In the keenly awaited decision in Commonwealth of Australia v Sanofi 1 ,
the Federal Court has dismissed the Commonwealth’s $325 million claim
for compensation made against Sanofi arising from a patent infringement
suit brought against Apotex Australia (Apotex), the Australian subsidiary
of the Canadian generic drug company Apotex Canada.

Inspire July 2020
Background 12
Back in September 2007 patentee
drug company Sanofi obtained an
interlocutory injunction against
Apotex restraining it from infringing
Sanofi’s patent relating to its
blockbuster anti-clotting drug,
clopidogrel. In order to obtain the
interlocutory injunction, Sanofi
provided “the usual undertaking
as to damages”, by which Sanofi
undertook to “submit to such order
as the Court may consider to be just
for the payment of compensation
… to any person whether or not a
party, adversely affected by” the
injunction. Sanofi initially succeeded
at trial in its infringement case, with
a “permanent” injunction being
ordered in August 2008, in similar
terms to the earlier interlocutory
order. However, in October 2009 the
Full Federal Court upheld Apotex’s
appeal and revoked Sanofi’s patent
in full. Special leave to appeal to the
High Court was refused in March
2010, whereupon the permanent
injunction was lifted and Apotex
(and others) entered the market.

Apotex then sought compensation
from Sanofi pursuant to the
undertaking for damages. That
claim was ultimately settled
without going to trial 2 .

In 2013, some three years after
the High Court refused leave to
appeal, the Commonwealth applied
for compensation pursuant to the
undertaking as to damages provided
by Sanofi. Under the terms of the
Pharmaceutical Benefits Scheme
(PBS), the Commonwealth pays
significant subsidies to customers of
particular drugs. As of August 2007 ,
upon the listing of a generic version
of a drug on the PBS there is an
automatic reduction in the amount
of subsidy paid, with further price
reductions occurring subsequently.

The listing of a first generic drug
therefore results in significant
savings to the Commonwealth in
the amount of subsidy it pays out.

In this case the Commonwealth
sought compensation on the basis
that, because of the interlocutory
injunction, Apotex did not list its
generic clopidgrel product on
the PBS, and so the mandatory
price reduction mechanism was
not triggered and there was no
reduction in the amount paid by
the Commonwealth in relation
to clopidogrel. This was the first
time a court has considered the
question of the Commonwealth’s
entitlement to compensation
in such circumstances.

Nicholas J refused the
Commonwealth’s claim.

At the time the interlocutory
injunction was granted, Apotex gave
its own undertaking to the Court that
it would not apply for PBS listing of
any clopidogrel product. However,
that undertaking was not tied to
the undertaking as to damages
given by Sanofi. Having reviewed
the relevant High Court authorities,
his Honour held that the following
questions needed to be addressed:
Would the Commonwealth’s
loss have been sustained
but for the grant of the
interlocutory injunction?
Did such loss flow directly from
the interlocutory injunction?
Could loss of the kind sustained
have been foreseen at the time
the interlocutory injunction
was granted?
Would the Commonwealth’s
loss have been sustained
but for the grant of the
interlocutory injunction?
His Honour considered whether
Apotex would have applied for PBS
listing of its generic clopidogrel
products, if the interlocutory
injunction had not been ordered.

There was a significant risk to
Apotex in entering the market
as it would have left it exposed to
an extremely large damages claim
if the patent was ultimately found
to be valid.

Evidence was given on behalf of
the Commonwealth by Apotex’s
Managing Director that Apotex
would have launched and applied for
PBS listing, but for the interlocutory
injunction. However, the Court held
that the decision whether to enter
the market was a matter for Apotex
Canada, and in particular its CEO
and Chairman, Dr Sherman.

For reasons that were not explained
by the Commonwealth, Dr Sherman
did not give evidence. In the
circumstances, his Honour drew
an adverse inference against the
Commonwealth that it chose not to
call him because his evidence would
not have assisted its case. Based on
the correspondence in evidence,
his Honour was not prepared to infer
Commonwealth of Australia v Sanofi (No.5) [2020] FCA 543
The terms of the settlement were confidential, but presumably resulted in a significant payment to Apotex
2
1
No compensation for
the Commonwealth:
Australia v Sanofi