Nearly 400-Year-Old English Statute of Monopolies Not Applicable to Damage Claim Under Canada’s Patented Drug Regime

March 24, 2021
By Andrew McIntosh and Martin Brandsma

In 1624, England introduced its Statute of Monopolies1 to limit perceived abuses by the monarch in awarding monopolies over various economic activities. Nearly 400 years later, an Ontario Superior Court decision has confirmed on a summary judgment motion that the pre-confederation English statute, along with a similar Ontario Statute of Monopolies2 and the common law, are all not applicable in the determination of damages under Canada’s patented drug regime. In practice, the decision limits a generic company’s recoverable damages caused by operation of Canada’s Patented Medicines (Notice of Compliance) Regulations (“PM(NOC) Regulations”) to those pursuant to section 8 of the PM(NOC) Regulations. While an appeal is anticipated, the decision provides the start of welcomed clarity to an issue left unresolved in multiple actions before Canada’s courts for a decade.

The PM(NOC) Regime

Introduced in 1993, Canada’s PM(NOC) Regulations permit innovator drug companies to list patents that meet certain criteria on a Patent Register. Generic companies not prepared to await the expiry of listed patents must serve a Notice of Allegation (“NOA”) on the innovator that details why the listed patent would not be infringed by the generic, is invalid, or is improperly listed on the Patent Register. Service of an NOA gives to the innovator the right to bring an action for patent infringement against the generic, triggering a freezing event whereby the Minister of Health is prohibited from issuing regulatory authorization to a generic company for a 24-month period (unless the prohibition proceeding was disposed of earlier). If a generic company is ultimately successful in the action, it may seek damages for delayed market entry pursuant to section 8 of the PM(NOC) Regulations.

For the past decade, Apotex had alleged in several actions against innovator companies that if a patent kept Apotex out of the market by operation of the PM(NOC) Regulations, and that patent was subsequently found invalid and void ab initio, then Apotex should be entitled to damages at common law and the Ontario and the English Statute of Monopolies. Until now, that issue had not been decided.

The Olanzapine Decision

In Apotex Inc. v. Eli Lilly Canada Inc., 2021 ONSC 1588 (“Olanzapine”), the Ontario Superior Court granted a motion for summary judgment brought by the Eli Lilly group of companies (“Lilly”) to dismiss Apotex’s action for damages, including treble damages under each Statute of Monopolies. Apotex’s underlying action arose from Lilly’s olanzapine drug patent and Lilly’s commencement of proceedings under the PM(NOC) Regulations that delayed Apotex’s launch of its generic olanzapine product. While Lilly’s patent was upheld in the prohibition proceeding against Apotex, the patent was later declared invalid in a subsequent proceeding against a different generic company. Despite the subsequent invalidation, Apotex was precluded from seeking damages pursuant to section 8 of the PM(NOC) Regulations since it was unsuccessful in the prohibition action against Lilly. As an alternative, Apotex commenced the underlying action to claim damages against Lilly under the common law, both Statute of Monopolies and the Trademarks Act for being delayed its market entry.

In granting Lilly’s summary judgment motion, the Court found that Apotex was kept out of the market due to the lawful operation of the PM(NOC) Regulations. By invoking the PM(NOC) Regulations, Lilly relied on an existing patent that was presumed to be valid. Lilly was simply using the regulatory scheme established to address patent disputes involving pharmaceutical drugs. Relying on a number of judicial precedents, the Court concluded that patent law in Canada is “wholly statutory”, with the Patent Act and the PM(NOC) Regulations providing “a complete code” to govern the issuance and use of patents, and the remedies available when patents have been infringed or found invalid. The Court also specifically observed that the Patent Act does not provide a right of damages against a patentee that unsuccessfully asserts a patent against a person. The Court thus held that absent a “stand alone cause of action” or a claim “totally independent of the regulatory regime,” the Patent Act and the PM(NOC) Regulations constitute a “complete code” which precludes causes of action arising from the operation of that code. Accordingly, the Court found that Apotex’s action should be dismissed as the actions alleged to have caused harm to Apotex were authorized by law and flowed from the operation of law.

With respect to the monopolies claim, Apotex argued that it had been “hindered, grieved, disturbed and disquieted by occasion of [Lilly’s Patent]” that was void ab initio, and sought “treble damages”. The Court found that when the English Statute of Monopolies was enacted almost 400 years ago, it specified that the prohibition on monopolies did not apply to patents for new inventions (nor did the Ontario Statute of Monopolies). Instead, it restricted other monopolies for trade in certain goods, trade routes, and to operate in particular industries, in return for payment to the Crown. The Court noted that Apotex’s argument that it was harmed by Lilly’s Patent was inconsistent with its position that Lilly’s Patent never existed. If Lilly’s Patent is void ab initio, then it is deemed to have never been granted a prohibited licence, patent, or monopoly under the Statutes of Monopolies under which Apotex could be granted damages. Lastly, to hold a patent owner retroactively liable for damages beyond those provided for in the Patent Act and PM(NOC) Regulations if a patent is found invalid would upset the patent bargain and undermine the objectives of the Patent Act. Thus, the Court found that Apotex’s monopolies claim had no merit and did not raise a genuine issue for trial. The Court also summarily dismissed Apotex’s claims for damages under section 7 of the Trademarks Act and for conspiracy.

The Sildenafil Decision

Four days after the Olanzapine decision, the Ontario Superior Court released a related endorsement in Apotex Inc. v. Pfizer Ireland Pharmaceuticals, 2021 ONSC 1860 (“Sildenafil). In that underlying action, Apotex sought damages under the Statutes of Monopoly similar to in the Olanzapine action, but this time against Pfizer and its patent relating to sildenafil. In the proceeding, Pfizer sought to adjourn an upcoming trial date to instead schedule a summary judgment motion against Apotex to dismiss its action, which Apotex opposed. That decision was under reserve when the Court issued its decision in Olanzapine.

Relying on the Olanzapine decision, the Court in the Sildenafil action vacated the upcoming trial dates, allowing Pfizer to proceed with its summary judgment motion instead. As noted by the Court: “[i]nviting a 20-day trial to re-visit questions of law already decided against the plaintiff by this court does not strike me as apt based on the foregoing doctrinal, resource allocation, efficiency, and affordability concerns”.

While essentially a determination on procedure, the Sildenafil decision suggests that the Olanzapine decision—if upheld—will have broad application with respect to numerous pending cases that Apotex has brought making similar claims. Indeed, the Court in Sildenafil noted that if the Olanzapine decision is upheld “as one of pure legal analysis”, then a trial in the underlying Sildenafil action “is probably unnecessary”.

These cases, and in particular, the Olanzapine decision, suggest that the only remedy available to a generic company that is delayed market entry due to operation of the PM(NOC) Regulations is damages through section 8 of those regulations. Updates on appeals will be provided as they become available.

1 An Act concerning Monopolies and Dispensation with Penal Laws, and the Forfeitures thereof, 1624, 21 Jac. I, c.3 (the English Statute of Monopolies).

2 An Act concerning Monopolies, and Dispensation with penal laws, etc., R.S.O. 1897, c. 323 (the Ontario Statute of Monopolies).

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