2014 FCA 68, 2014 FCA 68

2014 FCA 68 A-191-12 Apotex Inc. ( Appellant ) v. Sanofi-Aventis, Sanofi-Aventis Deutschland GmbH and Sanofi-Aventis Canada Inc. ( Respondents ) A-193-12 Sanofi-Aventis, Sanofi-Aventis Deutschland GmbH and Sanofi-Aventis Canada Inc. ( Appellants ) v. Apotex Inc. ( Respondent ) A-397-12 Sanofi-Aventis, Sanofi-Aventis Deutschland GmbH and Sanofi-Aventis Canada Inc. ( Appellants ) v. Apotex Inc. ( Respondent ) A-474-12 Sanofi-Aventis, Sanofi-Aventis Deutschland GmbH and Sanofi-Aventis Canada Inc. ( Appellants ) v. Apotex Inc. ( Respondent ) Indexed as: Apotex Inc. v.

Sanofi-Aventis Federal Court of Appeal, Sharlow, Pelletier and Mainville JJ.A—Toronto, October 30 and 31, 2013; Ottawa, March 14, 2014.

Patents — Appeals from Federal Court judgments ordering compensation to be paid to Apotex Inc. pursuant to Patented Medicines (Notice of Compliance) Regulations (NOC Regulations), s. 8 for net lost profits in respect of generic version of ramipril — Sanofi- Aventis, Sanofi-Aventis Deutschland GmbH, Sanofi-Aventis Canada Inc. (Sanofi) asserting patent rights with respect to ramipril — Apotex prevented from marketing ramipril until December 12, 2006 because of various applications made by Sanofi under NOC Regulations, s. 6(1) for orders prohibiting Minister from issuing notice of compliance (NOC) — NOC Regulations providing that where s. 6(1) application unsuccessful, patent holder (i.e.

Sanofi) liable to third party (i.e. Apotex) for any loss suffered for delay — Apotex entitled to such compensation herein — Issues raised in present appeals principally concerning framework under which compensation may be determined under NOC Regulations, s. 8 — Questions addressed including start, end date of s. 8 liability period, attributes of hypothetical market, ramp-up — Mainville J.A.’s conclusions, i.e. trial Judge making no error in concluding that: (

a) s. 8 liability period beginning on April 26, 2004, ending on December 12, 2006; (

b) Apotex entitled to compensation for lost sales of generic version of ramipril associated with HOPE indications; (

c) authorized generic drug manufacturer would have achieved 30 percent share of hypothetical generic ramipril market after 24 months, agreed with by majority — However, majority differing from Mainville J.A. with respect to (1) methodology for determining date on which Apotex’s potential competitors would have entered hypothetical market, (2) double ramp-up — Trial Judge correctly rejecting open season methodology — In hypothetical market, behaviour of competing generic drug manufacturers determined on basis NOC Regulations exist, each generic drug manufacturer to conduct itself accordingly — As to double ramp-up, trial Judge concluding that any reduction in sales during actual ramp-up period was loss occurring after s. 8 liability period, therefore could not be basis of claim for damages under s. 8 — Such conclusion inevitable consequence of Governor in Council’s decision to limit s. 8 damages to losses incurred within. s. 8 liability period — Appeal in A-191-12 allowed; appeals in A-193-12 and A- 397-12 dismissed; appeal in A-471-12 allowed solely to facilitate redetermination of quantum of damages — Per Mainville J.A. (dissenting): Normal or default start date of s. 8 liability period is when NOC would have been issued to generic manufacturer had it not been for operation of NOC Regulations — P rohibition order simply irrelevant for purposes of liability determinations under NOC Regulations, s. 8 in light of subsequent decision on non-infringement — As to hypothetical market during s. 8 liability period, methodology striving to compensate adequately, fairly generic manufacturers to be preferred over one almost unavoidably leading to windfalls — M ethodology used by trial Judge herein one inherently leading to windfalls — Proper methodology to construct hypothetical market most resembling real market — As to ramp-up, by denying double ramp-up claim herein, Sanofi benefitting from windfall because ramp-up period considered twice — In such circumstances, appropriate for court to exercise discretion under NOC Regulations, s. 8(5) , consider as relevant factor actual ramp-up period occurring in real market so as to avoid double counting it in hypothetical market.

These were four appeals from judgments of the Federal Court ordering compensation to be paid to Apotex Inc. pursuant to

section 8 of the Patented Medicines (Notice of Compliance) Regulations (NOC Regulations) for net lost profits incurred by Apotex in respect of its generic version of the drug ramipril. Apotex sells a generic version of ramipril, a drug principally used to treat hypertension but whose medical use has expanded over the years to include heart related health issues. Sanofi-Aventis, Sanofi-Aventis Deutschland GmbH and Sanofi-Aventis Canada Inc. (Sanofi) assert patent rights to this drug and to some of its uses.

Apotex and Sanofi appealed the determination of compensation made by the Federal Court (dockets A-191-12 and A-193-12 respectively). Sanofi also appealed from a subsequent order concerning ramp-ups

(docket A-397-12) and from a subsequent judgment pertaining to the final quantum of damages (docket A-474-12). To market a drug in Canada, a regulatory approval known as a notice of compliance (NOC) must first be obtained under the terms of the Food and Drug Regulations , C.R.C., c. 870. In certain circumstances, the issuance of a NOC may require certain steps to be followed under the NOC Regulations. In this case, on April 26, 2004, Apotex could have received its NOC from the Minister of Health to market in Canada its generic version of ramipril.

However, it was prevented from so doing until December 12, 2006 because of various applications made by Sanofi under subsection 6(1) of the NOC Regulations for orders prohibiting the Minister from issuing the NOC on the ground of its patent rights.

Section 8 of the NOC Regulations provides, inter alia , that if an application under subsection 6(1) is unsuccessful, a patent holder, such as Sanofi, is liable to a third party, such as Apotex, for any loss suffered for the delay as determined in accordance with the Regulations. Apotex took the view that it was entitled to such compensation and, after a long trial, the trial Judge agreed. The issues raised by these appeals principally concerned the framework under which compensation may be determined under

section 8 of the NOC Regulations, an issue which had not been previously fully addressed by the Court. Before the trial Judge, Sanofi agreed that Apotex was entitled to compensation pursuant to

section 8 of the NOC regulations. The debate before the trial Judge consequently concerned primarily how such compensation was to be determined. The trial Judge assessed the compensation owed by considering what would have happened if Sanofi had not brought applications for prohibition against Apotex. The answer to this question required the trial Judge to “construct a hypothetical, or ‘but for’, world during a defined period of time in the past in order to determine what share of the ramipril market Apotex would have captured if it had been able to sell its generic ramipril”.

The issues raised by these appeals were whether the trial judge erred in the determination of the compensation, and more particularly, (1) what are the start and end dates of the

section 8 liability period, (2) what are the attributes of the hypothetical market during the

section 8 liability period, (3) how the double ramp-up of generic drug sales should be treated in the hypothetical market and (4) whether the hypothetical sales by a generic in the hypothetical market should include sales for unapproved indications, such as the HOPE indications. Held (Mainville J.A. dissenting), the appeal in A-191-12 should be allowed; the appeals in A-193-12 and A-397-12 should be dismissed; and the appeal in A-471-12 should be allowed solely to facilitate the redetermination of the quantum of damages. The trial Judge made no error in concluding that: (

a) the

section 8 liability period began on April 26, 2004 and ended on December 12, 2006; (

b) Apotex was entitled to compensation for lost sales of its generic version of ramipril associated with the HOPE indications; (

c) an authorized generic drug manufacturer would have achieved a 30 percent share of the hypothetical generic ramipril market after 24 months. These conclusions, reached by Mainville J.A., were agreed with by the majority substantially for the reasons given by him. However, the majority differed from Mainville J.A. with respect to the methodology for determining the date on which the potential competitors of Apotex would have entered the hypothetical market, and with respect to the double ramp-up. The trial Judge was to be reversed only one point, namely, her conclusion that Teva would have entered the hypothetical market during the

section 8 liability period. With respect to the methodology for determining the date on which the potential competitors of Apotex would have entered the hypothetical market, the trial Judge correctly rejected the open season methodology, whereby each potential competitor is assumed to enter the hypothetical market free of the constraints of the NOC regulations. Such a methodology is inconsistent with the requirement that each claim for

section 8 damages must be determined on its own merits based on the evidence presented. In the hypothetical world, the competitors of a

section 8 damages claimant are bound by the NOC Regulations, and those competitors would act as they did in the real world in relation to the NOC Regulations. The methodology adopted by the trial Judge is more consistent with the language and purpose of the NOC Regulations than the open season methodology. The NOC Regulations are silent on the specific question of whether the determination of a claim for

section 8 damages must be based on the assumption that potential generic competitors of the claimant in the hypothetical market are subject to the NOC Regulations . However, paragraph 8(1)(

a) expressly requires the NOC Regulations to be disregarded in constructing one element of the hypothetical generic market. It provides that the beginning of the

section 8 liability period is the date “as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations”. Since the NOC Regulations say that their existence must be disregarded for one specific purpose, to disregard the NOC Regulations for some other purpose would be tantamount to judicially amending

section 8. Therefore, each claim for

section 8 damages is intended to be determined on the basis that the hypothetical world is one in which there are NOC Regulations. It follows that in the hypothetical market, the behaviour of competing generic drug manufacturers must be determined on the basis that the NOC Regulations exist, and each generic drug manufacturer will conduct itself accordingly.

With respect to the arguments relating specifically to the entry into the hypothetical market of ratiopharm inc., Riva and Teva, Apotex should be treated as having served the same notices of allegation in the hypothetical world just as it did in the real world. However, this did not undermine the trial Judge’s conclusion that the authorized generic, ratiopharm, inc., would not have been ready to launch on April 26, 2004. The trial Judge’s conclusion that it would have taken three months for all the steps required to launch the generic product of ratiopharm, inc. was reasonably open to her on the record.

Therefore, her conclusion that the authorized generic would have entered the hypothetical market on July 26, 2004 had to stand. As to Riva and Teva, they would have behaved in the hypothetical world just as they did in the real world, which was to seek

summary dismissal as soon as they considered they had a fair chance of success. And in the real world, the last of the prohibition applications against Riva and Teva relating to invalidity allegations was not dismissed until after December 16, 2006. There was no reason to conclude that either Riva or Teva could or would have achieved that result in the hypothetical world any earlier than they did in the real world.

Apotex submitted that the hypothetical market should have been constructed without any reference to a ramp-up. (The term “ramp-up” refers to the period of time that it takes a drug manufacturer to penetrate the market to its full potential.) The trial Judge concluded that in the hypothetical market, a ramp-up would have occurred that would have resulted in lower lost sales during the

section 8 liability period. However, she also concluded that any reduction in sales during the actual ramp-up period was a loss occurring after the

section 8 liability

period, and therefore it was a loss that could not be the basis of a claim for damages under

section 8. It was not possible to reach the contrary conclusion without implicitly reversing Apotex Inc. v. Merck & Co. Inc. ( Alendronate ). While not recognizing the double ramp- up could represent a windfall for Sanofi and other innovator drug companies in future cases, this is the inevitable consequence of the decision of the Governor in Council to limit

section 8 damages to losses incurred within the

section 8 liability period. Per Mainville J.A. (dissenting): With respect to the start date of the

section 8 liability period, paragraph 8(1) (

a) of the NOC Regulations clearly sets out that the

section 8 liability period begins “on the date, as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations unless the court concludes that […] a date other than the certified date is more appropriate”. Consequently, the usual, normal or default start date is when the NOC would have been issued to the generic manufacturer had it not been for the operation of the NOC Regulations. It is only in circumstances where the trial judge deems that another date is more appropriate that this default date can be set aside.

In this case, Apotex issued two notices of allegation against the ‘457 patent. The first notice alleged that its generic version of ramipril did not infringe that patent (a submission which the Federal Court did not accept), while the second notice alleged that the patent was invalid (a submission which was accepted the Federal Court). Taking into account all of the circumstances, the question which had to be asked in this case with respect to

section 8 liability was what was the overall result of the proceedings respecting the ‘457 patent flowing from the notices of allegations? Both decisions concerned the same patent, were closely tied one to the other, were rendered inside a month from one another, and should be read and understood together. For all practical purposes, and taking into account the entire context of these proceedings, the prohibition order was to be viewed as simply irrelevant for the purposes of liability determinations under

section 8 of the NOC Regulations in light of the subsequent decision on non-infringement. This was particularly true when one considered that the prohibition order would have never been issued had the decision on non-infringement been issued first. Liability under

section 8 of the NOC Regulation s should not be made to be dependent on the largely irrelevant question of which decision is issued first. Regarding the end date of the

section 8 liability period, in view of Sanofi’s conduct throughout the litigation, it was precluded by the doctrines of election and estoppel from asserting that Apotex was not a “second person” for the purposes of

section 8, at least until the NOC was issued to Apotex. The purpose of

section 8 of the NOC Regulations is to ensure that when an innovator drug manufacturer takes advantage of those Regulations by initiating unfounded prohibition proceedings, the generic drug manufacturer can then seek appropriate compensation for having been precluded from the market as a result. By initiating prohibition proceedings with respect to the HOPE patents and thereby precluding Apotex’s market entry until December 12, 2006, Sanofi was clearly subject to

section 8 compensation irrespective of whether the benefit it derived under the NOC Regulations was unjustified as later found in AstraZeneca Canada Inc. v. Canada (Minister of Health) . As a result, Sanofi could not now claim that its own prohibition proceedings were null ab initio so as to deny to Apotex the benefit of

section 8 compensation for the period during which those proceedings precluded it from entering the ramipril market. With respect to the attributes of the hypothetical market during the

section 8 liability period, a methodology which strives to compensate adequately and fairly the generic manufacturers must be preferred over one that almost unavoidably leads to windfalls. The methodology used by the trial Judge in this case was one which inherently leads to windfalls. The proper methodology is to construct a hypothetical market that most resembles a real market.

In the real market, save rare exceptions, once a generic drug manufacturer has received a NOC for a generic version of an innovator drug, another generic drug manufacturer can reasonably expect to secure a NOC for its own generic version of that drug. The findings of the trial Judge with respect to the entry of Teva, Riva and an authorized generic into the hypothetical market should be set aside. As to ramp-up, Apotex submitted that in the real market, it actually experienced a ramp-up period when it was finally authorized to sell its generic version of ramipril.

By taking into account a ramp-up in the hypothetical market without taking into account the ramp-up actually experienced in the real market, Apotex suffers a loss of profits which it would not otherwise have incurred. In Apotex Inc. v. Takeda Canada Inc. , the Federal Court held that the Alendronate decision is not to be read as endorsing the proposition that compensation under

section 8 of the NOC Regulations is to be determined without regard to double counting. Indeed, Alendronate must be understood within the context of the claim which was at issue in that case. The claims which are excluded by this principle are those losses which occur beyond the

section 8 liability period, such as those losses which occur as a result of the loss of a future market share. This principle does not however mean that a claim for compensation should be reduced as a result of double counting. By denying the double ramp-up claim herein, Sanofi would benefit from a windfall because the ramp-up period was considered twice.

In such circumstances, it is appropriate for a court to exercise its discretion under paragraph 8(5) of the NOC Regulations and to consider as a relevant factor the actual ramp-up period which occurred in the real market so as to avoid double counting it in the hypothetical market. STATUTES AND REGULATIONS CITED Food and Drug Regulations , C.R.C., c. 870, ss. C.08.002, C.08.002.1. Food and Drugs Act , R.S.C., 1985, c. F-27. Patent Act , R.S.C., 1985, c. P-4, ss. 55.2, 83(1) . Patented Medicines (Notice of Compliance) Regulations , SOR/93-133, ss. 3(2), 4 , 5 , 6 , 7(1) ( e ), (3) , (4) , 8 .

TREATIES AND OTHER INSTRUMENTS CITED Convention on the Grant of European Patents (European Patent Convention) , October 5, 1973. CASES CITED applied : Apotex Inc. v. Merck & Co. Inc. , 2009 FCA 187 , [2010] 2 F.C.R. 389, revg in

part 2008 FC 1185 , [2009] 3 F.C.R. 234; Housen v.

Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. considered: Sanofi-Aventis Canada Inc. v. Teva Canada Limited, 2012 FC 551, 410 F.T.R. 145, affd 2014 FCA 69, 459 N.R. 179; Bristol-MyersSquibb Co. v. Canada (Attorney General), 2005 SCC 26, [2005] 1 S.C.R. 533; AstraZeneca Canada Inc. v. Canada (Minister of Health),2006 SCC 49, [2006] 2 S.C.R. 560; Ferring Inc. v. Canada (Minister of Health), 2007 FC 300, [2008] 1 F.C.R. 19, affd 2007 FCA 276,60 C.P.R. (4th) 273; Unilin Beheer BV v. Beery Floor NV, [2007] EWCA Civ. 364; Sanofi-Aventis Canada Inc. v. Apotex Inc., 2006 FCA328, 54 C.P.R. (4th) 447; AB Hassle v.

Apotex Inc., 2006 FCA 51, [2006] 4 F.C.R. 513; Virgin Atlantic Airways Ltd. v. Zodiac Seats U.K.Ltd., [2013] UKSC 46; Poulton v. Adjustable Cover, [1908] 2 Ch. 430; Coflexip v. Stolt (No. 2), [2004] F.S.R. 34 (Pat. Ct.); Apotex Inc.v. Syntex Pharmaceuticals International Inc., 2010 FCA 155, 84 C.P.R. (4th) 409; Ratych v. Bloomer, (SCC), [1990] 1S.C.R. 940, (1990), 69 D.L.R. (4th) 25; Sanofi-Aventis Canada Inc. v. Novopharm Ltd., 2007 FCA 163, [2008] 1 F.C.R. 174; Apotex Inc.v. Merck Canada Inc., 2012 FC 1235, 105 C.P.R. (4th) 399; Apotex Inc. v. Takeda Canada Inc., 2013 FC 1237; Sanofi-Aventis CanadaInc. v.

Novopharm Ltd., 2006 FC 1135, 56 C.P.R. (4th) 242; Sanofi-Aventis Canada Inc. v. Novopharm Ltd., 2007 FCA 167, 59 C.P.R.(4th) 24; Sanofi-Aventis Inc. v. Laboratoire Riva Inc., 2007 FC 532, 58 C.P.R. (4th) 109. referred to: Sanofi-Aventis Canada Inc. v. Teva Canada Limited, 2012 FC 552, 410 F.T.R. 1, affd 2014 FCA 67, 456 N.R. 241; Sanofi-AventisCanada Inc. v. Apotex Inc., 2014 FCA 66; Katz Group Canada Inc. v. Ontario (Health and Long-Term Care), 2013 SCC 64, [2013] 3S.C.R. 810; Eli Lilly and Co. v. Novopharm Ltd., (SCC), [1998] 2 R.C.S. 129, (1998), 161 D.L.R. (4th) 1; Merck &Frosst Canada Inc. v.

Canada (Minister of National Health and Welfare) (1994), 55 C.P.R. (3d) 302, 169 N.R. 342 (F.C.A.); David BullLaboratories (Canada) Inc. v. Pharmacia Inc., (FCA), [1995] 1 F.C. 588, (1994), 58 C.P.R. (3d) 209 (C.A.); AventisPharma Inc. v. Apotex Inc., 2005 FC 1283, 278 F.T.R. 1; Aventis Pharma Inc. v. Apotex Inc., 2005 FC 1504, 44 C.P.R. (4th) 108; AventisPharma Inc. v. Apotex Inc., 2005 FC 1461, 283 F.T.R. 1; Eli Lilly Canada Inc. v. Apotex Inc., 2010 FC 952, 89 C.P.R. (4th) 332; Aventis-Pharma Inc. v. Pharmascience Inc., 2009 FC 915, 78 C.P.R. (4th) 54; Apotex Inc. v.

Canada (Minister of National Health and Welfare)(1997), (FCA), 76 C.P.R. (3d) 1, 219 N.R. 151 (F.C.A.), leave to appeal to S.C.C. refused, [1998] 1 S.C.R. viii;Apotex Inc. v. Canada (Attorney General), (FCA), [2000] 4 F.C. 264, (2000), 188 D.L.R. (4th) 145 (C.A.), leave toappeal to S.C.C. refused, [2001] 1 S.C.R. v; Eli Lilly and Co. v. Novopharm Ltd. (1997), (FC), 76 C.P.R. (3d) 312,137 F.T.R. 32 (T.D.); Bayer AG v. Canada (Minister of National Health and Welfare) (1997), (FC), 77 C.P.R. (3d)129, 142 F.T.R. 130 (F.C.T.D.); Bayer Inc. v.

Canada (Minister of National Health and Welfare) (1998), (FC), 82C.P.R. (3d) 359, 154 F.T.R. 192 (F.C.T.D.); Apotex Inc. v. Sanofi-Aventis Canada Inc., 2007 FCA 7, 54 C.P.R. (4th) 402; Sanofi-AventisCanada Inc. v. Canada (Minister of Health), 2007 FCA 71, 360 N.R. 321, application for leave to appeal to S.C.C. refused, [2007] 2S.C.R. vii; Apotex Inc. v. Nycomed Canada Inc., 2011 FC 1441, 100 C.P.R. (4th) 1, affd 2012 FCA 195, 105 C.P.R. (4th) 16, leave toappeal to S.C.C. refused, [2012] 3 S.C.R. xiv; Pharmascience Inc. v. Sanofi-Aventis Canada Inc., 2006 FCA 229, sub. nom. AventisPharma Inc. v.

Pharmascience Inc., [2007] 2 F.C.R. 103; Teva Canada Limited v. Sanofi-Aventis Canada Inc., 2011 FCA 149, 94 C.P.R.(4th) 110, leave to appeal to S.C.C. refused [2011] 3 S.C.R. xi; Teva Canada Limited v. Nycomed Canada Inc., 2012 FCA 129, 433 N.R.197, leave to appeal to S.C.C. refused [2012] 3 S.C.R. xiv. AUTHORS CITED “Effects of an Angiotensin-Converting-Enzyme Inhibitor, Ramipril on Cardiovascular Events in High-Risk Patients” (2000), 342 N.Engl. J.

Med. 145. appealS from four decisions of the Federal Court (2012 FC 553, 410 F.T.R. 78 and subsequent unreported decisions dated June 22, 2012and November 2, 2012) ordering compensation to be paid pursuant to

section 8 of the Patented Medecines (Notice of Compliance)Regulations. Appeal in A-191-12 allowed; appeals in A-193-12 and A-397-12 dismissed; appeal in A-471-12 allowed solely to facilitatethe redetermination of the quantum of damages, Mainville J.A. dissenting. APPEARANCES Harry Radomski, Nando De Luca and Ben Hackett for appellant in A-191-12, respondent in A-193-12, A-397-12 and A-474-12. Andrew J. Reddon, Steven Mason, David Tait and Sanjaya Mendis for respondents in A-191-12, appellants in A-193-12, A-397-12 andA-474-12.

SOLICITORS OF RECORD Goodmans LLP, Toronto, for appellant in A-191-12, respondent in A-193-12, A-397-12 and A-474-12. McCarthy Tétrault LLP, Toronto, for respondents in A-191-12, appellants in A-193-12, A-397-12 and A-474-12. The following are the reasons for judgment rendered in English by [1] Mainville J.A. (dissenting): These reasons concern: (

a) An appeal (docket A-191-12) brought by Apotex Inc. (Apotex) from a judgment of Snider J. of the Federal Court (the trial Judge)dated May 11, 2012 (the “Liability Judgment”) issued for reasons cited as [Apotex Inc. v. Sanofi-Aventis] 2012 FC 553, 410 F.T.R. 78and publicly released on May 23, 2012, which ordered compensation to be paid pursuant to

section 8 of the Patented Medicines (Noticeof Compliance) Regulations, SOR/93-133 (NOC Regulations [or Regulations]) for its net lost profits in respect of 1.25, 2.5, 5 and 10 mgcapsules of its generic version of the drug ramipril for the period commencing April 26, 2004 and ending December 12, 2006. (

b) A separate appeal (docket A-193-12) from the Liability Judgment brought by Sanofi-Aventis, Sanofi-Aventis Deutschland GmbHand Sanofi-Aventis Canada Inc. (Sanofi).

(

c) An additional appeal (docket A-397-12) brought by Sanofi from a subsequent order and direction issued by the trial Judge dated June 22, 2012 (the “Subsequent Ramp-Ups Order”) which allowed a motion for reconsideration submitted by Apotex and which resulted in an amendment to the Liability Judgment. (

d) A subsequent appeal (docket A-474-12), also brought by Sanofi, from a subsequent judgment of the trial Judge dated November 2, 2012 (the “Final Quantum Judgment”) which ordered, further to the Liability Judgment, the precise amount to be paid by Sanofi to Apotex, together with post-judgment interest. A copy of these reasons shall be placed in the Court file with respect to each of these dockets as reasons therein. [ 2 ] Apotex sells a generic version of ramipril in Canada. Ramipril is a drug principally used to treat hypertension but which also has other medical uses.

Sanofi asserts patent rights to this drug and to some of its uses, and it has for many years held a patent monopoly over this drug which it sold in Canada under the brand name ALTACE. [ 3 ] To market a drug in Canada, a regulatory approval known as a notice of compliance (NOC) must first be obtained under the terms of the Food and Drug Regulations , C.R.C., c. 870. In certain circumstances, the issuance of a NOC may require certain steps to be followed under the NOC Regulations.

In this case, on April 26, 2004, Apotex could have received its NOC from the Minister of Health to market in Canada its generic version of ramipril. However, it was prevented from so doing until December 12, 2006 because of various applications made by Sanofi under subsection 6(1) of the NOC Regulations for orders prohibiting the Minister from issuing the NOC on the ground of its patent rights.

Section 8 of the NOC Regulations provides, inter alia , that if an application under subsection 6(1) is unsuccessful, a patent holder, such as Sanofi, is liable to a third party, such as Apotex, for any loss suffered for the delay as determined in accordance with the Regulations. Apotex took the view that it was entitled to such compensation and, after a long trial, the trial Judge agreed. [ 4 ] The issues raised by these appeals principally concern the framework under which compensation may be determined under

section 8 of the NOC Regulations. This is an issue which has not been previously fully addressed by our Court. [ 5 ] As a preliminary technical observation, it is useful to note that the notice of appeal submitted by Sanofi in docket A-193-12 also seeks to appeal another judgment dated May 11, 2012 and issued for reasons cited as [ Sanofi-Aventis Canada Inc. v. Teva Canada Limited ] 2012 FC 551 , 410 F.T.R. 145 (the “Validity Judgment”) by which the trial Judge dismissed all the invalidity arguments raised by Sanofi with respect to

section 8 of the NOC Regulations. That Validity Judgment applies to the litigation involving Sanofi and Apotex in Federal Court docket T-1357-09 and to the litigation involving Sanofi and Teva in Federal Court docket T-1161-07. The validity arguments with respect to both cases were heard by the trial Judge simultaneously, and a single set of reasons was issued by the trial Judge. Sanofi has also appealed the Validity Judgment with respect to the Teva litigation in docket A-192-12.

This Court has dismissed the appeals related to the Validity Judgment for reasons issued concurrently and cited as [ Sanofi-Aventis Canada Inc. v. Teva Canada Limited ] 2014 FCA 69 , 459 N.R. 179. [ 6 ] Another judgment respecting liability under

section 8 of the NOC Regulations with respect to ramipril and involving Sanofi and Teva was issued by the trial Judge concurrently with the Liability Judgment concerning Sanofi and Apotex: Sanofi-Aventis Canada Inc. v. Teva Canada Limited , 2012 FC 552 , 410 F.T.R. 1 (referred to herein as the “Teva Liability Judgment (F.C.)”). Some of the issues raised in the Liability Judgment concerning Apotex and in the Teva Liability Judgment (F.C.) are similar.

Moreover, this Court heard the appeal from the Teva Liability Judgment (F.C.) two weeks before it heard this appeal involving Apotex, and has issued its reasons for judgment with respect to that appeal concurrently with these reasons: [ Sanofi-Aventis Canada Inc. v. Teva Canada Limited ] 2014 FCA 67 , 456 N.R. 241. [ 7 ] There are also two related appeals concerning amendments to proceedings and to the striking out of evidence (dockets A-462-11 and A-27-12) which have been dealt with by this Court in reasons issued concurrently: [ Sanofi-Aventis Canada Inc. v. Apotex Inc. ] 2014 FCA 66 .

The statutory and regulatory framework [ 8 ] The applicable statutory and regulatory framework has been discussed in other judicial decisions, notably in Bristol-Myers Squibb Co. v. Canada (Attorney General) , 2005 SCC 26 , [2005] 1 S.C.R. 533 ( Biolyse ); AstraZeneca Canada Inc. v. Canada (Minister of Health) , 2006 SCC 49 , [2006] 2 S.C.R. 560 ( AstraZeneca ); and Apotex Inc. v. Merck & Co. Inc. , 2009 FCA 187 , [2010] 2 F.C.R. 389 ( Alendronate ).

A brief overview of this framework follows. [ 9 ] Prescription drugs present a particularly difficult regulatory challenge in light of the various public interest issues which they raise: (

a) prescription drugs must be safe for public consumption, and the health risks associated with their use must be understood and disclosed; these public interest issues are primarily dealt with through the Food and Drugs Act , R.S.C., 1985, c. F-27 and the Food and Drug Regulations ; (

b) scientific research into new and better drugs must be encouraged and properly rewarded; this is primarily dealt with through the Patent Act , R.S.C., 1985, c. P-4; and (

c) the drugs must be accessible to the Canadian patients at prices which are affordable for the Canadian public; these public interest issues are primarily dealt through (

i) those provisions of the Patent Act which ensure that generic manufacturers of drugs may reasonably access the market when a patent monopoly over a drug has expired; (ii) those provisions of the Patent Act which allow for the control of prices for patented medicines; and (iii) provincial regulation of drug prices such as recently described in Katz Group Canada Inc. v. Ontario (Health and Long-Term Care) , 2013 SCC 64 , [2013] 3 S.C.R. 810. [ 10 ] The Food and Drugs Act sets up a regulatory structure through the Food and Drug Regulations to ensure that drugs marketed in Canada meet stringent health and safety requirements. Of particular interest for this appeal is Division 8 of

Part C of the Food and Drug

Regulations which establishes the regulatory process which must be followed by a manufacturer that wishes to introduce a new drug into the Canadian market. [ 11 ] As a general rule, an innovator drug manufacturer must file with the Minister of Health a new drug submission setting out the information and material to enable the Minister to assess the safety and effectiveness of the new drug:

section C.08.002 of the Food and Drug Regulations . This generally involves providing detailed reports of the tests made to establish the safety of the new drug and substantial evidence of its clinical effectiveness for the purpose and under the conditions of use recommended. It may be very costly and time consuming for an innovator drug manufacturer to gather the evidence and to carry out the testing required to satisfy the Minister as to the safety and effectiveness of the drug.

Once approved on the basis of the information provided, the Minister of Health then issues a notice of compliance (often referred to as a “NOC”) to the manufacturer of the new drug in respect to the submission. This NOC allows the manufacturer to sell and advertise the new drug. [ 12 ] A major sector of the prescription drug manufacturing industry in Canada involves so-called “generic” drug manufacturers which generally manufacture and distribute what is sometimes known in the trade as “copycat” drugs.

These copied drugs are similar to those researched, developed and first brought to market by innovator drug manufacturers. As a general rule, a generic drug manufacturer may file an abbreviated new drug submission with the Minister of Health by which it compares its proposed copycat drug with a Canadian reference product, namely a drug for which a NOC has already been issued and which is marketed in Canada by the innovator of the drug:

section C.08.002.1 of the Food and Drug Regulations . This allows the generic drug manufacturer to meet the safety and effectiveness requirements of the copycat drug by demonstrating that it is the pharmaceutical equivalent of, or is bioequivalent with, the Canadian reference product. In this way, the generic manufacturer avoids the costs of lengthy clinical trials with respect to its generic drug. Once approved on the basis of the information provided, the Minister of Health then issues a NOC to the generic drug manufacturer in respect to the submission.

This NOC allows the generic drug manufacturer to sell and advertise the copycat drug. [ 13 ] Because generic drug manufacturers generally do not have significant research and testing costs with respect to a copycat drug, they may sell that drug at a considerable discount on the market, at considerable savings for the Canadian public, but with significant impacts on the revenues and profits of the innovator drug manufacturer.

Innovator drug manufacturers are not however without legal recourse against these generics drug manufacturers where the copied innovator drug is subject to a monopoly resulting from the application of the Patent Act . [ 14 ] The basic scheme of the Patent Act is conceptually simple: an inventor who discloses the workings of an invention to the public may receive a patent which ensures a 20-year monopoly on the making, use and marketing of the invention.

This basic scheme also applies to prescription drugs. [ 15 ] In light of the importance of patented drugs with respect to human health, the Patent Act includes a number of provisions seeking to restrict potential abuses of the patent monopoly with respect to a drug.

As an example, the Patented Medicine Prices Review Board “may, by order, direct the patentee to cause the maximum price at which the patentee sells the medicine in that market to be reduced to such level as the Board considers not to be excessive”: subsection 83(1) of the Patent Act . [ 16 ] Between 1923 and 1993, Canada’s policy was to make patented medicines available to generic drug manufacturers through a scheme of compulsory licensing.

In determining the terms of the licence and the amount of royalties payable, the Commissioner of Patents was required to balance the desirability of making the medication affordably available to the public with rewarding the patentee for the research leading to the invention.

This approach was not favoured by innovator drug manufacturers because they believed that it generally precluded recovery of important costs for the research programs required to produce a few marketable drugs from many false starts and failed research projects. [ 17 ] In 1993, the compulsory licensing regime was repealed and replaced by the early working exception in

section 55.2 of the Patent Act . As noted by Binnie J. in AstraZeneca , at paragraph 13, the problem which

section 55.2 sought to address is that if a generic drug manufacturer waits to begin its preparation of a copycat drug for approval under the Food and Drug Regulations until the innovator’s patent to the comparator drug expires, the Food and Drug Regulations approval process could add up to two years to the effective monopoly of the patent owner under the Patent Act . Without

section 55.2, if the generic drug manufacturer tries to work the patented drug prior to the expiry of the patent, even if solely to satisfy the requirements of the Food and Drug Regulations for a NOC, it will infringe the patent, thus inviting litigation from the patent owner. [ 18 ]

Section 55.2 of the Patent Act reads as follows: Exception 55.2

(1) It is not an infringement of a patent for any person to make, construct, use or sell the patented invention solely for uses reasonably related to the development and submission of information required under any law of Canada, a province or a country other than Canada that regulates the manufacture, construction, use or sale of any product. …

Regulations

(4) The Governor in Council may make such regulations as the Governor in Council considers necessary for preventingthe infringement of a patent by any person who makes, constructs, uses or sells a patented invention in accordance withsubsection (1), including, without limiting the generality of the foregoing, regulations (

a) respecting the conditions that must be fulfilled before a notice, certificate, permit or other document concerning anyproduct to which a patent may relate may be issued to a patentee or other person under any Act of Parliament thatregulates the manufacture, construction, use or sale of that product, in addition to any conditions provided for by or underthat Act; (

b) respecting the earliest date on which a notice, certificate, permit or other document referred to in paragraph (

a) that isissued or to be issued to a person other than the patentee may take effect and respecting the manner in which that date isto be determined; (

c) governing the resolution of disputes between a patentee or former patentee and any person who applies for a notice,certificate, permit or other document referred to in paragraph (

a) as to the date on which that notice, certificate, permit orother document may be issued or take effect; (

d) conferring rights of action in any court of competent jurisdiction with respect to any disputes referred to in paragraph(

c) and respecting the remedies that may be sought in the court, the procedure of the court in the matter and the decisionsand orders it may make; and (

e) generally governing the issue of a notice, certificate, permit or other document referred to in paragraph (

a) incircumstances where the issue of that notice, certificate, permit or other document might result directly or indirectly in theinfringement of a patent. Inconsistencyor conflict

(5) In the event of any inconsistency or conflict between (

a) this

section or any regulations made under this section, and (

b) any Act of Parliament or any regulations made thereunder, this

section or the regulations made under this

section shall prevail to the extent of the inconsistency or conflict. For greatercertainty

(6) For greater certainty, subsection (1) does not affect any exception to the exclusive property or privilege granted by apatent that exists at law in respect of acts done privately and on a non-commercial scale or for a non-commercial purposeor in respect of any use, manufacture, construction or sale of the patented invention solely for the purpose of experimentsthat relate to the subject-matter of the patent. [19] The NOC Regulations were adopted pursuant to

section 55.2 of the Patent Act.

Section 4 of these Regulations allows aninnovator drug manufacturer who files a new drug submission to also submit to the Minister of Health a patent list relating to thesubmission.

A patent on this list may then be added to a register of patents maintained by that Minister under subsection 3(2) of theRegulations. [20] A generic drug manufacturer which files a submission for a NOC in respect of a drug (usually in the form of an abbreviated newdrug submission) and which compares that drug with another drug marketed in Canada under another NOC must indicate in itssubmission, with respect to each patent listed on the register for the other drug, either that it accepts that it will not obtain the Minister’sNOC until the patent expires, or allege (through what is known as a “notice of allegation” or “NOA”) that the patent is not valid or wouldnot be infringed, and include, inter alia, a detailed statement of the legal and factual basis for the allegation:

section 5 of the NOCRegulations. [21] An innovator drug manufacturer that is served with such a notice of allegation may, within 45 days, apply to the Federal Courtfor an order prohibiting the Minister of Health from issuing a NOC to the generic drug manufacturer until after the expiration of a patentthat is the subject of the notice: subsection 6(1) of the NOC Regulations.

The initiation of this application for prohibition automaticallytriggers a 24-month delay (or “statutory freeze”) that prevents the Minister of Health from issuing a NOC to the generic drugmanufacturer unless, within that period, the prohibition application is finally dismissed by the court or is otherwise withdrawn ordiscontinued: paragraph 7(1)(

e) and subsection 7(4) of the NOC Regulations. As noted by Binnie J. in Biolyse, at paragraph 24: It is important to note that under this procedure, the court hearing the prohibition application has no discretion to lift the stay even if itthinks the innovator’s case for interim relief is weak. Nor does the court have a discretion to leave the contending parties to theirremedies under the Patent Act. The “second person”’s [the generic’s] application for a NOC simply goes into deep-freeze until thestatutory procedures have played themselves out.

For these reasons, Iacobucci J. described the regime as “draconian” in Merck FrosstCanada Inc. v. Canada (Minister of National Health and Welfare), (SCC), [1998] 2 S.C.R. 193, at para. 33. [22] If the innovator drug manufacturer is successful in the prohibition proceeding, the Minister of Health is prohibited from issuingto the generic drug manufacturer a notice of compliance for its generic drug until the relevant patent has expired. If the generic drugmanufacturer is successful, the Minister may then issue a notice of compliance for the generic version of the drug.

Whatever theoutcome of the proceeding under the NOC Regulations, patent validity and patent infringement proceedings under the Patent Act may beinitiated or continued by the parties before any competent court: Eli Lilly and Co. v. Novopharm Ltd., (SCC), [1998] 2 S.C.R. 129, (1998), 161 D.L.R. (4th) 1, at paragraphs 95–96; Merck & Frosst Canada Inc. v. Canada (Minister of National Health andWelfare) (1994), 55 C.P.R. (3d) 302 (F.C.A.), at pages 319–320; David Bull Laboratories (Canada) Inc. v.

Pharmacia Inc., (FCA), [1995] 1 F.C. 588, (1994), 58 C.P.R. (3d) 209 (C.A.), at page 600. [23] A compensation mechanism has been set out in the NOC Regulations in the event that the innovator’s prohibition applicationmade under subsection 6(1) of the Regulations is withdrawn, discontinued or dismissed by the court. That mechanism is described insection 8 of the NOC Regulations, which is reproduced below:

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

a) beginning on the date, as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations, unless the court concludes that (

i) the certified date was, by the operation of

An Act to amend the Patent Act and the Food and Drugs Act (The Jean Chrétien Pledge to Africa) ,

chapter 23 of the Statutes of Canada, 2004, earlier than it would otherwise have been and therefore a date later than the certified date is more appropriate, or (ii) a date other than the certified date is more appropriate; and (

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

(2) A second person [the generic] may, by action against a first person [the innovator], apply to the court for an order requiring the first person [the innovator] to compensate the second person [the generic] 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 [the innovator] has commenced an action for the infringement of a patent that is the subject matter of the application.

(4) If a court orders a first person [the innovator] to compensate a second person [a generic] under subsection (1), the court may, in respect of any loss referred to in that subsection, make any order for relief by way of damages that the circumstances require.

(5) In assessing the amount of compensation the court shall take into account all matters that it considers relevant to the assessment of the amount, including any conduct of the first [innovator] or second [generic] person which contributed to delay the disposition of the application under subsection 6(1).

(6) The Minister is not liable for damages under this section. Background [ 24 ] The background to the litigation and the pertinent facts are set out in the reasons of the trial Judge and need not be repeated in full here. It suffices for the purposes of this appeal to highlight some of the most salient facts. [ 25 ] For the purposes of this litigation, Sanofi may be considered an innovator drug manufacturer, while Apotex may be viewed as a generic drug manufacturer.

Sanofi, either as a patentee or licensee, holds rights under various Canadian patents that relate to ramipril, which it sells under the brand name ALTACE.

Ramipril is a drug which is primarily used to treat hypertension, but whose medical use has expanded over the years to include heart related health issues following a “Heart Outcomes Prevention Evaluation” (HOPE) study published in the year 2000 which found that “[t]reatment with ramipril reduced the rates of death, myocardial infarction, stroke, coronary revascularization, cardiac arrest, and heart failure as well as the risk of complications related to diabetes and of diabetes itself”: HOPE study, at page 150 [ “Effects of an Angiotensin-Converting-Enzyme Inhibitor, Ramipril, on Cardiovascular Events in High-Risk Patients” (2000), 342 N.

Engl. J. Med. 145] as cited in the trial Judge’s reasons, at paragraph 277. The term “HOPE indications” has come to be associated with the patient profiles from the HOPE study where vascular protection was demonstrated: trial Judge’s reasons, at paragraph 277. [ 26 ] The initial Canadian patent for ramipril was Patent No. 1187087 issued May 14, 1985 and which expired May 14, 2002, after 17 years of patent monopoly as the Patent Act then provided.

With the pending expiration of this initial patent, many generic drug manufacturers became interested in marketing their own generic versions of ramipril, including Apotex. The trial Judge found that “Sanofi, in efforts to extend patent protection for ramipril, proceeded to obtain a further series of patents and protect those patents through listings on the Patent Register”: trial Judge’s reasons, at paragraph 26. Sanofi described these efforts as “Altace Lifecycle Management”, while the generic manufacturers referred to these as “evergreening”: trial Judge’s reasons, at paragraph 26.

A considerable amount of litigation under the NOC Regulations ensued with respect to these further patents. [ 27 ] The trial Judge provided a chart at paragraph 27 of her reasons setting out the list of subsequent patents involving ramipril and its uses. It is useful to reproduce this chart here: Canadian Patent No.

Issue Date Patent Register Listing Subject Matter/Indications 1,246,457 (the '457 Patent) December 13, 1988 (expired December 13, 2005) February 21, 2001 Ramipril for the treatment of cardiac insufficiency 1,341,206 (the '206 Patent) March 20, 2001 April 11, 2001 Composition-of-matter patent 2,055,948 (the '948 Patent) November 12, 2002 June 25, 2004 Use of ramipril together with a calcium antagonist for the treatment of proteinuria 2,023,089 (the '089 Patent) January 14, 2003 November 10, 2003 Use of ramipril in the treatment of cardiac and vascular hypertrophy and hyperplasia 2,382,549 (the '549 Patent) March 15, 2005 March 17, 2005 Use of ramipril in the prevention of cardiovascular events 2,382,387 (the '387 Patent) June 21, 2005 June 28, 2005 Use of ramipril in the prevention of stroke, diabetes and/or congestive heart failure

The last two patents in this list, the '549 and '387 patents, are referred to as the “HOPE patents”. [ 28 ] The trial Judge also provided, at paragraph 29 of her reasons, a useful chart briefly describing the results of the litigation under the NOC Regulations with respect to ramipril and involving Sanofi and Apotex. It is also useful to reproduce this chart here: Patent No. Notice of Allegation Notice of Application/Court File No. Outcome '206 Patent June 20, 2003 September 23, 2003/T-1742-03 Mactavish J. dismisses on September 20, 2005 [ Aventis Pharma Inc. v.

Apotex Inc , 2005 FC 1283 , 278 F.T.R. 1 (Ramipril NOC No. 1 (F.C.))] '457 Patent August 20, 2003 (non- infringement) October 8, 2003/T- 1851-03 Simpson J. issues Prohibition Order until expiry of '457 Patent on October 6, 2005 [Ramipril NOC No. 2 (F.C.)] '457 Patent November 10, 2003 (invalidity) December 29, 2003/T-2459-03 Tremblay-Lamer J. dismisses on November 4, 2005 [ Aventis Pharma Inc. v. Apotex Inc. , 2005 FC 1504 , 44 C.P.R. (4th) 108 (Ramipril NOC No. 3 (F.C.))] '089 Patent November 17, 2003 January 5, 2004/T- 11-04 von Finckenstein J. dismisses on October 27, 2005 [ Aventis Pharma Inc. v.

Apotex Inc. , 2005 FC 1461 , 283 F.T.R. 1 (Ramipril NOC No. 4 (F.C.)] '948 Patent June 28, 2004 August 16, 2004/T-1499-04 Order of Dismissal, on Consent, dated on June 27, 2006 [Ramipril NOC No. 5 (F.C.)] '549, '387 Patents (HOPE Patents) November 29, 2005 January 17, 2006/T-87-06 By Order, Aalto P. dismisses as moot on May 2, 2008 [Ramipril NOC No. 6 (F.C.)] The reasons of the trial Judge [ 29 ] The trial Judge provided detailed reasons reaching over 115 pages.

The salient aspects of those reasons may be summarized as follows. [ 30 ] Subject to the validity issues dealt with by the trial Judge in the Validity Judgment, Sanofi acknowledged at trial that Apotex was entitled to compensation pursuant to

section 8 of the NOC Regulations: trial Judge’s reasons, at paragraph 4. The debate before the trial Judge consequently concerned primarily how such compensation was to be determined. [ 31 ] The trial Judge saw her task as one of assessing the compensation owed by considering what would have happened if Sanofi had not brought applications for prohibition against Apotex.

The answer to this question required the trial Judge to “construct a hypothetical, or ‘but for’, world during a defined period of time in the past in order to determine what share of the ramipril market Apotex would have captured if it had been able to sell its generic ramipril” during that period: trial Judge’s reasons, at paragraph 6 [emphasis in original]. Start and end dates of the

section 8 liability period [ 32 ] This appeal involves many issues relating to the determination of the period contemplated by paragraphs 8(1)(

a) and (

b) of the NOC Regulations. For ease of reference, I will refer to that period as the “section 8 liability period”. [ 33 ] After identifying the issues and setting out the regulatory and factual background to the litigation, the trial Judge first dealt with the determination of the relevant

section 8 liability period during which the compensation should be calculated in this case. [ 34 ] The trial Judge noted that paragraph 8(1)(

a) of the NOC Regulations establishes the start date for the period as “the date, as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations”. The parties agreed in this case that the date certified by the Minister was April 26, 2004, the so-called “patent hold” date with respect to Apotex’s generic version of ramipril: trial Judge’s reasons, at paragraphs 38 and 40. [ 35 ] The trial Judge also noted that paragraph 8(1)(

a) nevertheless allows the Court to determine if “a date other than the certified date is more appropriate”. Sanofi argued that the trial Judge should exercise her discretion in this respect so as to set the start date on December 13, 2005, which was the expiration date of Sanofi’s '457 patent concerning the use of ramipril for the treatment of cardiac insufficiency. Sanofi’s argument to justify this subsequent date was founded on the existence of a prohibition order based on that patent issued by Simpson J. under subsection 6(2) of the NOC Regulations in Ramipril NOC No. 2 (F.C.).

Since the application upon which this prohibition order was based was never withdrawn, discontinued, dismissed or reversed on appeal, Sanofi submitted to the trial Judge that Apotex had no claim to compensation under

section 8 until the effect of that prohibition order ended, i.e. until the expiry of the '457 patent on December 13, 2005. [ 36 ] The trial Judge disagreed with Sanofi, largely on the ground that less than 30 days after Simpson J. had issued the prohibition order, Tremblay-Lamer J. found the '457 patent to be invalid within the framework of another proceeding which dismissed another of Sanofi’s prohibition applications in Ramipril NOC No. 3 (F.C.).

In the trial Judge’s view, the decision of Tremblay-Lamer J. effectively “unlocked” the door for Apotex to receive a NOC irrespective of the '457 patent, with the logical result that the prohibition order issued by Simpson J. had been subsumed or “trumped” by the subsequent decision, and was therefore no longer enforceable or of any practical effect: trial Judge’s reasons, at paragraphs 47–48. [ 37 ] This reasoning lead the trial Judge to conclude that April 26, 2004, the date of Apotex’s patent hold, was the appropriate date to begin the

section 8 liability period in this case: trial Judge’s reasons, at paragraph 55. [ 38 ] With respect to the end date of the

section 8 liability period, the trial Judge noted that paragraph 8(1)(

b) of the NOC Regulations provides that the liability period ends on “the date of the withdrawal, the discontinuance, the dismissal or the reversal” of the prohibition proceeding. However, in this case, there were multiple patents registered by Sanofi under the NOC Regulations with respect to ramipril,

and five different dismissal dates relating to five separate prohibition applications involving Sanofi and Apotex. Moreover, the trial Judge noted that the case also presented a “very unusual situation in which the second person [Apotex] received an NOC prior to the disposition of the last prohibition proceeding”: trial Judge’s reasons, at paragraph 57. [ 39 ] In light of the particular factual situation, Apotex urged the trial Judge to conclude, on a plain reading of paragraph 8(1)( b ), that the end of the period should be set to May 2, 2008, the date Prothonotary Aalto dismissed as moot the last prohibition proceeding involving Sanofi and Apotex under

section 6 of the NOC Regulations in Ramipril NOC No. 6 (F.C.). Sanofi rather favoured the date of June 27, 2006, the date it said Apotex ceased to be a “second person” with respect to the HOPE patents. The trial Judge rejected both submissions and rather found that the appropriate date to end the

section 8 liability period in this case was December 12, 2006, the date the Minister of Health issued a NOC to Apotex for its generic version of ramipril. [ 40 ] The trial Judge rejected Apotex’s argument that the end date of the

section 8 liability period should be the date of the formal dismissal of the last prohibition application on May 2, 2008. She did so on her finding that the application became moot when the NOC was issued to Apotex on December 12, 2006. [ 41 ] The trial Judge also rejected Sanofi’s proposed end date of June 27, 2006. Sanofi had submitted that this date was that of the dismissal of the “last true” prohibition proceeding involving ramipril in Ramipril NOC No. 5 (F.C.).

Sanofi had initiated prohibition proceedings against Apotex with respect to its HOPE patents; however, as a result of the decision of the Supreme Court of Canada in AstraZeneca , the Minister of Health took the position that Apotex did not need to address these HOPE patents since Apotex was not seeking a NOC for uses specified in these HOPE patents. As a result, for the purposes of

section 8 compensation determinations, Sanofi took the position that Apotex was never a “second person” under the NOC Regulations with respect to the HOPE patents, and that consequently the last “valid” prohibition proceeding which was withdrawn or dismissed was in Ramipril NOC No. 5 (F.C.) on June 27, 2006. [ 42 ] The trial Judge dismissed Sanofi’s argument on the ground that it was based on a misreading of AstraZeneca and of the decision of Hughes J. in Ferring Inc. v. Canada (Minister of Health) , 2007 FC 300 , [2008] 1 F.C.R. 19, affd 2007 FCA 276 , 60 C.P.R. (4th) 273 ( Ferring ).

In the trial Judge’s view AstraZeneca established that a generic drug manufacturer is not required to address patents listed by the innovator drug manufacturer after the generic drug manufacturer submits its abbreviated new drug submission, because the generic manufacturer will not have early-worked that patent. AstraZeneca did not decide or imply that a generic drug manufacturer would be unable to claim compensation under

section 8 of the NOC Regulations when an innovator actually commences a prohibition proceeding in respect of a patent that the generic drug manufacturer should not have been required to address: trial Judge’s reasons, at paragraphs 70 and 71. [ 43 ] The trial Judge acknowledged that the decision of Hughes J. in Ferring appeared to support Sanofi’s view: trial Judge’s reasons, at paragraph 73.

However, she was of the view that the issue in Ferring had been unnecessarily framed in terms of whether the generic manufacturer is a “second person”, and that in Ferring “Justice Hughes was not asked to consider, nor did he consider, whether [ AstraZeneca ] would strip Apotex of its claim to damages under s. 8”: trial Judge’s reasons, at paragraph 75. [ 44 ] Applying her own contextual analysis to the AstraZeneca and Ferring decisions and to the overall structure of the NOC Regulations, the trial Judge concluded that, in this case, Apotex was a second person in relation to the HOPE patents until December 12, 2006, when the Minister of Health decided to issue a NOC to Apotex notwithstanding the pending prohibition proceedings initiated by Sanofi with respect to those patents, thus confirming that Apotex was no longer a second person with respect to those patents only as of that date: trial Judge’s reasons, at paragraphs 77 and 78.

She found this approach to be consistent with the purpose of

section 8 which is to “compensat[e] a second person for the loss occasioned by the operation of the statutory stay”: trial Judge’s reasons, at paragraph 79. [ 45 ] The trial Judge consequently concluded that the relevant

section 8 liability period in this case was April 26, 2004 to December 12, 2006: trial Judge’s reasons, at paragraph 83. The hypothetical ramipril market [ 46 ] Having determined the relevant

section 8 liability period, the trial Judge proceeded to assess Apotex’s loss of profits during that period by (

a) estimating the size of the total ramipril market during the period; (

b) estimating the portion of the ramipril market that would have been acquired by generic drug manufacturers during the period; and

c) estimating the share of that generic market which would have accrued to Apotex: trial Judge’s reasons, at paragraph 84. [ 47 ] Based on the expert reports and the evidence submitted, the trial Judge adopted the analysis of Dr. Hollis to quantify both the size of the ramipril market as a whole (trial Judge’s reasons, at paragraphs 97–104) and of the generic ramipril market (trial Judge’s reasons, at paragraphs 107, 108 and 113–123) during the relevant

section 8 liability period. [ 48 ] One difficult question for the trial Judge concerned the determination of the generic ramipril market during the

section 8 liability period, and particularly whether that market should be assessed on the basis of a single “but for” world. Sanofi submitted that there can be only one “but for” world that should apply to all claims of all concerned generic drug manufacturers under

section 8 of the NOC Regulations. In Sanofi’s view, to decide otherwise would lead to overcompensation and inappropriate windfalls under

section 8 for the generic drug manufacturers: trial Judge’s reasons, at paragraphs 128–129. In light of the importance of this issue for the purposes of this appeal, it is useful to set out fully the trial Judge’s reasons for discarding the “one but for world” approach [at paragraphs 132–139]: I do not disagree with Sanofi’s arithmetic. I also acknowledge that, if this were to happen, the result would be, if not “absurd”, at least questionable. That said, Sanofi’s argument contains a number of flaws. The first issue that I take with Sanofi’s argument is that it misrepresents Apotex’s position.

Apotex is not arguing that the hypothetical world under the Regulations must consider Apotex to be a sole-source manufacturer with no competitors throughout the Relevant Period. Rather, as I understand Apotex’s argument, Apotex is submitting that other entrants in the market must be considered on a case-by-case basis.

While I agree with Sanofi that the “but for” world must consider the inclusion of potential competitors, I do not go so far as Sanofi asserts. In other words, I reject Sanofi’s urging that I establish one “but for” world that will apply in this case and in any others involving the genericization of ramipril. The assessment of damages can and should be made on the facts of each case. To the extent that there are common elements that impact on the quantification of damages, these will more likely than not come forth during the trial.

Another serious flaw in Sanofi’s argument is that the evidence in one case may establish a different Relevant Period than in another case. This will impact on many elements of the assessment of damages. In this case, for example, I have determined that Apotex would have entered the market on April 26, 2004. This finding means that different considerations will come into play with respect to the possible entry of an authorized generic than if I had concluded that an entry date of December 13, 2005 was more appropriate. In the companion Teva case (Court File No.

T-1161-07), I have concluded that a different Relevant Period is established and different considerations were relevant. Following Sanofi’s urging would accordingly require that I disregard evidence in either Teva’s case or this one. By their very nature, damages in this action are hypothetical. It follows that estimates must be made and a market constructed that will not be perfect. As I re-write history, hypotheses must be constructed and evaluated. Those hypotheses will necessarily change depending on the facts of each case. I am striving to be reasonable and fair—I cannot achieve perfection.

As pointed out by Lord Shaw in Watson, Laidlaw & Co Ld v Pott, Cassels, and Williamson (1914), 31 RPC 104 at 118 (HL): The restoration by way of compensation is therefore accomplished to a large extent by the exercise of a sound imagination and the practice of the broad axe. With respect to ramipril, Sanofi has identified only Teva, Apotex and Riva as participants in the “but for” world. I am quite certain that the damages in those three actions will not be greatly—if at all—in excess of the award of damages that would be made had the three cases been joined and one “but for” world established.

Since Sanofi is the defendant in all three cases, it is well aware of the total damages being claimed. If that amount raised a real threat that Sanofi’s total liability would exceed the bounds of rationality, Sanofi could urge the Court to consider an adjustment to the compensation pursuant to s. 8(5) of the Regulations . There may be a situation where Sanofi’s fear has some merit. It certainly is not this case. [ 49 ] The trial Judge then proceeded to determine from the evidence before her which generic drug manufacturers would enter the hypothetical market during the

section 8 liability period, and the timing of their respective market entries. [ 50 ] She assumed that Apotex would have entered the market as of the beginning of the

section 8 liability period on April 26, 2004. [ 51 ] The trial Judge reached a number of conclusions with respect to the participation in the hypothetical market of Teva, Riva and an authorized generic. These conclusions are summarized below. Teva [ 52 ] The trial Judge found that Teva would have entered the market only on August 1, 2006. Teva had filed its abbreviated new drug submission for its own generic version of ramipril on December 24, 2001, but it had also indicated pursuant to paragraph 5(1)(

a) of the NOC Regulations that it would await the expiry of Sanofi’s '457 patent (ramipril for the treatment of cardiac insufficiency) set for December 13, 2005, and it provided no notice of allegation with respect to that patent pursuant to paragraph 5(1)(

b) of the NOC Regulations. As a result, the trial Judge found that Teva’s earliest market entry date would be December 13, 2005: trial Judge’s reasons, at paragraphs 154 and 155. This date was in fact the one the trial Judge used to determine Teva’s market entry in her judgment concerning the similar

section 8 compensation claims of Teva against Sanofi in the Teva Liability Judgment (F.C.), at paragraph 75. [ 53 ] However, the trial Judge did not use this date on the ground that within the context of the

section 8 compensation claims of Apotex, all other generic drug manufacturers within the hypothetical market, including Teva, were to be presumed bound by the NOC Regulations, and that their respective market entry had to be determined, for the purposes of the hypothetical market, by taking into account the regulatory impediments established by those Regulations: trial Judge’s reasons, at paragraph 152. [ 54 ] Applying this methodology, the trial Judge reiterated that Teva had initially submitted an abbreviated new drug submission for its generic version of ramipril on December 24, 2001, and it acknowledged then that the issuance of its NOC would await the expiry of Sanofi’s '206 and '457 patents.

Thus, Teva’s market entry was delayed for a considerable period of time because of that initial choice. It was not until September of 2005 that Teva submitted a notice of allegation with respect to the '206 patent. The prohibition application that followed was dismissed on September 25, 2006: trial Judge’s reasons, at paragraphs 154 and 156–158.

The trial Judge nevertheless found that similar earlier prohibition proceedings respecting the '206 patent and involving Laboratoire Riva Inc. (Riva) would have concluded, hypothetically, with the dismissal of the proceedings in favour of Riva no later than July of 2006: trial Judge’s reasons, at paragraph 159. [ 55 ] In the trial Judge’s view, Teva, in the hypothetical market, would have been able to rely on the Riva proceedings to seek an earlier dismissal of Sanofi’s prohibition proceedings against it within days of the dismissal.

As a result, the trial Judge concluded that Teva would have been able to come to market on or about August 1, 2006: trial Judge’s reasons, at paragraph 160. Riva [ 56 ] The trial Judge found that though Riva’s “patent hold” date was June 18, 2004, it could not have entered the hypothetical generic ramipril market before June 21, 2007, and thus only after the

section 8 liability period with respect to Apotex had expired. As a result, Riva would not have been a participant in the hypothetical market during the relevant

section 8 liability period: trial Judge’s reasons, at paragraph 168. The trial Judge came to that conclusion by applying the same methodology she used to determine Teva’s market entry, namely that all other generic drug manufacturers except Apotex were to be presumed to be bound by the NOC Regulations in the hypothetical market, and that their respective market entry would largely depend on how they would have navigated these Regulations:

trial Judge’s reasons, at paragraph 161. [ 57 ] Riva had submitted its abbreviated new drug submission for its generic version of ramipril on June 8, 2004 and had a “patent hold” date of June 18, 2004. However, it had cross-referenced its own application under the NOC Regulations to that of Pharmascience Inc. (Pharmascience): trial Judge’s reasons, at paragraphs 163–164.

Health Canada had informed Riva that it would not receive a NOC for its generic version of ramipril in advance of Pharmascience as a result of this cross-reference; Health Canada did not change its position until June 21, 2007: trial Judge’s reasons, at paragraphs 165 and 166.

Applying her methodology requiring all other generic drug manufacturers to navigate the NOC Regulations, the trial Judge concluded from these circumstances that “Riva could not have entered the ramipril market before Health Canada changed its position on Riva’s cross-reference ANDS [abbreviated new drug submission]” on June 21, 2007: trial Judge’s reasons, at paragraph 167.

Authorized generic [ 58 ] The trial Judge described an “authorized generic” as a “drug that is manufactured by an innovative drug company—in this case, Sanofi—but sold by a generic company under the generic’s name”: trial Judge’s reasons, at paragraph 170. The trial Judge noted that the approval process under the Food and Drug Regulations for an authorized generic is quite simple and swift.

She also noted that the advantage for an innovator of using an authorized generic is to “recoup some of the market that has been lost to generics”: trial Judge’s reasons, at paragraph 171. [ 59 ] The trial Judge rejected Apotex’s submission that

section 8 of the NOC Regulations must be interpreted as precluding the presence of an authorized generic. She reached this conclusion by (

a) accepting Sanofi’s submission that the NOC Regulations themselves contemplate an authorized generic in subsection 7(3) ; and (

b) noting that this issue had been considered by the Governor in Council when adopting amendments to the NOC Regulations and resolved in favour of the innovators: trial Judge’s reasons, at paragraphs 176–179. [ 60 ] The trial Judge then found, based on the evidence submitted, that it was more likely than not that Sanofi would have decided to launch an authorized generic in the hypothetical market: trial Judge’s reasons, at paragraphs 181–190.

However, the trial Judge also found that, in the hypothetical market, Apotex would not have been impeded by the NOC Regulations; consequently, Apotex’s launch of its generic version of ramipril would have been a surprise for Sanofi since no prior notice of proposed market entry (as required by those regulations) would have been provided to Sanofi: trial Judge’s reasons, at paragraphs 192–196.

This surprise launch would have been followed within three months by the market entry of an authorized generic, namely by July 26, 2004: trial Judge’s reasons, at paragraphs 197–202. [ 61 ] Within this hypothetical generic ramipril market comprising Apotex (entering as of April 26, 2004), an authorized generic (entering as of July 26, 2004) and Teva (entering as of August 1, 2006), the trial Judge then proceeded to determine Apotex’s market share taking into account the different timing for the market entrance of each generic drug manufacturer.

She did not accept any of the expert evidence which had been submitted with respect to this issue (trial Judge’s reasons, at paragraphs 207 and 214), concluding instead that the “allocation of market share amongst the generic entrants appears to be too complex to estimate with any accuracy”: trial Judge’s reasons, at paragraph 215.

Relying on an internal Sanofi market analysis report, the trial Judge estimated Apotex’s share of the hypothetical generic ramipril market as follows (trial Judge’s reasons, at paragraphs 216–219): (a) 100 percent of the hypothetical generic market for the period of April 26, 2004 to July 26, 2004 when Apotex is alone in that market; (b) 70 percent of the hypothetical generic market for the short period of a few days from July 26, 2004 to August 1, 2004 when Apotex and the authorized generic are the only participants in that market; (c) 50 percent of the hypothetical generic market for the period from August 1, 2006 to December 12, 2006 when Apotex, Teva and the authorized generic are sharing that market. [ 62 ] The trial Judge then addressed the methodology to calculate Apotex’s lost gross sales of its generic version of ramipril, determining quite simply that it corresponded to the number of capsules it would have sold during the

section 8 liability period multiplied by the prices at which it would have sold those capsules: trial Judge’s reasons, at paragraph 227.

After discussing how drugs are priced (trial Judge’s reasons, at paragraphs 228–235), she concluded that Apotex’s generic version of ramipril would be sold for a price equivalent to the following percentage of the listed price of ALTACE (the innovator version of ramipril marketed by Sanofi): (a) 70 percent from April 26, 2004 to July 26, 2004; and (b) 65 percent from July 26, 2004 to December 12, 2006: trial Judge’s reasons, at paragraph 236. [ 63 ] The experts for both parties essentially agreed on the methodological approach to estimate Apotex’s lost profits on these lost gross sales, except with respect to three items, namely sales returns, trade spends and cost of the active pharmaceutical ingredient: trial Judge’s reasons, at paragraphs 238–240.

No issue has been raised in this appeal with respect to these concerns, and so it is not necessary to explain further the findings of the trial Judge with respect to them. [ 64 ] An important adjustment was requested by Apotex with respect to additional compensation for what was referred to as a “double ramp-up”. The term “ramp-up” refers to the period of time that it takes a drug manufacturer to penetrate the market to its full potential. In the hypothetical market, Apotex would have experienced a ramp-up period.

However, Apotex submitted that in the real market, it also experienced a ramp-up period when it was finally authorized to sell its generic version. By taking into account a ramp-up in the hypothetical market without compensating it for the ramp-up actually experienced in the real market, Apotex suffers a loss of profits which it would not otherwise have incurred: trial Judge’s reasons. at paragraphs 265–267. These losses are not insignificant: trial Judge’s reasons, at paragraph 268. [ 65 ] The trial Judge rejected this double ramp-up claim on the ground that since it was a loss occurring after the

section 8 liability period, it was precluded from compensation under

section 8 of the NOC Regulations as a result of the principles established in Alendronate , at paragraphs 99–102, where this Court found that

section 8 does not include compensation for losses suffered outside the

section 8 liability period: trial Judge’s reasons, at paragraphs 269 and 270.

[ 66 ] A final issue dealt with by the trial Judge concerned Sanofi’s submission that Apotex’s compensation under

section 8 of the NOC Regulations cannot extend to sales of its generic version of ramipril for unapproved indications, notably the HOPE indications. [ 67 ] The trial Judge found that, in the hypothetical market, Apotex would not have included in its product monograph for its generic version of ramipril a reference to anything other than hypertension; nevertheless, some sales of that generic product would have related to HOPE indications: trial Judge’s reasons, at paragraphs 280 and 281. She refused to discard these sales from the calculation of Apotex’s

section 8 compensation on the grounds that (

a) generic products are not promoted for specific uses, but rather sold as drug products; (

b) off-label prescribing and substitution commonly take place and there appears to be nothing illegal about this practice; (

c) Sanofi has not opposed in the real world the listing of Apotex’s generic version of ramipril as fully interchangeable with its own product ALTACE; and (

d) the availability to Sanofi of an action for patent infringement with respect to the HOPE patents: trial Judge’s reasons, at paragraph 283. [ 68 ] The trial Judge concluded that in the hypothetical market, Apotex would have been able to make sales for HOPE indications during the

section 8 liability period without any serious objection from Sanofi, and that consequently Apotex’s losses in respect to such sales should be compensated under

section 8 of the NOC Regulations: trial Judge’s reasons, at paragraphs 292 and 293. She however added “[t]hat is not to say that a second person [a generic manufacturer] may always recover for unapproved indications. Another s. 8 claim may provide a clear defence in the pleadings and a different set of facts that would warrant a different finding or a downward adjustment to the second person’s damage pursuant to s. 8(5) of the [ NOC ] Regulations . But, not in this case”: trial Judge’s reasons, at paragraph 295, emphasis in original. The issues in appeal and the standard of review [ 69 ] The principal issues in this appeal concern (

a) the start and end dates of the

section 8 liability period, (

b) the attributes of the hypothetical market during that period, (

c) how the double ramp-up of generic drug sales should be treated in the hypothetical market, and (

d) whether the hypothetical sales by a generic in the hypothetical market should include sales for unapproved indications, such as the HOPE indications. Two additional issues are also raised by the parties: (

e) Sanofi submits that the trial Judge made a “calculation error” when she concluded that the authorized generic drug manufacturer’s share of the generic market for ramipril would have been 30 perc

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