Commonwealth loses appeal in Clopidogrel PBS damages undertaking case: important lessons for patentees and generics alike

The Full Federal Court has dismissed the Commonwealth's appeal, and confirmed the dismissal of the Commonwealth's $325 million damages claim against Sanofi, for PBS cost-savings it says it would have made, but for a preliminary injunction that prevented generic pharmaceutical company, Apotex, from launching its own clopidogrel products.

The patent dispute

In 2007, generics pharmaceutical company Apotex sought to revoke Sanofi's patent that protected its blockbuster drug clopidogrel, which was sold under the brand names Plavix® and Iscover®. At the time, clopidogrel was the third most heavily subsidised prescribed drug in Australia, costing the Commonwealth around $170 million annually.

Sanofi cross-claimed for threatened patent infringement. It also sought and obtained a preliminary injunction to prevent Apotex from launching its generic clopidogrel products in Australia until the determination of the substantive patent dispute. As the standard "price" for obtaining the preliminary injunction, Sanofi gave the "usual undertaking as to damages" (damages undertaking) – an undertaking to submit to such order as the Court may consider just for the payment of compensation to be assessed by the Court "to any person whether or not a party, adversely affected by the operation of the injunctions".

At the trial of the substantive dispute, Sanofi was successful in part. The Court found certain patent claims to be valid and infringed, and issued a final injunction accordingly. On appeal, Apotex was wholly successful, and, in 2009, the patent was revoked and the final injunction set aside. An application for special leave to appeal to the High Court was later dismissed, meaning the validity of the patent had been finally determined, adversely to the patentee.

Commonwealth's claim on the undertaking

Apotex and the Commonwealth then each filed claims seeking compensation from Sanofi, pursuant to the damages undertaking. Apotex and Sanofi subsequently settled, leaving only the Commonwealth's claim remaining.

The Commonwealth contended that it had suffered loss by reason of Apotex being unable to obtain PBS listing, which would have caused an immediate statutory price reduction for all listed brands of clopidogrel, and further price reductions due to the PBS price disclosure regime. The Commonwealth claimed losses totalling approximately $325 million.

At first instance, Justice Nicholas considered that the Commonwealth's case suffered from an "evidentiary deficiency" and the Court was not satisfied that Apotex Australia would have sought and obtained a PBS listing, even if the injunction had not been granted. As a further "critical point", his Honour held that a voluntary undertaking given by Apotex during the substantive proceeding not to apply for a PBS listing meant that the loss suffered by the Commonwealth could not have "flowed directly" from the interlocutory injunction obtained by Sanofi, but instead, from the voluntary undertaking given by Apotex.

The Commonwealth appealed.

The Full Court appeal

On Monday, more than two years after the close of oral argument, the Full Court (Justices Besanko, Perram and Yates) delivered a single, unanimous judgment. The Full Court agreed with the primary judge that the Commonwealth's claim on the damages undertaking should be dismissed in its entirety, but disagreed in part with the primary judge's reasons.

The Full Court agreed with the primary judge that, in this particular case, the Commonwealth had failed to establish that Apotex would have launched its products on and from the foreshadowed PBS listing date of 1 April 2008 had the preliminary injunction not been granted. Importantly, even after the Full Court had set aside the final injunction, and declared the patent wholly invalid and liable to be revoked, Apotex did not at that point "launch at risk", preferring instead to wait until Sanofi's application for special leave to appeal to the High Court had been determined. The Full Court considered that this was real evidence, from which an inference could be drawn that Apotex would not have launched at risk had the preliminary injunction not been in place and the risk of patent infringement loomed large.

In a ruling that will be welcome to patentees, the Full Court rejected an argument by the Commonwealth that all that it was required to establish was a "prima facie" case that Apotex would have launched had the preliminary injunction not been granted. The Full Court thus confirmed:

"…once both sides had adduced evidence on the topic of what Apotex would have done if not restrained, it remained for the Commonwealth to discharge its persuasive burden by showing, on all of the evidence, that Apotex would have sought to list on the PBS and then distribute its products in Australia."

The Full Court also found no error in the primary judge's analysis of the evidence regarding Apotex's alleged readiness and willingness to launch. The primary judge found the evidence of one of Apotex's witnesses to be "most unconvincing", and explained why the body of contemporaneous written evidence was inconsistent with aspects of the oral evidence, and, taken together, did not persuade him that Apotex would in fact have launched at risk had the preliminary injunction not been granted. The Full Court agreed.

Although the above findings disposed of the appeal, the Full Court confirmed that it disagreed with the primary judge's analysis of relevant authorities on causation/remoteness, and his application of the principle that the claimed loss must "flow directly" from the preliminary injunction having been granted. This was particularly important in the facts of this case, because during the hearing of Sanofi's application for a preliminary injunction, senior counsel for Apotex had proffered an undertaking on behalf of his client that, pending the determination of the substantive proceeding, Apotex would not take any steps to obtain PBS listing of any of its clopidogrel products. The primary judge considered that this undertaking not to seek PBS listing was the direct cause of the Commonwealth's loss, meaning that the loss could not have flowed directly from the injunction. The Full Court disagreed, instead characterising Apotex's undertaking as "a link – not a break – in the chain of causation", and holding that:

"We would therefore reject the proposition that the presence of an interposed causal step inevitably prevents a loss flowing directly from an injunction."

It remains to be seen whether the Commonwealth will seek leave to appeal to the High Court of Australia from the Full Court's decision. For the time being, Sanofi breathes a sigh of relief, and is no doubt thankful that Apotex could not convince any of the judges that it was in fact ready to launch its products at the time the preliminary injunction was granted.