The protracted litigation history

The litigation began 16 years ago, when Apotex applied to revoke Sanofi's patent covering clopidogrel, a blockbuster drug sold by Sanofi as Plavix®. We detailed the protracted litigation history in our article on Nicholas J's first instance decision in the Commonwealth's damages claim in 2020. In summary:

1. In 2007, Sanofi obtained an interlocutory injunction (ie, preliminary injunction or PI) preventing Apotex's launch of its generic clopidogrel product.
2. In 2009, Apotex convinced the Full Court that Sanofi's patent was wholly invalid. As a result, the PI was lifted and Apotex obtained PBS listing.
3. In 2010, Apotex filed a claim for compensation from Sanofi under the cross-undertaking as to damages, which was settled in 2014.
4. In 2013, the Commonwealth filed a claim for compensation from Sanofi under the cross-undertaking as to damages (as a relevant "person affected") for the Commonwealth's loss resulting from Apotex being prevented from supplying its generic clopidogrel product and not having obtained PBS listing in 2007.
5. In 2020, Nicholas J held that Sanofi was not liable to compensate the Commonwealth, including because: (a) the evidence did not establish that Apotex would have applied for PBS listing if the PI had not been granted (the Apotex listing issue); and (b) the PI did not directly cause the Commonwealth's loss, because it did not expressly prevent Apotex from applying for PBS listing (the directness issue).

The Commonwealth appealed, principally on the grounds that Nicholas J erred in relation to the Apotex listing issue and the directness issue. The Full Court, comprised of Besanko, Perram and Yates JJ, unanimously dismissed the appeal, finding:

1. adverse to the Commonwealth on the Apotex listing issue, that the evidence did not establish that Apotex would have applied for PBS listing if the PI had not been granted;
2. in favour of the Commonwealth on the directness issue, that the PI did directly cause the Commonwealth's loss (although this issue did not need to be decided in light of the finding on the Apotex listing issue); and
3. there was no utility in commenting on the various other issues raised by the parties in light of the finding on the Apotex listing issue.

The Commonwealth has 28 days from the Full Court's decision to apply for special leave to appeal to the High Court, ie to 24 July 2023.

Apotex listing issue: Evidence did not establish that Apotex would have sought PBS listing

The Full Court rejected the Commonwealth's submissions that the trial judge was wrong to conclude that it had not established that Apotex would have applied for PBS listing if the PI had not been granted. According to the Full Court:

1. No legal principle supported the Commonwealth’s position that it only needed to establish a prima facie case that its damage "flowed directly" from the PI. Rather, the question for the trial judge was whether the Commonwealth had satisfied its "persuasive burden" of demonstrating that Apotex would have sought to list on the PBS and then distribute its products in Australia absent an injunction.
2. The trial judge did not fail to evaluate any relevant contemporaneous evidence which contradicted his conclusion and which was sufficiently material. The Commonwealth pointed to a number of internal Apotex emails that it submitted were not referred to or given appropriate weight by the trial judge. However, the Full Court held that to the extent the trial judge did not specifically refer to particular documents, it was because the judge did not consider them material. Once the trial judge had concluded that Dr Barry Sherman, Apotex's founder, chairman, CEO was "the ultimate controller of the Apotex Group" and "the key decision-maker" (which conclusion the Commonwealth did not appeal), the materiality of evidence of the views of other Apotex employees was diminished.
3. There was no error in the trial judge's conclusion that the Commonwealth’s case suffered an evidentiary deficiency which could only be made good by calling Dr Sherman to give evidence (which, as explained in our article, Commonwealth fails in $325 million compensation claim after generic medicine kept off market, the Commonwealth had not done, and had not explained, despite calling other Apotex overseas-based witnesses). The trial judge considered that the documents on which the Commonwealth relied could not sustain any inference about what Dr Sherman would have decided that Apotex should do, if the PI was not granted.
4. The trial judge "dealt in fine detail with three risk/reward analyses which were conducted by Apotex". These analyses showed that both before the PI hearing and before the delivery of the first instance decision on infringement/invalidity, Apotex considered that its exposure to Sanofi for damages greatly exceeded the profits it expected to make selling generic clopidogrel. These analyses were also relevant to whether Apotex would have launched at risk.
5. Even though 31 months passed between the trial of the Commonwealth's damages claim and the delivery of the first instance judgment, the trial judge demonstrated he gave full consideration to the evidence. The trial judge’s criticisms of a key witness for the Commonwealth, the former Managing Director of Apotex Australia, were not related to the witness's demeanour, but rather to the content of what he had said. Accordingly, the trial judge had not lost the advantage usually afforded to a trial judge to assess the credit of witnesses because of the long delay in the trial judgment.

Directness issue: Interlocutory injunction was the direct cause of Commonwealth's alleged loss

Although it did not need to decide the directness issue in light of its findings on the Apotex listing issue, the Full Court provided its view, in favour of the Commonwealth that the PI was the direct cause of the Commonwealth's alleged loss.

At first instance, the trial judge held that the Commonwealth's loss did not flow directly from the PI because it instead flowed directly from a separate undertaking that Apotex gave not to seek PBS listing (which the Full Court characterised as an "interposed causal step"). That specific undertaking was not supported by Sanofi’s cross-undertaking as to damages. The Full Court disagreed, however, finding that the Commonwealth's loss would have occurred regardless of Apotex's undertaking not to seek PBS listing because:

1. Once the PI was granted, Apotex's undertaking not to apply for PBS listing was no more than a promise not to do something that Apotex could never have done.
2. Even if Apotex’s undertaking not to seek PBS listing was one cause of the Commonwealth’s loss, the loss could also flow directly from the PI.
3. The fact that the Apotex undertaking not to seek PBS listing was not supported by Sanofi’s undertaking as to damages was not relevant to whether or not the Commonwealth's loss flowed directly from the PI.
4. The Full Court observed: "We do not think that there can be any hard and fast rule that an interposed causal step between an injunction and the loss claimed results in the injunction not being the direct cause of the loss. It depends on the nature of the interposed causal step".

Further, at the PI hearing in 2007, Sanofi did not suggest that if the injunction caused loss to a third party relating to Apotex's inability to seek PBS listing, this loss would not be recoverable under Sanofi's undertaking as to damages. According to the Full Court, "if that truly was the case it was a matter which required explicit disclosure."

Implications

The Commonwealth will continue to face significant evidentiary challenges in establishing that generic/biosimilar pharmaceutical products would have launched and listed on the PBS but for any PI enforcing an originator patent. This is particularly the case where the previously enjoined generic/biosimilar supplier does not pursue its own damages claim against the patentee to trial, even if the generic supplier assists the Commonwealth by giving documentary and witness evidence, as Apotex did here. In three of the Commonwealth's four claims of this kind, including this one, the previously enjoined generic/biosimilar supplier did not pursue its own damages claim to trial. The only case in which a generic supplier did pursue its damages claim to trial was Sigma v Wyeth [2018] FCA 1556, concerning venlafaxine, where the generic supplier succeeded against the patentee. The Commonwealth however had already settled its damages claim.

In any future damages claim, the Commonwealth is likely to do all it can to put forward stronger evidence that the generic/biosimilar supplier would have launched at risk, including subpoenaing documents or witnesses from a range of generic/biosimilar suppliers. But this will not be straightforward in the face of matters including privilege claims from generic/biosimilar suppliers, any relevant terms of settlement between the original parties to the dispute, the availability and recollection of key decision makers years after the event, and documentation that may be open to a number of possible interpretations as to corporate intention. The time and cost to the Commonwealth of pursing such claims will be substantial.

The Commonwealth's future intentions with respect to such compensation claims are unclear. The 2023/24 budget papers (published in May 2023, from the Labor Government elected in May 2022) no longer refer to legal action seeking compensation for PBS losses, but this does not necessarily mean the Commonwealth will not pursue such claims. The Commonwealth previously settled its claims against Wyeth in relation to venlafaxine and AstraZeneca in relation to rosuvastatin, and its claim against Otsuka in relation to aripiprazole was set down for hearing before a referee in May 2023.

Generic/biosimilar suppliers who want to be able to rely on a patentee's undertaking as to damages if they are subject to a PI should unambiguously document their intention, shortly before the injunction hearing, to launch but for any injunction, to avoid suffering the same evidentiary challenges as the Commonwealth. Generic/biosimilar suppliers should also expect that the Commonwealth may request or subpoena such documents in its own damages claims. This will be highly relevant to the negotiation between the generic/biosimilar suppliers and the patentee of any terms of settlement of the generic/biosimilar supplier's damages claim.

The Full Court's view on the directness issue will assist the Commonwealth in any future damages claims where the PI did not expressly prevent the generic/biosimilar supplier from applying for PBS listing, even if the generic/biosimilar supplier has not given a separate undertaking not to apply for PBS listing. We expect such circumstances to be limited however, as PIs granted more recently tend to expressly prevent generic/biosimilar suppliers from applying for PBS listing, thereby averting the directness issue from the outset.

In future PI proceedings, the Full Court's findings on the directness issue may give the parties, particularly patentees, greater flexibility when proposing the wording of the interlocutory restraint insofar as whether it should expressly restrain PBS listing. Although this case was highly fact specific, patentees may also be reassured by Sanofi's successful "walking the line" in relation to submissions made to support the grant of the PI (to the effect that the generic/biosimilar supplier would have launched), but later, calling into question the generic/biosimilar supplier's actual intention to launch at risk in its defence of a claim under the cross-undertaking as to damages.

The MinterEllison Intellectual Property team continues to monitor, and is available to discuss, all life sciences patent litigation and associated damages claims in Australia.