Australia: Injunctions and undertakings in pharma patent fights: the cost of doing business?

Clayton Utz Insights
Last Updated: 10 June 2016
Article by Natalie Shoolman and Ashley Cameron

Most Read Contributor in Australia, August 2016

Key Points:

When a pharma patentee obtains interlocutory injunctive relief and gives the "usual undertaking as to damages" to the Court but is unsuccessful at the final hearing and the interlocutory injunction is dissolved, the patentee is now at an increased risk of a claim being made for compensation by the Commonwealth.

Sanofi and Wyeth's battle to prevent generics from listing generic clopidogrel and generic venlafaxine on the Schedule of Pharmaceutical Benefits and, following their loss in respective proceedings, the Commonwealth from claiming on the usual undertaking, has taken another turn.

The High Court has refused them special leave to appeal the Full Federal Court's decision allowing the Commonwealth the ability to seek compensation from them pursuant to the usual undertaking as to damages (Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2015] FCAFC 172). As a result, any patentee will have to factor in compensating the Commonwealth as a possible risk of a similar challenge in the future.

Sanofi's and Wyeth's undertaking and the basis for the Commonwealth's compensation claim

In separate proceedings, Sanofi and Wyeth applied for and successfully obtained injunctive relief against a number of generics which prevented the generics from listing generic clopidogrel and generic venlafaxine on the Schedule of Pharmaceutical Benefits. Undertakings were given by each of Sanofi and Wyeth as one of the requirements for the grant of injunctive relief and any extension of that relief until resolution of the patent disputes.

Both Sanofi and Wyeth were, however, ultimately unsuccessful in the proceedings: Sanofi's patent was revoked and the relevant claims of Wyeth's patent were held to be invalid and revoked.

The Commonwealth then made a claim against each of Sanofi and Wyeth on the usual undertakings given by the patentees, as a person adversely affected by the operation of the interlocutory order or undertaking. Broadly, it is seeking the cost savings it could have made under the pricing rules if the generics had not been prevented from listing their products on the Schedule of Pharmaceutical Benefits by the injunctions.

The Full Federal Court unanimously held that Chapter 3, Part 3-2, Division 2 of the Therapeutic Goods Act 1989 (Cth) does not preclude the Commonwealth from recovering compensation pursuant to the "usual undertaking as to damages" ( you can learn more about the Full Court's reasoning here).

The question of whether the Commonwealth is actually entitled to any compensation by virtue of the usual undertaking as to damages remains to be determined.

Compensating the Commonwealth an added risk in patent disputes with generics ? or is it?

When a patentee obtains interlocutory injunctive relief on the "usual undertaking as to damages" but is unsuccessful at the final hearing and the interlocutory injunction is dissolved, the patentee is likely to face a claim to compensate the generic supplier. As a result of the Sanofi decision, the patentee is also more likely to face a claim for compensation from the Commonwealth on the "usual undertaking as to damages" regularly given by patentees as the price for the grant of an interlocutory injunction. This will undoubtedly weigh on the minds of patentees in deciding whether to seek interlocutory injunctive relief.

However, the comments of Justice Dowsett in the Full Federal Court's decision raise the possibility of the Court accepting undertakings different to the usual undertaking as to damages, which in turn could limit the risk of liability to the Commonwealth, or even exclude it altogether in an appropriate case.

His Honour noted that:

  • individual judges are not generally obliged to use the standard forms adopted by their respective courts;
  • nothing in the legislation suggests that the Court cannot tailor its own form of undertaking to meet the needs of the case; and
  • any limitations upon the undertakings should be sought at the time at which they are given. The Court would then be required to consider whether the limited undertakings were sufficient to justify the grant of an interlocutory injunction.

This will no doubt be considered carefully by patentees keen to seek an interlocutory injunction. It remains to be seen whether any novel form of undertakings will be acceptable to the Court, especially as restricted undertakings may shift the balance of convenience, making it more difficult to justify the grant of an interlocutory injunction.

What's next in the Sanofi / Wyeth litigation?

The judgment of the Full Federal Court, and the dismissal of the application for special leave to appeal that judgment, means that the proceedings concerning whether the Commonwealth is entitled to compensation from Sanofi and Wyeth under the usual undertakings will continue and Sanofi and Wyeth's arguments as to why the Commonwealth should not be entitled to recover compensation pursuant to the usual undertaking as to damages will need to be determined by the judge at first instance. The judge will likely be asked to consider and give guidance on the meaning of the expressions "adversely affected" and "by the operation of the interlocutory order or undertaking" which appear in the usual undertaking as to damages.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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