Blakes Guide to Litigation and Dispute Resolution in Canada

The Federal Court of Canada
The PM(NOC) Regime
Commencing a PM(NOC) Proceeding and Implications
Case Management in PM(NOC) Proceedings
Exchange of Documents and Discovery Process
Pre-Trial Procedure
Trial
Section 8 Damages
Typical Timeline in PM(NOC) Proceedings
Helpful Links to Public Databases in Canada

In Canada, patent disputes are typically heard before the Federal Court of Canada (Federal Court), which has concurrent jurisdiction with respect to patent infringement matters and exclusive jurisdiction involving patent matters that seek to expunge, impeach or invalidate a patent.

PM(NOC) Proceedings, arising out of the Patented Medicines (Notice of Compliance) (PM(NOC)) Regulations, are a particular type of pharmaceutical patent action that follows a slightly different set of rules from regular patent actions. These differences have important implications for pharmaceutical companies who wish to assert or defend their patents in Canada.

1. The Federal Court of Canada

The Federal Court is a national court with jurisdiction over disputes involving federal matters that have been conferred on the Court by statute. This includes intellectual property (IP) disputes such as PM(NOC) Proceedings.

The Federal Court can convene anywhere in Canada, with judges regularly travelling to conduct hearings across the country. Registry offices are located in each of the major cities in Canada, ensuring accessibility for litigants nationwide.

In Canada, patent disputes, including PM(NOC) Proceedings, are adjudicated by a judge alone. IP disputes are often assigned to judges who are part of the Federal Court’s IP and Competition Chambers, which consist of judges with specialized knowledge and experience in IP law, including patent litigation. A list of the judges in these specialized chambers is available online.

2. The PM(NOC) Regime

2.1 Notices of Compliance, Drug Submissions, and the Patent Register

In Canada, the Minister of Health (Minister) is responsible for both: (1) issuing Notices of Compliance (NOCs) that approve market prescription medicines that have met regulatory requirements and (2) maintaining a register of patents (Patent Register) that are linked to approved “innovative” drugs.

For a pharmaceutical company to obtain an NOC for an innovative drug, it (the “first person” under the PM(NOC) Regulations) must file a New Drug Submission (NDS). A pharmaceutical company that files an NDS for an innovative drug may also submit to the Minister a list of patents in respect of the innovative drug for listing on the Patent Register. To be eligible to be included on the Patent Register, these patents must contain a claim for either the approved medicinal ingredient, a dosage form, a formulation or a use of the medicinal ingredient.

2.2 Notices of Allegation

If a pharmaceutical company instead wishes to obtain an NOC for a generic product that is based upon an innovative drug, it (the “second person” under the PM(NOC) Regulations) must file either an Abbreviated New Drug Submission (ANDS) for a “small molecule” drug (or an NDS for a biosimilar drug). The second person’s drug submission makes either a direct or indirect comparison to an innovative drug that has patents listed on the Patent Register.

The pharmaceutical company that has filed the ANDS that makes such a comparison must either (1) wait for the innovative drug’s patents on the Patent Register to expire or (2) seek to have its NOC issued faster by alleging that the patents on the Patent Register are either invalid, not infringed and/or improperly listed.

These allegations, including the legal and factual bases behind them, must be detailed in a Notice of Allegation (NOA) by the second person and served on the innovative drug manufacturer.

After being served the NOA, the first person then has 45 days to decide whether to commence an action in the Federal Court (i.e., a PM(NOC) Proceeding) against the second person that issued the NOA for patent infringement.

If the innovative drug manufacturer decides not to commence a PM(NOC) Proceeding, the Minister will then proceed to approve the second ANDS once it meets the typical requirements under federal law relating to issues such as safety, efficacy and quality. If this happens, and the Minister issues an NOC, the innovative drug manufacturer will be precluded, with limited exceptions, from ever asserting the patents it has on the Patent Register in a regular patent action against the second pharmaceutical company.

3. Commencing a PM(NOC) Proceeding and Implications

Actions under the PM(NOC) Regulations are procedurally similar to other civil actions in Canada. This includes the requirements for an initial exchange of pleadings by the parties. See section II, 1.2 “Pleadings.”

However, there are some important elements that are distinctive of a PM(NOC) Proceeding. Many of these elements followed in a PM(NOC) Proceeding have been incorporated into the process in the spirit of expediting and streamlining procedural timelines.

After being served the NOA by the second person, the first person has 45 days to commence an action in the Federal Court seeking a declaration that the making, constructing, using or selling of a drug in accordance with the second person’s drug submission would infringe the first person’s patent(s). Within 10 days of receiving the first person’s Statement of Claim, the second person must then file and serve a Notice of Intention to Respond indicating whether it intends to challenge the validity of the patent and/or impeach the patent.

Importantly, and unique to PM(NOC) Proceedings, once the first person commences an action in response to the NOA, the Minister is automatically stayed from issuing the second person its NOC for up to a total of 24 months (i.e., for the time that there are outstanding issues in the action). This stay can be lifted if the proceeding has ended or if the second person is successful. This automatic stay is in sharp contrast to the fact that preliminary or interim injunctions are essentially unavailable in regular patent infringement actions.

If the first person succeeds in the action and the patent is found to be infringed and valid, then a second person cannot have the NOC for that drug issued until the first person’s patent(s) has expired.

4. Case Management in PM(NOC) Proceedings

PM(NOC) Proceedings are special case-managed proceedings, and the Court plays an active role in providing direction on how the proceedings advance. See section II, 1.7 “Case Management and Pre-Trial Conferences.”

Once a PM(NOC) Proceeding is commenced by the first person, a case management judge is immediately appointed by the Chief Justice of the Federal Court. The case management judge is often an Associate Judge (formerly known as a “prothonotary”) of the Federal Court. Within seven days of receiving the Notice of Intention to Respond from the second person, the first person shall request an initial case management conference.

The initial case management conference will typically be held within 28 days of the date that the first person’s Statement of Claim was issued. The parties in the action are expected to quickly agree on a schedule of pre-trial steps and deadlines, including those pertaining to discovery and the exchange of evidence.

Upon trial dates being set, an initial trial management conference will be held by the parties to discuss issues leading to trial on a preliminary basis. A further trial management conference is usually held at least 30 days prior to trial to identify issues in dispute and set a trial schedule.

5. Exchange of Documents and Discovery Process

Overall, PM(NOC) Proceedings share the aspects of the discovery process of typical Canadian civil actions (see section II, 1.3 “Discovery Process”).

However, certain discovery practices are unique to PM(NOC) Proceedings, having been designed to enhance efficiency in the process. For example, parties in PM(NOC) Proceedings are encouraged to proceed with electronic exchange of documents. Examinations for discovery, (and any motions to compel answers not answered during discovery) are to be conducted efficiently. The Federal Court of Canada places limitations on the amount of discovery that is permitted in these types of proceedings. Each party is required to identify one corporate representative who can speak to relevant questions. Oral examinations for discovery of that corporate representative are generally limited to one day for every week of trial per party to a maximum of four days, while any follow-up discovery (if any) is limited to one day per party.

Defendants commonly examine the inventors of the patent(s) at issue. However, unlike patent litigation in the United States, third-party examinations are not common.

Further, in a PM(NOC) Proceeding, parties are encouraged to exchange documents early, before the formal discovery process begins. Before the action has even commenced, a second person must deliver relevant documents, such as the relevant portions of its ANDS and NOA. The first person must deliver relevant documents pertaining to its invention along with its Statement of Claim.

6. Pre-Trial Procedure

6.1 Pre-trial Deadlines in PM(NOC) Proceedings

Parties in PM(NOC) Proceedings will abide by a mutually agreed upon pre-trial schedule. The Federal Court provides the parties with a PM(NOC) Timetable Checklist, which details these steps. This schedule includes discovery and evidence deadlines, such as for:

serving voluntary productions and affidavits of documents
requesting particulars
discovery plans and completing examinations for discovery
charts that highlight the claims of the patent(s) at issue and the parties’ positions on claims construction
a joint statement of issues
an agreed statement of facts and joint book of documents
demonstrative evidence at trial (exchanged at least 30 days before trial)
the duration and venue for trial

Parties also agree on deadlines to adduce expert evidence ahead of trial. This includes exchanging in-chief and responding expert reports.

6.2 Motions and Interlocutory Decisions in PM(NOC) Proceedings

As in any civil action, parties may bring interlocutory motions to seek specific relief from the Court before trial (see section II, 1.4 “Interlocutory Motions and Applications”). Typical motions in PM(NOC) Proceedings include those relating to the establishment of protective or confidentiality orders, the production of relevant materials that are referenced within drug submissions or invention documents, and leave to file reply expert reports.

In a PM(NOC) Proceeding, if an interlocutory motion decision made by the case management judge or trial judge is appealed, the appeal must be made directly to the Federal Court of Appeal, regardless of whether that judge was an Associate Judge.

Parties may also bring motions for summary judgment and summary trial to dispose of the action without trial. However, these summary dispositions are rare in the patent litigation context. See section II, 1.5.3 “Summary Judgment and Summary Trials.”

In Canada, claim construction issues are generally not addressed until trial, unless they are raised in a summary judgment or summary trial. Unlike the United States, Canada does not have a procedure equivalent to a “Markman hearing” that specifically resolves claim construction disputes before trial.

7. Trial

7.1 Trials in PM(NOC) Proceedings

As in all civil actions in Canada, if the PM(NOC) Proceeding advances to trial, then the basic aspects of trial procedure are followed (see section II, 1.9 “Trials”). A trial in a PM(NOC) Proceeding is typically 10 days, including expert and fact evidence. Unlike patent trials in the United States, PM(NOC) trials are always heard by a judge alone, without the option for a jury trial.

A large portion of trials in PM(NOC) Proceedings are dedicated to conducting examinations-in-chief and cross-examinations of experts on the reports that they submitted. As expert reports are exchanged ahead of trial, the first time that experts are typically examined in a PM(NOC) Proceeding is at trial. Parties often also examine any fact witnesses who have submitted affidavits adducing evidence.

Unique to Canadian PM(NOC) Proceedings, the first person must present and conclude its entire case, including any defenses related to invalidity, if the second person has filed a counterclaim. This requirement applies even though the burden of proving invalidity rests with the second person.

In the case of PM(NOC) Proceedings, the written judgement must be delivered within 24 months of when the action was commenced by the first person. Trial must be completed no later than 21 months from the commencement of the proceeding.

7.2 Costs

The successful party often recovers a portion of the expenses incurred in the case (see section II, 1.8 “Costs”). It is common for the parties to dispute costs after the disposition of the infringement and validity issues in a PM(NOC) Proceeding. Sometimes, costs are calculated in accordance with the tariffs set out in the Federal Courts Rules. However, more recently, Courts have also commonly awarded lump sum costs that consist of 25-50% of the successful party’s legal fees and all its disbursement expenses.

8. Section 8 Damages

As the second person is held off the market until the disposition of the PM(NOC) Proceeding, if the second person is successful in the action, section 8 of the PM(NOC) Regulations provides a framework for compensating the generic second person for the delay in entering the market (section 8 damages).

Section 8 damages typically cover the period from the time the second person would have received the NOC (but for the existence of the PM(NOC) Proceeding) to the time when it could legally enter the market after the proceeding concludes.

A second person may commence an action for section 8 damages after the Court ultimately determines in a PM(NOC) Proceeding that the first person’s patent is not infringed by the second person. Damages typically compensate the lost profits or sales the second person would have made had it entered the market earlier. Section 8 damages are calculated based on a hypothetical “but-for” world where the generic could have launched its product earlier but for the 24-month statutory stay invoked by the first person’s action.