Damages recovery by the Commonwealth pursuant to the “usual undertakings”
A recent procedural decision by Nicholas J in the Federal Court provides an interesting snapshot of the issues involved in the recovery of damages by the Government in bio pharma patent litigation.
In a judgment handed down on 24 April 2015, Nicholas J has partially allowed amendments sought by Sanofi to its particulars of defence in response to the Commonwealth’s claim for damages pursuant to various undertakings provided by Sanofi in the course of proceedings commenced against it by Apotex.
Background to Commonwealth recovery claims
The trial decision was handed down in 2008 (see Apotex Pty Ltd (formerly GenRx Pty Ltd) v Sanofi-Aventis  FCA 1194 (Apotex trial)) and the appeal decision in 2009 (see Apotex Pty Ltd v Sanofi-Aventis  FCAFC 134 (Apotex appeal)). An article on the decision in the Apotex appeal can be found here.
On 11 April 2013, the Commonwealth applied for orders that it be paid $60 million in compensation by Sanofi pursuant to various undertakings provided during the course of both the Apotex trial and the Apotex appeal proceedings.
The proceedings related to a successful revocation claim by Apotex and an unsuccessful infringement cross-claim by Sanofi, in relation to Sanofi’s patent protecting a series of products and processes regarding the compound known as clopidogrel (being sold by Sanofi under the name Plavix). As between Apotex and Sanofi, the judgment notes that the parties reached a settlement in November 2014.
In its application, the Commonwealth alleges that it suffered extensive financial loss as a result of interlocutory orders and undertakings preventing Apotex from listing its clopidogrel products on the Pharmaceutical Benefits Scheme (PBS) thereby preventing statutory price reductions. Sanofi applied for leave to file and serve further amended points of defence to the claim by the Commonwealth. The Commonwealth opposed some but not all of the proposed amendments, primarily on the basis that the relevant amendments raised defences which had no reasonable prospects of success.
Amendments sought by Sanofi
The defences advanced by Sanofi in its application for leave to amend were, broadly, that:
- It would be unreasonable or inequitable to allow the Commonwealth’s claim for compensation in circumstances where: (a) Apotex’s clopidogrel products would not have been listed on the PBS without Apotex infringing copyright in the Plavix product information and/or summary of product characteristics; and (b) any supply by Apotex of its clopidogrel product would have involved an infringement of copyright in the Plavix consumer medicine information.
- It would not be just and equitable, nor would it be fair and reasonable, for the Court to require Sanofi to compensate the Commonwealth pursuant to the undertakings as to damages in circumstances where the validity of Sanofi’s patent would have been upheld had the Full Court in the Apotex appeal adopted the same approach as the Full Court in AstraZeneca AB v Apotex Pty Ltd (2014) 226 FCR 324.
- In relation to the Commonwealth’s claim for compensation:
a. the Commonwealth did not notify Sanofi of its intention to pursue a claim for compensation at the time of Sanofi giving any of its undertakings as to damages; and
b. the Commonwealth delayed in notifying Sanofi of, and commencing, its claim for compensation and as a result, certain relevant evidence has been lost.
Copyright infringement claim
Despite the Commonwealth’s argument that it should not be disentitled to relief on account of Apotex’s infringement of copyright, Nicholas J held that Sanofi should be allowed to amend its defence to argue this point, particularly as the authorities do not provide any clear guidance, as they are all concerned with quite different facts to those alleged in the present case, and consequently Sanofi’s arguments were not precluded by existing authority.
The Apotex appeal was wrongly decided
Regarding the defence in point 2 above, Nicholas J refused to make the amendments sought by Sanofi on the basis that the “argument that Sanofi should, or might, not be found liable to the Commonwealth because the Full Court’s decision in the Apotex appeal was wrongly decided is not an argument that this Court can or should entertain” and, as a result of the principles of finality in litigation, Sanofi was bound by the judgment in the Apotex appeal.
Prejudice to Sanofi by the Commonwealth’s delay
As to defences set out point 3 above, Nicholas J
- firstly, found that it was not possible for the Commonwealth to ascertain whether or not it had a right to seek damages until after the High Court disposed of Sanofi’s application for special leave to appeal the Apotex appeal decision in 2010; and
- secondly, that Sanofi did not assert that it believed the Commonwealth would not make a claim for compensation.
In such circumstances, his Honour held that Sanofi’s claim that it would be unreasonable for the Commonwealth to recover on the undertakings because the Commonwealth had delayed, had no reasonable prospects of success. In addition, it was held that it would be inappropriate to allow Sanofi to amend its defence to plead that it had suffered prejudice arising out of the loss or destruction of relevant evidence without identifying that evidence.
Nicholas J ordered that Sanofi delete the paragraphs in its further amended particulars of defence relating to defences based on the Commonwealth’s delay in notifying Sanofi of its claim and the AstraZeneca decision. Nicholas J ordered that the defence based on the Commonwealth’s delay causing certain evidence to be lost should be deleted unless accompanied by additional particulars identifying the evidence said to have been lost.
As yet, the Court has not fixed a date to hear the Commonwealth’s compensation application, however we understand that the matter has been listed in June before a Full Federal Court, along with the Wyeth matter, to consider the legal issues raised by the Commonwealth.