Thank you to Peter E.J. Wells, who has previously authored on this issue prior to his retirement from McMillan LLP and was involved in authorship of this piece.

When Lilly sued Apotex for infringement of eight of its patents related to the production of the antibiotic cefaclor in 1997, it likely anticipated the litigation would be hard fought. It likely didn't anticipate that it would still be litigating aspects of the case some 24 years later.

In an earlier bulletin2 of Justice Zinn of the Federal Court awarding Lilly compound interest on the damages awarded for infringement. This made a significant difference to the total award. On damages of approximately $31 million, the prejudgment interest calculated by compounding annually came to approximately $75 million, making the total award some $106 million. The validity of that award returned to the Federal Court of Appeal in 2021.

The 2018 Appeal of The Interest Award

Apotex appealed Justice Zinn's decision. It paid the amount of the judgment4 It appears from an examination of the recorded entries for appeal A-64-15 that Apotex did not seek a stay of the judgment pending its appeal.6 But after adopting a passage from S.M. Waddams in The Law of Damages, 3rd ed. (Aurora, Ont.: Canada Law Book, 1997, as cited at paragraph 37 of Bank of America8 The Court of Appeal also noted that Justice Zinn's reasons did not fully explain the basis on which he had arrived at the rate of interest that he used, nor had he fully explained the basis for not taking income tax effects into account.10 The Court of Appeal noted that following reconsideration of the amount of interest to which Lilly was entitled, should the new award be less than the last one, the Federal Court would need to determine the rate of interest applicable to the amount to be reimbursed by Lilly.

The Rehearing of the Interest Issue

The re-hearing on the interest issue took place in September 2019.12

In addressing the first question, Justice Zinn noted that he was required to deal with a hypothetical situation, in that he was required to assess the use that Lilly would have made of profits that it had not actually earned as a result of Apotex's infringement. Consequently, the calculation could not be exact.14

In proving the use it might have made of the extra profit, it was necessary that Lilly show that it could have and would have invested the funds in a way that they would have earned the requested rate of interest.16

In addressing the third question concerning the rate of interest to be used to compensate Apotex for any overpayment, Justice Zinn found that the question did not arise as he had concluded that his original award must stand.18

The Second Appeal of the Interest Award

Apotex appealed. The Court of Appeal released its decision on July 23, 2021.20

Conclusion

An award of compound interest in cases of protracted litigation serves to ensure that the plaintiff is not undercompensated and that defendants do not have an incentive to delay. As Justice Hughes put it, "A party should not be encouraged not to pay a Judgment simply because it is cheaper to let the interest accumulate."22

Whether it is possible to recover compound interest as damages will depend upon the basis of the claim, and the applicable legislation concerning interest awards in judgments. A claim for compound interest is certainly something that should be considered for inclusion in any claim for relief made in the originating document used to start a proceeding, particularly when the matter is unlikely to be resolved quickly.

Footnotes

1. Playing for Time, or Paying for Time? - The Danger of Delay in Litigation - McMillan Intellectual Property Bulletin March 2015

2. Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2014 FC 1254.

3. Apotex Inc. v. Eli Lilly and Company and Eli Lilly Canada Inc. 2018 FCA 217 at ¶162.

4. Section 50 Federal Courts Act, RSC 1985 c. F-7. The situation is similar in Alberta [Rules 14.48 and 14.68 Alberta Rules of Court AltaReg 124/2010] and British Columbia [Section 18, Court of Appeal Act, RSBC 1996 c. 77]. In Ontario an appeal automatically stays until the disposition of the appeal, any provision of the order for the payment of money, except a provision that awards support or enforces a support order [Rule 63.01 Rules of Civil Procedure, RRO 1990, Reg. 194]. In Québec, a properly initiated appeal stays execution of the judgment, except if provisional execution has been ordered or is provided for by law [Section 355Code of Civil Procedure, CQLR c C-25.01].

5. The fact that interest was accumulating at the rate of $23,463 per day after December 31, 2014 may have influenced this decision - see Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2014 FC 1254 at ¶136.

6. Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2014 FC 1254 at ¶118

7. Bank of America Canada v. Mutual Trust Co., [2002] SCR 601.

8. Apotex Inc. v. Eli Lilly and Company and Eli Lilly Canada Inc. 2018 FCA 217 at ¶158.

9. Apotex Inc. v. Eli Lilly and Company and Eli Lilly Canada Inc. 2018 FCA 217 at ¶162-163.

10. Apotex Inc. v. Eli Lilly and Company and Eli Lilly Canada Inc. 2018 FCA 217 at ¶164.

11. Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2019 FC 1463.

12. Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2019 FC 1463 at ¶18.

13. Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2019 FC 1463 at ¶48.

14. Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2019 FC 1463 at ¶15.

15. Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2019 FC 1463 at ¶43-69.

16. Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2019 FC 1463 at ¶70-72.

17. Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2019 FC 1463 at ¶73.

18. Eli Lilly and Company and Eli Lilly Canada Inc. v. Apotex Inc. 2019 FC 1463 at ¶77-79.

19. Apotex Inc. v. Eli Lilly and Company and Eli Lilly Canada Inc. 2021 FCA 149.

20. Supreme Court Act, RSC 1985 c. S-26, s. 58.

21. AstraZeneca Canada Inc. and AstraZeneca Aktiebolag v. Apotex Inc. and The Minister of Health2011 FC 663 at ¶5.

22. Bank of America Canada v. Mutual Trust Co., [2002] SCR 601 at ¶61.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2021