Australian Government takes its $325 million damages claim to the High Court in Commonwealth v Sanofi

By Joel Barrett, Tracy Lu
Intellectual Property Patents & Trade Marks

The latest chapter in an 11-year saga 6 min read

The Federal Court of Australia will generally only grant an interim injunction if the applicant gives the 'usual undertaking as to damages' to the court. Broadly speaking, this is an undertaking to compensate any person, whether or not they are a party to the proceeding, adversely affected by the interim injunction if it turns out the injunction was not warranted (the Usual Undertaking).

On 26 June 2023, in a long-awaited appeal judgment, the Full Court confirmed that the Australian Government is not entitled to any damages from Sanofi and Bristol-Myers Squibb under the Usual Undertaking that those pharmaceutical companies gave in exchange for interim injunctions in 2007. The Government originally commenced its claim in 2012, which ended up totalling more than $325 million.

The Government has now applied for special leave to appeal the Full Court decision, which the High Court of Australia has not yet considered.

In this Insight, we look back at the Full Court decision and consider its implications, particularly for any companies that might be directly involved in, or otherwise affected by, patent infringement proceedings relating to pharmaceutical products.

Key takeaways

  • The Government is not, by virtue of its special position as a polity, automatically disentitled from claiming damages under the Usual Undertaking. In that regard, the Government is just like any other person that may be adversely affected by an interim injunction.
  • The court will not award damages under the Usual Undertaking to a person whose loss does not flow directly from the interim injunction. In the pharmaceutical patent context, the loss will be indirect if, even absent the injunction, the restrained party would not have risked infringing a patent by launching its own generic product.
  • In considering that issue, the court will carefully investigate all the factual circumstances. It will not accept bare assertions about what the restrained party would or would not have done absent the interim injunction, or even assertions supported by documents that are contemporaneous but equivocal.
  • Patentees should keep this in mind when assessing, as part of a cost–benefit analysis, whether to apply for an interim injunction in the Federal Court. The same goes for any person—party or otherwise—intending to claim under a Usual Undertaking.

Who in your organisation needs to know about this?

All decision-makers who have a say in whether to apply for an interim injunction, exploit an invention at risk of infringing a patent, and/or claim under a Usual Undertaking.

A tale of two undertakings

Clopidogrel is an antiplatelet drug that reduces the risk of heart disease and stroke in high-risk patients. Sanofi owned an Australian patent covering its clopidogrel products, which Sanofi and Bristol-Myers Squibb (the Originators) co-marketed as PLAVIX and ISCOVER respectively. PLAVIX and ISCOVER are both listed on the PBS, or Pharmaceutical Benefits Scheme, which is a program under the National Health Act 1953 (Cth) by which the Government subsidises the cost of certain medications. When the first generic version of a PBS-listed product is also listed, that triggers various automatic and ongoing price reductions that substantially reduce the government subsidies.

In August 2007, the generic pharmaceutical company Apotex (which has since merged with Arrow Pharmaceuticals to form Arrotex in Australia) commenced patent invalidity proceedings against Sanofi. The Originators cross-claimed for infringement and applied for an interim injunction to restrain Apotex from exploiting its generic clopidogrel products in Australia. The court ordered the injunction in exchange for the Usual Undertaking from the Originators.

During the course of the injunction hearing, the court questioned whether an application for PBS listing would constitute patent infringement and, therefore, whether the court had the power to restrain Apotex from applying for PBS listing. In the circumstances, Apotex voluntarily undertook that if the court was minded to order an interim injunction restraining the usual types of infringing conduct, it would not apply for its generic clopidogrel products to be listed on the PBS (the Voluntary Undertaking). The Voluntary Undertaking was not supported by the Usual Undertaking.

By March 2010, the patent was held to be invalid, the Originators had exhausted all avenues of appeal and the injunctions were finally lifted. Apotex secured PBS listing on 1 May 2010, and several other generic pharmaceutical companies followed suit in the subsequent months.

In May 2010, Apotex also applied to the court for compensation under the Usual Undertaking, and this claim was eventually resolved out of court in November 2014. No other pharmaceutical companies applied for compensation.

In 2012, the Government also applied to the court for damages under the Usual Undertaking. Broadly, the Government claimed that earlier entry by Apotex into the Australian clopidogrel market would have resulted in substantial PBS-related costs savings for the Government.

On 28 April 2020, the primary judge delivered judgment in relation to the Government's claim, deciding it was not entitled to any damages from the Originators under the Usual Undertaking. There were two main bases for this decision:

  • The Apotex Launch and Listing Issue. The primary judge was not convinced that, but for the interim injunction, Apotex would have actually applied for its generic clopidogrel products to be listed on the PBS, or launched them in the Australian market at risk. Although the Managing Director of Apotex Australia Pty Ltd gave evidence that Apotex would have definitely done so, his Honour did not consider that this evidence was consistent with discovery documents, which indicated that the CEO of Apotex, who had not engaged in a cost–benefit analysis or been committed one way or the other, was the ultimate decision-maker. The Government failed to put on evidence from the CEO, from which the primary judge drew an adverse inference. His Honour also considered that some discovery documents involving other Apotex executives 'reveal[ed] an intention to use the [Usual Undertaking] as a means of having Sanofi underwrite the decision not to launch', or 'reflect[ed] a decidedly timid approach and one that is not consistent with the bullish corporate philosophy espoused by [the Managing Director] in his evidence'. Therefore, the interim injunction did not cause any PBS-losses suffered by the Government.
  • The Directness Issue. The primary judge considered that any loss suffered by the Government under the PBS was a direct and immediate consequence of the Voluntary Undertaking. In the circumstances, such loss was only an indirect consequence of the interim injunction.

On 26 May 2020, the Government appealed the decision of the primary judge.

Appeal decision

The appeal decision focuses mainly on the parties' appeal and contention grounds in relation to the Apotex Launch and Listing Issue. The Full Court examined, in great detail, all of the factual materials that the Government argued the primary judge had failed to consider and, ultimately, dismissed this appeal ground. The Full Court held that the primary judge had not erred, including by drawing an adverse inference from the fact that the Government had not called the CEO of Apotex as a witness to give evidence about whether he would have given Apotex the green light to launch its clopidogrel products at risk.

The Full Court actually upheld the appeal in relation to the Directness Issue, concluding that the primary judge erred in finding that the Voluntary Undertaking had broken the chain of causation. The Full Court added:

'We would defer a determination of what kind of interposed causal step is sufficient to prevent a loss flowing directly from an interlocutory injunction to a time when that question needs to be answered in a concrete fashion.'

However, given that the Full Court found against the Government in relation to the Apotex Launch and Listing Issue, its success in relation to the Directness Issue did not assist the Government overall.

While the parties had advanced several other appeal and contention grounds, including one by the Originators to the effect that the Government is a polity and therefore not entitled to claim under the Usual Undertaking, the Full Court declined to engage with them given its resolution of the Apotex Launch and Listing Issue. The Originators had failed in these types of arguments before the primary judge, which the Full Court left undisturbed.

What does this mean?

For patentees contemplating seeking an interim injunction in patent infringement proceedings relating to PBS-listed products, this case confirms that the risk of liability to the Government under the Usual Undertaking must be seriously considered. In principle, the Government is entitled to claim under the Usual Undertaking just like anybody else, and given the value of subsidies under the PBS, its claim could potentially be in the hundreds of millions.

However, the Government (and any other claimant under the Usual Undertaking) will still need to prove its losses were directly caused by the injunction, and that no actual or hypothetical circumstances would have broken the chain of causation. In that inquiry, the Federal Court will be exacting.

On 24 July 2023, the Government applied for special leave to appeal the Full Court decision, which the High Court of Australia will consider in the coming months. So the saga is not over just yet.