FEDERAL COURT OF AUSTRALIA

Apotex Pty Ltd v AstraZeneca AB (No 5) [2013] FCA 560

THE COURT ORDERS THAT:

1.    Subject to any costs orders already made by the Court, AstraZeneca AB and AstraZeneca Pty Ltd pay the costs of Apotex Pty Limited (including all reserved costs and the costs of and incidental to the hearing in relation to costs) of the proceedings, as agreed or taxed, excluding the costs of Apotex Pty Limited incurred in connection with its application for indemnity costs.

2.    To the extent necessary, the parties are granted leave to appeal in respect of the orders for costs made today.

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

THE COURT ORDERS THAT:

1.    Subject to order 2 below:

a.    Claims 6 and 19 to 25 of Australian Patent No 2000051842 (the “842” Patent”) be revoked;

b.    Claims 11 to 20, 22 and 23 of Australian Patent No 2002214165 (the “165” Patent”) be revoked.

2.    Order 1 be stayed:

a.    Initially for a period of 21 days from the date on which these orders are pronounced; and

b.    If an appeal is lodged within that period, until the final determination of that appeal, or further order.

3.    To the extent necessary, leave is granted to the AstraZeneca parties to appeal order 1 above.

4.    Subject to any costs orders already made by the Court, AstraZeneca AB and AstraZeneca Pty Ltd pay the costs of Watson Pharma Pty Ltd (including all reserved costs and the costs of and incidental to the hearing in relation to costs) of the proceedings, as agreed or taxed.

5.    To the extent necessary, the parties are granted leave to appeal in respect of the orders for costs made today.

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

THE COURT ORDERS THAT:

6.    Subject to order 2 below:

a.    Claims 6 and 19 to 25 of Australian Patent No 2000051842 (the “842” Patent”) be revoked;

b.    Claims 11 to 20, 22 and 23 of Australian Patent No 2002214165 (the “165” Patent”) be revoked.

7.    Order 1 be stayed:

a.    Initially for a period of 21 days from the date on which these orders are pronounced; and

b.    If an appeal is lodged within that period, until the final determination of that appeal, or further order.

8.    To the extent necessary, leave is granted to the AstraZeneca parties to appeal order 1 above.

9.    Subject to any costs orders already made by the Court, AstraZeneca AB and AstraZeneca Pty Ltd pay the costs of Ascent Pharma Pty Ltd (including all reserved costs and the costs of and incidental to the hearing in relation to costs) of the proceedings, as agreed or taxed.

10.    To the extent necessary, the parties are granted leave to appeal in respect of the orders for costs made today.

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

REASONS FOR JUDGMENT

1    On 5 March 2013, I delivered judgment in these proceedings, being Apotex Pty Ltd v AstraZeneca AB (No 4) [2013] FCA 162 (principal reasons for judgment). These reasons concern the costs orders and further orders for invalidity which should be made consequent upon that decision.

Costs

2    Two claims were put before me in respect of costs. First, AstraZeneca submitted that there should be an apportionment of costs, in effect, reducing the costs of Apotex, Watson Pharma and Ascent (the generic parties) by 25 per cent to take account of the issues at trial in respect of which it might fairly be said the generic parties did not succeed. Second, Apotex claimed indemnity costs against AstraZeneca.

3    The first issue, primarily relating to the indemnity costs claim, is the applicable rules. The proceedings were commenced in May 2011 in respect of what I have called in the principal reasons for judgment the 051 or low dose patent. As at May 2011 the previous form of the Federal Court Rules was in force. The Federal Court Rules 2011 (Cth) (the new rules) in accordance with r 1.04(1) apply to a proceeding started in the Court on or after 1 August 2011. Rule 1.04(2) provides that the new rules also apply to a step in a proceeding that was started before 1 August 2011 if the step is taken on or after 1 August 2011. Rule 1.04(3) provides, however, that the court may order that the Federal Court Rules as in force immediately before 1 August 2011 apply with or without modification to a step mentioned in subr (2).

4    After August 2011 and the coming into force of the new rules these proceedings were expanded to incorporate allegations of infringement and validity in respect of both the 165 or HeFH patent and the 842 or cation patent, with those patents being brought into the proceedings in December 2011 and January 2012. The offers of compromise or Calderbank offers sent by Apotex consist of two letters dated 24 January 2012, two letters dated 7 September 2012, with formal notices of offers of compromise thereafter served under cover of a letter dated 13 September 2012. In other words, it is apparent that although the proceedings were commenced in May 2011 in respect of one of the patents, the vast majority of the proceedings was conducted at a time when the new rules were in force and, more to the point, all of the letters offering to settle the proceedings and notices of offers of compromise were sent when the new rules were in force.

5    I do not see any reason in these circumstances to make an order that the old rules apply. I do not accept that it is sufficient reason to make such an order that the new rules might be perceived as less generous to a party making an offer to settle proceedings than the old rules in the circumstances of this case. The fact is that all of the offers to which I have referred were made at a time when the new rules were in force. There is no evidentiary foundation to draw any inference that Apotex might have been operating on the basis that its offers of compromise should be dealt with pursuant to the old as opposed to the new rules. To the contrary, at least in respect of the formal offers of compromise dated 13 September 2012, there is express reference to the offers being made in accordance with the new rules.

6    It cannot be said in the circumstances of the timing of these proceedings that Apotex had any form of accrued right or even reasonable expectation that an order would be made pursuant to r 1.04(3). In these circumstances, I cannot see any reason to make an order pursuant to r 1.04(3). It follows that the new rules apply to the steps taken in these proceedings by operation of r 1.04(2). The relevant steps constitute the three groups of letters to which I have referred. Of the two letters dated 24 January 2012, one related to the 165 or HeFH patent and the other to the 842 or cation patent. To the extent that Apotex submitted that I should construe these offers of compromise as, in effect, offering to AstraZeneca to leave on foot and untouched the 051 or low dose patent, I do not accept the submission. If Apotex had truly intended to make an offer which dealt with all three patents then I would have expected there to be some reference in the letters to what would happen in respect of the 051 or low dose patent. However, there is no such reference. It is plain that each of the letters is intended to constitute a stand-alone offer in respect of the particular patent to which the offer relates. Accordingly, it cannot be said that the offers of 24 January 2012 relate in any way to the 051 or low dose patent. They certainly did not offer AstraZeneca any form of advantage in respect of the 051 or low dose patent. To that extent, I do not accept Apotex’s characterisation of the offers.

7    Taking the offers on their face, the first relates to the 165 or HeFH patent and the second relates to the 842 or cation patent. I do accept that each of the offers contains some element of compromise insofar as they offer that each party should bear its own costs of the proceedings as they relate to each particular patent. There is, accordingly, at least an element of compromise proposed. However, I do not accept that in all of the circumstances prevailing as at 24 January 2012 it was in any way unreasonable for AstraZeneca not to accept the offers as proposed.

8    Apart from each party bearing its own costs, what the 24 January 2012 letters propose is the dismissal outright of AstraZeneca’s claims for infringement. This is in circumstances where AstraZeneca had the benefit of an interlocutory decision in its favour. True it is that the interlocutory decision was based on the evidence that existed at the time and in accordance with the principles applying to interlocutory judgments but there is no doubt that AstraZeneca had the interlocutory decision in its favour. It also had available to it a wealth of evidence which, if it had ultimately been accepted, would have led to a final decision in AstraZeneca’s favour. Accordingly, far from the amount of evidence available at the interlocutory stage weighing in favour of a conclusion that AstraZeneca’s failure to accept the January offers evidences some form of unreasonableness, it seems to me that once hindsight is put to one side it could not be said that it was in anyway unreasonable for AstraZeneca not to accept what was put to it on 24 January 2012.

9    Of the 7 September 2012 letters, the first relates to the 165 or HeFH patent and the 051 or low dose patent and the second relates to the 842 or cation patent. As AstraZeneca has noted each of these letters offering to settle the proceedings proposes that AstraZeneca grant to Apotex a “royalty free licence under and for the remainder of the term of each of the” HeFH patent and low dose patent and a “royalty free licence under and for the remainder of the term” of the cation patent.

10    While I accept that it is not impossible that such a proposal might constitute a formal offer of compromise in accordance with r 25(14) of the new rules it is apparent in this case that the proposed licence did go well beyond the terms of the proceedings, and the details of what might be involved in such a licence remained entirely at large. In addition, the offers of 7 September 2012 had to be clarified by further letter of 10 September 2012 which said:

By way of clarification, for the avoidance of doubt, the offers of compromise set out in those letters are deliberately silent on the question of damages under the client’s cross-undertaking. Our client makes no offer to compromise its entitlement to claim damages under the undertaking.

11    In the circumstances of these letters, which included the necessity to work out the terms of a licence, again, I do not accept that there was anything unreasonable in AstraZeneca’s failure to respond by way of acceptance of the proposed settlement offers. In terms of the 13 September 2012 formal offer of compromise the licence proposal, again, appears in the notice of offer of compromise and for the same reasons I have already given it does not seem to me that it could be said that there is any element of unreasonableness in AstraZeneca’s failure to accept the offer as referred to in Pt 25 r 25(14)(2) of the new rules. For these reasons I am not satisfied that there should be any order for indemnity costs in favour of Apotex by reason of the three sets of communications attempting to settle the proceedings.

12    This leaves the issue of apportionment. AstraZeneca submits that the costs of the generic parties should be reduced to 75 per cent to take account of the fact that AstraZeneca succeeded in its defence of the patents on a number of grounds and also that the generic parties failed insofar as they alleged a particular construction of the 842 or cation patent, specifically the question of the meaning of salt in that context and the relevance of the coating. There is no doubt that in respect of the 842 or cation patent the generic parties did not succeed on all of the grounds on which they said the relevant claims of the patent were invalid and it is also true that they did not succeed on the issues of construction to which I have referred.

13    That said, however, it does not seem that this is an appropriate case for apportionment having regard to the issues which were raised and which call up for consideration the types of matters referred to by both McKerracher J in Bradken Resources v Lynx Engineering Consultants (No. 2) [2012] FCA 1478 at [5] and Doric Products v Lockwood Security (2002) 54 IPR 495; [2002] FCA 282 at [10]. In short, in both of those cases reference was made to the inevitable overlap between issues in complex cases with the consequence that it is not always fair, reasonable or appropriate that there be apportionment merely because a party has failed on one or more issues. In this case I simply do not accept, having heard the whole of the case and written the judgment, that the issues were anywhere near as discrete as AstraZeneca would have it. It seems to me that although they might appear to be discrete, evidentiary matters and submissions on one topic almost invariably informed approaches to another topic. In these circumstances it seems to me that it would be quite unfair to deprive the generic parties of any part of their costs in circumstances where in the overall result they were wholly successful. For this reason I reject AstraZeneca’s contention that there should be any reduction in those costs.

Further invalidity orders

14    In my principal reasons for judgment at [522] I said:

For the reasons given I consider that all of the claims of the 051 or low dose patent are invalid and that the patent should be revoked. The claims on which AZ relies to assert infringement of the 165 or HeFH patent (claims 1 to 10 and 21) and the 842 or cation patent (claims 1 to 5, 7 to 9 and 10 to 18) are also invalid and liable to be revoked, although there is a question whether any of the claims of these patents can be sustained given the conclusions I have reached as set out above.

15    The reason that [522] was expressed in this way is that AstraZeneca relied on only certain claims of the 165 or HeFH patent and 842 or cation patent to assert infringement by the generic parties. Further, although Watson Pharma and Ascent asserted that all of the claims of all three patents were invalid, Apotex’s claims were more confined. For these reasons, the principal judgment focused upon the claims on which AstraZeneca relied to assert infringement against the generic parties.

16    Paragraph [522] of the principal reasons for judgment reflects the fact that Watson Pharma and Ascent had asserted that all of the claims of each of the patents were invalid on the identified grounds, and that their evidence traversed the issues of invalidity relating to these grounds. It is for this reason that, in respect of the 165 or HeFH and the 842 or cation patent, I expressly noted that there remained a question whether any of the claims of these patents could be valid, given the conclusions I had reached. The issue of the validity of the remaining claims challenged by Watson Pharma and Ascent was reserved for hearing today. Watson Pharma and Ascent contend that none of the remaining claims of the two patents can be valid in the face of the conclusions in the principal reasons for judgment.

17    For AstraZeneca, the position is simply that there was not a particular focus on these claims in the proceedings and for that reason there is no cause for any declarations as to invalidity of those other claims to be made. In response to that, Watson Pharma and Ascent refer to the fact that they always alleged invalidity of all of the claims of the patents, that their evidence did traverse all of those claims and perhaps more importantly, in circumstances where there have been findings and conclusions which manifestly show that the remaining claims are also invalid as Watson Pharma and Ascent contended, the invalid claims should not remain on the register, in effect, inappropriately claiming monopolies in circumstances where the principal reasons for judgment on their face indicate that those claims are invalid.

18    In respect of the 842 or cation patent, it seems to me that the position is really beyond argument. AstraZeneca happens not to have contended infringement based on claims 6 and 19 through to 25, but, as I have said, the generic parties did assert invalidity of all of those claims, and their evidence traversed the invalidity of those claims. The conclusions which I reached about the cation patent, in particular the deferred priority date until 31 January 2005 as set out at [428] of the principal reasons for judgment, and lack of novelty based on, amongst other things, the international publication number W001/54669, as referred to at [439] and [440] of principal reasons for judgment, mean that it must be the case that claim 6 is also invalid. Further, claims 19, 20, 21 and 22, each claimed the use of an inorganic salt to stabilise rosuvastatin and also claimed the same novelty-conferring features as claims 1, 3, 4 and 6. As set out at [459] of the principal reasons for judgment judgment, the issue of addressing the stability of rosuvastatin would be addressed by the uninventive worker in the field as a matter of course in precisely the same way as the claimed invention in those claims. It follows that claims 19 through to 22 also simply cannot stand in the face of the conclusions in the principal reasons for judgment. Claims 23, 24, and 25, as submitted by the generic parties, concern a method of producing the stabilised pharmaceutical composition, including rosuvastatin, the composition having the same novelty features as claims 1, 3 and 6. And it must follow, just as with claims 19 through to 22, that these claims are also invalid.

19    In circumstances where the generic parties always contended that each of the claims of the 842 or cation patent were invalid and had evidence to support those claims, and in circumstances where the conclusions of the principal reasons for judgment inevitably and inexorably lead to invalidity of the remaining claims of the 842 or cation patent, I am satisfied that orders should be made as the generic parties seek in relation to that patent.

20    I turn now to the 165 or HeFH patent. The submission in relation to this patent is somewhat different. It is that the remaining claims, 11 through to 20 and 22 and 23, are limited to the same features as the claims which I expressly found to be either disclosed in the prior art, obvious, or subject matter not constituting a manner of manufacture. According to the generic parties, these remaining claims are “Swiss-style” claims because they seek to encompass the same subject matter as the method of treatment claims in 1 to 10. They were the subject of evidence by Dr O’Brien in which he noted the existence of the same features as he had already discussed in relation to claims 1 to 10, and there was no submission or contention by AstraZeneca that those claims were distinguishable or different in scope when compared to claims 1 to 10. According to the generic parties, it necessarily follows from the principal reasons for judgment that claims 11 to 20, 22 and 23 are invalid, again, in circumstances where they always contended invalidity, had evidence to support it, and where they call in aid also the public interest for invalid claims not remaining on the register. They seek the further orders as set out in the original process.

21    Again, my conclusions in the principal reasons for judgment relation to the HeFH or 165 patent are irreconcilable with the validity of these remaining claims. It is plain from those conclusions that these claims cannot be sustained in the face of my conclusions. In circumstances where the generic parties always contended for invalidity of these claims, had evidence to support it and invalidity is again the inexorable and inevitable result of the reasoning in the principle judgment, I can see no reason not to make the orders that are sought in respect of the 165 or HeFH patent.

Associate:

Dated:    13 June 2013