Blood pressure soars for Apotex, prez over patent

Violated Merck’s rights in Apo-Enalapril

The Federal Court of Canada has held Apotex and its president, Bernard Sherman, in contempt for taking a very literal interpretation of a patent infringement injunction.

Merck & Co. had claimed that Apotex was infringing its patent in Apo-Enalapril, a drug for treating high blood pressure. On December 14, 1994, the court issued a permanent injunction restraining Apotex from selling its cheaper generic version, and it ordered Apotex to deliver its inventory to Merck or destroy it.

Sherman read the judgment and, after consulting Apotex’s lawyer, determined that the company could continue marketing Apo-Enalapril, the largest-selling prescription drug in the Canadian market, until the judgment was formally filed in the court offices.

On December 15, 1994, Apotex sold 20 times the normal amount, with sales totalling $9-million. Its lawyer then learned that Merck was relying on case law that said that it was contempt of court to violate the terms of an injunction even before it was filed.

So, on December 16 Apotex stopped dealing in Apo-Enalapril and sought a hearing to stay the injunction. The court advised that, until the judgment was filed, there was nothing to stay.

Taking this as a green light, Apotex again began selling the drug, but the court then indicated that it agreed with Merck’s view of the case law on contempt. Before the day ended, Apotex again stopped selling the drug.

The injunction became final on January 9, 1995, but it excluded third parties with Apo-Enalapril in inventory.

Apotex suddenly cancelled its usual policy of accepting returns of such inventory and assisted customers who wanted to get rid of the drug, acting as their intermediary in resales.

In some cases, Apotex subsidized discounts and paid agency fees to assist its customers in transferring the drug to buyers.

Merck brought Apotex and Sherman back before the court, claiming that, except for during a brief period around Christmas 1995 when the injunction was stayed, all of these sales and the assistance with transfers of inventory amounted to contempts of court on the part of Apotex and its president.

The court has agreed with this view, and the penalties will probably be quite heavy, when the court sets them.

The court has found Apotex and Sherman both guilty of violating the original order.

As well, it says that Apotex violated the final order. The court admits that there was no breach of the injunction until the formal order was filed. However, as Apotex’s directing mind, Sherman knew of the injunction’s terms from the beginning and, by selling the drug on December 15 and 16, he and Apotex interfered with the orderly administration of justice and impaired the authority and dignity of the court.

It was no excuse, the court advises, that the judgment was not formally entered. The temporary injunction order clearly said that Merck’s infringement claims were valid. In other words, even if the judgment did not become literal law until Merck filed it in the court offices, it was already law in spirit, and it was disingenuous to say otherwise.

Apotex similarly interfered with the orderly administration of justice, the court holds, in facilitating sales among third-party vendors and purchasers in January 1995. The allowances Apotex paid amounted to incentives given by it to avoid loss of the goods.

However, the court adds, Sherman was not guilty of facilitating the sales as there was no evidence that he personally knew of or participated in the scheme. A vice-president had done so on the Apotex’s behalf.

For more information:

Merck & Co. v. Apotex Inc., Federal Court of Canada file T-2408-91, Mar. 7/00.

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