Federal Court Grants Interim Injunction to Protect Patent Medicament

FEDERAL [COMPANY] v [COMPANY] [2017] FCA 1075 File number: VID 885 of 2017

Judge: KENNY J

Date of judgment: 11 September 2017

Catchwords: PRACTICE AND PROCEDURE – Application for interim interlocutory injunction – relief granted

Legislation: Patents Act 1990 (Cth)

Cases cited: Australian Broadcasting Corporation v O'Neill [2006] HCA 46; 227 CLR 57 [COMPANY] v [COMPANY] (No 4) [2015] FCA 634; 113 IPR 191 [COMPANY] v Apple Inc [2011] FCAFC 156; 217 FCR 238

Date of hearing: 7 September 2017

Registry: Victoria

Division: General Division

National Practice Area: Intellectual Property

Sub-area: Patents and associated Statutes

Category: Catchwords

Number of paragraphs: 42

Counsel for the Cross-Claimants: [redacted]

Solicitor for the Cross-Claimants: [redacted]

Counsel for the Cross-Respondent: [redacted]

Solicitor for the Cross-Respondent: [redacted]

BETWEEN: [COMPANY] (ACN [PHONE]) Applicant

AND: [COMPANY] First Respondent

[NAME] Respondent

AND BETWEEN: [COMPANY] (and another named in the Schedule) First Cross-Claimant

AND: [COMPANY] (ACN [PHONE]) Cross-Respondent

JUDGE: KENNY J DATE OF ORDER: 11 SEPTEMBER 2017

PENAL NOTICE

TO: [COMPANY] (ACN [PHONE]) IF YOU (being the person bound by this order): (A) Refuse or neglect to do any act within the time specified in this order for the doing of the act; or (B) Disobey the Order by doing an act which the order requires you not to do, You will be liable to imprisonment, sequestration of property or other punishment. Any other person who knows of this order and does anything which helps or permits you to breach the terms of this order may be similarly punished. UPON the cross-claimants jointly and severally undertaking to the Court by their counsel: [redacted] b. to pay the compensation referred to in (a) to the person affected by the operation of the order or undertaking;

THE COURT ORDERS THAT:

1. Until the hearing and determination of the application for interlocutory relief set out in the Notice of cross-claim dated 18 August 2017, fixed for hearing on 23 November 2017, the cross-respondent, by itself, its directors, officers, servants, agents or howsoever otherwise, be restrained from engaging or threatening to engage in the following acts within the patent area (as that term is defined in the Patents Act 1990 (Cth)) without the licence or authority of the cross-claimants: [redacted] (b) offering to make, sell, supply or otherwise dispose of any Generic Dexmedetomidine Product; (c) using or importing any Generic Dexmedetomidine Product; (d) authorising, inducing, procuring or joining in a common design with any other person to do any of the acts referred to in sub-paragraphs (a) to (c) above.

2. Within 3 business days of the making of these orders, the cross-respondent recall, purchase back, or take all other necessary steps to immediately recover, all stock of dexmedetomidine that has been supplied, sold, delivered or transferred to its Australian distributor pursuant to the Tax Invoice dated 31 August 2017 (being Confidential Exhibit DG-9 to the Affidavit of [NAME] made 1 September 2017 and marked "Exhibit CR-6") (the Stock).

3. Within 4 business days of the making of these orders, the cross-respondent provide to the cross-claimants an affidavit sworn by an authorised officer of the cross-respondent that identifies all steps taken to comply with Order 2 above.

4. The parties have liberty to apply to the Docket Judge.

5. Unless a party notifies the Court in writing by 4:00 pm on 13 September 2017 that it opposes this order as to costs, the cross-respondent pay the cross-claimants' costs of the application for interim injunction, as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

KENNY J:

INtroduction 1 The cross-claimants, [COMPANY] ([NAME]) and [COMPANY] ([NAME]), apply for an interim interlocutory injunction to restrain the cross-respondent, [COMPANY] ([NAME]) from, amongst other things, offering to supply and supplying any medicament for use in intensive care unit (ICU) sedation containing dexmedetomidine or a pharmaceutically acceptable salt thereof (the [NAME]). 2 The interim injunction is sought up to the hearing and determination of the cross-claimants' claim for interlocutory injunctive relief, which is set down for hearing on 23 November 2017. 3 This application for interim injunctive relief was sought after the cross-claimants had filed their cross-claim on 18 August 2017 and the Court, having initially indicated that their interlocutory injunction application could be heard on 8 September 2017, was obliged to vacate that date and re-schedule the hearing for 23 November 2017. The cross-claimants have made application for an interim injunction, in circumstances where [NAME]: (a) declined to give undertakings sought by the cross-claimants not to supply or offer to supply the [NAME] prior to 23 November 2017; (b) declined to give undertakings sought by the cross-claimants not to rely on the change in the hearing date as a reason why the interlocutory injunction should not be granted; and (c) without notice to the cross-claimants commenced offering to supply, or market, the [NAME] in Australia. 4 In support of its application for interim injunctive relief, [NAME] relies on an affidavit of [NAME] affirmed on 6 September 2017, an affidavit of [NAME] affirmed on 6 September 2017, an affidavit of [NAME] affirmed on 5 September 2017 and a further affidavit of [NAME] affirmed on 8 September 2017. In opposition, [NAME] relies on an affidavit of [NAME] sworn on 1 September 2017, an affidavit of [NAME] sworn on 7 September 2017 and an affidavit of [NAME] affirmed on 8 September 2017. 5 For the reasons set out below, in the circumstances disclosed to the Court on the cross-claimants' present application, I would grant the interim relief sought by them. 6 In their cross-claim, the cross-claimants alleged that, in threatening and continuing to threaten to sell and selling the [NAME] will infringe all claims of Australian Patent No 754484 titled "Use of dexmedetomidine for ICU sedation" (the Patent). In its statement of claim, [NAME] has claimed that the Patent is invalid, alleging lack of novelty and inventive step, as well as lack of fair basis and clarity. Invalidity is denied by the opposing parties. 7 Up until 16 August 2017, [NAME] and [NAME] (Orion) were the patentees of the Patent. For present purposes it may be accepted that, on 17 August 2017, Orion assigned its right, title and interest in the Patent to [NAME] and, since that date, [NAME] has been the exclusive licensee of the Patent. The evidence presently before the Court indicated that the cross-claimants, by their predecessors in title, have been marketing their dexmedetomidine product since around 2003. 8 It may also be accepted for present purposes that [NAME] carries on business as an importer and distributor of pharmaceutical products for sale in Australia.

legal framework 9 The relevant legal framework and principles regarding the grant of interim injunctive relief were not in dispute: reference was made to [COMPANY] v Apple Inc [2011] FCAFC 156; 217 FCR 238 at [44]-[48] (Dowsett, Foster and Yates JJ) (Samsung). The following is a brief and necessarily non-exhaustive outline of some of the relevant principles. 10 Before granting interlocutory injunctive relief, a court will have regard to the principles set out in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; 227 CLR 57 at [19] (Gleeson CJ and Crennan J) and [65]-[72] (Gummow and Hayne JJ). These principles also inform the grant of interim injunctive relief, although the temporally-limited nature of that relief should be kept in mind, at least in so far as it may affect the balance of convenience. 11 Before granting the relief sought in this case, the Court must be satisfied that the cross-claimants have a prima facie case such that, if the evidence remains the same, there is a probability that they will succeed at trial; and that the balance of convenience favors the grant of the interim injunction. In considering the balance of convenience, the question is whether the injury that the cross-claimants are likely to suffer if the injunction is refused outweighs the injury the cross-respondent might suffer if the injunction is granted. Also when assessing the balance of convenience, there is a question whether the party seeking the injunction is likely to suffer injury for which damages will not be an adequate remedy. While this question is sometimes treated as a separate and distinct question to that concerning the balance of convenience, the [ADDRESS] in Samsung at [63] said that "[t]he interaction between the Court's assessment of the likely harm to the plaintiff, if no injunction is granted, and its assessment of the adequacy of damages as a remedy, will always be an important factor in the Court's determination of where the balance of convenience and justice lies". 12 In determining whether or not to grant the relief sought, it can also be relevant to consider the relative strengths of the cross-claimants' case on infringement and [NAME]'s challenge to the validity of the Patent.

Prima facie case in the relevant sense? 13 The Patent claims an earliest priority date of 1 April 1998. It was filed on 31 March 1999 and therefore expires on 31 March 2019. 14 Stated very briefly, the Patent relates to the use of dexmedetomidine (or a pharmaceutically acceptable salt thereof) in ICU sedation and the use of that compound in the manufacture of a medicament for ICU sedation. The independent claims of the Patent are: (a) Claim 1: "Use of dexmedetomidine or a pharmaceutically acceptable salt thereof in the manufacture of a medicament for use in intensive care unit sedation"; (b) Claim 13: "A method of sedating a patient in an intensive care unit, wherein said method comprises administering dexmedetomidine or a pharmaceutically acceptable salt thereof to a patient in need thereof"; (c) Claim 15: "A method of sedating an intensive care unit patient, comprising administering a pharmaceutical composition to the patient, wherein the pharmaceutical composition comprises an active agent and an inactive agent, wherein the active agent consists of dexmedetomidine or a pharmaceutically acceptable salt thereof"; and (d) Claim 26: "Use of dexmedetomidine or a pharmaceutically acceptable salt thereof in the intensive care unit sedation". 15 [NAME], for the cross-claimants, submitted, and for present purposes I accept, that claim 1 was in the "Swiss-style" form, since it was in the form: "the use of compound X in/for the manufacture of a medicament for a specified (and new) therapeutic use". As [NAME] submitted, Yates J considered the interpretation of claims in this form in [COMPANY] v [COMPANY] (No 4) [2015] FCA 634; 113 IPR 191 ([NAME]) at [100]-[121]. [NAME] submitted, and for present purposes I accept, that claims 13, 15 and 26 are method of treatment claims, as explained by Yates J in [NAME]. 16 The evidence currently before the Court indicates that [NAME] obtained registration on the Australian Register of Therapeutic Goods (ARTG) of various products that contain dexmedetomidine hydrochloride (a pharmaceutically acceptable salt of dexmedetomidine), that were entered in the ARTG on 13 July 2017. The product information for the [NAME] states that the drug is indicated for the claimed indication. Subject to issues of validity, having regard to the discussion in [NAME] at [163]-[174], it would appear that the cross-claimants have a prima facie case of infringement of claim 1 such that, if the evidence remains the same, there is a probability that they will succeed at trial. Again, subject to issues of validity, having regard to s 117(1) and (2)(c) of the Patents Act 1990 (Cth) (Patents Act) and that [NAME] threatens to supply the [NAME] with instructions (being the Product Information) to use the [NAME], it would also appear that the cross-claimants have a prima facie case of infringement of claims 13, 15 and 26 such that, if the evidence remains the same, there is a probability that they will succeed at trial. There would appear to be a further basis to substantiate infringement of these claims under s 117(1) and (2)(b) of the Patents Act, again subject to issues of validity. 17 On the evidence presently before the Court, I am therefore satisfied that, subject to issues of validity, the cross-claimants have a prima facie case against [NAME] regarding the apprehended infringement of the Patent, such that, if the evidence remains the same, there is a probability that they will succeed at trial. 18 As already mentioned, [NAME] alleges that the Patent is invalid. At the hearing, [NAME], for [NAME], submitted that [NAME] had a strong prima facie case on validity, particularly with respect to lack of novelty. She also outlined briefly the basis of [NAME]'s case on lack of fair basis. [NAME]'s clear submissions, the evidence presently before the Court does not permit assessment of [NAME]'s case on invalidity. 19 For present purposes, I am satisfied that the cross-claimants have met the relevant prima facie case requirement.

Balance of convenience 20 On balance, I am satisfied that the balance of convenience favours the grant of interim injunctive relief. 21 First, the grant of this relief would, so it seems to me, best protect the practical status quo until the interlocutory injunction application can be heard in November 2017. The cross-claimants' product, [NAME], was first launched in Australia in around 2003 by a predecessor in title as the sole distributor of dexmedetomidine in Australia. In about 2004, [NAME] emerged from the predecessor in title and acquired the rights to promote and sell [NAME] in Australia. On the evidence presently before the Court, these rights have continued to be exercised by [NAME] and subsequently by both cross-claimants. 22 Accordingly, until very recently, the cross-claimants by their predecessors in title have been the sole distributor of dexmedetomidine in Australia. Further, the Patent has remained registered for some time, without challenge, and has eighteen months to expiry in March 2019. 23 The cross-claimants filed their cross-claim seeking interlocutory (and permanent) injunctions on 18 August 2017. The evidence before the Court indicates that some time prior to 31 August 2017 [NAME] placed an order for the supply of the [NAME] with its supplier and that product was supplied on that date to [NAME] in Australia and then sent to [NAME]'s distributor. [NAME] deposes that it was his expectation that the distributor had sufficient quantity of the [NAME] to meet market demand for about 5 months. The attention of the cross-claimants was drawn to this development only when they began to receive new pricing requests under contracts with their customers. These requests were apparently triggered by [NAME]'s activities in marketing the [NAME]. There is no evidence before the Court that there have yet been any sales of the [NAME] to customers. 24 In the circumstances, protection of the status quo by interim injunctive relief favors the cross-claimants. 25 Secondly, the evidence before the Court at present shows that the cross-claimants have an established market position in relation to its products, and that market position is likely to be substantially adversely affected by the entry of the [NAME]. The evidence currently before the Court is that, if [NAME] continues to market the [NAME], there will be a great deal of commercial pressure on the cross-claimants to drop their price or lose market share to [NAME]. Either outcome would cause them substantial financial loss. 26 I interpolate here that, with respect to this kind of loss, the question arises as to whether damages would be an adequate remedy, as indeed [NAME], for [NAME], submitted they would. In this connection, [NAME] submitted that the cross-claimants would not be irreparably harmed, and damages would be readily calculable (citing Bayer Pharma Aktiengesellschaft v Generic Health Pty Ltd [2017] FCA 250) if an interim injunction were not granted, because the cross-claimants' product has had over 10 years of sales (with them or their predecessors, the sole suppliers), and the Patent would expire in 18 months. In any event, [NAME] submitted, there will be entry of generics into the market in 18 months, so [NAME]'s entry would only bring forward the discounting that would occur at that time. 27 Although the question of the adequacy of damages as a remedy is not free from doubt, on the evidence and the submissions before the Court, I accept [NAME]'s submissions that damages would be very difficult to calculate. This is because the evidence before the Court indicates any assessment of damages would be made in the following circumstances. (a) The cross-claimants' product, [NAME], is a substitutable product, which competes with other significantly less expensive sedation drugs (principally propofol and midazolam) although these drugs do not provide all the advantages of [NAME]. (b) [NAME] is provided in both a concentrate formulation and a ready-to-use formulation. As the ready-to-use formulation is a relatively recent entrant into the market, the percentage split between the two products is still unsettled.. (c) Notwithstanding that the drug has been on the market since 2003, the market for dexmedetomidine is not "mature" in the sense that it is relatively stable and has predictable growth trends. Rather, although the market volume has been increasing, it has not done so at a consistent rate and has not been steady for a material period of time. (d) The use of [NAME] varies across the market, with some [NAME] using [NAME] widely, and others using [NAME] only in certain situations, or not at all. This variable use also reflects the difference in price between [NAME] and its main competitors and is also said to reflect various levels of knowledge and levels of acceptance of the benefits of [NAME] over its competitors. (e) The entry of [NAME] to the market will significantly disrupt the market in terms of pricing of dexmedetomidine and in terms of overall sales of dexmedetomidine. 28 Furthermore, [NAME] deposed that the entry of [NAME] into the market would immediately give rise to a contractual right for most of the cross-claimants' customers to renegotiate the price at which they purchase [NAME] from the cross-claimants. Once the contractual price was re-negotiated, the cross-claimants would be unable to consider raising the price until the next round of its customers' purchasing decisions, which might not be for a number of years. 29 Also significant in this context is the fact that the evidence before the Court indicates that the cross-claimants may suffer reputational harm should [NAME] enter the market, for which damages would not be an adequate remedy. In his affidavit, [NAME] deposes that, if [NAME] was, after trial, enjoined from marketing and supplying the [NAME], the cross-claimants would be at significant risk of reputational damage were they to raise the price of [NAME] to the price at which it was sold before [NAME] entered the market. On the other hand, if the cross-claimants were to maintain the depressed prices after [NAME] was enjoined after trial, its pecuniary loss of profits would be even greater. 30 In assessing the harm to the cross-respondent from granting interim relief, I have borne in mind [NAME]'s criticism of the cross-claimants' evidence and that, as she submitted, it would be difficult to quantify the damage to [NAME] if an interim injunction were granted, since [NAME] had not entered the market. As [NAME] noted, the assessment of the cross-respondent's damages would involve assessing a number of counterfactuals with accompanying uncertainties. [NAME] also noted that, if an interim injunction were granted, it was possible that [NAME] would lose its "first mover advantage", and the quantification of the benefit it lost would be difficult. [NAME] attention to the fact that [NAME] had purchased the [NAME] to sell in Australia and, bearing in mind that they had an expiry date, [NAME] would have less time to sell them assuming no injunction were granted after the hearing in November 2017. On balance, however, in the circumstances and on the evidence before the Court, none of these considerations persuade me that the cross-claimants should not have interim injunctive relief. 31 Bearing in mind all the above-mentioned matters and the matters discussed hereafter, I am satisfied that, as best I can determine now on the evidence before the Court, the injury that cross-claimants are likely to suffer if interim injunctive relief is refused outweighs the injury the cross-respondent might suffer if that relief is granted. 32 Before considering the final two matters raised by the parties, I observe that both the cross-claimants and the cross-respondent referred to the public interest. [NAME] asserted that there was a public interest in [NAME] being able to purchase dexmedetomidine products at a reduced price. The cross-claimants, on the other hand, placed some evidence before the Court that they would no longer invest in clinical trials of the drug and market education as to its benefits. In the end, these considerations, though important in other contexts, were not central to the cases that the parties sought to make. 33 The last two matters raised by the parties were [NAME]'s failure to "clear the way" and the advantage that might be secured by the cross-claimants if they had the benefit of interim injunctive relief. 34 There was some evidence before the Court that [NAME] must have filed its application to the ARTG to market the relevant drug at least 12 months before its ARTG listing was published. It may be inferred, therefore, that it had an intention to enter the market at least 12 months before the ARTG listing was published. As already stated, the cross-claimants first learnt of [NAME]'s products shortly after they were registered on the ARTG on 13 July 2017. [NAME] did not commence proceedings alleging the Patent's invalidity until 8 August 2017. It is, I accept, on the present state of the evidence unlikely that [NAME] began the process of applying to register the drug on the ARTG without being aware of the Patent. [NAME], it may be accepted, took no steps to "clear the way" before launching the [NAME]. 35 This is, as [NAME] acknowledged, one factor to be considered with other factors and, although not determinative, it is a factor that militates against [NAME] to an extent (acknowledging that there are many reasons why a company may not commence proceedings in the years before entering the market). 36 The final matter that led to the filing of two affidavits following the hearing was whether the cross-claimants would use the period of the interim injunction to transition its customers to the ready-to-use form of dexmedetomidine by restricting provision of the product in concentrate form, and encouraging its customers to purchase only the ready-to-use product. At the hearing, [NAME] submitted that [NAME] had a real concern that the cross-claimants would take advantage of the opportunity afforded by an interim interlocutory injunction to act in this way. [NAME] stated that the concern of [NAME] was that it had only obtained registration from the ARTG for the concentrate form of dexmedetomidine, did not have registration of the ready-to-use form, and that the cross-claimants would seek to shrink the market for concentrate by transitioning their customers to the ready-to-use form. 37 The cross-claimants requested and were given leave to file a further affidavit of [NAME] affirmed on 8 September 2017, responding to these submissions. [NAME] later sought and was granted leave to file the affidavit of [NAME] affirmed on 8 September 2017, in response. 38 In his affidavit of 8 September 2017, [NAME] deposed that the cross-claimants intend to continue to supply both concentrate and ready-to-use dexmedetomidine products, and that they are not trying to convert the market to the ready-to-use product. He deposed that preferences as to those products differ between medical practitioners, and that the employees with whom he works are aware of the need and desire for both forms of the product. 39 [NAME] deposed that he had had discussions with hospital pharmacy customers since 1 September 2017 in a number of States, and in those discussions he was informed that [NAME] had been out of the concentrate form of [NAME], and that those customers had purchased the ready-to-use form. Annexed to [NAME]' affidavit was a copy of a notification published on the HPS website, indicating that in December 2016 [NAME] was experiencing a supply constraint on the concentrate form of [NAME], but that the ready-to-use form was still available. The notification indicated that [NAME] expected distribution to be constrained until early March 2017. [NAME] further deposed that since approximately April or May 2017 he has been aware that the ready-to-use form of [NAME] has been available at a price approximately 10% below that of the concentrate form. 40 For present purposes, I accept that the cross-claimants could seek to transition their customers from the concentrate product to the ready-to-use product. There is, however, no reason to disbelieve [NAME]'s statement that [NAME] will continue to supply both forms of the product and that the supply of these forms will continue to be affected by the preferences of medical practitioners. This is consistent with [NAME]'s earlier affidavit evidence. [NAME]' evidence at its highest (and leaving aside any issues that might be raised with respect to his evidence), it does not seem to me that his evidence necessitates the rejection of [NAME]'s further affidavit evidence; and nor would it lead me to a contrary conclusion about the grant of interim interlocutory relief.

Disposition 41 The cross-claimants submitted, and I accept, that there had been no relevant delay on their part that would tell against the grant of interim interlocutory relief. For the reasons stated, I would grant this relief. 42 The cross-claimants indicated by their counsel that they would give the usual undertaking as to damages. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.

Associate: Dated: 11 September 2017

SCHEDULE OF PARTIES VID 885 of 2017 Cross-Claimants Second Cross-Claimant: [redacted]