Commonwealth can still sue on the undertaking as to damages

The High Court has refused Sanofi and Wyeth special leave to appeal the Commonwealth’s claims on the clopidogrel undertaking as to damages.

You may recall that, when Sanofi and Wyeth got interlocutory injunctions to stop Apotex entering the market with a clopidogrel product, Sanofi had to give the “usual undertaking as to damages“. The patents, however, were held invalid.

Sanofi and Apotex settled the latter’s claim for damages. However, the Commonwealth also brought a claim against Sanofi and Wyeth under the undertakings as to damages, in broad terms claiming as damages the difference between the (higher) price it paid under the Pharmaceutical Benefits Scheme while the injunctions were in force and the lower price that would have applied if the interlocutory injunctions had not kept Apotex out of the market.

Last year, the Full Federal Court rejected Sanofi’s and Wyeth’s arguments that the Commonwealth could not bring a claim under the undertakings. Lauren John, an associate at Allens, reports that the High Court refused Sanofi’s application for special leave last week.

Links to the High Court dispositions here (Sanofi) and here (Wyeth). Ms John provides more detail here.

If you have a question or wish to make a comment, feel free to post it in the comments box or send me an email.

Commonwealth can sue on the undertaking as to damages

The Full Court (Dowsett, Kenny and Nicholas JJ) has upheld the Commonwealth’s power to sue for damages on the undertaking as to damages given by Sanofi and Wyeth when obtaining interlocutory injunctions against generic suppliers.

Sanofi sued Apotex (then called GenRX) for patent infringement when the latter sought to registration in the Therapeutic Goods Register of drug containing clopidogrel. Sanofi obtained an interlocutory injunction preventing the listing and sale of Apotex’ product, on terms of the “usual undertaking as to damages”. Thus, as a condition of obtaining the interlocutory relief, Sanofi undertook to the court:

(a) to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order or undertaking or any continuation (with or without variation) thereof; and

(b) to pay the compensation referred to in (a) to the person there referred to. (emphasis supplied)

After the trial judge found Sanofi’s patent valid and infringed, the Full Court on appeal held that the patent was invalid. Ultimately, the High Court refused special leave.[1]

The Commonwealth, which was not a party to either the Sanofi or Wyeth proceedings is now claiming compensation from Sanofi and Wyeth under the “undertaking as to damages”. In broad terms, it says it suffered losses because the price it paid under the Pharmaceutical Benefits Scheme was higher than it would have been if the generic parties had not been prevented from listing and selling their products by the interlocutory injunctions.

Sanofi and Wyeth argued that sections 26B, 26C, 26D of the Therapeutic Goods Act[2] precluded the Commonwealth from claiming under the usual undertaking as to damages. The Full Court held, however, that these provisions were ancillary or additional to the Court’s powers under the undertaking. They did not provide an exhaustive code which excluded the operation of the undertaking.

Dowsett J delivered a concurring judgment, suggesting at [20] that some restriction on the scope of the usual undertaking should have been sought and then questioning, if such a restriction had been sought, whether it would have been appropriate to grant the interlocutory injunction:

…. As the Commonwealth was not a party to the proceedings in which the undertakings were given, they were presumably not extracted at its request. I infer that the Court extracted the undertakings. It is not suggested that it lacked the power to do so in order to protect the interests of identified or unidentified third parties. In submitting that the Commonwealth may not recover other than pursuant to s 26C, the Sanofi and Wyeth parties effectively seek to resile from their undertakings. It may be simply too late for them to do so. Any limitations upon the undertakings ought to have been sought at the time at which they were given. The Court would then have had to consider whether such limited undertakings were sufficient to justify the grant of the interlocutory injunctions. The Commonwealth has not put its case in that way. However, in any event, I see no basis for limiting the Commonwealth’s right to seek to enforce the undertakings to the extent that it benefits under them.

If only the regime under sections 26B, 26C, 26D had been available, it looks like Sanofi’s and Wyeth’s exposure would have been limited to situations where they had given false or misleading certificates or did not have “reasonable prospects of success”.[3]

Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2015] FCAFC 172


  1. Similarly, in the Wyeth proceedings an interlocutory injunction was granted on the usual undertaking as to damages, but the patent was ultimately found to be invalid.  ?
  2. These provisions were introduced as part of the package implementing the Australia – United States Free Trade Agreement relating particularly to the 5 year data exclusivity for pharmaceutical test data.  ?
  3. Defined in s 26C(4) as “(4) For the purpose of paragraph (3)(b), proceedings have reasonable prospects of success if: (a) the second person had reasonable grounds in all the circumstances known to the second person, or which ought reasonably to have been known to the second person (in addition to the fact of grant of the patent), for believing that he or she would be entitled to be granted final relief by the court against the person referred to in paragraph (1)(a) for infringement by that person of the patent; and (b) the second person had reasonable grounds in all the circumstances known to the second person, or which ought reasonably to have been known to the second person (in addition to the fact of grant of the patent), for believing that each of the claims, in respect of which infringement is alleged, is valid; and
    (c) the proceedings are not otherwise vexatious or unreasonably pursued.”  ?

Abilify interlocutory injunction continues pending appeal

Last month, Yates J found that Otsuka’s patent for aripiprazole was invalid.[1] As a consequence, his Honour ordered that the interlocutory injunction preventing Generic Health from listing its product on the PBS and selling it be dissolved. Otsuka has appealed and now Nicholas J has granted a stay to preserve the interlocutory injunction pending the appeal.

While not being prepared to characterise Otsuka’s prospects on the appeal as higher than arguable, Nicholas J considered the balance of convenience favoured continuation of the interlocutory injunction.

Otsuka relied principally on the fact that there would be an automatic reduction of 16% the price payable under the PBS for Abilify[2] once Generic Health’s product was listed. It contended that it would not be possible to recover that price drop if its appeal were successful.

Generic Health countered that it risked losing the benefits of first mover advantage if it were enjoined and other generic producers were not. Generic Health’s evidence was that pharmacists would usually only carry one generic brand of each drug and that was likely to be the first brand “in”. This would exacerbate the difficulties in calculating its losses. Nicholas J did not dismiss that argument, but Otsuka said it would be seeking interlocutory injunctions against any other generics who tried to enter the market pending the appeal. Nicholas J noted further that, if Otsuka failed in an injunction applications against a second or further generic, that would be a strong basis to terminate the stay.

The Commonwealth also sought a specific undertaking to pay damages from Otsuka as the price of the injunction. It argues it will suffer loss, in the form of the higher prices payable under the PBS, if Generic Health continues to be enjoined but the appeal ultimately fails.

Nicholas J noted that a case has been stated to the Full Court on whether the Commonwealth can indeed claim under the “usual undertaking as to damages”. Subject to the outcome of that case, his Honour considered the Commonwealth was sufficiently within the scope of the usual undertaking and so did not need a separate, specific undertaking.

Nicholas J increased the security for costs that Otsuka had to provide to Generic Health in the amount of an additional $8.7 million[3] and, in addition, required a security of $6 million separately to the Commonwealth. His Honour also noted that the Commonwealth could apply to extend that security if the appeal was not decied in the first half of 2016.[4]

Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd [2015] FCA 848


  1. Otsuka Pharmaceutical Co., Ltd v Generic Health Pty Ltd (No 4) [2015] FCA 634. Patentology looked at the ‘swiss claims’ aspects of his Honour’s decision.  ?
  2. The commercial name under which aripiprazole is marketed by Otsuka and its licensee.  ?
  3. Otsuka has already provided $6.5 million pursuant to the orders made by Yates J at first instance.  ?
  4. At [35], Nicholas J recored that the Commonwealth estimated its losses from the continuation of the interlocutory injunction would be $6 million over the next 12 months and $15 million over the next 18 months.  ?

Commonwealth seeks $60 million on the undertaking as to damages

Sanofi sued Apotex (then known as GenRx) for infringement of its “clopidogrel patent”. It obtained interlocutory injunctions against Apotex against the sale of Apotex’ product and preventing Apotex from applying to list its product under the Pharmaceutical Benefits scheme (PBS). As a condition of the grant of those interlocutory injunctions, Sanofi gave the “usual undertaking as to damages”:

“(a)          submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person whether or not a party, adversely affected by the operation of the interlocutory injunction or any continuation (with or without variation); and

“(b)          pay the compensation referred to in subpara (a) to the person or persons there referred to.”

Sanofi won at trial, but lost on appeal with the Full Court ordering its patent be revoked. Sanofi’s application for special leave to appeal to the High Court was refused on 12 March 2010.

Apotex sought compensation under the undertaking by motion in May 2010. Sanofi and Apotex resolved that application by negotiation.

The Commonwealth also sought compensation under the undertaking as to damages by application made in April 2013. If we did not know before, we now know the Commonwealth is seeking $60 million. Essentially, the Commonwealth contends that is how much less it would have had to pay out under the PBS if the interlocutory injunctions had not prevented Apotex applying to list its product under the PBS:

 

“The Commonwealth has provided some particulars of its damages. It alleges it has suffered financial loss in excess of $60 million as a result of Apotex being prevented by the various interlocutory orders and undertakings from achieving a listing for its clopidogrel products under the PBS. Most of the Commonwealth’s loss is said to flow from statutory price reductions and price disclosure reductions that would have occurred had Apotex not been the subject of the relevant interlocutory restraints.”

 

The case is a long way off resolution. Nicholas J has allowed Sanofi to amend its points of defence to the Commonwealth’s claim to rely on the Commonwealth’s delay in making its application for compensation and to rely on infringement of copyright in Sanofi’s product information documents. Sanofi will be required to particularise the prejudice its claims it suffered as a result of the delay.

Nicholas J however refused leave to amend to plead that the Full Court’s decision invalidating Sanofi’s patent was wrong in light of the Full Bench’s subsequent decision in AstraZeneca (rosuvastatin). That would be inconsistent with res judicata and the principle of finality of litigation.

Commonwealth of Australia v Sanofi-Aventis [2015] FCA 384