Canada: Non-infringing alternative defence clarified

The Federal Court of Canada recently issued its public judgment and reasons concerning the financial compensation to be paid to AstraZeneca as a result of Apotex's infringement of the omeprazole formulation patent (AstraZeneca's Losec) in AstraZeneca Canada Inc v Apotex Inc, 2017 FC 726. During the liability phase of these proceedings, the Federal Court of Canada had found the omeprazole formulation patent valid and infringed by Apotex (AstraZeneca Canada Inc v Apotex Inc, 2015 FC 322).

In Canada, alternate remedies may be sought upon a finding of infringement. A successful plaintiff may be entitled to elect either their "damages" or an "accounting of profits" of the defendant. Here, AstraZeneca elected an accounting of Apotex's profits.

Many of the quantification issues relating to Apotex's profits had been settled between the parties before trial. The Court addressed the outstanding issues, including whether Apotex had an available non-infringing alternative (NIA).

Under Canadian law, a NIA defence is available to potentially reduce an innovator's claim to damages or to the recovery of the infringer's profits. In accounting of profits, it is incumbent on the defendant to prove costs, thus establishing the net profits from infringing sales. Similarly, the defendant must prove real net profits from infringing use by establishing on a balance of probabilities what costs would have been had the most likely NIA been used. The defendant has an onus to prove that a NIA was available and at what cost.

In the present case, Apotex failed to prove on a balance of probabilities that it could and would have sold a NIA at any time during infringement. Apotex's NIA defence was based on a number of formulations it designed for the purpose of the quantification trial (in-house NIAs), and in the alternative, product from third party foreign suppliers (third-party NIAs).

The Court held that an infringer's failure to produce a viable NIA formulation in the real world is not a threshold bar to the NIA defence, and a NIA need not be foreseeable to the infringer at the time of infringement. Rather, the question to be answered is: could the infringer have made the product had it attempted to do so at the relevant time and would the infringer have sold the product on some reasonable financial basis in substitution for the infringing product? Where there is brazen infringement, an inference may arise that no viable substitute was available.

In determining whether NIAs were available to Apotex and were true non-infringing substitutes, the Court assessed whether the in-house NIAs would be bioequivalent to Losec, had sufficient stability, and would have obtained regulatory approval. None of the asserted NIAs was shown to be approvable or commercially viable. Regarding the third-party NIAs, the Court found that these would only have been pursued after Apotex had tried and failed to produce and commercialise any in-house formulation.

Thus, while Apotex was unsuccessful in asserting a NIA defence, assessing the availability of a NIA remains an important consideration in patent infringement remedies in Canada.

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