Judgments

[1997] 1 F.C. 518

T-2424-93

Apotex Inc. (Applicant)

v.

The Attorney General of Canada, The Minister of National Health and Welfare, Merck & Co. Inc. and Merck Frosst Canada Inc. (Respondents)

and

Eli Lilly Canada Inc., Pharmaceutical Manufacturers Association of Canada and Canadian Drug Manufacturers Association (Intervenors)

Indexed as: Apotex Inc. v. Canada (Attorney General) (T.D.)

Trial Division, MacKay J.—Toronto, April 30; Ottawa, November 22, 1996.

Patents — Application for declaration Patented Medicines (Notice of Compliance) Regulations ultra vires — Patent Act, s. 55.2(4) permitting Governor in Council to make regulations considered necessary for preventing patent infringement — Regulations not exceeding Governor in Council’s authority — Purpose of Act to abolish system of compulsory licences, except those granted prior to December 20, 1991 — Contrary to purpose of Act to grant licence pursuant to application outstanding when compulsory licensing system abolished — New licensing system expressly paramount — Amending Act, Regulations applicable to outstanding NOC applications.

Administrative law — Judicial review — Declarations — Application for declaration Patented Medicines (Notice of Compliance) Regulations invalid — Patent Act, s. 55.2(4) permitting Governor in Council to make regulations as it considers necessary for preventing patent infringement — No onus on Governor in Council to demonstrate necessity or necessity considered — Adopting Regulations establishing considered necessary — That Regulations applied to particular producers (generic) in particular industry (pharmaceutical) even though Patent Act concerning patents generally, not discriminatory — Discrimination herein not relevant to human rights, Charter concerns, but relating to legitimate choices as Governor in Council deeming necessary — No basis for inference purpose of Regulations to preclude granting NOC to applicant — Doctrine of legitimate expectations not applicable to legislative functions — Governor in Council’s function under s. 55.2(4) legislative — Not subject to duty of fairness — Minister’s express undertaking to consult manufacturers association before regulations drafted not given on behalf of Governor in Council.

Construction of statutes — Amendment to Patent Act abolishing compulsory licence system in respect of drug products except for those granted before December 29, 1991 — Applicant’s application for Notice of Compliance (NOC) outstanding when Patented Medicines (Notice of Compliance) Regulations changing scheme for obtaining NOC adopted — Interpretation Act, s. 12 providing every enactment deemed remedial, to be given fair, large, liberal interpretation to ensure attainment of objects — Contrary to purpose of Patent Act to grant NOC — Interpretation Act, s. 44(c) providing where enactment repealed, another substituted therefor, proceeding under former enactment continued in conformity with new enactment — Amending Act, Regulations apply to outstanding application for NOC.

Practice — Stay of proceedings — Motion to stay application for order directing Minister to issue NOC for drug Norfloxacin and for declaration Patented Medicines (Notice of Compliance) Regulations ultra vires — Prohibition order preventing Minister from issuing NOC issued in proceedings commenced under Regulations, s. 6, upheld on appeal — Argued that duplication of proceedings, abuse of process — FCA decision determining result of first order sought — Not in interest of justice to stay, dismiss application for declaratory relief as (i) uncertainty about raising issue of invalidity in earlier proceedings; (ii) parties added as intervenors having interest in issue of validity of Regulations, investing considerable time, effort in preparation; (iii) intervention, preparation by third party in proceedings under Regulations, s. 6 possibly difficult because of statutory time limits for determination of whether prohibition order should issue; (iv) important to resolve validity issue.

This was an application for an order directing the Minister of National Health and Welfare to issue to the applicant a notice of compliance (NOC) for the drug Norfloxacin and for a declaration that the Patented Medicines (Notice of Compliance) Regulations are ultra vires the authority of the Governor in Council under Patent Act, subsection 55.2(4).

On February 15, 1993 Bill C-91 came into force. It amended the Patent Act, abolishing compulsory licences under which generic drug manufacturers like Apotex could market a generic version of a patented brand-name drug prior to the expiration of the patent except those compulsory licences granted prior to December 20, 1991. Also in February, 1993 the Minister of Consumer and Corporate Affairs wrote to the Canadian Drug Manufacturers Association (CDMA), assuring it that it would be consulted before any regulations pursuant to subsection 55.2(4) of the amending Act were established. Section 55.2(4) permits the Governor in Council to make such regulations as it considers necessary for preventing the infringement of a patent. Section 55.2 came into force on March 12, 1993, the same day that Patented Medicines (Notice of Compliance) Regulations came into force, pursuant to the authority granted to the Governor in Council by subsection 55.2(4), although no consultations with the CMDA had been held prior to their passage. Under the new Regulations, the holder of an NOC (issued under the Food and Drugs Regulations if the drug was found to be satisfactory as to safety and efficacy) may file a patent list for each drug for which they hold an NOC (the first person). Any second person, who submits a new drug submission (NDS) comparing its drug to one already approved, must comply with subsection 5(1). Subsection 5(1) specifically applies to a person who had filed a submission for an NOC before the Regulations came into force. If a second person files a notice of allegation under section 5, a first person may apply to the Court for an order of prohibition under section 6.

Merck & Co. held an exclusive licence for Norfloxacin, a prescription drug, and Merck Frosst Canada Inc. was a sublicensee holding the only NOC for sales in Canada. On April 6, 1993 Merck filed a patent list which included Norfloxacin. By notice of allegation under section 5 Apotex alleged that its generic form of Norfloxacin would not infringe Merck’s licence or patent. Thereafter Merck commenced proceedings in this Court for an order of prohibition to prevent the Minister from issuing an NOC to Apotex. Subsequently Apotex filed the originating notice of motion herein, seeking mandamus and declaratory relief. Merck’s application came on for hearing first, and Simpson J. issued an order prohibiting the Minister from issuing an NOC to Apotex. The appeal from that decision was dismissed shortly after this application was heard. Merck applied to either dismiss or stay this application on the ground that it was a duplication of its application for prohibition in relation to whether an NOC should issue which had already been heard, and thus was an abuse of process.

The issues were: (1) whether the application should be stayed; (2) whether the Regulations are ultra vires; (3) whether the Regulations apply to applications for an NOC that were outstanding before they came into force; (4) whether the Regulations are invalid because (i) it was not demonstrated that enactment thereof was necessary, (ii) the Regulations were enacted for a collateral or ulterior motive, (iii) they were discriminatory in the sense that among all matters subject to patents the Regulations relate only to pharmaceutical patents; (5) whether the failure to consult with the CDMA was a breach of the standard of fairness.

Held, the application should be dismissed.

(1) The preliminary motion to dismiss the application or stay the proceedings should be dismissed. The Court of Appeal’s decision, effectively upholding Simpson J.’s order prohibiting the issue of an NOC to Apotex, determined the result of these proceedings in so far as the first order sought by Apotex was concerned. It was not, however, in the interest of justice to dismiss or stay the application for declaratory relief because (1) there may have been some uncertainty about raising the issue of invalidity in the earlier proceedings; (2) parties had been added to the proceedings as intervenors, who also had an interest in the issue of the validity of the Regulations and they, as well as the parties, had spent considerable time and effort in preparation for the hearing of the matter; (3) intervention and preparation by third parties in section 6 proceedings under the Regulations might be difficult, especially because of time limits fixed by statute for determination of whether a prohibition order should issue; and, (4) it is important that the question as to the validity of the Regulations be resolved.

(2), (3) The Regulations were not beyond the authority granted to the Governor in Council under subsection 55.2(4). The principal purpose of the amending Act was to abolish the system of compulsory licences and only licences granted prior to December 20, 1991 were to be effective after February 4, 1993. Interpretation Act, section 12 provides that every enactment is deemed remedial and is to be given a fair, large and liberal interpretation to ensure attainment of its objects. Granting a licence to Apotex for Norfloxacin, or for any other product for which it had an outstanding application for an NOC when the compulsory licensing system was abolished, would be contrary to the purpose of the Act. Rather than such a contrary result, Interpretation Act, paragraph 44(c) applied. It provides that where an enactment is repealed, and another enactment is substituted therefor, every proceeding taken under the former enactment shall be continued under and in conformity with the new enactment in so far as it may be done consistently with the new enactment. The new system was specifically made paramount and prevailed over conflicting legislation or regulations (subsection 55.2(5)). Thus the amending Act and Regulations apply to an outstanding application for an NOC.

(4)(i) “As the Governor in Council considers necessary” grants discretion to the Governor in Council to which a court defers. The exercise of that discretion would only be upset if it were established, and there was no such evidence here, that the Governor in Council did not consider the Regulations necessary. There is no onus on the Governor in Council to demonstrate necessity or even that necessity was considered. The mere act of adopting regulations establishes that they are considered necessary by the Governor in Council, at least so far as this Court’s review is concerned. The words do not raise any question of an objective standard of necessity to be met or even considered. Absent any evidence that they were unnecessary, the Governor in Council, by adopting the Regulations must have considered them necessary at the time they were adopted.

(ii) There was no basis for an inference that the purpose of the Regulations was to preclude granting an NOC to Apotex. The purpose of the amending Act was to eliminate the opportunity for compulsory licences to be obtained by generic drug producers during the life of a patent. In that sense, Regulations, which support that goal by linking the grant of an NOC to a generic producer to a term after expiry of a patented drug already licensed, served the general purpose of preserving the market positions of originators where that was based upon their sale of patented drugs. That was an inevitable result, clearly implicit in the broad goals of Parliament in abandoning the pre-existing system of compulsory licences so long as there was an existing patent underlying a drug for which an NOC had been granted.

(iii) Legislation and regulations inevitably involve choices, including choices in regard to particular industries or activities to be affected, and in what ways. The absence of specific or express authority to make choices, which were here incorporated in the Regulations, is not a basis for finding the Regulations invalid. The discrimination complained of had no relevance to human rights or Charter concerns, but related entirely to legitimate choices as the Governor in Council, in the terms of subsection 55.2(4), considered necessary.

(5) The doctrine of legitimate expectations has no application in relation to purely legislative functions or decisions. As subsection 55.2(4) confers authority on the Governor in Council to regulate as it considers necessary in relation to the matters dealt with and without limitation by reference to some objective standard, the activity of the Governor in Council was clearly legislative in nature and therefore the Governor in Council’s function in enacting regulations was not subject to the duty of fairness. The Minister’s express undertaking, though he was principally responsible for the development of regulations, was not an undertaking on behalf of the Governor in Council, the body formally authorized to make regulations. There is no other basis on which a duty of fairness is recognized, to permit the Court to intervene if there are no prior consultations about the text or content of regulations before their adoption, even where consultation in advance of adoption had been promised but did not take place.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

An Act to amend the Patent Act and to provide for certain matters in relation thereto, R.S.C., 1985 (3rd Supp.), c. 33.

Federal Court Act, R.S.C., 1985, c. F-7, s. 50(1)(b).

Food and Drug Regulations, C.R.C., c. 870.

Food and Drugs Act, R.S.C., 1985, c. F-27.

Interpretation Act, R.S.C., 1985, c. I-21, ss. 12, 44(c).

Patent Act, R.S.C., 1985, c. P-4, s. 55.2 (as enacted by S.C. 1993, c. 2, s. 4).

Patent Act Amendment Act, 1992, S.C. 1993, c. 2, ss. 4, 12.

Patented Medicines (Notice of Compliance) Regulations, SOR/93-133, ss. 4, 5, 6, 7.

CASES JUDICIALLY CONSIDERED

APPLIED:

Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1995), 65 C.P.R. (3d) 483; 106 F.T.R. 294 (F.C.T.D.); Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1996), 67 C.P.R. (3d) 455; 197 N.R. 294 (F.C.A.); Reference as to the Validity of the Regulations in Relation to Chemicals, [1943] S.C.R. 1; [1943] 1 D.L.R. 248; (1943), 79 C.C.C. 1; Reference re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525; (1991), 83 D.L.R. (4th) 297; [1991] 6 W.W.R. 1; 58 B.C.L.R. (2d) 1; 127 N.R. 161; Apotex Inc. v. Canada (Attorney General), [1994] 1 F.C. 742 (1993), 18 Admin. L.R. (2d) 122; 51 C.P.R. (3d) 339; 162 N.R. 177 (C.A.); affd [1994] 3 S.C.R. 1100; (1994), 29 Admin. L.R. (2d) 1; 59 C.P.R. (3d) 82; 176 N.R. 1.

DISTINGUISHED:

Musqueam Indian Band v. Canada (Minister of Indian and Northern Affairs), [1990] 2 F.C. 351 (1990), 31 F.T.R. 31 (T.D.).

CONSIDERED:

Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd., [1975] A.C. 581 (P.C.); Henderson v. Henderson (1843), 3 Hare 100; Grandview (Town of) v. Doering, [1976] 2 S.C.R. 621; (1975), 61 D.L.R. (3d) 455; [1976] 1 W.W.R. 388; 7 N.R. 299; Fenerty v. The City of Halifax (1920), 50 D.L.R. 435; 53 N.S.R. 457 (S.C.); Fidelitas Shipping Co., Ltd. v. V/O Exportchleb, [1965] 2 All E.R. 4 (C.A.).

REFERRED TO:

Canadian Council of Churches v. Canada (Minister of Employment and Immigration), [1992] 1 S.C.R. 236; (1992), 88 D.L.R. (4th) 193; 2 Admin. L.R. (2d) 229; 5 C.P.C. (3d) 20; 8 C.R.R. (2d) 145; 16 Imm. L.R. (2d) 161; 132 N.R. 241; 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.); 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.); Attorney General of Canada v. Inuit Tapirisat of Canada et al., [1980] 2 S.C.R. 735; (1980), 115 D.L.R. (3d) 1; 33 N.R. 304; Thorne’s Hardware Ltd. et al. v. The Queen et al., [1983] 1 S.C.R. 106; (1983), 143 D.L.R. (3d) 577; 46 N.R. 91; Teal Cedar Products (1977) Ltd. v. Canada, [1989] 2 F.C. 158 (1988), 18 C.E.R. 214; 92 N.R. 308; 2 T.C.T. 4158 (C.A.).

APPLICATION for an order directing the Minister of National Health and Welfare to issue to the applicant a notice of compliance in relation to its drug Norfloxacin and for a declaration that the Patented Medicines (Notice of Compliance) Regulations are ultra vires the authority of the Governor in Council under Patent Act, subsection 55.2(4). Application dismissed.

COUNSEL:

H. B. Radomski for applicant.

Graham R. Garton for respondents the Attorney General of Canada and the Minister of National Health and Welfare.

W. Ian Binnie, Q.C. for respondent Merck & Co. Inc. and W. H. Richardson for respondent Merck Frosst Canada Inc.

Anthony G. Creber for intervenor Eli Lilly Canada Inc.

Emma A. C. Grell for intervenor Pharmaceutical Manufacturers Association of Canada.

Timothy H. Gilbert and Ronald G. Slaght for intervenor Canadian Drug Manufacturers Association.

SOLICITORS:

Goodman Phillips & Vineberg, Toronto, for applicant.

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

McCarthy Tétrault, Toronto, for respondent Merck & Co. Inc.

McCarthy Tétrault, Toronto, for respondent Merck Frosst Canada Inc.

Gowling, Strathy & Henderson, Ottawa, for intervenor Eli Lilly Canada Inc.

Gowling, Strathy & Henderson, Ottawa, for intervenor Pharmaceutical Manufacturers Association of Canada.

Lenczner Slaght Royce Smith Griffin, Toronto, for intervenor Canadian Drug Manufacturers Association.

The following are the reasons for order rendered in English by

MacKay J.: In this application for judicial review, the applicant, Apotex Inc. (Apotex), seeks an order directing the Minister of National Health and Welfare to issue to it a notice of compliance (an NOC) in relation to its drug product, Norfloxacin. That notice would authorize sale of that product in Canada. The applicant also seeks a declaration that the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 (the Regulations) are ultra vires the authority of the Governor in Council granted under subsection 55.2(4) of the Patent Act, R.S.C., 1985, c. P-4, as amended by the Patent Act Amendment Act, 1992, S.C. 1993, c. 2, section 4 (the Act).

The applicant company, Apotex, is a pharmaceutical manufacturer incorporated under the law of the Province of Ontario. It primarily manufactures and sells generic drugs, that is, drugs that are therapeutically equivalent to and contain the same quantities of active medicinal ingredients as drugs already marketed in Canada under an NOC earlier approved by the Minister of National Health and Welfare (the Minister) for a prescription drug product, usually one sold by a corporation with patent rights in the product, sometimes referred to herein as a “brand-name” drug.

At the hearing of this matter the applicant was supported by the intervenor Canadian Drug Manufacturers Association (CDMA) which was granted leave to intervene on terms limiting its materials and submissions to specified issues. The intervenor CDMA is an association, formed in 1967, that represents Canadian and some foreign-owned pharmaceutical and fine chemical companies that manufacture and sell generic drugs.

The respondent companies, Merck & Co. Inc. and Merck Frosst Canada Inc. (Merck), interrelated U.S. and Canadian companies, are also drug manufacturers. They primarily market innovative or brand-name drugs, that is, drugs for which one or other of the companies have sought and obtained approval from the respondent Minister for marketing prescription drug products in which they hold patent rights. They and companies like them are sometimes referred to herein as innovator companies.

The respondents were supported by the intervenors Eli Lilly Canada Inc. (Eli Lilly) and the Pharmaceutical Manufacturers’ Association of Canada (PMAC) who were granted leave to intervene with respect to this application, on terms that they not duplicate the materials and submissions of the respondents. Eli Lilly is a drug manufacturer which, like the respondent Merck, manufactures and sells brand name or original drugs. PMAC is an association comprised primarily of brand-name drug manufacturers, so-called innovator companies.

The Background

Prior to the coming into force of the Patent Act Amendment Act, 1992 and the Regulations made thereunder in 1993, the Patent Act, R.S.C., 1985, c. P-4, provided for a system of compulsory licensing whereby manufacturers of generic drugs could obtain a compulsory licence from the Commissioner of Patents permitting them to market a generic version of a patented brand-name drug. That system permitted the manufacture or importation and use of a generic drug prior to the expiration of the patent held on the similar original drug, upon compliance with the terms of the compulsory licence granted, including payment of royalties to the patent holder. The compulsory licensing system was originally applicable in relation to patents on processes for production of prescription drugs, and it was modified in 1987 [An Act to amend the Patent Act and to provide for certain matters in relation thereto, R.S.C., 1985 (3rd Supp.), c. 33].

Under that system, as now, the sale of a prescription medicine in Canada required a notice of compliance, issued upon approval of the safety and efficacy of the medicine, in accord with the Food and Drugs Act [R.S.C., 1985, c. F-27] and regulations made under that Act. The considerations in relation to the grant of a patent or of a compulsory licence for a patented medicine and those in relation to the grant of an NOC were unrelated, and they were undertaken independently by the Commissioner of Patents and by the Minister of National Health and Welfare, respectively.

All drug manufacturers seeking to sell drugs in Canada are required to submit a new drug submission (NDS), in accord with the Food and Drug Regulations, C.R.C., c. 870, as amended, in order to obtain an NOC. Until 1993, upon receipt of an NDS, the Minister was required to assess it and, if it was found to be satisfactory on the basis of its safety and efficacy, then the Minister was obliged to issue an NOC. If there was already an NOC issued for sale of a similar drug by one of the pharmaceutical innovator companies, that did not preclude issue of an NOC to a generic manufacturer for the same basic prescription drug if the safety and efficacy of the generic product was established.

At the same time, under the Patent Act until the 1993 amending statute only process claims or product-by-process claims were accepted for patent registration in relation to medicinal products. Thus, an applicant for a patent could obtain a patent for the process used to make a drug product, or a patent for the drug when manufactured by a specified process, but a patent for the product itself could not be obtained.

On January 14, 1992, Government announced that it intended to introduce legislation abolishing the compulsory licensing system. Bill C-91 was introduced to eliminate that system and was given first reading in the House of Commons on June 23, 1992. Following introduction of that Bill, CDMA was contacted in July 1992 by the then Director General, Drug Directorate, National Health and Welfare, concerning the possibility of a system of patent linkage by which issuance of an NOC would be linked to patent rights, a matter not provided for under the legislation as introduced. CDMA responded to that letter on August 4, 1992, strongly objecting to such a scheme.

Second reading of the Bill occurred on November 16, 1992, and public hearings in connection with Bill C-91 commenced on November 23, 1992, before a committee of the House of Commons. On November 26, 1992, the PMAC made representations to that committee, advocating a system linking the issuance of an NOC with patent rights, with details to be provided for by regulations. CDMA also made representations at the hearings and, on December 1, 1992, presented its submissions, including its opposition to the proposal to link issuance of an NOC to patent rights.

Thereafter, on December 2, 1992 CDMA representatives requested and met with officials of the Department of Consumer and Corporate Affairs, who advised them of a proposed amendment to Bill C-91, to provide for the Governor in Council to make regulations for preventing infringement of a patent by linking the grant of an NOC to patent rights, a provision not previously included in the Bill. By letters dated December 3, 1992, from Mr. Kay, Chairman of the CDMA, to the Minister of Consumer and Corporate Affairs and to the Minister of Industry, Science and Technology Canada, CDMA objected to the proposed amendment. In December 1992, a version of subsection 55.2(4) was added to the proposed legislation to permit regulations of the sort objected to by CDMA.

On December 10, 1992, Bill C-91, with the subsection 55.2(4) amendment, was approved by the House of Commons. Included in the Bill was section 12 which abolished all compulsory licences except those granted prior to December 20, 1991. On January 20, 1993, the CDMA made submissions about that Bill to the Senate Committee then considering the Bill. Thereafter, in January 1993, officials of the CDMA met with officials of Health and Welfare Canada. At that meeting, it is said that a deputy minister of the Department of National Health and Welfare stated that the Government intended to consult with stakeholders prior to the adoption of any regulations.

By letter dated February 5, 1993, Mr. Kay, Chairman of CDMA, was advised by Mr. Vincent, then the new Minister of Consumer and Corporate Affairs, who was responsible for the Bill and for regulations under it, that Bill C-91 was introduced to bring the drug patent laws of this country in line with the laws of Canada’s major trading partners and in accord with the North American Free Trade Agreement. In that letter Mr. Kay was also advised:

I agree that, as a general rule, judicial remedies are sufficient to address patent infringement. However, the Government, in allowing generic competitors to make use of an innovator’s patent to obtain regulatory approval, will remove a patent right that would have otherwise been available to a patentee to prevent a generic competitor from undertaking such activities. The amendment to which you refer must be read in this context. It is designed to enable the Government to mitigate any harm flowing from its decision to allow these activities that would otherwise constitute patent infringement.

Subsection 55.2(1) will ensure that a generic competitor is in a position to market its product immediately after the expiry of any relevant patents. It is not the Government’s intention to keep a generic competitor off the market unless there is a valid patent that will be infringed by sale of the generic product. Any regulations drafted pursuant to the newly added subsection 55.2(4) will reflect this intention. Rest assured that you will be consulted before any such regulations are established.

On February 15, 1993, Bill C-91, now known as the Patent Act Amendment Act, 1992 came into force, with the exception of section 55.2. By section 3 of the Act, the provisions authorizing the compulsory licensing of prescription medicines were repealed, and by section 12, compulsory licences, except those granted prior to December 20, 1991, were extinguished. On March 12, 1993, section 55.2 came into force. Relevant portions of that provision provide as follows:

55.2 (1) It is not an infringement of a patent for any person to make, construct, use or sell the patented invention solely for uses reasonably related to the development and submission of information required under any law of Canada, a province or a country other than Canada that regulates the manufacture, construction, use or sale of any product.

(2) It is not an infringement of a patent for any person who makes, constructs, uses or sells the patented invention in accordance with subsection (1) to make, construct or use the invention, during the applicable period provided for by the regulations, for the manufacture and storage of articles intended for sale after the date on which the term of the patent expires.

…

(4) The Governor in Council may make such regulations as the Governor in Council considers necessary for preventing the infringement of a patent by any person who makes, constructs, uses or sells a patented invention in accordance with subsection (1) or (2) including, without limiting the generality of the foregoing, regulations

…

[Paragraphs (a)-(e) then describe certain matters that may be subjects of regulations.]

(5) In the event of any inconsistency or conflict between

(a) this section or any regulations made under this section, and

(b) any Act of Parliament or any regulations made thereunder,

this section or the regulations made under this section shall prevail to the extent of the inconsistency or conflict.

Subsections (1) and (2) are designed to provide exemptions, to permit a generic manufacturer to engage in certain activities without infringing a patent. Thus, subsection (1) allows a company to develop a generic version of a brand-name drug and to make submissions for regulatory approval for that product without infringing the patent. In the past, the regulatory approval process for an NOC is said to have taken up to four years or even longer. The second exemption, in subsection (2), referred to as the “stockpiling exemption”, permits a manufacturer to accumulate a supply of a product using another’s patented invention prior to the expiry of the patent, in order that the manufacturer may be in a position to introduce the product to the market without delay following the date on which the patent expires.

On the same day that section 55.2 came into force, March 12, 1993, the Patented Medicines (Notice of Compliance) Regulations also came into force pursuant to the authority granted to the Governor in Council by subsection 55.2(4), although no consultations with CDMA had been held prior to their passage, despite the earlier assurance of the Minister that CDMA would be consulted before regulations were adopted.

The Regulations altered the scheme for obtaining an NOC, linking the issuance of an NOC to patent protection. Under the new Regulations, the holder of an NOC may file a patent list, for each drug for which they hold an NOC. Such a person, referred to in the Regulations as a “first person”, is usually a brand-name or innovative drug manufacturer or marketer. The Regulations provide that any second person, that is, a person who submits a new drug submission (an NDS) comparing its drug to one already approved, i.e. a generic manufacturer who wishes to apply for an NOC for a drug that is included on another’s patent list, must comply with subsection 5(1) of the Regulations, which provides:

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 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,

(a) state that the person accepts that the notice of compliance will not issue until the patent expires; or

(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.

A second person making an allegation pursuant to paragraph 5(1)(b) is required to serve a notice of the allegation on the first person. Thereafter, under section 6 of the Regulations, a first person may apply to the court within 45 days of receiving the allegation for an order prohibiting the Minister from issuing an NOC until after the expiration of the patent. The Minister is then prohibited, pursuant to subsections 7(1) and (2) of the Regulations, from issuing an NOC until the expiration of 30 months following the receipt of proof of the making of an application for an order of prohibition under subsection 6(1), or until the court has determined the allegation of the second person to be justified.

The Regulatory Impact Analysis Statement accompanying the Regulations, when they were tabled in the House of Commons, described the circumstances of the Regulations as follows.

These Regulations prohibit the Minister of Health and Welfare from granting a marketing approval (a Notice of Compliance) for a drug, that relies upon the earlier approval of a related drug until all the relevant product and use patents pertaining to the earlier approved medicine have expired.

…

Alternatives Considered

Under the status quo patentees have the right to pursue patent infringement actions in the courts to obtain interlocutory relief and to be compensated in damages if an injunction is not granted and it turns out that there was infringement…. However, with the enactment of Bill C-91 the government has created an exception to patent infringement allowing generic competitors to undertake any activities necessary to work up a submission to obtain regulatory approval of a product. This removes a patent right that may have otherwise been available to patentees to prevent generic competitors from obtaining such regulatory approval of their products.

The Regulations are needed to ensure this new exception to patent infringement is not abused by generic drug applicants seeking to sell their product in Canada during the term of their competitor’s patent while nonetheless allowing generic competitors to undertake the regulatory approval work necessary to ensure that they are in a position to market their products immediately after the expiry of any relevant patents.

…

Consultation

Primary stakeholders have been consulted on the principle of these Regulations prior to the passage of Bill C-91.

However, given the importance of quickly giving effect to the new statute, consultations have not been undertaken on the text of these Regulations prior to their coming into force. Early notice was not given in the Federal Regulatory Plan. As this is a new regulation the government will consult on its implementation, and make appropriate refinements if needed.

In 1989, long before the enactment of the Act and the Regulations, Apotex had filed an NDS seeking an NOC for Apo-Enalapril, its generic version of the respondent Merck’s brand-name drug Vasotec, for which Merck held a patent and an NOC. By 1992, Vasotec was the drug with the highest annual sales value in Canada. On December 22, 1992 Apotex commenced court proceedings to compel the Minister to issue an NOC to it for Apo-Enalapril, on the ground that its NDS satisfied the regulatory requirements then applicable for issuance of an NOC. In the course of those proceedings, Apotex brought a motion for judgment, returnable March 9, 1993. On March 9, 1993, counsel for the Minister sought an adjournment of the hearing of the applicant’s motion. Mr. Justice Pinard granted the adjournment until March 16, 1993. However, in the intervening time, on March 12, 1993, section 55.2 of the Act and the Regulations came into force, resulting in a substantially different scheme for obtaining an NOC than the one applicable when Apotex had brought its application.

After March 12, 1993 the Minister took the position that the Apotex application for an NOC, which had not yet issued, was subject to the new Regulations. That position was ultimately not accepted by my colleague Mr. Justice Dubé who ordered in July 1993 [Apotex Inc. v. Canada (Attorney-General) (1993), 49 C.P.R. (3d) 161 (F.C.T.D.)] that an NOC be issued to Apotex in respect of its Apo-Enalapril application, which he found had been recommended to the Minister by his staff for an NOC before the Regulations were in effect on March 12, 1993. Thereafter, a variety of proceedings in this Court involved Merck and Apotex with respect to Apotex’ Apo-Enalapril product, but those are a different story. Those proceedings and the timing of the introduction of the Regulations here in question are said to be closely interrelated in regard to the claim advanced by Apotex. In the view of Dr. Sherman, then president of Apotex, the manner and timing of introduction of the Regulations indicate that they were introduced in bad faith with a view to precluding Apotex from entering the lucrative market for sales of Enalapril and extending the monopoly of Merck in relation to those sales.

The Issues

There are three principal issues raised in this application. Apotex submits that the Regulations are ultra vires the authority conferred upon the Governor in Council by subsection 55.2(4) of the Act. Even if that is not accepted, Apotex urges that the Regulations, properly interpreted, do not apply to applications for an NOC that were outstanding before the Regulations came into force.

Further, Apotex submits that the validity of the Regulations may be impugned on other grounds which include the lack of any demonstration that enactment of the Regulations was necessary, that the Regulations were enacted for a collateral or ulterior motive, that they are discriminatory in the sense that among all variety of matters subject to patents, the Regulations relate only to pharmaceutical patents, and finally that they will have a paralyzing effect upon the generic drug industry. The last of these arguments, included in written submissions of the applicant, was not pursued when the application was heard.

The third main issue is raised by CDMA, with approval of the Court in the terms of the order allowing the association to be an intervenor in these proceedings. CDMA claims that the process whereby the Regulations were developed and introduced did not meet essential standards of fairness for, having had written assurance from the Minister that the association would be consulted in the development of regulations, there was no consultation before the Regulations were established.

Before turning to these issues, I deal with a preliminary issue raised at the commencement of the hearing by Merck by a motion seeking a dismissal or a stay of the application by Apotex on grounds that in the circumstances of this case, it is an abuse of process.

Preliminary Motion to Dismiss or Stay the Application

The motion by Merck, filed just two days before commencement of the hearing of this application, which had been set for some months to be heard over four days, sought an order to dismiss or, pursuant to paragraph 50(1)(b) of the Federal Court Act, R.S.C., 1985, c. F-7, to stay consideration of the application. It is urged that either course is here warranted since these proceedings are said to be an abuse of the Court’s process.

The background for that claim can be described briefly. Merck & Co. Inc. holds an exclusive licence for Norfloxacin, a prescription drug, and Merck Frosst Canada Inc. is a sublicensee for that drug for which it is the only holder of an NOC for sales in Canada. On April 6, 1993 Merck filed a patent list, which included the drug Norfloxacin, in accord with section 4 of the Regulations.

By notice of allegation dated April 19, 1993 Apotex alleged that its generic form of Norfloxacin would not infringe Merck’s licence or the patent because it intended to purchase Norfloxacin in bulk form from a company holding a valid compulsory licence for manufacture and sale of Norfloxacin, said to be a non-infringing activity. Thereafter, Merck commenced proceedings in this Court, in file T-1306-93, pursuant to section 6 of the Regulations, for an order of prohibition preventing the Minister from issuing an NOC to Apotex.

Subsequently, in October 1993, Apotex filed its originating notice of motion in these proceedings, seeking the relief already noted, an order in the nature of mandamus and a declaration that the Regulations are invalid.

The application by Merck was the first to come on for hearing. My colleague Madam Justice Simpson heard that application and, by order dated December 20, 1995, the Minister was prohibited from issuing an NOC to Apotex for the drug Norfloxacin. That decision was on appeal by Apotex when this application was heard and shortly after that, the appeal was dismissed, not on its substantive issues but on the preliminary ground, raised by the Court of Appeal, that the proceedings were bound by earlier decisions of that Court which determined the agreement, relied upon by Apotex for supply of the drug, constituted a sublicence and thus was contrary to the compulsory licence issued to another upon which Apotex relied. The effect was to take away the basis for Apotex’ claim that it would not infringe the patent, a claim that Simpson J. had found, for other reasons, was not justified. (See Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1995), 65 C.P.R. (3d) 483 (F.C.T.D.), per Simpson J. and (1996), 67 C.P.R. (3d) 455 (F.C.A.).)

The decision of the Court of Appeal, in effect upholding the order of Madam Justice Simpson prohibiting the issue of an NOC to Apotex for Norfloxacin, determines the result of these proceedings at least in so far as the first order sought by Apotex is concerned. It confirms the view expressed when I dealt with the preliminary issue at the hearing, that is, this Court would not issue an order in direct contradiction of the order already issued to the Minister, and, since this matter was heard, now upheld by the Court of Appeal.

That decision also makes it unnecessary to reiterate and comment upon submissions made at the hearing based on the circumstances then prevailing of two active proceedings in this Court, one at the Appeal level and this application, said to be between the same parties in relation to an NOC for the same drug product.

There were, however, other matters raised in relation to the preliminary motion which I discussed briefly in ruling orally that the motion be dismissed. Those matters and my reasons for dismissing the motion can be briefly summarized as follows.

It was argued by Merck, supported by Eli Lilly, that this application, involving Apotex and Merck, was a duplication and thus an abuse of process, seeking originally the opposite result in relation to issue of an NOC from that sought by Merck’s application for prohibition already before the Court when this application was filed. At the time this application was filed and until June 1994, Apotex did not include public reference in its application that it related to Norfloxacin, a matter it was ordered by the Court to clarify in June 1994.

I was not prepared at this stage, despite duplication of proceedings, to dismiss or stay the Apotex motion. I did indicate I would not issue an order directing action contradictory that ordered by Madam Justice Simpson in the Merck application, the order subsequently upheld, in effect, by the Court of Appeal. Thus, the first form of relief sought by Apotex was not to be considered: however, in this same application, a declaration is sought concerning alleged invalidity of the Regulations, and other parties, by orders of the Court some months ago, have been added to these proceedings as intervenors and have obviously prepared substantial records and argument concerning the application for a declaratory order.

On behalf of the Attorney General, with support of Merck, Eli Lilly and PMAC, it is submitted that the declaratory relief here sought is really secondary or incidental to Apotex’ main objective, to obtain an order for grant of an NOC for Norfloxacin, as the terms of the application indicate by reference to the issue of an NOC within the terms of the declaration sought, i.e. an order:

(b) declaring that the Patented Medicines (Notice of Compliance) Regulations are ultra vires subsection 55.2(4) of the Patent Act and that the Respondent Minister is accordingly not impeded by same in any way in the grant of the Notice of Compliance sought under paragraph (a).

In my view, that reference in the words of the originating motion concerning the implications of a finding that the Regulations are ultra vires, does not preclude the Court from considering the application for a declaration concerning the validity of the Regulations. Further, the suggestion that Apotex has no standing to seek a declaration of the nature here in issue, based on the test for standing to contest public interest issues as discussed in Canadian Council of Churches v. Canada (Minister of Employment and Immigration), [1992] 1 S.C.R. 236 is not helpful in this case. It ignores the fact that Apotex as a leading manufacturer and seller of generic drugs, with a long record of challenging regulatory authority in this Court and elsewhere, has a vital interest in the question raised by the application for declaratory relief. That interest is clearly shared by CDMA and that underlies the grant of standing to the association as an intervenor, with leave to address one aspect related to the issue of invalidity of the Regulations that concerns only that association. Supporting the validity of the Regulations underlies the grant of status to PMAC as an intervenor in light of its interests and that of its members. The interests of Apotex, of CDMA and of PMAC in my view are directly affected by the Regulations here questioned and each has a genuine interest in their validity.

It is urged there is a more effective way to bring the issue before the Court, in any of the regular proceedings for an order under the Regulations. Apotex urges that it is not clear that course of action is open in proceedings under section 6 of the Regulations, for the only relief expressly available in those proceedings is an order to prohibit the Minister from issuing an NOC, and the generic company, having applied for an NOC, can only argue the issues arising in regard to the notice of allegation under section 5. I am not persuaded that the position urged by Apotex precludes a generic producer from raising, in proceedings under section 6, the issue of the invalidity of the Regulations. In my opinion, the basic issue of the validity of the law which is sought to be enforced by court order may be raised in any proceedings, on constitutional or on administrative law grounds, whether or not there be specific reference to such a ground arising under the law in question. That, it seems to me, is a fundamental feature of a society based upon the rule of law, as our society is.

Thus, in my opinion, Apotex might well have raised its submission that the Regulations are invalid when the Merck application for prohibition was considered by Madam Justice Simpson. It did not do so. Merck maintains that Apotex relied upon the Regulations in those earlier proceedings and it is an abuse of process to now question their validity. Indeed, it is urged that on the broad principle of res judicata, this proceeding is an abuse of process.

On behalf of Merck it is submitted that a party is obliged to bring forward at one time all grounds which are relevant to the relief being sought. In Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd., [1975] A.C. 581, at page 590, the Privy Council stated:

… there is a wider sense in which the doctrine [of res judicata] may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings. The locus classicus of that aspect of res judicata is the judgment of Wigram V.-C. in Henderson v. Henderson (1843) 3 Hare 100, 115, where the judge says:

“… where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”

The shutting out of a “subject of litigation”—a power which no court should exercise but after scrupulous examination of the circumstances—is limited to cases where reasonable diligence would have caused a matter to be earlier raised; moreover, although negligence, inadvertence or even accident will not suffice to excuse, nevertheless “special circumstances” are reserved in case justice should be found to require the non-application of the rule….

The Vice-Chancellor’s phrase “every point which properly belonged to the subject of litigation” was expanded in Greenhalgh v. Mallard [1947] 2 All E.R. 255, 257, by Somervell L.J.:

“… res judicata for this purpose is not confined to the issues which the court is actually asked to decide, but … it covers issues or facts which are so clearly part of the subject matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them.”

The Supreme Court of Canada followed the principle cited above from Henderson [Henderson v. Henderson (1843), 3 Hare 100] in Grandview (Town of) v. Doering, [1976] 2 S.C.R. 621, at page 634 and for the majority, Mr. Justice Ritchie also made reference at pages 636-637 to Fenerty v. The City of Halifax (1920), 50 D.L.R. 435 (N.S.S.C.), at pages 437-438, where it was said:

The doctrine of res judicata is founded on public policy so that there may be an end to litigation, and also to prevent the hardship to the individual of being twice vexed for the same cause. The rule which I deduce from the authorities is that a judgment between the same parties is final and conclusive, not only as to the matters dealt with, but also as to questions which the parties had an opportunity of raising.

Ritchie J. also referred to Fidelitas Shipping Co., Ltd. v. V/O Exportchleb, [1965] 2 All E.R. 4 (C.A.), at page 9, where Lord Denning said:

The rule then is that each party must use reasonable diligence to bring forward every point which he thinks would help him. If he omits to raise any particular point, from negligence, inadvertence, or even accident (which would or might have decided the issue in his favour), he may find himself shut out from raising that point again, at any rate in case where the self-same issue arises in the same or subsequent proceedings. But this again is not an inflexible rule. It can be departed from in special circumstances.

Merck submits it is now an abuse of process for Apotex to raise this issue, which ought to have been and could have been raised before Madam Justice Simpson; it might, if raised, have been determinative of her decision.

While I am clear that Apotex might have raised its claim of the invalidity of the Regulations in the earlier proceedings, I concede that has not earlier been determined, nor so far as I am aware, has the issue been raised in other proceedings under the Regulations. When the Apotex application was initiated some seven months after the Regulations came into force and there was little jurisprudence about them, it may have been less clear to those involved that validity of the Regulations could have been challenged by defending against their application by a party that had acted under the provisions to file a notice of allegation. Jurisprudence developing in regard to the Regulations did establish that proceedings under section 6 did not finally resolve all rights of the parties. They are not proceedings to determine infringement or validity of the patent in issue (see Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1994), 55 C.P.R. (3d) 302 (F.C.A.) and David Bull Laboratories (Canada) Inc. v. Pharmacia Inc., [1995] 1 F.C. 588(C.A.)). Rather, they merely determine whether the allegation, of one seeking to compare its product with a patented product for which the NOC had been granted, that there would not be infringement of an existing patent, appears to be justified. If not, the issue of a second NOC in relation to the product is to be prohibited. But other proceedings, for invalidity, are not precluded.

The fact that other proceedings may be initiated, to resolve other issues concerning the interests of the parties, was here relied upon by Apotex to urge that the decision of Simpson J. prohibiting the issue of an NOC for Norfloxacin was not a “final decision”, but one comparable to an interlocutory injunction, pending final determination of the rights of the parties. Thus, these proceedings before me were to be perceived not as a collateral attack on the order of Simpson J., but as a process for determining an issue, not previously addressed, upon which the rights of the parties were dependent, i.e. the validity of the Regulations. I accept that in so far as this application seeks declaratory relief, it is not an attack directly on the determination of Madam Justice Simpson. It is here raised, as it might have been raised, in my opinion, in any proceedings under the Regulations. In itself, the claim for declaratory relief is no more a collateral attack on the order of Simpson J. than it is upon other orders of prohibition issued in other proceedings under the Regulations.

Nevertheless, I do not agree that the order of Simpson J. was not a final order in relation to the application of the Regulations in light of the issues raised before her. It was a final order in the sense that it was subject to variation only upon a successful appeal, and the Court of Appeal declined to vary that order. It was not an order this Court could vary directly, or one it would affect indirectly by issue of a contradictory order in similar circumstances.

I am not, however, prepared to apply the broad principle of res judicata to dismiss or stay the hearing in relation to the application for declaratory relief, as urged by the respondents here and PMAC and Eli Lilly. To dismiss or to stay proceedings would be an exercise of discretion and in an appropriate case, this Court has dismissed an action based on the doctrine of res judicata broadly applied, sometimes referred to as an issue estoppel. (See Musqueam Indian Band v. Canada (Minister of Indian and Northern Affairs), [1990] 2 F.C. 351(T.D.), per Joyal J.) In my opinion, the circumstances here are different, and the case is one that is special, as referred to in Yat Tung Investments, supra, where justice would appear to require “the non-application of the rule” of res judicata to an issue that might have been brought forward in earlier proceedings.

The factors which lead me to conclude that it is not in the interest of justice to dismiss or stay the application without hearing the case for declaratory relief are these. First, there may well have been some uncertainty about raising the issue of invalidity in the earlier proceedings. While in my view there should not have been, it is surprising that the matter was not raised in any other proceeding under or with reference to the Regulations. Second, there have been parties added to these proceedings as intervenors, who also have an interest in the issue of the validity of the Regulations and they, as well as the parties, have spent considerable time and effort in preparation for hearing the matter, effort which would be repeated at least in part if the issue were not here dealt with but left for another day in some other proceedings. Third, intervention and preparation by third parties in section 6 proceedings under the Regulations might well be difficult, especially because of time limits fixed by statute for determination whether an order of prohibition should issue. Finally, it is important that the validity of the Regulations, here questioned, be resolved not only for those directly affected by a determination in relation to a particular application for an NOC, but for others as well, and the hearing here arranged will resolve the question, subject only to appeal. In my view, it is in the interest of justice that the hearing proceed.

Thus, the preliminary motion by Merck to dismiss the application or stay the proceedings was dismissed at the hearing. The Court then heard argument on the merits of Apotex’ application for a declaratory order that the Regulations are invalid. I turn to the merits of the relief so claimed.

Statutory Authorization for the Regulations

Apotex argues that the Regulations are not within the authority conferred on the Governor in Council by subsection 55.2(4) of the Patent Act as amended. Relevant portions of section 55.2 have been set out earlier in these reasons in the review of the background leading to enactment of the amending Act in early 1993.

Apotex does not contest the broad purpose of the amending Act as described by Mr. Justice Robertson, speaking for the Court of Appeal, in Apotex Inc. v. Canada (Attorney General), [1994] 1 F.C. 742 at page 754; appeal dismissed, [1994] 3 S.C.R. 1100. That purpose was to abolish compulsory licences, “to protect innovator pharmaceutical companies’ distribution and sales rights to patented drugs … a reversal of government policy adopted by Parliament in 1923”. In addition, in my view, it was clearly an important subsidiary purpose of the Act, in protecting those rights, to permit, pursuant to subsection 55.2(4), the making of regulations to link existing patent rights and the grant of any required government approval, for use, such as an NOC, of products or processes subject to those patent rights.

Apotex submits that by subsection 55.2(4), Parliament did not intend to grant regulatory authority to the Governor in Council, for any or all purposes. Rather, the words of section 55.2 are said to be clear that Parliament intended the regulation of patents in general, not limiting that section to pharmaceutical patents. Further, it is urged the exception from infringing activity under subsection 55.2(2), for purposes of stockpiling goods subject to another’s patent for a limited period of six months prior to expiry of the patent, a time now fixed under subsection 55.2(3), does not stand alone, but is applicable to one who has used an invention of another for purposes of seeking regulatory approval under subsection 55.2(1). I am prepared to accept that interpretation, but I do not agree with all of the implications Apotex draws from this and from subsection 55.2(4).

In Apotex’ view, the last of these subsections is conditional upon or limited by two qualifications, the authority to regulate must be “necessary for preventing the infringement of a patent” and must be related to infringement “by any person who makes, constructs, uses or sells a patented invention in accordance with subsection (1) or (2)”. The purpose of the subsection is said to be authorizing regulations only with regard to preventing infringement by those who have the benefit of the exceptions in subsections (1) and (2). Seen in this way, subsection 55.2(4) is limited to regulations to prevent infringement by one who uses another’s patent for development of a patented product for regulatory approval, and one having done so also has the benefit of the exemption for stockpiling the product during the last six months before expiry of the pa-tent.

For Apotex, it is argued that the description of the Regulations, included in the Regulatory Impact Analysis Statement accompanying their publication, supports its interpretation. In my view, it hardly needs stating that that statement has no authoritative significance for construction of the Act or the Regulations.

It is argued that since its NDS application to acquire an NOC was originally submitted in 1989, even if it might have been modified in ongoing discussions with staff of the Health Protection Branch, Apotex did not have the benefit of the exemption for developing its product for regulatory approval. Yet the Regulations specifically apply to applications still to be determined, like that of Apotex for Norfloxacin, pursuant to section 5, which provides

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 .… [Emphasis added.]

Apotex urges that this express provision for applications already filed goes beyond the authority granted under subsection 55.2(4). Moreover, the Regulations make no specific reference to subsections (1) and (2) of section 55.2 or the exemptions provided by them. In all of its nine outstanding applications when the Regulations came into force, Apotex is said not to have had the benefit of those exemptions.

I am not persuaded that the interpretation of section 55.2 and subsection (4) of that provision as urged by Apotex should be accepted. Rather, the particular provision must be construed in light of the purposes of the amending Act and within the context of that Act. The principal purpose as we have seen was to terminate the system of compulsory licences, and by section 12, only licences granted prior to December 20, 1991, a date prior to the amending Act, were to be effective after February 4, 1993. The construction urged by Apotex would result in an unusual, indeed almost absurd situation, with licences granted under the previous Act prior to December 20, 1991, being recognized as valid, and no licences granted thereafter under the prior legislation, which licensing system was repealed by the amending Act, would be possible except for new licences, presumably under the legislation now repealed, for Apotex and others whose outstanding applications for NOCs were not determined at the date of the amending Act. Parliament would have to expressly provide for such an anomalous result, in my view, for it would be contrary to the principal purpose of the amending Act.

It did not do so. Rather the provisions of the Interpretation Act, R.S.C., 1985, c. I-21, are here applicable. Under that Act, section 12 provides that every enactment is deemed remedial and is to be given a fair, large and liberal interpretation to ensure attainment of its objects. Granting a licence to Apotex for Norfloxacin, or for any other product for which it had an outstanding application for an NOC when the compulsory licensing system was abolished, would surely be contrary to the purpose of the Act. Rather than such a contrary result, paragraph 44(c) of the Interpretation Act is applicable.

44. Where an enactment is repealed … and another enactment … is substituted therefor,

…

(c) every proceeding taken under the former enactment shall be taken up and continued under and in conformity with the new enactment in so far as it may be done consistently with the new enactment.

In this case, the application for an NOC, made under legislation that provided for a compulsory licence, was outstanding at the date that legislation was repealed and replaced by a new legislative regime. That new legislation abolishes compulsory licences except for those granted prior to December 20, 1991, and a new system is introduced. That system is specifically made paramount and prevails over conflicting legislation or regulations (see subsection 55.2(5)). Thus, the amending Act and Regulations thereunder are applicable to an outstanding NDS application for an NOC, even though that application is also regulated as to form and content by the Food and Drug Regulations.

Moreover, while Apotex describes its submission of an NDS for an NOC, made initially in 1989, as being without benefit of the exemptions under subsection 55.2(1), in fact it does have the benefit of that provision. Once the opportunity of a compulsory licence disappeared with passage of the amending Act, Apotex’ use of the patented product Norfloxacin, even though primarily used some years ago, is still a use continuing as an essential element of its NOC application. Only subsection 55.2(1) precludes Apotex’ use from constituting infringement. Thus, whether it intended to claim it or not, Apotex has the benefit of that exemption from a claim of infringement.

For the Attorney General, the respondent Minister and for Merck, it is urged that the words of subsection 55.2(4) are not as described by Apotex; they do not constitute a condition or words of limitation, i.e. “by any person who makes, constructs, uses or sells a patented invention in accordance with subsection (1) or (2)”. Rather, these are words describing the general class of persons to whom regulations may be made applicable. Thus, they do not, as Apotex’ interpretation would do, limit regulations by circumstances concerning a particular drug.

The Attorney General and the Minister also urge that the French version of subsection 55.2(4) supports the view that the words describe a class of persons. That is disputed by Apotex for which the words “au sens de” in the French version mean “within the meaning of” so that the interpretation Apotex seeks is supported. In my opinion, the French version of the introductory words, taken as a whole, does support the view advocated by the Ministers. The English text reads

55.2 …

(4) The Governor in Council may make such regulations as the Governor in Council considers necessary for preventing the infringement of a patent by any person who makes, constructs, uses or sells a patented invention in accordance with subsection (1) or (2) including, without limiting the generality of the foregoing, regulations

I reach the same conclusion, that regulations under subsection 55.2(4) may be adopted, with reference to all applicants for an NOC who did not have a vested right to a licence at the time the amending Act was adopted, whether or not they had already applied. While this circumstance was not in issue in Apotex Inc. v. Canada (Attorney General), supra, in that case, Robertson J.A. commented for the Court of Appeal, at pages 798-799:

Certainly, subsection 55.2(4) of the Patent Act, the regulation-making provision, does not expressly or implicitly authorize regulations of a retroactive nature. This explains why the legislative draftsperson did not craft subsection 5(1) of the Patented Medicines Regulations so as to embrace all NDSs “in the pipeline” by referring specifically to those in which the applicant had acquired a vested right. In my estimation, the draftsperson knew that such formulation would be ultra vires the Governor in Council.

By contrast, subsection 12(1) of Bill C-91 expressly extinguishes all compulsory licences granted after December 20, 1991. Like the learned Trial Judge, I am driven to the conclusion the Parliament could have done the same for NOCs “in the pipeline”. A purposive interpretation of subsection 5(1) of the Patented Medicines Regulations and an appreciation of the ejusdem generis canon of statutory interpretation reveals that it only applies to NDSs which had not reached the point where the Minister’s discretion was spent as of March 12, 1993.

For all these reasons, I am not persuaded that subsection 55.2(4) is subject to the limitations urged by Apotex or that the Regulations as enacted are beyond the authority granted to the Governor in Council under that provision. Moreover, by their terms, under subsection 5(1), the Regulations are clearly applicable to Apotex in relation to its application, by an NDS, for an NOC, which was still outstanding when the Regulations came into force on March 12, 1993.

Other Arguments of Apotex Concerning Validity of the Regulations

The other arguments of Apotex alleging invalidity of the Regulations are essentially three, that there was no necessity considered, let alone established, for the Regulations as subsection 55.2(4) requires, that the Regulations are discriminatory in that they are concerned only with pharmaceutical patents, and that they were enacted for an improper motive.

For the respondents, it is urged that these arguments essentially deal with non-justiciable issues, beyond the scope of the Court’s responsibility or authority in judicial review. Further, the arguments are said to contest the policy of the legislation in issue, a matter beyond review by the Court. The exercise of legislative powers is subject to question only with respect to the jurisdiction and the vires of the legislative body concerned. That principle is well established, and relied upon in such cases as Attorney General of Canada v. Inuit Tapirisat of Canada et al., [1980] 2 S.C.R. 735, per Estey J., at pages 758-759; Thorne’s Hardware Ltd. et al. v. The Queen et al., [1983] 1 S.C.R. 106, per Dickson J., at pages 111-112.

I deal briefly with each of the arguments of Apotex in turn, none of which, in my view, is persuasive.

The argument for establishing necessity for the Regulations arises from subsection 55.2(4) which, as we have seen, provides for “such regulations as the Governor in Council considers necessary”. Here it is said that no evidence of necessity is presented, that in correspondence prior to the enactment of the Regulations, it was acknowledged by the Minister and others that common law remedies for infringement are generally effective. Yet the Regulations, in effect, impose an interlocutory injunction for up to 30 months against a generic producer seeking an NOC before any determination concerning an allegation of non-infringement. Further, it is urged there was no evidence offered of any consideration by the Governor in Council about whether there was any necessity for the Regulations.

These submissions, in my view, mistake the purport of the words “as the Governor in Council considers necessary”. Those words grant discretion to the Governor in Council to which a court defers, recognizing that Parliament has left discretion to the Governor in Council. The exercise of that discretion would only be upset if it were established, and there is no such evidence here, that the Governor in Council did not consider the Regulations necessary. There is no onus on the Governor in Council to demonstrate necessity or even that necessity was considered. The mere act of adopting regulations establishes that they were considered necessary by the Governor in Council, at least so far as this Court’s review is concerned. The words used relate to a matter for determination by the Governor in Council, whose beliefs are not subject to review. The words do not raise any question of an objective standard of necessity to be met or even considered.

In Reference as to the Validity of Regulations in relation to Chemicals, [1943] S.C.R. 1, at page 12, Chief Justice Duff said:

… when Regulations have been passed by the Governor General in Council in professed fulfilment of his statutory duty, I cannot agree that it is competent to any court to canvass the considerations which have, or may have, led him to deem such Regulations necessary or advisable for the transcendent objects set forth.

I note that in this case, the recital of the Regulations in question clearly refers to action “pursuant to subsection 55.2(4) of the Patent Act”, in making the annexed Regulations respecting a notice of compliance pertaining to patented medicines.

Thus, the submission that neither necessity nor the consideration of necessity is here shown, is not persuasive that the Governor in Council, in adopting the Regulations, failed to meet the requirements of subsection 55.2(4). In the circumstances, absent any evidence that they were unnecessary, the Governor in Council, by adopting the Regulations, must be taken to have considered them as necessary at the time they were adopted. Where that is so, the only avenue for inquiry by the Court is whether the Regulations by their terms, relate to the statutory purposes of the enabling legislation. (See Teal Cedar Products (1977) Ltd. v. Canada, [1989] 2 F.C. 158 (C.A.), at page 171, per Pratte J.A.)

Apotex’ argument that the Regulations are discriminatory in their application arises because it is said the enabling legislation, subsection 55.2(4), concerns patents generally, yet the Regulations themselves relate to pharmaceutical patents, a discriminatory application to a particular industry, and even then they apply only to generic producers who seek an NOC by comparing their product with a patented product for which an NOC has already been granted. As Apotex suggests, the Regulations would not be applicable to a generic producer that sought an NOC on the basis of its own clinical test results, but that of course is not the situation for Apotex. Moreover, I am unable to agree that the Governor in Council is not authorized by the words of subsection 55.2(4) to regulate as he considers necessary to prevent infringement. Legislation and regulations inevitably involve choices, including choices in regard to particular industries or activities to be affected, and in what ways. The absence of specific or express authority to make choices, which are here incorporated in the Regulations, is not a basis for finding the Regulations invalid. The discrimination here complained of has no relevance to human rights or Charter [Canadian Charter of Rights and Freedoms, being Part I of the Constitution Act, 1982, Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C., 1985, Appendix II, No. 44]] concerns, rather it relates entirely to legitimate choices as the Governor in Council, in the terms of subsection 55.2(4), considered necessary.

The final submission of Apotex is that the Regulations are invalid because they were enacted both in purpose and timing which is not consistent with the authority conferred on the Governor in Council. It is suggested that the Regulations “appear to have been made for the specific purpose of precluding the grant of the Apo-Enalapril NOC and for the more general purpose of preserving the monopoly market positions of originators when there was no need to do so at the expense of legitimate competition”.

Much internal government documentation was made available through access to information requests and counsel for Apotex referred to a number of documents in the record which indicated, inter alia, that government representatives were in communication with PMAC, as well as CDMA, during 1992-1993 after the Bill to amend the Patent Act was presented to the House of Commons, when it was before committees and when it was enacted. The documents referred to indicated that by mid-December, linkage of an NOC with existing patent rights was likely to be included and as we have seen, the Bill was amended to permit regulations for that purpose. Even if inferences counsel would have drawn from documents in the record were to be accepted, there is no evidence that I am shown, and no basis for an inference, that the purpose of the Regulations was to preclude granting an NOC to Apotex for Apo-Enalapril.

At the same time, the record does support the conclusion, earlier referred to several times, and one all counsel initially accepted, that the purpose of the changes in the legislative regime, that is of the amending Act, was to eliminate the opportunity for compulsory licences for generic drug producers during the life of a patent. In that sense, the Regulations, which support that goal by linking the grant of an NOC to a generic producer to a term after expiry of a patented drug already licensed, clearly did serve the general purpose of preserving the market positions of originators where that was based upon their sale of patented drugs. That is an inevitable result, clearly implicit in the broad goals of Parliament in abandoning the pre-existing system of compulsory licences so long as there is an existing patent underlying a drug for which an NOC has been granted.

The ulterior motive or improper purpose suggested by Apotex is really a reflection of its dissatisfaction with the policy approved by Parliament under the amending Act and of the Governor in Council under the Regulations adopted. That provides no basis for the Court to find the Regulations are invalid. In Thorne’s Hardware Ltd. et al. v. The Queen et al., supra, Dickson J. commented, at page 112:

Counsel for the appellants was critical of the failure of the Federal Court of Appeal to examine and weigh the evidence for the purpose of determining whether the Governor in Council had been motivated by improper motives in passing the impugned Order in Council. We were invited to undertake such an examination but I think that with all due respect, we must decline. It is neither our duty nor our right to investigate the motives which impelled the federal Cabinet to pass the Order in Council ….

In my opinion, the grounds suggested by Apotex, and its construction of the enabling Act and the Regulations, do not warrant a finding that the Regulations are invalid.

CDMA’s Expectations to be Consulted

CDMA as an intervenor was authorized to raise a particular issue, that is, the implications of its expectations that it would be consulted prior to promulgation of any regulations under the Patent Act Amendment Act, 1992. As we have seen, the Minister responsible for the regulations, by letter dated February 5, 1993, wrote to CDMA and said:

Rest assured that you will be consulted before any such regulations are established.

CDMA considers this a promise, an acknowledgment of an obligation to consult with CDMA, a promise and an obligation not fulfilled. Five weeks later, on March 12, the Regulations were brought into force without any prior consultation with CDMA on the terms of regulations. As the Regulatory Impact Analysis Statement published with the Regulations noted, there were consultations on the principle of the Regulations prior to enactment of the amending Act. That Statement continues:

However, given the importance of quickly giving effect to the new statute, consultations have not been undertaken on the text of these Regulations prior to their coming into force. Early notice was not given in the Federal Regulatory Plan. As this is a new regulation the government will consult on its implementation, and make refinements if needed.

Thus, in this case, Government did not meet its own general objectives for open publication and discussion of contemplated regulations prior to their adoption. Yet there is no general legal requirement for such a process to be followed.

Does the specific assurance of the Minister create a special circumstance, one which if not fulfilled constitutes unfairness that provides a basis for the Court to intervene and declare the Regulations invalid? It should be noted that in the general context of fairness, while there was no communication between CDMA and those concerned in Government about the regulations then under consideration, PMAC and the two innovator companies involved in the hearing, Merck and Eli Lilly, continued through the same period to press Government to implement regulations linking an NOC with existing patent rights, that is to bring subsection 55.2(4) into effect with regulations established under it. That was not a new position, it was consistent with their stands throughout the process leading to enactment of the amending Act. Yet there is no evidence, indeed it is denied by Government affiants, that there were discussions with PMAC or any other group or company about the terms of the Regulations prior to their adoption on March 12, 1993.

CDMA urges that in the circumstances, whether or not the Court finds a duty on Government to consult in advance on the terms of the Regulations, the express undertaking of the responsible Minister created a particular duty of fairness. It is trite law that the duty of fairness may require consultation, or opportunity for submissions to be made, a right to be “heard” in advance of a decision affecting rights or interests. That duty may be expressed in certain circumstances as the doctrine of legitimate expectations, raised by the undertaking of a decision maker, which if unfulfilled may provide grounds for a court to intervene and set aside a decision made without providing the opportunity for consultation. Yet it is also trite law that in Canada, the doctrine of legitimate expectations has no application in relation to functions or decisions that are purely legislative. (See Reference re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525, at pages 557-558.)

CDMA urges that a purely legislative function is one in which the Governor in Council exercises “a purely ministerial decision, on broad grounds of public policy". Here it is said government exercises power that affects the process of approval for a specific group, applicants for NOCs, and the decision is not one that is purely legislative. Here it is said there is no evidence adduced by the Minister to support the proposition that the decision reflected in the Regulations was purely ministerial and based on broad grounds of public policy.

In my view, that submission fails to take account of the necessary process of assessing the nature of the decision in question. That process requires assessment of the statutory or other basis for the decision. Here that basis is subsection 55.2(4) of the amending Act. Conferring, as it does, authority on the Governor in Council to regulate as the Governor in Council considers necessary in relation to the matters here dealt with and without limitation by reference to some objective standard, the activity of the Governor in Council is clearly legislative in nature. I am not persuaded that the function of the Governor in Council in enacting regulations in this case is subject to the duty of fairness which CDMA would impose. The express undertaking of the Minister, though he was principally responsible for development of regulations, cannot, in my opinion, be seen by itself to be an undertaking on behalf of the Governor in Council, the body formally authorized to make regulations.

The function of the Governor in Council, the decision maker, which gave no undertaking about prior consultation despite the express words of the Minister, was a legislative function. The doctrine of legitimate expectations does not apply. CDMA argued, but I am not persuaded, that aside from that doctrine, a special duty of fairness applies in this case because of the Minister’s promise. In my opinion, there is no basis other than the principle of legitimate expectations on which a duty of fairness is recognized, to permit the Court to intervene if there be no prior consultations about the text or content of regulations before their adoption, even where consultation in advance of adoption has been assured but has not been permitted. The circumstances here, in my opinion, are clearly within the principle recognized by the Supreme Court of Canada in Reference re Canada Assistance Plan (B.C.), supra.

Conclusion

I conclude the application by Apotex for an order in the nature of mandamus, to compel issue of an NOC in relation to its application for Norfloxacin, is dismissed. As set out earlier in these reasons, the decision of Madam Justice Simpson ordering that the Minister is prohibited from issuing an NOC during the life of Merck’s patent rights to the drug has been, in effect, upheld by the Court of Appeal.

Moreover, as these reasons indicate, it is my conclusion that the Apotex application for an NOC is clearly subject to the Regulations, and those are valid within the authority conferred on the Governor in Council under subsection 55.2(4). I am not persuaded that the Regulations are beyond the authority granted by that provision of the Act.

Nor am I persuaded that any of the other grounds here urged, which relate to purposes of the Regulations or to the process under which they were enacted, provide any basis for this Court to find the Regulations ultra vires or otherwise unlawful. Neither the arguments of Apotex, nor those of CDMA, are accepted.

Thus, the request of Apotex, with support of CDMA, for an order declaring the Regulations to be unlawful, or ultra vires, is dismissed.