On appeal, the Full Federal Court has rejected the Commonwealth’s claim for compensation against Sanofi, upholding the Federal Court’s finding that the Commonwealth has failed to show Apotex would have listed its generic version of clopidogrel on the PBS at an earlier date, if it had not been restrained by an interlocutory injunction.
Background
Clopidogrel is a pharmaceutical that helps inhibit the formation of blood clots. The drug is sold in Australia as PLAVIX by Sanofi Australia Pty Ltd and as ISCOVER by Bristol-Myers Squibb Australia Pty Ltd (collectively referred to as “Sanofi”).
Both products were listed on the Pharmaceutical Benefits Scheme (PBS), which provides a subsidy to pharmacists who sell the drug. The listing of a generic version of the drug on the PBS would have triggered various reductions in the subsidy, including an automatic 12.5% reduction in the listed price of the drug.
Sanofi owned an Australian patent (AU 597784) covering clopidogrel that, if valid, would have prevented a generic manufacturer from entering the Australian market. In 2007, Apotex Pty Ltd sought to launch a generic version of clopidogrel and commenced proceedings to revoke the patent. Sanofi responded by seeking an interlocutory injunction preventing Apotex from launching its generic version of clopidogrel.
To obtain the injunction, Sanofi provided the “usual undertaking as to damages” — an undertaking to the Court to compensate any person adversely affected by the injunction if the patent was later found to be invalid. The undertaking was not limited to the parties involved, but extended to “any person whether or not a party, adversely affected by the operation of [the injunction]”.[1]
Apotex was successful in revoking Sanofi’s patent after appealing to the Full Court,[2] and listed its generic version of clopidogrel on the PBS on 1 May 2010.
The Commonwealth sought compensation for the loss suffered by the Commonwealth as a result of Apotex being prevented from obtaining PBS listing at the earlier date of 1 April 2008 and supplying its generic product in Australia from that date. The total amount of compensation claimed by the Commonwealth exceeded $325 million.[3]
The trial Judge dismissed the Commonwealth’s application on two principal grounds. Firstly, the trial Judge found that Apotex would not have sought to list its generic clopidogrel products on 1 April 2008, even in the absence of the injunction.[4] Secondly, the trial Judge found that the loss claimed by the Commonwealth did not flow directly from the injunction, but rather from an undertaking proffered by Apotex not to seek PBS listing.[5]
The Commonwealth appealed the decision to the Full Federal Court.
Full Federal Court decision
The Full Court unanimously rejected the Commonwealth’s claim for compensation.[6]
To be successful, the Commonwealth needed to show that:
i. the claimed loss flowed directly from the injunction, and
ii. Apotex would have successfully applied for listing on the PBS and launched its generic clopidogrel products at the earlier date, if not for the injunction.
On the first issue, the Full Federal Court overturned the trial Judge, and found that the loss claimed by the Commonwealth did flow directly from the injunction. Although the terms of the injunction did not strictly prevent Apotex from applying for PBS listing, the injunction would have made it impossible to provide the necessary assurance of supply and comply with the supply obligations if PBS listing was granted. Therefore, regardless of the undertaking proffered by Apotex not to seek PBS listing, the injunction had the practical effect of preventing Apotex from applying for PBS listing:
"[T]he interlocutory injunction put paid to any plan by Apotex to launch its generic product. Consequently it could not have complied with its obligation of supply for the two year period referred to in s 99AEB of the National Health Act 1953 (Cth) nor would it have been able to proffer to the Department a written statement that it could guarantee that supply. From the moment of the grant of the interlocutory injunction there was not the slightest prospect that Apotex would seek PBS listing."[7]
On the second issue, the Full Federal Court upheld that the burden lies on the Commonwealth to show that Apotex would have sought PBS listing if not for the injunction:
"The question for the trial judge and, assuming its review jurisdiction is engaged, this Court, is whether, on all the evidence, the Commonwealth has satisfied its persuasive burden of demonstrating that if it had not been restrained, Apotex would have sought to list on the PBS and then distribute its products in Australia."[8]
The Court considered a range of evidence, including evidence from witnesses and a series of emails between decision-makers at Apotex. Dr Sherman was the “key decision-maker” on whether or not to launch in Australia, and while the evidence as a whole conveyed a range of opinions, several of the emails suggested that Dr Sherman was reluctant to launch in Australia before the outcome of the revocation proceedings was known. In light of this, the Full Federal Court upheld the Federal Court’s decision that the Commonwealth had not met its burden.[9]
Implications
While the Commonwealth was unsuccessful in this case, the ruling does not exclude the possibility of such damages being awarded in different circumstances.
This case highlights the difficulty of showing what an enjoined party “would have done” if an injunction had not been granted, particularly when faced with infringement of a potentially valid patent.
Without evidence to the contrary, the Commonwealth may have a difficult time convincing a Court that a generic manufacturer would have taken the risk of entering the market before revocation proceedings have been concluded. If a generic manufacturer did apply for PBS listing, only for the patent to be found valid, they may end up stuck between a patent-infringement “rock” and a PBS supply obligation “hard place”.
[1] Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2023] FCAFC 97, [7].
[2] Apotex Pty Ltd v Sanofi-Aventis [2009] FCAFC 134.
[3] Commonwealth of Australia v Sanofi (formerly Sanofi -Aventis) (No 5) [2020] FCA 543, [22].
[4] Ibid, [351].
[5] Ibid, [451].
[6] Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2023] FCAFC 97.
[7] Ibid, [37].
[8] Ibid, [97].
[9] Ibid, [391].
