09 Jun 2016
Commonwealth of Australia v Sanofi: The Full Federal Court's decision
By Natalie Shoolman, Ashley Cameron
The Full Federal Court held that the Therapeutic Goods Act does not curtail the right of any person (including the Commonwealth) to recover on the usual undertakings.
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)  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.
Stated case referred to the Full Federal Court
In a number of 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. Sanofi and Wyeth were ultimately unsuccessful in the proceedings. Sanofi's patent was revoked and the relevant claims of Wyeth's patent were held to be invalid and were revoked.
Undertakings were given by 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. The undertakings given to the Court were in the form set out in Federal Court of Australia Practice Note CM 14:
"(a) to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order or undertaking or any continuation (with or without variation) thereof; and
(b) to pay the compensation referred to in (a) to the person there referred to."
As a result of the revocation of the relevant claims in the patents, the Commonwealth has 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 (and its continuation until the final determination of the proceedings). The compensation being sought is broadly the cost savings the Commonwealth could have made under the pricing rules if the generics had not been prevented from listing their generic clopidogrel and venlafaxine products on the Schedule of Pharmaceutical Benefits by reason of the preliminary injunctions granted to Sanofi and Wyeth.
On May 2015 the following question was referred to the Full Federal Court for determination in each proceeding:
"Is the Commonwealth of Australia precluded, as a matter of law, from recovering compensation pursuant to any of the Undertakings as to Damages by reason of Chapter 3, Part 3-2, Division 2 of the Therapeutic Goods Act 1989 (Cth)?"
Division 2, Part 3-2, Chapter 3 of the Therapeutic Goods Act 1989 is not an "exhaustive code"?
Sanofi and Wyeth contended that the Commonwealth was precluded from making a claim on the usual undertakings given by Sanofi and Wyeth because:
- sections 26B to 26D of the Therapeutic Goods Act 1989 (Cth) establish a legislative regime for the recovery of compensation by the Commonwealth for the loss suffered by reason of the grant of preliminary injunctive relief to a patentee;
- sections 26B to 26D of the Act must be understood as being the source of the Commonwealth's right to seek compensation and operate as a complete statement of the Commonwealth's right to recover compensation of this kind (ie. compensation is only available to the Commonwealth in the specific circumstances outlined in sections 26C(8) and 26D(5) where a certificate has been given by a generic pursuant to section 26B(1) of the Act. A certificate will be given under this section in all cases where the generic relies on safety and efficacy data from the innovator's dossier); and
- accordingly, the Commonwealth is precluded from making a claim on the undertakings by operation of this "exhaustive code" unless the requirements of section 26D(4) are satisfied. The creation of the statutory right (sections 26B to 26D) excludes the remedy on the undertakings which otherwise might have arisen.
The Court rejected Sanofi and Wyeth's contentions. It was unable to find any legislative intention that the relevant sections of the Act were intended to curtail the right of any person (including the Commonwealth) to recover on the usual undertakings. It was not in dispute that the relevant sections of the Act did not include any express restriction preventing the Commonwealth from recovering under the usual undertakings.
These findings were supported by the following reasoning in the joint reasons of Justices Kenny and Nicholas:
- if Parliament intended by the enactment of sections 26B, 26C and 26D to curtail the Court's power to make an award under the usual undertaking as to damages then it would have done so by express words or necessary intendment. Parliament has not done so;
- section 26D was implemented by Parliament with the intention that it would enhance the power of the Court to grant relief ordinarily available pursuant to the usual undertaking as to damages when the circumstances prescribed in the section apply;
- if the Commonwealth was precluded by operation of an "exhaustive code" from claiming on the usual undertakings, then it would be difficult to see why the claim of a generic who had given notice under section 26B(1)(b)(iii) would not also be precluded. This would not reflect a rational legislative choice; and
- there is no inconsistency in the present case or incompatibility that arises by holding that a prescribed Court can make an award of compensation under the usual undertakings in circumstances where a section 26B(1)(b)(iii) notice has been given. Nor is there anything inconsistent or incompatible with permitting recovery by the Commonwealth (or any other person) pursuant to section 26D(5) and not excluding recovery under the undertakings. Nor is there any reason to suggest that sections 26B to 26D were intended to supersede or displace a person's right to recover on the usual undertakings in the ordinary way.
Novel form of undertaking as to damages?
Interestingly, Justice Dowsett made some observations regarding the form of the undertaking as to damages given by patentees as part of being granted injunctive relief. These observations suggest that it may be possible for patentees to propose to the Court undertakings that are different to the usual undertaking as to damages. In particular, 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.
Justice Dowsett's comments suggest that undertakings in a different form to the usual undertakings may be acceptable to the Court as the price for a preliminary injunction. It will be interesting to see whether novel forms of undertaking are proposed by patentees based on his comments and if any of these are acceptable to the Court.