Canada: Federal Court Dismisses Limitation Period Defence In Patent Infringement Action Under Section 8.2 Of The PM(NOC) Regulations

The Federal Court recently released an important decision addressing for the first time the timeline that governs the right of action for "unlisted" patents under section 8.2 of the Patented Medicines (Notice of Compliance) Regulations (the "Regulations"). In Merck Sharp & Dohme Corp. v. Sandoz Canada Inc.¹ ("Merck"), Justice Southcott held that upon receiving a Notice of Allegation ("NOA"), a "first person" or owner of a patent may, at any time, bring an action for patent infringement with respect to a patent not listed on the Patent Register maintained by Health Canada. Such an action is not subject to the 45-day limitation period applicable to actions brought under section 6(1) of the Regulations for patents listed on the Patent Register.

Legislative Background

As background, having a patent listed on the Patent Register provides significant benefits to the holder of a drug Notice of Compliance ("NOC") (the "first person"). Importantly, Health Canada will not grant a NOC to a second person who makes reference to the first person's drug as part of its submission, where there is a patent listed on the Patent Register for that drug, unless and until the second person serves an NOA on the first person, setting out the reasons why the second person will not infringe the patent, or why the patent is invalid. At that point, under section 6(1) of the Regulations, the first person has a short limitation period of 45 days in which to bring an action for patent infringement against the second person, thereby engaging the regulatory linkage regime. If the first person commences an action within 45 days, the Minister of Health will not issue a NOC to the second person until the patent expires, unless the action is dismissed, or 24 months expires without the court finding the patent is valid and would be infringed. This is commonly referred to as the "24-month statutory stay" period.

But to be listed on the Patent Register and enjoy these material benefits, a patent must first meet specific regulatory requirements regarding timing of listing, subject-matter, and product specificity.

Prior to 2018, a first person had effectively no right of action against a second person with respect to a patent not listed on the Patent Register, at least until the second person received a NOC. Before receiving a NOC, the action was quia timet, and considered speculative as to whether any infringement could be imminent since it was not possible to know when, or even if, the second person would receive a NOC. The Court routinely struck such actions.

Section 8.2 was introduced as part of a major overhaul to the Regulations in 2018. It permits a first person to bring a patent infringement action against a second person who serves a NOA with respect to a particular drug submission, before the second person receives a NOC, with respect to patents not listed on the Patent Register. But in contrast to section 6(1), it does not expressly provide any time period within which such an action must be commenced. In Merck, the Federal Court was called upon to decide whether actions under section 8.2 are subject to the same 45-day limitation period as actions under 6(1).

The Facts of the Merck Case

The plaintiff, Merck, has three patents related to the drug sitagliptin, used to treat diabetes, listed on the Patent Register. The defendants in two separate proceedings, Sandoz and Pharmascience, each filed submissions with Health Canada for a NOC with respect to their own generic tablets of sitagliptin, and had served the plaintiff with NOAs addressing each of the three listed patents. Merck commenced patent infringement actions under section 6(1) of the Regulations within the 45-day limitation period, triggering the 24-month statutory stay period.

About three months later, the plaintiff commenced a new action against each defendant, asserting a fourth patent (Canadian Patent No. 2,518,435, the "435 Patent") related to the sitagliptin compound, which was not listed on the Patent Register. Merck alleged that the defendants' making, constructing, using or selling of their generic sitagliptin tablets would infringe the 435 Patent. The defendants in the two separate proceedings each brought motions to dismiss or strike Merck's action as being time barred. In their view, the proper interpretation of section 8.2 requires the same 45-day limitation period as that governing section 6(1) actions, and the plaintiff commenced its action 132 days after receiving the NOAs. Merck resisted the motions, and also requested the Court grant summary judgment on the issue, and dismiss the defendants' limitation period defences.

The Merck Decision

In support of their position, the defendants argued that, while the language of section 8.2 does not include any reference to a 45-day limitation period, it implies immediacy because the provision specifically affords a right of action "[o]n receipt of a notice of allegation", not "[o]n or after receipt of a notice of allegation". They contended that reading the provision in a way that would allow the first person to bring a section 8.2 action whenever it wishes after being served with an NOA would frustrate the legislative purpose of immediacy.² The defendants further submitted that the broad legislative purpose of facilitating timely market entry of generic products would not be achieved if late-appearing unlisted patents allow first persons to commence multiple and serial section 8.2 actions, and to delay adjudication of unlisted patent infringement claims beyond the pendency of the 24-month statutory stay even when related section 6(1) claims have been resolved.³

Merck argued that section 8.2 uses similar language requiring that "[o]n receipt of a notice of allegation...may...bring an action", but contains no express reference to a 45-day limitation period. This, it submitted, is in stark contrast to section 6(1) which expressly prescribes a 45-day limitation. Merck contended that the difference in language between the two sections clearly indicates that no limitation period was intended for actions under section 8.2. It argued that it would be unreasonable to conclude that the legislature would choose different language to achieve the same result in the same statute.⁴

The parties did not diverge on what relevant sources, authorities, passages of the Regulatory Impact Analysis Statement, and subsections of the Patent Act should guide the court's analysis.⁵ Rather, they diverged on how the omission of an express limitation period should be read in light of those sources and the underlying intent of the Regulations.⁶

Justice Southcott agreed with the defendants that "the legal uncertainty associated with unlisted patents is reduced sooner if the litigation surrounding those patents is commenced, and therefore resolved, promptly".⁷ However, he preferred Merck's interpretation of the legislative purpose surrounding section 8.2 and held that "there is no basis to conclude that the relevant legislative purpose requires reading down section 8.2 to include a 45 day limitation period".⁸

Justice Southcott afforded significant weight to a series of Merck's submissions focused on the specific features of the regulatory regime applicable to section 6(1) actions that are not similarly applicable to section 8.2 actions. He understood that those features compellingly supported the plaintiff's position that the legislative intent for expeditious resolution of section 8.2 actions is not tantamount to the requirement for timely resolution of 6(1) actions.⁹

Justice Southcott accepted Merck's submission that the 45-day limitation period for actions under section 6(1) is a function of the automatic 24-month stay of the grant of the NOC pursuant to section 7(1)(d) and that "[i]t is the automatic nature of the 24 month stay triggered by s 6(1) actions that creates the need for the 45 day limitation period." Actions under section 8.2, however, are not subject to the statutory stay. While a judicial stay may be potentially available, granting it is a discretionary decision based on the circumstances of the matter and whether the legal test for a stay is met. He concluded that the potential for a judicial stay outside of the Regulations does not require a similar limitation period and the same expeditious advancement for section 8.2 as do section 6(1) actions.¹⁰

Justice Southcott noted that another specific feature of the regulatory regime applicable to section 6(1) actions interconnected with the automatic stay is that such an action is automatically deemed a specially managed proceeding and subject to "provisions which require, or are designed to incentivize, diligence by the parties in conducting the proceeding" none of which equally applies to section 8.2 actions.

Justice Southcott also accepted Merck's point that section 6.01 of the Regulations prohibits any other actions against the generic for infringement of a patent that is the subject of an NOA and makes the actions under section 6(1) an exclusive remedy that must be claimed within 45 days unless there is a "reasonable basis" for why the first person did not bring the action within the 45 days. From this perspective, he concluded that there is no logic in the argument that section 8.2 actions should be subjected to an absolute bar following the expiry of 45 days when the same absolute bar does not apply to claims that may be saved by the "reasonable basis" exception.¹¹

Justice Southcott also agreed that the purpose of the NOA is to enable the first person to confidently decide within the 45-day limitation period whether to oppose the issuance of an NOC by bringing a section 6(1) claim and, because the NOA does not address unlisted patents, the first person would not be sufficiently equipped to commence a section 8.2 action within the same 45 days.¹²

Finally, Justice Southcott accepted that section 8.2 actions are not subject to the prohibition against joinder of any other action to a section 6(1) action to facilitate the expeditious resolution of section 6(1) actions within the 24-month stay period.¹³

In the end, Justice Southcott granted summary judgment in favour of Merck, and dismissed the defendants' limitation period defences.

Conclusion

Given the increasing number of actions being commenced under section 8.2,¹⁴ it will be interesting to monitor subsequent treatment of this decision.¹⁵ Justice Southcott's reasoning appears to be sound, and he expressly noted that his conclusion that section 8.2 does not include a limitation period "is not based on an analysis confined to a literal reading of that section" and is rather grounded on a broader analysis supported by the authorities "taking into account not only the text but also the context and legislative purpose of s 8.2 and the Regulations overall".¹⁶

Footnotes

1. Merck Sharp & Dohme Corp. v. Sandoz Canada Inc., and the companion case Merck Sharp & Dohme Corp. v. Pharmascience Inc., 2020 FC 1180.

2. Ibid at paras. 43-45.

3. Ibid at paras. 46-47.

4. Ibid at para. 41.

5. Ibid at paras. 36-37 and 53.

6. Ibid at para. 48.

7. Ibid at para. 57.

8. Ibid at para. 72.

9. Ibid at para. 68.

10. Ibid at paras. 61-62.

11. Ibid at paras. 64-65.

12. Ibid at para. 66.

13. Ibid at para. 67.

14 One action (discontinued) by Novo Nordisk re VICTOZA (liraglutide); one action by Bausch re JUBLIA (efinaconazole); four actions by Merck re JANUVIA (sitagliptin); one action by Merck re JANUMET (sitagliptin/metformin).

15 No appeal has yet been taken from the decision as of the date of this article.

16. Ibid at para. 77.

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