High Court Lessons for the Commonwealth and Generic Pharmaceutical Manufacturers Seeking a Claim to Damages
Commonwealth of Australia v Sanofi [2024] HCA 47 (11 December 2024)
The latest High Court decision discussed the issue of damages that can be recovered in the face of a wrongly granted interlocutory injunction and its burden of proof. Importantly, a 3:2 decision handed down in favour of Sanofi includes some crucial lessons for generics seeking to launch their products in the Australian market.
Background
Sanofi, the respondent along with a number of others in this case, is the owner of a patent in a number of jurisdictions, including in Australia, for the drug clopidogrel, sold under the names Iscover® and Plavix®. The drug is normally prescribed to patients who have or are at risk of having a heart attack or stroke. The annual worldwide revenue estimated from sales of clopidogrel, is over $1 billion and has been distributed for sale in Australia from 1998, the year prior to its first listing on the Pharmaceutical Benefits Scheme (“PBS”) on 1 November 1999.
Apotex as one of the major manufacturers and distributors of generic medicines worldwide, developed a generic version of the clopidogrel product. However, in September 2007, Sanofi sought to undertake damages against Apotex in support of an interlocutory injunction granted by the Federal Court of Australia, which prevented Apotex from competing with Sanofi with respect to its manufacture and sales of its patented clopidogrel drug. The interlocutory injunction prevented Apotex from undertaking steps to obtain a PBS-listing of its clopidogrel products.
The Federal Court granted a final injunction to Sanofi in August 2008, to restrain Apotex. However, following an appeal by Apotex, this final injunction was set aside by the Full Court of the Federal Court in September 2009, in a decision that saw the revocation of Sanofi’s patent. Subsequent application by Sanofi for special leave to the High Court was refused in March 2010.
The Commonwealth of Australia (“the Commonwealth”) as an appellant, whose interest lies in ensuring that it is not paying more than is necessary for medicines, then sought compensation from Sanofi, claiming damages for the loss it had suffered as a result of Apotex being restrained from supplying its generic clopidogrel pharmaceutical products and obtaining PBS listing for the same. It was argued by the Commonwealth that had it not been for the interlocutory injunction granted by the Federal Court on September 2007, Apotex would have obtained a PBS-listing for its clopidogrel products on 1 April 2008. Since Apotex was unable to do so, this prevented the reduction in prices for clopidogrel pharmaceutical products in Australia, therefore leading to a financial loss of approximately $11 million by the Commonwealth.
Key Points Made by the High Court
In presenting their case to the High Court, the appellant in this instance departed from the case as present in its application for special leave, which led to the High Court considering whether there was a “clear error” that disturbed concurrent findings of fact.
This led to a discussion wherein it was reaffirmed in this case that the High Court, as the ultimate appellate court, will not conduct a detailed review of concurrent factual findings of the lower courts, unless there are special or exceptional circumstances arising as a result of for example, plain injustice or clear error, which did not apply in this case. For there to be a finding of a clear error or plain injustice, there needs to be more than a mere error. As long as the findings of facts made by the lower courts appear to be correct, the requirements for plain injustice or clear error will not be satisfied. The point that the High Court must reach is that it holds a “clear conviction” that the findings made at trial and confirmed by the intermediate appellate court, as understood by the submissions put forward by the parties at trial and on appeal, are clearly wrong. In other words, it is not sufficient that the High Court simply reaches a different conclusion on its own. Errors made in the lower courts as a result of fundamental errors of law, does not preclude concurrent findings of fact. It is also not sufficient for there to be differences in the reasons of the primary judge and of the intermediate appellate court. An appeal to the High Court therefore is not a retrial, but rather a strict “appeal” concerned with the error. This supports a sense of finality in the legal system.
This approach taken by the High Court is consistent with that taken by other overseas legal systems, such as that in Canada, whereby the Supreme Court of Canada follows the “principle of non-intervention”, which refers to the principle that the “Court’s role is not to reassess the findings of fact of a judge at the trial level that an appellate court has not questioned”, which is considered “all the stronger in the face of concurrent findings of both courts below” unless there is a “palpable and overriding error in the … analysis of the facts”. Crucially, the Supreme Court of Canada does not reverse concurrent findings, even if the evidence on which the lower courts base their findings might seem weak.
A similar system can also be found to operate with respect to the Supreme Court of the United States and the equivalent in the United Kingdom.
Grounds of Appeal Pursued by the Commonwealth
There were two grounds of appeal pursued by the Commonwealth before the High Court. The first ground concerned the onus of proof that is required in a claim for damages. Specifically, the Commonwealth contended that its evidential burden was to establish a prima facie case that its financial loss occurred as a result of the interlocutory injunction, and that once this is established, the evidential burden should then shift to Sanofi to establish that Apotex would not have sought PBS-listings. Based on the above, the Commonwealth further argued that Sanofi had not properly discharged its evidential burden.
The second ground of the appeal related to the Commonwealth’s contention that the Full Court had erred in its judgment that in the absence of the interlocutory injunction, Apotex would not have sought and obtained PBS-listings for their generic clopidogrel products.
The High Court Findings
In a majority decision, ultimately both grounds of the appeal failed.
With respect to the shifting evidential onus, the High Court stated that an evidential onus might shift to a defendant in circumstances where the defendant’s wrongdoing has made proof of loss difficult or impossible or where adducing particular evidence is peculiarly within the power of the defendant. However, such principles did not apply in this case. Therefore, the Commonwealth carried the burden of providing the evidentiary onus of proof for financial loss that occurred during the period of the interlocutory injunction between 25 September 2007 and 19 August 2008. For this, the Commonwealth must first establish on the balance of probabilities that Apotex would have sought and obtained a PBS listing for their clopidogrel products (the “counter-factual test”).
As mentioned above, the High Court did not consider it necessary to re-consider the facts since the findings of the primary judge were affirmed unanimously by the Full Court and the Commonwealth’s grounds of appeal in the High Court did not point towards any error in the conclusions drawn by the Full Court. Nonetheless, the High Court stated that the counter-factual test should be assessed by directly focusing on what Apotex would have done, rather than considering what others, who did not have all the information and were not in the position of the decision maker, thought Apotex might have done.
The Counter-Factual Test
In the absence of any clear error in the concurrent facts of this case, as found by the lower courts, the High Court contended that there are several reasons as to why Apotex would not have sought and obtained a PBS listing from 1 April 2008, even in the absence of the interlocutory injunction. One of the reasons was because there needed to have been evidence that the decision maker at Apotex would have launched at risk in late 2007, for which there was none. This was complicated by the fact that there were two unexpected events that occurred in late September 2007.
The first of the unexpected events concerned Apotex unintentionally missing the 1 September 2007 deadline by which applications for PBS listing should be submitted. Their PBS listing application was subsequently withdrawn. This meant that the earliest Apotex could get a PBS listing was now April 2008, if they file their application for PBS-listing on-time.
Apotex further faced a second unexpected event on 21 September 2007, at the time when the interlocutory injunction was granted. Specifically, the parties were informed that the final hearing would commence on 28 April 2008, which was a date four weeks after the earliest date for PBS-listing, the deadline to apply for which fell on 1 December 2007. In addition to this, the decision was due to be delivered by 22 August 2008.
In the face of both these events, there was considered lack of clear evidence that Apotex would have still proceeded to launch their generic clopidogrel product at risk, particularly since there was evidence that Apotex was not considering launch of its products in Australia without PBS listing. This was made apparent in an email dated June 2006, wherein it was revealed that the decision maker at Apotex intended to launch the product “at risk” of damages for patent infringement in Australia, once they receive approval by the Therapeutic Goods Administration and only if Apotex Canada was successful in its ongoing litigation in the US and Canada, which ultimately it was not.
Noticeably, prior to September 2007, it was found that no cost-benefit analysis was performed to analyse the risk versus the reward for Apotex launching their products at risk. It was considered that evidence of such an analysis in 2007 would have supported the conclusion that, in the absence of an interlocutory injunction, Apotex may not have launched at risk prior to the determination of the matter, as it may have been determined that there would be little to gain from launching ahead of the final decision. Calculations were however undertaken by Apotex in 2008 and 2009.
In addition, in an email correspondence sent in August 2008, it was indicated that even if Apotex was successful in invalidating Sanofi’s patent, in light of the risk of an appeal being filed, Apotex may not have proceeded to launch its generic products.
Furthermore, the decision maker at Apotex did on several occasions change his mind at times about whether or not to launch the product at risk, which weakened the case for its generic product launch.
Notice of Contention
While the High Court deemed it unnecessary to address the issues raised in Sanofi’s notice of contention, they had proceeded to do so since those issues were considered to reinforce two points on which the High Court should dismiss. Firstly, it was noted that the issues listed in the notice of contention related to the need to revisit findings of the lower court, for which the High Court did not consider appropriate. Secondly, there was a discrepancy between the amount of loss suffered by the Commonwealth (approximately $325 million), which contrasted with the findings of the primary judge, wherein the estimated amount was approximately $11 million.
With reference to the counter-factual test discussed above, the High Court consider that even if the Commonwealth was able to prove that Apotex would have sought and obtained PBS-listing of their clopidogrel products from 1 April 2008, the amount lost of $11 million would have remained unresolved between the parties.
Do the Losses Arise Directly as a Result of the Interlocutory Injunction?
The ground of whether any of the Commonwealth’s alleged losses flows “directly” from the interlocutory injunction was also raised, for which Sanofi contended that such a loss would have instead been “indirect” since the losses would have required Apotex to apply for and obtain PBS-listing on their products. The High Court rejected this argument, stating that if Apotex applied for PBS listing in the absence of the interlocutory injunction, it would have been inevitable that Apotex’s products would have been listed and that, consequently, there would have been a 12.5% price reduction for clopidogrel products listed on the PBS and subsided by the Commonwealth. The loss to third parties “adversely affected” was therefore within the scope of the undertaking.
The extent of the Commonwealth’s alleged losses that would fall within the scope of the undertaking, was however a separate consideration, which the High Court considered was difficult to address, given that this would involve an assessment of the facts, to which only part of the issues in dispute were presented before the High Court.
The Commonwealth as a Person “Adversely Affected”by the Interlocutory Injunction
A further ground of contention included whether the Commonwealth was a person “adversely affected” by the interlocutory injunction. Sanofi contended that the Commonwealth, as a body politic, was not a person “adversely affected” and consequently, they had not suffered compensable loss, particularly because the loss arose as a result of the Commonwealth’s own laws.
The High Court disagreed and stated that the Commonwealth, as a body politic, is a legal person to be treated in the same way as any other person, in accordance with Section 64 of the Judiciary Act 1903 (Cth). It was also noted that there was absence of any suggestion by Sanofi that the Commonwealth was to be excluded from its scope of the undertaking, but rather there was express recognition of such.
Can the Commonwealth Claim on the Undertaking of Damages?
Sanofi argued that the Therapeutic Goods Act 1989 (Cth) constitutes a specific regime that allows for the recovery of compensation for loss arising from the erroneous assertion of patent rights. Specifically, section 26C of the Act states that the patentee must give a certificate to the person who is considered to have infringed the granted patent. In doing so, the certificate must be given with the effect that the proceedings are commenced in good faith, there is also a reasonable prospect of success, and the proceedings will also be conducted without reasonable delay. Should it be discovered that the certificate was in some way issued on false grounds, the court would then have the power to order the innovator company to compensate the Commonwealth for any financial loss incurred as a result of the interlocutory injunction. In other words, Sanofi contended that the Commonwealth was excluded from the claiming of compensation on the undertaking of usual damages.
The High Court rejected Sanofi’s arguments, primarily because it was noted that this issue was previously raised before the Full Court. Thus, re-structuring of the same arguments in a different form is an abuse of the appeal process.
In conclusion, the appeal failed. However, given this was a majority decision, it is also important to review the dissenting judgments that were handed down in this case by two of the five High Court judges.
Dissenting Judgments
Justice Jagot was one of the dissenting judges, contending that the conclusions of the primary judge and of the Full Court were in “clear error”, in that it was not correct to have discussed a counter-factual case. This is because, reconstructing a hypothetical scenario is inevitability biased, given that knowledge gained cannot be entirely forgotten.
It was further considered that the Commonwealth had discharged its onus of proof that Apotex would have sought and obtained PBS-listing for their generic products, had it not been for the interlocutory injunction. This is because it was considered that in the unlikely event that Apotex fails to have Sanofi’s patent revoked (due to a lack of novelty issue in the Australian granted patent, which was otherwise disclosed in the corresponding Canadian patent of the racemic mixture), there was also a significant advantage for Apotex, if they succeed in obtaining a PBS-listing for their generic clopidogrel products on the Australian market. This is because, without the interlocutory injunction, launch of Apotex’s clopidogrel products in Australia on 1 April 2008, would have seen Apotex as the sole generic provider of a generic clopidogrel product for up to 12 months. Aside from the profits that would have been made by Apotex, they would have also benefitted from potentially securing long-term deals and establishing commercial relationships with pharmacists across Australia through the supply of the only generic clopidogrel product in the market. Given these considerations, it would have been reasonable to expect the decision maker at Apotex to have sought to exploit these opportunities. Hence, the Commonwealth had discharged its onus of proof.
Overall, Justice Jagot together with Justice Beech-Jones, who agreed with most of Justice Jagot’s reasonings, considered that the Commonwealth’s appeal should succeed on ground 2, whilst Sanofi’s notice of contention should fail.
In a concluding statement, Justice Beech-Jones stated that the injunction had the practical effect of preventing Apotex from seeking a PBS-listing, to launch their generic products at risk from 1 April 2008. Any loss to the Commonwealth therefore directly flowed from this, as a result of the injunction, as Apotex would have had its PBS-listing application granted, had they applied for it. The findings of the primary judge and of the Full Court were therefore considered to have been a “clear error” as well as a “plain injustice” to the Commonwealth, as the Commonwealth’s case was not considered to have been properly addressed on its merits.
Key Points and lessons Learnt
What is clear from this decision is the unwillingness of the High Court to review concurrent findings of fact made by lower courts, unless there has been a “clear error” or “plain injustice”. Therefore, it would not be useful for parties to partially refer to the facts as previously outlined before a trial court and/or a Full Court. Importantly, this also applies to other legal systems overseas, which is crucial to note in situations whereby there may be an international patent dispute held in other major jurisdictions, for example in the United States.
The case also provides a useful reminder to pharmaceutical and/or biotechnological companies to ensure each step of the product development process is well-documented. This is applicable particularly for commercial decisions, for example, regarding product launch and/or PBS-listing are involved, since such information is critical when collecting evidence in an attempt to discharge an onus of proof.
With respect to a claim for damages, this case clarifies that this will be limited to compensating for the financial losses that arise directly as a result of the injunction, at the time of its grant.
Lastly, manufacturers of generic pharmaceutical drugs who may be looking to obtain a preliminary injunction should note that if they wish to risk launch of their products prior to invalidation of an innovator’s granted patent, they must be confident in their ability to provide sufficient proof that had the preliminary injunction not been granted, they would have sought and obtained PBS-listing for their generic products in Australia. Keeping in mind that the risk may carry significant consequences, should the challenge to patent invalidity fail.
