IP Update February 2009

Applications for interlocutory injunctions before Australian courts are generally governed by the three well established legal principles set out below. Arguably, in the case of a pharmaceutical patent, where it is often asserted by the alleged infringer that the patent is invalid, the impact of the Pharmaceutical Benefits Scheme (1) (PBS) on pharmaceutical pricing is another factor that needs to be considered. The recent decision of Interpharma Pty Ltd v Commissioner of Patents (2)  is yet another example of the line of cases, discussed below, that indicate that the Australian Federal Court is more likely to grant interlocutory injunctions in pharmaceutical cases than not grant them on the basis of the PBS price reduction scheme. For this reason, it is even more important that generic pharmaceutical companies wishing to gain early market entry into Australia take prompt steps to first clear the path of any patent obstacles before entering the market.

The three principles governing interlocutory relief

An applicant for interlocutory injunction must satisfy the Court that:

• there is a serious question to be tried as to the applicant’s entitlement to relief;
• unless the interlocutory injunction is granted, the applicant is likely to suffer irreparable harm (that is, harm for which damages will not be an adequate remedy); and
• the balance of convenience is in the applicant’s favour (3) . 

A serious question to be tried

In 2006, the High Court of Australia considered the appropriate test to be applied in an application for interlocutory relief. For some time the courts in Australia have been troubled as to the strength of the case that has to be demonstrated to entitle the applicant to interlocutory relief. In particular, whether the standard should be that applied in the House of Lords in American Cyanamid (that the claim in not frivolous or vexatious) or some higher test giving rise to considerations of probability of success. The High Court held that the applicant must establish a prima facie case, in the sense that if the evidence remains the same as it is on the interlocutory application, there is a probability that at the trial of the action the applicant will be held to be entitled to relief. As to how strong the probability needs to be, the Court said that it will depend upon the nature of the rights asserted and the practical consequences that will follow from the relief sought.

The recent cases demonstrate that the Federal Court is unlikely to consider infringement and validity issues at the interlocutory stage. Indeed, in the recent decision of Interpharma Pty Ltd v Commissioner of Patents (4), the Federal Court held that resolving the issue of construction of the relevant process and compound patents was a matter for the trial judge (5).

In the recent decision of Roche Therapeutics, Inc v GenRx Pty Ltd (6), the Federal Court held that it is not appropriate for it to decide the issue of validity in the context of an interlocutory application even though in that case the respondent (GenRx) advanced strong arguments that the applicant’s (Roche) patent was invalid.
 
Irreparable harm

An applicant for an interlocutory injunction also has to satisfy the Court that an award of damages would not adequately compensate it for the damage that it would suffer in the absence of an injunction.

For instance in Interpharma Pty Ltd v Commissioner of Patents (7), the Court (granting interlocutory relief for the process patent but not the compound patent) adopted the reasoning of Gyles J in GenRx Pty Ltd v Sanofi-Aventis (8), citing the unpredictable and potentially irreversible effect of the PBS price changes and the likely interference with the trade patterns of the innovator company which may not be detectable or measurable in money terms. His Honour regarded these factors as leading to the conclusion that the status quo should be preserved. However, the Court held that these considerations did not apply to the compound patent because it would expire before trial and damages would therefore be relatively simple to quantify.

In Merck and Co Inc v GenRx Pty Ltd (9), the Federal Court (granting intelocutory relief) took account of the fact that other generics were likely to follow the respondent (GenRx) into the market and that this would quickly erode Merck’s market share and the loss of its commercial advantage of being in the market when the patent expired.

In B Braun Melsungen Ag v Terumo Corporation (10) , the Federal Court reasoned that the presence of other companies in the market for products similar to the applicant’s (Braun) made it “difficult, if not impossible” to reliably quantify lost sales due to the respondent’s (Terumo) product as opposed to that of others.

Whereas, in Hexal Australia Pty Ltd v Roche Therapeutics Inc & Others (11) (the only one in a number of recent pharmaceutical cases in which interlocutory relief was refused), the Federal Court, reasoned that because, at the time of the interlocutory hearing, Roche had 100% of the relevant market, any loss of market share as a result of the entry into the market of the respondent (Hexal) would be easily quantifiable. There the Court decided that Roche could be fully compensated for any loss by way of a payment of damages or an account of profits. In coming to that view, the Court appears to have assumed that reduction in the price of the product under the PBS is reversible.

Balance of convenience

Weighing the balance of convenience involves a consideration as to whether the detriment that would be caused to an applicant by not granting the interlocutory injunction is greater than the detriment that would be caused to a respondent, by granting the interlocutory injunction. The applicant bears the onus of persuading the court that the balance of convenience favours the granting of the injunction (12).

In determining where the balance of convenience lies in patent cases, a court will also consider whether:

•  the respondent acted in full knowledge of the applicant’s patent (13);  and
• where the respondent claims that the patent is invalid, the respondent’s delay in bringing revocation proceedings against the applicant (14). 

In Interpharma Pty Ltd v Commissioner of Patents (15), the Court reasoned that the applicant (Interpharma) had entered into the situation with “its eyes wide open” and had undertaken commercial preparations in the knowledge of one or both of the patents, and had been “less than assiduous” in its inquiries as to whether its generic version of the innovator’s (Eli Lilly) drug might have constituted an infringement. The Court regarded Interpharma’s evidence of investigating the term extension of the compound patent as showing a lack of urgency during which it continued its commercial preparations to enter the market. The Court held that these circumstances compromised its attempt to resist an injunction which goes no further than to maintain the status quo.

In Pharmacia Italia SpA v Interpharma Pty Ltd (16), the Court concluded that the balance of convenience favoured the grant of an injunction. The Court was persuaded in this regard by the fact that the respondent (Interpharma) has acted in full knowledge of the applicant’s (Pharmacia) patent. Further, while Interpharma had obtained regulatory approval and PBS listing, it had not yet established itself in the market or, indeed, imported the relevant solutions. Accordingly, the Court held that it should be “kept at bay” until a decision had been made as to whether its “invasion” constituted an infringement of Pharmacia’s patent rights.

In GenRx Pty Ltd v Sanofi-Aventis (17), the Court reasoned that the grant of the applicant’s (Sanofi) patent, coupled with the longstanding exploitation of the patent in suit, together with the failure of the respondent (GenRx) to bring revocation proceedings in a timely fashion, established a prima facie case sufficient to support an interlocutory injunction. The Court held that the balance of convenience also tipped in the same direction. The Court did not accept GenRx’s submission that its delay in bringing revocation proceedings was because it had to first obtain registration of its product with the Therapeutic Goods Administration, and subsequently have its product listed on the PBS.

For more information please contact:

Scott Sloan| Partner | T: 61 2 8233 9554
E: scott.sloan@dibbsbarker.com

Helen Kavadias | Associate | T: 61 2 8233 9567
E: helen.kavadias@dibbsbarker.com

Stephen Cartwright | Lawyer | T: 61 2 8233 9764
E: stephen.cartwright@dibbsbarker.com

Footnotes

1. The PBS is a scheme by which the federal government of Australia subsidises the prices of pharmaceutical products supplied on prescription to Australian consumers
2. [2008] FCA 1498
3. Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; American Cyanamid Co v Ethicon Ltd [1975] AC 396; Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153; Australian Broadcasting Corporation v O’Neill [2006] HCA 46
4. [2008] FCA 1498 
5. The infringement and validity trial itself is set to proceed on a date after 1 June 2009 
6. (2007) FCA 83 
7. [2008] FCA 1498 
8. [2007] FCA 1485 
9. [2006] FCA 1407
10. 10 [2004] FCA 384 
11. [2005] FCA 1218 
12. Inetstore Corporation v Southern Matrix International [2005] NSWSC 883 at [19] 
13. Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; Tidy Tea Ltd and Another v Unilever Australia Ltd (1995) 32 IPR 405; Pharmacia Italia SpA v Interpharma Pty Ltd [2005] FCA 1675; Merck & Co Inc v GenRx Pty Ltd [2006] FCA 1407; GenRx Pty Ltd v Sanofi-Aventis [2007] FCA 1485. 
14. GenRx Pty Ltd v Sanofi-Aventis [2007] FCA 1485 
15. [2008] FCA 1498 
16. [2005] FCA 1675 
17. [2007] FCA 1485