Ontario Court Confirms Generic Drug Manufacturers Not Entitled to Unjust Enrichment

On January 15, 2013, the Ontario Superior Court of Justice (Ontario Court) granted a motion for partial summary judgment in Apotex Inc. v. Abbott Laboratories Limited.¹ Relying on Federal Court of Appeal precedent, the Ontario Court rejected Apotex’s claim of unjust enrichment as a result of Apotex being kept off the market through the operation of the Patented Medicines (Notice of Compliance) Regulations.

The Ontario Court's decision is further confirmation that the damages provision in section 8 of the Regulations is a "comprehensive scheme" and a "complete code" for the remedies available to generic drug manufacturers that allege that they have been kept off the market by an innovative company’s invoking the Regulations. This decision marks the Ontario Court’s first substantive consideration of the issue.

Background

After settling prohibition proceedings with Abbott and Takeda in September 2008, Apotex advanced a claim for damages under section 8 of the Regulations in Federal Court. It then discontinued the Federal Court claim and initiated a new claim in the Ontario Court, claiming both section 8 damages and unjust enrichment.

The basis for Apotex's unjust enrichment claim was that while the PM(NOC) application was pending, Abbott and Takeda earned profits that would not be fully accounted for by section 8 damages. Apotex claimed that the proceedings under the Regulations would result in a windfall that would enrich Abbott and Takeda, but Apotex would be correspondingly deprived. The Federal Court of Appeal had already rejected this argument,² but Apotex sought to try it again in the Ontario courts.

Federal Court of Appeal Precedent

Abbott and Takeda had previously unsuccessfully sought to strike Apotex’s claim for disgorgement. In denying that relief, Justice Whitaker (in a decision dated December 15, 2010)³ noted that there was no authority before him that precluded Apotex’s claim. Abbott and Takeda appealed that decision to the Divisional Court,⁴ where Justice Swinton concluded that it was not plain and obvious that the Regulations were a complete code for compensation.

However, by the time of Justice Quigley’s decision in the Ontario Court, the Federal Court of Appeal had released its decision in Apotex v. Eli Lilly. In that case, Apotex argued that its claim of unjust enrichment and entitlement to the disgorgement remedy was independent of section 8 and flowed from an independent cause of action arising from the wrongful invocation of the Regulations by the innovators. The Federal Court of Appeal disagreed, noting that Parliament had specifically considered the remedy available to generics in these circumstances and had intentionally excluded the possibility of the claim that Apotex was making by restricting the compensatory awards to "damages" (i.e., damages suffered by a generic kept off the market) when a prior version of the Regulations contemplated damages or profits.

The Ontario Superior Court’s Decision

Justice Quigley’s decision addressed two main issues: (1) Should the Ontario Court follow the Federal Court of Appeal’s decision in Apotex v. Eli Lilly? and (2) If not, could Apotex make out a claim of unjust enrichment?

On the first point, Justice Quigley held that, since the subject matter of the dispute arose from the PM(NOC) Regulations, the jurisdiction of the Ontario Court to grant relief to Apotex was no broader than the Federal Court’s. He found that, just as in Apotex v. Eli Lilly, Apotex had not alleged any cause of action independent from the operation of the Regulations (even though, in the case before him, it was asserted as a separate cause of action). Reviewing the analysis of the Federal Court of Appeal’s decision, heheld that that decision conclusively determined that the unjust enrichment claim was not available in the circumstances before him.

Justice Quigley went on to consider Apotex’s entitlement to assert unjust enrichment from first principles, independently of the decision of the Federal Court of Appeal. He determined that Apotex’s claim could not succeed. Although two parts of the tripartite test for unjust enrichment were satisfied – namely, the innovators’ enrichment and Apotex’s corresponding detriment – the third part of the test was not satisfied because there was a juristic reason for the enrichment and deprivation. Specifically, the scheme of the Regulations provided the juristic reason for the benefits that flowed to the innovators during the "patent hold" period, as well as (in the case before him) the settlement agreement.

The Ontario Court’s decision leaves open only a very narrow window for a generic to claim disgorgement of an innovator’s profits where the innovator’s conduct is egregious and amounts to a separate actionable wrong. However, the Ontario Court made clear that an innovator’s simply availing itself of the statutory procedures contained in the Regulations – and initiating prohibition proceedings, even unsuccessfully – did not constitute such a wrong.

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¹2013 ONSC 356.

² Apotex v. Eli Lilly Canada Inc., 2011 FCA 358, leave to appeal to the SCC denied.

³2010 ONSC 6909.

⁴2011 ONSC 3988 (Div. Ct.).

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