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Abuse of process by Relitigation

The Federal Court of Appeal has recently considered the doctrine of abuse of process in relation to a claim for patent infringement. The court’s conclusions are not limited to patent infringement and apply more broadly. Janssen Inc. v, Apotex Inc. 2023 FCA 253


The Facts

In 2021, Janssen Inc. and Janssen Pharmaceutica N.V. (collectively, Janssen) commenced an action against Apotex Inc. (the Prior Action) in response to an earlier notice of allegation (NOA) that it received from Apotex. The earlier NOA, and Apotex’s defense to the Prior Action alleged that its generic version of the pharmaceutical in issue would not infringe the Janssen’s patent because Apotex would not sell one of the essential elements of all of the claims of the patent. Apotex did not allege at that time that the Patent was invalid. The Federal Court disposed of the Prior Action following a summary trial. It was found that Apotex would infringe the Patent by inducement if it entered the market with its generic version. This decision was under appeal at the time of the hearing of Janssen’s appeal.


As the dispute between the parties continued, Apotex delivered additional NOAs to Janssen, which alleged that claims of the Patent were invalid because they comprise unpatentable subject matter, namely methods of medical treatment. These NOAs did not otherwise allege that Apotex’s generic version will avoid infringement of the Patent. Janssen commenced two actions (the Underlying Actions) and Apotex defended on the same basis as asserted in the NOAs.


Janssen moved for summary judgement seeking to have remedies claimed in the Underlying Actions granted because Apotex’s defenses were res judicata, an abuse of process and/or precluded by the doctrine of election. The Federal Court refused to grant summary judgment on these grounds and allowed the Underlying Actions to proceed. Janssen appealed to the Federal Court of Appeal.


The Appeal

The Court started its decision by making several general comments concerning abuse of process. Judges have an inherent and residual discretion to prevent an abuse of the court’s process:  The doctrine of abuse of process engages “the inherent power of the Court to prevent the misuse of its procedure, in a way that would … bring the administration of justice into disrepute”. It is a flexible doctrine unencumbered by the specific requirements of concepts such as issue estoppel:  Canadian courts have applied the doctrine of abuse of process to preclude relitigation when the strict requirements of issue estoppel are not met but where allowing the litigation to proceed would nonetheless violate such principles as judicial economy, consistency, finality, and the integrity of the administration of justice.


The policy grounds supporting abuse of process by relitigation are:

  1. That there be an end to litigation;

  2. No one should be twice vexed by the same cause;

  3. To preserve the courts’ and the litigants’ resources;

  4. To uphold the integrity of the legal system to avoid inconsistent results; and

  5. To protect the principle of finality so crucial to the proper administration of justice


The focus of the doctrine of abuse of process is less on the interest of parties and more on the integrity of judicial decision making as a branch of the administration of justice. Relitigation will be acceptable in some cases, for example, (1) when the first proceeding is tainted by fraud or dishonesty; (2) when fresh, new evidence, previously unavailable, conclusively impeaches the original results; or (3) when fairness dictates that the original result should not be binding in the new context.


The obligation of litigants to put their best foot forward concerns not only questions or facts distinctly put in issue and directly determined but extends to the material facts and the conclusions of law or of mixed fact and law that were necessarily (even if not explicitly) determined in the earlier proceedings.


Given the requirements associated with the doctrine, cases where it is applied will be rare.   

In the patent context the court referred to previous decisions where prior allegations of non-infringement indicated that the party making the allegations had accepted the validity of the patent in suit and invalidity had effectively been decided. Subsequently attempting to raise invalidity was an abuse of process.


The Court said that although the power to stay proceedings for abuse of process is discretionary, it must be exercised under settled jurisprudence, and failure to do so amounts to an error of law. The Federal Court Judge erred in his consideration of Janssen’s abuse of process argument by focusing on the distinction in the Regulations between non-infringement allegations and invalidity allegations, and the propriety of Apotex’s service of multiple NOAs. Since the doctrine of abuse of process is about the inherent power of the Court to prevent the misuse of its procedure, the focus should instead have been on the Underlying Actions.


The concerning fact was that Apotex argued the invalidity of the Patent only after being unsuccessful in the Prior Action, where it could have, but decided not to, raise the invalidity issue. This appears to be an attempt by Apotex to split its case and to litigate by instalments in a way that has been found to be an abuse of process. Even though Apotex did not raise invalidity as an issue in the Prior Action, it was implicitly considered. The imposition of injunctive remedies by the Federal Court in its decision in the Prior Action implies that it found the Patent to be valid.


The appeal was allowed and the motion for summary judgement granted in Janssen’s favour.


Comment

The decision of the Federal Court of Appeal clarifies when a defense based on abuse of process will be available.

If you have questions, please contact me at mckeown@gsnh.com.


Goldman Sloan Nash & Haber LLP 480 University Avenue, Suite 1600 Toronto, Ontario M5G 1V2 Direct Line: (416) 597-3371 Fax: (416) 597-3370 Email: mckeown@gsnh.com


These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.


A version of this article originally appeared in the Law360 Canada published by LexisNexis Canada Inc.



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