By Kevin Siu Contributed by Smart & Biggar/Fetherstonhaugh From ILO

Facts
Janssen US’s standing to claim damages
Quantum of damages
Pre-judgment interest
Mitigation

Facts

On May 31 2016 the Federal Court issued its public judgment in Janssen Inc v Teva Canada Ltd,(1) for the quantification of damages arising from infringement of Daiichi Sankyo’s Patent 1,304,080 for levofloxacin (Levaquin). In the earlier liability phase of the action, Teva (then Novopharm) was held liable for damages for patent infringement.(2)

The court awarded a total of C$18,841,219 in damages and pre-judgment interest to two plaintiffs – C$5,498,270 to Janssen Inc (Janssen Canada) and C$13,342,949 to Janssen Pharmaceuticals, Inc (Janssen US).

Four main issues were addressed by the court:

whether Janssen US had standing to claim damages;
what was the quantum of damages suffered by each of Janssen Canada and Janssen US;
how was the pre-judgment interest, if any, awarded to Janssen US to be calculated; and
should Janssen Canada have taken steps to mitigate its damages and, if so, when and to what extent.
Janssen US’s standing to claim damages

On the issue of standing, the court extensively reviewed the jurisprudence on Section 55(1) of the Patent Act defining a person “claiming under a patentee” and summarised the requirements under this section:

The person must be one who, as a user, assignee, licensee or lessee has a title or a right that can be traced back to the patentee;
It does not matter whether a licensee is exclusive or non-exclusive;
The license must be proved but it need not exist in writing; and
The claim must be one in respect of a use in Canada and not elsewhere in the corporate chain.
On the facts, the court found that although Janssen US (which was not a plaintiff in the original action) did not use the invention (eg, levofloxacin tablets) in Canada, it had the licence or permission by acquiescence of the patentee to be involved in the chain of sale of the tablets to Janssen Canada. It was immaterial whether Janssen US ever had title to the tablets in Canada. Thus, Janssen US had standing to claim damages for infringement.

Quantum of damages

The court endorsed a ‘broad axe’ approach to the quantification of damages. After reviewing the evidence adduced by both parties relating to the state of the levofloxacin competitive market specifically (including evidence on competitor drugs, prescribing practices of doctors and effect of promotional efforts) and the pharmaceutical industry generally, the court determined that Janssen’s asserted scenario “best represent[ed] what would have happened in the ‘but for’ world”. Of particular interest for future pharmaceutical patent cases is the extent to which the court considered the effect of other drugs in the same class. In this case, the “comparator market” was the respiratory fluoroquinolone class, with moxifloxacin (Bayer’s Avelox) being a main competitor relevant for determining ‘but for’ market share during the damages period.

The court also accepted that the damages period for patent infringement could extend some time beyond the patent expiry date – in this case two months for losses of retail sales and one year for hospital sales. For hospital sales, the court additionally allowed a claim for losses caused by price suppression (losses due to the patentee lowering its prices in order to compete).

Pre-judgment interest

In awarding pre-judgment interest, the court held that its previous ruling that Janssen Canada was entitled to simple (not compounded) interest at the average bank rate was also binding on Janssen US, thereby rejecting an argument by Janssen US that it was entitled to damages of the lost investment income on the lost profits as a result of infringement, by way of either compound interest or earnings on profits. However, the court left open the possibility that it could apply in future cases, citing Eli Lilly and Co v Apotex Inc (2014 FC 1254 (appeal pending)).

Mitigation

The court held that the party seeking to recover damages “bears the duty of taking all reasonable steps to mitigate those damages”. However, the burden is on the defendant to prove that the plaintiff failed to make reasonable efforts to mitigate and that mitigation was possible. In so doing, there are two evidentiary matters to determine:

what was actually done; and
whether something more or different ought to have been done.
The court found that Teva’s assertions of what ought to have been done was not supported by any evidence, and therefore could not conclude that there was insufficient mitigation.

Teva may appeal as of right.

For further information on this topic please contact Kevin Siu at Smart & Biggar/Fetherstonhaugh by telephone (+1 416 593 5514) or email ([email protected]). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.

Endnotes

(1) 2016 FC 593.

(2) Janssen-Ortho Inc v Novopharm Ltd, 2006 FC 1234, aff’d 2007 FCA 217, leave to appeal refused [2007] SCCA No 442.

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