Judgments

[1994] 3 F.C. 603

A-405-90

Searle Canada Inc. (Appellant)

v.

Novopharm Limited (Respondent)

A-776-90

Searle Canada Inc. (Appellant)

v.

Novopharm Limited (Respondent)

Indexed as: Searle Canada Inc. v. Novopharm Limited (C.A.)

Court of Appeal, Stone, Linden and McDonald JJ.A.—Toronto, May 25; Ottawa, June 15, 1994.

Trade marks — Passing-off — Drug for cardiovascular conditions — Respondent selling generic tablets identical in appearance to appellants — Motions Judge denying interlocutory injunction on finding neither side would suffer more irreparable harm than other — Appeal based on SCC decision in Ciba-Geigy Canada Limited v. Apotex Inc. holding wrong to exclude patients as customers in drug passing-off action — Whether Motions Judge erred in view appellant’s case lacked “much substance” in assessing balance of convenience — Principles governing common law passing-off action apply to Trade-marks Act, s. 7(c) — What must be shewn to succeed under that provision — Interlocutory injunction not granted where outcome of litigation uncertain.

Injunctions — Interlocutory — Action for passing-off under Trade-marks Act — When appelate court can interfere with discretion exercised by Motions Judge — Whether tests in American Cyanamid properly applied — Serious question to be tried — That will win at trial unnecessary to meet threshold test — No error in assessing relative strength of each party’s case after finding both would suffer irreparable harm in equal measure — No injunction where difficult questions of law, outcome at trial uncertain.

The appellant manufactured and sold a prescription drug, in tablet form, for use in the treatment of certain cardiovascular conditions. The respondent, having obtained the necessary compulsory licence, manufactured and sold its own formulation of that drug, with the same active ingredients. Its tablets were identical in appearance to the appellant’s. The appellant, in an action for passing-off and for other relief brought against the respondent on the basis of alleged violations of paragraphs 7(b) and (c) of the Trade-marks Act, brought a motion seeking, inter alia, an interlocutory injunction to stop the respondent from creating confusion between their respective products and from passing off its product for the appellant’s. This first motion was dismissed on the basis that a serious issue had been raised, neither party had demonstrated that it would suffer more irreparable harm than the other and the balance of convenience was equal. The appellant then brought a second motion for what, in effect, was a reconsideration of the first order. This motion was also dismissed. This was an appeal from both of these decisions on the basis of the subsequent Supreme Court of Canada decision in Ciba-Geigy Canada Ltd. v. Apotex Inc., wherein it was held, inter alia, that for the purposes of a passing-off action, the customers of pharmaceutical laboratories did not consist exclusively of health care professionals, and that it was wrong to exclude patients from the customers covered by the passing-off action, as the Motions Judge had done, on the pretext that they had no choice as to the product.

Held, the appeal should be dismissed.

An appellate court is entitled to interfere with the discretion exercised by a motions judge on an application for an interlocutory injunction in limited circumstances. It is insufficient that the Court of Appeal would have exercised the discretion differently. But the decision may be set aside if the judge’s exercise of discretion was based upon a misunderstanding of the law or if there has been a change of circumstances since the order was made such as would have justified his acceding to an application to vary.

The starting point for a discussion of the tests to be applied upon an application for an interlocutory injunction was American Cyanamid Co. v. Ethicon Ltd., the tests established therein having been adopted by the Supreme Court of Canada. The Motions Judge correctly applied the threshold test, holding that there was a serious issue to be tried. That was not inconsistent with his statement, after canvassing the merits, that the appellant’s action did not have much substance, since, at the threshold stage, appellant did not have to show that success awaited at trial. The conclusion that both sides would suffer irreparable harm in equal measure was reasonably open to the Motions Judge on the record before him. Nor was there reason to interfere with his view that, apart from strength of case, no factor tipped the balance of convenience significantly one way or the other.

In light of Ciba-Geigy, the Motions Judge was wrong in not taking patients into account in examining the issue of distinctiveness and confusion. But that did not resolve the question. Applying the general principles of the common law action of passing-off to a case of passing-off under paragraph 7(c) of the Trade-marks Act, the appellant still had to show how its get-up had become identified with the appellant or with some manufacturing source in the mind of the public and how the respondent was “guilty” of passing-off. And in order to succeed under paragraph 7(b), it would have to establish confusion. These issues could only be resolved at trial. Furthermore, the legal issues involved were not such as should be determined at the interlocutory stage. So, although the Motions Judge had erred on one point, that the appellant would succeed at trial was by no means certain. That would depend on the evidence and the legal submissions presented to the trial judge. In these circumstances it would be wrong for this Court, in effect, to decide the case summarily in the appellant’s favour on the untested material before it.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Federal Court Rules, C.R.C., c. 663, R. 1733.

O. Reg. 690/86.

Patent Act, R.S.C., 1985, c. P-4.

Prescription Drug Cost Regulation Act, 1986, S.O. 1986, c. 28.

Trade-marks Act, R.S.C., 1985, c. T-13, ss. 7(b),(c).

CASES JUDICIALLY CONSIDERED

APPLIED:

Ciba-Geigy Canada Ltd. v. Apotex Inc., [1992] 3 S.C.R. 120; (1992), 95 D.L.R. (4th) 385; 143 N.R. 241; revg (1990), 75 O.R. (2d) 589; 32 C.P.R. (3d) 555; 45 O.A.C. 356 (C.A.); affg (1986), 12 C.P.R. (3d) 76 (Ont. H.C.); Hadmor Productions Ltd. v. Hamilton, [1983] A.C. 191 (H.L.); American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (H.L.); Manitoba (Attorney General) v. Metropolitan Stores Ltd., [1987] 1 S.C.R. 110; (1987), 38 D.L.R. (4th) 321; [1987] 3 W.W.R. 1; 46 Man. R. (2d) 241; 25 Admin. L.R. 20; 87 CLLC 14,015; 18 C.P.C. (2d) 273; 73 N.R. 341; RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311; (1994), 111 D.L.R. (4th) 385; 164 N.R. 1; Turbo Resources Ltd. v. Petro Canada Inc., [1989] 2 F.C. 451; (1989), 22 C.I.P.R. 172; 24 C.P.R. (3d) 1; 91 N.R. 341 (C.A.); Eng Mee Yong v. Letchumanan s/o Velayutham, [1980] A.C. 331 (P.C.); Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd. et al., [1982] 1 S.C.R. 494; (1982), 134 D.L.R. (3d) 271; 20 C.C.L.T. 113; 64 C.P.R. (2d) 1; 41 N.R. 553; Cayne v Global Natural Resources plc, [1984] 1 All ER 225 (C.A.).

CONSIDERED:

Ayerst, McKenna & Harrison, Inc. v. Apotex Inc. (1983), 41 O.R. (2d) 366; 146 D.L.R. (3d) 93; 72 C.P.R. (2d) 57 (C.A.).

REFERRED TO:

Perry v. Truefitt (1842), 49 E.R. 749; Singer Manufacturing Company v. Loog (1880), 18 Ch. D. 395 (C.A.); affd (1882), 8 App. Cas. 15 (H.L.); Reckitt & Colman Products Ltd v Borden Inc, [1990] 1 All ER 873 (H.L.); John Wyeth & Bro. Ltd. v. M. & A. Pharmachem Ltd., [1988] F.S.R. 26 (Ch. D.); N.W.L. Ltd. v. Woods, [1979] 1 W.L.R. 1294 (H.L.).

AUTHORS CITED

Sharpe, Robert J. Injunctions and Specific Performance, 2nd ed. Toronto: Canada Law Book, 1993.

APPEALS from orders of the Trial Division ((1990), 31 C.P.R. (3d) 1; 37 F.T.R. 177 and [1991] 1 F.C. 292; (1990), 33 C.P.R. (3d) 336; 37 F.T.R. 220) dismissing a motion for an interlocutory injunction on the basis of alleged violations of paragraphs 7(b) and (c) of the Trade-marks Act. Appeals dismissed.

COUNSEL:

Glen A. Bloom for appellant.

Malcolm S. Johnston and Brigitte J. M. Fouillade for respondent.

SOLICITORS:

Osler, Hoskin & Harcourt, Ottawa, for appellant.

Malcolm Johnston & Associates, Toronto, for respondent.

The following are the reasons for judgment rendered in English by

Stone J.A.: These appeals are from orders of the Trial Division made on May 9, 1990 [(1990), 31 C.P.R. (3d) 1] and September 24, 1990 [[1991] 1 F.C. 292]. The first order dismissed a motion for an interlocutory injunction in an action for passing-off and for other relief brought against the respondent on the basis of alleged violations of paragraphs 7(b) and 7(c) of the Trade-marks Act, R.S.C., 1985, c. T-13. The motion was both supported and opposed by affidavit evidence, the deponents of which were cross-examined before the motion reached the learned Motions Judge. The second order dismissed a motion brought under Rule 1733 of the Federal Court Rules [C.R.C., c. 663] for what, in effect, was a reconsideration of the first order. It was supported by affidavits whose deponents were not cross-examined. The appellant relies heavily, if not exclusively, on this additional evidence.

BACKGROUND

The controversy centres on the sale and distribution in Canada of the drug verapamil, a calcium antagonist for use in the treatment of certain cardiovascular conditions. In 1981, the appellant entered into an agreement with a German company which agreed to manufacture and supply the appellant with oral dosage formulations of the drug for sale in Canada. The appellant sells these formulations under the German company’s trade-mark “Isoptin” of which the appellant is the registered user in Canada.

The appellant’s drug is sold in Canada in the form of two tablets, which were quite accurately described by the Motions Judge as “a flattened sphere, bright yellow in colour, of 80 mg … a white flattened sphere of 120 mg.”[1] Before these formulations could be sold to the public, it was necessary for the appellant to secure a notice of compliance from the Health Protection Branch of the Department of National Health and Welfare. It did so on December 14, 1981.

On April 25, 1989, the respondent, who by that date held a compulsory licence under the Patent Act, R.S.C., 1985, c. P-4, to manufacture and sell its own formulations of the drug in Canada, obtained a notice of compliance from the Health Protection Branch which enabled it to do so. Shortly thereafter, the respondent commenced the sale and distribution in Canada of its own formulations of the drug in the form of two tablets—one of 80 milligrams and the other of 120 milligrams. Of these formulations, the Motions Judge found:[2]

Its pills are identical in appearance, size, and shape to those of the plaintiff and are sold under the name “Novo-Veramil”.

It is not disputed that the respondent’s 80 milligram tablet is yellow in colour and that its 120 milligram tablet is white in colour. The tablets of both parties are accepted by them as identical in appearance. The Motions Judge also noted:[3]

It is common ground that the active ingredients are the same in the pills of both companies, but that the excipients are somewhat different.

For example, it appears that the appellant’s product may contain lactose and that the respondent’s product may not.

In July 1989, the appellant applied to the Registrar of Trade Marks for registration of the trade-mark “Yellow Tablet Design” in respect of its tablets containing 80 milligrams of verapamil hydrochloride and “White Tablet Design” in respect of its 120 milligram tablets. It asserts that these trade-marks have been used and associated with the sale and distribution of its tablets ever since it began to distribute them in Canada in January 1982.

In its original amended notice of motion for an interlocutory injunction, the appellant sought to have various activities of the respondent enjoined. These include:

… otherwise directing public attention to its oral dosage formulations of verapamil hydrochloride in such a way as to cause or to be likely to cause confusion in Canada between said formulations and the Plaintiff’s oral dosage formulations of verapamil hydrochloride contrary to Section 7(b) of the Trade-marks Act.

…

… inducing or enabling others to pass off its oral dosage formulations of verapamil hydrochloride as and for the Plaintiff’s oral dosage formulations of verapamil hydrochloride ordered or requested contrary to the provisions of Section 7(c) of the Trade-marks Act.

In its amended statement of claim, the appellant claims both an interlocutory and a permanent injunction to restrain these alleged activities. In addition, the appellant claims a declaration that these activities contravened the provisions of paragraphs 7(b) and 7(c) of the Trade-marks Act.[4]

In issuing the notice of compliance to the respondent, the Health Protection Branch made no determination that its drug is interchangeable with or may be substituted for another drug such as that of the appellant. That it is a matter for determination under appropriate provincial laws. The Motions Judge summarized the effect of provincial interchangeability laws in the following manner[5] (which both parties accept as accurate):

In British Columbia, Alberta and Prince Edward Island a generic drug is deemed to be interchangeable with another having the same active ingredients, once the federal Health Protection Branch has issued a notice of compliance for that generic drug. The decision to substitute a generic drug for an originator product is left to the discretion of the pharmacist. In the Province of Quebec the decision to substitute a generic product for an originator product is also left to the discretion of the pharmacist. In Manitoba and New Brunswick it is necessary for the generic producer to apply for listing in the provincial formulary and the main requirement for listing is that the generic have the same amount of the same active ingredients as does the originator. Ontario, Saskatchewan and Nova Scotia require applications for listing in their formularies and provincial officials must be satisfied as to the bioequivalency of the generic to the originator product. The defendant’s Novo-Veramil has been automatically recognized as interchangeable with Isoptin in some provinces, has been listed in the formularies of others because it contains the same active ingredient as Isoptin, and awaits recognition in other provinces. The defendant has of course pursued this matter with the various provincial ministries. This recognition of interchangeability is of vital importance to generic producers because it enables their drugs to be sold to public institutions; in some provinces it enables druggists dispensing to individual patients to substitute the generic drugs for the originator; and in Manitoba a druggist is obliged to substitute the generic drug if it is cheaper than the prescribed originator. All such substitution is subject to the prescribing doctor not having specified in the prescription that there is to be no substitution for the originator.

It is agreed that the respondent’s formulations were not listed in the January 1990 formularies in Ontario and Saskatchewan and that as of January 11, 1990, the listing for the province of Nova Scotia was still pending. British Columbia, Alberta, Quebec and Prince Edward Island are not significant markets for the respondent’s formulations of the drug in issue.

The parties are also in agreement that the drug can be made available to the ultimate consumer—the patient—only upon a physician’s prescription which is directed to a pharmacist to whom the drug is sold in bulk form. A patient to whom a physician prescribes the drug simply presents the prescription to a pharmacist whose assistant transfers the prescribed number of tablets from the dispensary, in which they are clearly identified by the name of the manufacturer, to a transparent plastic vial and prepares a label showing the name of the physician, the name of the pharmacy, the name of the drug and the coded name of the distributor. After this is done, the pharmacist verifies that the correct product has been transferred and then checks and applies the label.

DECISIONS OF THE MOTIONS JUDGE

The Motions Judge concluded with respect to the first motion that a “serious issue” had been raised and that neither party had demonstrated “that it will suffer substantially more irreparable harm than the other, should the injunction be either granted or refused.” As he put it at page 6 of his reasons:

From the evidence I am not satisfied that either party has demonstrated that it will suffer substantially more irreparable harm than the other, should the injunction be either granted or refused. Both parties are substantial and there is no suggestion that either would be unable to pay an award of damages. Similarly, neither has attempted to demonstrate that the grant or refusal, respectively, of an injunction would put it out of business. Both have described possible damages, some of which are, in my view, quantifiable, others of which are not quantifiable, and yet others are purely speculative. Indeed, I find the outer reaches of the possible damages predicted by each to be speculative in about equal measure. I am therefore unable to determine the matter on the basis of irreparability of injury to be suffered by either party.

Turning to a consideration of the balance of convenience, the Motions Judge took the view that he was “unable to find any factors which tip the balance of convenience significantly one way or the other.”[6] In these circumstances, he found it necessary to “give some consideration to the merits of the case.”[7] He proceeded to canvass the merits under the different heads of the appellant’s claim for relief as set forth in its amended statement of claim. As the appeals before us are confined to his refusal of injunctive relief on the basis of alleged violations of paragraphs 7(b) and 7(c) of the Trade-marks Act, it will be sufficient here to recite the Motions Judge’s assessment of the merits of those claims. He stated:[8]

With respect to its allegations of passing-off under para. 7(b) of the Trade-marks Act, it will have to prove at trial that its alleged trade mark (i.e., the colour, shape and size of its yellow and white pills, on which no letter or word appears) is distinctive. In this respect I am unable to see any difference in principle between a claim under para. 7(b) of the Trade-marks Act and a common law passing-off action. The proper interpretation of para. 7(b) requires that to succeed the plaintiff must show that the actions of the defendant are such as to cause or be likely to cause confusion between the plaintiff’s goods and the defendant’s goods, resort being had to s. 6 of the Trade-marks Act to define “confusion”: Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd. et al. (1987), 14 C.P.R. (3d) 314 at p. 330, 38 D.L.R. (4th) 544, [1987] 3 F.C. 544 (F.C.A.). For such confusion to arise in a case such as the present, it is necessary to show that the appearance of the plaintiff’s pills is distinctively associated with its product so that other pills of identical colour, shape, and size, being formulations of verapamil hydrochloride, might be confused with the plaintiff’s pills. In Ayerst, McKenna & Harrison Inc. v. Apotex Inc. (1983), 72 C.P.R. (2d) 57 at pp. 66-7, 146 D.L.R. (3d) 93, 41 O.R. (2d) 366 (C.A.), a passing off case, it was said in obiter dicta in an appeal involving facts very similar to the present (except that the pills of each producer though otherwise similar in appearance had different words embossed on them) that the plaintiff must establish in such an action that there is a distinguishing feature to his pills which has caused them to acquire a certain reputation and to be known by that appearance. It was recognized also that the plaintiff might show that the pills have acquired a “secondary meaning” so that consumers would identify them, not with the medication itself, but with the manufacturer. However, Cory J.A. observed that the plaintiff would face great difficulties in establishing a distinguishing feature or secondary meaning to exist which would lead to confusion between the plaintiff’s and the defendants’s products because, given the regulatory structure in Canada, only doctors and dentists may issue prescriptions for drugs and only they and pharmacists may dispense prescription drugs. He observed that such professionals were not likely to identify all similar looking medications with one formulation or one manufacturer, nor be confused into believing that generic substitutes come from the originator company.

Similar reasoning has been followed in several Ontario cases: see e.g., Syntex Inc. v. Novopharm Ltd. (1983), 74 C.P.R. (2d) 110 (H.C.J.); Smith, Kline & French Canada Ltd. v. Novopharm Ltd. (1983), 72 C.P.R. (2d) 197 (H.C.J.); CIBA-GEIGY Canada Ltd. v. Novopharm Ltd. (1986), 12 C.P.R. (3d) 76 (H.C.J.). I find the reasoning in these cases persuasive and directly relevant to the present case. I therefore consider it improbable that the applicant can succeed in a claim under para. 7(b) of the Trade-marks Act.

With respect to the plaintiff’s claim based on para. 7(c) of the Trade-marks Act, I think this has no substance. This paragraph provides that no person shall

(a) pass off other wares or services as and for those ordered or requested;

The plaintiff does not suggest that the defendant is itself committing such acts as filling orders for the plaintiff’s pills with its own pills. Rather, the plaintiff contends that the defendant is making it possible for, and perhaps inciting, pharmacists to fill orders for Isoptin with Novo-Veramil. No admissible evidence was provided that such is happening. It is of course true that in many provinces pharmacists are now permitted, and indeed induced, by provincial law to make such a substitution. That does not flow from the actions of the defendant. Further, according to the evidence, pharmacists are required to state on the prescription container delivered to the patient the name of the manufacturer, at least in code. To the extent that any patient is interested in such matters he can no doubt have the code explained to him. The fact that there may be dishonest pharmacists somewhere in Canada should not cause an injunction to be visited upon the defendant. After all, any manufacturer who produces similar-appearing yellow or white pills or even candies of a similar shape and size could be equally responsible for enabling a dishonest pharmacist to make unauthorized substitutions for Isoptin.

On August 4, 1990, the appellant launched its second motion. By that motion, an order was sought varying the terms of the order of May 9, 1990 “to thereby grant an interlocutory injunction” restraining the commission of acts which were sought to be enjoined on the first motion. The effect of the supporting affidavit evidence was summarized by the Motions Judge in his reasons:[9]

In support of this notice of motion the plaintiff has filed several affidavits upon which there has been no cross-examination, The defendant has filed no evidence in reply. The affidavits describe investigations carried out by the plaintiff in the province of Quebec and in Toronto in April and May, 1990. In each case the company or its agents obtained prescriptions from doctors (apparently in respect of non-existent patients or non-existent maladies) for Isoptin and these prescriptions were taken to various pharmacies to be filled. The pills supplied were then tested on behalf of the plaintiff to determine whether Isoptin had really been provided by the pharmacists. Of eighty-nine prescriptions purchased in the province of Quebec where the druggists had identified the pills as “Isoptin” on the label, nine contained no lactose and therefore, presumptively, were not Isoptin. Of three prescriptions filled in Toronto and labelled by pharmacists as “Isoptin”, two did not contain lactose. While counsel for the defendant suggested various hypotheses as to how this could have happened, I think that prima facie one could draw the conclusion in the absence of other evidence that at least in some of these cases deliberate mislabelling was involved. (It must be noted, of course, that Quebec pharmacists are perfectly entitled to substitute Novo-Veramil for Isoptin although they are not entitled to label it as Isoptin.) It must also, of course, be kept in mind that there was no systematic sampling done and it is even conceivable that the pills being provided were not the defendant’s product. There was no new evidence whatever that the defendant had incited or encouraged such false labelling.

The Motions Judge had this to say in dismissing the second motion:[10]

I believe the new evidence could only have relevance to a claim based on paragraph 7(c) of the Trade-marks Act. It will be seen from the quotation above from my order that, in dealing with the relief sought under that paragraph, I took the view that if pharmacists and doctors were not likely to be confused by pills of identical shape and colour then there could not be a claim under paragraph 7(c), as it was for those professionals to decide, in effect, which drug the ultimate consumer received. In reaching that conclusion I placed considerable reliance on a series of cases in the Ontario courts² in which it was said, in effect, that the consumer of prescription drugs is for all practical purposes the pharmacist or prescribing physician and that “confusion” must be measured by the likelihood of these professionals being misled as to the provenance of a particular drug. Counsel for the plaintiff in argument on the present motion sought to distinguish those cases on the basis that they each involved two formulations of different manufacturers which, though similar, were somehow distinguishable by sight. With respect, I think that is irrelevant to the basic concept as to who is the “consumer” of the drugs. I was not satisfied in May, and I am no more satisfied in September, that these professionals simply identify drugs by sight and that they do not have careful regard to the actual source. On the rationale which I adopted in my original reasons, it is of no particular importance to the liability of the defendant that there may be druggists who are deliberately mislabelling the defendant’s product as being that of the plaintiff. If I have adopted the wrong rationale then the remedy is to appeal my decision, not to ask me to reject that rationale on a motion to vary the original order.

Counsel for the plaintiff cited to me several cases³ containing statements to the effect that a manufacturer who adopts a get-up for his product which makes it possible for retailers to deceive the ultimate consumer is himself liable for that deception. None of these cases are recent, and three of them are English decisions from the nineteenth century. Nor are they binding on me. I deliberately preferred the rationale more recently applied by Ontario courts in respect of the special provision of pharmaceutical manufacturers vis-à-vis druggists and medical practioners.

On the basis of that rationale, the new evidence would not have made any difference had it been presented at the time of the original hearing. Therefore, the application is dismissed with costs.

² Ayerst, McKenna & Harrison, Inc. v. Apotex Inc. (1983), 41 O.R. (2d) 366 (C.A.), at pp. 374-376; Syntex Inc. v. Novopharm Ltd. et al. (1983), 74 C.P.R. (2d) 110 (Ont. H.C.); Smith, Kline & French Canada Ltd. v. Novopharm Ltd. (1983), 72 C.P.R. (2d) 197 (Ont. H.C.); Ciba-Geigy Canada Ltd. v. Novopharm Ltd. (1986), 12 C.P.R. (3d) 76 (Ont. H.C.).

³ Reddaway v. Banham (1896), 13 R.P.C. 218 (H.L.); Parke, Davis & Co. Ltd. v. Empire Laboratories Ltd., [1964] Ex. C.R. 399; Lever v. Goodwin (1887), 4 R.P.C. 492 (C.A.); Johnston v. Orr Ewing (1882), 7 App. Cas. 219 (H.L.).

It is against this background of facts and proceedings that we are asked to intervene. The particular reason the appeals are advanced is the decision of the Supreme Court of Canada in Ciba-Geigy Canada Ltd. v. Apotex Inc., [1992] 3 S.C.R. 120, which was rendered on October 29, 1992. It is necessary to summarize the circumstances of that case and the basis upon which it was disposed of by the Supreme Court of Canada.

THE CIBA-GEIGY CASE

Ciba-Geigy involved the sale and distribution in Canada of the drug metoprolol tartrate. It was manufactured and sold by Ciba-Geigy Canada Limited under the trade name “Lopresor” and was prescribed by physicians for hypertension and angina. This drug was available in two dosages—an oblong pink tablet for the 50 milligram tablets and an oblong blue tablet for the 100 milligram. The respondents therein held licenses under the Patent Act to manufacture and sell metoprolol tartrate in Canada. In 1986, both respondents sold the drug in the same two dosages as that of Ciba-Geigy and in identical get-ups as that of Ciba-Geigy. The tablets were designated as interchangeable pursuant to the Prescription Drug Cost Regulation Act, 1986, S.O. 1986, c. 28.

Ciba-Geigy brought two common law actions of passing-off in the courts of Ontario in 1986 against the respective respondents. It alleged in those actions that its metropolol tartrate tablets had a unique get-up because of size, shape and colour and that the get-up had become associated with its product. Ciba-Geigy’s application for an interlocutory injunction to prevent one of the respondents from manufacturing and selling its tablets under the same get-up as its own was dismissed by the Supreme Court of Ontario [(1986), 12 C.P.R. (3d) 76]. Leave to appeal to the Ontario Divisional Court was refused. This was followed by motions by the respondents for summary judgments, on the ground that no genuine issue to be tried existed because Ciba-Geigy was not able to establish that physicians and pharmacists prescribed or dispensed metoprolol tartrate on the basis of its appearance or that either physicians or pharmacists were confused in selecting which brand to give patients due to the similarity of appearance of the tablets available. As an alternative to dismissal of Ciba-Geigy’s action, the respondents posed the following question to the Supreme Court of Ontario:

… with respect to the marketing of prescription drugs, a plaintiff in an action for the alleged passing-off of a prescription drug must establish that the conduct complained of is likely to result in the confusion of physicians and pharmacists in choosing whether to prescribe or dispense either the plaintiff’s or the defendant’s product.

The motions were denied but the question answered in the affirmative, a decision which was later upheld by the Ontario Court of Appeal [(1990), 75 O.R. (2d) 589]. Both the Motions Judge therein and the Ontario Court of Appeal rested their decisions on the decision of the Ontario Court of Appeal in Ayerst, McKenna & Harrison, Inc. v. Apotex Inc. (1983), 41 O.R. (2d) 366, at page 376 where Cory J.A. (as he then was) stated on behalf of the Court of Appeal:

The problems faced by Ayerst are increased by the federal and provincial statutes and regulations which must be complied with by manufacturers of prescription drugs. A manufacturer cannot advertise his product to the general public. Only physicians and dentists can prescribe and only physicians, dentists, and pharmacists can dispense prescription drugs. The plaintiff must then establish that its product has, by its shape, size and colour, acquired a secondary meaning among physicians, dentists, and pharmacists.

There has always been an element of deception in passing-off actions. Usually the similarity of appearance of goods is specifically designed to encourage the consumer to purchase the goods of the defendant believing they are those of the plaintiff. That is not the situation in this case for these are prescription tablets, not shelf-goods displayed to the public. Physicians, dentists, and pharmacists (the customers of the plaintiff) are not likely to attach a secondary meaning to the size, shape, and colour of the plaintiff’s product. Nor will they be confused, misled, or deceived by a generic drug product manufactured and sold in tablets of a similar size, shape, and colour to those of the plaintiff.

In commenting on these passages, at page 144 of Ciba-Geigy, Gonthier J. stated for the Supreme Court of Canada:

These comments make it clear that for the purposes of a passing-off action the customers of pharmaceutical laboratories consist exclusively of health care professionals. The patient who uses the product is not included.

Gonthier J. proceeded to an analysis of the views expressed by Cory J.A. in Ayerst, McKenna & Harrison, having particular regard to whether any choice in the selection of a brand of drug was left to the ultimate patient under the Prescription Drug Cost Regulation Act, 1986 and O. Reg. 690/86, which provided for interchangeability of products. In the view of Gonthier J., the patients were left with some degree of choice. At pages 149-150, he stated:

The fact that the consumer has no choice as to the product brand does not, however, mean that he cannot refuse to be sold a drug other than the one indicated by the doctor.

This led him to add, at page 150, that “excluding patients from the customers covered by the passing-off action on the pretext that they have no choice as to the product brand is quite wrong.” Later, at page 157, Gonthier J. expressly rejected the above-recited views of Cory J.A. in Ayerst, McKenna & Harrison, when he stated:

In the case at bar, the real question was not whether Cory J.A.’s comments were obiter dicta, but rather whether that opinion, limiting the customers of pharmaceutical laboratories for the purposes of a passing-off action to health care professionals, is correct in law. For the reasons I have stated, I do not think it is.

INTERFERENCE WITH MOTIONS JUDGE’S DISCRETION

The appellant sees the result in Ciba-Geigy as decisive, saying that it requires us to reject the Motions Judge’s strength of case analysis which I have already recited. According to the appellant, this error would also justify us in interfering with the exercise of the Judge’s discretion and leave us to exercise our own discretion in favour of the appellant. It is no doubt clear that an appellate court is entitled to interfere in a discretion exercised on an application for an interlocutory injunction in limited circumstances. Lord Diplock so held in Hadmor Productions Ltd. v. Hamilton, [1983] A.C. 191 (H.L.), at page 220:

Before adverting to the evidence that was before the learned judge and the additional evidence that was before the Court of Appeal, it is I think appropriate to remind your Lordships of the limited function of an appellate court in an appeal of this kind. An interlocutory injunction is a discretionary relief and the discretion whether or not to grant it is vested in the High Court judge by whom the application for it is heard. Upon an appeal from the judge’s grant or refusal of an interlocutory injunction the function of an appellate court, whether it be the Court of Appeal or your Lordships’ House, is not to exercise an independent discretion of its own. It must defer to the judge’s exercise of his discretion and must not interfere with it merely upon the ground that the members of the appellate court would have exercised the discretion differently. The function of the appellate court is initially one of review only. It may set aside the judge’s exercise of his discretion on the ground that it was based upon a misunderstanding of the law or of the evidence before him or upon an inference that particular facts existed or did not exist, which, although it was one that might legitimately have been drawn upon the evidence that was before the judge, can be demonstrated to be wrong by further evidence that has become available by the time of the appeal; or upon the ground that there has been a change of circumstances after the judge made his order that would have justified his acceding to an application to vary it. Since reasons given by judges for granting or refusing interlocutory injunctions may sometimes be sketchy, there may also be occasional cases where even though no erroneous assumption of law or fact can be identified the judge’s decision to grant or refuse the injunction is so aberrant that it must be set aside upon the ground that no reasonable judge regardful of his duty to act judicially could have reached it. It is only if and after the appellate court has reached the conclusion that the judge’s exercise of his discretion must be set aside for one or other of these reasons, that it becomes entitled to exercise an original discretion of its own.

INTERLOCUTORY INJUNCTION TESTS

I take the decision of Lord Diplock in American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (H.L.) as the starting point for a discussion of the tests to be applied in determining whether an interlocutory injunction should be granted or refused. In general terms these are, first, whether the applicant has shown that there is a serious issue to be tried in the sense that it is one that is neither frivolous nor vexatious, secondly, whether the applicant would suffer irreparable harm in the sense that damages at common law would not provide an adequate remedy if the court refused to grant an injunction, and, thirdly, whether the balance of convenience lies in favour of granting an injunction. It is clear that these tests are intended to be applied with some degree of flexibility given that the remedy is discretionary. This flexibility in achieved in the final analysis through the application of factors which serve to tip the balance of convenience one way or the other. The American Cyanamid tests have been adopted by the Supreme Court of Canada in two cases involving applications to stay the execution of a judgment under appeal to that Court pending final decision: Manitoba (Attorney General) v. Metropolitan Stores Ltd., [1987] 1 S.C.R. 110; RJR-Macdonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311. They have been applied by this Court in a number of interlocutory injunction cases, including Turbo Resources Ltd. v. Petro Canada Inc., [1989] 2 F.C. 451 (C.A.). In his text, Injunctions and Specific Performance (2nd ed.) (Toronto, 1993), at paragraph 2.190, Dr. Robert J. Sharpe explained the application of these broad tests in the following terms:

First, as indicated, the court is to ask whether the plaintiff has presented a case which is not frivolous or vexatious but which presents a serious case to be tried. Second, will damages provide the plaintiff with an adequate remedy? If so, no injunction should be granted. If not, third, would the plaintiff’s undertaking in damages provide adequate compensation to the defendant, should he or she succeed at trial, for loss sustained because of the interlocutory injunction? If so, then there is a strong case for an interlocutory injunction. Fourth, where there is doubt as to the adequacy of the respective remedies in damages, the case turns on the balance of convenience. Fifth, at this point, according to Lord Diplock, weight may be placed on the court’s prediction of ultimate success, but only in certain cases.

It has been held that the threshold test of a “serious question to be tried” is inapplicable in some circumstances. Application of a more stringent test (such as “a prima facie case”) was recognized by Lord Diplock himself in N.W.L. Ltd. v. Woods, [1979] 1 W.L.R. 1294 (H.L.), at page 1307. The Woods exception to the American Cyanamid tests was referred to in Turbo Resources, at pages 467-468. It and another possible exception to the “serious question” test were discussed by the Supreme Court of Canada in RJR-Macdonald, at pages 338-340. The American Cyanamid tests are otherwise to be applied. It has not been suggested that the Motions Judge was wrong in applying the American Cyanamid tests in the circumstances of this case.

ANALYSIS

It is not disputed that this case too is to be determined upon the application of the tests laid down in American Cyanamid. The real dispute is whether those tests were properly applied by the Motions Judge.

“Serious question” and strength of case

I am satisfied that the Motions Judge correctly applied the relatively low “serious question” threshold test laid down by Lord Diplock in American Cyanamid. At page 407 of that case, Lord Diplock rejected the “supposed rule” that balance of convenience is not to be addressed by a court “unless it has first been satisfied that if the case went to trial upon no other evidence than is before the court at the hearing of the application the plaintiff would be entitled to judgment for a permanent injunction”. As he put it:

Your Lordships should in my view take this opportunity of declaring that there is no such rule. The use of such expressions as “a probability”, “a prima facie case,” or “a strong prima facie case” in the context of the exercise of a discretionary power to grant an interlocutory injunction leads to confusion as to the object sought to be achieved by this form of temporary relief. The court no doubt must be satisfied that the claim is not frivolous or vexatious; in other words, that there is a serious question to be tried.

Counsel for the respondent confessed to some difficulty with the Motions Judge’s opinions that a “serious question” to be tried had been shown and, later, that the action did not have “much substance,” thus tipping the balance of convenience against the granting of an interlocutory injunction. He saw these two conclusions as perhaps inconsistent. I myself do not appreciate any difficulty. The questions which the Motions Judge considered arose at two distinct stages. He first considered whether the appellant had satisfied the threshold test of a serious question to be tried. I do not understand the Motions Judge to have done more than apply the threshold test that was required to be applied and in so doing determine that there was a serious question to be tried. It was not necessary for the appellant to show at that stage that success awaited at trial. Thus in Eng Mee Yong v. Letchumanan s/o Velayutham, [1980] A.C. 331 (P.C.), in a passage which was recited in Turbo Resources, at page 467, Lord Diplock stated, at page 337 that:

… there is no requirement that before an interlocutory injunction is granted the plaintiff should satisfy the court that there is a “probability,” a “prima facie case” or a “strong prima facie case” that if the action goes to trial he will succeed; but before any question of balance of convenience can arise the party seeking the injunction must satisfy the court that his claim is neither frivolous nor vexatious; in other words that the evidence before the court discloses that there is a serious question to be tried. [Emphasis added.]

Once the threshold test is met, two additional broad considerations needed to be assessed by the Motions Judge in determining whether or not to grant the injunction, namely the adequacy of damages as a remedy and where the balance of convenience lay. Because the Motions Judge took the view that both sides would suffer irreparable harm “in equal measure,” he turned to assess the relative strength of each party’s case, but only at the balance of convenience stage. I am unable to say that his framework for decision offended that which was constructed by Lord Diplock in American Cyanamid. I respectfully agree with the views expressed by Dr. Sharpe at paragraph 2.200 of his work on this particular aspect:

Under the Cyanamid approach, the strength of the case comes into play, initially, only to the extent of determining that the plaintiff’s claim is not frivolous or vexatious. The core test to be applied is balance of convenience. It is only where the court cannot properly assess balance of convenience that the relative strength of the parties’ cases may be taken into account and then, only where one side of the case is clearly stronger.

This, it seems to me, is what Lord Diplock had in mind when he stated at page 409 of American Cyanamid:

… and if the extent of the uncompensatable disadvantage to each party would not differ widely, it may not be improper to take into account in tipping the balance the relative strength of each party’s case as revealed by the affidavit evidence adduced on the hearing of the application.

Irreparable harm

In RJR-Macdonald, at page 341, the Supreme Court of Canada illustrated the concept of “irreparable harm” in the following terms:

“Irreparable” refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of the former include instances where one party will be put out of business by the court’s decision (R.L. Crain Inc. v. Hendry (1988), 48 D.L.R. (4th) 228 (Sask. Q.B.)); where one party will suffer permanent market loss or irrevocable damage to its business reputation (American Cyanamid, supra); or where a permanent loss of natural resources will be the result when a challenged activity is not enjoined (MacMillan Bloedel Ltd. v. Mullin, [1985] 3 W.W.R. 577 (B.C.C.A.)). The fact that one party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately be able to collect damages, although it may be a relevant consideration (Hubbard v. Pitt, [1976] Q.B. 142 (C.A.)).

Despite the able arguments on both sides, I am not persuaded that the Motions Judge erred in deciding that both parties would suffer irreparable harm depending on whether an interlocutory injunction was granted or refused. The Motions Judge took the view that some of the damages to each side are not “quantifiable,” which I take as referring to the harm an injunction or its refusal would cause to reputation and goodwill. That conclusion was reasonably open to the Motions Judge on the record before him. The evidence was not wholly speculative. I am of the view that some of the damages would be impossible to prove or to quantify. I would not interfere with the Motions Judge’s overall conclusion on this aspect of the case.

Balance of convenience

Nor would I interfere with the Motions Judge’s view that, apart from strength of case, no factor tips the balance significantly one way or the other. No doubt, as the Supreme Court of Canada pointed out in RJR-Macdonald, at page 342, the factors to be considered under this head are “numerous.” It has not been shown, in my view, that the Motions Judge neglected any relevant factor or otherwise erred in principle in concluding as he did.

The question remains, however, whether the Motions Judge was correct in his view that the appellant’s case lacked “much substance” and in allowing that factor to tip the balance of convenience against the appellant. Viewed in hindsight in the light Ciba-Geigy, it can indeed be seen that the Motions Judge’s analysis of the relative strength of each party’s case was incorrect, based as it was on the decision of the Ontario Court of Appeal in Ayerst, McKenna & Harrison. In Ciba-Geigy, it is made clear by Gonthier J., at page 157 that:

… the final consumer of a product must be taken into account in determining whether the tort of passing-off has been committed.

That view, of course, runs counter to that expressed by Cory J.A. in Ayerst, McKenna & Harrison and by the Motions Judge. Accordingly, the important questions of distinctiveness and confusion, which Ciba-Geigy also affirmed as central to success in an action for passing-off, are not to turn exclusively on the evidence of physicians or pharmacists. The ultimate patients are to be taken into account.

In Ciba-Geigy, Gonthier J. undertook a brief review of the general principles governing the common law action of passing-off. I have no doubt that these same principles apply to an action in passing-off under paragraph 7(c) of the Trade-marks Act. At pages 131-132, the learned Justice traced the concept to Perry v. Truefitt (1842), 49 E.R. 749. He drew attention to two subsequent English decisions: Singer Manufacturing Company v. Loog (1880), 18 Ch. D. 395 (C.A.); affd (1882), 8 App. Cas. 15 (H.L.); Reckitt& Colman Products Ltd v Borden Inc, [1990] 1 All ER 873 (H.L.). He next referred to the decision of the Supreme Court of Canada in Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd. et al., [1982] 1 S.C.R. 494 where, in his words [at pages 132-133], it was “stated that in any passing-off action the plaintiff, in order to succeed, must establish that its product has acquired a secondary meaning.” At page 133, Gonthier J. added:

In Consumers Distributing Co. v. Seiko Time Canada Ltd., [1984] 1 S.C.R. 583, this Court noted at p. 601 that the requirements of a passing-off action have evolved somewhat in the last hundred years:

… attention should be drawn to the fact that the passing off rule is founded upon the tort of deceit, and while the original requirement of an intent to deceive died out in the mid-1800’s, there remains the requirement, at the very least, that confusion in the minds of the public be a likely consequence by reason of the sale, or proffering for sale, by the defendant of a product not that of the plaintiff’s making, under the guise or implication that it was the plaintiff’s product or the equivalent.

A manufacturer must therefore avoid creating confusion in the public mind, whether deliberately or not, by a get-up identical to that of a product which has acquired a secondary meaning by reason of its get-up.

In order to succeed in its passing-off action under paragraph 7(c) of the Trade-marks Act, the appellant would have to show that its get-up had acquired a secondary meaning or reputation in the mind of the public such that the public identifies that get-up with the appellant; or at least with some manufacturing source, (as to which see e.g. John Wyeth & Bro. Ltd. v. M. & A. Pharmachem Ltd., [1988] F.S.R. 26 (Ch. D.), at page 29). In addition, confusion in the minds of the public would need to be shown. Moreover, the appellant would have to show that the respondent induced or enabled others to pass off its oral dosage formulations as the appellant’s oral dosage formulations. To succeed in its action under paragraph 7(b), it would be necessary for the appellant to show that the respondent has directed public attention to its oral dosage formulations in such a way as “to cause or be likely to cause confusion” in Canada between those formulations and the appellant’s formulations. The evidence of one pharmacist deals with some concerns expressed by patients to whom are dispensed the same drug under a different colour than that to which they had become accustomed.[11] It is not clear from this evidence, however, whether the patients associate a particular get-up with the drug’s effect or with its commercial origin, a question which Gonthier J. treated in Ciba-Geigy, at page 156 as “a question of fact the consideration of which must be left to the trier of fact.” From a factual standpoint alone, all of the above-mentioned issues give rise to considerable difficulty that can only be resolved at a trial.

Leaving aside this difficulty, it is my opinion that the legal issues involved are not such as should be determined at the interlocutory stage. In American Cyanamid, at page 407, Lord Diplock cautioned against doing so in a case in which the evidence is in conflict or where there are “difficult questions of law which call for detailed argument and mature considerations.” It seems to me that this applies with particular force here, especially so when the case is viewed in the light of the Supreme Court of Canada’s decision in Ciba-Geigy read as a whole and particularly with reference to what Gonthier J. stated, at pages 150-151:

It should not be forgotten that in cases like the one before the Court, the medical treatment generally extends over a long period. Hypertension is often treated for several years, if not a lifetime. Patients taking a drug for some time can become accustomed to it and insist on a particular brand. Generally when a person is satisfied with a product, he tends to remain faithful to it. This is especially true in the health field where—understandably—patients are not very willing to experiment and perhaps still less so when they are suffering from conditions such as hypertension. There are thus grounds which I would characterize as psychological for insisting on a particular brand of drug. There are certainly also physiological reasons. It is entirely conceivable that excipients, the non-medicinal part of the drug surrounding the active ingredient, may not have the same characteristics or not produce the same ingestive, digestive and other effects in the case of all manufacturers. The shape of the tablet may also play a part in the patient’s preferences: it may be another reason why the patient insists on a particular brand and asks his physician to put it on the prescription.

Moreover, quality control may not be identical from one laboratory to another or the quality itself may not be perceived as such.

To conclude that the Motions Judge erred in his analysis of the strength of the appellant’s case is not to say that an interlocutory injunction should be granted. In order for the strength of case factor to tip the balance in favour of granting an injunction, I would have to be satisfied that the appellant stands a good chance of succeeding at trial. The difficulty I have is in reliably predicting the outcome of the litigation should the appellant determine to pursue the case to trial. Although the appellant may take heart from what was decided by the Supreme Court of Canada in Ciba-Geigy, it is not to say that success at trial is assured or even that the odds are in favour of the appellant. That will depend on the evidence and the legal submissions presented to the trial judge. Evidence in support of the second motion was not tested. That evidence was characterized before us as critical to the appellant’s case in this Court. The evidence is incomplete. Although the question is serious, the outcome at trial remains uncertain. I would here adopt the words of Kerr L.J. in Cayne v Global Natural Resources plc, [1984] 1 All ER 225 (C.A.), at page 236, as apposite:

In these circumstances it seems to me that it would be wholly wrong for this court, in effect, to decide the entire contest between the parties summarily in the plaintiffs’ favour on the untested material before us. This does not present any overwhelming balance on the merits in the plaintiffs’ favour, or any other overriding ground for an immediate injunction without a trial. There is only a triable issue whose outcome is doubtful; and that issue should be tried and not pre-empted.

An interlocutory injunction is a rare and exceptional remedy. Viewing the case all in all, I am not persuaded that it is one in which an interlocutory injunction should be granted, despite the fact that, for the reasons already given, I am entitled to exercise an independent discretion.

DISPOSITION

In the result, I would dismiss the appeals with costs.

Linden J.A: I agree.

McDonald J.A.: I agree.

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