Date: 19990326
Docket: T-1663-97
BETWEEN:
MERCK FROSST CANADA INC.,
- and -
MERCK & CO., INC.,
Applicants
AND:
THE MINISTER OF HEALTH,
- and -
PRO DOC LIMITED,
Respondents
Docket: T-1258-97
BETWEEN:
MERCK FROSST CANADA INC.,
- and -
MERCK & CO., INC.,
Applicants
AND:
THE MINISTER OF HEALTH,
- and -
NU-PHARM INC.,
Respondents
REASONS FOR ORDER
TEITELBAUM, J.
[1] This hearing deals with judicial review proceedings initiated in two different files T-1258-97 and T-1663-97 which raise virtually identical issues. In both files, the applicants Merck Frosst Canada Inc. (Merck Frosst) and Merck & Co., Inc. (Merk & Co.) filed an application for judicial review pursuant to section 55.2 of the Patent Act, section 6 of the Patented Medicines (Notice of Compliance) Regulations (the Regulations) and Rule 1600_(as the rule then was) and following regarding Applications for judicial review under the Federal Court Rules. The applicants seek to obtain an order of prohibition precluding the respondent Minister of Health (the Minister) from issuing to the respondent Nu-Pharm Inc. (Nu-Pharm) in file T-1258-97, and to the Respondent Pro Doc Limited (Pro Doc) in file T-1663-97, a notice of compliance (NOC) for the medicine lovastatin until after the expiry of the Canadian Patent No. 1,161,380.
FACTS
[2] The applicant Merck & Co. is the owner of the Canadian Patent No. 1,161,380, (the "380 Patent) granted on January 1, 1984 in respect of lovastatin. The medicine lovastatin, also known as Mevinolin and Monacolin K, is a hypocholesteremic drug effective in the treatment of people with elevated blood cholesterol. Merck Frosst is the sole licensee of the "380 Patent and has been marketing lovastatin in Canada in tablet form under the trade-mark MEVACOR, in accordance with the NOC obtained on June 30, 1988 for lovastatin 10 mg, 20 mg, and 40 mg tablets. On or about April 6, 1993, Merck Frosst, a first person for the purposes of the Regulations, filed Patent lists pursuant to the Regulations pertaining to lovastatin and listing the "380 Patent.
[3] The Respondents Pro Doc and Nu-Pharm are Canadian generic drug manufacturers. Merck Frosst received Pro Doc"s notice of allegation (NOA) dated June 17, 1997, and Nu-Pharm"s NOA dated April 23, 1997, for lovastatin, alleging non-infringement of the "380 Patent. Both NOAs state that until the expiry of the said patent, tablets will be made by Apotex Inc. (Apotex) who will use only lovastatin made by Apotex Fermentation Inc. (AFI) pursuant to their process using the microbe Coniothyrium fuckelii , which does not infringe the "380 Patent and was disclosed in court file No. T-1305-93.
[4] The "380 Patent for lovastatin includes claims for the medicine itself as well as claims for the medicine prepared by methods and processes of manufacture described therein. As evidenced by the specification of the "380 Patent, lovastatin is obtained by cultivation of a microfungus of the species Aspergillus and in particular Aspergillus terreus, but not limited to the micro-organism Aspergillus terreus. Other organisms would also include mutants of Aspergillus which are capable of producing these novel compounds and their use is contemplated in carrying out the process of the invention described in the "380 Patent.
[5] On June 10, 1997, the applicants commenced prohibition proceedings pursuant to the Regulations in respect of the aforementioned NOAs in files T-1663-97 and T-1258-97, which, as I have stated, raise virtually identical issues. For this reason, they are heard jointly by this court.
Procedural background
[6] Before these prohibition proceedings came before this Court, the parties raised preliminary issues dealing with confidentiality. As a result, orders were issued to protect the confidentiality of the parties" respective information and knowledge. Accordingly, the following documents were submitted in sealed envelopes pursuant to the following confidential protective orders.
Justice Muldoon"s Order dated July 14, 1997, issued in file T-1258-97
[7] Pursuant to Justice Muldoon"s Order, Nu-Pharm filed its Application Record and Book of Authorities on May 20, 1998 (T-1258-97) as well as the Affidavit of David Cox, sworn June 27, 1997. Also, Merck Frosst and Merck & Co., filed their Applicants" Application Record, Volume VI, as well as a reply Memorandum of Fact and Law of the Respondent Nu-Pharm Inc.
Justice Richard"s Order dated September 8, 1997, issued in file T-1663-97
[8] Pursuant to Justice Richard"s Order, Pro Doc filed its Application Record and Book of Authorities on May 20, 1998, as well as the Affidavit of David Cox, sworn August 31, 1997; and Merck Frosst and Merck & Co. filed their Applicants" Application Record, Volume VI.
PARTIES" RESPECTIVE POSITION
Applicants"position
[9] The applicants submit two main arguments. Firstly, it is argued that the lovastatin to be produced and supplied by AFI to the respondents Nu-Pharm and Pro Doc uses the micro-organism Aspergillus terreus or a micro-organism such as Coniothyrium fuckelii or Aspergillus oryzae which has been contaminated with Aspergillus terreus, and infringes the "380 Patent. This contention is based on the fact that the Coniothyrium fuckelii yields disclosed in the Apotex U.S. patent application filed on August 6, 1993, and its corresponding Canadian patent application filed on August 3, 1994, are not commercially viable. It is submitted that commercially viable quantities of lovastatin can only be produced through use of Coniothyrium fuckelii or Aspergillus oryzae if it has been contaminated by the microbe Aspergillus terreus.
[10] The applicants submit that the evidence they introduced by way of affidavit shows, firstly, that AFI or its predecessor carried on a program to develop the production of lovastatin using Merck & Co."s patented strain Aspergillus terreus , which strain is still kept by AFI as part of AFI"s culture collection, which program included the screening of mutants of Aspergillus terreus to make lovastatin; secondly, that the microbe Aspergillus terreus can easily contaminate the air, vessels, equipment, rooms and facilities in which Aspergillus terreus fermentation is or has been carried out; thirdly, that the procedures used by AFI regarding fermentation and particularly regarding sterilisation are inadequate to prevent contamination; and fourthly, that AFI"s standard operating procedures and test methods are inadequate to detect and prevent contamination.
[11] Secondly, the applicants raise a compliance issue. They submit that the Minister should be prohibited from issuing an NOC to Pro Doc and Nu-Pharm because they have not complied with section 5 of the Regulations, which requires that a second person file with the Minister a New Drug Submission (NDS), a Notice of Allegation (NOA) with proof of service, and a detailed statement.
[12] At the hearing, I believe, the applicants conceded that because of this Court"s past jurisprudence, this argument cannot be accepted. This issue is nevertheless discussed below in this judgment.
[13] It is submitted, in the written argument, that there is no evidence that Pro Doc or Nu-Pharm filed an NDS with the Minister and counsel for Pro Doc and Nu-Pharm refused to permit the President of Pro Doc and the Vice-President for Nu-Pharm to answer questions in this respect. If such an NDS was submitted, there is no proof that it was before the Minister at the time the respective NOAs were forwarded as required by section 5 of the Regulations. Also, there is no evidence that Pro Doc or Nu-Pharm filed with the Minister an NOA or a proof of service of its NOA on Merck Frosst as required by section 5 of the Regulations. Failure to bring forward evidence within the respondents" control or knowledge to establish that section 5 of the Regulations was complied with should give rise to a presumption to the contrary.
Respondents"position
[14] The respondents Nu-Pharm and Pro Doc are represented by the same counsel and submit virtually identical arguments in their respective written submissions and in their oral submissions. They assert that Merck Frosst"s position rests solely on the assumption that yields which Coniothyrium fuckelii produces remained the same as they were in August 1993 when Apotex" patent application was filed in the U.S. This assumption is unfounded.
[15] Firstly, the respondents argue that the evidence shows that a short period of time elapsed between the discovery in the fall 1992 of the microbe Coniothyrium fuckelii and the filing in August 1993 of the Apotex U.S. patent application, which explains why the yields produced were as low as they were in August 1993. Furthermore, it is submitted that the evidence demonstrates that an intense experimentation program undertaken in the spring of 1993 led to substantial increases in the yield of Coniothyrium fuckelii, thereby producing lovastatin in commercially viable quantities.
[16] Secondly, in response to the applicants" argument that Coniothyrium fuckelii would have been contaminated by Aspergillus terreus, it is submitted that evidence shows that the only time that one of the production fermenters (14,000 litre) was used to produce lovastatin from Aspergillus terreus was on September 1994 and the next run involving the product lovastatin using Coniothyrium fuckelii was in the fall of 1996. The evidence also shows that since 1994 AFI has conducted many fermentations with other products and the fermenters have been subjected to many caustic cleaning and heat sterilization cycles. There is no evidence to suggest that Coniothyrium fuckelii is an infringing microbe and the evidence introduced by the applicants in support of its assertion of contamination is speculative and answered by the respondents" witnesses.
[17] With respect to the Regulations, the respondents submit that Merck Frosst"s position is misconceived in law and devoid of merit. Firstly, it is submitted that unlike an NOA, an NDS does not form part of the judicial record and is not relevant to prohibition proceedings under the Regulations. An NDS, which must be filed with the Minister as a condition precedent to the issuance of an NOC, is solely concerned with the requirements of the Food and Drugs Act and Food and Drug Regulations . Further, it is the NOA, not the NDS which triggers the first person"s right to commence proceedings, and the filing of an NDS, its content and the treatment it receives from Health Canada is irrelevant to any prohibition application, which is solely concerned with the merits of the particular allegations at issue. It follows that the evidentiary scope of the hearing is necessarily circumscribed by the bounds of relevance set by the particular allegation placed before the court.
[18] The respondents also submit that the only requirements set out in section 5 of the Regulations stipulate that the allegation must be "attached to a New Drug Submission, must be completed by a detailed statement as to its legal and factual basis and must be served on the patent holder". These requirements may be fulfilled in an out-of-sequence order and an NOA may be provided to a first person prior to the filing of an NDS. The NDS need not be in a particular form or have a specific content. When the allegation is eventually attached to the NDS, and if a detailed statement and an NOA have been given to the first person, all the requirements under the Regulations have been met. As a result, there is no substance to Merck Frosst"s procedural complaints. When all requirements set out in section 5 of the Regulations have been met, and only then, will the Minister be in a position to issue an NOC to the respondents. The content and status of an NOC application are inter partes matters reserved to the Minister and the applicants which are entirely irrelevant to the prohibition proceedings.
ISSUES
[19] The applicants raise the following issues in their submissions:
| Non-infringement |
| i) Will the lovastatin to be supplied by AFI to Apotex and formulated by Apotex into tablets for supply to the respondents Nu-Pharm and Pro Doc infringe the "380 Patent? |
| ii) Will the lovastatin made by AFI use the micro-organism which is contaminated by Aspergillus terreus? |
The above issue is the real and only serious issue put to the court.
| Regulatory compliance |
| iii) Have Nu-Pharm and Pro Doc complied with section 5 of the Regulations? More specifically, |
| (a) Did Nu-Pharm have a submission for a notice of compliance for lovastatin pending before the Minister at the time that it forwarded its notice of allegation dated April 13, 1997? And Did Pro Doc file a submission for a notice of compliance for lovastatin with the Minister? |
| (b) Did Nu-Pharm and Pro Doc file their respective allegation of non-infringement with the Minister? |
| (c) Did Nu-Pharm and Pro Doc file with the Minister proof of service of their respective notice of allegation on Merck Frosst? |
| iv) Are the respective Abbreviated New Drug Submission for lovastatin filed by Nu-Pharm and by Pro Doc valid cross-references in view of the legal challenge by Merck of the NOC granted to Apotex? |
ANALYSIS
Burden of proof
[20] In their submissions, the respondents suggest that the only issue for this Court is to determine whether the applicants have discharged their burden of establishing that Pro Doc"s and Nu-Pharm"s allegations of non-infringement are not justified. It is submitted that pursuant to subsection 6(2) of the Regulations, the burden of proof in a prohibition application rests on the applicant to establish to the Court"s satisfaction that the allegations are not justified. Consequently, prohibition proceedings should be dismissed where the applicant fails to establish that the generic"s allegations of non-infringement or invalidity have no merit. Relying upon Hoffmann-La Roche Ltd. et al. v. Canada (Minister of National Health and Welfare) et al. (1996), 67 C.P.R. (3d) 484 (F.C.T.D.); aff"d (1996), 70 C.P.R. (3d) 1 (F.C.A.), the respondents submit that if there remains a question that an allegation may be justified, then the applicant has failed to meet its burden and the application must be dismissed.
[21] In their reply, both oral and written, the applicants submit that the respondents" approach does not reflect the applicable legal test. I am in agreement with the applicants" position. In Bayer AG et al. v. Canada (Minister of National Health and Welfare) et al. (1996), 65 C.P.R. (3d) 203, Justice MacKay rejected the respondents" contention as follows at pages 213-215:
| Having considered the relevant evidence I turn to determination of the issue before the court. While both parties agree that the ultimate onus is on the applicants to persuade the court that the allegation of Apotex is not justified, the precise standard to be met is not agreed upon. For the applicants it is urged that the usual burden in civil cases, a balance of probabilities, is the standard to be met and they are entitled to the relief sought where on that balance the court is persuaded that the allegation by Apotex is not justified. For Apotex, it is urged that the purpose of s-s. 6(2) of the Regulations is to permit a patent owner to proceed summarily to protect its patent rights where the notice of allegation, whether it be of non-infringement or invalidity or other ground in accord with s. 5, has no merit. Unless the applicants can establish that the allegations have no merit, it is said, the prohibition application should be dismissed. This proceeding is not meant to establish infringement or invalidity. In Apotex' view, an application under s. 6 for an order of prohibition, contemplates a proceeding akin to a motion for summary judgment where the burden is on the moving party to demonstrate there is no genuine issue for trial. |
| Counsel for Apotex acknowledges that a similar submission was made to, but not accepted by, my colleague Madame Justice McGillis in Eli Lilly and Co. v. Apotex Inc. (1995), 91 F.T.R. 181 at pp. 188 to 189; 60 C.P.R. (3d) 206 (...) |
| In light of those comments of the Court of Appeal, and of the views expressed by McGillis J. in Eli Lilly, supra, in my opinion, the standard to be met by the applicants is to establish on the balance of probabilities drawn from the evidence adduced, that the allegation of Apotex is not justified. The standard proposed by counsel for Apotex, that the applicants establish there is no merit to the allegation by Apotex is not one I accept. That standard would require a standard of proof higher than the norm in civil proceedings.(...) |
[22] Also, in Hoffmann-La Roche, supra, relied upon by the respondents, Madame Justice Reed states the following with respect to the burden of proof at page 494:
| The applicant has the burden of proof. There has been some confusion as to whether that burden is: (1) proving that the drug if marketed will infringe; (2) proving that the respondent has not proven that the drug will not infringe; or (3) proving that the evidence which has been provided by the respondent does not justify the allegation. The weight of the jurisprudence to which I have been referred has now settled on the last. |
[23] The legal burden in prohibition proceedings pursuant to the Regulations was considered at length in Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (F.C.T.D.) (T-1502-98, December 18, 1998). Justice Campbell concurred with Justice Reed and reasoned as follows:
| C. What is Merck required to do to meet the legal burden? |
| The hurdle for Merck is to prove, on a balance of probabilities, that Apotex's allegation of non-infringement is not justified, which is a hurdle having a lower bar than the hurdle of proving infringement. |
| The degree of difficulty that Merck has getting over this hurdle depends on the weight to be given to the evidence presented by Apotex to support its allegation, and also the weight to be given to the evidence presented by Merck. If Apotex's evidence is found to be weak, then the legal burden on Merck may not be difficult to meet. My opinion is consistent with Reed J.'s as expressed in Hoffman-La Roche Ltd. et al. v. Canada (Minister of National Health and Welfare) et al. that the burden on the applicant is proving that the evidence which has been provided by the respondent does not justify the allegation. [See: Hoffman-La Roche Ltd. et al. v. Canada (Minister of National Health and Welfare) et al. (1996), 67 C.P.R. (3rd) 487 at 484; aff'd (1996), 70 C.P.R. (3rd) 1 (F.C.A.)] Accordingly, I do not accept Apotex's argument that the burden on Merck is to prove that the allegation has no merit. |
Compliance with the Regulations
[24] The applicants argue that the respondents have not complied with section 5 of the Regulations and that the Minister should be prohibited from issuing an NOC to the respondents Nu-Pharm and Pro Doc until such time as they comply with the Regulations. More specifically, it is submitted that there is no evidence in the present case that the respondents filed allegations of non-infringement with the Minister, that the respondents" submissions for an NOC was pending before the Minister when the respondent"s NOA dated April 23, 1997 was served on the applicant Merck Frosst, or that the respondents filed proofs a service with the Minister.
[25] The respondents submit that the applicants" assertion that they did not comply with the regulation is devoid of merit. There are no requirements with respect to the form or content of an NDS, which is solely intended to ensure compliance with the requirements of the Food and Drugs Act and related Regulations: Glaxo Canada Inc. v. Canada (1994), 53 C.P.R. (3d) 434 at 436 (F.C.T.D.). It is submitted that it is the NOA, not the NDS, which triggers the first person"s right to commence prohibition proceeding. The filing of an NDS, its content and the treatment it receives from Health Canada is irrelevant to prohibition proceedings. Also, it is submitted that the NDS does not form part of the judicial record and plays no substantive role in determining the outcome of a prohibition proceeding: Merck & Co. v. Canada (Minister of Health) , March 31, 1998, T-1273-97, (F.C.T.D.); Hoffmann-La Roche Ltd. v. Canada, supra.
[26] In the respondents" view, the Minister is in a position to issue an NOC to the respondents when, and only when, all three requirements - the allegation is attached to an NDS, and the first person is served with a detailed statement and a NOA - set out in section 5 of the Regulations - are fulfilled in any sequence: Apotex Inc. v. Canada (Minister of National Health) (1997), 76 C.P.R. (3d) 1 (F.C.A.); and Smithkline Beecham Pharma Inc. v. Canada (Minister of National Health) (1997), 77 C.P.R. (3d) 147.
[27] In response to the respondents" position, Merck Frosst submits that the Court of Appeal"s decision in Apotex , supra, to which the applicants refer to as Eli Lilly in their written submissions, has been erroneously interpreted and applied by the Trial Division in Smithkline, supra, under appeal in A-906-97, and Merck Frosst Canada Inc. v. The Minister of Health (March 31, 1998, T-1273-97) under appeal in A-276-98.
[28] In Apotex, supra, at pages 11 and 12, the Federal Court of Appeal held, inter alia, that the three step sequence set out in section 5 of the Regulations is directory and not mandatory, and that the requirements may be complied with in an out-of-sequence order:
| According to subsection 5(3) of the Regulations, an allegation with respect to a patented medicine must be attached to a new drug submission, must be completed by a detailed statement as to its legal and factual basis and must be served on the patent holder. The three requirements were met here, albeit in an order different from the one that was used to enumerate them in the provision. Indeed, the allegation was served before the NDS could be updated to refer to it, and prior to the filing with the Minister of a detailed statement as to its factual and legal basis. Apotex explained that, in abstaining from making full disclosure of its non-infringing process in the allegation itself, it was merely acting in accordance with the teachings of the Court in Bayer, supra, where it was said: |
| An applicant for a NOC alleging a different process cannot be expected to make full disclosure without a protective order. Confidentiality cannot be assured until there is a proceeding in court. |
| And in delaying to update its NDS, it was trying to avoid having its submission stripped of its rank among the submissions to be considered under the administrative procedure then applied by the Minister. |
| The only position taken by the Minister on this appeal was with respect to this procedural argument which incidentally Eli Lilly had not raised as such before the motions judge. In the Minister's submission, the three step sequence as set out in section 5 is merely directory, not mandatory. The Minister argues that the process cannot be vitiated by the sole fact that the requirements of section 5 were complied with in an out-of-sequence manner. I fully agree. The basic purpose of the Regulations is to provide a means by which patents are noted and protected from possible infringement at the instance of the patent-holder. The Regulations thus ensure that an NOC is not issued without a patent-holder having the opportunity to defend its patent. This opportunity is not diminished by the fact that the notice of allegation is given first, if, as here, it contains sufficient information for the patent-holder to determine whether to seek a prohibition order and the Court can immediately proceed to determine its justification. If the sequence is held to be mandatory, the process would simply have to be commenced anew and this would cause a purposeless delay in the marketing of a drug in cases where the allegation proves to have been justified. The intent of the Regulations shows that compliance with section 5 in a manner inconsistent with the sequence set out should not be considered a defect sufficient to vitiate the process. |
[29] The decision was followed and applied in Merck Frosst, supra, by Justice Wetston, and also in Smithkline, supra, where Justice McKeown considered, inter alia, in a prohibition application based on section 6 of the Regulations, whether the three requirements under section 5 must be met before the expiration of the 45 day period after service of an allegation. In Smithkline, no NDS had been filed with the Minister. Justice McKeown held that the NDS need not be filed before the NOA is served upon the first person or prior to the expiry of the 45 day period in section 6, and commented on the purpose of the NDS and the scope of prohibition proceedings as follows at pages 149 and 150:
| The applicants take the position that it is plain and obvious that, in the absence of a new drug submission (NDS), one cannot have compliance with the statutory requirements of the Regulations. The applicants submitted that the person who serves the allegation cannot be the second person referred to in the Regulations. In the absence of fulfilment of the statutory requirements by the alleged second person there is nothing to give the Federal Court of Canada jurisdiction. The applicants further submitted that the distinction between this case and the Eli Lilly case, supra, is that the statutory requirements have not been met here whereas they were met in the Eli Lilly case and it was strictly a question of whether they were met in sequence. I cannot agree with the applicants' submission in light of Eli Lilly, supra. I must look at what the allegation is in the application before me and what the Court is asked to consider in prohibition proceedings. In my view, these matters are distinguishable from the matters that the Minister must consider in issuing a NOC. |
| In the present case, the allegation is one of non-infringement of the applicants' patents by the respondents. The question that the Court will have to determine is whether or not there shall be infringement by the respondents and whether the infringement is justified. This is a totally separate matter from the Minister's considerations after receiving the NDS. In my view, giving the details of the non-infringement by the respondents gives the patentee everything it needs to know. The only linkage that exists between the non-infringement allegation and the NDS is that the allegation must be included as part of the NDS. The respondent is not alleging that there is something in its intended NDS that is non-infringing. The only allegation the respondent made is non-infringement and the allegation can be considered in a non-infringement proceeding. The patentee under subsection 6(1) has 45 days after being served with a Notice of Allegation to apply to the Court for an Order prohibiting the Minister from issuing a NOC until after the expiration of one or more patents that are the subject of an allegation. Subsection 6(2) of the Regulations makes it clear that the relief sought depends on whether the Court finds that "none of those allegations is justified". Accordingly, it is not a hypothetical case so long as there is an allegation. All section 6 requires is that there be an allegation and there is no mention of it in the NDS. It is the allegation, not the NDS, which forms the factual underpinning for any subsequent prohibition proceeding under the Regulations. |
[30] The applicants argue that Justice McKeown"s decision is incorrect in light of the Court of Appeal decision in Apotex, supra . On the facts, unlike in Apotex, supra, an NDS had not been filed at the date of the hearing in Smithkline, supra. Also, Justice McKeown"s finding that an NDS is irrelevant to proceedings under the Regulations is unsustainable in light of Justice"s Marceau"s comment in Apotex, supra, identifying the NDS as one of the three requirements stipulated in the Regulations. Further, it is submitted that Smithkline, supra, is at odds with prior jurisprudence which interpreted that the NDS, NOA and detailed statement were "inextricably linked". And lastly, it is submitted that Smithkline , supra, conflicts with the purpose of proceedings under the Regulations as stated by the Federal Court of Appeal in Pharmacia v. Canada (Minister of National Health and Welfare) (1994), 58 C.P.R. (3d) 207 at 216:
| "That decision must turn on whether there are allegations by the generic company sufficiently substantiated to support a conclusion for administrative purposes (the issue of a notice of compliance) that the applicant"s patent would not be infringed if the generic"s product is put on the market." |
[31] The applicants also take issue with the correctness of the decision in Merck Frosst Canada, supra, relied upon by the respondents. It is submitted that Justice Wetston in Merck Frosst, supra, erred in applying Apotex, supra, beyond its limited ratio decidendi, - that the three step sequence under the Regulations is directory, not mandatory - and failed to distinguish Apotex, supra, on its facts. In Merck Frosst, supra, it was argued that the respondents had failed to comply with the requirements set out in section 5 of the Regulations. As in this case, the applicants had argued that the NDS, NOA and detailed statement were inextricably linked, and presented arguments regarding the legislative objective, statutory interpretation and the nature of prohibition proceedings. In Merck Frosst, supra, Justice Wetston also considered arguments with respect to Marceau"s decision in Apotex , supra.
[32] In short, the applicants argue that the ratio decidendi in Apotex, supra, is limited to the fact that the three step sequence set out in section 5 of the Regulations is directory, not mandatory; and that Smithkline, supra, and Merck Frosst, supra, dealt with similar issues were incorrectly decided and should not be considered by this Court. With due respect, I disagree.
[33] In both decisions, Smithkline and Merck Frosst, supra, the facts underlying the issues and decision in Apotex, supra, were carefully considered by the Court, and I see no reason to doubt their correctness. Therefore, I am of the view that these decisions dispose of the regulatory issues raised by the applicants and I would agree with the respondents that it does not justify the intervention of the Court. On this point I would also refer to Justice Muldoon"s decision in Hoffman-La Roche Ltd. v. Canada (Minister of National Health and Welfare) (F.C.T.D.) (T-2730-97, December 22, 1998), which held that the Minister has jurisdiction to receive a notice of allegation even though there is no NDS at the date of the allegation. Justice Muldoon reviewed the requirements under section 5 of the Regulations and reasoned:
| The applicants argue that the Minister has jurisdiction under the Regulations, only to consider allegations for a drug described in the NDS filed by the generic company. If there be no NDS at the date of the allegation, there is, according to the applicant, no jurisdiction for Genpharm to make, or for the Minister to receive a notice of allegation. |
| However, the Federal Court of Appeal has already established that the notice of allegation does not initiate a judicial proceeding; rather it simply sets out the basis for a second person's (Nu-Pharm) contention that no claim for the medicine itself and no claim for its use would be infringed upon issuance of an NOC. Once the prohibition proceeding is commenced, the allegation then serves to define and limit the scope of the inquiry (Pharmacia Inc. v. David Bull Laboratories (Canada) Inc. (1994), 58 C.P.R. (3d) 207 (F.C.A); Hoffman-La Roche Ltd. v. Canada (Min. of National Health and Welfare) (1996), 70 C.P.R. (3d) 1 (F.C/A). |
| Unlike a notice of allegation, an NDS does not form part of the judicial record in an application for prohibition. That submission is directed to the Minister and initiates the administrative review process required by the Food and Drug Regulations as a condition precedent to the issuance of an NOC in respect of that submission. An NDS does not come before the Court and plays no substantive role in determining the outcome of a prohibition proceeding. |
| The applicants' argument has already dealt with this issue in Eli Lilly and Company v. Apotex Inc. (A-339-97) (September 29, 1997) leave to appeal to the Supreme Court of Canada refused on January 8, 1998, where Mr. Justice Marceau made pertinent comments; and they ought to be read with care. |
| From this, the Court of Appeal is stating that subsection 5(3) of the Regulations mandates that three requirements must met with respect to the allegation: (1) the allegation must be attached to a NDS, (2) the allegation must be completed by a detailed statement as to its legal and factual basis, and (3) it must be served on the patent holder. The sequence is irrelevant, as long as three conditions are met. |
| In this case, the respondents' notice of allegation and new drug submission were both dated November 3, 1997 with the notice of allegation served the following day. Further, while the applicants, in their supplementary memorandum dispute the fact that the NDS was filed on November 3, 1997, they admit that the NDS was filed on November 28, 1997. Accordingly, the first and the third requirements were met by the respondent, albeit in a different sequence from that mandated by the Regulations. |
[34] In my opinion, the Regulations stipulate that the requirements must be complied with before the Minister may issue an NOC. However, compliance with the requirements is a matter for the determination of the Minister as part of the administrative process leading to the issuance of an NOC. The Minister is in a position to issue an NOC where a NDS was filed with an allegation and where the first person was served with a NOA and a detailed statement. The Regulations do not prescribe the form or content of a NDS which has no relevance in a prohibition proceeding. In prohibition proceedings, the Court should only be concerned with the challenged allegations of non-infringement. Further, whether proof of service of the NOA upon the first person was filed with the Minister should not vitiate the process since it is intended to inform the Minister that the first person has been advised of the allegation in support of the NOC and is in a position to challenge it by means of prohibition proceedings. Where this has obviously been done, failure to file a proof of service, as may have been the case in these proceedings, should not vitiate the entire process.
[35] This is consistent with Parliament"s intent in enacting the Regulations as part of the new patent scheme, namely, to ensure that the Minister of Health attest to the health, safety and efficacy of drugs prior to the issuance of an NOC, and to give first persons protection over their proprietary rights by permitting them to challenge generic manufacturers" allegations of non-infringement.
Allegations of non-infringement
[36] The applicants argue that AFI"s production of lovastatin, from whom the respondents intend to obtain lovastatin, infringes the "380 Patent which relates to the production of lovastatin from the cultivation of a microfungus of the species Aspergillus terreus . The applicants argue that the microbe Coniothyrium fuckelii used by AFI could only produce commercially viable quantities of lovastatin if it were contaminated by the microbe Aspergillus terreus.
[37] This contention is based on the following arguments: production of lovastatin using the microbe Coniothyrium fuckelii is not commercially viable unless it is contaminated by Aspergillus terreus; AFI or its predecessor has used the patented strain Aspergillus terreus to commercialize the production of lovastatin, which cultures have been kept by AFI; AFI"s fermentation and sterilisation procedures are flawed and inadequate to prevent contamination which cannot be detected.
Commercial viability of lovastatin using Coniothyrium fuckelii
[38] The applicants introduced evidence by way of affidavit, namely the affidavit of Richard L. Monaghan, to show that lovastatin using Coniothyrium fuckelii is not commercially viable. In mid-1992, AFI engaged in activities pertaining to the making of lovastatin using the microbe Coniothyrium fuckelii, which led to the U.S. patent application in August 1993. A corresponding patent application was filed in Canada in August 1994. Based on Dr. Monaghan"s opinion, it is submitted that the low level of yields produced from Coniothyrium fuckelii disclosed in the U.S. patent and corresponding Canadian Application indicate that commercial production of lovastatin using the microbe Coniothyrium fuckelii is not viable. The process disclosed in the U.S. patent application and an example producing the best yield shows that the composition includes L-isoleucine and L-aspartic acid which is very expensive. Therefore use of such a medium would be a less economically viable one. Further, the process disclosed in the U.S. patent which produces the highest titer of lovastatin from Coniothyrium fuckelii does not indicate the growing period required, unlike other examples. Based upon Apotex"s patent application describing the best mode of the purported invention, commercial production of lovastatin using Coniothyrium fuckelii is not commercially viable.
[39] The respondents submit that this contention is not founded as it rests solely on the premise that the yields which Coniothyrium fuckelii produces have remained frozen at their August 1993 level when Apotex"s application was filed. Dr. Monaghan"s testimony should be considered in light of the respondents" cross-examination, whereby he testified that substantial improvement in yield may be achieved in a fairly short period of time. The respondents submit that the uncontradicted evidence before the Court shows that AFI discovered Coniothyrium fuckelii further to engaging in activities relating to potential non-infringing strains for the production of lovastatin. Experimentation took place in the fall of 1992 to spring 1993 leading to the preparation of a patent application. The patent application discloses that one of the experiments using Coniothyrium fuckelii reported a production of 430 mg per litre. As evidenced by David Cox, President of AFI, an intense program of experimentation relating to strain improvement, development of appropriate seed, and production media components, and determination of the optimum fermentation conditions and downstream process was undertaken in the spring of 1993 and is still active. M. Cox also confirmed that by December 1995, the development program had led to substantial increases in the titer of Coniothyrium fuckelii such that titers of 3.6 g/litre were achieved up to and including the 1500 litre scale.
[40] The respondents also submit that Dr. Monaghan"s testimony with respect to the acceptable benchmark for commercial production supports the respondents" conclusion that the production results achieved using Coniothyrium fuckelii show that lovastatin can be produced in commercial viable quantities using Coniothyrium fuckelii. Dr. Monaghan declared that a yield of about 1.5 to 2 g/l of lovastatin from fermentation of a micro-organism would indicate that the micro-organism has the potential for commercial production. The yield achieved by December 1995 of 3.6 g/litre is almost two times higher than the minimum standard he set as a benchmark for "potential for commercial production". Consequently, the respondents submit that Dr. Monaghan" admissions and Mr. Cox"s affidavit show that production of lovastatin using Coniothyrium fuckelii is commercially viable.
Contamination
[41] The Applicants submit that AFI or its predecessor carried on a development program relating to the production of lovastatin using Merck Frosst"s Aspergillus terreus with good results. It is submitted that over 40 development runs were carried to commercialize the production of lovastatin using Aspergillus terreus, which included the screening of Aspergillus to make the drug lovastatin. During the same period, after mid-1992, AFI engaged in activities pertaining to the making of lovastatin using Coniothyrium fuckelii, which led to Apotex"s U.S. patent. Dr. Monaghan testified that Aspergillus terreus can by its nature easily contaminate the air, vessels, equipment, rooms and facilities in which Aspergillus terreus fermentations are or have been carried out. Based on the respondents" affiant Mr. Pavagadhi, Production Group Leader for AFI, AFI"s production fermenter (14,000 l) was used on September 8, 1994, and their seed fermenters were used up to September 1994 to produce lovastatin using Aspergillus terreus .
[42] The respondents assert, as per Mr. Pavagadhi"s affidavit, that fermentation using Aspergillus terreus was an isolated fermentation which occurred on September 8, 1994, and that fermentation runs using Coniothyrium fuckelii did not start until October 1996. Further, Mr. Pavagadhi deposed in his affidavit that the seed fermenters which are used in the production area had only been used once to produce lovastatin from Aspergillus terreus in September 1994.
Sterilization procedures
[43] The applicants rely on Dr. Monaghan"s opinions to suggest that AFI"s sterilization procedures to prevent contamination and the measures to verify contamination of the micro-organism Coniothyrium fuckelii are ineffective, for the following reasons:
| (i) The sterilisation times and temperatures are less than adequate to ensure complete sterilisation; |
| (ii) The production fermenter (14,000 litre) is not subject to sterilisation to kill cycle between runs as this would increase the down time for the fermenter; |
| (iii) Caustic cleaning are not performed after each run of the fermenter unless there is a product change between fermentation runs. |
| (iv) AFI has acknowledged performing at least 50 large scale successive fermentation runs using Coniothyrium fuckelii and the same equipment. |
| (v) A number of small parts of the fermenter, to which leftover material from a fermentation run using Aspergillus terreus or contaminated thereby may attach, are not changed between fermentations unless there is a change over in product. |
[44] The respondents submit that Dr. Monaghan"s opinion should be given little or no weight given his admission in cross-examination that he has no hands-on experience with large scale fermentation and possible contamination. Dr. Monaghan works with shake flasks, and his opinions are based on what others have told him.
[45] The respondents argue that Mr. Pavagadhi fully answers the speculation engaged by Dr. Monaghan as follows:
| (a) After every ten runs, all fermenters go through a caustic cleaning where 0.2% weight per volume of sodium hydroxide is added and the contents are sterilized at 121.5 C for a minimum of thirty minutes. |
| (b) Where there was a changeover in product necessitating the use of a different micro-organism, a caustic cleaning would be carried out before fermentation of the new product, in addition to a thorough and complete sterilization by heat, and a replacement of all O-Rings and gaskets in the fermenters. |
| (c) Mr. Pavagadhi stresses in his affidavit that the production fermenter (14,000 l) was used only once on September 8, 1994 to produce lovastatin using Aspergillus terreus, in order to test the new fermenter and to produce biomass for research and development purposes. He also indicates that the seed fermenters were only used once to produce lovastatin from Aspergillus terreus in September 1994. |
| (d) In response to Dr. Monaghan"s allegations of contamination, Mr. Pavagadhi testified that since the fermentation in question in 1994, AFI has conducted many fermentations with other products, and the fermenters have been subjected to many caustic cleaning and heat sterilization cycles. Contamination from the fermentation which occurred in 1994 is not a possibility. Even if that were possible, carry over of the micro-organism Coniothyrium fuckelii , there was a time span of two years between the single runs using Aspergillus terreus in September 1994 and the next run using Coniothyrium fuckelii in the fall of 1996. After September 1994, the production fermenter was never used for Aspergillus terreus. |
[46] The applicants also assert that AFI"s testing methods to verify for contamination are flawed. AFI has never conducted an axenic test to determine what a contaminated culture looks like. In reply, the respondents state that Mr. Zarow confirmed that a testing protocol was in place at AFI in June of 1993.
[47] I have reviewed the affidavits submitted by the respective parties and have tried to assess the expert witnesses" credibility based on their experience or expertise. Given the nature of these proceedings, it is not for the Court to scrutinize every shred of evidence to determine whether there is an infringement. The nature of prohibition proceedings requires that a determination be made on whether, on a balance of probabilities, the allegations of non-infringement are justified. In my opinion, the applicants" challenge to the allegations of non-infringement is based on a speculative theory of contamination. This is clearly apparent from a reading of Dr. Monaghan"s affidavit evidence on cross-examination. The weight of evidence adduced by way of affidavit does not show that contamination more likely than not occurred. In this respect I am unable to find that the applicants have shown that the respondents" allegations of non-infringement, on a balance of probabilities, with respect to the intended use of lovastatin provided by AFI, is not justified.
CONCLUSION
[48] On a balance of probabilities, the weight of evidence adduced by the respective parties tends to show that the respondents" allegation of non-infringement is justified. In my view, the applicants" opposition to the allegation of non-infringement is largely based on a contamination theory which appears speculative. The weight of evidence adduced by way of affidavit does not show that contamination more likely than not occurred. In this respect I am unable to find that the applicant has shown that the respondents allegations of non-infringement with respect to the use of lovastatin provided by AFI, is not justified.
[49] The filing of an NDS or of a proof of service of an NOA upon the first person with the Minister are matters which fall in the realm of the administrative process leading to the issuance of an NOC by the Minister and are not relevant to prohibition proceedings. In prohibition proceedings, the Court is concerned with the allegations and a first person is in a position to challenge it where it was served with an NOA and a detailed statement. This argument does not justify the intervention of the Court.
[50] I dismiss both applications with costs in favour of the respondents. In that there was only one hearing, only one hearing fee shall be included in the costs.
"Max M. Teitelbaum"
J.F.C.C.
Ottawa, Ontario
March 26, 1999