A-466-96

CORAM:      HUGESSEN J.A.

     DESJARDINS J.A.

     DÉCARY J.A.

B E T W E E N :

     NU-PHARM INC.

     Appellant

     (Respondent)

     - and -

     JANSSEN PHARMACEUTICA INC. and

     JANSSEN PHARMACEUTICA naamloze vennootschap

     Respondents

     (Applicants)

     - and -

     THE MINISTER OF NATIONAL HEALTH AND WELFARE

     Respondent

     (Respondent)

     Heard at Ottawa, Ontario, Wednesday, February 19, 1997.

     Judgment rendered from the Bench, February 19, 1997.

REASONS FOR JUDGMENT OF THE COURT

DELIVERED BY:      HUGESSEN J.A.

     A-466-96

CORAM:      HUGESSEN J.A.

     DESJARDINS J.A.

     DÉCARY J.A.

B E T W E E N :

     NU-PHARM INC.

     Appellant

     (Respondent)

     - and -

     JANSSEN PHARMACEUTICA INC. and

     JANSSEN PHARMACEUTICA naamloze vennootschap

     Respondents

     (Applicants)

     - and -

     THE MINISTER OF NATIONAL HEALTH AND WELFARE

     Respondent

     (Respondent)

     REASONS FOR JUDGMENT OF THE COURT

     (Delivered from the Bench at Ottawa, Ontario,

     Wednesday, February 19, 1997)

HUGESSEN J.A.

     We are not persuaded that the learned motions judge erred in concluding as she did that in the peculiar circumstances of this case the extinguishment of Apotex's compulsory licence on 14 February 1993 had the effect of eliminating any rights that the appellant, Nu-Pharm, may have had to process and sell the patented drug acquired by it in bulk form under its arrangement with Apotex. This is not a case of a normal commercial sale to an innocent third party e.g. a pharmacist. Indeed, in our view the arragnement between the appellant and Apotex cannot properly be characterized as a sale at all. Rather, that arrangement seems to us to be in substance an agency agreement whereby Nu-Pharm, which had no licence, employed Apotex, which did have a licence, albeit one of very limited duration, to purchase, import and manufacture the patented drug on its behalf.

     The case is in some respects similar to the one dealt with by this Court in Eli Lilly and Co. v. Apotex Inc.¹. In both cases the Court is required to determine the true substance and legal effect of an arrangement made between two generic drug companies, one of whom has a compulsory licence, for the avowed purpose of forestalling the effects of the imminent enactment of the Patent Act Amendment Act, 1992². In Lilly, the agreement was reduced to writing, whereas here we must assess the nature of the contract from what the parties actually did. We note in particular that, from the outset, it was envisaged that Apotex would process the drug from its bulk form into tablets and that this would necessarily be done as Nu-Pharm's agent. We can see no reason for thinking that other actions taken by Apotex under the same agreement would not have been done in that same capacity.

     In the result, since in the present case the drug had been neither delivered to Nu-Pharm, nor processed into tablet form at the time Apotex's compulsory licence was statutorily extinguished, Nu-Pharm can no longer pretend that its agent could supply it with a non-infringing product.

---

     The appeal will be dismissed with costs.

     "James K. Hugessen"

     J.A.

     FEDERAL COURT OF APPEAL

     A-466-96

B E T W E E N :

     NU-PHARM INC.

     Appellant

     (Respondent)

     - and -

     JANSSEN PHARMACEUTICA INC. and

     JANSSEN PHARMACEUTICA

     naamloze vennootschap

     Respondents

     (Applicants)

     - and -

     THE MINISTER OF NATIONAL HEALTH

     AND WELFARE

     Respondent

     (Respondent)

     REASONS FOR JUDGMENT OF THE COURT

__________________

¹      (1996), 66 C.P.R. (3d) 329. Leave to appeal granted by the Supreme Court of Canada, 6 February 1997.

²      S.C. 1993, ch. 2