Federal Court of Appeal Finds No Settlement Agreement Arising from Communications Between Counsel

On May 18, 2016, the Federal Court of Appeal (FCA) allowed an appeal by Apotex Inc. (Apotex) and overturned the Federal Court’s (FC) finding that the plaintiffs, Allergan Inc. (Allergan), and Apotex had settled the patent infringement litigation regarding gatifloxacin (2016 FCA 155, rev’g 2015 FC 367, previously reported in E-TIPS® Newsletter).

Allergan sued Apotex for patent infringement. The parties were engaged in settlement discussions for two years through emails, letters, draft Minutes of Settlement and reporting letters to the FC. Allergan brought a motion seeking enforcement of the alleged Settlement Agreement, which was granted by the FC on the basis that the parties had reached agreement on all essential terms although there was no signed agreement.

The FCA laid out the following requirements to satisfy a settlement agreement in a common law jurisdiction:

1. objectively viewed, the parties must have a mutual intention to create legal relations;
2. there must be consideration flowing in return for a promise;
3. the terms of the agreement are sufficiently certain;
4. there is matching offer and acceptance on all terms essential to the agreement; and
5. other requirements, including legislative requirements.

The FCA also stated that, when assessing whether the requirements for a settlement agreement are met, the standard is objective.

The FCA reviewed the exchange of communications between counsel from the standpoint of a reasonable businessperson, and found that the parties had not reached a settlement agreement. In particular, the FCA found that the scope of restriction sought to be placed upon Apotex was an essential term that had been agreed upon. It also found counsel for Apotex consistently communicated to counsel for Allergan that he would await instructions or confirmation from his client and, therefore, there was no legally-effective acceptance of Allergan’s offer based solely on the words of counsel for Apotex.