The $325M Question | Commonwealth Disappointed in Landmark Appeal Court Damages Case

Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2023] FCAFC 97

26 June 2023

Full Federal Court of Australia

Besanko, Perram and Yates JJ

Highlight 

In the first such matter to be decided by the Full Federal Court, it rejected the Commonwealth’s claim for damages resulting from an interlocutory/preliminary injunction (PI) preventing generic launch, where the patent was subsequently invalidated.  The Full Court denied the Commonwealth’s $355M damages application, and made a costs order against the Commonwealth, expected to be in the order of tens of millions of dollars. 

The Court has left open the potential for future Commonwealth damages claims for Pharmaceutical Benefits Scheme (PBS) savings forgone as the clopidogrel claim was rejected on the facts.  The Commonwealth was unsuccessful as it failed to establish that Apotex would have applied to PBS list its clopidogrel product (triggering the PBS price reductions) and launch the product in Australia had it not been restrained by the PI.  In overturning the first instance decision, the Full Court found that there was a direct link between the grant of the PI and the loss suffered by the Commonwealth.  However this did not assist the Commonwealth without a finding that Apotex would have listed and launched generic clopidogrel in Australia in the absence of the PI.   

Background 

Commonwealth Damages Claims for PBS Savings Foregone

The Australian government has made numerous claims for damages against patentees for savings forgone when an interlocutory/preliminary injunction (PI) delays generic launch but the patent is invalided or there is a finding of non-infringement.   This decision is the first Full Federal Court decision on this issue handed down following a 10 year damages battle between the Commonwealth and Sanofi relating to Apotex’s “delayed” launch of generic clopidogrel following PI.   

The Undertaking as to Damages

In order to obtain PI, the patentee must provide an “undertaking as to damages” which applies to the world at large.  It applies to the Commonwealth’s savings foregone, even when the Commonwealth is not a party to the patent proceedings.  As the Commonwealth has learned the hard way, the devil’s in the detail.  The Court rejected Commonwealth’s claim relating to “delayed” sales of generic clopidogrel, finding that it had not established that Apotex would have PBS listed and launched its generic clopidogrel in Australia in the absence of PI. 

This is the first of such claims to be determined by the Full Court, with the industry having waited for more than a decade for the answer on whether and when such claims will be allowable.   

The Commonwealth settled its parallel damages claims regarding venlafaxine (Effexor™, Wyeth) and rosuvastatin (Crestor™, AstraZeneca), while its claim regarding aripiprazole (Abilify™, Otsuka/BMS) is ongoing and was heard in May 2023 (judgment pending) almost 8 years after the initial patent proceedings were commenced in 2015. 

These proceedings originated from revocation proceedings filed by Apotex (formerly GenRx) in the Federal Court in 2007 in relation to Sanofi’s Australian patent no. 597784 for clopidogrel.  Clopidogrel is the active ingredient in Plavix® approved and PBS listed for the prevention of atherothrombotic events such as myocardial infarction and stroke in certain patients, and marketed by Sanofi-Aventis Australia Pty Ltd (Sanofi).  In the proceedings below, Sanofi filed a cross-claim for infringement which was successful resulting in a PI in 2007 restraining Apotex from launching its generic clopidogrel.  The PI was granted after Sanofi provided an undertaking to the Court (in the usual form) with the effect that Sanofi would compensate persons adversely affected by the PI in the event that it was wrongly granted. 

The patent was ultimately held entirely invalid by the Full Federal Court on 29 September 2009,¹ as it lacked novelty and/or inventive step² and Sanofi’s patent was revoked on 13 October 2009.  Sanofi’s application to the High Court for special leave was refused on 12 March 2010.³  It was the Commonwealth’s case that Apotex’s Australian launch was delayed between the 2007 PI and the patent revocation in 2009, and that the Commonwealth suffered PBS savings foregone as a result of the PI. 

In April 2013, the Commonwealth filed an application with the Federal Court seeking compensation under Sanofi’s undertaking as to damages.  The Commonwealth claimed that had Apotex obtained PBS-listing of its generic product in 2008, this would have triggered several reductions in the reimbursed price for clopidogrel, including the immediate mandatory price reduction on listing of the first generic product (then 12.5%), together with ongoing price disclosure reductions.  In total the Commonwealth’s damages claim amounted to over $325 million with interest.  Apotex also sought compensation from Sanofi for losses resulting from its prohibition to enter the market for over two years, a claim which settled in November 2014.   

In a comparable scenario relating to the anti-depressant venlafaxine, generic suppliers (Sigma Pharmaceuticals, Generic Health and Alphapharm) successfully pursued a damages claim against the patentee (Wyeth) (Sigma v Wyeth [2018] FCA 1556).  In that case, three non-parties also claimed damages, including two suppliers and the Commonwealth.  The Commonwealth settled its damages claim with Wyeth before judgment.⁴   

Key issues 

Two key issues on appeal were:  

1. Directness: does the Commonwealth loss directly flow from the PI? 
2. Apotex Listing & Launch: does the evidence establish that Apotex would have sought PBS listing if not restrained by the PI? 

In brief, the Court found against the Commonwealth on the second issue, so its finding for the Commonwealth on directness did not take the matter further. 

Outcomes 

Directness: Commonwealth Damages Are Direct 

The Court held that the Commonwealth had established that its claimed loss flowed directly from the PI, overturning the trial judge’s finding that it flowed from Apotex’s intervening undertaking not to seek PBS listing.  The undertaking to supply (a condition of PBS-listing) was a factor considered, the Court acknowledging Apotex’s ‘significant legal and commercial peril’ if the undertaking was not met with commercial supply. 

The primary judge held that, even though the Commonwealth’s claimed loss would not have occurred but for the PI awarded in Sanofi’s favour, it did not flow directly from it.  Rather, the loss flowed from Apotex’s intervening undertaking not to seek PBS listing (which was not explicitly supported by Sanofi’s undertaking as to damages).  Sanofi’s undertaking as to damages only applied to those adversely affected by order 1 (relating to certain specified acts of infringement), which did not refer to Apotex’s undertaking not to obtain PBS listing (addressed in order 2).   

The Full Court disagreed, holding that the Commonwealth’s loss flowed directly from the PI.  The Full Court found that once the PI was in place, the Apotex undertaking proffered at the hearing was no more than a promise not to do something which it could never have done.  Their Honours noted that the finding by Justice Nicholas⁵ was that the practical effect of the PI prevented Apotex from applying for a PBS listing of its clopidogrel products on 1 April 2008, assuming it was otherwise willing and able to do so.  If Apotex had refused to give the undertaking not to seek PBS listing, the PI would still have been granted.   

On the issue of PBS listing, the PI could have been (a) granted, (b) refused, or (c) abandoned by Sanofi.  The Full Court concluded that regardless of which of (a)-(c) occurred, Apotex would not have sought PBS listing and the Commonwealth’s claimed loss would still have occurred.   

Apotex Launch & Listing:  Commonwealth Damages Case Rejected on the Facts 

The Commonwealth ultimately failed because it had not established that, but for the injunction, Apotex would have successfully listed and launched its clopidogrel products in 2008.  The trial judge and Full Court took the same view on this point, following a detailed consideration of extensive internal Apotex correspondence as to its launch plans should Sanofi’s interlocutory injunction application be dismissed. 

The Commonwealth argued that Nicholas J at first instance applied the wrong standard of proof when assessing whether Apotex would have launched its generic clopidogrel products.  The Full Court rejected the argument that the Commonwealth had to prove no more than a prima facie case of the loss caused by the non-performance of the act which was restrained by the PI.  Their Honours held that after both parties had presented evidence regarding the potential listing of the generic product, the onus continued to rest upon the claimant to substantiate that the generic product’s launch would indeed have occurred if not for the injunction. 

The primary judge held that the Commonwealth had not established that but for the PI, Apotex would have successfully launched its clopidogrel products on 1 April 2008 including by applying for and securing PBS listing.  The Full Court saw no basis to challenge the primary judge’s conclusion.  This aspect of the case involved a detailed consideration of extensive Apotex evidence and correspondence relating to its launch plans, including: 

• internal communications between Apotex leaders concerning its decision to launch at risk, including findings on the decision maker, and the effect of the decision- whether it was provisional and whether the company would have changed its mind;
• Apotex’s public announcements including letters to customers and pharmacists noting it would soon be launching generic clopidogrel products; and
• Apotex’s application for PBS listing made on 1 September 2007.

The Full Court held that the emails and communications demonstrated that Apotex’s decision to launch was provisional, and the internal documents were appropriately considered by the primary judge or were otherwise not material.  Their Honours also concluded that the Commonwealth’s failure to call Dr Sherman (who by the time of the decision had passed away in tragic circumstances) without providing any convincing rationale for its decision not to summon him was sufficient to draw the inference that his evidence would not have assisted the Commonwealth.  

The Full Court accepted in principle the Commonwealth’s argument that because 31 months had passed between the conclusion of the case and the delivery of the judgment by the primary judge, his Honour may have overlooked some of the evidence.  However, the Full Court was in no better position to assess the credit of the witness than the primary judge, and was not satisfied that the delay provided any reason to review his conclusion that the evidence was unsatisfactory. 

Implications  

This case highlights the importance of carefully documenting decisions (ideally at Board level) pertaining to PBS application/listing and generic launch “at risk” plans.  Whilst such evidence is not within the Commonwealth’s control, the Commonwealth’s damages case was fully dependant on it.  The case was rejected on the facts, the Full Court’s directness findings leaving open a path for future Commonwealth damages claims arising from PIs preventing generic launch, provided that the evidence can establish that but for the PI, the generic would have applied for and secured PBS listing.   

_____

¹ Apotex Pty Ltd v Sanofi-Aventis [2009] FCAFC 134

² Ibid at [31]-[33], [167].

³ Sanofi-Aventis & Ors v Apotex Pty Ltd; Sanofi-Aventis & Ors v Spirit Pharmaceuticals Pty Ltd [2010] HCATrans 59 (12 March 2010)

⁴ Sigma v Wyeth [2018] FCA 1556 at [3].

⁵ Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5) [2020] FCA 543 at [428]

About Pearce IP

Pearce IP is a boutique firm offering intellectual property specialist lawyers, patent attorneys and trade mark attorneys to the life sciences industries (in particular, pharmaceutical, biopharmaceutical, biotech, ag-tech and food tech).  Pearce IP is the 2021 ‘Intellectual Property Team of the Year’ (Lawyers Weekly Australian Law Awards) and was shortlisted for the same award in 2022.  Pearce IP is ranked in IAM Patent 1000 and Managing IP (MIP) IP Stars, in Australasian Lawyer 5 Star Awards as a ‘5 Star’ firm, and the Legal 500 APAC Guide for Intellectual Property.

Our leaders have been recognised in virtually every notable IP listing for their legal, patent and trade mark excellence including: IAM Patent 1000, IAM Strategy 300, MIP IP Stars, Doyles Guide, WIPR Leaders, 5 Star IP Lawyers, Best Lawyers, and Australasian Lawyer 5 Star Awards, and have been honoured with many awards including Australian Law Awards – IP Partner of the Year, Women in Law Awards – Partner of the Year, Women in Business Law Awards – Patent Lawyer of the Year (Asia Pacific), Most Influential Lawyers (Changemaker), among other awards.