Federal Court of Appeal dismisses Teva’s levofloxacin damages appeal

On February 8, 2018, the Federal Court of Appeal issued public reasons for its decision dismissing Teva’s appeal relating to the damages and costs awarded against it for its infringement of Janssen’s patent for levofloxacin (LEVAQUIN): Teva Canada Ltd v Janssen Inc, 2018 FCA 33. As previously reported, the Federal Court awarded close to $19 million in damages and pre-judgment interest to the plaintiffs: Janssen Inc v Teva Canada Ltd, 2016 FC 593 and subsequently granted $1 million in costs: 2016 FC 727.

General approach to quantification. Teva argued that the Court below had erred in principle by applying a “broad axe” approach to its assessment of damages, contrary to Apotex Inc v Merck & Co, Inc, 2015 FCA 171, which requires “perfect compensation”. In rejecting this argument, the Court of Appeal noted that its comment to this effect was made in the context of a discussion as to the purpose of an award of damages for patent infringement, rather than a calculation. The but-for world is a hypothetical and theoretical construct, and the Court below had properly considered economic proof of the nature of the levofloxacin market and the likely outcomes in that market absent Teva’s infringement.

Construction of the but-for world. Teva alleged that the Court below erred by finding that:

1. LEVAQUIN would have competed directly against the two other respiratory fluoroquinolones on the market, but not against other antibiotics;
2. the market would have been highly promotion sensitive; and
3. levofloxacin and moxifloxacin would have been preferred equally by prescribers during the relevant years.

The Court of Appeal held that each finding had a proper evidentiary foundation.

Mitigation. The Court of Appeal rejected each of Teva’s arguments alleging failures by Janssen to mitigate its loss as impermissible requests to re-weigh evidence.

Quantification of lost sales to hospitals. Teva alleged a number of errors which broadly related to the Court’s finding that Janssen’s indirect sales to hospitals in the but-for world were a certain proportion of its total sales in the real world, with respect to the period for which the Court calculated the loss. The Court of Appeal found that the lower Court’s findings on this issue were supported by evidence. 

Janssen US was a person claiming under the patentee. The Federal Court had concluded that Janssen US was a person claiming under the patentee because it had “the license or permission, by acquiescence, of Daiichi, to be involved in the chain of the sale of tablets made in Puerto Rico by Janssen Puerto Rico, through Janssen US to Janssen Canada”.  The Court of Appeal rejected Teva’s arguments on this issue, finding that:

1. the Court below had properly articulated the test under s. 55(1) of the Patent Act;
2. Janssen US was not required to demonstrate that it had engaged in conduct in Canada that would otherwise amount to infringement; and
3. the Court had not erred in finding that Janssen US had permission to be involved in the LEVAQUIN supply chain. 

Assessment of damages. The Court of Appeal rejected Teva’s assertions that the Court below had erred in calculating the damages owed to Janssen US. Teva failed to demonstrate any error in that analysis, and it was open to the Court to prefer Janssen’s expert evidence over Teva’s.

Costs. Lastly, the Court of Appeal rejected Teva’s argument that the $1 million lump sum costs award was excessive. Contrary to Teva’s submissions, it is not necessary for a lump sum award to correspond to the amount an assessment officer would assess.

The Federal Court decision is one of the few decisions relating to the assessment of damages in the context of infringement of a pharmaceutical patent. Damages for infringement have also been assessed for patents relating to lovastatin (Merck & Co v Apotex, 2013 FC 751, aff’d 2015 FCA 171 (reported here)) and cefaclor (Eli Lilly and Company v Apotex, 2014 FC 1254  (reported here), appeal decision under reserve in A-64-15).