Double Recovery in Transnational Patent Litigation

The recent decision of the Federal Court of Canada invalidating Sanofi’s Canadian Plavix patent raises some interesting points relating transnational patent litigation. The (simplified) facts are that Sanofi holds US and Canadian patents for Plavix (clopidogrel). Apotex made generic Apo-clopidogrel in Canada and exported it into the US for sale there, so the same pills that were infringing the US patent by sale in the US, were also infringing the Canadian patent by manufacture in Canada. Sanofi sued in both the US and Canada. The parties entered into a settlement agreement respecting the US litigation. The settlement was subject to regulatory approval, and provided for alternate terms in the event of regulatory denial; in particular, if Sanofi prevailed in subsequent litigation, damages were specified to be 50% of Apotex’s net sales. Regulatory approval was denied, Sanofi prevailed in the subsequent US litigation, and, in an October 2010 decision, 748 F.Supp.2d 293 (SDNY), Sanofi was awarded damages of 50% of Apotex’s net sales, as provided for in the settlement. In November, 2010 Apotex paid into court US$556 million in respect of the judgment.

The Canadian litigation went to trial in April 2011, after US proceedings were concluded. Apotex argued that Sanofi should not be able to come to Canada to get an award in respect of the same Apo-clopidogrel in respect of which they had already secured judgment and payment in the US. As a matter of law, Apotex argued that the settlement agreement governed and precluded claims in any litigation, worldwide, in respect of the infringing US sales. The trial judge disagreed, noting that the settlement agreement provided that the parties agreed “to settle the litigations between them involving the U.S. Patent No. 4,847,265.” There was no mention of the Canadian patent, which was the basis of the Canadian litigation. In other words, the parties had agreed to settle litigation in respect of the US patent, not to settle litigation in respect of the US sales.

Having failed with that argument, Apotex came at the problem from a different angle, and asserted res judicata and abuse of process. The court held that there was no res judicata, as the cause of action was different, being based on the Canadian patent rather than the US patent. That left the court’s inherent jurisdiction to prevent an abuse of process. The court dismissed this argument summarily, in a couple of sentences.

Ultimately the matter was moot because the court held the Canadian patent to be invalid, but the underlying problem is a general one. The result respecting the settlement agreement is idiosyncratic, though it is a reminder of the need to take care to cover all the angles in a settlement (Merpel says that the agreement did cover very precisely what was intended – or at least what Sanofi intended). But the objection to double recovery has considerable force as a matter of principle, even in those cases in which no settlement agreement had ever been entered into in any jurisdiction. This Kat’s view is that the court reached the right conclusion on res judicata in the strict sense. That leaves abuse of process to address the problem of double recovery; or perhaps it might better be dealt with at the remedial stage, rather than as a defence. While this problem must arise with some regularity, this Kat was unable to find any law addressing the matter directly. This Kat is admittedly not an expert in this particular area, and feels he must be missing something. Can any readers help?