Ciba-Geigy Canada Ltd. v. Apotex Inc. and Ciba-Geigy Canada Ltd. v. Novopharm Limited


CITATION: Ciba-Geigy Canada Ltd. v. Apotex Inc. and Ciba-Geigy Canada Ltd. v. Novopharm Limited, [1992] 3 S.C.R. 120
DATE: 1992: March 27; 1992: October 29
DOCKET: 22251, 22252

Ciba-Geigy Canada Ltd.
Apotex Inc.

Ciba-Geigy Canada Ltd.
Novopharm Limited

La Forest, L'Heureux-Dube, Gonthier, Stevenson*, and Iacobucci JJ.

* Stevenson J. took no part in the judgment.

Show Headnote

The judgment of the Court was delivered by Gonthier J. –

This case involves determining, in the context of a passing-off action, who are the customers of pharmaceutical laboratories manufacturing prescription drugs. Do those customers consist only of physicians, dentists and pharmacists or are the patients to whom the drugs are dispensed also included?

Facts and Proceedings

The plaintiff Ciba-Geigy Canada Ltd. ("Ciba-Geigy") is a pharmaceutical laboratory which since 1977 has manufactured and sold metoprolol tartrate ("metoprolol") in Canada under a licence from AB Hässle of Sweden. Metoprolol is included in the list contained in Schedule F of the Food and Drug Regulations of drugs which can only be sold on prescription. Since 1977 this beta-blocker product, the trade name of which is “Lopresor”, has been prescribed by doctors in Ontario and Canada for low or moderate hypertension; since 1981 it has been prescribed in Ontario for patients suffering from angina. Hypertension is one of the diseases and disorders listed in Schedule A of the Food and Drugs Act, R.S.C., 1985, c. F-27 (formerly R.S.C. 1970, c. F-27), for which the advertising and sale of therapeutic products are prohibited. The drug is given in two doses, each of which has a specific get-up. Fifty mg Lopresor is an oblong pink tablet and 100 mg Lopresor is a tablet of the same shape, only blue.

The respondents, Apotex Inc. (“Apotex”) and Novopharm Limited (“Novopharm”), obtained licences under the Patent Act, R.S.C., 1985, c. P-4 (formerly R.S.C. 1970, c. P-4), to manufacture and sell metoprolol in Canada.

From July 1984 to June 1986, the product sold by Apotex, the trade name of which is “Apo-metoprolol”, took the form of white circular, biconvex 50 mg and 100 mg tablets. Since June 1986 the tablets sold by Apotex have had the same get-up – shape, size and colour – as those of the plaintiff.

The drug manufactured and sold by Novopharm since 1986, “Novo-metoprolol”, available in two doses – 50 mg and 100 mg – also has the same get-up as that of the plaintiff.

The parties’ metoprolol tartrate tablets have been designated interchangeable pharmaceutical products pursuant to the Prescription Drug Cost Regulation Act, 1986, S.O. 1986, c. 28. Accordingly, a pharmacist may give a patient the products of either of the respondents in place of Lopresor when the prescription does not bear the notation “no substitution”.

In June 1986 the plaintiff brought two passing-off actions, one against Apotex and the other against Novopharm, alleging that its metoprolol tartrate tablets have a unique get-up by reason of their size, shape and colour and that this get-up has become associated with its product.

As often happens in such a case, the plaintiff sought an interlocutory injunction to prevent Novopharm from manufacturing and marketing blue capsule-shaped and pink capsule-shaped metoprolol tablets. The injunction was denied by J. Holland J. of the Supreme Court of Ontario on September 8, 1986 as Ciba-Geigy had not shown there was any “serious issue to be tried”: (1986), 12 C.P.R. (3d) 76. Leave to appeal to the Ontario Divisional Court was refused by Osler J. on November 21, 1986.

The respondents filed motions for summary judgment in the Supreme Court of Ontario in response to the plaintiff’s actions. They submitted that there was no genuine issue for trial as Ciba-Geigy was unable to establish that physicians and pharmacists prescribe or dispense metoprolol tartrate on the basis of its appearance or that physicians and pharmacists were confused in choosing the brand of metoprolol to give patients because of the similar appearance of the parties’ tablets.

In the alternative, the respondents asked the court to rule on the following question of law:

In February 1989 Fitzpatrick J. denied the motions but answered the question of law in the affirmative. Ciba-Geigy appealed to the Ontario Court of Appeal as, it argued, the trial judge had erred in excluding patients, who are consumers of the drugs, from those affected by the confusion. The Ontario Court of Appeal dismissed the appeal: (1990), 75 O.R. (2d) 589, 45 O.A.C. 356, 32 C.P.R. (3d) 555.

On May 16, 1991, leave to appeal to this Court was granted, [1991] 1 S.C.R. vii.

II Judgments Below

 Supreme Court of Ontario (interlocutory injunction)

Holland J. refused to issue an interlocutory injunction because the appellant had not shown there was a “serious issue” to be tried. Reviewing the case law on passing-off in the pharmaceutical field, Holland J. considered that the plaintiff had to show that its product’s get-up had acquired a secondary meaning for its customers, consisting exclusively of physicians, dentists and pharmacists. Even assuming that Ciba-Geigy had shown this, it was not able to prove that those customers were likely to be misled by the similarity of the products.

 Supreme Court of Ontario (motions for summary judgment)

Novopharm and Apotex argued in their motions for a summary judgment that only confusion in the minds of physicians, dentists or pharmacists was relevant to a passing-off action and that the plaintiffhad not established such confusion.

Fitzpatrick J. accepted the first part of the argument relying on the opinion of Cory J.A., as he then was, in Ayerst, McKenna & Harrison, Inc. v. Apotex Inc. (1983), 41 O.R. (2d) 366:

Fitzpatrick J. refused to rule on the evidence of confusion in the minds of physicians and pharmacists, however, and he accordingly dismissed the motions for summary judgment.

 Court of Appeal (Morden A.C.J.O. and Tarnopolsky and Krever JJ.A.)

The appellant argued that the Supreme Court of Ontario had erred in considering that the ultimate consumer of the prescribed drug should be excluded from the customers affected by the passing-off. It submitted that Fitzpatrick J. should not have relied on the remarks of Cory J.A. in Ayerst, McKenna & Harrison because they were merely obiter dicta, or alternatively, because they were wrong.

The Court of Appeal rejected these two arguments, and Morden A.C.J.O. wrote (at p. 591 O.R.):

With respect to the alternative argument, the Court of Appeal, at p. 592 O.R., distinguished Parke, Davis & Co. v. Empire Laboratories Ltd., [1964] S.C.R. 351, cited by the appellant:

III Issue and Arguments

This Court must determine whether, in a passing-off action dealing with prescription drugs, a plaintiff may argue that the public affected by the risk of confusion includes, in addition to physicians, dentists and pharmacists, the patients who consume the drugs, or is instead limited exclusively to the health care professionals in question.

The appellant Ciba-Geigy puts forward four arguments. First, it considers that, contrary to what was held by the lower courts, the tort of passing-off always concerns the ultimate consumer of goods or services.

Second, the appellant submits that, in relation to a passing-off action in the specific field of pharmaceutical products, the Supreme Court admitted in Parke, Davis & Co. that the testimony of those who consume the prescribed drugs is relevant. Ciba-Geigy adds that in Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd., [1982] 1 S.C.R. 494, at p. 502, the Supreme Court cited with approval the decision of the English Court of Appeal in Roche Products Ltd. v. Berk Pharmaceuticals Ltd., [1973] R.P.C. 473, which recognized that in the case of pharmaceutical products passing-off can be established by proving reputation and confusion among the public or consumers.

Thirdly, the appellant argues that Morden A.C.J.O. of the Ontario Court of Appeal erred when he considered that Cory J.A.’s judgment in Ayerst, McKenna & Harrison laid down a rule of law, since in its submission the passage quoted is only obiter dictum.

Finally, the appellant submits that if Cory J.A. laid down a rule of law in Ayerst, McKenna & Harrison, he erred because: (1) the rule contradicts this Court’s opinion in Parke, Davis & Co. which recognizes that patient evidence is relevant; (2) the rule is based on misapprehension of the relevant legislation: although advertising of prescription drugs is restricted, the legislation does not go so far as to totally prohibit advertising aimed at the general public of products such as metoprolol; in any event, in the appellant’s submission, the question of advertising is not significant or determinative of the outcome of the present case; (3) there is nothing in the relevant legislation that sanctions passing-off at the consumer or patient level; (4) the rule disregards the fact that under the Prescription Drug Cost Regulation Act, 1986, patients have a choice among interchangeable drugs; and (5) the rule disregards the fact that passing-off may actually have occurred.

One of the respondents, Apotex, argues that the reference clientele for passing-off in the particular field of this case includes only physicians or pharmacists, as was stated in Ayerst, McKenna & Harrison. Prescription drugs are not sold to the public as other consumer products are and the customer cannot simply obtain them from the pharmacy shelf, by comparing similar products and finally selecting one of them. The choice of brand is determined pursuant to legislated interchangeability rules. According to Apotex, given this regulatory framework Ontario courts and the Federal Court have properly recognized that in a passing-off action based on the appearance of products the customers of prescription drugs were the health care professionals who prescribe it and dispense those drugs to patients. The customers are thus the persons who buy the products from the manufacturers.

Apotex further submits that Cory J.A.’s comments in Ayerst, McKenna & Harrison are not obiter dicta.

Finally, Apotex argues that in Ayerst, McKenna & Harrison the Ontario Court of Appeal did not distinguish Parke, Davis & Co. and did not have to do so.

The other respondent, Novopharm, states that the pharmaceutical products market differs considerably from that of other consumer goods and that, as noted in Ayerst, McKenna & Harrison, the “market” is made up of pharmacists, physicians and dentists. In the submission of Novopharm, neither Cory J.A. in Ayerst, McKenna & Harrison nor Morden A.C.J.O. in the present case erred in their conclusions and Cory J.A.’s opinion does not conflict with this Court’s decision in Parke, Davis & Co.

Novopharm considers that given the present legislation, if there is no misrepresentation, if the patient has no possibility of choice and there is no damage to the plaintiff, there is no passing-off. It argues that pharmacists buy and sell its products because of their interchangeability and cost, not because of their appearance. The Prescription Drug Cost Regulation Act, 1986, which came into force three years after Ayerst, McKenna & Harrison, gives patients outside hospitals the right to request an interchangeable product. The fact that the patient has a choice, however, does not mean he is part of the clientele: he remains subject to the physician’s prescription and the pharmacist purchases and dispenses the drug because of the price and interchangeability.

IV Analysis

A. Passing-off Action
(1) General Principles Developed by the Courts

The concept of passing-off was developed in 1842 in Perry v. Truefitt (1842), 6 Beav. 66, 49 E.R. 749, which seems to have been the first case in which the expression “passing-off” appeared: “A man is not to sell his own goods under the pretence that they are the goods of another man” (p. 752 E.R.). In Singer Manufacturing Co. v. Loog (1880), 18 Ch. D. 395 (C.A.), aff’d (1882), 8 App. Cas. 15 (H.L.), James L.J. described passing-off and its origins, at pp. 412-13:

The House of Lords has set out the requirements for a passing-off action on many occasions. In Erven Warnink B.V. v. J. Townend & Sons (Hull) Ltd., [1980] R.P.C. 31, Lord Diplock identified five conditions, at p. 93: there must be (1) misrepresentation (2) by a trader in the course of trade (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader, and (5) which causes actual damage to the business or goodwill of the trader bringing the action.

More recently, in Reckitt & Colman Products Ltd. v. Borden Inc., [1990] 1 All E.R. 873, Lord Oliver reaffirmed, at p. 880:

The three necessary components of a passing-off action are thus: the existence of goodwill, deception of the public due to a misrepresentation and actual or potential damage to the plaintiff.

In Canada the Supreme Court has also had occasion to rule on a passing-off action, in particular in Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd., supra, in which the issue turned primarily on the similar get-up of the parties’ products. In that case this Court stated that in any passing-off action the plaintiff, in order to succeed, must establish that its product has acquired a secondary meaning.

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:

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.

Outside the common law countries passing-off has no exact lexicological equivalent and in general is not a delict as such. In France, for example, it is one aspect of unfair competition to which civil liability sanctions apply. The passing-off rules in Quebec are derived largely from the common law. Remedies may be sought in federal as well as provincial law:

(2) Purposes of the Passing-off Action and Target Clientele

In considering those upstream and downstream of the product, two separate aspects must be distinguished. I refer in this regard to the persons who manufacture or market the products, on the one hand (“the manufacturers”), and on the other to those for whom the products are intended, the persons who buy, use or consume them (“the customers”).

It is clear that however one looks at the passing-off action, its purpose is to protect all persons affected by the product.

(a) Protection of Manufacturers

This corresponds to the third point mentioned by Lord Oliver. The right to be protected against the “pirating” of a brand, trade name or the appearance of a product is linked to a kind of “ownership” which the manufacturer has acquired in that name, brand and appearance by using them.

In Pinard v. Coderre, [1953] Que. Q.B. 99, Marchand J.A. of the Quebec Court of Appeal noted at p. 103:

Accordingly, to begin with, from what might be called the individual or manufacturer’s standpoint, the passing-off action is intended to protect a form of ownership.

There is also the concept of ownership, protected by the passing-off action in relation to goodwill, a term which must be understood in a very broad sense, taking in not only people who are customers but also the reputation and drawing power of a given business in its market. In Consumers Distributing Co. v. Seiko Time Canada Ltd., supra, Estey J., at p. 598, cites Salmond on the Law of Torts (17th ed. 1977), at pp. 403-4:

It will then be necessary to look at the relationship between the various merchants or manufacturers, and it is at that point that questions of competition have to be considered. As Chenevard says (Traité de la concurrence déloyale en matière industrielle et commerciale (1914), vol. 1, at pp. 6-7), [TRANSLATION] “[c]ompetition is the soul of commerce; it requires unceasing effort and as such is the chief factor in economic progress”. Drysdale and Silverleaf (Passing Off:Law and Practice (1986)) are substantially of the same opinion, at p. 1:

However, merchants must observe certain rules which, quite apart from being legal, are ethical at the least:

The author describes at p. 10 certain situations which, if the manufacturer succumbs to temptation, will easily lead him to commit the tort of passing-off:

The purpose of the passing-off action is thus also to prevent unfair competition. One does not have to be a fanatical moralist to understand how appropriating another person's work, as that is certainly what is involved, is a breach of good faith.

Finally, another more apparent, more palpable aspect, a consequence of the preceding one, must also be mentioned. The "pirated" manufacturer is very likely to experience a reduction in sales volume and therefore in his turnover because of the breaking up of his market. When such a situation occurs in the ordinary course of business between rival manufacturers that is what one might call one of the rules of the game, but when the rivalry involves the use of dishonest practices, the law must intervene.

(b) Protection of Customers

In the Anglo-Saxon legal systems, [TRANSLATION] "the person chiefly concerned is the competitor affected by the unfair act" (Mermillod, Essai sur la notion de concurrence déloyale en France et aux États-Unis (1954), at p. 176). He is frequently in fact the first party affected by the practice or aware of it.

However, "[i]t should never be overlooked that …unfair competition cases are affected with a public interest. A dealer's good will is protected, not merely for his profit, but in order that the purchasing public may not be enticed into buying A's product when it wants B's product" (General Baking Co. v. Gorman, 3 F.2d 891 (1st Cir. 1925), at p. 893). Accordingly, "the power of the court in such cases is exercised, not only to do individual justice, but to safeguard the interests of the public" (Scandinavia Belting Co. v. Asbestos & Rubber Works of America, Inc., 257 F. 937 (2d Cir. 1919), at p. 941). The ordinary customer, the consumer, is at the heart of the matter here. According to the civilian lawyer Chenevard, supra, at p. 20, in a case of unfair competition it is [TRANSLATION] "the buyer who is the first to be injured".

The customer expects to receive a given product when he asks for it and should not be deceived. It often happens that products are interchangeable and that a substitution will have little effect. However, the customer may count on having a specific product. There are many reasons for such a choice: habit, satisfaction, another person's recommendation, the desire for change, and so on. I have no hesitation in using the classic saying, taken from popular imagery: "the customer is always right". Merchants must respect his wishes, choices and preferences as far as possible. Where this is simply not possible, no substitution must be made without his knowledge. That is the minimum degree of respect which manufacturers and merchants, who we should remember depend on their customers, should show.

There is no shortage of fraudulent or simply misleading practices: one may think, for example, of products having a similar get-up, the use of similar labelling, use of the same trade name, counterfeiting, imitation of packaging. These are all possible ways of attempting, deliberately or otherwise, to mislead the public. The courts and authors have unanimously concluded that the facts must be weighed in relation to an "ordinary" public, "average" customers:

The average customer will not be the same for different products, however, and will not have the same attitude at the time of purchase. Moreover, the attention and care taken by the same person may vary depending on the product he is buying: someone will probably not exercise the same care in selecting goods from a supermarket shelf and in choosing a luxury item. In the first case, the misrepresentation is likely to "catch" more readily.

In The Law of Passing-off (1990), Wadlow gives the following definition at p. 351:

The look, the appearance, the get-up of a product play a crucial role in the purchase process since they are the chief means at the manufacturer's disposal to attract customers. The importance of visual impact is well known: what appeals to the eye is crucial.

The product's appearance or its packaging – shape, size or colour – may be characteristic of a particular manufacturer and have the effect of marking out the product or making it recognizable as his own. In the mind of the customer appearance is not always linked to a trade mark, that is, the consumer may rely on the appearance rather than the trade mark to indicate the use of the product. For example, when he needs removable self-stick notes, he will look for small blocks of yellow paper. He may not know the name of the product or manufacturer, but he does not need to in order to recognize what he wants to buy. What he has noticed and what he has retained is the specific colour of the merchandise; or he will know that a particular product contained in a tin with an exotic bird on the lid is polish, without necessarily having to know the trade name or brand, and when he wishes to purchase that polish it is the image of the bird on the packaging that will assist him in recognizing the product. With a few exceptions, the external features of a product are not sought for themselves, but because they are the means of recognizing the satisfactory product, for example. They are a source of information associated with reputation for a consumer or a group of customers. Appearance is thus useful not only in product recognition but also to distinguish one product from another with the same uses.

Of course, it may be that appearance is associated with a specific brand in the consumer's mind. When he wishes to have a product of that brand he will look for that get-up.

The question now is as to who lies beyond the product, that is who must be protected, who must not be confused by manufacturers, for example, by a similar appearance. As business is organized at present, it is very seldom that an individual deals directly with the manufacturer or producer: he is not generally the immediate customer. The route taken by a product between the time of its manufacture, to use a broad term, and the time it reaches the consumer can be compared to a chain made up of several links which must all be there and be in a particular order. Manufacturer, wholesaler, retailer and consumer are all links in this chain.

The first person who buys the product is not generally the one for whom it is ultimately intended. Assuming that there are three links in the chain, with the producer and the consumer at the two ends, the "retailer" (grocer, bookseller, garage owner and so on) is an intermediary between the producer and the consumer. I would without hesitation describe him as a "trade customer", that is a person who obtains a product not for his own use but with a view to passing it on to a third person in the course of his business. There is little need to dwell at length on the case of such merchant intermediaries, who are in fact part of the manufacturer's or producer's clientele. There may at times be some question whether the passing-off action really affects them as customers. The closer they are, that is the more direct contact they have with the manufacturer or producer, the less likely they are to be misled. This is indeed what Viscount Maugham found in Saville Perfumery Ld. v. June Perfect Ld. (1941), 58 R.P.C. 147 (H.L.), at pp. 175-76: "It is, for example, quite a common occurrence …to find that retail traders are not misled while ordinary customers are".

Outside the field of pharmaceutical products, the courts and authors have unquestionably recognized that the consumer, or the person who might be called the ordinary customer – the last link in the chain – is also part of the "clientele" in whose minds any confusion must be avoided.

The English common law has long recognized this principle very explicitly. I shall again quote a passage from James L.J. mentioned above to emphasize the use of certain terms:

Further, when Lord Diplock in Erven Warnink B.V. v. J. Townend & Sons (Hull) Ltd., supra, set out the conditions for the passing-off action at p. 93, he used the very words "ultimate consumers".

There is no question that confusion, which is the essence of the tort of passing-off, must be avoided in the minds of all customers, whether direct – here one thinks of the retailers – or indirect – in that case the consumers. Proof of reputation or secondary meaning and of misrepresentation has never been limited by the courts to direct customers of the person claiming a right.

In civil law jurisdictions, including Quebec, the concept of a clientele is expressed still more broadly where misrepresentation is involved, as indicated by this passage from the reasons of Pelletier J.A. in République française v. S. Hyman Ltd. (1920), 31 Que. K.B. 22, at p. 23:

Nadeau and Nadeau, supra, at p. 224, state in connection with passing-off: [TRANSLATION] "It is not necessary to establish that buyers have been misled, but simply that an attempt was made to mislead the public". (Emphasis added.) This language indicates that it is necessary to avoid confusing anyone who has an actual or potential, immediate or remote, connection with the product. The tendency in Anglo-Saxon law appears to be to discontinue use of the expression adopted by Lord Diplock, "ultimate consumers", and, as he himself has increasingly done, to refer to the concept of the public. (See inter alia Wadlow, supra, and Fleming, The Law of Torts (7th ed. 1987), at pp. 675-76.)

Moreover, we must not lose sight of the fact that the ordinary clientele includes "consumers". I use this word in its juridico-sociological meaning, which to Western minds in the late 20th century inevitably implies the need for protection. The passing-off action is entirely consistent with the plethora of present-day protectionist provisions, even though it existed long before they did!

B. The Principles of Passing-off Applied to the Pharmaceutical Field
(1) Preliminary Observations

There is no need to dwell at length on the purposes of the passing-off action in this field as they are essentially the same as those I have just considered. Adapting the principles set out to cases such as that now before this Court leads to the conclusion that competing laboratories must avoid manufacturing and marketing drugs with such a similar get-up that it sows confusion in the customer's mind.

First, I should make a few observations on the get-up of the products at issue here. As Wadlow points out (supra, at p. 379), pharmaceutical companies are limited in the choice of ways to distinguish the get-up of their products. As pharmacists buy such products in bulk and dispense them to the public in standard containers which are transparent and anonymous, the only way of drawing the attention of patients to the origin of the product is the capsule or tablet itself. There are not many possibilities: what is written on tablets is often too small to be legible, at least not readily so, and that leaves only the shape, size and colour of the products as a means of distinguishing them. Here again pharmaceutical laboratories have little room for manoeuvre. The size and shape of drugs cannot depend solely on imagination, since they must meet certain functional requirements resulting from physiological necessities such as ingestion and digestion. As to colour, owing partly to the small size of the products, combinations which might be original or characteristic are also relatively limited.

Further, the same is true for the composition of drugs as for that of any other product. What I would call the basic components of two competing products are quite often identical while it is the incidental ingredients that are specific to each, and it is often the quantity and quality of such ingredients which make the difference in taste, consistency, texture and so on. In the pharmaceutical field, drugs consist of an active ingredient, the basic medicinal substance, and an excipient which plays a role inter alia in get-up, ingestion and digestion. Understandably, two remedies which must achieve the same therapeutic result will contain the same active ingredients. In the case at bar, the parties' products all contain a beta-blocker, metoprolol tartrate. At the same time, the incidental substances in which the active ingredients are embodied may well be different.

(2) Target Clientele

Of course, the passing-off action is meant to protect manufacturers. In the case at bar, these are the pharmaceutical laboratories which manufacture and market the drugs. There is no need to consider this point further, as it presents no problem here. One must instead look at the other links in the chain, those who "buy" or "consume" the products, in order to determine who are the customers to be protected by the passing-off action. There are those who argue that only physicians, dentists and pharmacists are included. I will begin by reviewing the cases which have given a limited definition of the clientele and then consider several aspects of the question, an analysis of which will inevitably lead in my opinion to a preference for a broad clientele. Finally, I will cite decisions of the courts and authors who consider that the patient is included in the clientele of pharmaceutical laboratories for the purposes of a passing-off action.

(a) Ayerst, McKenna & Harrison and a Few Subsequent Cases

The courts below, and the parties in their factums submitted to this Court, referred frequently to Ayerst, McKenna & Harrison, Inc. v. Apotex Inc., supra, and to the decisions of the Ontario High Court of Justice which have followed it. In Ayerst, McKenna & Harrison, Ayerst had since 1968 manufactured and sold a drug containing propranolol to control certain cardiovascular problems. Beginning in 1980, Apotex also manufactured and sold a drug with a propranolol base. The products of the two pharmaceutical laboratories were prescription drugs declared to be "interchangeable" by the Ontario and Quebec ministries of Health. The tablets had the same get-up: colour, size and shape. Ayerst lost a part of the market and brought a passing-off action against Apotex. The only issue in the Court of Appeal was whether a new trial should be directed on account of the antipathy to the plaintiff shown by the trial judge and the latter's refusal to allow certain important rebuttal evidence.

The Court of Appeal considered that the trial judge's attitude had resulted in a denial of justice and so ordered a new trial. Cory J.A., speaking for the court, added the following comment, at p. 376:

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.

Cory J.A.'s opinion was followed by a number of courts and his arguments used to dismiss applications for interlocutory injunctions in cases involving similar drug get-up. In Smith, Kline & French Canada Ltd. v. Novopharm Ltd. (1983), 72 C.P.R. (2d) 197 (Ont. H.C.), at p. 204, McRae J. wrote: "The defendant submits that according to recent judicial authority, members of the general public are not the true consumers of cimetidine. Rather, doctors and pharmacists are the actual ‘customers’." (Emphasis added.) Then, considering the evidence before him, he concluded, at p. 209:

McRae J. admitted, however, that patients taking cimetidine are consumers of it, but according to the language used, there appear to be "consumers" and "true consumers". Only the latter, physicians and pharmacists, count in a passing-off action.

In Syntex Inc. v. Novopharm Ltd. (1983), 74 C.P.R. (2d) 110 (Ont. H.C.), Walsh J. referred, at p. 114, to Hoffmann-La Roche Ltd. v. Apotex Inc. (1982), 72 C.P.R. (2d) 183 (Ont. H.C.), and to Ayerst, McKenna & Harrison:

In Smith, Kline & French Canada Ltd. v. Apotex Inc. (1985), 12 C.P.R. (3d) 479 (Ont. H.C.), Callon J. refused to issue an interlocutory injunction, arguing at p. 480: "The plaintiff has not shown that doctors and/or pharmacists, the true consumers of cimetidine, identify its tablets as coming from one trade source by reason of their physical appearance." (Emphasis added.)

More recently, the Federal Court of Appeal used the same reasoning in overturning the granting of an interlocutory injunction. That case, Syntex Inc. v. Novopharm Ltd. (1991), 36 C.P.R. (3d) 129, concerned the colour of competing tablets. Heald J.A. considered that the plaintiff was not likely to suffer irreparable damage and pointed out, inter alia, that the purchasers of the drugs were pharmacists and physicians among whom no confusion could occur as to the appearance of the plaintiff's and the defendant's tablets. In particular, at p. 137, the judge observed:

(b) The Several Aspects of the Question
(i) The Connection Between the Product and the Patient

One of the Court of Appeal's arguments in Ayerst, McKenna & Harrison was that there was no direct connection between the consumer and the product. The medicinal substances in question can only be dispensed by a pharmacist, and only on a doctor's prescription. The patient does not take the drug from a store shelf but is required to go through several intermediaries in order to obtain it, in this case a doctor and then a pharmacist. Consequently, there are those who are of the view that the patient does not risk being deceived in the same way as when he has free access to several competing products placed at his disposal side by side.

For consumer products in general, present-day commercial organization is such that the consumer rarely obtains products or goods directly from the manufacturer or producer. Strictly speaking, whatever the sphere of commercial activity, the customers of producers or manufacturers are the retailers through whom the producers or manufacturers seek to supply as many goods as possible with the greatest possible profit. In my opinion, pharmacists occupy the same place in this organizational chain, correspond to the same link, as other merchants. Apart from the prescription drugs field, there is no doubt that the customers concerned in a passing-off action include both retailers and consumers. If one reasons by analogy, patients should be included among the customers, as well as health care professionals of course.

As the patient has no direct access to the product, it is all the more necessary for him to be able to exercise some kind of control over what he is being given. In the field of prescription drugs the first information the patient receives when the product is given to him comes from its appearance. If he is familiar with Lopresor, for example, and the pharmacist hands him a bottle filled with white tablets, he will know at once that this is not Lopresor and that the prescription has not been followed.

Moreover, the fact that drugs like those with a metoprolol base are not sold without a prescription does not fundamentally alter the reasoning. These are not the only products the sale of which is controlled by legislation or regulation. Firearms are another example. For obvious reasons of safety, not just anyone can go into a gun shop and freely obtain such an item. He must give the dealer at least a purchase certificate, as the patient must give the pharmacist a prescription. There would seem to be no doubt that the purchasers of firearms would be included among customers in a passing-off action. Here again, the analogy inclines one to include patients among the customers of pharmaceutical laboratories.

Under general law principles, when a pharmacist receives a prescription he must supply what it indicates. The various statutes (Prescription Drug Cost Regulation Act, 1986 and Ontario Drug Benefit Act, 1986, S.O. 1986, c. 27) only set out certain exceptions to these fundamental rules.

(ii) The Patient's Choice

Does the fact that a patient has to obtain the product through a physician and pharmacist rule out the possibility of his making a choice?

It should be borne in mind that the legislation itself, being the Prescription Drug Cost Regulation Act, 1986 and the Ontario drug cost regulation Regulations, O. Reg. 690/86, provides for interchangeable products. That means that alternatives exist. Section 4 of the Ontario Act states:

The expression "specific interchangeable product" means, according to s. 1 of the Act:

Accordingly, if the physician simply puts "Lopresor" on the prescription, the pharmacist may (it is up to him) give out a drug other than Lopresor. He may supply one or other of the respondents' products, Apo-metoprolol or Novo-metoprolol.

The patient may exercise the choice himself, as s. 4(2) states:

The Act also requires the pharmacist to inform the consumer – the patient – of his right to indicate which product he would like:

The pharmacist's duty to provide this information is fulfilled by the posting of a visible notice to that effect.

The only situation in which the patient – and this is also true of the pharmacist – has no opportunity to select the brand of metoprolol, for example, is when the physician specifies on the prescription that there are to be no substitutions, as provided in s. 4(6) of the Prescription Drug Cost Regulation Act, 1986. 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.

The foundations of this right to choose and the reasons for patients' choices do not have to be discussed at length here. Whether the choice is great or small, easily exercised or not, does not change anything in the case at bar. All that is significant, and beyond question, so far as the reasoning is concerned is that the patient has a choice.

In my opinion, therefore, 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. The physician's opinion as to the brand of drug to be taken may of course influence the patient and most prescriptions do in fact specifically indicate the product brand. That information may sometimes come from the patient. 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.

(iii) Advertising of Prescription Drugs

Another argument accepted by the Court of Appeal in Ayerst, McKenna & Harrison is that the manufacturer does not have the right to engage in advertising aimed at the general public.

The Food and Drugs Act, R.S.C., 1985, c. F-27, prohibits the sale and advertising of drugs used in treating diseases listed in Schedule A, which includes hypertension. The Food and Drug Regulations contain the regulations governing prescription drugs. Schedule F of the Regulations is an exhaustive list of the drugs – including metoprolol and its salts – which cannot be sold without a prescription and advertising of which is restricted. I use this adjective deliberately because, as a reading of the provision indicates, it is going too far to say that all advertising for the general public is prohibited. It would be more accurate to say that the Regulations restrict the content of the advertising that can be directed at the public. Moreover, there is nothing to prohibit patients having access to pharmaceutical advertising directed at health care professionals when they go to see their physicians, pharmacists or dentists. Frequently, patients can read or at least see pamphlets, magazines and posters and so on.

Such legislation and regulations are understandable. Prescription drugs contain medicinal substances which, while beneficial in small doses, can be harmful or even fatal to health in larger quantities. It is then quite natural for society to limit access to such products as a means of protecting the individual. The advisability of use is determined by a professional, the physician or in some cases the dentist, and distribution is the responsibility of a specialized "merchant", the pharmacist. It is readily understandable that in such a case advertising, at least in its commonly accepted meaning, is not entirely free. Furthermore, it would be completely illogical on the one hand to give the consumer information comparable to that which he can obtain on an ordinary consumer product while at the same time preventing him from freely obtaining that product.

This argument may be summarized as follows: public advertising of the product is prohibited, therefore the patient for whom it is intended has no special knowledge of the product, and therefore he does not risk being affected by any confusion. As I have just explained, such logic is mistaken.

(iv) The Prescription Drug Market Is Like Any Other

As I mentioned earlier, a manufacturer that wishes to succeed in a passing-off action must usually show that its product has acquired a secondary meaning with its customers, the public, and that the competing product is likely to create a risk of confusion in the public mind. There is no reason for the approach to be any different when the producer or manufacturer is a pharmaceutical laboratory. The prescription pharmaceutical products business is not so fundamentally different from other areas of commercial activity that special rules should apply to it. The courts have no reason in law to deprive pharmaceutical laboratories of means of proof available to other industries.

With the greatest possible respect, following the Court of Appeal's reasoning in Ayerst, McKenna & Harrison would also ultimately lead to treating the patient as a special kind of consumer: yet the patient needs information and protection just as other consumers do. Not including him in the clientele covered by the passing-off action in my opinion divests him of part of his rights as an individual. He is deprived of the means of protecting himself as an informed person. In Travaux de l'association Henri Capitant on consumer protection, Professor Lilkoff says:

When the present Act (Food and Drugs Act) states in s. 9(1): "No person shall label, package, treat, process, sell or advertise any drug in a manner that is false, misleading or deceptive or is likely to create an erroneous impression regarding its character, value, quantity, composition, merit or safety" (emphasis added), there is no basis for saying that it applies only to health care professionals.

(v) Citations from Case Law and Scholarly Comment

In Hoffmann-La Roche & Co. v. D.D.S.A. Pharmaceuticals Ltd., [1972] R.P.C. 1, the English Court of Appeal upheld an interlocutory injunction barring the defendant from manufacturing and selling prescription tranquilizers which had the same appearance as those of the plaintiff. According to the court, though there was no confusion – that was proven – in the minds of the laboratories' direct customers, namely pharmacists and physicians, the ultimate customers of the drugs, the patients, were likely to be misled by the misrepresentation.

In Roche Products Ltd. v. Berk Pharmaceuticals Ltd., supra, the English Court of Appeal also agreed that the plaintiff could establish the possibility of confusion among patients using the drug:

In the United States, the courts have in passing-off actions in the field of prescription drugs allowed parties to prove confusion both among professionals and consumer patients. I refer inter alia to Ciba-Geigy Corp. v. Bolar Pharmaceutical Co., 224 USPQ 349 (3d Cir. 1984), Par Pharmaceutical, Inc. v. Searle Pharmaceuticals, Inc., 227 USPQ 1024 (N.D. Ill. 1985), Merck & Co. v. Par Pharmaceutical, Inc., 227 USPQ 489 (3d Cir. 1985).

In Canada, finally, in Parke, Davis & Co., supra, this Court has already had occasion to deal with passing-off in the context of pharmaceutical products, among other matters. The plaintiff alleged that the defendant was passing its products off as those of the plaintiff by giving its capsules a similar appearance. Stating the reasons of the Court on this aspect of the action, Hall J. said, at pp. 357-58:

Many of the Canadian passing-off cases refer to the trade mark case of Parke Davis & Co. v. Empire Laboratories Ltd. before the Supreme Court of Canada, in which the get-up of the plaintiffs' capsules had failed to acquire secondary meaning. Although the get-up was not distinctive, this case is one of the few which is not inconsistent with treating patients as part of the relevant public.

Whether the get-up of drugs is associated with their effect rather than their commercial origin is a question of fact the consideration of which must be left to the trier of fact, as happens in other commercial fields. That definitely does not mean in law that evidence should be limited to physicians, pharmacists and dentists.

C. Cory J.A.’s Opinion in Ayerst, McKenna & Harrison

One of the questions discussed in the courts below is the "binding force" of Cory J.A.'s opinion in Ayerst, McKenna & Harrison. In the submission of the appellant, Morden A.C.J.O. erred in concluding that Cory J.A.'s opinion laid down a rule of law when, it argued, his opinion was only obiter dictum. There is no need to deal at length with this question. Even assuming that Cory J.A.'s comments are obiter dicta, they have been adopted, applied and followed on many occasions, thus becoming the ratio decidendi of numerous subsequent decisions.

It should further be noted that the Prescription Drug Cost Regulation Act, 1986 came into effect in December 1986, more than three years after Ayerst, McKenna & Harrison, and was amended in 1989, giving the patient increased control over the brand of drug he wishes to obtain where the product is interchangeable. This is a further reason for not following that decision.

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.


There is no reason in law to depart from the well-established rule that the final consumer of a product must be taken into account in determining whether the tort of passing-off has been committed. In the field of prescription drugs, therefore, the customers of pharmaceutical laboratories include physicians, pharmacists, dentists and patients.

The appeals should accordingly be allowed with costs. The second paragraph of the disposition in the judgment rendered by Fitzpatrick J. should be replaced by the following paragraph:

Appeals allowed with costs.

Solicitors for the appellant: Smart & Biggar, Toronto.

Solicitors for the respondent Apotex Inc.: Goodman & Goodman, Toronto.

Solicitors for the respondent Novopharm Ltd.: Malcolm Johnston & Associates, Toronto.

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