Federal Court of Appeal remits decision based on hearsay evidence back to the Federal Court for redetermination

Federal Court of Appeal remits decision based on hearsay evidence back to the Federal Court for redetermination

Pfizer Canada Inc v Teva Canada Limited, 2016 FCA 161

Stakes can be very high in patent lawsuits, compelling parties to include as much evidence in their favour as possible. However, as with any type of litigation, it is important for parties to ensure they are not relying on hearsay evidence.

In this decision, the Federal Court of Appeal (“FCA”) remitted a proceeding back to the Federal Court (“FC”) for redetermination after agreeing with the appellant, Pfizer Canada Inc. (“Pfizer”), that part of Teva Canada Limited’s (“Teva”) evidence in the FC decision was based on hearsay. [5]

Founded on this hearsay evidence, the FC had previously ordered Pfizer to pay a total of $92 million in damages and $32 million in pre-judgement interest. [2] Pfizer sought reversal of the FC decision on a number of bases, [3] but the FCA only agreed with the issue pertaining to the reliance upon the hearsay evidence at trial. [4]

Background: Evergreening Effexor XR

Pfizer had been marketing an extended release version of the drug venlafaxine hydrochloride (“venlafaxine”) under the name Effexor XR, which depended on Canadian Patent No. 1,248,540 (“the ‘540 Patent”). [19] The ‘540 Patent was due to expire on January 10, 2006 and was listed on the Patent Register against Effexor XR. [19] Around the same time, Teva wanted to market its generic version of venlafaxine and filed an abbreviated new drug submission, but Health Canada’s review of it stated that a Notice of Compliance would not be issued until requirements under the Patented Medicines (Notice of Compliance) Regulations (“PM(NOC) Regulations”) were met. [20] Just before the ‘540 Patent expired, Pfizer was issued Canadian Patent No. 2,199,778 (“the ‘778 Patent”), which covered the extended release formulation of venlafaxine, and listed it on the Patent Register against Effexor XR. [21]

Teva issued a Notice of Allegation on the same day as the ‘778 Patent’s registration, in which it accepted that its Notice of Compliance for its generic would not issue until the expiry of the ‘540 Patent, and alleged that the ‘778 Patent was invalid or would not be infringed by its generic. [22] Pfizer applied for a prohibition preventing the Minister of Health (“the Minister”) from issuing a Notice of Compliance to Teva, which triggered the automatic twenty-four month stay of the Minister’s ability to grant a Notice of Compliance to Teva. [22] The litigation that ensued showed that the ‘778 Patent was ineligible for listing on the Patent Register. [24] Teva was eventually granted its Notice of Compliance and launched its product into the Canadian market in 2007. [25]

The current decision stems from the premise that Pfizer should have neither listed the ‘778 Patent on the Patent Register for Effexor XR nor brought a prohibition application. Under section 8 of the PM(NOC) Regulations, Teva sought damages for having its version of venlafaxine being kept off the market. [26] This was precisely how Teva proceeded. [27]

Hearsay in the “but for” world

As the FCA had decided to remit the case back to the FC for determination, it focused primarily on the hearsay issue. This issue was specifically based on Pfizer’s submissions that the FC wrongly admitted and relied upon hearsay evidence in determining whether Teva could have supplied the market with its venlafaxine product at the relevant time and in sufficient quantities. [43] The FCA assessed the admissibility of hearsay evidence in constructing a “but for” world.

The FC had held that Teva must “show on the balance of probabilities that [it] was able to supply the market” in the “but for” world. [72] The FCA noted that this would include both the “could” and “would” have supplied analyses, [72] and even if the FC appreciated that Teva had to prove it could have supplied its version, it wrongly admitted hearsay evidence on this point. [75]

Teva’s witness had provided some first-hand evidence, but had also provided evidence based on things told to him by personnel at a drug manufacturing plant and other Teva employees who received that information from personnel at a manufacturing plant. [76] The FCA found that the former was hearsay, while the latter was double hearsay. [76] Pfizer asserted that the FC had improperly admitted hearsay evidence, which the FCA agreed with. [77]

In offering some guidance to the FC, [163] the FCA stated that the redetermination should decide upon whether and to what extent Teva is entitled to section 8 damages, and is to be conducted by applying proper legal principles to the admissible evidence in the record. [164] It was not, in the FCA’s view, enough to establish Teva would and could have access to sufficient supplies on the balance of probabilities by pointing only to sufficient manufacturing capacity a long time before the relevant time and the willingness of Teva’s manufacturer to keep Teva happy. [165]

Commentary

With patent litigation becoming increasingly complex, it is paramount that the fundamental principles of the court process be adhered to. This decision also touches on the controversial practice of evergreening of pharmaceutical drugs, a subject which has also garnered a fair amount of criticism worldwide. Many drug originators use evergreening as a means to prevent generic manufacturers from being able to bring their own versions onto the market. Excerpts from the FC decision suggest that evergreening Effexor XD was at the heart of this dispute, in that Pfizer should have known that Teva, or another generic manufacturer, would likely serve it with a Notice of Allegation, rather than waiting years to gain entry into the venlafaxine market.

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