Four’s a crowd: Federal Court of Appeal overturns order to trial of common issues

In a recent decision, the Federal Court of Appeal overturned the Federal Court’s order that the trial of common issues in separate actions under the Patented Medicine (Notice of Compliance) Regulations involving the same patent should be heard together¹. In doing so, the Court elaborated on section 6.02 of the PM(NOC) Regulations, which prohibits joinder of actions, and on the nature of the 24-month stay.

What you need to know

• Prohibition on joining actions. In this decision, the Federal Court of Appeal suggested that case management judges should not order that PM(NOC) actions brought by the same plaintiff against multiple defendants should progress and be tried together. This is a novel ruling, given that cases involving multiple parties have gone and will (presumably) go to trial.
• The 24-month stay period. The Court stated that the purpose of section 6.02 of the PM(NOC) Regulations, which prohibits the joining of other actions within the 24-month stay period (subject to limited exceptions), is to promote the expediency of a single subsection 6(1) action.
  • The Court also remarked in obiter that the PM(NOC) Regulations do not expressly require the Federal Court to determine PM(NOC) actions within a 24-month timeframe. While the 24-month timeline is a goal, it is not a requirement of the Court.

Background: Apotex, Teva and first-mover advantage

In August 2019, the Federal Court ordered that a trial of common issues be heard jointly in four separate actions involving Teva Canada Limited, Apotex Inc., Sandoz Canada Inc., and Taro Pharmaceuticals against Bayer Inc. All four actions stemmed from the service, on Bayer, of Notices of Allegation (NOA) in respect of the same patents under the PM(NOC) Regulations. The Prothonotary case managing the actions had previously ordered the common invalidity issues for the Teva and Apotex actions to be heard together. When “late-comers” Sandoz and Taro commenced their actions, the Federal Court ordered, in the context of a Case Management Conference, the common trial of common issues in all four matters.

Teva and Apotex appealed that order, arguing that a common issues trial with all four defendants would be prejudicial to them because they were the first to serve their NOAs while Sandoz and Taro had delayed. The PM(NOC) Regulations’ imposition of a 24-month stay beginning at the initiation of an action gave them a head-start that the Court had unfairly removed. They argued that the joining of actions therefore created prejudice by denying them “first-mover advantage.”

The first-mover advantage argument was rejected by both the Federal Court, and by the Federal Court of Appeal in this decision. However, the Federal Court of Appeal allowed the appeal and set aside the order on the basis that the order that the actions be heard together violated section 6.02 of the PM(NOC) Regulations.

Section 6.02 and the prohibition on joining actions

Section 6.02 of the PM(NOC) Regulations prohibits the joinder of actions within the 24-month stay period. The Federal Court had ordered that the four proceedings be heard together on common issues despite the section 6.02 limitation. In ordering that the common issues in the Teva and Apotex proceedings be heard together, the Prothonotary had held that 6.02 prohibited joining of entire actions (e.g., consolidation), but did not prohibit a common trial of some issues.

However, the Court of Appeal disagreed. Justice Nadon held that the prohibition in section 6.02 is sufficiently broad to prohibit multiple matters from being “brought together, connected, or brought into close association”².

The Court noted that the entire purpose of the section 6.02 prohibition is to promote the expediency of a single action within its own 24-month stay period. The factors that typically motivate joinder, such as efficiencies and cost savings resulting from the consolidation of actions, have no bearing in this context. Given that an order for common hearings could possibly result in individual actions exceeding their 24-month timeframes, a prohibition on joinder is “entirely consistent with the purpose of the prohibition”³.

The Federal Court of Appeal decision’s interpretation of section 6.02 has significant implications. This is the first time that section 6.02 has been analyzed at the Federal Court of Appeal. The decision holds that any order of joinder by the Federal Court that could add to effort and delay in a single action, or possibly extend the action beyond the 24-month timeline, would be prohibited by section 6.02.

It will be interesting to see what impact this decision will have on other proceedings. It may be that the Federal Court will, in the future, be unlikely to join any proceedings brought under the PM(NOC) Regulations unless all parties consent. This would certainly prevent the harm and complexity that may arise when a late-comer arrives. However, it would also represent a departure from current Federal Court practice: the Federal Court recently decided two actions against different defendants under the PM(NOC) Regulations with a common trial on issues of validity in Biogen Canada Inc. v Taro Pharmaceuticals Inc., 2020 FC 621.

Implications on the 24-month timeframe

The Federal Court of Appeal also noted in obiter dicta that the PM(NOC) Regulations do not explicitly require the Federal Court to determine subsection 6(1) actions within the 24-month stay period. It stated that Judges are not positively duty-bound to determine these actions before the 24-month stay is released; the 24-month timeline is a “goal”, rather than an “obligation” on the Court, though it should not be dealt with flippantly:

Although the 24-month period is [a highly relevant] consideration in making orders under Rule 105 [of the Federal Courts Rules], it is not the only factor to be considered. Otherwise, the Court would have to neglect many of its other litigants in favor of the pharmaceutical industry. If it was Parliament’s intention that the Federal Court decide these cases within the 24-month period, it should have said so.

This is a significant comment given the importance of having an action resolved within the 24-month timeline in subsection 6(1) actions. However, it is consistent with the text of the PM(NOC) Regulations as well as the Regulatory Impact Analysis Statement (RIAS) that states that “a proceeding can continue after the [24-month] bar on NOC issuance expires.”

Yet, the RIAS makes it clear that the timely resolution of actions by the Court is a priority, as it rejects the notion of an extension to the 24-month stay period, stating that “ongoing efforts by the Court to streamline litigation practices will help facilitate timely resolution of matters.” Similarly, the Federal Court’s practice direction, Guideline for Actions under the Amended PMNOC Regulations, dated September 21, 2017, states that parties must provide dates of mutual availability for a trial “to be completed no later than 21 months from the date of commencement of the action.”

While this decision implies that determining cases within the 24-month timeframe is not a hard-and-fast requirement within the PM(NOC) framework, in our view, the efforts of the Federal Court to facilitate and expedite proceedings will continue to be, not only an important consideration, but a continued goal. The effect of the current COVID-19 pandemic on timelines of cases under the PM(NOC) Regulations remains to be seen.

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¹ Teva Canada Limted v. Bayer et al., 2020 FCA 86

² Ibid. at para. 113

³ Ibid. at para. 124

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