On 26 June 2023, the Full Court of the Federal Court of Australia unanimously upheld the first instance decision (previously reported here) that the Commonwealth is not entitled to compensation pursuant to its claim in respect of the “usual undertaking” given by Sanofi in 2007 (Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis)  FCAFC 97). The “usual undertaking” as to damages was given by Sanofi as the price for obtaining an interlocutory injunction (also known as a preliminary injunction; PI) that prevented Apotex from launching generic clopidogrel products in 2007.
This decision is the first time the Full Court has considered a claim by the Commonwealth for compensation pursuant to such an undertaking. While the Commonwealth has made similar claims in other proceedings, those claims have previously settled out of court, other than one outstanding claim which is ongoing.
This decision will be of interest to pharmaceutical companies operating in or considering the Australian market, as it adds to the small number of authorities that have considered claims (including third party claims) pursuant to the “usual undertaking” in circumstances where a PI was granted but the underlying patent was ultimately revoked.
The decision provides guidance regarding the approach to assessing causation and remoteness in these types of circumstances, sheds light on the complex nature of the evidence required to make out a claim by a third party pursuant to the “usual undertaking”, and highlights potential difficulties associated with adducing such evidence.
In 2007, Apotex brought proceedings seeking to revoke Sanofi’s patent in relation to clopidogrel (PLAVIX), a medication for inhibiting the formation of blood clots. Sanofi filed a cross-claim, seeking interlocutory and final injunctive relief to enjoin Apotex from exploiting (including making, importing or supplying) its generic clopidogrel products in Australia.
The PI was granted upon Sanofi giving the “usual undertaking” to compensate any person (whether or not a party) adversely affected by the PI. Apotex also gave a separate undertaking not to seek listing of its generic clopidogrel products on the Pharmaceutical Benefits Scheme (PBS).
Apotex was ultimately successful in invalidating the patent in 2009, with special leave to appeal that decision refused in 2010. Accordingly, all injunctions granted were set aside and Apotex launched its clopidogrel products shortly after the application for special leave was refused.
Both Apotex and the Commonwealth brought claims seeking compensation from Sanofi pursuant to the undertakings it had given. While Apotex and Sanofi settled their dispute, the Commonwealth continued its claim. The Commonwealth’s claim sought damages for the loss suffered due to the delay in the listing of a generic clopidogrel product on the PBS. The Commonwealth alleged this delay also delayed the various price reductions triggered by a first generic listing on the PBS, and if such delays had not occurred, the Commonwealth would have saved hundreds of millions of dollars. Indeed, the Commonwealth’s claim exceeded $325 million plus interest.
First instance judgment
Justice Nicholas handed down the first instance judgment in these proceedings in April 2020, 31 months after the matter was heard. In that judgment, his Honour dismissed the Commonwealth’s claim, finding (among other things) that:
- Apotex would not have sought to list its generic clopidogrel products on the PBS on 1 April 2008, even if it had not been enjoined from doing so (the Apotex Launch and Listing Issue); and
- even if Apotex were to have listed its generic clopidogrel products on the PBS on 1 April 2008, the loss claimed by the Commonwealth did not flow directly from the PI, but rather from Apotex’s undertaking not to seek PBS listing. This was asserted to be an interposed causal step preventing loss flowing directly from the PI (the Directness Issue).
Key findings and reasoning from the appeal judgment
The Apotex Launch and Listing Issue
On the Apotex Launch and Listing Issue, the Commonwealth advanced a number of reasons why the trial judge’s conclusion that Apotex would not have listed its generic clopidogrel products on the PBS on 1 April 2008 in the absence of a PI was wrong.
A significant portion of the judgment is dedicated to stepping through the evidence and submissions that the Commonwealth contended had not been taken into account by the trial judge. The Full Court was ultimately not convinced that the trial judge had erred in his dealings with and treatment of the various evidence and submissions.
Importantly, the Full Court upheld the findings that:
- it remained open to Apotex to decide not to launch on 1 April 2008;
- the key decision maker was ultimately the CEO of Apotex, Dr Sherman;
- the evidence was consistent with Dr Sherman taking the position that he would wait to see the outcome of the PI application before making the decision to launch; and
- the trial judge was correct to decline to speculate about what Dr Sherman would have done, in the absence of evidence from Dr Sherman.
The Full Court rejected the Commonwealth’s contention that the trial judge had erred in drawing a Jones v Dunkel inference against the Commonwealth, i.e., that because the Commonwealth did not call Dr Sherman to give evidence, such evidence would not have assisted the Commonwealth. The Full Court agreed with the trial judge that there was an evidential deficiency that could only have been remedied by Dr Sherman giving evidence about what he would have done if the PI had been refused. The Court noted that the Commonwealth had called other witnesses from Apotex who were based outside of Australia, and the Commonwealth had not provided any explanation nor led evidence as to why it did not call Dr Sherman, or what attempts had been made to call him.
While the Full Court accepted in principle that a significant delay (here 31 months) between a hearing and judgment may weaken a trial judge’s advantage with respect to seeing the oral and documentary evidence unfold in a coherent manner (including the assessment of the credit of witnesses), the Court was satisfied that the trial judge’s reasons were “a most thorough and searching excavation of the very complicated factual questions which the case generated”, and that the delay was not a basis for review of the trial judge’s conclusions.
The Commonwealth was unable to impugn the trial judge’s approach and reasoning, and therefore failed to convince the Full Court that, had the PI not been granted, Apotex would have launched its generic clopidogrel products in 2008. As this counterfactual scenario was not sufficiently proved, the Commonwealth’s claim failed.
The Directness Issue
On the Directness Issue, the Full Court recognised the reality that from the moment of the grant of the PI, there was “not the slightest prospect that Apotex would seek PBS listing”. The PI had the practical effect of preventing Apotex from seeking PBS listing because, regardless of Apotex’s undertaking not seek PBS listing, PBS listing required a written assurance of supply to meet anticipated demand from the date of listing. Therefore, the PI was the direct cause of the Commonwealth’s alleged loss and not an indirect cause of it.
The Full Court undertook a comprehensive analysis of the authorities regarding causation and remoteness and rejected the proposition that the presence of an interposed causal step inevitably prevents a loss flowing directing from an injunction. In any event, the Full Court found that the undertaking given by Apotex not to seek PBS listing was not an interposed causal step, and deferred the question of what would be an interposed causal step sufficient to prevent loss flowing directly from a PI to a time when that question needs to be answered.
The Full Court noted that it did not strictly have to decide the Directness Issue, having regard to its findings on the Apotex Launch and Listing Issue. Accordingly, the Full Court’s findings are not strictly binding. However, the Court’s guidance is likely to be persuasive in any future proceedings regarding the same issue.
Future impact and takeaways
The Commonwealth has 28 days from the date of the judgment to file any application for special leave to appeal to the High Court.
This decision is likely to be referred to in future proceedings for interlocutory injunctive relief in respect of pharmaceutical patents, and any subsequent claims for compensation pursuant to the “usual undertakings” as to damages.
The Full Court’s comments with respect to the effect of a PI on PBS listing may affect how litigants approach cross-undertakings not to list on the PBS. The form of the “usual undertakings” may also be revisited, which may lead to a re-evaluation of factors relevant to the grant of a PI.
The judgment also provides some useful guidance regarding aspects of evidence in proceedings involving hypothetical or “counterfactual” inquiries. In particular, the case highlights the need for cogent and comprehensive evidence from the ultimate decision maker regarding what would have happened if a PI had not granted.
The Commonwealth will no doubt take this decision into account in its ongoing claim for compensation pursuant to the “usual undertakings” given by Otsuka and Bristol-Myers Squibb in respect of the litigation concerning aripiprazole (ABILIFY).