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What Is Patented Medicines (Notice of Compliance) Litigation?
Before the 2017 amendments to the PM(NOC) Regulations, applicants for a generic or similar drug to that of a patented drug would bring a prohibition application proceeding that would prohibit the Minister of Health from granting a Notice of Compliance for a generic version of a patented medicine and result in a determination on issues such as patent infringement and validity. This determination was not necessarily final and binding in nature as proceedings could simultaneously be brought under the Patent Act regarding patent infringement and validity. Therefore, having these two avenues through which to bring claims could lead to inconsistent results. The amendments to the PM(NOC) Regulations, now provide that the determinations made under these proceedings are final and no longer allow for a dual track form of litigation where inconsistent decisions could result.
PM(NOC) Regulations: Section 6 (1) Proceedings (Infringement and Invalidity)
When a company with similar version of a drug in Canada, such as a generic company, wishes to enter the market, they must apply for a NOC and receive the NOC from the Minister of Health. The company with the similar version of a patented drug cannot enter the Canadian market if the patent of the patented drug is still valid.
Therefore, usually before or at the same time of applying for a NOC, the generic company or the company with the similar drug, must subsequently file a Notice of Allegation (NOA) that compares its drug with the patented drug and additionally, addresses all claims of the similar drug’s patent indicating if there are any that could potentially be infringed by the generic product. In the NOA, the company with the similar drug must indicate if it will wait until the expiry of the patent to come onto the market, if it intends to come onto market sooner, and if it challenges any claims of the patent on the grounds of invalidity. This challenge of patent validity is called a counterclaim.
In response to the NOA, the patentee, after reviewing the NOA, has 45 days to commence proceedings under the Regulations against the company that filed the similar drug product to allege patent infringement and assert patent validity. These proceedings are brought under section 6(1) of the Regulations.
PM(NOC) proceedings are full actions that involve documentary production, discovery and a trial that addresses issues of patent infringement and patent validity. The 2017 amendments affected discovery and confidentiality within proceedings. The amended Regulations now require extended document production and adherence to confidentiality rules imposed by the disclosing party.
These proceedings are typically conducted within a 24-month period (this is an accelerated schedule) and put a hold on the activities of the generic company with the similar drug product unless the patentee waives this 24-month period. Unlike the pre-2017 regime where waiving the 24-month stay would have essentially terminated the proceeding, waiving the 24-month period now allows patentees to avoid any liability for damages, however they must also must accept the potential competition that can arise in the marketplace until a final judgment is found.
PM(NOC) Regulation litigation often stems from innovative or “brand” drug companies, which have a patent for a medication it innovated, protecting, and enforcing its patent rights against generic drug companies that are seeking to come onto the Canadian market but cannot do so unless the patent in invalidated. Therefore, much like broader scale patent litigation, PM(NOC) Regulation Proceedings address at least one or both of patent infringement and validity.
Parties are entitled to damages and costs depending on the outcome of the proceedings. Furthermore, several of these proceedings settle before trial.
PM(NOC) Regulations: Section 8 Proceedings (Damages)
Another type of proceeding often brought under the Regulations pertain to determining the amount of damages a second person is entitled to when a patentee’s application brought under section 6(1) is dismissed. The purpose of these proceedings is to determine the correct amount of damages to compensate the second person for the loss incurred while the patentee or innovator pharmaceutical company sought a statutory stay causing the generic pharmaceutical company a delay in the Minister issuing a NOC and keeping them off the market.
It is possible for more than one generic company that was kept off the market during this same period of time to claim damages as well. Determining the amount of damages the second person would have made “but for” the first person’s application under section 6(1). This hypothetical “but for” world is presented by evidence of the parties and ultimately, each decision is decided on its own merits. A patentee can avoid such a calculation of damages if they waive the 24-month stay.
Patent Infringement
Patentees allege that their patent has been infringed, or in the alternative the company with a similar version of the patented drug may allege non-infringement. The burden is on the party alleging infringement of the patent to prove its case on a balance of probabilities.
If a patentee alleges infringement, it is possible to allege that the infringement occurred based on inducement. Infringement can be alleged to be direct or indirect. Direct infringement means the party seeking the NOC, has a product that encroaches upon the claims of the patent in some manner. Indirect infringement involves encouraging a third party in some manner to directly infringe the patent. Inducement is a form of indirect infringement that refers to a situation where the party that makes a similar version of the patented drug encourages or facilitates a third party to directly infringe the patent.
Patent Invalidity
Parties that seek an NOC can attack the validity of a patent to enter the market. The patent can be attacked on a variety of grounds including lack of novelty (anticipation), prior use, prior publication, obviousness, inutility, insufficiency of specification and non-patentable subject matter.
Involvement of Experts
This form of litigation is complex and generally costly as it involves deep scientific comparisons and understanding of formulations and compositions of drugs, uses of drugs, dosing of drugs, product monographs, and various other elements. Often due to this complexity, experts are used to provide insight on these complex matters. These experts often are scientists with backgrounds in formulations, pharmacodynamics and kinetics, development, clinical scientists, and physicians to name a few.
Appeals
Parties can seek to appeal Federal Court decisions so long as leave to appeal is granted. The threshold for obtaining leave to appeal involves:
- A fairly arguable case taking into account the standard of review; and
- That the issue raised is capable of having a direct impact on the overall success or failure of the case.
A Federal Court decision, Apotex Inc. v. Allergan Inc., 2020 FCA 208, further clarified that the amendments to the Regulations suggest leave should only be granted in matters of “prime significance and materiality”. If leave is granted, a further appeal can also be heard by the Supreme Court of Canada.
Conclusion
Overall, PM(NOC) Regulation litigation can be complex with the potential for multiple rounds of discovery, complexities with finding and responding to experts used in the matter, and often occur between larger pharmaceutical companies and generic pharmaceutical companies. The litigation can be costly in nature, but also provides the potential for great benefits to patentees for enforcing their rights and maintaining a monopoly on the market, or for manufacturers of similar products, this litigation can lead to them entering the market early by invalidating a patent. When a product is available on the market and whether it is the only product out there serving a particular purpose can be a determining factor in assessing whether litigation is the right step to take. Patent expiration dates and additional considerations are also important to consider when determining whether PM(NOC) Regulation litigation is the best way to proceed.
