evidence a bundle of documents submitted pursuant to the agreement as to documents, exhibit D- 37, and read-ins and related documents from its discovery of Apotex exhibits D-38, D-39 and D-40.

Additionally, Counsel for Apotex agreed to certain stipulations respecting the '762 patent (transcript page 872). [ 12 ] In reply, Apotex filed certain other materials arising out of answers that it gave to certain undertakings made during discovery, exhibit P-41 as did AstraZeneca, exhibit D-42. It called no further witnesses. [ 13 ] I have made a separate Order dated March 29, 2012 respecting the confidentiality of certain portions of the transcripts of evidence and certain trial exhibits.

ANSWERS GIVEN ON DISCOVERY [ 14 ] During Apotex’s examination for discovery conducted by AstraZeneca, Apotex, by its Counsel, undertook to provide answers to certain questions. Among these questions was Question 858, as follows: To advise why Apotex was seeking approval to have Apo-omeprazole manufactured at the Etobicoke site. [ 15 ] On June 7, 2011, Counsel provided the following answer: The technology for the manufacture of Apo-Omeprazole on a commercial scale was not available at the Signet site during the specified time period.

The notifiable change for the Etobicoke site was approved in August, 2004. [ 16 ] On March 5, 2012 (two weeks before the trial began) Counsel for Apotex provided the following corrected answer: Apotex corrects and replaces the preceding answer as follows. The Signet plant was capable of manufacturing Apo-Omeprazole capsules for commercial sale. It had the requisite technology. However, there was greater capacity to produce Apo-Omeprazole capsules at the Torpharm facility.

[17] AstraZeneca, as part of its case in defence, filed only the first or “uncorrected” answer. In reply Apotex filed the corrected answer,plus portions of its further discovery conducted by AstraZeneca “without prejudice” subsequent to the delivery of the corrected answerand before the trial began. [18] AstraZeneca argues that Apotex is attempting to withdraw an admission upon which AstraZeneca was relying in conducting itscase and should not be permitted to do so. Apotex argues that Rule 245 of the Federal Courts Rules, SOR/98-106 obliges it to correctinaccurate or deficient answers given on discovery.

Rule 248 would also preclude it from leading evidence on the point at trial if theanswer were not corrected. Further, Apotex argues, AstraZeneca had further discovery and the opportunity to cross-examine the relevantwitnesses, Dr. Sherman and Mr. Fahner, at trial. [19] To resolve the issue as to whether the “corrected” answer is admissible and whether the evidence of Dr. Sherman and Mr. Fahner,which contradicts the earlier, uncorrected, answer, is admissible, I will start with considering the distinction between “formal” and“informal” admissions.

Sopinka et al, The Law of Evidence in Canada, 3rd ed (Markham: LexisNexis, 2009) at 1263, discusses formaladmissions which are made for the purpose of dispensing with proof at trial and are conclusive as to the matters admitted. The authorsillustrate the manner in which formal admissions may be made in Canadian proceedings at

section 19.2 of this book, which I repeat: §19.2 A formal admission may be made: (1) by a statement in the pleadings or by failure to deliver pleadings, (2) by an agreedstatement of facts filed at the trial, (3) by an oral statement made by counsel at trial, or even counsel’s silence in the face of statementsmade to the trial judge by the opposing counsel with the intention that the statements be relied on by the judge, (4) by a letter written bya party’s solicitor prior to trial; or (5) by a reply or failure to reply to a request to admit facts.

A formal admission of fact, as distinctfrom an admission of law, cannot be withdrawn except with leave of the court or the consent of the party in whose favour it was made.An admission relating solely to a question of law, on the other hand, may be withdrawn at any time, even in the Court of Appeal. Leave towithdraw an admission should not be granted, however, unless: (1) the admission was made clearly without authority, by mistake orunder duress; (2) there exists a triable issue concerning the admitted fact; and (3) there will be no prejudice to the party in whose favourit was made.

An inadvertent statement of fact by counsel in opening may be withdrawn if retracted before it has been acted upon. Thediscretion of the court ought to be warily exercised and usually on terms. [20] It appears that this Court has extended the categories of the means by which “formal” admissions are made to certain kinds ofadmissions made by Counsel on discovery, as is illustrated by the decision of Justice Tremblay-Lamer in Archambault v Ministre duRevenu National, (FC), [1998] FCJ No 635, 189 FTR 37 (aff’d without discussion on the point: 264 NR 171 ).

Thereported reasons do not repeat what was actually said during the discovery, but what was said appears to have been said expressly for thepurpose of trial if we take paragraph 6 of the reasons, which refer to another case, as being illustrative.

At paragraph 5, Tremblay-LamerJ. states that, absent consent of the opposite party, a “formal” or “judicial” admission cannot be withdrawn without leave of the Court: 5 The case law is clear on the question of withdrawing admissions: a party may not withdraw a "formal admission" (or "judicialadmission") without first obtaining leave of the Court or consent of the adverse party. [21] On the other hand, this Court has treated answers on discovery as “informal” admissions which can be qualified, enlarged upon oreven contradicted upon notice to the opposite party.

Prothonotary Lafreniere in Apotex Inc v Wellcome Foundation Ltd, 2009 FC 117, [2009] FCJ No 177, 343 FTR 41 wrote at paragraph 37: 37 Although the answers provided by GSK's representative during examination for discovery are considered informal admissions, theycan be qualified, enlarged upon, or even contradicted upon notice to the opposing party.

The correction of inaccurate or deficientanswers is specifically contemplated by Rule 245 which provides that a person who was examined for discovery and who discovers thatthe answer to a question in the examination is no longer correct or complete must provide the corrected or completed information inwriting without delay. [22] The Ontario Court of Appeal in Marchand v Public General Hospital Society of Chatham, (ON CA), [2000]OJ No 4428, 51 OR (3d) 97 dealt precisely with the issue of correction of an answer given on discovery where the correction was madeduring the trial itself.

The Court distinguished between answers given on discovery and “formal” admissions. Discovery answers couldbe corrected, leaving the impact of the correction to be determined by the trial judge. The entire discussion on the point in the decisionwritten by the Court at paragraphs 70 to 86 is instructive. I repeat only paragraphs 77 and 80:

77 First, Dr. Asher's original discovery answer was not a formal admission. As such, it was always open to him to explain hisdiscovery answer in his testimony. In Sopinka, Lederman and Bryant, The Law of Evidence in Canada, 3rd ed. (Toronto: Butterworths,1999) at 1051-53, the authors distinguish between formal and informal admissions. A formal admission is conclusive as to the matteradmitted, and cannot be withdrawn except by leave of the court or the consent of the party in whose favour it was made.

The Law ofEvidence states at 1051-52 that a formal admission may be made in the following ways: 1) by a statement in the pleadings or by failure to deliver pleadings; 2) by an agreed statement of facts filed at the trial; 3) by an oral statement made by counsel at trial, or even counsel's silence in the face of statements made to the trial judge by opposingcounsel with the intention that the statements be relied on by the judge; 4) by a letter written by a party's solicitor prior to trial; or 5) by a reply or failure to reply to a request to admit facts.

In contrast, an informal admission does not bind the party making it, if it is overcome by other evidence. That is, a party making aninformal admission may later lead evidence to reveal the circumstances under which the admission was made in order to reduce itsprejudicial effect. . . . 80 Holmested and Watson, supra, describe at 31 Subsection 25 the obligation under rule 31.09 as an ongoing duty to correct andcomplete the answers given. In general, parties are entitled to correct their discovery answers.

The impact of corrections is a matter tobe decided by the trial judge, who is entitled to examine both the original and the amended answers: See Machado v. Pratt & WhitneyCanada Inc. (1993), 17 C.P.C. (3d) 340 (Ont. Master); Capital Distributing Company v. Blakey (1997), (ON SC), 33O.R. (3d) 58 (Gen. Div). [23] In the present case, Apotex “corrected” an earlier answer in respect of a critical fact. AstraZeneca had further discovery. TwoApotex witnesses testified on the point at trial and were cross-examined. AstraZeneca led no evidence of its own in respect of this fact.

Iwill accept the corrected answer into evidence and weigh it along with the evidence of Dr. Sherman and Mr. Fahner. THE ISSUES [24] The principal issues are first whether Apotex is entitled to claim for loss under

section 8 of the NOC Regulations and, if so, overwhat period and to what extent; and, second, is

section 8 of the NOC Regulations valid legislation. [25] Counsel for the parties have filed with the Court a document entitled “Joint List of Issues for Trial” setting out more specificallythe issues that they wish the Court to address. All parties consented to this List. At trial, that List was amended and certain issuesremoved as a result of discussions between Counsel. As amended, that List of Issues is as follows: 1. Is

section 8 of the Patented Medicines (Notice of Compliance) Regulations (the “PM (NOC) Regulations”) invalid and of noforce and effect as being: a. Unconstitutionally vague and ambiguous; b. Draconian, harsh and punitive;

c. Invalid delegated legislation; and d. Inconsistent with and contrary to NAFTA and TRIPS? 2. Has Apotex satisfied the conditions for engaging

section 8 of the PM (NOC) Regulations , including that it is a “second person” within the meaning of

section 8 of the PM (NOC) Regulations, or has Apotex failed to satisfy any relevant condition insofar as such failure has been expressly pleaded by AstraZeneca(It is noted that paragraphs 58 and 59 of the Defence have been dropped by AstraZeneca and that party now agrees that the Minister did certify that a Notice of Compliance would have been issued to Apotex on January 3, 2002 were it not for the proceedings T-2311-01). 3. Does

section 8 of the PM (NOC) Regulations require a second person to establish abuse by the first person to comply with TRIPS and NAFTA and is the remedy so limited? 4. (Omitted) 5. Whether the alleged infringement of the '693 Patent is relevant in law, including whether it is relevant as a defence, to the

section 8 claim of Apotex (including possible set-off of damages) (and if so, see para. 4 of Order of October 4, 2011)? 6. Whether Apotex was in a position to market Apo-Omeprazole in the period January 3, 2002 to January 27, 2004, including any impact of Apotex’s alleged lack of approvability to manufacture for sale at a commercial manufacturing site? 7. Whether the start date for any liability should be forward dated by reason of Apotex’s alleged delay in serving a Notice of Allegation and/or Apotex’s alleged lack of approvability to manufacture for sale at a commercial manufacturing site? 8. (Omitted) 9.

Whether Apotex was under a duty to mitigate, and if so, whether Apotex failed to mitigate? 10. (Omitted) 11. (Omitted) 12. Whether, any of the subject of items 5-7 and 9-11 are relevant factors to consider pursuant to section 8(5)? REFERENCE ORDER AND PRE-TRIAL ORDER OCTOBER 4, 2011 [ 26 ] The present trial dealt with only certain aspects of the disputes between the parties. There has been an Order in this action dated February 20, 2008 directing that a Reference be held, after the disposition of the matters presently before me, to deal with the quantification of damages and other matters.

As it turns out, many of the matters dealt with in that Order are no longer relevant. The relevant parts of that Order which remain, as agreed upon by Counsel at the trial before me, are: THIS COURT ORDERS THAT: 1. Pursuant to Rule 107 of the Federal Courts Rules , this matter shall proceed to trial without requiring the parties to adduce evidence at trial, or to conduct discoveries, or make production on any issue of fact relating solely to:

(

a) the quantum of any damages suffered by Apotex Inc. (“Apotex”) as a consequence of any delay in issuance to Apotex of a Notice of Compliance (“NOC”) for Apo-Omeprazole 20mg capsules by reason of the Patented Medicines (Notice of Compliance) Regulations (“Regulations”); . . . 2. Subject to paragraph 3, a hearing under Rules 107 and/or 153 shall be conducted following trial, if it appears that any of the issues set out in paragraph 1 above require determination, including necessary documentary and oral discovery. . . . 4. Any party may apply to the Court at any time, on notice to all other parties, for an order varying this Order. 5. In the event of disagreement among the parties as to the

interpretation of this Order, which the parties have been unable to resolve by negotiation, any party may apply to the Court, on notice to all other parties for: (

a) a case conference to discuss the disagreement with the case manager with a view to resolution of the disagreement; or (

b) an order or direction of the Court in respect of the subject of the disagreement. 6.

There shall be no costs of the motion save as to the costs of the attendance on February 14, 2008, including disbursements associated with said attendance only, which shall be to the Moving Parties in the cause. [ 27 ] By way of example, as discussed with Counsel at trial, if I were to determine that Apotex could manufacture the product at issue in commercial quantities at one or other of its sites, I need not, at this time, make an apportionment as to which site could produce how much. [ 28 ] Further, following a pre-trial conference, I issued an Order dated October 4, 2011.

That Order made reference to another action in this Court, T-1409-04, in which AstraZeneca is suing Apotex for infringement of Canadian Patent No. 1,292,693 (the ‘693 patent, which is not the same patent as the ‘762 patent at issue here). Presently, that action is set down to be heard in April 2014. Paragraph 4 of my Order directs that, if I find that AstraZeneca’s defences in this action respecting infringement are viable in law, then Judgment in this action shall be reserved until final disposition of action T-1409-04. Paragraph 4 of my Order states: 4.

The trial in T-2300-05 will be heard on all issues and if the Court finds the defences raised in paragraph 60 of the Sixth Amended Statement of Defence and Counterclaim (Infringement Defences) are viable in law, then any Judgment in T-2300-05 finding liability will be reserved until the final disposition of T-1409-04, and in the event that Apotex is found to infringe a valid patent in T-1409-04, the parties will be given the opportunity to make further submissions to the Court as to the applicability and impact, if any, of the findings of infringement from T-1409-04 in the within action.

The foregoing is without prejudice to Apotex’s ability to proceed with a reference following the initial finding of liability in T-2300-05 or the ability of AstraZeneca to bring a motion to stay the Judgment in T-2300-05 or any subsequent appeal. [ 29 ] As discussed with Counsel at trial, if I find that AstraZeneca’s defence as to infringement is not viable, there is no prohibition against giving Judgment in the present action right away. BURDEN OF PROOF [ 30 ] This action is based on

section 8 of the NOC Regulations . The Federal Court of Appeal in Apotex Inc v Merck & Co Inc , 2011 FCA 364 has clearly set out the elements of a claim for loss under that section. It requires that (1) an application for prohibition be dismissed; (2) that a second person has suffered loss from a date certified by the Minister or another date found by the Court to be appropriate, and ending on the date of dismissal. The Court may determine in its discretion whether, and to what extent, a second person’s claim for compensation should be reduced or eliminated.

[31] AstraZeneca argues that Apotex bears the burden of proof in respect of all those elements. I accept that Apotex has a burden insome respects but not others. [32] Sopinka et al, supra provides a lengthy discussion as to allocation of burdens at sections 3.61 to 3.96. It cites the decision of theSupreme Court of Canada in Rainbow Industrial Caterers v CNR Co, (SCC), [1991] 3 SCR 3 (QL) as modern authorityon the point.

That decision relates to facts similar to those at issue here in that the plaintiff claimed that it had been induced into enteringinto a contract with the defendant by misrepresentations of the defendant and had thereby suffered loss. The defendant argued that in the“hypothetical situation” where the plaintiff would have entered into a contract on different terms, the plaintiff was required to bear theburden of negating all the speculative hypotheses that the defendant put forward. The majority of the Court disagreed. The defendantbears the burden of proving its hypothesis.

Justice Sopinka for the majority wrote at paragraphs 23 and 24: Once the loss occasioned by the transaction is established, the plaintiff has discharged the burden of proof with respect to damages. Adefendant who alleges that a plaintiff would have entered into a transaction on different terms sets up a new issue. It is an issue thatrequires the court to speculate as to what would have happened in a hypothetical situation. It is an area in which it is usually impossibleto adduce concrete evidence.

In the absence of evidence to support a finding on this issue, should the plaintiff or defendant bear the riskof non-persuasion? Must the plaintiff negate all speculative hypotheses about his position if the defendant had not committed a tort ormust the tortfeasor who sets up this hypothetical situation establish it? Although the legal burden generally rests with the plaintiff, it is not immutable. See National Trust Co. v. Wong Aviation Ltd., (SCC), [1969] S.C.R. 481, and Snell v. Farrell, (SCC), [1990] 2 S.C.R. 311. Valid policy reasons will besufficient to reverse the ordinary incidence of proof.

In my opinion, there is good reason for such reversal in this kind of case. Theplaintiff is the innocent victim of a misrepresentation which has induced a change of position. It is just that the plaintiff should beentitled to say “but for the tortuous conduct of the defendant, I would not have changed my position”.

A tortfeasor who says “Yes, butyou would have assumed a position other than the status quo ante”, and thereby asks a court to find a transaction whose terms arehypothetical and speculative, should bear the burden of displacing the plaintiff’s assertion of the status quo ante. [33] Thus, Apotex has the burden of proving the elements of its claim and AstraZeneca has the burden of proving those matters whichit raises in arguing that no claim exists or that the claim should be reduced or eliminated. [34] In stating that a party has the burden of proof, that burden is a two-fold burden.

The first burden is to put sufficient evidence in therecord such that the issue is “in play”. The second burden is that of proving, in this case, on a balance of probabilities, that the issue is tobe resolved in favour of the party asserting or challenging the issue. In this respect, I refer again to Sopinka et al, supra, at sections 3.6and 3.7: §3.6 As noted, the term “burden of proof” is ambiguous and it has sometimes been used to mean that there is evidence of a fact, while onother occasions it has been used to mean that a fact has been proved by the evidence.

Since the term is applied without discriminating inwhich sense the term is being used, it is difficult to determine which burden a party has satisfied in a particular case. §3.7 The term “evidential burden” means that a party has the responsibility to insure that there is sufficient evidence of the existence ornon-existence of a fact or of an issue on the record to pass the threshold test for that particular fact or issue. As Lord Devlin explained inJayasena v.

R., to satisfy an evidential burden a party is not required to prove anything: Their Lordships do not understand what is meant by the phrase “evidential burden of proof”…It is doubtless permissible to describe therequirement as a burden, and it may be convenient to call it an evidential burden. But it is confusing to call it a burden of proof. Further,it is misleading to call it a burden of proof, whether described as legal or evidential or by any other adjective, when it can be dischargedby the production of evidence that falls short of proof.

The essence of the appellant’s case is that he has not got to provide any sort ofproof that he was acting in private defence. So it is a misnomer to call whatever it is that he has to provide a burden of proof…[emphasisadded] In contrast, the term “persuasive (legal) burden” means that a party has an obligation to prove or disprove a fact or issue to thecriminal or civil standard.

The failure to convince the trier of fact to the appropriate standard means that party will lose on that issue.Because the evidential burden and the persuasive burden will on occasion be distributed between the parties, it is essential that theissues to be tried, and the underlying facts in support of the issues, be clearly identified.

[ 35 ] In brief, it may be said that the party who has led sufficient evidence to put an issue “in play”, must, to succeed on that issue, put in sufficient evidence so that on the balance of probabilities, the relevant facts are accepted by the Court as having been proved. Thus Apotex must put in play and subsequently prove on the balance of probabilities the facts that it needs to establish its case for compensation. AstraZeneca must put in play and subsequently prove those facts that it asserts disqualifies Apotex or reduces or negates Apotex’s claim for compensation.

FACTUAL BACKGROUND [ 36 ] Omeprazole is the active ingredient in the drug sold by AstraZeneca in Canada under the brand name LOSEC and by a related company in the United States under the brand name PRILOSEC. The drug is sold in varying strengths including 20 mg and 40 mg, and in capsule form and tablet form. Here we are concerned with a capsule form containing 20 mg of the drug. In this form, the omeprazole itself is mixed with other materials, called excipients, and formed into very small pellets. These pellets are coated then placed into capsules.

For our purposes, therefore, the manufacture of the 20 mg capsule consists of three steps; pellet forming, pellet coating, and encapsulation. [ 37 ] In the 1990s, AstraZeneca was selling omeprazole in Canada in forms including 20 mg LOSEC capsules. At some point in the late 1990’s or early 2000’s, AstraZeneca switched from the capsule form to the tablet form, at least for the 20mg strength. However, a related company continued to sell the 20 mg drug in capsule form in the United States under the PRILOSEC name.

There is a suggestion that AstraZeneca may have made the 20 mg product available again in Canada in the capsule form, but I find on the record before me that there is no evidence to support that suggestion. [ 38 ] In 1994, Apotex made an application to Health Canada for approval to sell a generic version of AstraZeneca’s 20 mg LOSEC capsules in Canada. At that time, Apotex had a manufacturing facility located at Signet Drive in Weston, a suburb of Toronto, which Apotex indicated would be the site of the plant to be used to manufacture this drug.

This site is variously referred to in the evidence as Weston or Apotex or Signet. I will call it Signet. Subsequently, Apotex developed or acquired another manufacturing facility located a few kilometres away from Signet, in Etobicoke, another suburb of Toronto. That site is variously referred to in the evidence as Etobicoke or Torpharm. I will call it Torpharm. I find, on the uncontradicted evidence of each of Dr. Sherman and Mr.

Fahner, and giving due weight to the answers given on discovery as previously discussed, that each of the Signet and Torpharm sites were capable of manufacturing the 20 mg omeprazole capsule in commercial quantities. I find that the entire manufacturing could take place at one site or the other, or partially at one and partially at the other; for instance, pellet forming and coating could take place at Torpharm, and encapsulation at Signet. These findings apply throughout any period that may be relevant here.

SEEKING, OBTAINING AND MAINTINING APPROVAL TO SELL A DRUG IN CANADA [ 39 ] The Minister of Health, particularly through a department known as Health Canada, is responsible for regulating the manufacture, distribution and sale of drugs in Canada. The Minister grants approval to do so by issuing a Notice of Compliance (NOC) to the party seeking such approval. [ 40 ] Such approval may be sought by a party in one of two ways. One is by filing a New Drug Submission (NDS), which requires a party to provide a great deal of information as to the safety and efficacy of the drug in question.

The other is by filing an Abbreviated New Drug Submission (ANDS), which requires first that some other person has already been granted an NOC for the drug; and second, that the party seeking approval need not provide the voluminous material otherwise required in respect of safety and efficacy, provided that it can make certain satisfactory comparisons to the drug already approved. The ANDS procedure is one followed by many “generic” drug companies. [ 41 ] In filing an NDS or an ANDS, the party seeking approval must provide certain information to Health Canada, including that as set out in subsection C.08.002 (2)(

d) of the Food and Drug Regulations , CRC c 870, as amended ( FDA Regulations ):

(2) A new drug submission shall contain sufficient information and material to enable the Minister to assess the safety and effectiveness of the new drug, including the following: . . . (

d) a description of the plant and equipment to be used in the manufacture, preparation and packaging of the new drug;

(2) La présentation de drogue nouvelle doit contenir suffisamment de renseignements et de matériel pour permettre au ministre d’évaluer l’innocuité et l’efficacité de la drogue nouvelle, notamment : . . .

d) la description des installations et de l’équipement à utiliser pour la fabrication, la préparation et l’emballage de la drogue nouvelle; [ 42 ] At trial, there was discussion as to the precise meaning of “plant and equipment” and whether it is the equivalent of the “site” of manufacture. For instance, if there is more than one “site” that uses substantially the same machinery and procedures for making a drug, can each site be considered the same “plant and equipment”?

I do not need to resolve this debate other than to say that it gives rise to a reasonable debate. [ 43 ] I now turn to the circumstances which arise after an NOC has been given to a party and that party makes changes after the grant. Subsection C.08.003(1) of the FDA Regulations provides that if there are “significantly different” changes made to, among other things as defined in subsection (2)(d), “plant and equipment”, then the party must seek and obtain a “supplement” to its NDS or ANDS.

That supplement is called a Supplementary New Drug Submission (SNDS) or “Supplementary Abbreviated New Drug Submission (SANDS), as the case may be. I repeat the relevant portions of subsections (1), (2) and (3):

(1) Despite

section C.08.002, no person shall sell a new drug in respect of which a notice of compliance has been issued to the manufacturer of that new drug and has not been suspended under

section C.08.006, if any of the matters specified in subsection (2) are significantly different from the information or material contained in the new drug submission, extraordinary use new drug submission, abbreviated new drug submission or abbreviated extraordinary use new drug submission, unless (

a) the manufacturer of the new drug has filed with the Minister a supplement to that submission; (

b) the Minister has issued a notice of compliance to the manufacturer of the new drug in respect of the supplement; (

c) the notice of compliance in respect of the supplement has not been suspended pursuant to

section C.08.006; and (

d) the manufacturer of the new drug has submitted to the Minister specimens of the final version of any label, including any package insert, product brochure and file card, intended for use in connection with the new drug, where a change with respect to any of the matters specified in subsection (2) is made that would require a change to the label.

(2) The matters specified for the purposes of subsection (1), in relation to the new drug, are the following: […] (

d) the plant and equipment used in manufacturing, preparation and packaging the new drug;

[…]

(3) A supplement to a submission referred to in subsection (1), with respect to the matters that are significantly different from thosecontained in the submission, shall contain sufficient information and material to enable the Minister to assess the safety andeffectiveness of the new drug in relation to those matters. […] [44] Apart from the provisions as set out in

section C.08.003 of the FDA Regulations, there are no other provisions dealing withchanges. However, Health Canada has, through a series of “Guidelines”, introduced a procedure known as NC or Notifiable Change.This procedure has been the subject not only of “Guidelines”, but also draft guidelines and policies originating from Health Canada.

Inpublishing its guidelines, Health Canada is careful to point out that: Guidance documents are administrative instruments not having the force of law, and, as such, allow for flexibility in approach. [45] Justice Evans of the Federal Court of Appeal in Thamotharem v Canada (Minister of Manpower and Immigration), 2007 FCA198, [2008] 1 FCR 385, at paragraphs 58 to 60, wrote about guidelines. They are “soft law” techniques forming part of the continuum oflegal rules and discretion and, although not legally binding, they may validly influence a decision-maker’s conduct.

He wrote: 58 Legal rules and discretion do not inhabit different universes, but are arrayed along a continuum. In our system of law andgovernment, the exercise of even the broadest grant of statutory discretion which may adversely affect individuals is never absolute andbeyond legal control: Roncarelli v. Duplessis, (SCC), [1959] S.C.R. 121 at 140. (per Rand J.). Conversely, few, if any,legal rules admit of no element of discretion in their

interpretation and application: Baker at para. 54. 59 Although not legally binding on a decision-maker in the sense that it may be be an error of law to misinterpret or misapply them,guidelines may validly influence a decision-maker's conduct. Indeed, in Maple Lodge Farms Ltd. v.

Canada, (SCC),[1982] 2 S.C.R. 2, McIntyre J., writing for the Court, said (at 6): The fact that the Minister in his policy guidelines issued in the Notice to Importers employed the words: "If Canadian product is notoffered at the market price, a permit will normally be issued; ..." does not fetter the exercise of that discretion. [Emphasis added] The line between law and guideline was further blurred by Baker at para. 72, where, writing for a majority of the Court, L'Heureux-Dubé J. said that the fact that administrative action is contrary to a guideline "is of great help" in assessing whether it is unreasonable. 60 The use of guidelines, and other "soft law" techniques, to achieve an acceptable level of consistency in administrative decisions isparticularly important for tribunals exercising discretion, whether on procedural, evidential or substantive issues, in the performance ofadjudicative functions.

This is especially true for large tribunals, such as the Board, which sit in panels; in the case of the RPD, asalready noted, a panel typically comprises a single member. [46] In the present action, I have been provided with the expert evidence of Ms. Wehner and Dr. Garven as to how those experiencedin the Canadian drug regulatory world deal with such guidelines and

interpretations given by Health Canada. They largely agree in thisrespect. [47] It is important to begin with

section C.08.003 of the FDA Regulations previously set out, as it requires that a party which alreadyhas an NOC advise the Minister (Health Canada) as to changes that are “significantly different”. Thus, the initial

interpretation in respectof any differences lies with the holder of the NOC, as they must consider whether a difference is “significant”. I appreciate thatinspectors from Health Canada do visit the NOC holders’ facilities from time to time and they are expected to notice “differences”, aswell.

[ 48 ] In April 1994 and September 1994, Health Canada released publications described as “policy” documents. They never gained status as “guidelines”. Nonetheless, the evidence is that these documents serve to inform the public as to what changes Health Canada may consider to be “significant” and what steps Health Canada expects an NOC holder to take. Four different “Levels” of changes are provided for with descending degrees of “significance” and descending degrees of expectations placed on an NOC holder.

Both experts agree that while there is no “legal” requirement for an NOC holder to live up to these expectations, those holders regularly do endeavour to live up to those expectations. [ 49 ] The practice with respect to a difference or change as to “plant and manufacturing equipment” under the practice established by Health Canada is considered a “Level 2” change. The relevant practice is set out in the “Policy Issues” document dated April 6, 1994, as follows: LEVEL 2 – NOTIFIABLE CHANGE (Notice of Intention to Change) Level 2 changes are those considered to be notifiable.

Changes identified in Level 2 require the preparation and filing of the same level and detail of information and scientific justification as is currently required in a supplemental new drug submission. This information and material must be filed prior to the institution of the change. Unless a written objection is received from the Branch within 90 days, the manufacturer may proceed with the change.

Level 2 changes are those made: . . . 3. subject to Level 1 (3) & (4), in the formulation, method of manufacture, equipment, process control, or production site of the drug product; [ 50 ] The experts advise that the practice is for Health Canada to review the changes set out in the notice (NC) provided by an NOC holder and to discuss with the holder what modifications, if any, ought to be made so as to satisfy Health Canada.

Once Health Canada is satisfied, it sends out a letter described as a “No Objection” or NO letter which puts an end to the matter from Health Canada’s perspective. [ 51 ] There is some overlap as to what kind of a change would be treated under the Notice of Change (NC) regime as opposed to one that would be required to be processed through the more formal Supplementary New Drug Submission (SNDS) or Supplementary New Drug Submission (SANDS) process. I largely accept Dr.

Garven’s evidence as set out in paragraph 61 of her Report, exhibit P-14 that, from a regulatory perspective, the acceptance as a NC does not mean that the changes were insignificant; the level and detail of information and scientific justification which was required in a NC submission may be the same level as for an SNDS.

Rather, from a policy perspective, Health Canada was prepared to treat the submission according to different timing review requirements and permit the change in one form or another. [ 52 ] When I pressed Counsel for AstraZeneca in argument to provide me with any statutory penalty that could be imposed upon an NOC holder for failure to adhere to the Food and Drug Act , RSC 1985, c F-27 or the FDA Regulations , I was provided with

section C.08.006 of the FDA Regulations . That

section provides that the Minister may suspend an NOC if the new information is inadequate so as to assure and preserve the identity, strength, quality or purity of the new drug. I repeat subsections (1) and (2)(e): C.08.006.

(1) For the purposes of this section, evidence or new information obtained by the Minister includes any information or material filed by any person pursuant to Division 5 or

section C.08.002, C.08.002.1, C.08.003, C.08.005 or C.08.005.1.

(2) The Minister may, by notice to a manufacturer suspend, for a definite or indefinite period, a notice of compliance issued to that manufacturer in respect of a new drug submission or an abbreviated new drug submission or a supplement to either submission, if the Minister considers

. . . (

e) that, on the basis of new information obtained after the issuance of the notice of compliance, the methods, equipment, plantand controls used in the manufacturing, processing and packaging of the drug are inadequate to assure and preserve the identity,strength, quality or purity of the new drug; or [53] Neither of the experts could recall any instance when this had ever been done.

They agreed in the “hot tubbing” session that, mostlikely, Health Canada personnel would work with the NOC holder so as to ensure that conformity with the necessary standards wasachieved. [54] It is important to note that in the circumstances of this case, Apotex has never been penalized or shut down by Health Canada. NOC REGULATIONS –

SECTION 8 [55] On many occasions, members of this Court have written that the NOC Regulations are poorly drafted and difficult to interpret andimplement. I will once more lend my voice to that complaint and pass on. [56] The purpose of the NOC Regulations has been discussed in many decisions of this and higher Courts. I will only briefly recapsuch purpose in general terms.

The purpose is to provide a party who has already received an NOC to market its drug in Canada anopportunity to require another party who wishes to market the same drug and seeks an NOC, for instance, by way of the abbreviatedANDS route, to address a patent or patents that the NOC holder owns or in which it has an interest. Generally speaking, these persons arereferred to as a “first person” for the NOC holder, and the other person as a “second person”. The first person may list with the Ministerof Health certain patents that it owns or in which it has an interest.

The second person must send a notice to the first person allegingwhether it will simply await the expiry of the patent(

s) or that the patent(

s) are not infringed or invalid, and provide a factual and legalbasis as to why. The first person may then, if it chooses, commence an application to prohibit the Minister from issuing an NOC to asecond person until the patent(

s) expire. The Minister would then put the second person’s application on “patent hold” until theprohibition proceedings are resolved or for twenty four months, whichever comes first. In effect, the first person gets an injunctionautomatically for up to twenty-four months, which will prevent a second person from getting approval to sell its drug until the prohibitionproceedings are resolved or the time period expires. Justice Iacobucci in the Supreme Court of Canada wrote in his decision in Apotex Incv Merck Frosst Canada Inc, (SCC), [1998] 2 SCR 193 at paragraph 33 that such a scheme was “draconian”. [57] As a counterweight to the “automatic injunction”,

section 8 of the NOC Regulations provides that the second person may seekrecovery of any loss suffered during the period in which it was held off the market if it turns out that the prohibition application iswithdrawn, discontinued or dismissed. The parties are agreed that the version of the NOC Regulations in force, October 1, 1999, is theversion of those Regulations that is applicable to the present action.

Section 8 in that version is as follows: 8.

(1) If an application made under subsection 6(1) is withdrawn or discontinued by the first person or is dismissed by the courthearing the application or if an order preventing the Minister from issuing a notice of compliance, made pursuant to that subsection, isreversed on appeal, the first person is liable to the second person for any loss suffered during that period (

a) beginning on the date, as certified by the Minister, on which a notice of compliance would have been issued in the absenceof these Regulations, unless the court is satisfied on the evidence that another date is more appropriate; and (

b) ending on the date of the withdrawal, the discontinuance, the dismissal or the reversal.

(2) A second person may, by action against a first person, apply to the court for an order requiring the first person to compensate thesecond person for the loss referred to in subsection (1).

(3) The court may make an order under this

section without regard to whether the first person has commenced an action for the

infringement of a patent that is the subject matter of the application.

(4) The court may make such order for relief by way of damages or profits as the circumstances require in respect of any loss referred toin subsection (1).

(5) In assessing the amount of compensation the court shall take into account all matters that it considers relevant to the assessment ofthe amount, including any conduct of the first or second person which contributed to delay the disposition of the application undersubsection 6(1). [SOR/98-166, s. 8.] [58] I adopt the comments that I wrote in Apotex Inc v Merck & Co Inc, 2008 FC 1185 at paragraphs 54, 55 and 74 concerning section8. A “first party” has choices: it may choose to list a patent with the Minister, or not; it may choose to institute prohibition proceedings,or not.

Its basic patent rights, such as the right to institute an ordinary infringement action, are unaffected. In making a choice to list apatent and a choice to institute prohibition proceedings, that party must be mindful that, just as if it had given an undertaking in order tosecure an interlocutory injunction, it must make good the losses suffered by the other party should it fail to secure the prohibition Order.I wrote: 54 In many respects,

section 8 can be analogized to the undertaking usually required by a party seeking an interlocutory injunctionfrom a Court. This Court (Rule 372(2)) and most other courts in this country require, unless otherwise ordered, that an undertaking as todamages be provided. An undertaking is a serious matter and the damages afforded may be substantial, although as stated by theOntario Court of Appeal in Debrina Corporation v. Triolet Systems Inc. (2002), (ON CA), 17 C.P.R. (4th) 289 atparagraph 87, they must be reasonably foreseeable at the time of the granting of the interlocutory injunction and must be caused by("naturally flow from") the injunction and not something else. 55 Merck characterizes

section 8 as providing a civil remedy without a wrong having been committed. Merck argues that the simpleinstitution of a

section 6 application and being subsequently unsuccessful cannot be said to be a "wrong" for which liability is created.This is a mischaracterization of the circumstances. Merck and others in its position have choices, a patent may be listed or not, anapplication may be instituted or not. Just like the institution of proceedings and seeking an interlocutory injunction, choices are made.Section 8 is a consequence of such choices. Merck and any other patentee has available to it all the remedies afforded to any patenteeunder the Patent Act, it is deprived of nothing in that regard. In seeking the advantage of

section 6, it must be presumed to have done somindfully of

section 8. . . . 74 The PMNOC Regulations must be considered as a whole.

Section 8 provides, just as in any ordinary court proceeding, adisincentive for seeking what is in effect an interlocutory injunction. It is like an undertaking given by a person seeking such injunction.It is part of a "balance" to use the words of the Supreme Court of Canada in Biolyse, supra, of the Regulations. It is a normal andexpected balance having regard to undertakings given in Court proceedings such as those for patent infringement when interlocutoryinjunctions are sought. Subsection 55.2(4)(

d) specifically provides for regulations respecting remedies and procedures in respect ofdisputes under subsection (

c) as to when the NOC may issue. This includes the 24 month stay on any issuance of the NOC provided bysection 7(1)(

e) of the PMNOC Regulations and disincentives for seeking such a stay. [59] I accept as appropriate the approach advocated by the Ontario Court of Appeal in respect of an undertaking given by a party whoso readily receives an interlocutory injunction.

It wrote in Nelson Burns & Co v Gratham Industries Ltd, [1987] OJ No 1100, 25 OAC89, at paragraphs 10 and 11, that the undertaking should be honoured without quibble and the courts should generally be unsympathetictoward those who seek to resile from such an obligation: Because of this change and because of the number of such injunctions that are sought it is appropriate to emphasize the serious nature ofthe undertaking to pay damages which is a condition of the issuance of the interlocutory injunction.

In the ordinary course theunsuccessful plaintiff must understand that he is obliged to pay damages in accordance with his undertaking without quibble and courtsgenerally will be unsympathetic towards those who seek to resile from such an obligation.

TIMELINE OF EVENTS [ 60 ] With the foregoing as background, I will set out a number of events, largely in chronological order, relevant to the matters at issue. An omission does not mean that I consider an event unimportant or have overlooked it: November 1994 – Apotex filed a new drug submission (NDS) for omeprazole capsules Including a bioequivalence study compared Apotex’s product with LOSEC.

It indicated that the site of manufacture was Signet May 1997 – Health Canada rejects Apotex’s application and considers it withdrawn December 1997 – Apotex re-files the same application as an abbreviated new drug submission (ANDS) and includes further bioequivalence comparisons with LOSEC March 1999 – Apotex files further bioequivalence studies comparing the Apotex product to the United States product PRILOSEC, as LOSEC capsules are no longer available in Canada December 1999 – Health Canada rejects Apotex’s application January 2000 – Apotex appeals, asserting that its application should be listed as an NDS, not an ANDS May 2000 – February 2001 – Apotex appeals within Health Canada at two levels.

The appeals are denied March 2001 – Apotex files an application for judicial review in this Court (T-493-01) which is suspended pending reconsideration within Health Canada September 2001 – Health Canada reconsiders and allows Apotex’s application to proceed as an NDS.

The judicial review application is discontinued October 19, 2001 – Health Canada report recommends acceptance of Apotex’s application, but without a declaration of equivalence November 2001 – Apotex serves AstraZeneca with a Notice of Allegation under the NOC Regulations addressing the '762 patent December 31, 2001 – AstraZeneca files an application to prohibit the issuance of an NOC to Apotex (T-2311-01) until the expiry of the ‘762 patent. January 3, 2002 – date certified by the Minister under section 8(1)(

a) of the NOC Regulations as the date on which an NOC would have been granted to Apotex in the absence of the NOC Regulations if AstraZeneca had not started the prohibition application October/November 2003 – Apotex starts commercial manufacture of omeprazole capsules at its Torpharm facility for export to the United States and elsewhere December 30, 2003 – this Court dismisses AstraZeneca’s prohibition application

January 24, 2004 – Health Canada issues an NOC to Apotex but does not put on that NOC any indication of equivalence to LOSEC or any other drug. Apotex commences manufacture of its omeprazole capsules for the Canadian market at Torpharm February 23, 2004 – Apotex files an application for judicial review (T-388-04) to require Health Canada to issue an NOC with an indication of equivalence to LOSEC May 14, 2004 - Apotex files a Notifiable Change Level 2 submission with Health Canada indicating a change of site of manufacture from Signet to Torpharm.

August 26, 2004 -Health Canada issues a “No Objection” letter to Apotex respecting the change of manufacturing site. December 19, 2005 – Apotex discontinues its application T-388-04 January 4, 2006 – Health Canada issues an NOC to Apotex which indicates an equivalence to LOSEC [ 61 ] I will now turn to the Joint Issues for Trial as submitted by the Parties. ISSUE #1 AND ISSUE #3 1. In

section 8 of the Patented Medicines (Notice of Compliance) Regulations (the “PM(NOC) Regulations”)invalid and of no force and effect as being: a. Unconstitutionally vague and ambiguous; b. Draconian, harsh and punitive; c. Invalid delegated legislation; and d. Inconsistent with and contrary to NAFTA and TRIPS? . . . 3. Does

section 8 of the PM (NOC) Regulations require a second person to establish abuse by the first person to comply with TRIPS and NAFTA and is the remedy so limited? These are the issues which were deferred on consent to the joint hearing before me and Justice Snider held April 30 and May 1, 2012. [ 62 ] These issues have been raised by AstraZeneca as a defense to Apotex’s claim. The constitutionality of

section 8 was also raised by AstraZeneca by way of a counter-claim against the Minister. A few days before the hearing on these issues was scheduled to commence, AstraZeneca and the Minister settled their dispute, and the counter-claim was discontinued without costs, on consent. The Minister’s representative did not appear at the hearing. A Notice of Constitutional Question had been served on the appropriate federal and provincial representatives, but none of them were represented at the hearing and none of them provided any written representations. [ 63 ] What remains are the allegations made by AstraZeneca in its defense as to invalidity of

section 8. I repeat those allegations and tie them in with the headings provided in the above Statement of Issues in bold type:

Section 8 of the Patent Regulations is Invalid and of No Force or Effect

Section 8 of the Patent Regulations is invalid and of no force or effect because: (a) ▲ (b) ▲ (

c) Section 8 of the Patent Regulations is unconstitutionally vague and ambiguous.

Section 8 exposes a first person to losses suffered during a defined period but which losses have no relationship to any activity of the first person. A vague regulation is unconstitutional because it forces the court to depart from its judicial role of interpreting legislation to that of legislator when the court attempts to give meaning to the legislation. [Unconstitutionally vague and ambiguous] (

d) Section 8 of the Patent Regulations is draconian, harsh and punitive because the first person has no control over the period of liability. The liability period is subject to manipulation by the second person. By its role in the regulatory process, the second person can affect the date when its drug submission is approvable by the Minister. In addition, the second person selects the date when a notice of allegation is made. [Draconian, harsh and punitive] (

e) Section 8 is invalid legislation delegated by Parliament to the Governor General in Council because Parliament could never have contemplated a regulation which is unreasonable, uncertain, and arbitrary.

Section 8 imposes an absolute liability and is penal and confiscatory if there is no requirement that fault be proven and an award under s. 8 can be granted even if the second person continues to infringe a valid patent. Thus, s. 8 can reward unlawful conduct. [ Invalid delegated legislation] (

f) Section 8 of the Patent Regulations is inoperative and of no force or effect because it is inconsistent with and contrary to Canada’s treaty obligations under the North American Free Trade Agreement (“NAFTA”) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) (Annex 1C to the Agreement Establishing the World Trade Organization) and the statutes implementing the treaties, the North American Free Trade Agreement Implementation Act, S.C. 1993, c. 44 (assented to June 23, 1993) and the World Trade Organization Agreement Implementation Act, S.C. 1994, c. 47 (assented to December 15, 1994).

These statutes were implemented after the coming into force of s. 55.2(4) of the Patent Act , under which the patent Regulations were purportedly made. NAFTA and TRIPS require that Canada provide adequate and effective protection and enforcement of patent rights.

Section 8 derogates from and is inconsistent with those requirements. In particular, while the Patent Regulations were enacted to prevent abuse of the regulatory use exception provided by s. 55.2(1) of the Patent Act, s. 8 imposes harsh remedies against a patentee, absent proof that the generic was improperly delayed market entry, namely, a finding that the patent is invalid and/or would not be infringed, so as to discourage reliance on the scheme provided by the Patent Regulations. [Inconsistent with and contrary to NAFTA and TRIPS] [ 64 ] Issue #3 covers much the same ground as Issue #1(d).

AstraZeneca pleads this issue at paragraph 56 of its Defence: No entitlement - no abuse 56. In the alternative, if s. 8 is valid, in order to comply with

Article 48.1 of TRIPS and

Article 1715.2(

f) of NAFTA, s. 8 should be interpreted ti (

k) require a second person to prove that the first person abused enforcement procedures; and (ii) limit the second person’s remedy to compensation for injury suffered because of such abuse. As Apotex has not alleged abuse by AstraZeneca, there can be no liability under s. 8. [ 65 ] I will start with the generally acknowledged principal that there is a presumption of constitutionality (e.g. Nova Scotia Board of Censors v. McNeil , [1987] 2 SCR 662 per Richie J for the majority at pages 687 to 688). The burden lies on AstraZeneca to displace this presumption.

[66] Second, it must be noted that the decision of the Federal Court of Appeal in Merck Frosst Canada Ltd v Apotex Inc, 2009 FCA187 (leave to appeal to SCC refused [2009 SCCA No. 347]) dealt with many issues respecting the validity of

section 8 of the NOCRegulations. [67] This decision is sometimes referred to by the parties in their arguments as the Alendronate decision. That decision, which isbinding upon me, made several determinations as to

section 8, including that

section 8 of the NOC Regulations comes within the generalgrant of authority set out in subsection 55.2(4) of the Patent Act, RSC 1985, c P-4 and was thus validly promulgated. I repeat what NöelJA, for the Court, wrote at paragraphs 58 to 61: 58

Section 8, by imposing on first persons a liability for the losses suffered by a second person, as a result of the operation of theautomatic stay, when a prohibition application is withdrawn, discontinued or is ultimately unsuccessful, alleviates these concerns. Aswas noted in AB Hassle v. Canada (Minister of National health and Welfare), (2000), (FCA), 7 C.P.R. (4th) 272(FCA) (AB Hassle) (per Stone J.A. at para. 27), the ability of the Court to order payment of damages resulting from the operation of theautomatic stay suggests that a first person no longer has an exclusive interest in delaying the progress of a

section 6 prohibitionproceeding. 59 By the same logic, a first person no longer has an exclusive interest in triggering the operation of the automatic stay by referenceto patents which are not properly listed (Ferring, supra; Hoffman-La Roche, supra; see also Apotex Inc. v. Canada (Minister of NationalHealth and Welfare), (2000), (FCA), 3 C.P.R. (4th) 1, at paras. 27 and 28) or to "evergreen" a patented drug inorder to perpetuate the benefit which the PM(NOC) Regulations provide (AstraZeneca, supra, paras. 23 and 39; Biolyse, supra, para.66). As a result of

section 8, a first person must focus on the issue of infringement and consider the strength of its position beforeinitiating a prohibition proceeding. 60 This promotes the use of the PM(NOC) Regulations for the purpose for which they are intended: the prevention of infringement.Significantly, it does so in a manner which is consistent with maintaining the balance alluded to in Biolyse and in AstraZeneca. It isuseful to repeat that both these cases were decided on the basis that the PM(NOC) Regulations should be construed in a manner whichgoes no further than is necessary in order to prevent infringement since overshooting this objective would upset the other part of thebalance which

section 55.2 of the Patent Act seeks to achieve, namely the timely entry of cheaper generic drugs on the market. Thestatutory authority of the Governor-in-Council to make regulations pursuant to subsection 55.2(4) of the Patent Act must be construedaccordingly. 61 I therefore find that

section 8 of the PM(NOC) Regulations comes within the general grant of authority set out in subsection55.2(4) of the Patent Act and that the Federal Court Judge came to the correct conclusion when he held that

section 8 was validlypromulgated. [68] Third, I refer to the principle that constitutional cases should not be decided without a clear factual foundation, and that the Courtshould not make a decision that goes any farther than it needs to, based on the factual circumstances of the case before it. I refer to whatLeBel J wrote in Kitkatla Band v British Columbia (Minister of Small Business, Tourism and Culture), 2002 SCC 31, at paragraph 46: 46 Constitutional questions should not be discussed in a factual vacuum. Even in a division of powers case, rights must be assertedand their factual underpinnings demonstrated.

In this case, the appellants assert that the importance of the CMTs goes to the core oftheir cultural values and identity. This assertion grounds their claim that the impugned provisions of the Act impinge on a federal headof power. Because of this assertion, the nature and quality of the evidence offered will have to be assessed and discussed. Even if thiscase remains a division of powers case, the comments of McLachlin C.J. on evidentiary standards and problems in aboriginal law casesin Mitchell v. M.N.R., [2001] 1 S.C.R. 911, 2001 SCC 33, remain highly apposite.

In such cases, oral evidence of aboriginal values,customs and practices is necessary and relevant. It should be assessed with understanding and sensitivity to the traditions of acivilization which remained an essentially oral one before and after the period of contact with Europeans who brought their owntradition of reliance on written legal and archival records. Nevertheless, this kind of evidence must be evaluated like any other. Claimsmust be established on a balance of probabilities, by persuasive evidence (Mitchell, at para. 39, per McLachlin C.J.).

"Sparse, doubtfuland equivocal evidence cannot serve as the foundation for a successful claim ..." (Mitchell, at para. 51, per McLachlin C.J.). [69] I also refer to what Sharpe JA of the Ontario Court of Appeal wrote in Abou-Elmaati v Canada (Attorney General), 2011 ONCA95 at paragraph 39:

39 It is not only unnecessary but also usually unwise to attempt to decide constitutional issues in the absence of a concrete factualsituation. As this court stated in Clark v. Peterborough Utilities Commission (1998), (ON CA), 40 O.R. (3d) 409 at p.413, citing Phillips v.

Nova Scotia (Commission of Inquiry into the Westray Mine Tragedy), (SCC), [1995] 2 S.C.R. 97at p. 111, "courts should only rule on constitutional issues when it is necessary to do so". [70] As well, I refer to what the Chief Justice of the Supreme Court, Lamer CJ wrote in Phillips v Nova Scotia, (SCC), [1995] SCJ No 36 (QL), at paragraph 6: 6 This Court has said on numerous occasions that it should not decide issues of law that are not necessary to a resolution of anappeal.

This is particularly true with respect to constitutional issues and the principle applies with even greater emphasis incircumstances in which the foundation upon which the proceedings were launched has ceased to exist. [71] AstraZeneca has raised a number of factual scenarios in its argument, many of which have no relationship to the facts establishedin this case.

It is important to keep in mind that in the present case: Apotex is not seeking to establish a date for the beginning of its recovery period any earlier than the date certified by the Minister; Apotex is seeking only damages suffered by it in respect of the delay in issuance to it of a Notice of Compliance for its 20 mgcapsules by reason of the NOC Regulations; it is not seeking punitive or exemplary damages; it is not seeking damages beyondthose provided for in the NOC Regulations; there will be a Reference conducted following this trial as to the nature and extent of those damages. [72] With all of the foregoing in mind, I will turn to the specific issues raised. [73] I have reviewed AstraZeneca’s written arguments and heard its Counsel in oral argument.

Some of that argument goes beyondwhat AstraZeneca pleaded. AstraZeneca urges that it is not required to plead law, and that its arguments are directed to the law; thus, donot need to be constrained by the pleadings. I do not subscribe to this argument. Rules 173 to 181 of this Court, which are similar to suchrules as found in other Courts in this country, stipulate what pleadings shall contain. They shall contain a concise statement of thematerial facts, they may raise a point of law, and they shall contain sufficient particulars. Pleadings define the issues. Facts provide theframework for those issues.

Law is argued in support of or against those issues when it comes to a trial or hearing. There is nounrestrained permission to present an argument simply because it is based only on law. The argument must relate to a pleaded issue. [74] In the present case, AstraZeneca’s arguments are not structured so as to conform with its pleadings. Furthermore, a few weeksbefore trial the parties, at the urging of the Court, produced a Statement of Issues designed to direct the Court to those matters that trulyremained in controversy. That Statement, together with the pleadings, frames the issues.

To the extent that the Notice of ConstitutionalQuestion appears to raise further issues I will ignore them for two reasons. First, as it turns out, there is no constitutional issue. Second,such a Notice is not a pleading; the opposite party has no opportunity to plead to it. The Notice is simply a document alerting possibleinterveners as to what might be raised. In this instance the Notice overstated those Issues and, to the extent it overstated them, it will beignored.

I repeat what Létourneau JA wrote for the Federal Court of Appeal in Bekker v Canada, 2004 FCA 186 at paragraph 9 that sucha Notice is just that, a notice to the relevant Attorneys-General, it is no more than that: 9 The Notice serves a useful and essential purpose. The Attorney General, whether for Canada or for a province, bears theresponsibility of enforcing legislation and defending the constitutionality of the laws enacted by Parliament or provincial Legislatures,as the case may be. The Notice enables them to discharge that duty: on the duty, see Thorson v.

Canada (Attorney General), (SCC), [1975] 1 S.C.R. 138, at page 146; Finlay v. Canada (Minister of Finance), (SCC), [1986] 2 S.C.R. 607,at paragraph 28; Miron v. Trudel, (SCC), [1995] 2 S.C.R. 418. It also alerts the provincial Attorneys General tochallenges made to federal laws that may have an impact on their provinces although the duty to sustain the constitutionality of theselaws is not theirs.

This is why the Notice has to provide its recipients with adequate and sufficient information in terms of the materialfacts giving rise to the constitutional question and the legal basis for that question, otherwise it will be found insufficient and the Courtwill assume that there is no serious question to be addressed: see Gitxsan Treaty Society v. Hospital Employees Union et al., previouslycited. Finally, it ensures that no injustice is created to the elected representatives who enacted the law and to the people that theyrepresent: see Eaton v.

Brant County Board of Education, (SCC), [1997] 1 S.C.R. 241, at pages 264-65 per Sopinka J.

[75] To the extent that any facts are recited in AstraZeneca’s written and oral arguments, many are recited in the form of speculationand hypotheticals. Given this situation, I will address the issues as pleaded. [76] In respect of the issues as pleaded, and those raised in argument by AstraZeneca, the following must be noted: There is no “constitutional” argument as such – no issue is raised that

section 8 is ultra vires the jurisdiction of the federalParliament; No Charter argument is raised. ISSUE #1

a) Unconstitutionally Vague and Ambiguous [77] I start with the remarks of Gonthier J in Ontario v Canadian Pacific, (SCC), [1995] 2 SCR 1031, especially atparagraph 79, where he wrote that a law should only be declared unconstitutionally vague where it has concluded that

interpretation isnot possible; there is no need to consider hypothetical situations. He wrote: 79 Where a court is faced with a vagueness challenge under s. 7, the focus of the analysis is on the terms of the impugned law. Thecourt must determine whether the law provides the basis for legal debate and coherent judicial

interpretation. As I stated above, the firsttask of the court is to develop the full interpretive context surrounding the law, since vagueness should only be assessed after the courthas exhausted its interpretive function. If judicial

interpretation is possible, then an impugned law is not vague. A law should only be declared unconstitutionally vague where a court has embarked upon the interpretive process, but has concludedthat

interpretation is not possible. In a situation, such as the instant case, where a court has interpreted a legislative provision, and thenhas determined that the challenging party's own fact situation falls squarely within the scope of the provision, then that provision isobviously not vague. There is no need to consider hypothetical fact situations, since it is clear that the law provides the basis for legaldebate and thereby satisfies the requirements of s. 7 of the Charter. [78] Here, AstraZeneca asserts in its pleadings that losses suffered by Apotex during a defined period have no relationship to theactivity of AstraZeneca; thus,

section 8 is unconstitutional for vagueness and ambiguity. [79] It is difficult to find, outside of Charter cases, any situation where a Court has struck down legislation simply because it wasvague or ambiguous. For instance, in Canada v JTI-Macdonald Corp, 2007 SCC 30 , [2007], 2 SCR 610 at paragraphs 62 to 66,per McLachlin C J, the Court has held that where a reasonable

interpretation can be afforded to legislation, the Court should not strike itdown for vagueness. [80] AstraZeneca’s argument appears to be, with respect to subsection 8(1)(a)(ii) of the NOC Regulations, that the legislation does not“accord” with the enabling provisions of

section 55.2 of the Patent Act; or that to afford the Court an opportunity to establish a “startdate” earlier than the date certified by the Minister under subsection 8(1)(a), renders the provision unfair to a first person such asAstraZeneca. In either case, the provision is not “vague”. [81] AstraZeneca argues that, in order to be valid, the provisions of subsection 8(1)(a)(ii) must be “read down” so as to limit theCourt’s ability to provide for a different start date to a date after that certified by the Minister. [82] Similarly, AstraZeneca argues that paragraph 8(1)(

b) does not accord with the enabling provisions of

section 55.2 of the PatentAct if it is construed so as to permit recovery of loss suffered after the date of withdrawal, discontinuance, dismissal or reversal of theproceedings. [83] Both these arguments are not “vagueness” arguments. They are arguments relating to statutory or regulatory

interpretation.

[84] In the present case, it is to be remembered that Apotex is not seeking that the Court establish a date for commencement of therecovery period under subsection 8(1)(a)(ii) of the NOC Regulations earlier than the date certified by the Minister under subsection 8(a).I am aware that my colleague, Justice Snider, is dealing with a situation where a generic, Teva, is seeking to establish an earlier date(Sanofi-Aventis Canada Inc v Teva Canada Limited, Court File No. T-1161-07). It may be that, whether in the Teva situation or someother situation, an earlier date is proper and justified.

I leave that for Justice Snider or another Judge hearing another case. In the casebefore me, an argument “at large” that an earlier date is not supported by

section 55.2 of the Patent Act, or is otherwise “unfair”, issimply too speculative to address without a proper factual foundation. [85] With respect to the end date for recovery as established by subsection 8(1)(

b) of the NOC Regulations, I note two things. First,the Federal Court of Appeal in Alendronate, supra, has clearly interpreted this provision and observed that “the Governor-in-Council’sclearly expressed intent” was that only losses during the relevant period (ie before the cut-off date) could be compensated. Nöel JA, forthe Court, wrote at paragraphs 100 to 102: 100 When regard is had to the broad grant of authority conferred by subsection 55.2(4) of the Patent Act, it seems clear that themeasure of the compensation which can be awarded under the

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