FEDERAL COURT OF AUSTRALIA

Apotex Pty Ltd v Les Laboratoires Servier (No 4) [2010] FCA 1202

THE COURT ORDERS THAT:

1.     The parties submit proposed orders, including orders as to costs, by 10 November 2010 to give effect to these reasons.

2.    The proceedings be stood over to 12 November 2010 at 9.30 am.

3.    These reasons are to be kept confidential in accordance with existing confidentiality undertakings in the proceedings until further order.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1    Les Laboratoires Servier (Servier) is the registered owner of Australian Patent No. 2001276418 entitled ‘A crystalline form of perindopril tert-butylamine salt’ (the AC Patent). In these proceedings, Apotex Pty Ltd (Apotex) claims revocation of the AC Patent. By cross-claim, Servier claims infringement by Apotex of the AC Patent. Perindopril erbumine is the relevant product within the scope of the claim and the subject of the infringement proceedings. Servier alleges infringement through the importation, sale or supply of generic versions of perindopril erbumine in Australia.

2    Servier seeks to join two overseas companies, Apotex Inc and Apotex Pharmacem Inc (Pharmacem) to the proceedings pursuant to O 6 r 8 of the Federal Court Rules (the FCR). Servier has not sought to amend its present pleading but has submitted a form of a proposed pleading. The proposed pleading alleges that each of Apotex Inc and Pharmacem has infringed and continues to infringe and/or threatens to infringe claims of the AC Patent by, without the licence or authority of Servier, causing, authorising, directing, procuring or inducing Apotex to engage in the infringing conduct and participating with Apotex in such conduct pursuant to a common design to exploit perindopril erbumine products in Australia.

3    The joinder of Apotex Inc to the proceedings is not opposed. The joinder of Pharmacem is opposed. The issue is whether Pharmacem should be joined. Apotex submits that the appropriate basis for an application for joinder is O 6 r 2 rather than O 6 r 8 of the FCR. Servier did not respond to this submission or change the basis of its application, O 6 r 8.

The legislation

4    Neither O 6 r 2 nor O 6 r 8 of the FCR specifies or limits the matters a court must consider when exercising its discretion to join a party to proceeding.

5    Order 6 r 2 provides:

Two or more persons may be joined as applicants or respondents in any proceeding:

(a)    where:

(i)    if a separate proceeding were brought by or against each of them, as the case may be, some common question of law or of fact would arise in all the proceedings; and

(ii)    all rights to relief claimed in the proceeding (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions; or

(b)    where the Court gives leave so to do.

6    Order 6 rule 8 relevantly provides:

(1)    Where a person who is not a party:

(a)    ought to have been joined as a party; or

(b)    is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon;

the Court may order that the person be added as a party and make orders for the further conduct of the proceeding.

7    I will not consider O 6 r 2 further as it does not form the basis of Servier’s application.

8    Ryan J held in Caboolture Park Shopping Centre Pty Ltd v White Industries (QLD) Pty Ltd (unreported, Federal Court of Australia, Ryan J, 25 May 1988) that the Court’s discretion under O 6 r 8 in relation to the joinder of a new party is a wide one. The parties jointly submit that in order to exercise the discretion in favour of the addition of a respondent pursuant to O 6 r 8, the Court must be satisfied that there is an arguable case against that proposed respondent, at least to the standard of being able to resist an application for summary judgment had the proposed respondent been sued in a separate proceeding (Commonwealth Bank of Australia v Peto (No 2) (2006) 152 FCR 362). The test for a summary dismissal application against a respondent is found in s 31A of the Federal Court of Australia Act 1976 (Cth) (the FC Act), which provides relevantly:

(2)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3)    For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

for it to have no reasonable prospect of success.

9    The application of the test was recently considered by the High Court in Spencer v Commonwealth (2010) 269 ALR 233. Justices Hayne, Crennan, Kiefel and Bell emphasised that s 31A forms a different procedural regime to that which applied prior to its introduction. Their Honours held at [60] that the phrase “no reasonable prospect” should be interpreted by giving full weight to the expression as a whole and that s 31A applies if and only if the Court is satisfied that there is “no reasonable prospect” of success. Chief Justice French and Gummow J recognised at [24] that s 31A involves a power, the exercise of which should be attended with caution and involves a high degree of certainty about the ultimate outcome if the matter were to go to trial (citing Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 at [46] and Agar v Hyde (2000) 201 CLR 552 at [57]).

Servier’s submissions

Case against Pharmacem

10    In the proposed pleading, Servier seeks injunctive and pecuniary relief against Pharmacem. Servier’s case against Pharmacem is for indirect infringement of the AC Patent, on the bases that:

Pharmacem has infringed and continues to infringe and/or threaten to infringe the AC Patent by causing, authorising, directing, procuring or inducing Apotex to import and sell perindopril erbumine products in Australia; and

Pharmacem is jointly liable for any infringement of the AC Patent committed by Apotex on the basis of having acted pursuant to a common design with Apotex to import and sell perindopril erbumine products in Australia.

11    Servier contends that this sets out a clear prima facie case against Pharmacem. It relies on a number of matters in support of this contention:

There is evidence, in correspondence from Apotex’s solicitors to Pharmacem, on the Pharmacem website and in an affidavit sworn by a solicitor for Apotex, that Pharmacem manufactures in Canada the perindopril erbumine products sold by Apotex in Australia (the Australian product).

The active pharmaceutical ingredient of the Australian product (API) is manufactured by Pharmacem.

Both the API and the Australian product fall within the scope of the claims of the AC Patent.

Pharmacem played an active role in obtaining and maintaining approval for the Australian product under the Therapeutic Goods Act 1989 (Cth) (TGA). As the manufacturer of the API, Pharmacem completed documents and supplied information as requested by the Australian regulatory authorities in order for Apotex to obtain TGA approval.

Pharmacem manufactures the API in circumstances where it knows about the AC Patent and, by its involvement in obtaining TGA approval, knows that the API will form part of the Australian product.

Apotex is a wholly owned subsidiary of Apotex Inc. Apotex Inc and Pharmacem are related companies, being subsidiaries of the same parent companies, Sherfam Inc and Apotex Holdings Inc. There is evidence that the Apotex group of companies (of which Apotex, Apotex Inc and Pharmacem form part) operates as a vertically integrated group of companies or as a single worldwide organisation.

The Apotex group of companies operates a single worldwide research and development program in Canada.

The Apotex group of companies has sold the relevant perindopril erbumine products throughout the world. For example, the products page of the Apotex group of companies’ worldwide website contains links to the local Apotex company website for each of Australia, Belgium, Canada, Czech Republic, Netherlands, Spain, United Kingdom and United States. Perindopril erbumine products are listed, inter alia, on the Australian website.

On 1 August 2006 proceedings were initiated in the United Kingdom against parties from the Apotex group of companies including Pharmacem and Apotex Inc in relation to infringement of Servier’s UK equivalent of the AC Patent. It follows that, at all material times, Pharmacem has been aware of the AC Patent and is not in the position of an innocent third party supplier.

Pharmacem has instructed Apotex’s solicitors with respect to discovery sought by Servier from Apotex.

The joinder of Pharmacem is necessary in order to obtain discovery of documents not in the possession of Apotex and likely to be in the possession of Pharmacem, given Pharmacem’s role in the manufacturing of the product and its involvement in the corresponding UK proceedings.

Joinder rather than the commencement of fresh proceedings against Pharmacem is preferable and consistent with the overarching purpose of s 37M of the FC Act.

As the proceedings are at an early stage and awaiting the determination of the Full Court on proposed amendments to the claims of the AC Patent, Apotex will not suffer any prejudice, nor will there be an unreasonable delay in the proceedings.

Authorisation

12    The exclusive rights given to a patentee are defined in s 13 of the Patents Act 1990 (Cth) (the Act). Under s 13 of the Act, the patentee has the exclusive right in the patent area to exploit the invention and to authorise another person to exploit the invention during the term of the patent.

13    Exploit is defined in the Act as follows:

exploit, in relation to an invention, includes:

(a)     where the invention is a product—make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or

(b)     where the invention is a method or process—use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use.

An unauthorised exercise of any of the patentee’s exclusive rights within the patent area will constitute an infringement of the patent.

14    Authorisation in the context of s 13 of the Act has the same meaning as in ss 36 and 101 of the Copyright Act 1968 (Cth) and as set out in University of New South Wales v Moorhouse (1975) 6 ALR 193, that is, ‘to sanction, approve or countenance’ (Bristol-Myers Squibb Company v F H Faulding (2000) FCA 316 at [97]; Inverness Medical Switzerland GmbH v MDS Diagnostics Pty Limited [2010] FCA 108 at [194]). Express or formal permission is not essential; inactivity may constitute authorisation, particularly where there is a power to prevent infringement (Australasian Performing Right Association Ltd v Metro on George Pty Ltd (2004) 61 IPR 575 at [19]). Servier submits that it is arguable that, as in a copyright context, providing the means for performing an infringing act and taking no steps to prevent or discourage that act will amount to authorisation if there is reason to believe that the act might occur (Moorhouse at 200-1).

Joint Tortfeasance

15    Servier further submits that, as an infringement of a patent is considered a tort (Spotless Group Ltd v Proplast Pty Ltd (1987) 10 IPR 668 at 670), the common law concept of joint tortfeasor liability will apply to patent infringements. Accordingly, a person who participates with another in an enterprise pursuant to a common design in the course of which a patent infringement is committed will be liable for that infringement as a joint tortfeasor (Morton-Norwich Products Inc v Intercen Ltd [1978] RPC 501). In Morton-Norwich at 512 and 515, Graham J held that provided a tort is in fact committed in the jurisdiction and it is proven that the defendants had a common design to commit it, it does not matter whether the agreement which is the basis of such design was made in the country or outside the jurisdiction, nor does it matter that the person sued has not done within the jurisdiction any act which taken by itself could be said to amount to infringement.

16    Servier also relies on Unilever Plc v Gillette (UK) Ltd [1989] RPC 583 (Gillette), in which the English Court of Appeal considered the joinder of a US-based parent company of the respondent, Gillette UK. The Court said that the key question was whether a common design could be inferred between the defendant and the party sought to be added as a co-defendant. Also of importance was whether the prospective co-defendant had acted in furtherance of the common design. Servier submits that leave was granted to serve the parent company as a common design was actually found, based on the fact that the parent:

    wholly owned Gillette UK (through another subsidiary);

    sold the allegedly infringing product to Gillette UK;

    was aware of the patent at the time of sale;

    was party to a know-how agreement with Gillette UK;

    exercised a worldwide right to veto products intended to be marketed by the Gillette group; and

    benefited financially from direct profits through sales and from royalties payable under the know-how and licence agreement.

In fact, the Court of Appeal found an arguable case of common design.

Apotex’s submissions

17    Apotex submits that no prima facie case has been made out by Servier, in the sense that Servier has no “reasonable prospect of successfully prosecuting the proceeding” and accordingly would not be able to withstand an application for summary dismissal under s 31A of the FC Act.

18    Apotex points out that the evidence only shows that Pharmacem manufactures the API but does not establish that Pharmacem manufactures the Australian product. The evidence is, Apotex says, that Apotex Inc manufactures the Australian product in Canada.

19    As to Pharmacem’s regulatory involvement forming the basis for the alleged common design, Apotex accepts that the inference may be drawn that Pharmacem has participated in the process by which the perindopril erbumine products sponsored by Apotex obtained TGA approval. However, Apotex says that Pharmacem’s regulatory involvement is a statutory requirement by virtue of its role as a supplier of the API. Apotex points out that the seeking, or obtaining, of regulatory approval is not patent infringement. Apotex argues that the evidence does not show that Pharmacem has otherwise participated in (whether directly or by way of common design) or authorised any act of infringement alleged against Apotex. Pharmacem’s knowledge that Apotex may well take the benefit of TGA approval to sell the Australian product is not, Apotex says, sufficient to constitute authorisation.

20    Further, Apotex points out that it is not clear that Pharmacem has engaged in any conduct within the reach of the Act, that is, within the “patent area”. Apotex also relies on a presumption against the extra-territorial operation of legislation, which Servier has not sought to displace (Pearce D and Geddes R, Statutory Interpretation in Australia (6th ed, Butterworths, 2006) pp 168-171).

21    Apotex submits that the Court should be slow to accept a proposition that the supply of information by a third party manufacturer of pharmaceuticals to the Australian regulator could amount to direct or indirect patent infringement. Apotex says that it is common practice within the policies and framework of the TGA that a local sponsor of a pharmaceutical will rely on a third party manufacturer’s supply of information. Apotex submits that, if this were not the case, it would follow that some, perhaps many, local sponsors would not be able to obtain regulatory approval for the supply of particular pharmaceuticals in Australia. If it be the case that a foreign third party manufacturer may infringe an Australian patent and be exposed to costly litigation in Australia and potential pecuniary relief when its only action was to supply the Australian regulator with information about a drug, Apotex submits that such foreign third party manufacturers may be discouraged from participating in the TGA approvals process, which would have a ‘stifling effect’ on the pharmaceutical industry in Australia.

22    Apotex says that the fact that the Apotex entities are in the same international corporate group with a product sold internationally is not sufficient to advance an argument in favour of the joinder of Pharmacem. Apotex maintains that Servier needs to explain how Pharmacem authorised Apotex's infringing conduct or otherwise formed a common design with it for joint tortfeasance purposes. The mere fact of membership of the same corporate group does not, Apotex says, get close to doing so.

23    The fact that an inference might be drawn that Pharmacem has been aware of the AC Patent or that Pharmacem instructed Apotex’s lawyers in relation to an application that it provide discovery does not, Apotex says, constitute conduct that gives rise to joint tortfeasance or authorisation.

24    As to Servier’s assertion that it is necessary to obtain injunctive relief against Pharmacem as the supplier of the Australian product, Apotex points out that Pharmacem has advised Apotex’s solicitors that it gives an undertaking in the following terms:

In the event of injunctive relief restraining the exploitation of perindopril in Australia by [Apotex] and/or Apotex Inc, [Pharmacem] undertakes to [Servier] and Servier Laboratories (Aust) Pty Ltd to abide by any such restraint.

25    Servier has not challenged that undertaking.

Consideration

Relevance of a Discovery Motive

26    It was suggested in Caboolture that one reason for the application to join additional respondents was to make them compellable to give discovery. Justice Ryan said that he was not aware of any authority suggesting that joinder is available for that purpose, which appeared to be ulterior to that contemplated by O 6 r 8 of the FCR. As in Caboolture, the role of Pharmacem has been known for some time and there is no explanation as to why Servier has resiled from its initial decision not to join Pharmacem at the outset.

27    However, Servier denies that discovery is the sole purpose of its application to join Pharmacem.

28    If the Court is not satisfied that there is no reasonable prospect of Servier succeeding in its case against Pharmacem, several United Kingdom cases indicate that, even if a primary motive for the joinder is the obtaining of discovery from Pharmacem, this does not preclude the joinder of Pharmacem (Molnlycke AB v Procter & Gamble Ltd [1992] RPC 21; Gillette; Unilever Plc v Chefaro Proprietaries Ltd [1994] FSR 135 (Chefaro)).

29    I agree, however, with what was said by Lord Hoffmann in Chefaro at 142-3, which, despite differences in the test for summary dismissal in that case, is apposite:

In practice, however, the plaintiff has no interest in obtaining a final judgment against the additional defendant. The remedy against the primary infringer would usually be adequate. The plaintiff will have achieved the whole of its objective by keeping the additional defendant in the action for the purposes of discovery. It therefore seems strange to me that its right to do so should depend upon whether the court thinks there is a serious issue to be tried on a question which thereafter no-one will seriously want to have tried at all…

The logical solution, as it seems to me, is that discovery of research and development documents should be available against a multi-national on a group basis… This would, however, require legislative change which the responsible authorities may wish to consider.

30    The fact that discovery is a motive, even a primary motive for the application, does not preclude joinder if Servier has a reasonable cause of action against Pharmacem.

Authorisation

31    Servier relies on authorisation by Pharmacem of the infringing acts of Apotex. Mere inactivity or failure to take some steps to prevent an infringing act does not necessarily establish authorisation (Adelaide Corporation v Australasian Performing Rights Association Limited (1928) 40 CLR 481 at 504). It is a question of fact in each case what is the true inference to be drawn. In Moorhouse (1975) 133 CLR 1, Gibbs J (at [13]) considered to be ‘too widely expressed’ the observation of Isaac J in dissent in Adelaide that infringement would lie where a person knew or had reason to know that a particular infringing act would be performed and having the legal power to prevent it nevertheless disregards that power and allows the act to be done.

32    Control is a significant element in finding authorisation. Mere facilitation of infringing conduct is insufficient, as is knowledge that there is a likelihood that there will be infringing use (Metro at [18], citing Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 at 497-8). Mere indifference as to whether an infringing act occurs cannot be treated as authorisation unless there was some duty to interfere: (Metro at [19]; Adelaide at 497; Inverness at [203]; Universal Music Australia Pty Ltd and Others v Sharman License Holdings Ltd and Others (2005) 220 ALR 1 at [382]). In Nationwide News Pty Ltd v Copyright Agency Ltd [1996] 65 FCR 399 at 422, the Full Court held that a person does not authorise an infringement merely because he or she knows that another person might infringe the copyright and takes no step to prevent the infringement. Knowledge that a breach of copyright is likely to occur does not necessarily amount to authorisation even if the person having that knowledge could take steps to prevent the infringement (at 424).

33    Servier relies on Caterpillar Inc v John Deere Ltd and Others [1999] FCA 1503, in which the Full Court held that an American parent company (Deere USA) could be joined to an action for infringement against an Australian company (John Deere) because a prima facie case for relief had been made out with respect to authorisation. In that case, Servier submits that the evidence indicated that Deere USA:

designed and manufactured the allegedly infringing tractors;

sold the tractors throughout the world through various subsidiaries;

owned 100% of the shares in John Deere (through a subsidiary);

controlled the marketing and import of the allegedly infringing tractors by John Deere;

provided John Deere with technical and marketing advice, assistance, know-how, instructions and services;

was aware of the patent before its first supply of the allegedly infringing tractors to Australia;

profited from the sale of the allegedly infringing tractors in Australia;

operated its own companies and subsidiaries as a single worldwide organisation;

had a common object with John Deere to reduce market share loss in Australia by selling the allegedly infringing tractors; and

instructed John Deere's Australian solicitors.

34    In its submissions, Servier states that the Full Federal Court held in Caterpillar that Deere USA was jointly liable for infringement by John Deere due to a common design to sell infringing tractors. However, although not contradicted by Apotex, this is incorrect. The Full Court found that Deere USA could be joined to an infringement action against John Deere because there was an arguable authorisation case. Although Caterpillar asserted both joint tortfeasorship and authorisation, the Full Court stated that for leave to be granted, Caterpillar only needed to make out a prima facie case for relief for one cause of action and that was made out with respect to authorisation. The Court observed that there was enough in the contents of the documents that Caterpillar relied upon to permit an inference that Deere USA had, at least in a broad sense, authorised the alleged infringing acts contrary to s 13(1) of the Act. The Court concluded at [34]:

It seems to us that Caterpillar must be taken to have made out a prima facie case for relief on the basis that it was open to infer that Deere USA had approved the importation into and sale in Australia of the tractors by [John Deere].

However, the evidence in Caterpillar was not exactly to the effect of Servier’s submissions. The evidence also indicated that:

Deere USA played a critical role in determining when and on what terms the allegedly infringing tractors would be marketed in Australia;

there was consultation among US personnel as well as discussion between Deere USA and John Deere concerning the placement of the allegedly infringing tractors on the Australian market;

the initial steps taken to place the allegedly infringing tractors in the Australian market were in the nature of a joint project undertaken by Deere USA with John Deere;

Deere USA provided special training for John Deere personnel in connection with the use of tractors;

Deere USA made particular efforts to supply John Deere with material designed to assist in the promotion and sale of the allegedly infringing tractors in Australia; and

Deere USA wanted to be and was informed of the promotional and marketing plans being made by John Deere in connection with the sale of the allegedly infringing tractors in Australia.

35    No such evidence has been presented as to the role of Pharmacem. It is clear that Caterpillar is not analogous to the present case as the role of Deere USA was quite different to that of Pharmacem.

Joint tortfeasance

36    The English Court of Appeal considered and explained its decision in Gillette in its subsequent decision of Chefaro, in which Glidewell LJ said at 138:

In order to show infringement by common design, it is necessary for the plaintiff to show some act in furtherance of the common design - not merely an agreement. The issue ... is: does the evidence show a good arguable case that there was such a common design and/or that [the parent] had procured or assisted [the subsidiary] to infringe the patent?

37    At 141, Glidewell LJ stated:

I do not accept that when Mustill LJ [in Gillette] was referring to “a fair inference” he meant anything other than that what must be shown is a good arguable case that there are facts from which an inference could clearly and properly be drawn.

38    In Mead Corporation v Riverwood Multiple Packaging [1997] FSR 484 at 490, Laddie J held:

The Court must be satisfied that there are proper grounds before it allows foreign parties to be exposed to the expense and inconvenience of joinder in proceedings here. In particular, it is not enough merely to point to the fact that the English and the foreign defendants are closely related to one another either by shareholding or otherwise. It is for that reason that in Chefaro the Court of Appeal reaffirmed that the fact that the foreign corporation had overall control, both financial and voting, of the English defendant was not sufficiently [sic] by itself to enable a Court to conclude that there is a good arguable case that the necessary inference of assistance or common design should be drawn. Some evidence that the foreign party was actually involved in furthering the common design of infringement must be shown to the Court or, as Glidewell LJ put it, it is necessary for the evidence to show that the foreign party “took part” in the primary act of infringement. Material which is neutral on this critical issue is of no assistance. It follows that material which merely shows that the foreign and domestic defendants are closely associated with each other, or which shows that the parent regards itself and its subsidiaries as a single economic unit throws no light of the issue of who took part in the acts alleged to infringe the patent. Similarly, the fact that a parent proclaims a strong proprietorial claim to all the assets and activities of its subsidiaries were not normally throw significant like on the crucial issue whether its hands participated in or controlled the primary act of infringement in England. A parent company which does not take part in the active infringement could just as well say that, in its eyes, it owned the subsidiary’s plant and operations. Such general proprietary claims and assertions say nothing about who is responsible for or involved in the detailed day to day activities of a subsidiary. Such evidence is therefore neutral. It does not advance a plaintiff's argument for joinder. The activities conducted by the English subsidiary in England would usually be a concern of the management of the English company alone.

39    If this approach were to apply in Australia, the evidence provides support for a case of common design by Pharmacem, Apotex Inc and Apotex.

Application of s 31A of the FC Act

40     In Spencer, French CJ and Gummow J discussed the application of s 31A in cases where complex questions of fact or unexplored areas of law have been raised at [25]–[26]:

Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law… Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant. The importance of those considerations is amplified if the case involves resolution of issues of law and fact, or mixed law and fact.

Lord Hope’s view, in Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1 at 260, was:

[t]he simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence… As Lord Woolf said in Swain v Hillman… that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.

41    The majority judgment of Hayne, Crennan, Kiefel and Bell JJ is not inconsistent with the joint judgment of French CJ and Gummow J in that it emphasises the need to consider whether the prospect of success is “reasonable”, that the power to dismiss an action summarily is not to be exercised lightly (at [60]) and that s 31A does not entail an inquiry directed to whether a certain and concluded determination can be made that the proceedings would necessarily fail (at [52]). In the present case, whether or not there is an arguable case of either authorisation or joint tortfeasorship depends on the facts. The mere facts that Apotex and Pharmacem form part of the same global group of companies and that a manufacturer and distributor relationship exists between them is not sufficient to support an arguable case.

42    However, this is not the only basis for the joinder of Pharmacem. Servier relies, at least, upon the actions of Pharmacem in gaining TGA approval of the Australian product, thus enabling the sale of the Australian product which, Servier says, infringes the AC Patent. There is no authority in Australia which suggests that Pharmacem’s actions amount to authorisation of infringement or constitute Pharmacem as a joint tortfeasor. However, as the joint judgment of French CJ and Gummow J makes clear, that is not sufficient for summary dismissal. The question is whether it can be said that, at trial, Servier has no reasonable prospect of success under either of the causes of action.

Authorisation

43    There is no evidence in support of the joinder application that Pharmacem, as a related company of Apotex, has a duty or power to interfere with or influence the actions of Apotex. Its role is, relevantly and as relied on by Servier, the manufacture and supply from Canada of the allegedly infringing Australian product. The fact that Pharmacem is the manufacturer in Canada of the API is not sufficient, alone, to establish that it could be liable under s 13 of the Act. Servier would need evidence of Pharmacem’s involvement in the exploitation of the product in Australia (cf Inverness). Servier’s role in fulfilling the requirements of the TGA is insufficient evidence in this respect.

44    On the evidence presented by Servier, I am satisfied that Servier has no reasonable prospect of success in establishing that Pharmacem authorised the alleged infringement by Apotex of the AC Patent.

Joint Tortfeasorship

45    Servier submits, and I accept that, considering the totality of the evidence and the approach in Chefaro, there is an arguable case against Pharmacem for having acted in common design with Apotex and Apotex Inc to infringe the AC Patent.

46    I am not satisfied that Servier would have no reasonable prospect of success in prosecuting this cause of action.

Should joinder be ordered under O 6 r 8 of the FCR?

47    In Peto at [32], Rares J observed that the structure of O 6 of the FCR gives primacy to r 2 over r 8. Servier relies on authorisation by Pharmacem of Apotex’s alleged infringement of the AC Patent and on actions that constitute Pharmacem a joint tortfeasor with Apotex and Apotex Inc for infringement of the AC Patent. This suggests that O 6 r 2 is apposite, yet Servier declined to seek joinder on that basis.

48    I have already accepted that, within s 31A of the FC Act and the principles enunciated in Spencer, Servier has established a reasonable cause of action against Pharmacem in respect of joint tortfeasorship. However, whether or not a party should be joined is not solely determined by the existence of a reasonable cause of action. If that were the case, O 6 r 8 would not provide for a discretion. It is for the party applying for joinder not only to establish a reasonable cause of action but also that the provisions of O 6 r 8 apply and that the discretion should be exercised. Such a determination depends on the matters in dispute in the proceedings. As the pleadings stands, O 6 r 8 is not satisfied. Servier has not sought to amend its pleading. However, the application was argued on the basis of the proposed amended pleading, so I will consider the proposed pleading of joint tortfeasorship. If that formed part of an amended pleading, applying the test enunciated in Spencer, O 6 r 8 allows for joinder under either limb (1)(a) or (1)(b).

49    There are competing discretionary factors. The Australian product is sold in Australia by Apotex and supplied to Apotex by Apotex Inc. Pharmacem has given an undertaking, in effect, to abide by any restraining orders if infringement is found. The question of infringement is an objective one, determined by reference to the claims of the AC Patent and the Australian product. The main factors against joinder are:

Other than Servier’s asserted need for discovery by Pharmacem, questions of the infringement of the AC Patent by the Australian product and the validity of the AC Patent do not require and are not affected by the joinder of Pharmacem;

Pharmacem is a company operating outside the patent area;

The only evidence of Pharmacem’s participation in an act within the patent area is the completion of data that is required from a manufacturer of the API of a product for the purposes of the TGA;

The orders to which Servier would be entitled if infringement were found would involve restraining the exploitation of the AC Patent in Australia. That would be achieved without the joinder of Pharmacem;

As to the alleged tort, Pharmacem will abide by any restraining orders made against its alleged joint tortfeasors;

Any order for damages payable to Servier would be joint and several. There is no suggestion that the joinder of Pharmacem is necessary to compensate Servier or that Apotex and Apotex Inc would not be able to satisfy any award of damages;

The joinder of Pharmacem is not necessary for the determination of the validity of the AC Patent; and

Servier chose not to join Pharmacem at the commencement of proceedings.

50    However, Apotex did not demonstrate any prejudice that would be occasioned by the joinder in terms of delay or other effects on the conduct of the proceedings other than, obviously, costs. The main discretionary factors in favour of joinder are that the case of joint tortfeasorship is not susceptible of summary dismissal under s 31A of the FC Act and that Servier wishes to obtain discovery against Pharmacem. If the Australian product infringes the AC Patent the question arises as to whether Pharmacem, as the manufacturer of the API of the Australian product, is a joint tortfeasor. While Pharmacem will abide by any restraining order against Apotex, there may be other consequences of a finding of joint tortfeasorship if Servier is successful. Pharmacem is not an unrelated third party manufacturer but is part of the same global organisation as Apotex and Apotex Inc. While Servier’s submitted need to obtain discovery from Pharmacem in relation to its case of infringement of the AC Patent by the Australian product is not of itself a reason to join Pharmacem, it is a factor to be taken into account.

51    If Servier’s pleading includes the proposed allegations as set out in [2] above, Pharmacem is liable to be joined to the proceedings under O 6 r 8. In my view the discretionary factors favour the joinder of Pharmacem to the proceedings. I will hear from the parties as to orders including, in the circumstances of this application, orders as to costs.

Associate:

Dated:    5 November 2010