FEDERAL COURT OF AUSTRALIA

Mylan Health Pty Ltd v Sun Pharma ANZ Pty Ltd (No 2) [2019] FCA 505

ORDERS

THE COURT NOTES:

1.    For the sole purpose of this proceeding, Sun Pharma (Netherlands) B.V undertakes to the appellants and the Court by its counsel that Sun Pharma (Netherlands) B.V will pay any and all pecuniary relief ordered to be paid by the first respondent for patent infringement, if the first respondent fails to comply with such an order.

THE COURT ORDERS THAT:

2.    The appellants’ interlocutory application dated 13 February 2019 be dismissed.

3.    The appellants pay the first respondent’s costs of and incidental to the interlocutory application.

4.    The appeal be listed for case management at 9.30 am on 6 May 2019.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

YATES J:

Introduction

1    This is an application for interim injunctive relief by the appellants against the first respondent in an appeal commenced on 12 February 2019.

2    The appellants, Mylan Health Pty Ltd (Mylan Health) and BGP Products Operations GmbH (BGP) unsuccessfully sued the first respondent, Sun Pharma ANZ Pty Ltd (Sun Pharma), for infringement of three patents: Mylan Health Pty Ltd (formerly BGP Products Pty Ltd) v Sun Pharma ANZ Pty Limited (formerly Ranbaxy Australia Pty Ltd) [2019] FCA 28 (the primary judgment). Mylan Health and BGP are related entities. I will refer to them as a single entity (Mylan) unless it is necessary to distinguish between them.

3    Two of those patents are relevant for present purposes. The first is Patent No. 2006313711 (the 711 patent), the complete specification of which is entitled “Use of fenofibrate or a derivative thereof for preventing diabetic retinopathy”. The second is Patent No. 2003301807 (the 807 patent), the complete specification of which is entitled “Nanoparticulate fibrate formulations”. BGP is the patentee of the 711 patent and the co-owner of the 807 patent. The other co-owner of the 807 patent is the second respondent, Alkermes Pharma Ireland Limited. Mylan Health is the exclusive licensee of the 711 patent and a licensee of the 807 patent. The 807 patent will not expire until May 2023. The 711 patent will not expire until November 2026.

4    Fenofibrate is a fibric acid derivative (or fibrate) that is used to regulate low-density lipoproteins and triglycerides in the blood. Fenofibrate is used to treat high cholesterol. It is also used to treat diabetic retinopathy. The knowledge that fenofibrate is useful to treat diabetic retinopathy condition is more recent than the knowledge that fenofibrate is useful to treat high cholesterol.

5    LIPIDIL has been the only fenofibrate product on the Australian market since August 2006. It has been sold by Mylan Health since February 2015.

6    The infringement suit was commenced because Sun Pharma had obtained entry on the Australian Register of Therapeutic Goods (ARTG) of certain fenofibrate film-coated tablets on 29 February 2016, which it proposes to market and supply in Australia. The primary judge described the products as the Ranbaxy Products. I will do likewise.

7    As regards the 711 patent, some of the claims sued on were so-called Swiss type claims (claims 1, 5 and 6) and some were method of treatment claims (claims 7 and 10 - 12). In respect of the method of treatment claims, Mylan contended that Sun Pharma’s liability for infringement was attracted by the operation of s 117(1), informed by s 117(2)(b), of the Patents Act 1990 (Cth) (the Patents Act).

8    The primary judge found that Mylan had not established that the Swiss type claims had been, or would be, infringed by Sun Pharma. While his Honour accepted Mylan’s submission that there was a sound medical basis for considering that the Ranbaxy Products were suitable to be administered for the therapeutic use designated in each of these claims, Mylan had not established that the products would be manufactured with the intention that they be used for the prevention or treatment of diabetic retinopathy.

9    As to the method of treatment claims, the primary judge found that Mylan had established that Sun Pharma had reason to believe that a significant portion of the Ranbaxy Products would be used in a manner that would infringe the method of treatment claims.

10    However, the primary judge found that both the method of treatment claims and the Swiss type claims were invalid because they were not novel in light of the publication of The ACCORD Eye Study Protocol: Version January 2004 (the Accord Protocol). In addition, his Honour found that claims 1, 6, 7 and 12 of the patent were not novel in light of the publication of European Patent Application EP D 482 498 A (the Squibb Patent), when read with the Physicians’ Desk Reference, 59th Edition 2005 at pages 523 - 525 and 1325 - 1328.

11    Further, the primary judge found that all the claims in suit were invalid because they lacked an inventive step.

12    Finally, the primary judge indicated that even if the method of treatment claims were found to be valid and likely to be infringed, he would not have granted final injunctive relief as a matter of discretion. In this connection, the primary judge said:

257    The question whether a blanket injunction restraining any supply of a product should be granted based on s 117(2)(b) of the Act will often be problematic in cases involving claims for new methods for treating medical conditions that utilise therapeutic agents that were known and used before the priority date to treat other medical conditions. The fact that the new method of treatment involves using a therapeutic agent that is widely used for non-infringing purposes (ie to treat conditions not designated in the relevant claim) provides a powerful argument in favour of refusing such an injunction particularly if there is no evidence to suggest (as in this case) that the alleged infringer will induce or encourage any direct infringement of the method of treatment except by the mere act of supplying the therapeutic agent used to perform the method of treatment.

13    The primary judge did not make a similar observation in respect of the threatened infringement of the Swiss type claims.

14    The primary judge noted that Sun Pharma had proffered an undertaking that, until the expiry or revocation of the patent, it would only promote and market the accused products for certain indications, and not for the treatment or prevention of diabetic retinopathy. His Honour said:

259    Given the conclusions I have reached in relation to the validity of the method of treatment claims, it is not necessary for me to decide whether or not the applicants should be awarded the quia timet injunctive relief they seek. However, in light of the undertakings proffered by the respondent and the extensive use of fenofibrate as a lipid-lowering agent, I would have refused the injunctive relief sought by the applicants. I would not have required the respondent to give all of the proffered undertakings as a condition of such a refusal. In particular, I am not satisfied that it would be either necessary or desirable to require the respondent to write to medical practitioners as proposed in the fourth of the proposed undertakings. It is open to the applicants to write to medical practitioners suggesting that they prescribe Lipidil for the prevention or treatment of diabetic retinopathy should the applicants choose to do so. Had the relevant claims been found valid, it would have been open to the applicants to advise medical practitioners that by failing to act in accordance with that suggestion they may be liable for authorising a patent infringement. Of course, I accept that the applicants may have strong commercial reasons for not wishing to engage in such correspondence.

15    As regards the 807 patent, Mylan sued on a large number of claims. The primary judge found that the claims were invalid because they lacked an inventive step. His Honour reached this finding on the basis of the common general knowledge alone, although he had framed the issue as whether the asserted claims of the 807 patent lacked an inventive step in light of the common general knowledge when considered with the information disclosed in US 2002/0012704 (the 704 patent), entitled “Water-Insoluble Drug Particle Process”. As matters transpired, his Honour did not think that the 704 patent was of any assistance to the respondents’ obviousness case.

16    It is necessary to say something more about the way in which the hearing proceeded in respect of the alleged infringement of the 807 patent. Prior to the hearing, an order had been made that, insofar as it required certain experimental evidence to be adduced, the question of infringement be deferred until after the determination of all other issues of liability in the proceeding. The experimental evidence related to:

(a)    whether the accused composition exhibits bioequivalence upon administration to a human subject in a fed state as compared to a fasted state, by reference to AUC and Cmax, which is a requirement of claims 1, 2, 3, 40, 41 and 42 (and their dependent claims);

(b)    whether the difference in AUC of the accused composition administered in a fed versus fasted state is less than about 35% or lower, which is a requirement of claim 7 (and its dependent claims); and

(c)    whether the accused composition redisperses in a biorelevant media, which is a requirement of claims 1, 2, 3, 40, 41 and 42 (and their dependent claims).

17    The primary judge found that the term “composition”, as used in claim 1, referred to compositions in finished dosage form (e.g., a tablet, capsule or oral suspension) suitable for oral administration.

18    The other procedural matters to note are, firstly, on 4 May 2016, the primary judge made orders by consent that Sun Pharma be restrained from exploiting the Ranbaxy Products in the patent area and from applying to list the products on the Schedule of Pharmaceutical Benefits (the PBS) maintained under the National Health Act 1953 (Cth). The primary judge discharged that order on 22 January 2019 when giving judgment in the primary proceeding. Mylan sought a stay of the discharging order, which was refused for the reason that, as matters then stood, the primary judge could see no significant prejudice to Mylan in doing so.

19    Secondly, the judgment pronounced by the primary judge on 22 January 2019 included orders that the contested claims of the 711 patent and the 807 patent be revoked. His Honour stayed those orders, on terms, until the final determination of the appeal or further order. However, the terms did not include the requirement for an undertaking that, in the period up to the determination of the appeal, Mylan would not threaten a third party with infringement proceedings based on the claims that had been found to be invalid.

The involvement of Cipla

20    On 20 February 2019, Mylan commenced a proceeding against Cipla Australia Pty Ltd (Cipla) alleging threatened infringement of the 711 patent (the Cipla infringement proceeding). Amongst other relief, Mylan claimed interim injunctive relief to restrain Cipla from exploiting, in various ways, fenofibrate products, identified as the Cipla Products, which Cipla is intending to bring to market.

21    In addition, on 5 March 2019, Mylan commenced proceedings for preliminary discovery to determine whether to commence proceedings against Cipla for, inter alia, threatened infringement of the 807 patent. Mylan wished to have the originating application for preliminary discovery heard and determined before the hearing of its application for interim injunctive relief in respect of the Cipla Products, so as to support its claim by reference also to threatened infringement of the 807 patent. Separately, Cipla wished to have the claim for interim injunctive relief against it heard and determined at the same time as Mylan’s claim for interim injunctive relief against Sun Pharma, for the reason that any assessment of the balance of convenience in the cases brought against it (Cipla), and against Sun Pharma, could not sensibly proceed in isolation from each other. Neither Mylan nor Sun Pharma disagreed with the wisdom of that observation. However, the apparent need to hear and determine the proceeding for preliminary discovery was a practical impediment to having the two claims for interim injunctive relief heard together in a timely manner.

22    To resolve this difficulty, Mylan and Cipla sensibly reached an accommodation whereby, without admissions, and only for the purpose of Mylan’s claim for interim injunctive relief against Cipla, they agreed that it can be assumed that the Cipla Products have the same stability, particle size, bioavailability and redispersibility characteristics as the Ranbaxy Products, and that the Cipla Products include at least one surface stabiliser.

23    The proceeding for interim injunctive relief against Sun Pharma and the proceeding for interim injunctive relief against Cipla have been heard together on the basis that, in each proceeding, the threatened infringement of both the 711 patent and 807 patent (assuming the relevant claims to be valid) are in play. The parties also accepted that, in each proceeding, the balance of convenience should be considered having regard to the individual and collective positions of Sun Pharma and Cipla as intending suppliers of, respectively, the Sun Pharma products and the Cipla Products as unauthorised generic fenofibrate products.

24    Therefore, these reasons will include, where appropriate, reference to Sun Pharma’s and Cipla’s respective submissions on the question of the balance of convenience.

fenofibrate products entered on the artg

25    There are a number of fenofibrate products entered on the ARTG. Entry on the ARTG means that the registration holder has the necessary regulatory approval to market and sell the pharmaceutical product on the market from the “start date” given. Sometimes the registration holder may seek to list the product on the PBS before seeking to market and sell it, so that the product can be dispensed at a price subsidised by the Commonwealth of Australia (the Commonwealth). However, PBS listing is not necessary and the registration holder may seek to market and sell the product on the private script market.

26    LIPIDIL was entered on the ARTG in May 2006 for use as an adjunct in the treatment of hypercholesterolaemia; types II, III, IV and V dyslipidaemia; and dyslipidaemia associated with type 2 diabetes. In October 2013, the entry was amended to include approval to use LIPIDIL for the reduction in the progression of diabetic retinopathy in patients with type 2 diabetes and existing diabetic retinopathy.

27    LIPIDIL is not the only fenofibrate product entered on the ARTG by Mylan Health. Mylan Health has six other fenofibrate products that have been registered: two products under the name TRICHODIL (start date 30 March 2016); two products under the name FENOFIB (start date 30 March 2016) and two products under the name FENOFIBRATE MYLAN (start date 1 April 2016).

28    Alphapharm Pty Limited (referred to in the evidence as a related entity of Mylan Health) (Alphapharm) has five fenofibrate products entered on the ARTG, although three of these products are listed for “export only”. The other two products are registered under the name LENOFIL (start date 19 February 2014).

29    Sandoz Pty Limited (Sandoz) has one fenofibrate product entered on the ARTG under the name FENOFIBRATE SANDOZ (start date 31 August 2017).

30    Sun Pharma has twelve fenofibrate products entered on the ARTG (i.e., the Ranbaxy Products), each with the start date of 29 February 2016: four products under the name FENOFIBRATE RAN; four products under the name FENOFIBRATE RBX; and four products under the name FENOFIBRATE SUN.

31    Cipla has three fenofibrate products entered on the ARTG (i.e., the Cipla Products), each with the start date 30 April 2018: FENOCOL; FENOFIBRATE CIPLA; and FENOCIPLA.

32    The Ranbaxy Products were originally approved for the same indications as LIPIDIL. The approvals included, therefore, use of the Ranbaxy Products “for the reduction in the progression of diabetic retinopathy in patients with type 2 diabetes and existing diabetic retinopathy”. This was recorded in the product information (PI) for the products and in supporting clinical trial information.

33    The PI for the Ranbaxy Products has since been amended to remove reference to diabetic retinopathy. According to the amended PI, fenofibrate is indicated as an adjunct to diet in the treatment of hypercholesterolaemia, various types of dyslipidaemia, and dyslipidaemia associated with type 2 diabetes. Dyslipidaemia is one of the medical conditions referred to in claim 40 of the 807 patent: see below at [45].

34    The amended PI for the Ranbaxy Products describes them as bioequivalent to LIPIDIL. The PI for LIPIDIL states that it is indicated for the reduction of the progression of diabetic retinopathy. The amended PI for the Ranbaxy Products does not state expressly that they are not indicated for diabetic retinopathy or that they are not relevantly bioequivalent to LIPIDIL for the treatment of diabetic retinopathy. However, as I have said, the Ranbaxy Products are not registered for that indication.

35    Following the delivery of the primary judgment on 22 January 2019, Sun Pharma commenced all necessary activities to enable the launch and commencement of supply of the Ranbaxy Products as soon as possible. On 6 February 2019, it applied to list the Ranbaxy Products on the PBS from 1 June 2019. Sun Pharma’s intention is to launch the Ranbaxy Products on the private script market in late April 2019 and on the PBS market on 1 June 2019.

36    The Cipla Products were originally registered for indications that included use “for the reduction in the progression of diabetic retinopathy in patients with type 2 diabetes and existing diabetic retinopathy”. However, on 1 March 2019, Cipla applied to amend the ARTG entry to remove diabetic retinopathy as a registered condition for those products. Once this amendment occurs, the Cipla Products will not be indicated in Australia for the prevention and/or treatment of diabetic retinopathy, and will not be marketed or supplied by Cipla with any instructions that the Cipla Products can be administered for the prevention and/or treatment of diabetic retinopathy.

37    Cipla intends to seek PBS listing of the Cipla Products and to follow Sun Pharma into the PBS market once those listings are obtained. However, it has made clear that the Cipla Products will not enter the market unless another generic fenofibrate product first enters the market. In other words, although Cipla seeks to be an “early mover”, it will not be a “first mover” with respect to its products.

38    In an affidavit affirmed on 5 March 2019, Mr Vigneault, who holds the position of Country Manager – Australia and Head of ANZ Commercial for all Mylan entities in Australia, deposed that if the applications for interim injunctive relief against Sun Pharma and Cipla are refused, Mylan’s present intention is to launch an authorised generic fenofibrate product. Mr Vigneault was cross-examined on this statement. His evidence in this regard is currently subject to a confidentiality order.

39    Mylan has proffered an undertaking in this proceeding and in the Cipla infringement proceeding that if the interim relief it seeks is granted, it will not during the period of restraint imposed on Sun Pharma and Cipla supply or authorise the supply of a pharmaceutical product (other than LIPIDIL), which includes fenofibrate as the active ingredient.

Presently relevant claims

40    For the purposes of supporting the grant of interim injunctive relief in this appeal, Mylan argues that it is sufficient to focus on claims 5, 10 and 11 of the 711 patent (which were not found to have been anticipated by the Squibb patent) and claim 40 of the 807 patent.

41    Claim 1 of the 711 patent is:

1.    Use of fenofibrate or a derivative thereof for the manufacture of a medicament for the prevention and/or treatment of retinopathy, in particular diabetic retinopathy.

42    Claim 5 of the 711 patent is:

5.    Use according to any of claims 1 to 4, wherein said medicament contains 200 mg, 160 mg, 145 mg or 130 mg of fenofibrate or a derivative thereof.

43    Claim 7 of the 711 patent is:

7.    A method for the prevention and/or treatment of retinopathy, the method comprising administration of fenofibrate or a derivative thereof to a patient in need thereof.

44    Claims 10 and 11 of the 711 patent are:

10.    The method according to any one of claims 7 to 9 wherein said method further comprises administration of a statin.

11.    The method according to any one of claims 7 to 10 wherein 200 mg, 160 mg, 145 mg or 130 mg of fenofibrate or a derivative thereof is administered.

45    Claim 40 of the 807 patent is:

40.    A method of treating a condition selected from the group consisting of hypercholesterolemia, hypertriglyceridemia, coronary heart disease, cardiovascular disorders, peripheral vascular disease, symptomatic carotid artery disease, mixed dyslipidemia, and increased risk of pancreatitis comprising administering to a subject an effective amount of a composition, wherein:

(a)    the composition comprises particles of fenofibrate having a D50 particle size of less than about 500 and at least one surface stabilizer;

(b)    the fenofibrate particles present in the composition redisperse in a biorelevant media; and

(c)    administration of the composition to a human subject in a fasted state is bioequivalent to administration of the composition to a human subject in a fed state, wherein bioequivalency of the composition is established by:

(i)    a 90% Confidence Interval for AUC which is between 0.80 and 1.25; and

(ii)    a 90% Confidence Interval for Cmax, which is between 0.80 and 1.25.

Interim injunctions in the context of an appeal

46    There is no doubt that the Court has power to grant interlocutory relief pending the determination of an appeal: s 25(2B)(ab) of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act). Plainly, the power includes the power to grant interim injunctive relief of the kind Mylan now seeks.

47    In Stirling Harbour Services Pty Ltd v Bunbury Port Authority (No 2) [2000] FCA 87 (Stirling Harbour v Bunbury), French J discussed the factors that are relevant to the exercise of the Court’s power to grant interim injunctive relief pending the determination of an appeal. At [13], his Honour said:

13    The decision whether or not to grant an interlocutory injunction pending an appeal will be informed by general principles governing the grant of such injunctions and, within those general principles, considerations analogous to those which arise in relation to stay orders made in aid of the court's appellate jurisdiction under s 29 or O 52 r 17 and orders for stay of execution under O 37. The weight of authority in this Court does not require the applicant for a stay to demonstrate special or exceptional circumstances before the order will be made - Westaflex (Aust) Pty Ltd v Wood [1990] AIPC 36,227 at 36,228, Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 30 FCR 548 at 551, Henderson v Amadio Pty Ltd (No 3) (1996) 65 FCR 66 at 69, Powerflex Services Pty Ltd v Data Access Corporation (1996) 137 ALR 498 at 499. The Court generally has adopted the approach of the New South Wales Court of Appeal in Alexander & Ors v Cambridge Credit Corp Ltd (Receiver Appointed) (1985) 2 NSWLR 685 at 691. It has differed from the Supreme Court of Victoria in this respect - Cellante v G Kallis Industries Pty Ltd [1991] 2 VR 653 and Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1995] 1 VR 150. The same approach was adopted by Kirby J in Bryant v Commonwealth Bank of Australia (1995) 134 ALR 460. While, as his Honour said, a stay is not granted simply for the asking, special or exceptional circumstances are not generally required to justify a stay of execution of orders the subject of an appeal which lies as of right. It may be that, as Heerey J observed in Amadio at 69, the difference is "more apparent than real since on any approach the party seeking a stay needs to show a reason why the stay should be granted". But broadly speaking, as was said in Powerflex Services at 499, the language of O 52 suggests "no limitations upon a broad discretion inhering in the court."

48    At [15], his Honour said:

15    The order sought by the applicants in this case is in the nature of an interlocutory injunction. In the ordinary course it is a necessary condition of the grant of such an injunction that the applicant demonstrate a serious case to be tried and that the balance of convenience favours imposition of the restraint. These requirements apply with equal force to a case, such as the present, where the restraint is sought effectively to prevent a party from exercising what have been found to be its rights after trial of an action - Hollier v Australian Maritime Safety Authority (Fed Court, unrep, 27/4/98, Sundberg J). It is to be remembered also that the strength of the case and the assessment of where the balance of convenience lies are interdependent - Bullock v Federated Furnishing Trades Society of Australasia (No 1) (1985) 5 FCR 464 at 472. Where the applicant's case has been tried and found wanting there may nevertheless be a serious case to be tried on appeal. However, the Court's assessment of the strength of that case will be influenced by the fact that there has been an adverse judgment at first instance. It is relevant to the balance of convenience that the appeal may be nugatory if the restraint is not granted. It is also relevant that the successful party will be prejudiced if impeded in the exercise of its judicially vindicated rights. The factors relevant to the grant of an interlocutory injunction under s23 pending appeal are similar to those applicable under s29, O37 and O52, but capable of expression in terms of the considerations usually applied to the grant of interlocutory relief.

49    Similar observations were made by Sundberg J in William Hollier and The Engen Institute v Australian Maritime Safety Authority, State of Tasmania and Minister for Workplace Relations VG 667 of 1991 (unreported 27 April 1998), where his Honour said:

… On such an application [for the grant of a stay] the Court must be satisfied that the appellant has an arguable ground of appeal, and the appellant cannot expect a stay without showing that there is one: Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685 at 695; Griffiths v Australian Postal Commission (1987) 87 FLR 139 at 141; Enterprise Gold Mines NL v Mineral Horizons NL (1988) 91 FLR 403 at 410. This requirement protects the position of a successful litigant where it may be plain that the appeal has been commenced without any real prospect of success and simply in the hope of avoiding an immediate execution upon the judgment: Alexander at 695. A comparable jurisdiction exists where a stay would achieve no purpose, as where there is an appeal from an application that has been dismissed. The Court can grant an injunction against the successful respondent for the purpose of preserving the status quo until the appeal is determined, for instance by restraining the respondent from parting with the subject matter of the claim, as in Orion Property Trust Ltd v Du Cane Court Ltd [1962] 1 WLR 1085; [1962] 3 All ER 466. The principle on which the Court acts in applications for injunctions pending appeal is the same as that applicable where a stay pending appeal is sought. It is to ensure that the appeal, if successful, is not nugatory: Wilson v Church [No 2] (1879) 12 Ch D 454 at 458; Erinford Properties Ltd v Cheshire County Council [1974] Ch 261 at 268; Bercove v Hermes [No 2] (1983) 51 ALR 105; North Flinders Mines Ltd v Hartogen Energy Ltd (1988) 52 SASR 14. As on an application for a stay, an appellant who seeks an interlocutory injunction pending appeal must show some prospect of success on the appeal. That is involved in establishing the existence of a serious question to be tried: Felkro Nominees Pty Ltd v Deputy Commissioner of Taxation (unreported, Sundberg J, 4 September 1996).

50    My consideration of the present application proceeds on the basis of these principles.

The application based on the 711 patent

Mylan’s submissions

51    The alleged errors in the primary judgment identified by Mylan were expressed by reference to the following propositions. The primary judge erred:

(a)    in finding that the Swiss type claims had not been or would not be infringed by Sun Pharma (Grounds 1 - 4 of the notice of appeal);

(b)    in concluding that, had the method of treatment claims been valid, he would have refused injunctive relief (Grounds 16 - 20 of the notice of appeal);

(c)    in finding that the invention claimed in claims 10 and 11 lack novelty in light of the Accord Study (Grounds 5 - 7 of the notice of appeal); and

(d)    in finding that the invention claimed in claims 10 and 11 lack an inventive step in light of the common general knowledge (Grounds 10 - 15 of the notice of appeal).

52    The first proposition is directed to the question whether infringement of a Swiss type claim requires proof of a mental element on the part of the manufacturer of the medicament and, if it does, whether the primary judge erred in making a finding which, Mylan submitted, was inconsistent with his Honour’s own reasoning and other findings of fact. In this latter regard, Mylan called in aid the primary judge’s finding with respect to s 117(2)(b) of the Patents Act that Sun Pharma had reason to believe that a significant portion of the Ranbaxy Products will be used in a manner that would infringe the method of treatment claims: see at [118].

53    The second proposition concerns the method of treatment claims and the primary judge’s conclusion that, had he found the relevant claims to be valid, he would have refused injunctive relief. In essence, Mylan contended that, had the primary judge been put to a decision whether or not to grant injunctive relief, he would have erred if he had refused that relief for the reasons that his Honour foreshadowed. In the context of the appeal itself, this seems to be no more than an academic question. I accept, however, that in the context of the present application and in considering the balance of convenience, the question whether the primary judge would have granted final relief, had all else fallen in Mylan’s favour, is relevant. This is because an applicant for interim injunctive relief must be able to show sufficient colour of right to the form of final relief in aid of which the interim relief is sought: Australian Broadcasting Corporation v Lenah Game Meats Pty Limited [2001] HCA 63; (2001) 208 CLR 199 at [11], per Gleeson CJ. Thus, if final relief in the form of a blanket injunction against Sun Pharma would not be granted, or it is unlikely that such relief would be granted, there is a direct challenge to the basis on which interim relief, of the same scope, can be granted.

54    I should add that, in respect of the Swiss type claims, Mylan submitted that if infringement had been found, there is no question that a blanket injunction would have been granted because the medicament would have been made for the purpose of the prevention and/or treatment of retinopathy, in particular diabetic retinopathy.

55    The third proposition concerns whether the Accord Protocol discloses “clear and unmistakable directions” to use fenofibrate as claimed in the Swiss type claims and the method of treatment claims. Mylan submitted that there is no such disclosure and that, in finding as he did, the primary judge wrongly applied a standard akin to the test for obviousness, not the test for novelty. As developed in oral submissions, Mylan submitted, in essence, that the primary judge’s analysis of the disclosures in the Accord Protocol was not in accordance with the analysis by the plurality in Bristol-Myers Squibb Co v FH Faulding & Co Ltd (2000) 97 FCR 524 (BMS v Faulding) of the asserted novelty-destroying documents in that case.

56    The fourth proposition concerns the primary judge’s finding that the person skilled in the art (here, a notional team) would have been directly led to try the claimed invention. It also concerns the primary judge’s finding that the notional team would have proceeded with the requisite expectation of success. These enquiries are directed to the reformulated Cripps question referred to in Hassle v Alphapharm Pty Ltd [2002] HCA 59; (2002) 212 CLR 411 at [53]. Mylan submitted that the primary judge erred in making the first-mentioned finding having regard to other findings that were made which, in Mylan’s submission, are inconsistent with the conclusion to which his Honour came. As to the second-mentioned finding, Mylan submitted that the primary judge arrived at that finding by giving improper weight to the evidence of certain experts (Dr Beaumont and Professor Carter) and misapplied the evidence of another expert (Professor O’Brien).

Sun Pharma’s submissions

57    Sun Pharma did not address the primary judge’s findings in relation to the Swiss type claims because, but for his findings on invalidity, the primary judge would have found liability against Sun Pharma under s 117(1) of the Patents Act in light of the method of treatment claims. Sun Pharma therefore directed attention to Mylan’s challenge to the primary judge’s findings that the claims in suit were invalid and, specifically, the primary judge’s finding on lack of novelty.

58    In that connection, Sun Pharma submitted that the primary judge’s analysis of the disclosures in the Accord Protocol was entirely orthodox and in accordance with the teachings in BMS v Faulding as understood in the Full Court’s reasons for judgment in Merck & Co Inc v Arrow Pharmaceuticals Ltd (2006) 154 FCR 31 (Merck v Arrow). Sun Pharma submitted that the very argument advanced by Mylan in this application for contending that the primary judge erred in his finding with respect to the disclosures in the Accord Protocol, is the very argument that was rejected by Gyles J in Arrow Pharmaceuticals Ltd v Merck & Co Inc (2004) 63 IPR 85 (Arrow v Merck). Gyles J’s reasoning and analysis were endorsed by the Full Court in Merck v Arrow. In his recitation of the relevant principles to be applied in determining the significance and quality of a prior art disclosure, the primary judge referred to and discussed BMS v Faulding, Merck v Arrow and Arrow v Merck. Sun Pharma submitted, therefore, that Mylan’s prospects on appeal in disturbing the primary judge’s finding of lack of novelty on the basis of the disclosures in the Accord Protocol are “miniscule”.

59    Sun Pharma did not advance submissions in relation to the primary judge’s finding on lack of inventive step, on the basis that the hurdle provided by the primary judge’s finding on lack of novelty was sufficient to demonstrate that Mylan had no viable case of threatened infringement of the 711 patent.

60    Sun Pharma did, however, address the question whether blanket injunctive relief would be available and appropriate if liability for threatened infringement were to be found against it under s 117(1) of the Patents Act. It referred to the caution expressed by the plurality in AstraZeneca AB v Apotex Pty Ltd [2014] FCAFC 99; (2014) 226 FCR 324 (AstraZeneca) at [444] in respect of granting such relief where a product can be put to substantial non-infringing use. The primary judge referred to this caution when noting the undertakings that had been proffered by Sun Pharma (see [14] above) and the extensive use of fenofibrate in Australia as a lipid-lowering agent: see at [259]. Sun Pharma submitted that, even if Mylan’s appeal is successful, blanket injunctive relief is unlikely, and thus interim injunctive relief, with a blanket effect, would be inappropriate.

The application based on the 807 patent

Mylan’s submissions

61    The errors identified in the primary judgment by Mylan (said to be covered by Grounds 32 and 33 - 39 of the notice of appeal) were expressed by reference to the following propositions.

62    First, Mylan submitted that the primary judge erred in finding that Sun Pharma advanced a case that the claimed invention was obvious in light of the common general knowledge alone. In written submissions, this ground was developed as one about procedural fairness and the denial of an opportunity to put what, in Mylan’s view, was a materially different case to the case it was required to put. If this ground is to be pursued on appeal, it may require Mylan to reflect on the relief it has claimed in the notice of appeal. It may also have a profound effect on the way in which the hearing of the appeal should be conducted: see Concrete Pty Limited v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577 at [117] and [172].

63    In support of this ground, Mylan took me to evidence given by Associate Professor Morton, who was called by Sun Pharma. Associate Professor Morton was set the hypothetical task of developing a pharmaceutical formulation of fenofibrate for use in the management of dyslipidaemia, including in patients affected by diabetes. He said that the information disclosed by the 704 patent (which he would have located on a literature search) would have been directly relevant to the task he was asked to carry out. He said he would have had regard to, and been substantially guided and assisted by, the 704 patent.

64    Mylan submitted that, although Sun Pharma had particularised a case on lack of inventive step by reference to the common general knowledge alone, its (Mylan’s) evidence in answer responded to the alternatively particularised case based on the common general knowledge taken with the information in the 704 patent (as advanced, for example, through Associate Professor Morton): see s 7(3) of the Patents Act. Mylan argued that the hearing before the primary judge proceeded accordingly.

65    In oral submissions in the present application, Mylan advanced an alternative argument which was that, because the evidence and the hearing in respect of this ground of invalidity proceeded on the basis that the notional team would have had the 704 patent (which was not common general knowledge) there were, in fact, gaps in the common general knowledge which the primary judge erroneously filled when concluding that the claims in suit lacked an inventive step on the basis of the common general knowledge alone. Primary among these was the fact that there was a problem with fenofibrate in that it is a poorly soluble drug, the therapeutic effect of which depends on whether the patient is fed or fasted at the time of oral administration. The gist of Mylan’s submission was that, although this problem was disclosed by the 704 patent, the 704 patent itself was not common general knowledge.

66    Secondly, Mylan submitted that in determining the question of obviousness, the primary judge relied on an incorrect scenario, which involved the hypothetical skilled team proceeding without regard to the information contained in the 704 patent. This submission was directed to the contention that, by reference to the common general knowledge alone, the notional team would not have been directly led as a matter of course to try the invention as claimed.

67    Thirdly, Mylan submitted that the primary judge erred in finding that:

(a)    the “notional team would have known of the need for a new fenofibrate formulation suitable for oral administration that eliminated the food effect”, and that this problem was common general knowledge;

(b)    the “notional team would try HPMC and SLS, both of which were commonly used in the formulation of pharmaceuticals to prevent or reduce particle agglomeration and to assist in dissolution”; and

(c)    the notional skilled team would have had a reasonable expectation that a formulation that used HPMC and SLS to stabilise nanoparticles of fenofibrate would work.

68    The first matter aside (see [62] above), Mylan’s grounds of appeal are, in essence, directed to errors in fact-finding—including facts based upon the primary judge’s impression of the evidence given by a particular witness (Professor Roberts) and his Honour’s evaluation of the evidence as a whole—and the conclusions that can be drawn from facts as found.

69    As to the question of infringement, the primary judge found that the fenofibrate particles in the Ranbaxy Products manufactured in accordance with Sun Pharma’s manufacturing protocols would have, in their finished form, a size falling within claims 1 and 40 of the 807 patent. The primary judge also found that the products included at least one surface stabiliser. Thus, the features in (a) of the definition of claim 40 (see [45] above) are present in the Ranbaxy Products and, on the assumptions to which I have referred, the Cipla Products. Further, both the Ranbaxy Products and the Cipla Products are entered on the ARTG for the treatment of hypercholesterolaemia and dyslipidaemia. Therefore, at issue is whether the Ranbaxy Products, and hence the Cipla Products, are compositions that have the features (b) and (c)—the redispersion and bioequivalency features of claim 40.

70    As I have noted, the primary judge deferred consideration of these questions in contemplation that their proof depended on the need for Mylan to conduct a clinical trial to establish their presence in the Ranbaxy Products. Although the primary judge made no direct findings in respect of the presence of features (b) and (c) in the Ranbaxy Products, he did make two general findings on which Mylan now relies.

71    First, with respect to the bioequivalency feature, the primary judge said:

423    The applicants emphasised that the formulations of the invention must meet the specified bioequivalence requirements. I think it is implicit in the teaching of the 807 Patent that the bioequivalence requirement will most likely be satisfied using a formulation comprising stable fenofibrate particles of 500 nm or less in size. The smaller the particle size, the larger the surface area of the particles, which leads to a more rapid and complete dissolution in the GI tract. The dissolution process will also be assisted by the presence of the surfactant SLS. Rapid and complete dissolution of the fenofibrate particles in the GI tract is likely to eliminate the food effect.

72    Secondly, with respect to the redispersion feature, the primary judge said:

424    The applicants also emphasised the requirement that the formulations of the invention must meet the specified redispersion criteria. However, it is difficult to see what, if anything, this requirement adds to the bioequivalence requirement. If the fenofibrate particles did not disperse in the GI tract (which the “biorelevant media” referred to in the claims is intended to replicate) then the formulation could not reasonably be expected to exhibit the bioequivalence required by the claims. In my view, the redispersion requirement adds nothing of substance to the other requirements of the relevant claims.

73    Thus, Mylan submitted, the Court can be satisfied that there is, at least, a prima facie case that the Ranbaxy Products, and thus the Cipla Products, are compositions having the features of the composition referred to in claim 40. I should add that Mylan also took me to evidence given by Professor Prestidge (on the question of bioequivalence) and Professor Roberts (on the question of redispersion). It is not necessary for me to recite that evidence in these reasons. It is sufficient for me to record that it supports the existence of a prima facie case that the Ranbaxy Products possess features (b) and (c).

Sun Pharma’s submissions

74    In relation to the primary judge’s finding that the claims in suit lacked an inventive step having regard to the common general knowledge alone, Sun Pharma submitted that it had pleaded such a case and had not abandoned it, although it accepted that it ran a “s 7(3) case” because it saw that case as its “best case”.

75    Sun Pharma submitted that, even though it ran a “s 7(3) case”, it does not follow that the content of the common general knowledge is different because of that circumstance.

76    Sun Pharma directed attention to [445] of the primary judgment where the primary judge said:

445    The 704 Patent is significant in that it confirms that by reducing the size of fenofibrate particles in a fenofibrate composition suitable for oral administration, it may be possible to eliminate or substantially eliminate the food effect. However, in this respect, I do not think it would tell the notional team anything more than it would already deduce from the common general knowledge.

(Emphasis added)

77    Sun Pharma submitted that ss 7(2) and (3) of the Patents Act identify a pool of information against which the determination of the presence or otherwise of an inventive step falls to be determined. These provisions do not stipulate how the prior art information is to be used in arriving at that determination. For example, Sun Pharma postulated that the Court might conclude that the person skilled in the art might accept some parts of that information and reject other parts. Sun Pharma submitted that this is, effectively, what the primary judge did in the present case.

78    Sun Pharma then referred me to a number of the primary judge’s findings with respect to the common general knowledge at [388] - [394]. These findings deal with multiple aspects of common general knowledge which were not in dispute and other aspects which were in dispute, and which were resolved adversely to Mylan. The latter included the fact that, for BCS Class II drugs (fibrates are typically of this type), the presence of food may result in an increase in drug absorption (which the primary judge described as a positive food effect); smaller drug particles generally dissolve faster than larger particles; drug particle size has important implications for bioavailability; and that particle size reduction was widely used before the priority date to increase dissolution rates. The correctness of these particular findings is not challenged in the notice of appeal.

79    It is convenient at this point to record that, consistently with the facts found by the primary judge, p 6 of the specification of the 807 patent states that fenofibrate formulations exhibit dramatically different effects depending on the fed or fasted state of the patient. The primary judge referred to this acknowledgement at [399] of the primary reasons. Mylan countered by pointing to a statement in the specification disavowing certain matters as common general knowledge.

80    Sun Pharma submitted that, armed with these findings, and assisted in particular by the evidence of Professor Roberts who was called by Mylan, the primary judge came to an evaluative judgment, which included his overall impression of Professor Roberts’ evidence, that the claimed invention lacks an inventive step. Sun Pharma submitted that when the Full Court comes to review the primary judge’s findings and conclusions, it will not be guided by whether it disagrees with his Honour’s findings, but whether it detects error in them: Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; (2018) 358 ALR 683 at [49] per Perram J. Sun Pharma submitted that Mylan’s prospects in determining error are “remote”.

81    As to the question of infringement, Sun Pharma submitted that the evidence referred to by Mylan did not advance the debate on infringement. In particular, Sun Pharma submitted that Mylan’s case proceeded on the basis that its evidence could not prove, on the balance of probabilities, that the Ranbaxy Products possessed all the features of the composition of claim 40. Sun Pharma identified various matters which, it argued, militated against a finding that a prima facie case of infringement existed, assuming the relevant claims to be valid.

Conclusion: ARGUABLE APPEAL

82    Guided by the principles to which I have referred, I am persuaded that, overall, Mylan has an arguable appeal. But the prospects of success of Mylan’s appeal are another matter.

83    Mylan submitted that it has “good” prospects of success. In other parts of its submissions it argued that it had “strong” grounds of appeal: see [96] below. Sun Pharma submitted that Mylan had “very weak” prospects. Sun Pharma also described Mylan’s likelihood of success on different aspects of its appeal as, variously, “hopeless”, “low” and “remote”. Cipla, similarly, submitted that Mylan has “a very weak prima facie case”.

84    I will not express myself in such terms. However, it is appropriate that I recognise at the outset that, after a ten day hearing, when the issues then before the Court on infringement and the validity of the patents were canvassed extensively against a considerable body of expert evidence, the primary judge came to firm views on infringement and validity after what seems to be (if I may say so) a careful analysis of the issues involved. As stated by French J in Stirling Harbour v Bunbury, the Court’s assessment of the strength of an appellant’s case, in an application such as the present one, will be influenced by the fact that there has been an adverse judgment at first instance. It is, of course, also relevant to consider how adverse that judgment is, and to appreciate the nature of the grounds of appeal that are to be relied on.

85    In the case of the 711 patent, the question raised with respect to the infringement of Swiss type claims is an important one. So far as I am aware, in this country the question the primary judge addressed has not previously been raised as directly as it was before his Honour.

86    In aid of its submissions, Mylan referred to my own reasons for judgment in Otsuka Pharmaceutical Co Ltd v Generic Health Pty Ltd (No 4) (2015) 113 IPR 191 which, it argued, supported its case on infringement of the Swiss type claims. In that case (at [172]), I made the observation that, for the purpose of determining infringement of a Swiss type claim, the question is whether, objectively ascertained, the medicament that results from the claimed method or process is one that has the therapeutic use defined in the claim. Mylan submitted that the primary judge erred by wrongly rejecting or distinguishing that observation. It would be fair to say, however, that my observation was directed to a somewhat different proposition to the one that the primary judge addressed. The proposition I addressed was whether it matters that an alleged infringer does not actually advertise or promote the medicament specifically for the therapeutic use defined in the claim. This was not the proposition that the primary judge addressed. The proposition the primary judge addressed concerned the relevance of the manufacturer’s intention when making the medicament. The primary judge addressed that matter with the benefit of the decision of the Supreme Court of the United Kingdom in Warner-Lambert Company LLC v Generics (UK) Ltd [2018] UKSC 56. The primary judge found that the manufacturer’s intention was relevant and that Mylan had not established that intention.

87    The grounds of appeal directed to this issue are plainly arguable. However, success on those grounds would not, itself, lead to the final injunctive relief that Mylan seeks, given the primary judge’s findings that the claims in suit are invalid. What is more, Mylan faces the significant hurdle that the primary judge found that the claims are invalid on two separate and independent bases—lack of novelty and lack of inventive step.

88    As to lack of novelty, Mylan’s grounds of appeal do not raise matters of principle. They are squarely directed to challenging the primary judge’s findings, based on informed evaluation and judgment, about what a document—the Accord Protocol—discloses to the hypothetical person skilled in the art. It will not be enough for Mylan to persuade the Full Court that another view is open as to the scope and character of the disclosures made in that document. Mylan will need to show that the primary judge’s evaluation and judgment are affected by error.

89    Although Sun Pharma did not address Mylan’s submissions directed to the primary judge’s findings on lack of inventive step, it is necessary for me to say something about the nature of the appeal that is to be mounted in that regard. These grounds, too, are directed to matters of evaluation and judgment: specifically, whether the primary judge erred in his evaluation of the expectations of success that the hypothetical person skilled in the art (or team) would have in embarking on a particular course; and the weight that should be given to competing evidence given by experts whose testimony the primary judge had the benefit of witnessing. Once again, it will not be enough for Mylan to persuade the Full Court that different views are open on the evidence. It will need to demonstrate that the primary judge’s evaluation and judgment are affected by error.

90    As to the 807 patent, I am satisfied that Mylan has established a prima facie case that the Ranbaxy Products, and hence the Cipla Products, possess the features of the composition claimed in claim 40. There is, however, the hurdle presented by the primary judge’s finding that the claims in suit, including claim 40, are invalid because the claims lack an inventive step.

91    There may also be difficulty in persuading a Full Court that a case advanced in reliance on the common general knowledge taken with the information in a single piece of prior art (here, the 704 patent) cannot be decided on the basis of the common general knowledge alone. The issue raised by Mylan is certainly a novel one in the context of s 7(2) of the Patents Act. However, I cannot say that the way in which this issue has been raised in this appeal shows that Mylan’s prospects on this ground are devoid of success.

92    There is also the difficulty that the challenge to the primary judge’s finding that the claims in suit lack an inventive step is directed primarily to the primary judge’s evaluation of the expectations of success that the notional team would have in proceeding in a particular way, and whether the person skilled in the art would have considered using certain stabilisers in undertaking a suitable formulation. I repeat my earlier observations about such challenges.

93    The grounds are also directed to challenging the primary judge’s finding that the notional team would have known of the need for a fenofibrate formulation that eliminated the “food effect”. As I have recorded, Sun Pharma pointed to a number of findings (unchallenged in the notice of appeal) which, arguably, were part of the primary judge’s consideration of this question and which, arguably, support the finding that the need for a new formulation that eliminated the “food effect” was part of the common general knowledge, despite anything said in the 704 patent.

94    I have raised these various matters to give a picture of the nature of the appeal that is to be advanced, and obviously not to express any concluded view on the grounds of appeal raised. To be clear, I have no concluded views. Indeed, it would be impossible to reach concluded views without the benefit of full argument and a detailed appreciation of the evidence before the primary judge. The parties sensibly realised that the present application is not the occasion for full argument and did not endeavour to proceed as if it was. They tailored their submissions accordingly. In recognition of this fact, I was only taken to some of the evidence that was before the primary judge. As I have said, I am persuaded that, overall, Mylan has shown that it has an arguable appeal. However, my current appreciation of the issues does not persuade me that the appeal, as explained, is more than merely arguable.

95    Even assuming success on all these matters, there is a further hurdle confronting Mylan in respect of its case brought under s 117(1) of the Patents Act. In light of the Full Court’s observation in AstraZeneca noted above at [60], it is by no means clear that Mylan would secure, as final relief, a blanket injunction of the kind it now seeks as interim injunctive relief for threatened infringement of the 711 patent in respect of the method of treatment claims. While the scope of any relief to which Mylan might be entitled remains to be argued and determined, the primary judge’s finding concerning the extensive use of fenofibrate as a lipid-lowering agent suggests the real and not remote possibility that any injunctive relief granted on a final basis for threatened infringement in respect of the method of treatment claims would be qualified so as not to prevent the supply of the Ranbaxy Products for the indications for which they are now registered on the ARTG. The same observation applies with respect to the Cipla Products under their proposed amended registrations.

The balance of convenience

Mylan’s submissions

96    Mylan addressed the balance of convenience by reference to the following submissions:

(a)    The grounds of appeal are “strong” and there is a “strong” prima facie case that the separate question of infringement in respect of the 807 patent will be determined in Mylan’s favour.

(b)    The refusal of interim injunctive relief will not obviate the need for Sun Pharma to prove its damage in the period for May 2016 to 22 January 2019 in the event that the appeal is unsuccessful and Sun Pharma calls on the undertaking as to damages previously given by Mylan.

(c)    Mylan has proffered the usual undertaking as to damages in respect of the present application for interim injunctive relief.

(d)    LIPIDIL has been the only fenofibrate product on the market since 2006. The Ranbaxy Products are yet to enter the market. This reflects the status quo, and Mylan will seek to restrain the supply of any other generic fenofibrate product coming to the market.

(e)    LIPIDIL is one of the most important products in Mylan Health’s range. Its sales are increasing, albeit unpredictably. The entry of the Ranbaxy Products and the Cipla Products will cause immediate, significant and irreparable loss, even after Mylan’s launch of its own (authorised) generic fenofibrate product, which will happen if interim injunctive relief, as sought, is not granted and PBS listing for the Ranbaxy Products is obtained.

(f)    Mylan Health has made a significant financial investment in education and awareness of LIPIDIL, with a primary focus since October 2013 on the need to treat diabetic retinopathy in patients with type 2 diabetes. If Sun Pharma and Cipla were to enter the market with the Ranbaxy Products and the Cipla Products, Mylan Health would suffer a large decline in projected revenue from LIPIDIL, which would cause it to reduce or entirely withdraw its LIPIDIL education and awareness programs to the detriment of patients, Mylan Health’s reputation, and sales of LIPIDIL.

(g)    There will be considerable difficulty in calculating damages if interim injunctive relief is not granted and the appeal is ultimately successful.

(h)    The asserted “first mover” advantage which Sun Pharma asserts is illusory.

(i)    With respect to the 711 patent, there is a strong likelihood that the Ranbaxy Products and the Cipla Products will be supplied to patients for the treatment and/or prevention of diabetic retinopathy.

97    It is appropriate that I elaborate on some of these submissions.

98    With regard to the likely loss or damage Mylan would suffer if interim injunctive relief is not granted, Mylan submitted, firstly, that the listing of the Ranbaxy Products on the PBS would cause an immediate 25% mandatory price reduction of the price at which Mylan Health can supply LIPIDIL. LIPIDIL will be removed from the F1 formulary to the F2 formulary and, as a consequence, Mylan Health will be obliged to provide the Department of Health with price disclosure information. This will likely result in the determination of a new (and reduced) ex-manufacturer price for LIPIDIL. If the Ranbaxy Products and the Cipla Products obtain PBS listing, but their supply is later restrained, it is highly unlikely that the 25% mandatory price reduction and any price disclosure-related reductions suffered by LIPIDIL will be reversed.

99    Secondly, Mylan submitted that there will be an inevitable loss of market share to the Ranbaxy Products and the Cipla Products, and to any other generic fenofibrate products that might enter the market (which, on Mr Vigneault’s evidence, is likely). The loss of market share is likely to be swift and substantial. Based on Mr Vigneault’s evidence, an originator brand in a genericised market typically retains about 25% market share, although the actual percentage share could be much less.

100    Thirdly, Mylan submitted that rather than seeking to impose a brand premium on the price of LIPIDIL, Mylan Health will offer a generic fenofibrate product at the same or lower price than the price of the competing generic fenofibrate products. Sun Pharma has offered to supply the Ranbaxy Products at a 63% discount against the current Price to Pharmacist of LIPIDIL. These discounts are likely to be deeper should further generic fenofibrate products enter the market. In Mr Vigneault’s view, the profits generated by the sale of Mylan Health’s generic product will be minimal compared to the profit that would be generated by LIPIDIL, absent generic competition.

101    Fourthly, as I have noted, Mylan submitted that the reduction or withdrawal of expenditure on education and awareness programs will cause reputational loss to Mylan Health.

102    Fifthly, Mylan submitted that the loss of revenue will lead to a scale-back in other aspects of Mylan Health’s business. Mr Vigneault exemplified the following: cutting staff levels; internal restructuring; reducing investment in research and development in other drugs; reducing revenue available to support educational medical support programs; and reduced or lost ability to financially support clinical programs studying the progression of complications in patients with type 2 diabetes.

103    Sixthly, Mylan submitted that the loss will affect both Mylan Health and BGP.

104    Seventhly, Mylan submitted that the loss or damage if the Ranbaxy Products and the Cipla Products enter the fenofibrate market, but are later restrained, will inure for the life of the 711 patent and the 807 patent. For a number of reasons, Mylan Health would not be able to reinstate the price of LIPIDIL to its previous level. Further, it is unlikely that it will be able to withdraw the authorised generic product it will introduce.

105    With regard to the difficulty in calculating damages should interim injunctive relief not be granted, Mylan submitted that it would be more difficult and burdensome to calculate Mylan Health’s damages compared to calculating the compensation that would be payable by Mylan under an undertaking as to damages if interim injunctive relief should be granted. This was so for, essentially, three reasons.

106    First, Mylan submitted that the market for LIPIDIL is not static. It is growing, but unpredictably so. The difficulty in calculating damages is compounded by a prospective inability to account accurately for how the LIPIDIL market would have grown with Mylan Health’s education and awareness programs intact.

107    Secondly, Mylan submitted that damages will be difficult to calculate over the period of the unexpired terms of the two patents. In oral submissions, my attention was directed to certain observations I made in Novartis AG v Hospira Pty Ltd [2012] FCA 1055; (2012) 98 IPR 185 (Novartis) at [120]:

Although it can be accepted that [if interim injunctive relief is not granted] data on sales would be available for the closed period from the time when the respondent’s products enter the market until the time when final injunctive relief is granted, the respondent’s submission does not fully grasp the difficulty of assessing damages, particularly in the form of future loss and damage over the somewhat lengthy remaining terms of the patents. Such future loss and damage may well be affected by the influence of presently-unknown external factors, such as new compounds or new methods of treatment affecting prices and sales levels existing at the time that damages come to be assessed. The difficulties in quantifying future loss and damage are not necessarily obviated by simply having historical sales derived from the closed period. … The respondent’s submission also fails to recognise that if the applicants are subjected to additional generic competition in the interim, it is also likely that they will be subjected to the cost, inconvenience and risk of litigation against multiple respondents to recover the loss and damage they will have suffered.

108    I note that those observations were made in the context of a submission that the difficulty in assessing damages for infringement had been exaggerated by the party seeking interim injunctive relief. In the present case, neither Sun Pharma nor Cipla has suggested that there would not be difficulties in assessing damages for infringement if interim injunctive relief were to be refused. Their submissions were directed to the comparative burden of assessing compensation under an undertaking as to damages in the present case.

109    Thirdly, Mylan submitted that at the time damages for infringement come to be assessed, future price movements for LIPIDIL as a result of competitive product entry will be unknown and unpredictable.

110    Mylan contrasted this position with Sun Pharma’s and Cipla’s respective positions if the supply of the Ranbaxy Products and the Cipla Products is restrained and Mylan’s appeal is unsuccessful. Mylan submitted that, in the counterfactual world, the price at which generic fenofibrate products will have entered the market will be known because Sun Pharma has disclosed that price. Further, time and resources will be saved because Sun Pharma’s claims for damages under Mylan’s undertaking as to damages in respect of the period 4 May 2016 to 22 January 2019, and the period of the restraint which it now seeks, can be heard and determined together.

111    Mylan submitted that the calculation of Cipla’s damages under an undertaking as to damages will only be for a relatively short intervening period while the appeal is heard and determined. Mylan argued that the determination of Cipla’s damages would be straightforward compared with the difficulties that Mylan will face should interim injunctive relief not be granted and the appeal is successful.

112    Mylan submitted that other cases referring to the difficulty in calculating compensation under an undertaking as to damages (Sigma Pharmaceutical (Australia) Pty Ltd v Wyeth (2018) 136 IPR 8 (Sigma) and Sanofi-Aventis Deutschland GmbH v Alphapharm Pty Ltd (No 3) [2018] FCA 2060) are distinguishable.

113    Finally, Mylan submitted that, even if the degree of difficulty in calculating damages is equal as between itself and Sun Pharma and Cipla, the size of Mylan’s loss will be much greater taking into account the loss of price and market share of LIPIDIL.

114    As to the so-called “first mover” advantage (see Sun Pharma’s submissions at [121] below), Mylan submitted that any such advantage in the present case is illusory because, if interim injunctive relief is not granted, the Ranbaxy Products, the Cipla Products and Mylan’s authorised generic product will launch in close time proximity. According to Mylan, one generic fenofibrate product would not have a time advantage over the others. Further, fenofibrate market share is likely to be determined along pre-existing contractual arrangements and preferences held by pharmacies or pharmacy buying groups. Moreover, patients do not typically express a preference for a particular generic brand. There is no reluctance to switch between generic brands. Another way of expressing this is that customers, including patients, exhibit no brand loyalty so far as generic pharmaceutical products are concerned.

Sun Pharma’s submissions

115    Sun Pharma addressed the balance of convenience by reference to the following submissions:

(a)    Mylan has delayed in seeking interim injunctive relief;

(b)    Mylan’s evidence is overstated;

(c)    Sun Pharma stands to suffer irreparable harm if interim injunctive relief is granted; and

(d)    Sun Pharma’s losses will be harder to calculate if interim injunctive relief is granted than Mylan’s losses if interim injunctive relief is not granted.

116    I will elaborate on some of these submissions.

117    With respect to the submission that Mylan’s evidence is overstated, Sun Pharma referred to aspects of Mr Vigneault’s evidence in which he discussed the investment that Mylan Health had made in LIPIDIL since February 2015 when the group (of which Mylan and BGP are member companies) acquired the Abbott Laboratories’ portfolio in Australia, which included LIPIDIL. Sun Pharma made various observations about the development of LIPIDIL, which I need not recite. The essential point advanced by Sun Pharma was that Mylan’s evidence was silent on a number of important matters, such that it should not be assumed that, in respect of LIPIDIL, the business in Australia, as owned by Mylan’s group or as formerly owned by Abbott Laboratories, is “entitled to all the credit for developing LIPIDIL”.

118    Sun Pharma also addressed Mr Vigneault’s evidence which linked the growth in sales of LIPIDIL with Mylan’s investment in “education and awareness”, which Sun Pharma submitted was a euphemism for marketing. I have referred to Mylan’s submissions on this topic at [96] and [101] above. By reference to certain information given in presently confidential evidence, Sun Pharma disputed this link as well as the likely effect that cuts to this form of expenditure by Mylan, as foreshadowed by Mr Vigneault, would have on Mylan’s business in Australia, including in respect of Mylan’s reputation (a loss which Sun Pharma submitted was no more than a wholly speculative suggestion in any event).

119    Relatedly, Sun Pharma submitted that Mylan’s loss of market share through generic competition will be readily calculable. If interim injunctive relief is not granted, and Mylan’s appeal is successful, then, at the time of any damages hearing for infringement, a simple assessment can be made from then known facts of Mylan’s loss of market share. However, if interim injunctive relief is granted, and Mylan’s appeal is unsuccessful, Sun Pharma submitted that it will be nearly impossible to quantify what its market share would have been in the intervening period. Sun Pharma returned to this contention in later submissions.

120    With respect to its submission that is stands to suffer irreparable harm if interim injunctive relief is granted, Sun Pharma submitted that it has already made very substantial preparations to enter the market this month. If restrained, the costs associated with these preparations will be wasted.

121    In this context, Sun Pharma also addressed the loss of its claimed “first mover” advantage. Sun Pharma accepted that, if interim injunctive relief is not granted, it is likely that other suppliers of generic fenofibrate will follow it into the market. On the evidence before me, there can be no doubt about that fact. It is certainly clear that Cipla will follow at some point. However, the prospect remains that Sun Pharma will be the first to enter the market with generic fenofibrate products. Sun Pharma submitted that, if so, it will be able to “forward sell” the Ranbaxy Products in substantial quantities which would make it more challenging for subsequent generic fenofibrate product entrants to gain the same level of market share that Sun Pharma will capture. Sun Pharma submitted that it would also provide it with the opportunity to secure supply agreements with pharmacies and pharmacy groups, as well as public hospitals, for generic fenofibrate, which opportunity would not (or at least may not) be available presently to other suppliers. Also, Sun Pharma submitted that its ability to supply the Ranbaxy Products will enhance its commercial offering, and may provide it with the opportunity to supply other products in its range when seeking to negotiate these agreements. The evidence shows that Sun Pharma’s supply, at the present time, of the Ranbaxy Products will be financially valuable for it.

122    With respect to the submission that its losses will be harder to calculate if interim injunctive relief is granted than Mylan’s losses if interim injunctive relief is not granted, Sun Pharma returned to its contention that, if interim injunctive relief is granted, and Mylan’s appeal is unsuccessful, it will be nearly impossible to quantify what Sun Pharma’s market share would have been in the intervening period. Sun Pharma submitted that this is because, when seeking to enforce the undertaking as to damages, it would be necessary for it to construct a hypothetical market reflecting the likely state of play had there been no injunction.

123    Sun Pharma called in aid Jagot J’s observations in Sigma at [1336] when dealing with the difficulty in assessing compensation under an undertaking as to damages given in respect of the restrained supply of pharmaceutical products:

1336    It is difficult to imagine that when Sundberg J and then I granted the interlocutory injunctions in 2009 we anticipated that if those injunctions turned out to be wrongly granted, the resulting exercise would bear any resemblance to this one. Hindsight makes one thing certain. Knowing what has occurred, it could never have been concluded, for example, that insofar as relevant to the balance of convenience it would be easier for the generics to prove their loss if the interlocutory injunctions were wrongly granted than for Wyeth to prove its loss if the interlocutory injunctions were withheld and the method patent was valid.

124    These observations are a snap-shot of the prodigious task that faced her Honour in assessing compensation. The true magnitude and difficulty of that task are revealed from a reading of her Honour’s comprehensive and detailed reasons for judgment.

125    Sun Pharma also called in aid Jagot J’s observations in H. Lundbeck A/S v Sandoz Pty Ltd [2018] FCA 1797; (2018) 137 IPR 408 (Lundbeck) at [382] - [383] when dealing with an assessment of damages for patent infringement involving pharmaceutical products:

382    Lundbeck’s approach to loss involved the simple step of a time shift. The market shares those generic entrants achieved are known facts. This includes the market shares which Sandoz (and all participants in the market) achieved from time to time and the prices at which Sandoz (and all participants in the market) sold their products. Lundbeck’s approach shifted in time the generic market shares achieved at its expense, including the shares of Sandoz, so that their entry to the market commenced on 1 January 2013 rather than 15 June 2009. By this means, instead of requiring econometric modelling to ascertain prices and market shares Lundbeck could rely on the prices and market shares actually involved in generic entry into the market.

383    It may be apparent from this that it was far easier for Lundbeck to prove the value of its loss on the basis of the generics having entered the market than it was for the generics in Sigma to prove the value of their loss on the basis that they were wrongfully held out of the market.

126    Finally, on the balance of convenience, Sun Pharma submitted that the interests of third parties should be taken into account, relevantly the Commonwealth and patients, who would benefit from the lower prices that would result from the competition that would be provided by the supply of generic fenofibrate products.

Cipla’s submissions

127    Cipla addressed the balance of convenience by reference to the following submissions:

(a)    Mylan has a very weak prima facie case of infringement.

(b)    Presently, Cipla has a very significant commercial opportunity to launch the Cipla Products as an early entrant in the market for generic fenofibrate products. This will enhance its revenue and competitive position.

(c)    Any loss suffered by Mylan (assuming the patent can be “resurrected”) can be adequately, and comparatively easily, compensated by an award of damages

(d)    The recent experience of the Court has been that the assessment of a generic supplier’s loss under the usual undertaking as to damages may be a complex exercise.

(e)    Unlike Sun Pharma, the task of enforcing an undertaking as to damages is not one that Cipla presently faces because it is not affected by the interim injunctive relief granted on 4 May 2016.

(f)    There is a strong public interest in the price of fenofibrate pharmaceutical products being reduced, thereby reducing the cost burden borne by the Commonwealth in subsidising fenofibrate under the PBS.

128    I will elaborate on Cipla’s submission about the opportunity for early entry. As I have noted, Cipla does not seek to be the “first mover”. It submitted, however, that there are real benefits in being an early mover in capturing market share. The market for fenofibrate pharmaceutical products is substantial. Mr Ibrahim, Cipla’s Managing Director, gave evidence that if there are only one or two early generic entrants in the market, those suppliers may achieve a more substantial share of the generic market than the later entrants, simply due to less generic product competition. Further, later entrants have decreased access to pharmacies which have already purchased or committed to a significant supply of generic medicines. Pharmacies may also be reluctant to stock different generic brands for the one medicine. Mr Ibrahim deposed that this advantage can be maintained for years into the future, even after the introduction of other generic products.

129    Mr Ibrahim also deposed that, given the size of the fenofibrate market, Cipla is likely to generate revenue which will see a material increase in its current revenue and likely to provide it, as a small to medium generic pharmaceutical company, with significant growth opportunities.

130    Cipla submitted that, even though Mylan disputed Cipla’s claims in this regard, it (Cipla) is best placed to identify and assess the value of commercial opportunities for its business.

Conclusion: BALANCE OF CONVENIENCE

131    I am persuaded that the balance of convenience is against granting the interim injunctive relief that Mylan seeks.

132    I accept the likelihood that, if generic fenofibrate pharmaceutical products enter the market and displace LIPIDIL’s present monopoly position, Mylan will suffer a significant loss of revenue, and a significant loss of market share with its own flow-on effects for Mylan’s revenue. I accept that, once the state of the present market is altered by generic supply, there is a significant likelihood that the price-effects of that supply will not be reversed should Mylan ultimately be successful in its appeal and secure the blanket injunctive relief it seeks. However, the possibility of Mylan securing final injunctive relief must be gauged in light of the matters I have discussed above when dealing with the nature of the appeal that is to be brought.

133    I accept the possibility that any significant loss of revenue may have other consequences for Mylan’s business. I accept, for example, that there may be an adverse impact on the extent to which Mylan can financially support its current education and awareness programs, although I do not think that the evidence provides much guidance on that matter. I accept the possibility that cutting back or withdrawing altogether these programs may have some adverse reputational consequences for Mylan, although I find it difficult to accept that, faced with new market entry and new market dynamics, Mylan would not seek to actively market and support LIPIDIL and its own generic fenofibrate product against new competition.

134    I also accept that it is possible that a significant reduction in revenue will have other consequences for Mylan’s business of the kind foreshadowed in Mylan’s submissions.

135    Further, I accept that, even though the Ranbaxy Products and the Cipla products are not registered on the ARTG for the treatment and/or prevention of diabetic retinopathy, it is possible that there will be supply of those products for those indications. The primary judge found as much when dealing with the question arising under s 117(2)(b) of the Patents Act in respect of the method of treatment claims in the 711 patent: see at [117] - [119].

136    I accept that, if Mylan is ultimately successful in its appeal and the question of damages for infringement arises for consideration, there may be difficulties in calculating damages of the kind to which Mylan referred in submissions. I accept that these difficulties may include the kind of difficulties in estimating forward-looking losses to which I referred in Novartis. I do not accept, however, that these difficulties are such that it can be said that damages are incapable of proper assessment and will not provide a proper and adequate remedy to compensate Mylan for the losses it might suffer.

137    The most compelling reason for the conclusion to which I have come is the difficulty, complexity and uncertainty involved in assessing compensation under an undertaking as to damages given in patent infringement proceedings involving the supply of pharmaceutical products in the Australian market. I accept that the recent experience of the Court has demonstrated that, whatever general views might have been held in the past about the difficulty of that task compared with the task of assessing damages for infringement, the calculation of compensation under an undertaking as to damages can impose burdens and raise uncertainties that are far greater than the burdens and uncertainties involved in assessing damages for infringement. The differential nature of these burdens and uncertainties is captured by Jagot J’s observations in Sigma and Lundbeck, which I have quoted above. Mylan sought to distinguish Sigma from the present case on the basis that the present case seeks interim injunctive relief pending the determination of an appeal and after the supply of the Ranbaxy Products has already been restrained. Mylan’s arguments do not, however, meet the point that Jagot J was making in Sigma and, indeed, in Lundbeck. Her Honour’s observations in Sigma reflect my own view as to the likely difficulty, complexity and uncertainty that would be involved in assessing compensation under an undertaking as to damages in the present case.

138    To elaborate: on the evidence presently before me, the likely state of the market, absent the interim injunctive relief sought, is far from clear. I say this particularly bearing in mind the state of the registrations for fenofibrate on the ARTG and the evidence given in cross-examination by Mr Vigneault. What is clear is that, if interim injunctive relief is granted and Mylan’s appeal fails, the task of assessing compensation would likely involve the consideration of multiple counterfactual cases advanced by multiple claimants, including (I can anticipate) the Commonwealth, each seeking to hypothesise what the market would have been like had interim injunctive relief not been granted. In its submissions, Cipla exemplified some of the variables likely to be involved in the different counterfactuals, such as:

(a)    the nature of fenofibrate and how readily prescribers and patients might accept brand substitution;

(b)    the value of the medicine to pharmacists and whether they could be incentivised sufficiently to stock multiple brands to facilitate substitution;

(c)    the identification of the generic products that should be taken as entering the market and whether those products would enter the private script market or the PBS market, or possibly both (take, for example, Sun Pharma’s intentions);

(d)    the role that authorised generic products might play in shaping the market overall;

(e)    the time when various generics should be taken as having entered the market; and

(f)    the hypothetical sales strategies and capabilities of different suppliers to capture market share through competitive offerings, not just involving price (such as bundling and the like).

139    The simple point is that the particular difficulty, complexity and uncertainty involved in assessing compensation under an undertaking as to damages in the present case will not be present in an assessment of damages for infringement because, in assessing damages for infringement, the state of the market before generic entry, and at the time damages would come to be assessed, would be known and need not be hypothesised.

140    As to Mylan’s contention that the difficulties in assessing compensation have already been realised in Sun Pharma’s case, I do not, with respect, see this as a particularly persuasive reason to, in effect, continue the interim relief previously granted when circumstances now point persuasively against granting that relief. In this connection, I should record that the pre-trial interim injunctive relief was granted on consent orders, without any finding as to the balance of convenience.

141    I note that in Otsuka Pharmaceuticals Co., Ltd v Generic Health Pty Ltd [2015] FCA 848 where, pending the hearing and determination of an appeal, a stay was granted of an order discharging the interim injunctive relief that had previously been granted, the consideration which Mylan advances found favour with Nicholas J. But there were also other factors that supported the granting of interim injunctive relief in that case which are not present in the instant case. Further, in the instant case, Cipla has not been adversely affected by the interim injunctive relief that was granted against Sun Pharma. There is, therefore, no realised burden so far as it is concerned.

142    Having reached the views expressed and explained at [137] - [141] above, I do not propose to set out, in these reasons, a detailed analysis of each and every other submission that was advanced by the parties in the course of the hearing. I do, however, wish to comment on the following submissions.

143    First, contrary to Sun Pharma’s submission, I do not accept that there has been delay on Mylan’s part that would disentitle it to the relief it now seeks. I am satisfied that it has proceeded with due expedition. The fact that Mylan would seek interim injunctive relief to protect its commercial position pending the determination of its appeal was known by Sun Pharma shortly after judgment was given by the primary judge on 22 January 2019. On 28 January 2019, Mylan’s solicitors wrote to Sun Pharma’s solicitors seeking an undertaking from Sun Pharma that it not launch the Ranbaxy Products before the determination of the appeal that Mylan said it would commence. On 30 January 2019, Sun Pharma’s solicitors responded, stating that Sun Pharma would not give the undertaking and that Sun Pharma had commenced all necessary activities to enable it to launch and commence supplying the Ranbaxy Products. Thus, Sun Pharma’s recent commercial activities directed to commencing supply of the Ranbaxy Products have been undertaken with a full awareness of Mylan’s intentions to seek interim injunctive relief.

144    Secondly, contrary to Mylan’s submission, I do not accept that the “first mover” advantage is illusory on the facts of this matter. Much of that advantage may have been eroded by the passage of time since the granting of interim injunctive relief on 4 May 2016. However, on the evidence before me there is a real possibility that Sun Pharma can still realise that advantage, albeit on a more limited basis than might otherwise have been the case. I accept that, if interim injunctive relief is granted now, that advantage will likely disappear completely.

145    Thirdly, I accept that there is likely to be some advantage to Cipla in being an early mover in the market for generic fenofibrate pharmaceutical products. This advantage is not as pronounced as Sun Pharma’s “first mover” advantage, but this does not mean that it is not commercially valuable to Cipla and not equally worthy of protection.

146    The preservation, to the extent possible, of Sun Pharma’s possible “first mover” advantage, and Cipla’s possible early mover advantage, must be seen in the context that there has been a full hearing on the validity of the relevant claims of the 711 patent and the 807 patent, and those claims have been found to be invalid. So too must the interests of other third parties, such as other potential suppliers of generic fenofibrate products and the Commonwealth in relation to its operation of the PBS.

147    Finally, in reaching my view as to where the balance of convenience lies, I have taken into account my assessment of the appeal which is to be brought, bearing in mind, in particular, the observations I have made at [82] and [94] above.

Disposition

148    Mylan’s application for interim injunctive relief should be dismissed. I can see no reason why Mylan should not pay Sun Pharma’s costs. I will make orders accordingly.

149    I note that Sun Pharma has proffered draft orders which include an undertaking by its parent company, Sun Pharma (Netherland) B.V. that it will pay any and all pecuniary relief ordered to be paid by Sun Pharma for patent infringement, should Sun Pharma fail to comply with any such order. That undertaking should be accepted.

Associate:

Dated:    11 April 2019