Pfizer Canada ULC (“Pfizer Canada”) was accused of infringing Canadian Patent No. 2,486,935 (the “Patent-at-Issue”) owned by Seedlings Life Sciences Ventures, LLC (“Seedlings”), by selling the second generation of an epinephrine auto-injector product trademarked as the EpiPen® (“EpiPen”). NERA was retained by counsel for Pfizer Canada to assist the Federal Court of Canada (the “Court”) in determining the reasonable royalty for a hypothetical license to the Patent-at-Issue, to which parties would have agreed but-for the alleged infringement. Dr. Christine Meyer, Managing Director and Chair of the Intellectual Property Practice at NERA, served as the expert witness for Pfizer Canada with the assistance of former Senior Consultant Dr. Omar Robles. The trial was held before Justice Sébastien Grammond in late 2019 and the Court’s judgement was issued in January 2020. 

The Court recognized that a reasonable royalty generally constitutes “reasonable compensation” and can be estimated through an exercise of hypothetical negotiation, in which defendant Pfizer would have sought a license from plaintiff Seedlings instead of infringing the Patent-at-Issue. The Court also affirmed that the exercise of hypothetical negotiation involves the determination of the hypothetical negotiation date (HND), licensor’s minimum willingness to accept (MWA), and licensee’s maximum willingness to pay (MWP), a framework first introduced in the Court by Dr. Meyer in Merck & Co, Inc v Apotex Inc. (“Merck”). Dr. Meyer’s framework, which the Court determined to be both “reasonable” and “very helpful” in Merck and repeatedly affirmed in Dow Chemical Co v Nova Chemicals Corp and Airbus Helicopters S.A.S. v. Bell Helicopter Texteron Canada Limitée, was once again considered “well anchored in economics literature” by the Court in this case.

In determining the HND, the Court agreed with Dr. Meyer that the hypothetical negotiation would have taken place “at the time of first infringement” and determined that the appropriate date was in early 2010, as put forth by Dr. Meyer. The Court recognized that King Canada, an entity acquired by Pfizer Canada in 2011, first infringed the Patent-at-Issue in early 2010 and that “Pfizer Canada continued the business of King Canada” thereafter. In the process, the Court disregarded the opposing expert’s assessment that the hypothetical negotiation would have taken place in 2011 because “the negotiation must involve the defendant [Pfizer Canada].”

In determining Seedlings’ MWA, the Court also agreed with Dr. Meyer that the proper approach is to identify Seedlings’ next-best alternative to understand “at what point Seedlings would have rationally walked away from the negotiations.” The Court determined Seedlings’ next-best alternative was the “incremental profits [Seedlings] would have made by not selling a licence to Pfizer [Canada]” and agreed with Dr. Meyer’s assessment that “Seedlings would not have foregone anything by entering in a licencing agreement with Pfizer [Canada].” In the process, the Court disregarded the opposing expert’s assessment that Seedlings would have foregone some licensing opportunities by granting a hypothetical licence to Pfizer Canada, determining that Seedlings did not have “any realistic expectation of selling a licence to anyone” in early 2010. 

The Court found that “the claims asserted by Seedlings were invalid…[but] had those claims been valid, I would have found that they were not infringed by the EpiPen.” However, the Court still offered an opinion on the damages in case “judgment is reversed on appeal,” and as discussed, agreed entirely with Dr. Meyer’s opinions on the hypothetical negotiation date and the MWA in its determination of a reasonable royalty rate. Moreover, the Court repeatedly cited Merck, the case in which Dr. Meyer first introduced the exercise of a hypothetical negotiation framework in Canada.