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Beecham Group Limited (Appellant)
v.
Frank W. Horner Limited (Respondent)
and
Attorney General of Canada (Intervenant)
Court of Appeal (A-35-72), Thurlow J., MacKay and Sweet D.JJ.—Ottawa, January 8 and 9, 1974.
Patents—Granting of licence to manufacture drugs—Roy- alties fixed by Commissioner of Patents Appeal re quan- tum—Patent Act, R.S.C. 1970, c. P-4, s. 41(4).
The Commissioner of Patents, in fixing the quantum of royalty to be paid the appellant of 1% of the net selling price of the drug ampicillin, when he granted a licence to the respondent under section 41(4) of the Patent Act, made a decision that was for him to make and that decision was not made in error of principle. The appeal from his decision is therefore dismissed.
Merck & Co. Inc. v. S & U Chemicals Ltd. (1972) 4 C.P.R. (2d ) 1 9 3, followed.
APPEAL. COUNSEL:
C. Robinson, Q.C., for appellant.
D. S. Johnson, Q.C., for respondent.
D. Aylen, Q.C., for intervenant.
SOLICITORS:
Smart and Biggar, Ottawa, for appellant.
MacBeth and Johnson, Toronto, for respondent.
Deputy Attorney General of Canada for intervenant.
THURLOW J. (orally)—The issue in this appeal is whether the Commissioner of Patents erred in fixing a royalty of 1% of the net selling price of a drug known as ampicillin when granting a licence to the respondent under section 41(4) of the Patent Act under nineteen patents held by the appellant all of which are concerned with the preparation of that substance or with inter mediates used in its preparation. The Commis sioner's reasons suggest that he might have set a royalty of as much as 4% of the net selling price
had it not been for the fact that he was at the same time dealing with three other applications by the respondent for licences under a total of eleven other patents held by three other compa nies all of which patents are also concerned with the preparation of the drug or intermedi ates used in its preparation. The Commissioner granted licences under these patents as well and fixed a royalty of 1% of the selling price of the drug in the case of each of the companies con cerned. There is no appeal before us in respect of any of these awards though we were informed that at least some of the companies had asked for royalties of 4% or more.
On the facts it is unlikely that the patented inventions of all four companies will be used at the same time by any manufacturer in the preparation of the drug. It is even possible though highly unlikely that only those of the appellant could be used. The respondent, there fore, is, it is said, in a position to avoid payment of a 4% royalty and to pay only 1%, 2% or 3% depending on which of the three other patentees it considers it expedient and feasible to ignore. As a practical matter, however, whether or not the respondent can avoid paying royalty to any of these companies depends not only on which particular inventions have been used in the preparation of the drug but on whether the respondent can obtain and maintain the infor mation and the capacity to defend itself from patent infringement proceedings by any one or more of the companies in question. Moreover it seems not unlikely that such a course of action in order to avoid the payment of royalties could. itself be expected to involve expense which ultimately would be reflected in the price of the respondent's merchandise to the public.
These considerations have, as I see it, a direct bearing on the value of a licence under the appellant's patents and I can see no error in principle in the Commissioner having taken into account as he did when fixing the royalty to be paid to the appellant, the practical requirement of the respondent to have a licence under the patents of the three companies other than the
appellant, or in his having in consequence awarded a lower royalty than he might other wise have awarded.
The decision as to the quantum of royalty to be paid was for him to make 1 , his reasons indicate that he was aware of all the relevant considerations, in particular he appears to have contemplated and considered that the total roy alties which the respondent would be required to pay might come to less than 4% of the selling price, and I am not persuaded that any error has been shown in his having fixed 1% of the selling price as the royalty payable to the appellant in carrying out his statutory duty to:
. have regard to the desirability of making the medicine available to the public at the lowest possible price consistent with giving to the patentee due reward for the research leading to the invention and for such other factors as may be prescribed.
I would dismiss the appeal.
* * *
MACKAY and SWEET D.JJ. concurred.
Merck & Co. Inc. v. S & U Chemicals Ltd. (1972) 4 C.P.R.(2d) 193.
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