Beecham Group Limited (Appellant)
v.
Frank W. Horner Limited (Respondent)
and
Attorney General of Canada (Intervenant)
Court of Appeal (A-35-72), Thurlow J., MacKay
and Sweet D.JJ.—Ottawa, January 8 and 9,
1974.
Patents—Granting of licence to manufacture drugs—Roy-
alties fixed by Commissioner of Patents Appeal re quan-
tum—Patent Act, R.S.C. 1970, c. P-4, s. 41(4).
The Commissioner of Patents, in fixing the quantum of
royalty to be paid the appellant of 1% of the net selling
price of the drug ampicillin, when he granted a licence to the
respondent under section 41(4) of the Patent Act, made a
decision that was for him to make and that decision was not
made in error of principle. The appeal from his decision is
therefore dismissed.
Merck & Co. Inc. v. S & U Chemicals Ltd. (1972) 4
C.P.R. (2d ) 1 9 3, followed.
APPEAL.
COUNSEL:
C. Robinson, Q.C., for appellant.
D. S. Johnson, Q.C., for respondent.
D. Aylen, Q.C., for intervenant.
SOLICITORS:
Smart and Biggar, Ottawa, for appellant.
MacBeth and Johnson, Toronto, for
respondent.
Deputy Attorney General of Canada for
intervenant.
THURLOW J. (orally)—The issue in this appeal
is whether the Commissioner of Patents erred in
fixing a royalty of 1% of the net selling price of
a drug known as ampicillin when granting a
licence to the respondent under section 41(4) of
the Patent Act under nineteen patents held by
the appellant all of which are concerned with
the preparation of that substance or with inter
mediates used in its preparation. The Commis
sioner's reasons suggest that he might have set a
royalty of as much as 4% of the net selling price
had it not been for the fact that he was at the
same time dealing with three other applications
by the respondent for licences under a total of
eleven other patents held by three other compa
nies all of which patents are also concerned
with the preparation of the drug or intermedi
ates used in its preparation. The Commissioner
granted licences under these patents as well and
fixed a royalty of 1% of the selling price of the
drug in the case of each of the companies con
cerned. There is no appeal before us in respect
of any of these awards though we were
informed that at least some of the companies
had asked for royalties of 4% or more.
On the facts it is unlikely that the patented
inventions of all four companies will be used at
the same time by any manufacturer in the
preparation of the drug. It is even possible
though highly unlikely that only those of the
appellant could be used. The respondent, there
fore, is, it is said, in a position to avoid payment
of a 4% royalty and to pay only 1%, 2% or 3%
depending on which of the three other patentees
it considers it expedient and feasible to ignore.
As a practical matter, however, whether or not
the respondent can avoid paying royalty to any
of these companies depends not only on which
particular inventions have been used in the
preparation of the drug but on whether the
respondent can obtain and maintain the infor
mation and the capacity to defend itself from
patent infringement proceedings by any one or
more of the companies in question. Moreover it
seems not unlikely that such a course of action
in order to avoid the payment of royalties could.
itself be expected to involve expense which
ultimately would be reflected in the price of the
respondent's merchandise to the public.
These considerations have, as I see it, a direct
bearing on the value of a licence under the
appellant's patents and I can see no error in
principle in the Commissioner having taken into
account as he did when fixing the royalty to be
paid to the appellant, the practical requirement
of the respondent to have a licence under the
patents of the three companies other than the
appellant, or in his having in consequence
awarded a lower royalty than he might other
wise have awarded.
The decision as to the quantum of royalty to
be paid was for him to make 1 , his reasons
indicate that he was aware of all the relevant
considerations, in particular he appears to have
contemplated and considered that the total roy
alties which the respondent would be required
to pay might come to less than 4% of the selling
price, and I am not persuaded that any error has
been shown in his having fixed 1% of the selling
price as the royalty payable to the appellant in
carrying out his statutory duty to:
. have regard to the desirability of making the medicine
available to the public at the lowest possible price consistent
with giving to the patentee due reward for the research
leading to the invention and for such other factors as may be
prescribed.
I would dismiss the appeal.
* * *
MACKAY and SWEET D.JJ. concurred.
Merck & Co. Inc. v. S & U Chemicals Ltd. (1972) 4
C.P.R.(2d) 193.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.