In Apotex Inc. v. Merck & Co., Inc (2010 FC 287), the Federal Court of Canada (FC) held that Apotex is entitled to obtain compensation from Merck for having been kept out of the norfloxacin market for several years while the parties litigated Apotex’s Notice of Compliance (NOC) application.

Apotex tried to market a generic version of norfloxacin in the early 1990s, a drug patented by Merck. Merck filed an order to prohibit Apotex from obtaining a NOC. The Supreme Court of Canada set aside the prohibition order on July 9, 1998 in Merck Frosst Canada v. Canada. Apotex sought relief under s.8 of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 (“the 93 Regulations”), as amended by SOR/98-166 (“the ’98 Regulations”), for delayed market entry caused by Merck’s prohibition order application.

The FC first addressed the issue of whether the amending ’98 Regulations applied and ruled the ’98 Regulations, rather than the ’93 Regulations, applied to the action because Merck’s application for prohibition order was still pending in 1998. The applicable version of Regulations was important because the remedies provision of the ’98 Regulations demonstrated a “clearer indication” to award generic manufacturer compensation for loss suffered because of delayed market entry.

The FC held that a matter is considered pending until all avenues of appeal have been exhausted. Merck’s application for an order of prohibition was reversed by the Supreme Court of Canada in its July 9, 1998 decision. Therefore, the legal foundation of its application remained as a live issue before the Supreme Court of Canada when the ’98 Regulations first came into effect. Merck argued that its vested rights would be interfered by application of ’98 Regulations since it went from bearing no liability in 1993 to having potential liability in 1998. The FC held that the ’93 Regulations were obscure in its meaning and Merck’s liability was at best uncertain in 1993. Therefore, Merck did not have a vested right in 1993.

Since the ’98 Regulations applied, Merck was liable to Apotex for “any loss suffered during the period” from the date Apotex would otherwise have obtained an NOC until the date Merck’s application was dismissed by the Supreme Court of Canada.

The FC held that the start date of the loss suffering is different from the date that the Minister of Heath would have issued an NOC to the generic manufacture. In this case, Apotex would not be able to prove on a balance of probabilities that it had access to a supply of norfloxacin on June 10, 1993, when the Minister of Heath would issue an NOC. Because of problems obtaining material from its supplier and the existence of a sub-licensing agreement the FC found Apotex would not have been able to get on the market until one full year after it would have received its NOC. As a result, Apotex was entitled to compensation for its loss from this time until the Supreme Court of Canada’s decision dismissing Merck’s prohibition application.