FEDERAL COURT OF AUSTRALIA

Apotex Pty Ltd v AstraZeneca AB [2011] FCA 1520

Upon the respondents/cross-claimants by their senior counsel giving to the Court the usual undertaking as to damages:

THE COURT ORDERS THAT:

1.    AstraZeneca Pty Ltd be joined as the second respondent and second cross-claimant.

2.    The applicant/cross-claimant be restrained until further order from, in Australia and without the licence of the respondents/cross-claimants, selling, supplying, offering to sell or supply (including without limitation offering to sell or supply after 1 April 2012), soliciting or taking orders for, or advertising or promoting any generic rosuvastatin product.

3.    Within 1 day of the date of these orders, the applicant/cross-respondent notify the Department of Health of:

(a)    the making of order 2 above and the terms of that order; and

(b)    the terms of the interlocutory relief sought by the respondents/cross-claimants in their notice of cross-claim dated 2 December 2011 and the fact that the respondents/cross-claimants’ application for that relief is listed for further hearing on 31 January 2012.

4.    The notice to produce returnable this day be stood over to the Registrar’s list on 16 December 2011.

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

THE COURT ORDERS THAT:

1.    Pursuant to r 39.05 of the Federal Court Rules 2011 (Cth), order 3(b) made on 14 December 2011 and entered on 15 December 2011 be varied by deleting the words “the respondents/cross-claimants’ application for that relief” and inserting the word “matter” after “that” so that order 3(b) reads “the terms of the interlocutory relief sought by the respondents/cross-claimants in their notice of cross-claim dated 2 December 2011 and the fact that the matter is listed for further hearing on 31 January 2012.”

2.    On or before 19 December 2011, the applicant/cross-respondent notify the Department of Health of the making of these orders and the corrected terms of order 3 made on 14 December 2011.

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

REASONS FOR JUDGMENT

(Revised from the Transcript)

1    This is an application for interlocutory relief to enjoin Apotex Pty Ltd from pursuing its launch of a new generic drug. The parties are fierce competitors in the pharmaceutical market. AstraZeneca AB has relevantly three patents in Australia for what it claims are innovations in relation to rosuvastatin, a compound that is an active ingredient in a drug for treating high blood cholesterol levels and related conditions. The drug is marketed under the brand name “CRESTOR”. AstraZeneca has given an exclusive licence that authorises its Australian subsidiary AstraZeneca Pty Ltd (collectively “AstraZeneca”) to market rosuvastatin, the subject of the patents here. That exclusive licence is not in issue for the purposes of today’s proceedings.

2    Apotex commenced proceedings in this Court on 18 May 2011 by filing an application and statement of claim alleging that one of the AstraZeneca patents, known as the 051 patent, or the dosage patent, ought to be revoked on the ground of invalidity. Apotex filed some further amended particulars of invalidity in Court before the docket judge on 6 December 2011.

The three patents

3    The three patents in issue are:

    the 051 patent, or dosage patent, the subject of the invalidity proceeding;

    a patent known as the 842 patent, or composition patent, that concerned the composition of the pill in which the active ingredient is delivered; and

    a patent known as the 165 patent, or generic patent, that concerns the use of the active ingredient in the treatment of heterozygous familial hypercholesterolemia.

Each of those patents, if valid, will expire some time around 2020 or 2021. For present purposes it is only necessary to describe the following claims and specifications.

4    Claim 1 in the 051 patent is as follows:

“A method of treating a patient suffering from hypercholesterolemia which comprises administration as a starting dose of a single, once daily, oral dose of 5 to 10 mg of [rosuvastatin] or a pharmaceutically acceptable salt thereof, in the form of a pharmaceutical composition.”

5    The first paragraph of the specification for this patent was:

“The present invention relates to the use of a cholesterol-lowering agent, and more particularly to the administration of a particular dose or dosage range of the HMG CoA reductase inhibitor [rosuvastatin] and pharmaceutically acceptable salts thereof, hereinafter referred to as “the Agent” and illustrated (as the calcium salt) in formula 1 hereinafter. The invention further relates to the dosage range, start dose and dosage forms of the Agent.”

6    Claim 1 in the 842 patent is as follows:

“A pharmaceutical composition comprising [rosuvastatin] or a pharmaceutically acceptable salt thereof as the active ingredient and an inorganic salt in which the cation is multivalent, provided that:

(i)    the inorganic salt is not synthetic hydrotalcite; and

(ii)    the counter anion to the inorganic salt is not a phosphate.

…

However, we have found that for the Agent [ie rosuvastatin] it is not sufficient to improve stability by solely controlling pH in the formulation. We have found that with the Agent stability is improved by selection of an inorganic salt to be added to the composition which contains one or more multivalent inorganic cations. Whilst not wishing to be bound by theory we believe that the multivalent inorganic cation stabilises the structure of the Agent and makes it less susceptible to oxidation and/or lactonization.”

7    Claim 1 in the 165 patent is as follows:

“A method for treating heterozygous familial hypercholesterolemia in a patient suffering heterozygous familial hypercholesterolemia, comprising administering to the patient [rosuvastatin] or a pharmaceutically acceptable salt thereof.” (emphasis added)

The procedural history

8    Following the commencement of the proceedings, the matter was first returned before the docket judge on 16 June 2011. On that occasion, counsel for AstraZeneca raised the question as to whether or not the proceedings were being used to “clear the way” for Apotex to market a generic rosuvastatin product. However, these matters remained in limbo and during the course of the next few months, AstraZeneca’s solicitors sought to elicit from Apotex whether or not it was making some attempt to bring a generic product to the market. The attempts to elicit the information were deflected. During this period, AstraZeneca threatened to bring proceedings for preliminary discovery to see what Apotex was up to. Apotex suggested that AstraZeneca had no basis for seeking such relief.

9    On 8 July 2011, Freehills, the solicitors for Apotex, wrote to Blake Dawson, the solicitors for AstraZeneca asserting that contemplation of the launch of a generic rosuvastatin product was not an act of exploitation, and, therefore, an application for preliminary discovery was not concerned with a right that a party considered might give rise to relief in the future should certain events occur. Freehills asserted that the right to bring such proceedings only related to circumstances where a party reasonably believed it may have an immediate right to relief, and in this case, further information was required in order for it so to decide. It is not necessary to descend into whether that is an accurate characterisation of the right, although I should not be thought to be endorsing it. The letter asserted that should Apotex be so minded, it would be subject to:

“... numerous commercial and regulatory contingencies, not the least being the listing of the sponsored product on the Australian Register of Therapeutic Goods. Such a listing would come to your client’s attention in advance of any launch. There has been no such listing. In the absence of such a listing, and in light of our earlier comments as to the operation of Order 15A rule 6, your client cannot hold the necessary “reasonable belief” for the purposes of any application for preliminary discovery.” (emphasis added)

10    The question of preliminary discovery was agitated again by Blake Dawson in a letter of 3 October 2011, in which AstraZeneca’s solicitors argued that Apotex had not denied that it was contemplating the launch of a generic rosuvastatin product in the market. A response from Freehills came on 26 October 2011. In the meantime, on 13 October 2011, Apotex had obtained approval from the Therapeutic Goods Administration for its generic version of rosuvastatin. Nonetheless, on 26 October 2011, Freehills boldly told Blake Dawson that:

“… our client remains of the view that your client cannot have the requisite ‘reasonable belief’ to justify an application for preliminary discovery and it declines to respond to the requests for information in your letters of 20 July and 21 October 2011.” (emphasis added)

Freehills asserted that it had been unnecessary for them to respond to Blake Dawson’s letter of 3 October 2011 because counsel for AstraZeneca had already indicated at the directions hearing before the docket judge on 6 October 2011 that it would make an application for preliminary discovery.

Apotex launches its generic

11    By 17 November 2011, Apotex was ready to launch its generic into the market. On that day, Freehills wrote advising Blake Dawson that this is what had already happened. Freehills also said that Apotex had obtained approval from the Therapeutic Goods Administration for a variety of preparations involving the active ingredient, rosuvastatin, that would be published in the Australian Register of Therapeutic Goods the next day. They then asserted that Apotex had applied to the Pharmaceutical Benefits Branch of the Department of Health for some of those products to be put into the Schedule of Pharmaceutical Benefits at a benchmark price from 1 April 2012. Freehills sought a confidentiality rÉgime in relation to disclosure of any information about the generic products and advised that once that was put in place there would be no need for AstraZeneca to seek preliminary discovery, saying: “The orders sought in your client’s application are rendered moot”.

12    In the meantime, the market had become informed that another related generic form of the statins involved in this application, called atorvastatin, would also be listed on the Pharmaceutical Benefits Scheme (PBS) from 1 April 2012. It is accepted by both parties that this will have the effect that, from that time, the price of rosuvastatin will drop by about 16% regardless of any activity on the part of Apotex in relation to its generic form of the product.

13    From 17 November 2011, AstraZeneca sought to obtain information about the generic competitor with which it was faced. Apotex launched an intense marketing campaign on 17 November 2011 that immediately came to the attention of Mark Fladrich, AstraZeneca’s managing director in Australia, on the same day. Apotex’s campaign involved sending out about 5000 fliers advising of the availability of the generic. The marketing campaign involved Apotex offering a substantial number of pharmacy groups and individual pharmacists discounts in the order of 75% off the current price charged by AstraZeneca for its product. It combined that with an offer for an antidepressant preparation, which is also a generic product. I will deal with the evidence and the impact of that on the market shortly.

14    On 19 November, AstraZeneca’s solicitors advised Freehills that AstraZeneca proposed to file and serve a cross-claim in the proceeding alleging infringement of four patents in respect of rosuvastatin. However, only three of those are now relevant, namely, the 051, 842 and 165 patents. In the letter, AstraZeneca sought admissions from Apotex that its generic product would infringe its patents and sought information about the generic on a confidential basis. AstraZeneca suggested that it would be convenient for it to bring a proceeding based on fuller information to test, in an orderly way, whether or not the generic would infringe its patents.

15    On 23 November, Apotex’s solicitors made available certain confidential information in respect of its product under the terms of an email with a confidentiality undertaking provided earlier that day by AstraZeneca’s solicitors. On the same day, Apotex’s solicitors wrote that the filing of a cross-claim was entirely a matter for AstraZeneca, but it reserved the right to rely on any relevant period of delay. Apotex asserted that in light of the confidential information it had supplied, a solicitor could not sign a certificate in respect of any cross-claim, as required by r 16.01(c) of the Federal Court Rules 2011 (Cth), because there was not a proper basis for an allegation of infringement of, among others, the 842 and 165 patents.

16    The information provided by Apotex on 23 November disclosed the composition of its generic product and the indications for treatment. These included a recommended starting dose of 5 to 10 mg once per day. That dosage is a claim made in the 051 patent. The product information also disclosed that the chemical composition included calcium salt and stated that:

“In patients with hypercholesterolaemia:

Rosuvastatin is indicative for the treatment of hypercholesterolaemia (excluding heterozygous familial hypercholesterolaemia)”. (emphasis added)

That is to say, Apotex’s indication for its generic excluded the very use claimed in the 165 genetic patent.

17    Then, late on 25 November 2011, AstraZeneca’s solicitors advised Apotex’s solicitors that a cross-claim was being prepared. AstraZeneca sought Apotex’s agreement so that it could furnish the confidential information to an expert, Dr Desmond Williams, whom it had engaged for the purposes of reviewing the claims for infringement. That permission was given promptly on the next Monday, 28 November. However, an executed confidentiality undertaking was only provided by Dr Williams on 30 November.

18    It is important to appreciate that Apotex had previously challenged claims for the 051 and 165 patents in the Patents Office. Its claims for those patents to be further examined were rejected by the Office in 2010.

Evidence as to the balance of convenience

19    Each of the parties has put on significant evidence as to the financial consequences of either the grant or refusal of interlocutory relief. For its part, AstraZeneca has identified that in 2011 to date it has had sales of CRESTOR worth approximately $366 million and this forms a very significant part of its business income, enabling it to carry on significant activities in the development of its marketing and product base. From its point of view, CRESTOR is a very successful drug. AstraZeneca recognises that inevitably it will suffer a drop of about 16% in price in April 2012 when atorvastatin comes onto the market as the result of the operation of the PBS.

20    However, AstraZeneca says that it is already suffering significant impact from the aggressive and very substantial marketing campaign mounted by Apotex. This involved offering very substantial discounts for its generic rosuvastatin. The evidence shows that a considerable number of pharmacists and other customers who are aware of the price competition offered by Apotex’s generic products, are seeking either to delay orders, or to obtain discounts in price from AstraZeneca for CRESTOR based on the anticipated availability in April 2012 of Apotex’s generic.

21    For its part, Apotex relies on evidence to show that it has had a very significant initial market impact from its aggressive pursuit of business on the basis that it anticipates it will be registered for PBS purposes on 1 April 2012. Indeed, it is likely that on 15 January 2012 the generic will go into what is called the “Yellow Book”, unless Apotex is restrained. On the evidence before me, it will be very difficult to remove Apotex’s product from the Yellow Book if an injunction is not granted.

22    If the patents are valid, AstraZeneca is entitled to exploit that monopoly under the law. There is other evidence showing that a person in the position of AstraZeneca suffers a market backlash by seeking to enforce its monopoly and resisting the offer by its competitor of apparently attractive blandishments of significantly lower prices from a new generic product. Nonetheless, there is a significant effect on the patentee’s customers, and an understandable, and all too human, feeling that they are being overcharged very significantly when the generic can be sold at 75% less than the patentee’s price.

23    The evidence of Mr Fladrich, which I accept, demonstrates that AstraZeneca is likely to suffer a significant erosion of sales volume if Apotex’s generic were allowed to be sold. He also fears that there will be significant price erosion resulting from ad hoc reductions in the PBS system if AstraZeneca is made to compete in the market at the present time, with Apotex exploiting its prospective listing on the PBS system next April.

24    If Apotex is able to bring its generic to market and AstraZeneca’s infringement claims are found to be justified at a final hearing, the latter will have suffered significant and irreversible damage to its market position. This would flow from the fact that AstraZeneca would be required to meet the competition provided at the moment in the market by the generic, while it is able to be marketed. That has the effect of reducing the pharmaceutical benefit payable for all forms of the drug, including CRESTOR, because once prices drop, the PBS will only pay a benefit based on actual market prices. If CRESTOR had to compete in the market on price against Apotex’s generic, and the generic were later found to have infringed one or more of AstraZeneca’s patents, the benefit payable by the scheme would be permanently reduced to the competitive price. That would have the consequence of denying the patentee the ability to exploit its statutory monopoly by returning to a higher price in circumstances where its patent has been wrongly infringed.

25    That change in its market pricing will be irreversible in circumstances where AstraZeneca’s patents have over eight years to run, if they are valid. Mr Fladrich said that the harm that would be caused to AstraZeneca by the entry of the generic would be irreversible. He considered that AstraZeneca would never be capable of being restored to its current position because the market would become accustomed to the lower prices of the generic caused by the intense competition on its entry into the market and the irreversible nature of the PBS price reductions.

26    On 9 December 2011, Apotex’s managing director, Roger Millichamp, sent out to its market a letter stating:

“Apotex initiated Federal Court proceedings to revoke AstraZeneca’s 5 mg and 10 mg rosuvastatin dosing patent. It is only within the last week or so that AstraZeneca has responded by issuing a cross claim against Apotex alleging patent infringement. The commencement of a cross claim by AstraZeneca was not unexpected, although the fact that it waited for 7 months before doing so is itself an issue before the court in the current proceedings.

…

Apotex remains committed to bringing the most important molecules to the market at the earliest opportunity. That often involves litigation. Challenging bad patents is an investment Apotex is prepared to make so that it can bring important products to the market, with long term benefits to its customers and their clients.

Apotex is continuing with its launch plans for rosuvastatin and anticipates PBS listing on 1 April 2012. Apotex remains confident of success in the litigation against AstraZeneca and that the launch of its rosuvastatin products will be a great success for all involved.”

27    The letter also referred to the pendency of the injunction application that had been set down for today by the docket judge. Her Honour was unable to hear it today but fixed the application so as to meet the parties’ convenience.

28    For its part, Apotex pointed to the considerable expenditure it had made on its campaign and the significant impact of being able to make a first move into the market as it had done with its pre-emptive strike. It argued that this head start was something that it was entitled to continue to pursue until 31 January 2012, being the day the docket judge had fixed a fully contested interlocutory injunction application for hearing.

29    Mr Millichamp identified that, in his experience, the launch of the first generic version of a drug on the cardiovascular and other markets in Australia, together with a period of exclusivity, enables the exploiter to acquire market share rapidly for the new drug that it will retain even when other companies subsequently launch their generic version of the same drug. He said that there is an enormous commercial advantage in being the first generic in the market in the short, medium and long term. He described this as the “first mover advantage”. He noted that the PBS does not take account of the new entrants’ reductions in, or actual, prices in the market for the first month after the new drug has been entered on the PBS register. Accordingly, the prices that Apotex charges until 1 May 2012 will not be taken into account against it under the PBS scheme. Mr Millichamp noted that the customers’ forward buying behaviour in making pre-orders of a drug (such as a generic that will be launched into the market at a future date) had a corresponding impact on how much of a product wholesalers and pharmacies would buy from Apotex. He said that this part of the first mover advantage provides a once and only opportunity for the first generic brand to the market. He said that it was difficult for subsequent generic market entrants to gain market share and that Apotex itself had been in such a position in other circumstances. He asserted that Apotex currently enjoys a significant commercial advantage and opportunity to commence promoting and securing orders for generic rosuvastatin products that it intends to supply in Australia. He considered that Apotex had secured a major coup that gave it a major competitive advantage by being the first company to market a generic version of rosuvastatin in Australia.

30    Apotex contended that it had already changed the market. Mr Millichamp pointed out that the inclusion of rosuvastatin in Apotex’s range of products would allow it to compete more effectively for significant pharmacy group business. This was on the basis that these would be the first generic rosuvastatin products to be marketed in Australia and that the campaign had already given, and would continue to give, Apotex a continuing competitive advantage, facilitating discussions with pharmacy groups that had been aligned with its competitors. He noted that already 12 pharmacy groups (comprising approximately 300 stores) and 70 independent pharmacies in Australia who had been first line customers of Apotex’s competitors – that is, as I understand it, other generic manufacturers – had ordered the generic rosuvastatin from Apotex. There is some evidence that Ranbaxy and other generic manufacturers are planning to launch their generic rosuvastatin products when the PBS listing occurs in April 2012. But, at the moment, there is no evidence that they have actually done what Apotex has done, namely, entered the market with any activity that could be characterised as potentially infringing AstraZeneca’s patents.

31    Mr Millichamp said that if an injunction were granted today, then even if no generic competitor entered the Australian market prior to 31 January 2012, Apotex would be deprived of what would otherwise have been an additional seven weeks’ head start in promoting its generic products and securing market share for them.

Is there a prima facie case?

32    Curiously, Mr Millichamp confirmed that Apotex had sought, and obtained, from the Therapeutic Goods Administration the express exclusion of heterozygous familial hypercholesterolemia in the indications for treatment for its generic rosuvastatin that I set out earlier in these reasons (see [16]). That is, in contradistinction to the approved indications for CRESTOR and the claim in the 165 patent that it is indicative for treating the very condition that Apotex excluded from its indications. No explanation was given by Mr Millichamp or Apotex for seeking and obtaining that exclusion.

33    AstraZeneca’s experts gave the following evidence. Dr Paul Nestel, a consultant physician, explained that the practice of medical practitioners, in his experience, was that when they issued prescriptions for rosuvastatin, it was not usual for them to specify on the prescription the indication for which the drug is being used. For example, he said that practitioners generally would not write “hypercholesterolemia” in the prescription even if that was the condition for which the patient had been prescribed the drug. Similarly, they would not generally write the indication, such as heterozygous familial hypercholesterolemia on the prescription, even if that was the purpose for which the prescription was written for rosuvastatin. He said that often medical practitioners prescribe a drug using its compound name or its brand name, such as CRESTOR, and the prescription would be filled with a generic version if that were available.

34    Dr Nestel said that, ordinarily, a medical practitioner is taken to permit substitution of the original brand of the prescribed medication with a generic brand, unless the practitioner specifically states that brand substitution is not permitted. Practitioners can exercise that discretion by placing a tick mark in the appropriate box on the prescription, but the default position was to permit brand substitution, and in his experience, he rarely exercised his discretion not to allow that to happen. He also said that, as a medical practitioner, he would expect that the product information leaflet for a generic version of a particular pharmaceutical product would be the same as that for the original version of the product. That was because he would assume that if a generic version of the product had obtained approval, it had been shown to behave in the same way, in relation to the same indications, as the original version of the product. For that reason, if he was familiar with a product information leaflet for an original version of a particular pharmaceutical product, he would not consider it necessary to review the product information leaflet for the new generic version. That was because he would expect it to be the same and would expect pharmacists to have the similar view.

35    Dr Nestel said that he would be concerned if he became aware that a generic version of a branded drug had different indications to those specified in relation to the original branded drug. He noted that when a patient presented a pharmacist with a prescription for rosuvastatin, the pharmacist would generally not be aware of the indication for treatment of which the particular patient had been prescribed the drug. Details of the indication, such as, for example, the genetic condition of heterozygous familial hypercholesterolemia, would come into play when the decision was made to dispense either CRESTOR or a competing generic of the same active ingredient. A pharmacist would generally also respect the decision of the prescribing practitioner to either allow brand substitution by default or exercise a discretion not to do so.

36    In Dr Nestel’s opinion, having reviewed the 051, or dosage, patent, he considered that the 5 and 10 mg versions of the Apotex products fell within the claims in that patent. He also said he had read the 165 patent and considered that, from a practical perspective, use of all of the Apotex products would fall within its claims. That was because of the view he had taken about the prescribing habits of doctors and the dispensing habits of pharmacists. He went on to say that even if a pharmacist had in fact read the product information leaflet for Apotex products and was aware of the exclusion of heterozygous familial hypercholesterolemia, the pharmacist would generally not be aware of the indication for which rosuvastatin had been prescribed. That was because the indication would not usually be specified on the prescription presented by patients to the pharmacist and therefore he or she would not be able to refuse to dispense the Apotex products to patients.

37    AstraZeneca argued that the prescribing and dispensing habits to which Dr Nestel referred, showed that by supplying its generic, Apotex would infringe the 165 patent by authorising its use to treat heterozygous familial hypercholesterolemia within the meaning of s 117 of the Patents Act 1990 (Cth) (especially s 117(2)(b)).

38    Dr Desmond Williams was an expert in pharmaceutical science. He reviewed the 842, or composition, patent. He came to the conclusion that Apotex’s indications and materials, that have been provided in evidence supporting its products, showed that they fell within the description in this patent.

39    Apotex argued that in his initial description of the claimed invention in the 842 patent, Dr Williams had read it in a way which Apotex contends it ought to be read, namely, that the selection of the inorganic salt ought to form part of the mixture within the tablet, rather than forming part, as Apotex’s products do, of its surface. Apotex accepted that Dr Williams’ evidence was capable of being read and, indeed, I would for present purposes read it, to say what he said in his affidavit, namely:

“Overall, for the reasons outlined above, I consider that the rosuvastatin formulation of the Apotex Products as described in the Apotex Materials falls within the scope of claim 1 in the ‘842 Patent, notwithstanding that it is not the preferred embodiment of that claim.”

He had previously pointed out:

“There is no distinction in any of the claims [in the patent] between the tablet core and the tablet coating; just a reference to the components all being ‘comprised’ in a ‘pharmaceutical composition’.

40    Dr Williams said that he understood those words in the patent claims to have been intentionally broad, so as to capture all variations and compositions of a pharmaceutical composition which contained the inorganic salt in a way in which it performed its stabilising function.

Apotex’s submissions

41    Apotex argued that the 165 patent was highly likely to be found invalid. It argued that the 165 patent did no more than take a known drug for treatment of patients with high cholesterol conditions, and then it excluded patients who had homozygous familial cholesterol (a different condition to that the subject of the 165 patent) from its claims. Apotex said that the 165 patent had been found invalid in Europe and that the claimed invention in that patent was obvious because rosuvastatin was known to treat people with high cholesterol conditions. It argued that all that had been done in the 165 patent was to claim that the molecule would work in a particular case. Apotex said that it was obvious that the molecule could be applied for the uses in the claims in the patent. Apotex said that, therefore, AstraZeneca’s claim for infringement of this patent was insufficient to support a prima facie case; indeed, its overall case was a weak one.

42    Apotex also argued that the 842, or composition, patent should be read, as I have mentioned, as requiring the inorganic salt to be mixed in the core of the tablet with rosuvastatin rather than on the tablet’s surface. Apotex argued that the composition of its products, using a surface inorganic salt mixture, could not be seen to infringe the 842 patent.

43    Apotex pointed to its solicitor’s evidence that, only after the cross-claim had been received, did it engage Dr Phillip Marshall to provide it with expert evidence. The solicitor said that Dr Marshall understood that the problem described in the 842 patent was the instability of rosuvastatin due to oxidisation and lactonisation. The solicitor said that Dr Marshall understood that the invention claimed was that in order to stabilise rosuvastatin, the inorganic salt in which the cation was multivalent had to be closely associated in some way with the rosuvastatin, ie, it had had to be mixed with it. The solicitor said that Dr Marshall had concluded from his review of the information in the Apotex compositions that Apotex’s products did not incorporate rosuvastatin blended together with an inorganic salt in which the cation is multivalent so as to constitute an infringement of the 842 patent.

44    Apotex argued that AstraZeneca had been guilty of significant delay on and from 17 November so as to disentitle it to injunctive relief today. It argued that it should and could have moved much earlier, ultimately saying that it ought to have moved for ex parte relief before the docket judge on 6 December.

Consideration

45    The seminal case on conditions for the grant of interlocutory relief, Beecham Group Limited v Bristol Laboratories Pty Limited (1968) 118 CLR 618 and 621, was itself a case in which an interlocutory injunction had been sought based on claims of infringement of patents. The claims for infringement were based on allegations of actual sales of an infringing drug. The proceedings were commenced one month before the primary judge, McTiernan J, was moved for the interlocutory injunction. The principles for interlocutory relief authoritatively established in that case were endorsed subsequently in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at 81-84 [65]–[72] per Gummow and Hayne JJ, whose approach to the organising principles to be applied by courts in such applications was approved by Gleeson CJ and Crennan J at 67-68 [18].

46    The first question is whether AstraZeneca has established a sufficient prima facie case and the second question is whether the balance of convenience justifies the grant of interim relief that is sought.

47    In order to establish a prima face case it is necessary that, if the evidence remains as it is, there is a probability that, at the trial of the action, the applicant will be found to be entitled to relief. I am of opinion that a prima facie case has been made out here. First, there is the unexplained omission from the indications in Apotex’s description of its product that it excludes the heterozygous familial hypercholesterolemia condition. Apotex deliberately chose to avoid an explanation of that omission. It argued that a common feature of indications set out in a product’s description was that some indications were omitted. In argument, senior counsel for Apotex speculated that one explanation might be that it was avoiding an unnecessary fight. That contention hardly strengthens its argument that this patent was so obvious that it would be held to be invalid.

48    The evidence of Dr Nestel and Dr Williams satisfies me that there is a sufficient prima facie case that, if things remain the same at the trial, AstraZeneca will be able to establish a claim for infringement. Indeed, it is somewhat curious that if each of the patents were so obviously defective, Apotex, with its carefully planned marketing campaign and its having commenced this proceeding solely to challenge the validity of the 051 or dosage patent, has not been in a position to put any evidence of any expert on at all, albeit that it has relied on information and belief as to what Dr Marshall says.

49    That brings me to the second question of whether the balance of convenience favours the grant of an injunction. In Samsung Electronics Co Limited v Apple Inc [2011] FCAFC 156 at [194] Dowsett, Foster and Yates JJ cited with apparent approval the following:

“In Miller R, Burkill G, Birss C, Campbell D, Terrell on the Law of Patents (17th edn, Sweet & Maxwell Ltd, 2010) at 18–51, the authors say, under the heading ‘Clearing the way’, that:

When a basic patent for a pharmaceutical agent expires …, the innovator company will often posses a number of further patents which may be infringed by a generic product otherwise due to be launched at expiry of the basic patent … . While there is no obligation on a potential defendant to start proceedings, if a party who wishes to launch a generic product in such circumstances chooses to wait until there is insufficient time between notifying the innovator company of its intentions and the launch date, that fact can be taken into account by a court deciding whether or not to grant an interim injunction. In other words:

“Where litigation is bound to ensue if the defendant introduces his product, he can avoid all the problems of an interlocutory injunction if he clears the way first. That is what the procedures for revocation and declaration of non-infringement are for.”

Accordingly on evidence before the court that an interim injunction would cause uncompensatable loss to both sides; because on the claimant’s side there would be formidable difficulties in the way of trying to get back to its present market position after a major collapse in prices caused by generic competition and because on the defendant’s side one could not determine what the defendant would have sold if it entered the market at the moment it wishes to, the failure to clear the way has led to interim injunctions being granted in a number of patent cases in recent years.” (emphasis added)

50    Each of the parties will suffer some damage to its present position, whether or not an injunction is granted. Nonetheless, it seems to me that the balance of convenience, at the moment, is strongly in favour of maintaining the status quo ante. This is a proceeding in which AstraZeneca, as an innovator, would be irreparably damaged in its ability to exploit its invention for another eight years if it is forced to drop its prices to meet demand over the next seven weeks pending the hearing of the application for further interlocutory relief by the docket judge. It seems to me that while Apotex might lose the first mover advantage, it is an advantage that it has quite carefully sought to exploit through its somewhat misleading assertions that there was no basis for AstraZeneca’s claims for preliminary discovery.

51    In my opinion, the principles enunciated by Brett JA in Plimpton v Spiller (1876) 4 Ch D 286 at 292-293, as approved by Kitto, Taylor, Menzies and Owen JJ in Beecham 118 CLR at 625-626, are directly apposite:

“… if you assume that the defendant is in the right, there is no doubt that an injunction is a great hardship upon him; but if you assume that the plaintiff is right, then the mere keeping of an account by the defendant seems to me to be a great hardship on the plaintiff, for he would be driven to commence actions against the purchasers from and customers of the defendant, which would obviously lead to a multiplication of suits. There will be a hardship on the one side or on the other, and the question is, on which side does the balance appear to lie? Now if the trade of a defendant be an old and an established trade, I should say that the hardship upon him would be too great if an injunction were granted. But where, as here, the trade of the defendant is a new trade, and he is the seller of goods to a vast number of people, it seems to me to be less inconvenient, and less likely to produce irreparable damage, to stop him from selling, than it would be to allow him to sell and merely keep an account, thus forcing the plaintiff to commence a multitude of actions against the purchasers. Therefore, as a rule of conduct, I think that in such a case as this it is better, where the trade of the defendant is a new one – and not an old established trade – and where there are likely to be many customers of the new trade, to say that you will act against the new trader by injunction, whereas if he were carrying on an old trade you would act in the other way.” (emphasis added)

52    As their Honours went on to point out, about two weeks before it brought the proceedings, Beecham had warned Bristol Laboratories that if it began to market the competing product in Australia infringement proceedings would be taken. Their Honours then said (118 CLR at 626):

“It was in the face of this warning that the defendant commenced the acts now complained of, and the action was thereafter instituted without delay. Any goodwill the defendant may have built up for the hectacillin would of course be destroyed or damaged by granting an injunction, but that was a risk the defendant took with its eyes open. If it be not restrained, it will presumably take advantage of the time before the hearing to subject the goodwill of the plaintiff’s established trade in ampicillin to the prejudice of competition from a product which the defendant maintains has some points of superiority. In no meaningful sense could matters be said to be kept in status quo if in these circumstances the defendant were left free to pursue its course, merely keeping account of the profits it makes.” (emphasis added)

53    In my opinion that is the situation in the present case. The long term damage that AstraZeneca will suffer strongly outweighs the damage which Apotex might suffer. I am not persuaded that there has been any delay sufficient to warrant AstraZeneca being deprived of its right to protect its intellectual property pending the hearing fixed for 31 January 2012 or until further order.

54    Apotex engaged in a carefully orchestrated marketing exercise designed to catch AstraZeneca by surprise. Indeed, as appeared in the assertions in Freehills’ correspondence on Apotex’s behalf in the period before 17 November 2011, Apotex was asserting that AstraZeneca had no reasonable basis to seek preliminary discovery to find out whether Apotex was about to launch a generic into the market. The last such assertion was made by Freehills on 26 October 2011, days after its client had obtained approval from the Therapeutic Goods Administration for its generic rosuvastatin.

55    In my opinion, it would be entirely unreasonable to have expected AstraZeneca to have prepared a complex case involving allegations of infringement of its patents in a rush. These were important assets for it. It was entitled to protect those assets in as careful and appropriate a way as possible, having regard to the urgency of the proceedings. At every point beforehand, Apotex was fully on notice that its claims would be contested. What Apotex sought to do was, as it has candidly admitted, to build up as big a market presence and share as it could, having had the advantage of surprise. While Apotex had no obligation to foreshadow what it was going to do, it does not lie well in its mouth to criticise AstraZeneca for the time it took to, first of all, understand the effect and characteristics of the generic product and, secondly, obtain expert advice and evidence to demonstrate its claims for infringement and then bring proceedings in the Court to make those claims good.

56    I am unable to see any unreasonable delay on the part of AstraZeneca. While there may be some force in the criticism that it ought to have moved before the docket judge on 6 December 2011, as matters have transpired, both parties have produced considerably more evidence in the meantime and the proceedings before me have taken a very considerable time today. Because of the urgency of the matter I am sitting late in the evening and delivering these reasons ex tempore.

57    Obviously each case involving delay has to be assessed on its merits. Where parties have very valuable intellectual property rights, they are entitled to take some care in preparing a case that hopefully, once and for all, will be able to resolve issues as to whether, on an interim basis, a party is or is not entitled to protect those rights pending the final hearing of its claims for infringement. It is invidious that I must decide this contested application now. But that is because of the way in which Apotex has chosen to conduct the litigation that proceeded before the docket judge for some six months without any suggestion by Apotex that it proposed to launch a product in the way it did. Indeed, it engaged in somewhat disingenuous deflections of AstraZeneca’s foreshadowed application for preliminary discovery by asserting that it had no basis and was doomed to fail.

58    In those circumstances, it is difficult to accept Apotex’s complaint that, for some reason, AstraZeneca has been dilatory. Indeed, at no point in these proceedings has Apotex had any expert evidence to file, despite having made a claim for the invalidity of the 051 or dosage patent on 18 May this year. That dearth of evidence is to be seen in circumstances where, for the purposes of obtaining interlocutory relief, AstraZeneca has had to instruct, and obtain, the expert opinion evidence on which it has been able to rely. Indeed, Apotex says it still needs more time to be in a position to file its expert evidence; ie, was only able to put information and brief evidence on from Dr Marshall. In my opinion, that demonstrates the complexity of these matters and the need for parties to take, as both these parties have, proper and appropriate steps that they consider will protect their intellectual property and other rights adequately. In the circumstances there has not been any delay of significance by AstraZeneca.

The duration of the interlocutory injunction

59    It is most unfortunate that the Court has been put in the position where I have had to decide this case today in this way. Part VB of the Federal Court of Australia Act 1976 (Cth) requires parties to proceedings, as well as their lawyers, to cooperate to achieve the overarching purpose of the Court’s civil practice and procedure provisions. This includes achieving the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible.

60    In my opinion, Apotex’s conduct was calculated from the start to frustrate the achievement of that overarching purpose. That conduct is not the way that litigation of this kind in this Court or in the 21st century ought to be conducted. The only sensible course, if parties want to contest the validity of patents in a case of this nature, having regard to the issues that were raised, including the foreshadowed preliminary discovery application, would have been to ensure that the current issue of whether or not the generic should be marketed was raised promptly: Samsung [2011] FCAFC 156 at [194]. That would have enabled the parties to prepare the matter in an orderly way and the Court would not be inconvenienced in the inappropriate way that it has been today, sitting now at 8.50 pm delivering reasons for judgment on an urgent application that would not be otherwise able to be delivered in any reasonable time if I had to reserve my decision.

61    At the outset of the hearing today, counsel for AstraZeneca indicated, as they had before the docket judge on 6 December 2011, that it wished to proceed ex parte for injunctive relief up to 31 January 2012, but, that, if Apotex had substantive evidence and opposed the ex parte grant of relief, AstraZeneca wished to have the relief granted inter partes until further order. I made it clear then to Apotex’s counsel that the usual practice of the courts has been that, ordinarily, a respondent who appears to oppose the grant of interlocutory injunctive relief and leads evidence, rather than allowing the applicant to proceed ex parte, will lose the opportunity for the relief to be granted only up to a particular time shortly afterwards, while it better marshalls its case against interlocutory relief. I adhere to that view.

62    First, ordinarily the Court and parties should have one substantive hearing on the question whether inter partes interlocutory orders should be made to preserve the status quo until a final hearing on the merits. Put simply, a party is entitled to one bite at that cherry. Secondly, an application for ex parte injunctive relief usually proceeds far more quickly than a contested interlocutory hearing in the expectation that when the injunction is next returnable, the applicant usually, in the presence of the respondent, will have to discharge afresh the onus of satisfying the Court that the injunction should be continued until further order. As McLelland J said in Resort Hotels Management Pty Ltd v Resort Hotels of Australia (1991) 22 NSWLR 730 at 731C, on the first return of proceedings after the grant of an ex parte injunction, the substantive position should be that the applicant, or plaintiff, carries the onus of establishing its entitlement to relief “… on the first occasion on which the defendant [or respondent] has any opportunity at all to put its case to the court”.

63    Here, Apotex substantively opposed AstraZeneca’s application. That opposition was based on a deal of evidence and submissions. Apotex was aware that it ran the risk that by doing so I would make an order until further order. The time of the Court is public time. It would be contrary to the ordinary practice I have referred to and to the overarching purpose in Pt VB of the Federal Court of Australia Act to permit Apotex to have the benefit of requiring AstraZeneca to prove its case for interlocutory relief once more on 31 January 2012. I am satisfied that I should grant interlocutory relief as sought until further order.

Associate:

Dated:    20 January 2012