PM(NOC) Invalidity Grounds May Extend Beyond NOA

January 18, 2021
By Melanie Szweras and Scott MacKendrick

The Federal Court, in its recent decision Sunovion Pharmaceuticals Canada Inc. v. Taro Pharmaceuticals Inc. (2021 FC 37), allowed amendments to a Statement of Defence in a PM(NOC) action that went beyond the grounds of invalidity set out in the Defendant’s Notice of Allegation.

On September 17, 2017, the PM(NOC) Regulations were significantly amended as a part of Canada’s implementation of the CETA agreement with the EU, converting what had been a patent linkage application driven regime – litigated like a summary judgment motion – into an action regime – litigated mostly like a conventional patent infringement trial. And under the old application driven regime, the Notice of Allegation defined the issues that could be raised during the PM(NOC) proceeding.

In this motion, the Defendant, Taro Pharmaceuticals, Inc., sought to include in an amended Statement of Defence allegations that were not part of its Notice of Allegation (“NOA”). These allegations were, however, included in the statement of defence in a different PM(NOC) action involving Pharmascience Inc.

The Plaintiffs (Sunovion et al.) argued that the scheme of the PM(NOC) Regulations restricts the invalidity allegations to those that were included in the detailed statement of fact and law in Taro’s NOA, as had been the case under the old regime. They further argued that to do otherwise would encourage generics to hide invalidity allegations until after the action is brought, which would necessarily hinder the innovator’s ability to assess risks and to assess whether to initiate a proceeding.

In contrast, Taro argued that, under the new regime, the generic is no longer limited to the issues raised in their NOA but, instead, the action is governed by the pleadings alone and the rules that typically apply in regular patent infringement actions.

The Court favoured Taro’s submissions, finding that the amendments should not be refused outright based on the fact that they were not included in the Notice of Allegation. This finding is further supported by the Regulatory Impact Analysis Statement that accompanied the new regime, which stated that the purpose of the delivery of the NOA is: “to facilitate early consideration of issues likely to be raised in litigation. This requirement does not circumscribe or otherwise limit the issues and argument that may be raised in a proceeding under the Regulations. The scope of proceeding will be defined by the pleadings…”.

Thus, the Court concluded that the amendments “must be considered under the principles relating to pleading amendments” and the consideration of the impact allowing the amendments will have on the proceedings. Further, “the issues and arguments raised for invalidity in a Statement of Defence will be premised on those in the NOA, although when read in connection with the earlier RIAS statement, are not intended to be so limited”. With this in mind, the Court noted the following factors in finding that the amendments should be allowed: the amendments were submitted in a timely manner, they do not delay the trial, they are in play in the Pharmascience action, the course of the litigation will not be unreasonably altered, and it goes to the merits of the validity of the patents in issue.

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