FEDERAL COURT OF AUSTRALIA

H Lundbeck A/S v Alphapharm Pty Ltd [2016] FCA 1232

ORDERS

THE COURT ORDERS THAT:

1.    The separate questions be answered as follows:

(a)    Are Alphapharm Pty Ltd and/or Aspen Pharma Pty Ltd estopped from raising the issue of whether the Second Applicant was the exclusive licensee of the patent in dispute from 14 June 2009 to 9 December 2012?

Answer: No.

(b)    Should the Respondents (or any of them) be precluded from placing the matter of whether the Second Applicant was the exclusive licensee of the patent in issue from 14 June 2009 to 9 December 2012 by reason of the doctrine of abuse of process?

Answer: No.

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

ORDERS

THE COURT ORDERS THAT:

1.    The separate questions be answered as follows:

(a)    Are Alphapharm Pty Ltd and/or Aspen Pharma Pty Ltd estopped from raising the issue of whether the Second Applicant was the exclusive licensee of the patent in dispute from 14 June 2009 to 9 December 2012?

Answer: No.

(b)    Should the Respondents (or any of them) be precluded from placing the matter of whether the Second Applicant was the exclusive licensee of the patent in issue from 14 June 2009 to 9 December 2012 by reason of the doctrine of abuse of process?

Answer: No.

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

ORDERS

THE COURT ORDERS THAT:

1.    The separate questions be answered as follows:

(a)    Are Alphapharm Pty Ltd and/or Aspen Pharma Pty Ltd estopped from raising the issue of whether the Second Applicant was the exclusive licensee of the patent in dispute from 14 June 2009 to 9 December 2012?

Answer: No.

(b)    Should the Respondents (or any of them) be precluded from placing the matter of whether the Second Applicant was the exclusive licensee of the patent in issue from 14 June 2009 to 9 December 2012 by reason of the doctrine of abuse of process?

Answer: No.

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

ORDERS

THE COURT ORDERS THAT:

1.    The separate questions be answered as follows:

(a)    Are Alphapharm Pty Ltd and/or Aspen Pharma Pty Ltd estopped from raising the issue of whether the Second Applicant was the exclusive licensee of the patent in dispute from 14 June 2009 to 9 December 2012?

Answer: No.

(b)    Should the Respondents (or any of them) be precluded from placing the matter of whether the Second Applicant was the exclusive licensee of the patent in issue from 14 June 2009 to 9 December 2012 by reason of the doctrine of abuse of process?

Answer: No.

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

REASONS FOR JUDGMENT

JAGOT J:

Separate questions

1    These reasons for judgment answer these questions:

(a)    Are Alphapharm Pty Ltd and/or Aspen Pharma Pty Ltd estopped from raising the issue of whether the Second Applicant was the exclusive licensee of the patent in dispute from 14 June 2009 to 9 December 2012?

(b)    Should the Respondents (or any of them) be precluded from placing the matter of whether the Second Applicant was the exclusive licensee of the patent in issue from 14 June 2009 to 9 December 2012 by reason of the doctrine of abuse of process?

2    On 4 October 2016, I ordered that these questions be answered separately from all other issues in the proceedings as contemplated by r 30.01(1) of the Federal Court Rules 2011 (Cth). The order reflects the contentions of the applicants, H Lundbeck A/S (Lundbeck) and Lundbeck Australia Pty Ltd (Lundbeck Australia), that the respondents should not be granted leave to withdraw the admissions in their defences that Lundbeck Australia is the exclusive licensee in Australia of Australian Patent No 623144 titled “(+)-enantiomer of citalopram and process for the preparation thereof” (the Lexapro patent) on the basis that two respondents, Alphapharm Pty Ltd (Alphapharm) and Aspen Pharma Pty Ltd (Aspen), are subject to an issue estoppel and all respondents (the others being Apotex Pty Ltd or Apotex and Sandoz Pty Ltd or Sandoz) would be engaged in an abuse of process if permitted to question the status of Lundbeck Australia as the exclusive licensee of that patent.

3    The answer to each question is “no”.

4    My reasons follow.

The current proceedings

5    The Lundbeck parties commenced proceedings against each respondent on 26 June 2014 alleging that they had infringed the Lexapro patent and claiming damages or an account of profits. In para 7(b) of the statements of claim it was alleged that Lundbeck Australia is the exclusive licensee of the Lexapro patent (exclusive licensee being a term defined in Schedule 1 to the Patents Act 1990 (Cth) (the Act) as “a licensee under a licence granted by the patentee and conferring on the licensee, or on the licensee and persons authorised by the licensee, the right to exploit the patented invention throughout the patent area to the exclusion of the patentee and all other persons”). By s 120(1) of the Act, only the patentee or an exclusive licensee may bring proceedings for infringement of a patent.

6    On 24 July 2014, before any defences were filed, these proceedings were stayed pending resolution of an application for special leave to appeal to the High Court of Australia in respect of the grant of an extension of time to Lundbeck to apply to extend the term of the Lexapro patent and an appeal to this Court against the Commissioner of Patents’ decision to extend the term of the Lexapro patent (proceedings which will be explained in greater detail below).

7    By 22 September 2015, the stay had been exhausted by reason of resolution of the outstanding appeals. The Lundbeck parties filed amended and then further amended statements of claim on 9 and 19 November 2015 respectively. In each version of the pleading it was alleged that Lundbeck Australia is the exclusive licensee of the Lexapro patent.

8    On 9 December 2015 and 24 February 2016, the respondents each filed a defence and an amended defence respectively in which they admitted that Lundbeck Australia is the exclusive licensee of the Lexapro patent.

9    On 29 March 2016, a few weeks after the respondents’ solicitors sent a letter to the solicitors for the Lundbeck parties requesting further information about the status of Lundbeck Australia, the respondents served proposed further amended defences in which, amongst other things, they sought to withdraw the earlier admissions and put in issue the status of Lundbeck Australia as the exclusive licensee of the Lexapro patent. After the Lundbeck parties advised on 21 April 2016 that they would not consent to the filing of the proposed further amended defences, the respondents filed interlocutory applications on 14 July 2016 seeking leave to withdraw the admissions and amend the defences as proposed. I decided that it would be appropriate to resolve the contentions of the Lundbeck parties about issue estoppel and abuse of process before determining the interlocutory applications, which led to the order for determination of separate questions set out above.

10    It will be apparent from the above that, insofar as the current proceedings are concerned, the admissions were first made on 9 December 2015 and sought to be withdrawn on 29 March 2016. Due to these and other interlocutory steps not yet determined, directions for evidence have not yet been made and the proceedings have not been fixed for hearing.

Facts said to give rise to estoppels/abuses of process

11    Lundbeck applied for the Lexapro patent for (+) – citalopram (also known as escitalopram) on 13 June 1989. The Lexapro patent was granted on 31 August 1992. Pursuant to s 67 of the Act, the standard term of the Lexapro patent was to expire on 13 June 2009.

12    The compound (+) – citalopram is the (+) – enantiomer of citalopram which is a racemic mixture containing equal amounts of (+) and (-) enantiomers of citalopram. Citalopram was disclosed in Australian Patent No 509445 owned by Lundbeck which expired on 5 January 1993 (the Citalopram patent) and the drug Cipramil (an antidepressant drug marketed by Lundbeck Australia in the form of an acid salt addition of citalopram) was registered on the Australian Register of Therapeutic Goods (the ARTG) from 9 December 1997.

13    On 27 May 2004, in response to an application by Lundbeck lodged on 22 December 2003, the Commissioner granted Lundbeck an extension of term of the Lexapro patent until 13 June 2014 based on a view that the provisions of the Act and the Therapeutic Goods Act 1989 (Cth) (Therapeutic Goods Act) enabled the extended term to be granted by reference to the date of registration of Lexapro (a drug containing the active compound (+) – citalopram) on the ARTG, which occurred on 16 September 2003.

14    On 26 September 2005, Lundbeck and Lundbeck Australia entered into an agreement described as an Exclusive Licence Deed. This is said to be the foundation for the status of Lundbeck Australia as the exclusive licensee of the patent in Australia.

15    On 6 July 2005, Alphapharm commenced a proceeding in this Court against Lundbeck challenging the validity of the Lexapro patent and of the extension of term of that patent, the latter on the basis that the provisions of the Act and the Therapeutic Goods Act meant that the relevant date for any extension of term of the Lexapro patent was the date of registration of Cipramil, the consequence being that Lundbeck was out of time to apply for an extension of term.

16    On 13 October 2005, the Lundbeck parties cross-claimed against Alphapharm for infringement of the Lexapro patent. The claimed infringements concerned Alphapharm’s alleged threat to manufacture and sell goods containing (+) – citalopram in Australia if Alphapharm obtained the necessary regulatory approvals and listings, and actions taken by Alphapharm to obtain registration of its (+) – citalopram product on the ARTG. There was no suggestion that Alphapharm had marketed or sold a (+) – citalopram product in Australia. In the cross-claim it was alleged that Lundbeck Australia “is, at the date of filing this Cross-Claim” the exclusive licensee of the Lexapro patent. Alphapharm did not admit this allegation.

17    In the meantime, Alphapharm had also raised the validity of the extension of term with the Commissioner. The Commissioner apparently accepted Alphapharm’s argument, with the consequence that the Commissioner proposed to reduce the extended term of the Lexapro patent so that it expired on 9 December 2012 pursuant to regulation 10.7(7) of the Patents Regulations 1991 (Cth) (requiring rectification of the Register of Patents if the Commissioner becomes aware of an earlier approval date). Ultimately, on 19 May 2006, the Commissioner determined that the extension of time was wrongly granted and thereby reduced the extended term of the Lexapro patent from 13 June 2014 to 9 December 2012.

18    Lundbeck and Alphapharm appealed to this Court against this decision of the Commissioner. Lundbeck’s appeal was to the effect that the Commissioner had no power to reduce the term of the extension so that the Lexapro patent would continue until 13 June 2014. Alphapharm’s appeal was to the same effect as its claim in the proceeding commenced in this Court on 6 July 2005 that the Commissioner’s original extension decision was invalid, with the consequence that the only rectification of the Register open was to remove the extension of term altogether.

19    Arrow Pharmaceuticals Pty Ltd (Arrow) and Sandoz also each commenced proceedings against Lundbeck seeking similar relief as that sought by Alphapharm in respect of invalidity of the Lexapro patent and the extension of term. Arrow was a wholly owned subsidiary of Sigma Pharmaceuticals (Australia) Pty Ltd (Sigma). Aspen Asia-Pacific Pty Ltd acquired Sigma and thus Arrow in January 2011. There were no cross-claims against Arrow or Sandoz for infringement of the Lexapro patent, and thus Lundbeck alone was the relevant respondent to those proceedings.

20    Sandoz and Lundbeck settled and the proceeding between them was discontinued before the hearing commenced.

21    The remaining proceedings between the Lundbeck parties, Alphapharm and Arrow were heard in April and May 2007. Justice Lindgren delivered judgment on 24 April 2008 in Alphapharm Pty Ltd v H Lundbeck A/S [2008] FCA 559; (2008) 76 IPR 618 (Alphapharm No 1).

22    Insofar as relevant, Lindgren J held that:

(1)    The extension of term of the Lexapro patent was invalid so that the Register was required to be rectified by removal of the extension of term.

(2)    Alphapharm had infringed claims 1, 3, 5 and 6 of the Lexapro patent “from November 2002 to 27 May 2004, after which time there was no infringement by Alphapharm by reason of s 78(2) (and, if it be relevant, s 119A) of the Act” (at [697]).

23    In his reasons, Lindgren J made these statements:

[34] In the Revocation Proceeding, Lundbeck and the exclusive licensee of the Patent in Australia, Lundbeck Australia (together, the Lundbecks) cross-claim against Alphapharm for infringement of the Patent…

[634] I referred to the cross-claim for infringement in the Revocation Proceeding at [34]–[35] above, and will not repeat what I said there. There is no issue concerning Lundbeck’s title to the Patent or Lundbeck Australia’s being the exclusive licensee of the Patent or being entitled to sue for infringement of it.

24    On 10 July 2008, Lindgren J published further reasons for judgment in Alphapharm Pty Ltd v H Lundbeck A/S (No 2) [2008] FCA 1036; (2008) 78 IPR 338 (Alphapharm No 2) in respect of orders he made on 19 June 2008. The orders in Alphapharm’s proceeding, insofar as relevant, included the following:

1.    The Applicant/Cross-Respondent (Alphapharm) has, between November 2002 and 27 May 2004, infringed each of claims 1, 3 & 6 of Australian Patent No. 623144 (the Patent).

2.    Alphapharm be permanently restrained whether by itself, its directors, servants, agents or otherwise howsoever during the term of the Patent, from exploiting the Patent or authorising others to do so, save as permitted by s. 78 or s. 119A of the Patents Act 1990 (the Act).

2A.    Upon the Respondents/Cross Claimants (Lundbeck) giving the undertaking in 12 below and until further order of the Court, Alphapharm be restrained whether by itself, its directors, servants, agents or otherwise howsoever during the term of any extension of the Patent, from exploiting the Patent or authorising others to do so save as permitted by s 78 or s. 119A of the Act.

…

4.    Claim 5 of the Patent is and has at all material times been invalid.

5.    Claim 5 of the Patent be revoked.

6.    The Register of Patents (the Register) be rectified pursuant to s. 192 of the Act to remove the extension of term of the Patent from the Register.

7.    Upon Lundbeck giving the undertakings in 12 and 13 below, Orders of paragraphs 5 and 6 above be stayed:

(a)    initially until the date which is 21 days after the making of these Orders; and

(b)    if a notice of appeal to the Full Court of the Federal Court is filed against those Orders within that period, until the determination of that appeal.

…

9.    Alphapharm pay the Respondents/Cross-claimants damages for infringement of the Patent, to be assessed on a date to be fixed.

10.    The Orders of paragraph 8 and 9 above be stayed:

(a)    initially until the date which is 21 days after the making of these Orders; and

(b)    if a notice of appeal to the Full Court of the Federal Court is filed within that period, until the determination of that appeal.

…

AND THE COURT NOTES:

12.    Lundbeck undertakes to the Court:

(a)    to pay to Alphapharm such damages or loss whether legally claimable or not as a Judge may think just and fair as compensation to Alphapharm for any disadvantage it may sustain by reason of Orders of paragraphs 2A and 7 above;

(b)    to have particulars of the Orders of paragraph 4 to 7 above registered pursuant to s187 of the Act;

(c)    until the final determination of any appeal, not to threaten any person with infringement of claim 5 of the Patent; and

(d)    not to seek to amend any claim of the Patent otherwise than in the course of or in connection with proceedings in this Court.

13.    Lundbeck undertakes to the Court during the period of the stay set out in Order 7 to prosecute any appeal expeditiously.

25    The orders in Arrow’s proceeding reflected Arrow’s unsuccessful challenge to the validity of the Lexapro patent but for claim 5 and the same outcomes in respect of the extension of term, with equivalent undertakings given for the stay of the orders for revocation of claim 5 and rectification of the Register to remove the invalid extension of term.

26    In Alphapharm No 2, Lindgren J explained that he stayed the order for rectification of the Register because of doubt that, if Lundbeck succeeded in a foreshadowed appeal against that order, the extension could be reinstated to the Registrar. Lindgren J said:

[12] The extension granted was from and including 14 June 2009 to 13 June 2014. If Lundbeck’s appeal succeeds in relation to the extension, it will be held that it was entitled to retain that extension.

[13] Immediate removal of the particulars will tell the world now that the term of the Patent will not extend beyond 13 June 2009, and other pharmaceutical and generic companies may make plans and expenditures on the faith of the removal. I was informed that if there is a stay, nonetheless the attention of those searching the Register will be drawn to the fact of the making of the Court’s orders, the pending appeal and the stay of the orders in the light of the appeal.

…

[20] There should be a stay in relation to removal of the extension of the term. The potential hardship to Lundbeck if there is no stay, it succeeds in its appeal, and the Court is found to lack power to order reinstatement, far exceeds the hardship to Alphapharm if there is a stay, it successfully resists Lundbeck’s appeal, and the appeal is not determined until after 13 June 2009.

[21] As a condition of getting the stay, the Lundbeck parties must give to the Court the usual undertaking as to damages, an undertaking to prosecute their appeal expeditiously, and related undertakings.

27    The Lundbeck parties appealed and Alphapharm and Arrow cross-appealed against the orders of 19 June 2008. In its cross-appeal Alphapharm did not contend that Lindgren J erred in ordering Alphapharm to “pay the Respondents/Cross-claimants [that is, Lundbeck and Lundbeck Australia] damages for infringement of the Patent, to be assessed on a date to be fixed” (order 9). It will be recalled that it was not contended that Arrow had infringed the Lexapro patent and no order had been made against Arrow for payment of damages.

28    The Full Court gave reasons for judgment on 11 June 2009 (H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70; (2009) 177 FCR 151). Alphapharm failed in its cross-appeal alleging invalidity and non-infringement other than it was found not to have infringed claim 6. Consistent with this, Arrow’s cross-appeal alleging invalidity of the Lexapro patent failed. Lundbeck’s appeal also failed in its entirety.

29    Orders consequential on these reasons were made on 12 June 2009 following a hearing. Sandoz attended the hearing on the basis that it had an interest in the orders made but did not take an active role in the hearing about the orders (its proceeding having been discontinued earlier).

30    In Alphapharm’s cross-appeal these orders were made:

1.    Order 1 made by the Court on 19 June 2008 be varied by deleting “& 6”.

2.    Orders 2A and 7 made by the Court on 19 June 2008 be vacated.

3.    Upon the Appellants [Lundbeck and Lundbeck Australia] giving the undertakings in 6 below, Orders 5 and 6 made on 19 June 2009 [sic – 2008] in proceeding NSD 1120 of 2005 be stayed:

(a)    initially until the date which is 28 days after the making of these Orders; and

(b)    if an application for special leave to appeal to the High Court of Australia against those Orders is filed, until the determination of that application or further order.

4.    Order 3 made by the Court on 19 June 2008 be stayed pending the determination of any application being made for Special Leave to appeal to the High Court of Australia and, if leave be granted, of any appeal.

5.    Orders 8 and 9 made by the Court on 19 June 2008 be stayed pending the determination of any application for special leave to appeal to the High Court of Australia and, if leave be granted, of any appeal.

THE COURT NOTES:

6.    The Appellants [Lundbeck and Lundbeck Australia] undertake to the Court:

(a)    to pay to the Respondent [Alphapharm] such damages or loss whether legally claimable or not as the Judge may think just and fair as compensation to Alphapharm for any disadvantage it may sustain by reason of Order of 3 above;

(b)    to have particulars of these Orders and undertakings registered on the Register of Patents pursuant to s 187 of the Patents Act 1990 (Cth);

(c)    not to seek to amend any claim of the Patent otherwise than in the course of or in connection with proceedings in this Court;

(d)    to prosecute any application for Special Leave to appeal to the High Court of Australia expeditiously; and

(e)    until the determination of any application for Special Leave to appeal made to the High Court of Australia or further order, not to commence or threaten proceedings against any person for infringement of the Patent in respect of conduct engaged in after 13 June 2009 or to inform any actual or potential purchaser, distributor, wholesaler or retailer of escitalopram in Australia (except for a sponsor) of the Orders made by this Court and of their intention to apply to the High Court of Australia for Special Leave to appeal,

PROVIDED THAT, it shall not be a breach of this undertaking for the Appellants accurately to inform any person who makes enquiry of either of them,

(a)    of the result of this appeal, and

(b)    of the fact that the Appellants intend to seek Special Leave to appeal to the High Court of Australia and if leave be granted, to appeal to that Court.

31    Equivalent orders and undertakings were given in the Arrow appeal.

32    On the same day, 12 June 2009, Lundbeck applied to the Commissioner for an extension of time to apply for an extension of term of the Lexapro patent based on the registration of Cipramil on the ARTG, and an extension of term of that patent on that basis (which would be until 9 December 2012 if granted). Alphapharm, Sigma, Apotex and Sandoz opposed the extension of time by filing notices of opposition.

33    The standard term of the Lexapro patent expired on 13 June 2009. Given the above stays of the orders made regarding the extension, the Register remained unrectified, and the term of the Lexapro patent remained as 14 June 2014 on the Register.

34    From 15 June 2009, Alphapharm, Sigma, Apotex and Sandoz each launched a generic (+) – citalopram product.

35    Lundbeck sought special leave to appeal to the High Court against the orders requiring rectification of the Register by the removal of the extension of term. Alphapharm and Arrow sought special leave to appeal against the orders dismissing their claims as to invalidity of the Lexapro patent (specifically, claims 1 and 3 which Alphapharm had been found to have infringed).

36    On 11 December 2009, all of the applications for special leave were refused.

37    On 9 February 2010, the Register was rectified to remove the extension of term of the Lexapro patent.

38    As noted, Aspen acquired Sigma and thus Arrow in January 2011.

39    On 1 June 2011 the Commissioner dismissed the notices of opposition of Alphapharm, Sigma, Apotex and Sandoz to the extension of time application (Alphapharm Pty Ltd v H Lundbeck A/S [2011] APO 36; (2011) 92 IPR 628).

40    Alphapharm, Apotex, Sandoz and Aspen applied to the Administrative Appeals Tribunal (the Tribunal) for review of the Commissioner’s decision to extend time to allow Lundbeck to apply to extend the term of the Lexapro patent.

41    In their statement of facts, issues and contentions in the Tribunal, Alphapharm, Apotex, Sandoz and Aspen noted that on 4 September 2006 a subsidiary of Lundbeck, CNS Pharma Pty Ltd (CNS), registered a generic brand of (+) – citalopram on the ARTG known as Esipram. Alphapharm, Apotex, Sandoz and Aspen also filed a report of Tony Samuel, forensic accountant, the purpose of which was to “outline the types of damage” that Lundbeck may seek to recover from Alphapharm, Apotex, Sandoz and Aspen if it succeeded in obtaining an extension of term of the Lexapro patent until 9 December 2012. In the course of this report, Mr Samuel said that Lundbeck is the patentee, Lundbeck Australia is shown as the exclusive licensee of the Lexapro patent on the IP Australia website and that, in addition, CNS sells a generic (+) – citalopram product. Because Mr Samuel could not differentiate between the Lundbeck entities he assessed potential damages for the sale of generic of (+) – citalopram products on the basis of any Lundbeck entity that might be entitled to make a claim, including Lundbeck Australia.

42    The Tribunal was unpersuaded by the arguments of Alphapharm, Apotex, Sandoz and Aspen and, on 4 December 2012, affirmed the decision of the Commissioner to grant the extension of time to apply for an extension of term of the Lexapro patent (Aspen Pharma Pty Ltd and Commissioner of Patents [2012] AATA 851; (2012) 132 ALD 648).

43    Alphapharm, Apotex, Sandoz and Aspen appealed against the Tribunal’s decision. They also filed an application to stay the Commissioner’s decision to extend time. The application for a stay was refused on 9 April 2013 (Aspen Pharma Pty Ltd v H Lundbeck A/S [2013] FCA 324). The Commissioner, accordingly, processed Lundbeck’s application for an extension of term of the Lexapro patent, which Alphapharm, Apotex, Sandoz and Aspen each also opposed. In the interim, on 18 November 2013, the Full Court dismissed the appeals from the Tribunal (Aspen Pharma Pty Ltd v H Lundbeck A/S [2013] FCAFC 129; (2013) 216 FCR 508). Alphapharm sought special leave to appeal to the High Court against this dismissal, which was granted.

44    In the opposition to the extension of term before the Commissioner, a solicitor for Alphapharm on behalf of all of the opposing parties (Alphapharm, Apotex, Sandoz and Aspen) made a statutory declaration which said that he understood that Lundbeck Australia was the exclusive licensee of the Lexapro patent. Also, another expert witness made a statement in a statutory declaration to the same effect in support of the opposition to the extension of term. On 25 June 2014, after a hearing in May 2014, the Commissioner granted the extension of term of the Lexapro patent until 9 December 2012 (based on the registration of Cipramil on the ARTG) (Alphapharm Pty Ltd v H Lundbeck A/S [2014] APO 41; (2014) 109 IPR 323). Alphapharm, Apotex, Sandoz and Aspen appealed to this Court against the Commissioner’s decision to grant the extension of term.

45    On 26 June 2014, the Lundbeck parties commenced these proceedings against Alphapharm, Apotex, Sandoz and Aspen claiming damages or an account of profits for infringement of the Lexapro patent during the period 15 June 2009 until 9 December 2012. These proceedings were stayed pending resolution of the appeal to the High Court in respect of the Full Court’s orders dismissing the appeal against the Tribunal’s decision to affirm the extension of time granted by the Commissioner and of the appeal to this Court against the Commissioner’s decision to grant the extension of term of the Lexapro patent.

46    In the appeal to this Court, Alphapharm, Apotex, Sandoz and Aspen agreed to a statement of facts dated 4 September 2014 “for the purposes of the proceeding only” which recorded that from about September 2005, the Lexapro patent was exclusively licensed to Lundbeck Australia.

47    Alphapharm’s appeal to the High Court was dismissed in a majority decision (3:2) on 5 November 2014 (Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42; (2014) 254 CLR 247).

48    The following day, 6 November 2014, this Court dismissed the appeal against the Commissioner’s decision to extend the term of the Lexapro patent (Alphapharm Pty Ltd v H Lundbeck A/S [2014] FCA 1185; (2014) 110 IPR 59). A subsequent appeal from this dismissal was itself dismissed by the Full Court on 22 September 2015 (Alphapharm Pty Ltd v H Lundbeck A/S [2015] FCAFC 138; (2015) 234 FCR 306). Yet another application for special leave to appeal to the High Court was filed thereafter but it too was ultimately dismissed (Alphapharm Pty Ltd & Ors v H Lundbeck A/S [2016] HCATrans 52).

49    As a result, the stay of these proceedings expired on 22 September 2015. This led to the filing by the Lundbeck parties of their amended statements of claim contending, amongst other things, that Lundbeck Australia is the exclusive licensee of the Lexapro patent and the respondents’ admission of this in their defences filed on 9 December 2015 and amended defences filed on 24 February 2016. It is this admission which the respondents now seek to withdraw.

Discussion

50    It will be apparent from the sequence of events set out above that the best case for the Lundbeck parties must be against Alphapharm which not only has been involved in every proceeding but was the only party in Alphapharm No 1 against which infringement was alleged by the Lundbeck parties. As such, Lundbeck Australia was a party to the cross-claim for infringement against Alphapharm in Alphapharm No 1 but was not a party to any other proceeding.

51    The principles are not in dispute. The relevant statement is that of Dixon J in Blair v Curran (1939) 62 CLR 464 at 531-532:

A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared.

…

Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue-estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. … the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point in issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous.

52    Applying these principles, I consider that the issue estoppel alleged cannot arise as against Alphapharm.

53    First, the issue of the status of Lundbeck Australia after the filing of the cross-claim for infringement was not essential to Alphapharm No 1 or any subsequent appeals from that decision. The statements of Lindgren J at [34] and [634] of that decision must be understood as reflecting a common position of the parties that, at the least, Lundbeck Australia was the exclusive licensee of the Lexapro patent for the purpose of bringing the cross-claim as required by s 120(1) of the Act. While the reasons for judgment do not identify the time to which this finding applies, s 120(1) meant that Lundbeck Australia could bring the proceeding only if it was an exclusive licensee. Order 9 of Lindgren J’s orders in Alphapharm No 2 does not assist. It is that Alphapharm pay the Lundbeck parties damages for infringement, “to be assessed”. Assessment in favour of Lundbeck Australia would depend on its status as exclusive licensee from time to time, and thus order 9 takes the matter no further. Given that the only infringement found was in the period November 2002 to 27 May 2004 and the licence agreement between Lundbeck and Lundbeck Australia (upon which Lundbeck Australia’s status as exclusive licensee apparently rests) was not executed until 26 September 2005, it seems unlikely that any damages could have been assessed in favour of Lundbeck Australia.

54    Second, and contrary to the submissions for the Lundbeck parties, it cannot be the case that Lindgren J’s finding was to the effect that Lundbeck Australia was the exclusive licensee of the Lexapro patent at all times and for the entirety of the period of the extension of the patent, whether the extension be until 9 December 2012 or 13 June 2014. One reason why this is so is that Lindgren J says no such thing. Another is that the status of a person as an exclusive licensee may change over time and, at best, a judgment might speak to the circumstances, existing or proposed, in fact before the Court for resolution. Yet another is that it is not the case that Lundbeck was bound to obtain an extension of term to either 13 June 2014 or 9 December 2012 at the time Lindgren J made orders. This is because, as Lindgren J said, Lundbeck was out of time to apply for an extension of term based on the registration of Cipramil on the ARTG. While there was a capacity to extend time, that would involve an exercise of discretion in Lundbeck’s favour which was by no means guaranteed. Further, even the question whether capacity to extend time existed was the subject of arguable dispute, a majority of the High Court ultimately resolving that issue in Lundbeck’s favour. In other words, it cannot be said that Lundbeck, if it failed in defending the extension of term until 13 June 2014, necessarily would obtain an extension of term until 9 December 2012. Lundbeck had a number of substantial hurdles to overcome to achieve that objective. Accordingly, the effect of the decision of Lindgren J was that there was in law no extension of term of the Lexapro patent at all. Lundbeck merely received a stay of the order requiring rectification of the Register to preserve its position pending appeal but, in law, the extension had ceased to exist.

55    It follows that the only relevant essential finding Lindgren J must have made was that, for the purposes of s 120(1) of the Act (that is, to permit it to bring the proceeding by way of the cross-claim), Lundbeck Australia was the exclusive licensee. The present proceedings were commenced on 26 June 2014 and involve allegations of infringement between 15 June 2009 and 9 December 2012. Nothing in Alphapharm No 1 can give rise to an estoppel against Alphapharm in respect of the status of Lundbeck Australia as an exclusive licensee of the Lexapro patent between 14 June 2009 and 9 December 2012 or at 26 June 2014.

56    Third, the undertakings by Lundbeck and Lundbeck Australia to Alphapharm (and Arrow) were the price the Lundbeck parties had to pay in order to obtain the various stays they sought. The giving of undertakings does not involve any judicial determination at all and thus the principle of issue estoppel is not engaged. It is not the case that Lundbeck Australia could only be required to give undertakings as a result of its status as the exclusive licensee of the Lexapro patent. The Lundbeck parties proffered the undertakings as the price of the stay they wanted and obtained.

57    Fourth, the fact that Alphapharm did not challenge the findings in Alphapharm No 1 on appeal is immaterial. It is orders, not findings, against which parties appeal. Alphapharm challenged the declaration of infringement and thus, necessarily, the order for damages. It failed but that is beside the point. No issue estoppel of the kind alleged could arise by reason of Alphapharm No 1, and thus the appeal could yield no different result.

58    Fifth, nothing said or done in the opposition to the extensions of time and term before the Commissioner or on appeal therefrom can give rise to the alleged issue estoppel. The status of Lundbeck Australia was not in issue in the extension of term proceeding. Lundbeck Australia was not a party to any such proceedings. There was no judicial determination to that effect in any such proceedings. The statements in the statutory declarations reflected nothing more than the respective witness’s understanding. The agreed fact in the appeal to this Court was for the purpose of the proceeding in this Court only.

59    Sixth, the admissions in the defences in these proceedings cannot found an issue estoppel. These proceedings remain undetermined. The respondents seek leave to withdraw the admissions which is opposed on grounds which include the alleged issue estoppels and abuses of process. To argue for an issue estoppel on the basis of those facts is circular.

60    For these reasons, the alleged issue estoppel against Alphapharm cannot arise.

61    It follows from this that the issue estoppel against Aspen by reason of Arrow’s conduct must also fail. Leaving aside issues of privity between Arrow and Aspen, Lundbeck Australia was not a party to Arrow’s proceeding leading to Alphapharm No 1. The fact that the Full Court requested that the submissions of Alphapharm and Arrow be combined for the purpose of the hearing of the appeal cannot alter the fact that the status of Lundbeck Australia was irrelevant to Arrow’s proceeding. Further, for the same reason as for Alphapharm, no other conduct of Arrow can give rise to the issue estoppel alleged.

62    What then of the more flexible doctrine of abuse of process raised against all respondents? In Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 89 ALJR 750, the High Court said this:

[25] Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court’s procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.

[26] Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel. Similarly, it has been recognised that making such a claim or raising such an issue can constitute an abuse of process where the party seeking to make the claim or to raise the issue in the later proceeding was neither a party to that earlier proceeding, nor the privy of a party to that earlier proceeding, and therefore could not be precluded by an estoppel.

63    In Walton v Gardiner (1993) 177 CLR 378 at 392-393, the High Court said:

The inherent jurisdiction of a superior court to stay its proceedings on grounds of abuse of process extends to all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness…

Yet again, proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings [See, e.g., Reichel v Magrath (1889) 14 App Cas 665, at 668; Connelly v DPP [1964] AC 1254, at 1361-1362]. The jurisdiction of a superior court in such a case was correctly described by Lord Diplock in Hunter v Chief Constable of the West Midlands Police [[1982] AC 529, at 536] as "the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right thinking people".

64    In Batistatos v Newcastle City Council [2006] HCA 27; (2006) 226 CLR 256 at [15] the High Court said:

Earlier, in Rogers v The Queen [[1994] HCA 42; (1994) 181 CLR 251 at 286], McHugh J observed:

Although the categories of abuse of procedure remain open, abuses of procedure usually fall into one of three categories: (1) the court's procedures are invoked for an illegitimate purpose; (2) the use of the court's procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court's procedures would bring the administration of justice into disrepute.

His Honour added:

Many, perhaps the majority of, cases of abuse of procedure arise from the institution of proceedings. But any procedural step in the course of proceedings that have been properly instituted is capable of being an abuse of the court's process.

To that it should be added that the power to deal with procedural abuse extends to the exclusion of particular issues which are frivolous and vexatious. Further, the failure to take, as well as the taking of, procedural steps and other delay in the conduct of proceedings are capable of constituting an abuse of the process of the court.

65    In State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Rep 81-423 (64,077), Giles JA at 64,089 said:

It is apparent from this brief review of the decisions that whether proceedings are, or an aspect of proceedings is, an abuse of process because a party seeks to relitigate an issue already decided depends very much on the particular circumstances. The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice, and amongst the matters to which regard may be had are –

(a) the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or an ultimate issue;

(b) the opportunity available and taken to fully litigate the issue;

(c) the terms and finality of the finding as to the issue;

(d) the identity between the relevant issues in the two proceedings;

(e) any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; all part of –

(f) the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and

(g) an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.

66    Brereton J reviewed many of the relevant authorities in Re HIH Insurance Ltd (in liq; De Bortoli Wines (Superannuation) Pty Ltd v McGrath [2014] NSWSC 774; (2014) 101 ACSR 1 and identified the relevant principle in these terms at [78]:

…a person who was not party to earlier proceedings may nonetheless also be precluded from maintaining later proceedings in respect of substantially the same subject matter, even though not in privity in the strict sense with the unsuccessful party in the earlier proceedings, if the person is sufficiently identified with a party to the earlier proceedings, and it was unreasonable to stand by and allow the earlier proceedings to be determined without intervening. This is a form of Anshun estoppel; so that where a given matter becomes the subject of litigation and adjudication, the court requires not only that the parties bring forward their whole case, but also that other persons with notice of the claim who have a sufficient interest in the subject matter and a sufficient identification with a party, to do so. One relevant type of identification with a party is where the party controls, or is controlled by, the other person. Consistent with Anshun, proceedings will be precluded only where it was unreasonable for the other person not to intervene in the earlier proceedings.

67    In O’Shane v Harbour Radio Pty Ltd [2013] NSWCA 315; (2013) 85 NSWLR 698 at [111] Beazley JA said:

The authorities also state that the power to stay proceedings permanently on the ground that they are an abuse of process should be exercised with caution: Moore v Inglis (1976) 50 ALJR 589, at 593 and only in the most exceptional or extreme case: Walton v Gardiner [1993] HCA 77; 177 CLR 378, at 392, per Mason CJ, Deane and Dawson JJ (approving the Court of Appeal’s formulation of the test in Gill v Walton (1991) 25 NSWLR 190). The onus of satisfying the court that there is an abuse of process lies upon the party alleging it and that the onus is “a heavy one”: Williams v Spautz [1992] HCA 34; 174 CLR 509, at 529, per Mason CJ, Dawson, Toohey and McHugh JJ.

68    The Lundbeck parties submitted this:

Ultimately, the question is whether it would be unjustifiably oppressive to the Lundbeck Parties or would otherwise bring the administration of justice into disrepute to allow the Generics to place in issue whether Lundbeck Australia was, relevantly, the exclusive licensee of the Patent.

69    The caveat that needs to be placed on this identification of the relevant issue contains within it the reason why I am unable to accept the contentions of the Lundbeck parties. The caveat is that the issue in the present proceedings is not whether “Lundbeck Australia was, relevantly, the exclusive licensee of the Patent”. One issue, for the purposes of s 120(1) of the Act, is whether Lundbeck Australia was the exclusive licensee of the patent when the proceedings were commenced (26 June 2014). Another issue is whether Lundbeck Australia was the exclusive licensee of the patent when the alleged infringements occurred (between 15 June 2009 and 9 December 2012). Contrary to the submissions for Lundbeck Australia, those issues have never been litigated before and thus no question of re-litigation can arise.

70    For the same reasons, concepts of approbation and reprobation are also immaterial. It is true that the respondents adduced evidence for the purposes of opposing the extension of time application which identified the damages to which they might be exposed at the suit of all entities related to Lundbeck (which includes Lundbeck Australia). In so doing the respondents did not choose between inconsistent remedies. They merely adduced evidence of their overall potential exposure to damages as a matter relevant to any exercise of discretion to extend time in Lundbeck’s favour. Placing in issue the status of Lundbeck Australia in these proceedings is not inconsistent with that course of action. If Lundbeck Australia was an exclusive licensee at a time relevant to these proceedings then the respondents will be exposed to those damages.

71    Otherwise, none of the circumstances on which the Lundbeck parties rely involve their oppression or the bringing into disrepute of the administration of justice. Take the position at its highest for the Lundbeck parties. That position is that the Lundbeck parties might have assumed from Alphapharm No 1 that Alphapharm accepted that from 22 September 2005 Lundbeck Australia was the exclusive licensee of the Lexapro patent and, based on the statement of facts dated 4 September 2014 in the extension of term appeal, that this was the position of all of the respondents (including Alphapharm). In his affidavit, John Petersen – Lundbeck’s Vice President of Global IP Litigation – said that, given the history of the litigation in Australia, the Lundbeck parties “did not anticipate that this issue would be raised” and had they done so it is likely that they would have “taken a different approach with regard to maintaining its records, and would have documented and kept track of all important events more systematically”. Mr Petersen said that in the 11 years since it had been involved in litigation with Alphapharm in Australia about the Lexapro patent, the Lundbeck parties had undergone significant personnel changes and do not have a central document centre for all contractual documents, and thus are heavily reliant on the recollection of employees to locate documents. Neither signatory to the licence of 22 September 2005 remains employed by the Lundbeck parties. Other changes, including to its computer systems and external legal advisers, caused Mr Petersen to express the view that it will be very difficult and time consuming for Lundbeck to comprehensively investigate the arrangements in place between the various Lundbeck entities over time and identify witnesses to give evidence about those arrangements.

72    Yet the reality is that, at best, it is the position of Alphapharm alone that might have informed this anticipation from the hearing before Lindgren J in 2007. The other respondents did nothing which could possibly have given rise to this anticipation. They were never called upon to do or say anything about the status of Lundbeck Australia and have no relevant connection to Alphapharm. On any view, whatever the Lundbeck parties did or did not do between 2007 and 4 September 2014 had nothing to do with the respondents other than Alphapharm. Insofar as those other parties are concerned on 4 September 2014, in the context of a proceeding in which the issue was not relevant, they for the first time said something unequivocal about the status of Lundbeck Australia as an exclusive licensee. The report of Mr Samuel, which pre-dates this, as noted, did nothing more than explain the total potential exposure of the respondents to damages and record that the website of IP Australia showed Lundbeck Australia as an exclusive licensee of the Lexapro patent.

73    To return to Alphapharm, do the circumstances with respect to its conduct give rise to an abuse of process? If not, the position of the other respondents cannot possibly do so.

74    First, and as noted, this is not a case in which there is any re-litigation of an issue already decided in an earlier proceeding. The issue decided in the earlier proceeding, on any view, was not whether Lundbeck Australia was the exclusive license of the Lexapro patent as at 26 June 2014 or between 14 June 2009 and 9 December 2012.

75    Second, there was no opportunity to litigate the issue whether Lundbeck Australia was the exclusive licensee of the Lexapro patent as at 26 June 2014 or between 14 June 2009 and 9 December 2012 in any earlier proceeding. The only proceeding in which that issue is relevant are the current proceedings.

76    Third, any view the Lundbeck parties reached to the contrary (which is not apparent from the evidence in any event) could not have been based on Alphapharm’s position in Alphapharm No 1 and Alphapharm No 2 because the status of Lundbeck Australia as at 26 June 2014 or between 14 June 2009 and 9 December 2012 was not in issue in those matters. The Lundbeck parties must be taken to have known that the judgment of Lindgren J could not relate to a subsequent period, despite any change of circumstances in its arrangements. They must have known that the status of an entity as an exclusive licensee might change depending on the circumstances. Despite this, they did not take steps to ensure that they could easily establish the status of Lundbeck Australia as an exclusive licensee between 15 June 2009 and 9 December 2012, even though it must have been in their mind that they might take infringement proceedings if the extension of term of the Lexapro patent was granted. Any difficulty to which the Lundbeck parties might be subject by being put to proof about the status of Lundbeck Australia at the times relevant to these proceedings is a result of the conduct of the Lundbeck parties, not Alphapharm. As such, it cannot be said that Alphapharm is engaged in an abuse of process by reason of events before the commencement of these proceedings.

77    Fourth, it is not the case that making admissions then applying to withdraw them in these proceedings involves oppression or could bring the administration of justice into disrepute. The proceedings were stayed for a lengthy period. The delay between the making of the admissions and the application to withdraw them has not been substantial in light of the course of the proceedings. The position of the Lundbeck parties could not have changed in any material way by reason of the admissions, as evidence has not yet been filed nor the matter fixed for hearing.

78    Fifth, the fact that the respondents, at different times and in different contexts, have disclosed their awareness of sale of a generic (+) – citalopram product by CNS is not material in the circumstances described above. It may be accepted that, for the purpose of the defences in these proceedings when the status of Lundbeck Australia as an exclusive licensee as at 26 June 2014 and between 15 June 2009 and 9 December 2012 was in issue (for the first time), the respondents could have brought to bear their awareness of CNS and, in their first defences filed on 9 December 2015, placed in issue the question of Lundbeck Australia’s status at the relevant times. The failure to do so is explained by the responsible solicitor, Kim O’Connell. The failure was based on mere oversight, not any conscious decision to obtain a forensic advantage in these proceedings. No forensic advantage or disadvantage has been obtained or resulted. Whatever the Lundbeck parties did or did not do to ensure they maintained records in a manner that was easily accessible occurred before the filing of the defences, apparently from as early as 2007.

79    Sixth, the complaint by the Lundbeck parties that they have been attempting for years to enforce their rights under the Lexapro patent but have been thwarted at every turn, at the least by Alphapharm but now by all respondents, cannot be taken at face value. Lundbeck decided to apply for the longest possible extension of term of the Lexapro patent based on the registration of Lexapro. Lundbeck chose to defend the extension until all rights of appeal had been exhausted. When its rights were exhausted, it then chose to apply for an extension of time to enable an extension of term for the shorter period based on the registration of Cipramil. The extension of time it required was substantial (some 10 years). The respondents had the right to oppose the extension of time and term, and the fact that they also exhausted their rights in that regard does not mean that the legal process has miscarried or the administration of justice has been brought into disrepute. It means only that well-resourced and sophisticated participants in the pharmaceuticals market, a description which includes the Lundbeck parties, have chosen to act on all such rights as they might have to support their commercial interests.

80    The reality is that it was not until the grant of the second (valid) extension of term on 25 June 2014 that the Lundbeck parties could claim infringement for the period between 15 June 2009 and 9 December 2012. The fact that these proceedings were stayed to enable appeals relating directly to the subject matter of the litigation – the extended term of the Lexapro patent – is one of the ordinary contingencies of litigation. Understood in this way, as must be done, nothing in the sequence of events or the passage of time suggests any oppression of the Lundbeck parties by the respondents or any other fact, matter or circumstance bringing the administration of justice into disrepute. Nor, for that matter, is there any basis for the suggestion that proper case management in the light of the requirements of s 37M of the Federal Court of Australia Act 1976 (Cth) for the just resolution of disputes as “quickly, inexpensively and efficiently as possible” would be undermined by the respondents being permitted to withdraw their admissions, if the interests of justice otherwise support that position (an issue I have deferred to enable determination of the present separate questions).

81    Seventh, the issue sought to be raised, on the evidence available, is not vexatious or spurious. There is sufficient evidence to call into question the status of Lundbeck Australia as the exclusive licensee of the Lexapro patent at the times relevant to these proceedings. That being so, there is nothing improper in the respondents seeking leave to withdraw their admissions. For the reasons given, the doctrines of issue estoppel and abuse of process do not prevent them doing so.

82    The applications for leave to withdraw the admissions and otherwise to amend the defences should now be determined, consistently with the reasons given above.

Associate:

Dated:    21 October 2016