Judgments

[1997] 1 F.C. 3

A-101-94

Nu-Pharm Inc. (Appellant) (Respondent)

v.

Eli Lilly and Company and Eli Lilly Canada, Inc. (Respondents) (Applicants)

and

The Minister of National Health and Welfare (Respondent) (Respondent)

Indexed as: Eli Lilly and Co. v. Nu-Pharm Inc. (C.A.)

Court of Appeal, Stone, Linden and McDonald JJ.A. —Toronto, February 28; Ottawa, June 27, 1996.

Patents — Patented medicines — Notice of compliance — Appeal from order prohibiting Minister of National Health and Welfare from issuing notice of compliance to appellant until expiry of first respondent’s patent — Appellant alleging under Patented Medicines (Notice of Compliance) Regulations, s. 5(1)(b)(iv) making, constructing, using or selling capsules of fluoxetine hydrochloride not infringing patent — Respondents applying for prohibition order under Regulations, s. 6 as allegation not providing detailed statement of legal, factual basis — S. 6 proceedings not action for infringement of patent — Burden of proof on respondents — Statement submitted by appellant not detailed statement required under Regulations.

Evidence — Patented medicines notice of compliance proceedings — Types of burden of proof in civil, criminal cases — “Persuasive (or legal) burden” — “Evidential burden” — Evidential burden under relevant Regulations — Legal burden to show facts alleged in notice of allegation not true — Whether common law imposing burden of showing process not infringing patent — Common law presumption: Court will infer facts adverse to party’s interest if failing to lead evidence of fact in better position to establish.

This was an appeal from a Trial Division order prohibiting the Minister of National Health and Welfare from issuing a notice of compliance to the appellant for its 10 mg and 20 mg capsules and its 20 mg/5 ml oral suspensions of fluoxetine hydrochloride until the expiry of Canadian Patent No. 1051034 owned by the first respondent. In a letter dated May 5, 1993, the appellant alleged, under subparagraph 5(1)(b)(iv) of the Patented Medicines (Notice of Compliance) Regulations, that the making, constructing, using or selling of capsules of fluoxetine would not infringe the patent in question. Shortly after, the respondents applied for an order prohibiting the Minister from issuing a notice of compliance, under subsection 6(1) of the Regulations, on the basis that there was no detailed statement of the legal and factual basis for the allegation contrary to paragraph 5(3)(a) of the Regulations. The Motions Judge held that the application under subsection 6(1) of the Regulations is an action for infringement of a patent, that section 55.1 of the Patent Act creates a presumption in favour of the respondents and that this presumption had not been rebutted by the appellant. The issue on appeal was whether the Motions Judge erred in coming to these conclusions.

Held, the appeal should be dismissed.

An action for infringement of a patent is a well-known and well-defined cause of action in Canadian patent law. Proceedings under section 6 of the Regulations neither fit the description of an action for infringement nor an infringement proceeding. Although the purpose of section 6 is to prevent the infringement of a patent, it is not a proceeding for a declaration of infringement of a patent pursuant to sections 54 and 55 of the Patent Act, but a proceeding for an order of prohibition against the Minister. Therefore, the presumption created by section 55.1 of the Patent Act has no application in the proceedings brought pursuant to section 6 of the Regulations and was of no assistance to the respondents. Neither could the section 6 proceedings be regarded as an action for infringement because of Article 1709(11) of the North American Free Trade Agreement, which requires each party to NAFTA to place on the defendant the burden of establishing that the allegedly infringing product was made by a process other than the patented process in any infringement proceeding, and the amended section 55.1 of the Patent Act.

At common law, in relation to a civil or criminal proceeding, there are two types of burdens of proof. The first is commonly referred to as the “persuasive burden” or the “legal burden” which, in a civil case, consists of establishing a case to the civil standard of proof. The other is the “evidential burden” which is the burden of putting an issue in play. The law as so developed by the Court places the legal burden on the respondents to show that allegations of fact contained in the notice of allegation are not true. The Motions Judge was correct in concluding that the respondents had the obligation of discharging that burden. While the respondents had to satisfy the legal burden of proof, they were to do so on the basis that the appellant has itself fulfilled the requirements of the Regulations including the submission of a “detailed statement”. The statement submitted by the appellant in its letter of May 5, 1993 could not be considered as a detailed statement in compliance with the Regulations. It asserted that its process would not infringe the patent but provided no evidence to that effect beyond the bald assertion. The required information, which lay peculiarly within the appellant’s knowledge, was not accessible by the respondents pursuant to Rules 1612 and 1613. The respondents have established that the appellant’s subparagraph 5(1)(b)(iv) allegation was not justified and that they were entitled to an order prohibiting the Minister from issuing a notice of compliance.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Federal Court Act, R.S.C., 1985, c. F-7, ss. 18(3) (as am. by S.C. 1990, c. 8, s. 4), 18.1 (as enacted idem, s. 5).

Federal Court Rules, C.R.C., c. 663, RR. 419, 1203(1), 1402(8) (as enacted by SOR/79-57, s. 23; 90-846, s. 23; 92-43, s. 17), 1603 (as enacted by SOR/92-43, s. 19; 94-41, s. 15), 1606 (as enacted by SOR/92-43, s. 19), 1607 (as enacted idem), 1612 (as enacted idem), 1613 (as enacted idem).

North American Free Trade Agreement Between the Government of Canada, the Government of the United Mexican States and the Government of the United States of America, December 17, 1992, [1994] Can. T.S. No. 2, Art. 1709(11).

North American Free Trade Agreement Implementation Act, S.C. 1993, c. 44, ss. 3, 193.

Patent Act, R.S.C., 1985, c. P-4, ss. 39(2) (repealed by S.C. 1993, c. 2, s. 3), 54, 55 (as am. by R.S.C., 1985 (3rd Supp.), c. 33, s. 21; S.C. 1993, c. 15, s. 48), 55.01 (as enacted idem), 55.1 (as enacted by S.C. 1993, c. 2, s. 4; c. 44, s. 193), 55.2 (as enacted by S.C. 1993, c. 2, s. 4), 56 (as am. by R.S.C., 1985 (3rd Supp.), c. 33, s. 22; S.C. 1993, c. 44, ss. 194, 199), 57, 58, 59, 60.

Patented Medicines (Notice of Compliance) Regulations, SOR/93-133, ss. 4, 5(1),(3), 6.

CASES JUDICIALLY CONSIDERED

APPLIED:

Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1994), 55 C.P.R. (3d) 302; 169 N.R. 342 (F.C.A.); affg (1994), 53 C.P.R. (3d) 368; 75 F.T.R. 97 (F.C.T.D.); Eli Lilly and Co. v. Novopharm Ltd. (1995), 60 C.P.R. (3d) 417 (F.C.T.D.).

CONSIDERED:

Bayer AG v. Canada (Minister of National Health and Welfare) (1993), 51 C.P.R. (3d) 329; 163 N.R. 183 (F.C.A.); David Bull Laboratories (Canada) Inc. v. Pharmacia Inc., [1995] 1 F.C. 588 (1994), 58 C.P.R. (3d) 209; 176 N.R. 48 (C.A.); AB Hassle v. Canada (Minister of National Health and Welfare) (1994), 55 C.P.R. (3d) 323; 81 F.T.R. 21 (F.C.T.D.); Bayer AG v. Canada (Minister of National Health and Welfare) (1995), 60 C.P.R. (3d) 129; 179 N.R. 122 (F.C.A.); Pharmacia Inc. v. Canada (Minister of National Health and Welfare) (1995), 64 C.P.R. (3d) 450; 191 N.R. 157 (F.C.A.); Pharmacia Inc. v. Canada (Minister of National Health and Welfare) (1995), 60 C.P.R. (3d) 328; 92 F.T.R. 253 (F.C.T.D.); Blatch v. Archer (1774), 1 Cowp. 63; 98 E.R. 969; Pleet v. Canadian Northern R.W. Co. (1921), 50 O.L.R. 223; 64 D.L.R. 316; 26 C.R.C. 227 (C.A.); Hoffmann-La Roche Ltd. v. Apotex Inc. (1984), 47 O.R. (2d) 287; 1 C.P.R. (3d) 507 (C.A.); leave to appeal to S.C.C. refused [1985] 1 S.C.R. v; Hoffmann-La Roche Ltd. v. Canada (Minister of National Health and Welfare) (1996), 67 C.P.R. (3d) 484 (F.C.T.D.).

REFERRED TO:

Eli Lilly and Co. v. Novopharm Ltd. (1995), 60 C.P.R. (3d) 163; 90 F.T.R. 241 (F.C.T.D.); National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324; (1990), 74 D.L.R. (4th) 449; 45 Admin. L.R. 161; 114 N.R. 81; Robins v. National Trust Co., [1927] A.C. 515 (P.C.); Rhesa Shipping Co SA v. Edmunds, [1985] 2 All E.R. 712 (H.L.); Pharmacia Inc. v. Canada (Minister of National Health and Welfare) (1994), 58 C.P.R. (3d) 207; 175 N.R. 334 (F.C.A.); Canadian Northern Quebec R. Co. v. Pleet, [1923] 4 D.L.R. 1112; (1921), 26 C.R.C. 238 (S.C.C.).

AUTHORS CITED

Sopinka, J. et al. The Law of Evidence in Canada. Markham, Ont.: Butterworths, 1992.

APPEAL from a Trial Division order ((1994), 54 C.P.R. (3d) 145; 78 F.T.R. 27) prohibiting the Minister of National Health and Welfare from issuing a notice of compliance to the appellant for its 10 mg and 20 mg capsules and its 20 mg/5 ml oral suspensions of fluoxetine hydrochloride until the expiry of Canadian Patent No. 1051034 owned by the first respondent. Appeal dismissed.

COUNSEL:

Harry B. Radomski and Richard Naiberg for appellant (respondent).

David Watson, Q.C. and Anthony G. Creber for respondents (applicants).

No one appearing for respondent Minister of National Health and Welfare.

SOLICITORS:

Goodman Phillips & Vineberg, Toronto, for appellant (respondent).

Gowling, Strathy & Henderson, Ottawa, for respondents (applicants).

Deputy Attorney General of Canada for respondent Minister of National Health and Welfare.

The following are the reasons for judgment rendered in English by

Stone J.A.: This is an appeal from an order of the Trial Division of February 23, 1994 [(1994), 54 C.P.R. (3d) 145], made pursuant to subsection 6(2) of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 (the Regulations), prohibiting the Minister of National Health and Welfare from issuing a notice of compliance to the appellant for its 10 mg and 20 mg capsules and its 20 mg/5 ml oral suspensions of fluoxetine hydrochloride (fluoxetine HCL) until the expiry of Canadian Patent No. 1051034, issued March 20, 1979, (the patent) which is owned by the first respondent. The Regulations were made pursuant to subsection 55.2(4) of the Patent Act, R.S.C., 1985, c. P-4 which was added to that statute by virtue of section 4 of the Patent Act Amendment Act, 1992, S.C. 1993, c. 2.

In April 1993, the first respondent submitted three patent lists to the Minister in accordance with section 4 of the Regulations in respect of the above-mentioned formulations of fluoxetine HCL. The patent appears on these lists. On May 11, 1993, the second respondent received a letter from the appellant dated May 5, 1993, which reads in part:

RE: Fluoxetine HCl Capsules 10 mg, Fluoxetine HCl Capsules 20 mg and Fluoxetine HCl Liquid 20 mg/5 mL

This is a Notice of Allegation pursuant to Section 5(3)(b) of the Patented Medicines (Notice of Compliance) Regulations.

With respect to both patents 1051034 and 1114841, we allege that no claim for the Fluoxetine HCl itself and no claim for the use of Fluoxetine HCl would be infringed by the making, constructing, using or selling by us of capsules or liquid containing Fluoxetine HCl.

The legal and actual (sic) basis for the aforesaid allegation is as follows.

Patent 1051034

This patent has claims for Fluoxetine HCl when prepared by processes claimed. Until such time as this patent has expired, we will limit our purchases of Fluoxetine HCl to material made by processes other than those of this patent, so that the material we use will not infringe. We hereby so undertake. This patent has no claim for the use of Fluoxetine HCl.

Patent 1114841

This patent has no claim for Fluoxetine HCl itself or for the use of Fluoxetine HCl.

Only the patent is in controversy in these proceedings.

It is useful at this juncture to set out the relevant portions of the Regulations governing the making by a person in the position of the appellant of an “allegation” and of a “detailed statement”. Paragraphs 5(1)(b) and 5(3)(a) and (b) read:

5. (1) Where a person files or, before the coming into force of these Regulations, has filed a submission for a notice of compliance in respect of a drug and wishes to compare that drug with, or make a reference to, a drug that has been marketed in Canada pursuant to a notice of compliance issued to a first person in respect of which a patent list has been submitted, the person shall, in the submission, with respect to each patent on the patent list,

…

(b) allege that

(i) the statement made by the first person pursuant to paragraph 4(2)(b) is false,

(ii) the patent has expired,

(iii) the patent is not valid, or

(iv) no claim for the medicine itself and no claim for the use of the medicine would be infringed by the making, constructing, using or selling by that person of the drug for which the submission for the notice of compliance is filed.

…

(3) Where a person makes an allegation pursuant to paragraph (1)(b) or subsection (2) the person shall

(a) provide a detailed statement of the legal and factual basis for the allegation; and

(b) serve a notice of the allegation on the first person and proof of such service on the Minister.

The appellant submits that the letter of May 5, 1993 met the requirements of paragraph 5(3)(a) of providing a “detailed statement of the legal and factual basis” for the allegation made pursuant to subparagraph 5(1)(b)(iv).

Section 6 of the Regulations entitled the respondents to apply to a court for an order prohibiting the Minister from issuing a notice of compliance to the appellant. That section specifies the circumstances under which a court may grant prohibition. It reads:

Right of Action

6. (1) A first person may, within 45 days after being served with a notice of an allegation pursuant to paragraph 5(3)(b), apply to a court for an order prohibiting the Minister from issuing a notice of compliance until after the expiration of one or more of the patents that are the subject of an allegation.

(2) The court shall make an order pursuant to subsection (1) in respect of a patent that is the subject of one or more allegations if it finds that none of those allegations is justified.

(3) The first person shall, within the 45 days referred to in subsection (1), serve the Minister with proof that an application referred to in that subsection has been made.

(4) Where the first person is not the owner of each patent that is the subject of an application referred to in subsection (1), the owner of each such patent shall be made a party to the application.

The application by the respondents which lead up to the prohibition order was launched on June 23, 1993 by way of an originating notice of motion in the Trial Division pursuant to section 6 of the Regulations. By paragraph 5 of the originating notice of motion they gave the appellant notice as follows:

5. Nu-Pharm alleged in the said Notice of Allegation that the fluoxetine hydrochloride it will utilize will not be made by a process covered by Canadian Letters Patent 1,051,034. No detailed statement of the legal and factual basis for the allegation, is set out in the said Notice of Allegation and none has been provided to Eli Lilly Canada Inc.

In paragraph 6 of the notice the respondents also asserted that:

6. None of the allegations made by Nu-Pharm in the said Declarations re: patent lists are justified for the following reasons:

(a) Fluoxetine hydrochloride is a new substance within the meaning of Section 55.1 of the Patent Act. The fluoxetine hydrochloride to be sold by Nu-Pharm is of the same chemical composition and constitution as the fluoxetine hydrochloride described and claimed in Canadian Letters Patent 1,051,034 and the Applicant Eli Lilly Canada Inc. hereby refers to and relies on section 55.1 of the Patent Act.

(b) the process used to make the fluoxetine hydrochloride to be sold by Nu-Pharm is within the scope of the claims of Canadian Letters Patent 1,051,031 [sic] and any manufacture, use, import or sale of fluoxetine hydrochloride by Nu-Pharm in Canada of its 10 mg and 20 mg/5 mL oral suspension of fluoxetine hydrochloride infringes the said letters patent.

The application was supported by two affidavit evidence in compliance with Rule 1603 which appears in Part V.1 of the Federal Court Rules [C.R.C., c. 663 (as enacted by SOR/92-43, s. 19; 94-41, s. 15)]. The affidavit of Klaus K. Schmiegel sworn June 16, 1993, to which was attached a copy of the patent, contains the following paragraphs:

2. I have reviewed Canadian Letters Patent 1,051,034 which issued on March 20, 1979, for an invention of Brian B. Molloy and myself entitled “Aryloxphenylpropylamines”. The application which matured into Canadian Letters Patent 1,051,034 was filed on January 2, 1975, based on a United States priority application filed on January 10, 1974.

3. Claims 5 and 6 of Canadian Letters Patent 1,051,034 relate to a compound the generic name of which is fluoxetine hydrochloride, as well as to processes for making fluoxetine hydrochloride.

4. As of the priority date of Canadian Letters Patent 1,051,034, fluoxetine hydrochloride was a new substance not publicly known. I make this statement based on my knowledge and experience relating to this compound, as well as my review of the relevant chemical literature.

The affidavit of Fern Arbuckle was sworn June 23, 1993. The affiant testified to employment with the second respondent, to familiarity with the company’s applications for notices of compliance and to the issuance of NOCs by the Health Protection Branch of the Ministry of National Health and Welfare. In paragraph 2 the affiant stated:

2. I am familiar with the pharmaceutical compound known as fluoxetine hydrochloride which is sold by Lilly Canada under the trade-mark PROZAC. Lilly Canada has obtained Notices of Compliance (“NOC”) in respect of each of 10 mg and 20 mg capsules and 20 mg/5mL oral suspension of fluoxetine hydrochloride.

Neither affiant was cross-examined by the appellant.

Subsections 1603(2) and (3) of the Rules entitled the appellant to “file one or more affidavits in reply” “no later than 30 days after the day the adverse party was served with the notice of motion”. It did not do so.

On August 23, 1993, the respondents filed their application record provided for in Rule 1606 [as enacted by SOR/92-43, s. 19]. Subsection 1607(1) [as enacted idem] of the Rules required the appellant to file and serve its own application record “within 30 days after the day of service of the applicant’s application record” which, by paragraph 1607(2)(b) [as enacted idem] of the Rules, is to consist of “a copy of each supporting affidavit, including its documentary exhibits, and a transcript of any cross-examination on the affidavit”. The appellant failed to comply with that requirement. It appears, indeed, that the appellant made no attempt to file an application record until the date on which the hearing of the respondents’ judicial review application was fixed to commence, namely, November 22, 1993. At the outset of that hearing the appellant sought an adjournment, without any advance notice, apparently so as to allow it to file its application record as well as Rule 1603 evidence. The learned Motions Judge summarily dismissed the request. An appeal from that order was abandoned on the day this appeal was heard. The failure of the appellant to file evidence, as the Trial Judge put it, at page 149 of his reasons, resulted in there being no evidence before him “with respect to the process by which the fluoxetine HCL it intends to sell would be made”.

The Motions Judge discussed in his reasons whether the burden of proof that “none of these allegations is justified”, within the meaning of subsection 6(2) of the Regulations, lay on the appellant or on the respondents and concluded, at page 154, that “at the outset” this burden fell upon the respondents. He went on to conclude that section 55.1 [as enacted by S.C. 1993, c. 2, s. 4] of the Patent Act, as amended, creates a presumption in favour of the respondents and that, as the appellant had offered no evidence whatsoever, this presumption had not been rebutted. In applying the section 55.1 presumption, the Motions Judge stated the following, at pages 154-157:

Hughes & Woodley state that s. 55.1 “in effect, reverses the onus and, once the substances are found to be identical, an alleged infringer must provide proof of non infringement”. (Hughes & Woodley on Patents, p. 346, para. 31(b)). It would therefore be more accurate to say that s. 55.1 creates a presumption of infringement, but only once an applicant (a plaintiff) has satisfied a minimum evidentiary burden of establishing that the substances in question are “new substances” and identical.

I accept the applicants’ evidence that fluoxetine HCL is a new substance within the meaning of s. 55.1. I also accept that the fluoxetine HCL in respect of which Nu-Pharm seeks to obtain a NOC is “of the same chemical composition and constitution” as the composition claimed in the patent. Consequently, if the applicants’ proceedings herein can be classified as an “action for infringement of a patent”, Nu-Pharm’s fluoxetine HCL, by reason of the clear wording of s. 55.1, will be deemed to have been produced by the patented process, thereby relieving the applicants of the necessity of proving that the process by which Nu-Pharm intends to sell fluoxetine HCL is the same process as that covered by Canadian patent No. 1,051,034.

…

While the burden of proof initially lies with the applicants according to the wording of s. 6(2) of the Regulations, there is nothing explicit in the wording of that provision that removes any presumptions that may arise if certain requirements are met.

I therefore conclude that the application commenced by the applicants under s. 6(1) of the Regulations is an action for infringement of a patent within the meaning of s. 55.1 of the Patent Act, as amended. Consequently, Nu-Pharm’s fluoxetine HCL is deemed to have been produced by the patentee’s process. Nu-Pharm has not offered any evidence whatsoever, and consequently the presumption has not been rebutted.

The sole objection to the order of February 23, 1994 is that the Motions Judge erred in concluding that the section 6 proceedings fell within the words “an action for infringement of a patent” in section 55.1 and accordingly rendered applicable the presumption created by that section.

At the time the within prohibition proceedings were instituted, the Patent Act as amended by section 4 of the Patent Act Amendment Act, 1992, S.C. 1993, c. 2, contained the following provisions in section 55.1:

55.1 In an action for infringement of a patent where the invention relates to the production of a new substance, any substance of the same chemical composition and constitution shall, in the absence of proof to the contrary, be deemed to have been produced by the patented process.

That section came into force February 15, 1993. It contains the same provisions as had earlier appeared in subsection 39(2) [repealed idem, s. 3] of the Patent Act. By the “North American Free Trade Agreement” [North American Free Trade Agreement Between the Government of Canada, the Government of the United Mexican States and the Government of the United States of America, [1994] Can. T.S. No. 2] signed by the governments of the United States, Canada and Mexico on December 17, 1992 (NAFTA), it was agreed in Article 1709(11) as follows:

Article 1709 …

11. Where the subject matter of a patent is a process for obtaining a product, each Party shall, in any infringement proceeding, place on the defendant the burden of establishing that the allegedly infringing product was made by a process other than the patented process in one of the following situations:

(a) the product obtained by the patented process is new; or

NAFTA was implemented in Canada by virtue of the North American Free Trade Agreement Implementation Act, S.C. 1993, c. 44, which, for the most part, came into force January 1, 1994. By section 193 of that statute, section 55.1 of the Patent Act was repealed and the following substituted:

55.1 In an action for infringement of a patent granted for a process for obtaining a new product, any product that is the same as a new product shall, in the absence of proof to the contrary, be considered to have been produced by the patented process.

The appellant submits that decisions of this Court and of the Trial Division rendered both prior and subsequent to the date of the order show that section 55.1 has no application to proceedings brought under section 6 of the Regulations because such proceedings are not considered to be “an action for infringement of a patent”. It is instructive to examine those decisions. Bayer AG v. Canada (Minister of National Health and Welfare) (1993), 51 C.P.R. (3d) 329 (F.C.A.) was concerned solely with whether section 6 proceedings are governed by the Rules respecting judicial review applications contained in Part V.1 of the Federal Court Rules. Submissions were made both for and against the relevance of section 55.1. The appellant in that appeal, relying on section 55.1, contended that as the medicine was a new substance “any substance of the same chemical composition and constitution shall, in the absence of proof to the contrary, be deemed to have been produced by the same patented process”.[1] The respondents in that appeal contended that: “A proceeding under section 55.2 is not an infringement action” and that such a proceeding contemplates “a summary process not an action for infringement with all the panoply that such an action entrains”.[2] Mahoney J.A., speaking for the Court, was of the view that the Part V.1 Rules did apply, stating, at pages 335-336:

Relevant provisions of the Federal Court Act follow:

18.(1) Subject to section 28, the Trial Division has exclusive original jurisdiction

(a)  to issue an injunction, writ of certiorari, writ of prohibition, writ of mandamus, or writ of quo warranto, or grant declaratory relief, against any federal board, commission or other tribunal; and

(b)  to hear and determine any application or other proceeding for relief in the nature of relief contemplated by paragraph (a)…

…

(3) The remedies provided for in subsections (1) and (2) may be obtained only on an application for judicial review made under section 18.1.

…

What is authorized by s. 6(1) of the Regulations is an application “to a court for an order prohibiting the Minister from issuing” a NOC. That seems clearly to be an application within the contemplation of s. 18(1)(b) of the Federal Court Act. The application is required by s. 18(3) to be made under s. 18.1 and the prescribed procedures are to be found in Part V.1 of the rules. The learned trial judge did not err in determining that the proceedings are governed by the Part V.1 rules.

Mahoney J.A. went on to observe that the Part V.1 Rules are not exhaustive and that the Rules in Part III apply to section 6 proceedings “[e]xcept to the extent of any conflict”. The Part III Rules, he noted at page 336, “provide for cross-examination on affidavits, interlocutory motions and other matters not expressly dealt with under Part V.1”. At page 337 he reiterated:

The legislative scheme does not contemplate a proceeding by way of action. The person claiming patent rights must commence the proceeding within 45 days of being served with a notice of allegation and it is contemplated that the court will have resolved the matter within 30 months after that. Patent infringement actions simply do not proceed at a rate that would meet the legislative time frame.

Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1994), 55 C.P.R. (3d) 302 (F.C.A.) involved an appeal from a decision of the Trial Division [(1994), 53 C.P.R. (3d) 368] dismissing a motion to compel production of certain documents and to answer certain questions in cross-examination on an affidavit. This Court, however, used the occasion to trace the genesis of the Regulations made under the Patent Act Amendment Act, 1992. Hugessen J.A. writing for the Court, after expressing the view, at page 314 that the purpose of the Regulations “is, in the language of the enabling legislation, `for preventing the infringement of a patent’”, went on to explain the nature of the scheme provided for in the amended legislation and in the regulations adopted thereunder. He further stated, at page 314:

In very abbreviated terms, the scheme permits drug manufacturers, who hold or are licensees under subsisting patents, to file a “patent list” in respect of each drug for which they hold or obtain a notice of compliance (s.4). The regulations refer to anyone filing such a list as the “first person”. In practice they will usually be brand-name pharmaceutial [sic] manufacturers.

Thereafter, any other manufacturer (the “second person”—in practice generic pharmaceutical companies) who wishes to apply for a notice of compliance in respect of the same drug must, unless he is prepared to wait until all outstanding patents have expired, make one of the allegations referred to in s. 5(1)(b), in effect asserting that the first person is not the patentee or that the patent has expired or is invalid or would not be infringed by the second person if the notice of compliance were issued. That allegation is made to the Minister in the second person’s new drug submission, but notice of it must be served on the first person.

Up to this point there have been no court proceedings and, if none are taken, the Minister is entitled, after the expiry of 45 days, and assuming his public health and safety concerns under the Food and Drug Regulations have been otherwise satisfied, to issue a notice of compliance to the second person.

Within that same 45-day period, however, s. 6 allows the first person to apply to the court for an order prohibiting the Minister from issuing a notice of compliance (s. 6(1)) and the court is directed to make such an order unless it finds one or more of the second person’s allegations to be “justified” (s. 6(2)).

Later in his reasons, at page 319, Hugessen J.A. made the following observations:

As I understand the scheme of the regulations, it is the party moving under s. 6, in this case Merck, which, as the initiator of the proceedings, has the carriage of the litigation and bears the initial burden of proof. That burden, as it seems to me, is a difficult one since it must be to disprove some or all of the allegations in the notice of allegation which, if left unchallenged, would allow the Minister to issue a notice of compliance. There may, of course, be some presumptions (such as for example the statutory presumption of validity of a patent) (Patent Act, s. 43) which may help the moving party and have the effect of displacing the burden of proof. The presumption enacted by s. 55.1, however, is not one of them. The proceedings are not an action and their object is solely to prohibit the issuance of a notice of compliance under the Food and Drug Regulations. Manifestly, they do not constitute “an action for infringement of a patent”: see Bayer, supra.

Furthermore, since the regulations clearly allow the Minister, absent a timely application under s. 6, to issue a notice of compliance on the basis of the allegations in the notice of allegation, it would seem that on the hearing of such an application, at least where the notice has alleged non-infringement, the court should start from the proposition that the allegations of fact in the notice of allegation are true except to the extent that the contrary has been shown by the applicant. In determining whether or not the allegations are “justified” (s. 6(2)), the court must then decide whether, on the basis of such facts as have been assumed or proven, the allegations would give rise in law to the conclusion that the patent would not be infringed by the respondent. [Emphasis added.]

Hugessen J.A. then added the following, at page 320:

As a further consequence of the application under s. 6 not being an ordinary action for infringement, there is no opportunity for either party to have recourse to discovery, whether oral or documentary. Where either party files affidavits there is, of course, opportunity for the opposite party to cross-examine thereon, but since there is no requirement that the notice of allegation be in affidavit form, and no obligation on the respondent to produce any affidavits at all (Rule 1603(2) permits but does not require such affidavits), the applicant cannot expect to be able to make his case out of the mouth of the respondent. Even when there is an opportunity to cross-examine, such cross-examination is far more limited in scope than examination for discovery and, apart from questions going to the witness’ credibility, is limited to relevant matters arising from the affidavit itself.

In a third decision of this Court, David Bull Laboratories (Canada) Inc. v. Pharmacia Inc., [1995] 1 F.C. 588(C.A.), the view was expressed that section 6 proceedings are not an “action” in the sense of that word in Rule 419. At pages 594-595, Strayer J.A., for the Court, stated:

It is clear that Rule 419 does not directly authorize the striking out of a notice of motion. The opening words of Rule 419(1) are:

Rule 419. (1) The Court may at any stage of an action order any pleading or anything in any pleading to be struck out …. [Emphasis added.]

Rule 2 defines “action” as a proceeding in the Trial Division

Rule 2. (1) …

“action” … other than an appeal, an application or an originating motion ….

and it defines “pleading” as

Rule 2. (1) …

“pleading” … any document whereby an action in the Trial Division was initiated ….

Thus an application for prohibition commenced by notice of motion is not an “action” and the notice of motion is not a “pleading”.

See also Eli Lilly and Co. v. Novopharm Ltd. (1995), 60 C.P.R. (3d) 163 (F.C.T.D.); Eli Lilly and Co. v. Novopharm Ltd. (1995), 60 C.P.R. (3d) 417 (F.C.T.D.).

The provisions of section 55.1 of the Patent Act as applied by the Motions Judge were those which existed before the amendment of January 1, 1994 was enacted as a result of the implementation of NAFTA. Strictly speaking, therefore, it is those provisions which require interpretation rather than the amended provisions. It seems to me that this was the issue which was addressed by Hugessen J.A. in Merck Frosst, supra, at page 319, where he emphatically rejected the argument that the section 55.1 presumption had application to section 6 proceedings because, in his view, the object of the latter is to prohibit the issuance of a notice of compliance rather than an “action for infringement”. I subscribe to that view. Nor can I conclude that the section 6 proceedings are now to be regarded as an action for infringement because of Article 1709(11) of NAFTA and the amended section 55.1 of the Patent Act. By section 3 of the North American Free Trade Agreement Implementation Act it is provided:

3. For greater certainty, this Act, any provision of an Act of Parliament enacted by Part II and any other federal law that implements a provision of the Agreement or fulfils an obligation of the Government of Canada under the Agreement shall be interpreted in a manner consistent with the Agreement.

Apart from section 3 it is, of course, clear law that an international treaty may be used to interpret domestic legislation: National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324, per Gonthier J., at pages 1371-1372. Despite the language of Article 1709(11) requiring each party to NAFTA to “place on the defendant the burden of establishing that the allegedly infringing product was made by a process other than the patented process” “in any infringement proceeding”, I remain of the view that section 6 proceedings neither fit the description of “an action for infringement” nor an “infringement proceeding”. This was the conclusion of Richard J. in Eli Lilly and Co. v. Novopharm Ltd. (1995), 60 C.P.R. (3d) 417 (F.C.T.D.) where, after considering Merck Frosst, supra and several other cases, he stated, at page 431:

Amendments were made to this provision in 1993 as part of the NAFTA Implementation Act. It refers to an “action for infringement”, while art. 1709(11) of the North American Free Trade Agreement (December 17, 1992) (Ottawa: Minister of Supply and Services Canada, 1992, p. 17-11), refers to “any infringement proceeding”. Lilly submits that, in light of NAFTA, the proceedings brought pursuant to s. 6 of the Regulations should be construed to encompass an action for infringement and, accordingly, that it has the benefit of the statutory presumption in s. 55.1. Whether the word “action” in s. 55.1 includes the type of proceeding envisaged by s. 6, a summary application for judicial review, is not determinative since the proceeding referred to must be for infringement of a patent. Although the purpose of s. 6 is to prevent the infringement of a patent, it is not a proceeding for a declaration of infringement of a patent pursuant to ss. 54 and 55 of the Patent Act, but a proceeding for an order of prohibition against the Minister. This is so even if the allegation is one of non-infringement of a patent. Lilly has accepted that it has the overall burden of proof. However, it cannot, as it claimed, be assisted by the statutory presumption found in s 55.1 of the Patent Act in discharging this burden. Counsel for Lilly agreed that whatever evidential burden rested on Novopharm, it had been discharged in this proceeding through the introduction of the evidence of Mr. Kairisalo.

An action for infringement of a patent is a well-known and well-defined cause of action in Canadian patent law. It is explicitly provided for in sections 54-60 of the Patent Act [ss. 54, 55 (as am. by R.S.C., 1985 (3rd Supp.), c. 33, s. 21; S.C. 1993, c. 15, s. 48), 55.01 (as enacted idem), 55.2 (as enacted by S.C. 1993, c. 2, s. 4), 56 (as am. by R.S.C., 1985 (3rd Supp.), c. 33, s. 22; S.C. 1993, c. 44, ss. 194, 199)]. Where a person is found by a court to have infringed, the patentee and all persons claiming under the patentee are entitled to the remedies available in sections 55 and 57. In my view, it is a “proceeding” of that kind that is contemplated in Article 1709(11) of NAFTA and by the word “action” in the amended version of section 55.1 rather than of the kind provided for under subsection 55.2(4) of the Patent Act . That subsection, in my view, is not addressed to an action for infringement of a patent. As was held by this Court in David Bull Laboratories, supra, at pages 598-600, proceedings under section 6 of the Regulations do not preclude a subsequent action for infringement of a patent. What is sought to be achieved by way of section 6 proceedings is the prevention of patent infringement by an order of prohibition addressed to the Minister. I do not read the subheading “Right of Action” in the Regulations as indicating that the nature of the proceedings as described in that section was somehow changed from one of prohibition to an action for infringement of a patent. Accordingly, in my view, Article 1709(11) of NAFTA is not applicable to an application provided for by subsection 55.2(4) of the Patent Act.

I turn to the respondents’ submissions concerning the burden of proof. The respondents submit that the Motions Judge erred in concluding that the burden of proving that the appellant’s subparagraph 5(1)(b)(iv) allegation is not justified rests, by virtue of subsection 6(2) of the Regulations, on the respondents in the circumstances of this case. While the respondents have not filed a notice of cross-appeal, I agree that it was not necessary to do so in the circumstances. A party is required by subsection 1203(1) of the Federal Court Rules to give notice of that party’s intention to contend upon the hearing of the appeal “that the decision that is the subject of the appeal be varied”. Here, the respondents do not seek to vary the order of February 23, 1994 but merely to contend that the Motions Judge ought to have made that order because the appellant had failed to discharge the onus of proof imposed by law.

Before turning to the respondents’ arguments, it would be useful to discuss briefly the burdens of proof which operate in legal proceedings. At common law, in relation to a civil or criminal proceeding, there are two types of burdens. The first is commonly referred to as the “persuasive burden” or the “legal burden”. In a civil case, it is the burden of establishing a case to the civil standard of proof. The other is commonly referred to as the “evidential burden”. It is the burden of putting an issue in play and means that a party has the responsibility to ensure that there is sufficient evidence of the existence or non-existence of a fact or an issue on the record to pass the threshold for that particular fact or issue. (See J. Sopinka, S. N. Lederman, A. W. Bryant, The Law of Evidence in Canada (Markham, Ont.: Butterworths, 1992), at pages 56-57.) In practice, it is rare that a civil proceeding is decided upon the legal burden. However, if the evidence pro and con is so evenly balanced such that no determination can be made one way or the other, the legal burden has decisive application. Robins v. National Trust Co., [1927] A.C. 515 (P.C.), at page 520; Rhesa Shipping Co SA v. Edmunds, [1985] 2 All E.R. 712 (H.L.), at page 718.

In the case at bar, the respondents advance three arguments in support of their contention that the order below should stand. Firstly, an evidential burden rested upon the appellant of adducing sufficient evidence to justify the allegation it made pursuant to subparagraph 5(1)(b)(iv) of the Regulations and the appellant failed to discharge that burden. Secondly, if the respondents have the overall legal burden of proving that the appellant’s subparagraph 5(1)(b)(iv) allegation is not justified, section 55.1 of the Patent Act applies so as to shift the burden to the appellant. Finally, if the section 55.1 presumption is not available a common law presumption applies to shift the burden to the appellant. In view of the conclusion I have already expressed that section 55.1 has no application in the proceedings brought pursuant to section 6 of the Regulations, the presumption created by that section is of no assistance to the respondents. I turn then to consider the respondents’ first and third arguments.

The first argument is rooted in various decisions of the Court rendered subsequent to Merck Frosst, supra. In AB Hassle v. Canada (Minister of National Health and Welfare) (1994), 55 C.P.R. (3d) 323 (F.C.T.D.), McGillis J. stated, at page 327:

However, in my opinion, the wording of s. 6(2) of the Regulations imposes an evidential burden on the generic company. In the event that the generic company fails to satisfy its burden of adducing sufficient evidence to justify its allegations, the patentee will have little difficulty meeting its overall legal burden in the proceedings.

Again in David Bull Laboratories, supra, Strayer J.A. stated, at page 599, that the

… decision must turn on whether there are allegations by the generic company sufficiently substantiated to support a conclusion for administrative purposes (the issue of a notice of compliance) that the applicant’s patent would not be infringed if the generic’s product is put on the market. [Emphasis added.]

In Bayer AG v. Canada (Minister of National Health and Welfare) (1995), 60 C.P.R. (3d) 129 (F.C.A.), Strayer J.A. stated, at page 134:

Those who fail to file notices of allegation, or adequate notices of allegation, must assume their own risks when it comes to attacks on the adequacy of such allegations once prohibition proceedings are commenced before the court.

Finally, in Pharmacia Inc. v. Canada (Minister of National Health and Welfare) (1995), 64 C.P.R. (3d) 450, at pages 451-452, this Court approved the following views of Wetston J. in the same proceedings before the Trial Division [(1995), 60 C.P.R. (3d) 328]:

It is the opinion of the court that the applicants herein are more than nominal applicants. The generic is required, by virtue of s. 5(1), to make an allegation. The allegation made by the generic must be supported by a detailed statement of the legal and factual basis for that allegation. This allows the patentee to determine if an order for prohibition should be sought, either because the facts as set out in the detailed statement are deficient, or because the legal conclusion as to non-infringement is unsupported by the facts. At this stage, since a further and better statement cannot be compelled, concerns with the detailed statement should be highlighted. Moreover, the grounds that the patentee has for challenging the generic’s notice of allegation should be advanced in the originating notice of motion filed pursuant to s. 6(1) of the Regulations. This approach flows from the dual requirements of the Federal Court Rules, Part V.1, and the legal burden on the applicants. The patentee should also present evidence to support its grounds whether such grounds are based on fact, law, mixed fact and law or opinion evidence. The generic may then be informed as to what vexes the patentee and why a prohibition order barring entry should be issued. Initially, i.e., before the Minister, the generic has raised the issue of non-infringement. At this stage, before the court, the generic now has the opportunity to file evidence supporting its detailed statement. In essence, this is the evidential burden on a respondent.

In my view, the law as so developed by this Court clearly places the legal burden on the respondents to show that allegations of fact contained in the notice of allegation are not true (Merck Frosst, supra, at page 319). It seems to me, moreover, that the Motions Judge was correct in concluding that the respondents had the obligation of discharging that burden.

This leaves the respondents’ third argument. In the circumstances of this case they contend the common law imposed upon the appellant, by way of presumption, the burden of showing that its process would not infringe the patent. I will elaborate on the possible application of that presumption momentarily. In the meantime, it is necessary to remind ourselves of the context in which we are asked to apply it. The appellant’s submission to the Minister for the notice of compliance had to be supported by a “detailed statement of the legal and factual basis for the allegation” as required by paragraph 5(3)(a ) of the Regulations. While the Regulations do not expressly spell out the purpose of a detailed statement, its purpose seems evident. The detailed statement is to be served on the patentee and on the Minister who is faced with determining whether to issue a notice of compliance. Service upon the patentee alerts that party to the fact a submission had been presented to the Minister. The patentee must then decide whether to oppose the issuance of the notice of compliance pursuant to section 6 of the Regulations. It is a critical decision. Indeed, its significance was captured by the Motions Judge, at page 153:

In order to enable the applicants to understand and respond to Nu-Pharm’s allegation, s. 5(3)(a) of the Regulations requires the person making an allegation to provide a detailed statement of the legal and factual basis for the allegation (”the detailed statement”). The purpose of the detailed statement is to ensure that the first person is fully cognizant of the grounds on which the second person relies on in making its allegation of non-infringement. Mahoney J.A., in Bayer AG v. Canada (Minister of National Health and Welfare) (Court File No. A-389-93), … at pp. 8 and 9 thereof … states as follows:

One further matter warrants comment. Section 5(3)(a) of the Regulations requires that the applicant for the NOC provide a detailed statement of the basis in fact and law for his statement of allegation. It seems intended that the patentee be fully aware of the grounds on which the applicant says issuance of an NOC will not lead to infringement of the patent before the patentee decides whether or not to apply to a court for a determination. Such disclosure would define the issues at a very early stage.

If the patentee raises no objection by way of section 6 proceedings, the Minister is free to dispose of the submission without anything further. If, on the other hand, section 6 proceedings are launched, the patentee is required to do that which is imposed upon him by subsection 6(2) of the Regulations. As in any civil litigation the burdens described above have application. They must be applied within the overall statutory framework and spirit of the Regulations. Thus while the respondents must satisfy the legal burden of proof, they are to do so on the basis that the appellant has itself fulfilled the requirements of the regulations including the submission of a “detailed statement”.

I respectfully agree with the view of the Motions Judge that the statement submitted by the appellant in its letter of May 5, 1993 cannot be considered “by any stretch of imagination, as a detailed statement in compliance with the Regulations”. As he put it, at page 154 of his reasons:

Nu-Pharm has not offered any evidence as to the process used in the production of its fluoxetine HCL. It has simply made a bald assertion that it will not infringe the applicants’ patent rights. No more no less.

The appellant submits that, regardless, the respondents cannot complain about the sufficiency of its statement. Indeed, the Motions Judge, in effect, agreed at page 154 that if the respondents were not satisfied with the content of the letter of May 5, 1993 they could have sought a court order for the purpose of supplying the details. It was by this reasoning that he precluded the application of the common law presumption. Although the Motions Judge was justified at the time in the view he expressed, it is now clear that the Court is not in a position to oversee the adequacy of a detailed statement. (Pharmacia Inc. v. Canada (Minister of National Health and Welfare) (1994), 58 C.P.R. (3d) 207 (F.C.A.), at page 209.) The avenue suggested by the Motions Judge was foreclosed.

The Motions Judge described the common law presumption, at pages 152-153:

… where a party fails to lead evidence of a fact that it is in a better position to establish, the Court will infer that the facts are adverse to that party’s interests.

The maxim underlying this exception was enunciated by Lord Mansfield in Blatch v. Archer (1774), 1 Cowp. 63, at page 65; 98 E.R. 969, at page 970:

It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.

In this century, the presumption was described in the following terms by Ferguson J.A. in Pleet v. Canadian Northern R.W. Co. (1921), 50 O.L.R. 223 (C.A.), at page 227:

No doubt the general rule is that he who asserts must prove, and that the onus is generally upon the plaintiff, but there are two well-known exceptions:”

(1) That where the subject-matter of the allegation lies particulary within the knowledge of one of the parties, that party must prove it, whether it be of an affirmative or negative character: Mahony v. Waterford Limerick and Western R.W. Co., [1900] 2 I.R. 273, at p. 280; Kent v. Midland R.W. Co. (1874), L.R. 10 Q.B. 1.

(2) That he who relies on an exception to the general rule must prove that he comes within the exception: Ashton & Co. v. London and North-Western R.W. Co., [1918] 2 K.B. 488; London and North-Western R.W. Co. v. Ashton & Co., [1920] A.C. 84.

That judgment was upheld by the Supreme Court of Canada: Canadian Northern Quebec R. Co. v. Pleet, [1923] 4 D.L.R. 1112. The presumption was again applied by the Ontario Court of Appeal in Hoffmann-La Roche Ltd. v. Apotex Inc. (1984), 47 O.R. (2d) 287, a patent case, where Blair J.A. stated, at page 288:

Apart from statute, the common law burden of proof fell on the appellant because the evidence of the process of manufacture in a foreign country by its chosen manufacturer was peculiarly within its power to ascertain and disclose and manifestly beyond the power of the respondent to discover and prove in evidence.[3]

In Pharmacia Inc. v. Canada (Minister of National Health and Welfare) (1995), 60 C.P.R. (3d) 328 (F.C.T.D.), at page 339 Wetston J., relying upon Pleet, supra, expressed the view that it is a precondition to the application of the principle that the person relying upon it prove that he comes within it. Specifically, Wetston J. stated, at page 340, that an applicant under section 6 of the Regulations “cannot expect to rely on the common law presumption … without pleading, in their originating notice of motion, the nature of the information which is within the exclusive knowledge of the generic”.

It is first to be observed that paragraph 5 of the originating notice of motion clearly asserted that a “detailed statement” had not been provided and, by paragraph 6 of the same document, that the appellant’s process would infringe the respondents’ patent rights. I respectfully agree, however, that before giving effect to the presumption the Court would have to be satisfied that the required information was not in possession of the respondents and that it was peculiarly within the knowledge of the appellant. It would also be necessary for the respondents to show that the required information was not adduced in evidence by the appellant and that the respondents did not have available other means of accessing it. The appellant asserted in its letter of May 5, 1993 that its process would not infringe the patent but provided no evidence to that effect beyond the bald assertion. The respondents could not possibly know, without more, that this assertion was true. Evidence that the process would not infringe the patent obviously lay peculiarly within the knowledge of the appellant. Contrary to the appellant’s contention, the required information was not accessible by the respondents pursuant to Rules 1612 [as enacted by SOR/92-43, s. 19] and 1613 [as enacted idem]. Those rules provide a means of enabling a party wishing to rely on material in the possession of a federal board, commission or other tribunal and not in that party’s possession, to have access to that material.[4] This surely has reference to “material” that was before the federal board, commission or other tribunal whose decision is the subject of an application for judicial review pursuant to section 18.1 of the Federal Court Act [R.S.C., 1985, c. F-7 (as enacted by S.C. 1990, c. 8, s. 5)] and not to the contents of a Minister’s file where no decision of his is the subject of the judicial review. I cannot see how those rules could be made to apply in the circumstances where no decision of the Minister is under review in the within proceedings.[5] Indeed, the whole purpose of the section 6 proceedings was to prevent the Minister from making a decision of whether to issue a notice of compliance. I would add, having regard to the nature of the proceedings, that the appellant surely cannot refuse disclosure of the required information on the ground that to do so would reveal a trade secret. It seems to me that the Rules of the Court afford an adequate safeguard for the appellant in the form of a confidentiality order. That protection is, indeed, commonplace whenever the circumstances are such as to warrant it, the model usually adopted being by way of analogy to the provisions of subsection 1402(8) [as enacted by SOR/79-57, s. 23; 90-846, s. 23; 92-43, s. 17] of the Rules.[6]

Based upon the foregoing I am satisfied that the respondents could not access the required information and that this information lay peculiarly within the knowledge of the appellant. It did not, for whatever reasons, avail itself of the opportunity under Part V.1 Rules of rebutting the presumption. In point of fact, it presented no evidence. Therefore the respondents are entitled to rely on the presumption. In my view the respondents have established in the circumstances that the appellant’s subparagraph 5(1)(b)(iv) allegation is not justified and that they are entitled to an order prohibiting the Minister from issuing a notice of compliance.

I would dismiss the appeal with costs.

Linden J.A.: I agree.

McDonald J.A.: I agree.

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