Alphapharm Pty Ltd v H Lundbeck A/S

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE: LINDGREN J DATE OF ORDER: 19 JUNE 2008

1. The District Registrar draw up and issue a certificate pursuant to s 19(1) of the Patents Act 1990 (Cth) certifying that the validity of each of claims 1, 2, 3, 4 and 6 of Australian Patent No 623144 (the Patent) was questioned, provided that no such certificate be issued before the expiry of 42 days from the date of making of these Orders or, if an appeal or cross-appeal against this Order is filed within that period, until after the determination of that appeal or cross-appeal.
2. Claim 5 of the Patent is and has at all material times been invalid.
3. Claim 5 of the Patent be revoked.
4. 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.
5. Upon the Respondent giving the undertakings in paras 7 and 8 below, Orders of paras 3 and 4 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.
6. The Applicant pay 10 percent of the Respondent's costs of proceedings NSD 1120 of 2005 and NSD 954 of 2006.

THE COURT NOTES: 7. The Respondent undertakes to the Court: (a) to pay to the Applicant such damages or loss whether legally claimable or not as a Judge may think just and fair as compensation to the Applicant for any disadvantage it may sustain by reason of Order of para 5 above; (b) to have particulars of the Orders of paras 2 to 5 above registered pursuant to s 187 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. 8. The Respondent undertakes to the Court during the period of the stay set out in Order 5 to prosecute any appeal expeditiously.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA NSD 1078 OF 2006

AND: COMMISSIONER OF PATENTS

1. The appeal be dismissed.
2. The Commissioner correct the Register of Patents by removing from it the extension of term of Australian Patent No 623144.
3. Upon the Applicant giving the undertakings in paras 7 and 8 below, the Order of para 2 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 is filed to the Full Court of the Federal Court within that period, until the determination of that appeal.
4. The Applicant be granted leave to appeal to the Full Court by filing a notice of appeal by the date which is 21 days after the making of these Orders.
5. Pursuant to Order 1 rule 8 of the Federal Court Rules, compliance with Order 52, Division 1, be dispensed with.
6. The Applicant pay the First and Second Respondents' costs of the proceeding.

AND THE COURT NOTES: 7. The Applicant undertakes to the Court: (a) to pay to the Respondents such damages or loss whether legally claimable or not as a Judge may think just and fair as compensation to the Respondents for any disadvantage they may sustain by reason of the Order of para 3 above; (b) to have particulars of the Orders of paras 2 and 3 above registered pursuant to s 187 of the Patents Act 1990; and (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. 8. The Applicant undertakes to the Court during the period of the stay set out in Order 3 to prosecute any further appeal expeditiously.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NSD 1120 OF 2005

BETWEEN: ALPHAPHARM PTY LTD (ACN 002 359 739)

BETWEEN: ARROW PHARMACEUTICALS PTY LTD

IN THE FEDERAL COURT OF AUSTRALIA NSD 1078 OF 2006

NEW SOUTH WALES DISTRICT REGISTRY ON APPEAL FROM THE COMMISSIONER OF PATENTS

BETWEEN: H LUNDBECK A/S

AND: COMMISSIONER OF PATENTS

Introduction 1 I published Reasons for Judgment in four related proceedings on 24 April 2008: see Alphapharm Pty Ltd v H Lundbeck A/S [2008] FCA 559 (the earlier reasons). 2 The earlier reasons left outstanding the question of all orders to be made, including orders as to costs. 3 On 9 July 2008, by consent as to form, I made orders disposing of one of the four proceedings, NSD 1870 of 2005 (the TGA (Protected Information) Proceeding). 4 The parties made written and oral submissions on the orders to be made in the remaining three proceedings: NSD 1120 of 2005 (the Revocation Proceeding) NSD 954 of 2006 (the Arrow Proceeding) NSD 1078 of 2006 (the Lundbeck Appeal (Extension of Term) Proceeding) 5 I made orders on 19 June 2008 in those proceedings. These are my reasons for the making of those orders. 6 I will use the abbreviations that were used in the earlier reasons and will take those reasons as read. 7 Two main issues have been debated: (1) whether there should be a stay of the order for rectification of the Register by removal of particulars of the extension of term of the Patent; and (2) costs. 8 As referred to below, other issues were also in contest.

The question of a stay 9 On the stay question two issues were raised: (1) will there be time for any appeal to be heard and determined by 13 June 2009, when the original term of the Patent will expire?; and (2) does the Court have power to reinstate the entry of the particulars of the extension of term in the event that Lundbeck's appeal is successful? 10 Alphapharm and Arrow accept that, upon the appropriate undertakings being given by Lundbeck, there should be a stay in relation to revocation of claim 5 of the Patent since there is some doubt as to the Court's power to order re-instatement: see Atlantis Corporation Pty Ltd v Schindler, unreported, Emmett J, 27 May 1997; Doric Products Pty Ltd v Lockwood Security Products Pty Ltd (2002) 54 IPR 495 at [4]; Imperial Chemical Industries plc v E I Dupont De Nemours & Co (2002) 58 IPR 227 at [11]. I agree that there should be a stay in relation to claim 5. I note that in Doric v Lockwood above, Hely J observed (at [4]) that it is usual for an order for revocation of a patent to be stayed pending an appeal against the order. 11 However, both Alphapharm and Arrow contend that there should be no stay in relation to removal of the particulars of the extension of the term of the Patent, and that no such doubt exists in relation to the Court's power to order re-instatement of those particulars. 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. 14 If the particulars of the extension are removed, and the Court lacks power to order their reinstatement, Lundbeck would suffer a gross injustice if it succeeds in its appeal, whether or that success occurs before or after 13 June 2009. Obviously it would be a very serious matter for Lundbeck to be denied the benefit of such success merely because the Court lacked power to order reinstatement of the registration of the extension. On the other hand, if the particulars of the extension remain registered and Lundbeck loses the appeal after 13 June 2009, Lundbeck will have the benefit of a de facto extension for a short while beyond that date. 15 From Alphapharm's viewpoint, Alphapharm would not enjoy the benefit of the removal of the particulars of the extension until after 13 June 2009. However, if Lundbeck's appeal is dismissed at some time later than 13 June 2009, the effect of the stay will be to deprive Alphapharm of the fruits of its victory at first instance in relation to the period from that date to the dismissal of the appeal. 16 I accept that there is at least some doubt as to whether the result of the appeal will be known by 13 June 2009. It probably will but it may not. I should note in passing that the delay between the publication of the earlier reasons on 24 April 2008 and the making of the orders on 19 June 2008 was attributable to the desire of the parties to make oral submissions on the present issues and the difficulty in obtaining dates for that purpose suitable to all counsel who appeared at the trial. In the result, the appeal has missed out on the August 2008 Full Court sittings and will not be able to be heard until the November 2008 Full Court sittings. It seems reasonable to think that the Full Court's decision will be given by 13 June 2009 but the possibility of a later date cannot be excluded, in particular if there are post-hearing written submissions. 17 On the question of the Court's power to order reinstatement, in contending that the Full Court would have that power, Alphapharm relies on Woolworths Ltd v BP plc (2006) 150 FCR 134 (Woolworths) at [30]-[48] per Sundberg and Bennett JJ. Lundbeck contends that Woolworths is distinguishable. That case concerned s 68(1)(b) of the Trade Marks Act 1995 (Cth) (TM Act), in circumstances in which a trade mark had been registered pursuant to the order of the primary Judge and the issue was whether the Court, in its appellate jurisdiction, had power to order removal of the mark. There are some differences between s 192 of the Act and s 68(1)(b) of the TM Act. 18 Lundbeck points out that there has been no judicial determination of the Court's power to order reinstatement of an entry in the Register where the Court has ordered removal of particulars of an extension of term and the order for rectification of the Register has been implemented. 19 I will not explore the present question. It suffices to say that while I suspect that it would be within the implied power of the Court to order reinstatement, there is some doubt which is not clearly removed by Woolworths. 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.

Costs 22 Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a broad discretion to award costs. In Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748, Toohey J stated (at 2):

1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order: Ritter v. Godfrey (1920) 2 K.B. 47.
2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed: Forster v. Farquhar (1893) 1 Q.B. 564.
3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law: Cretazzo v. Lombardi (1975) 13 S.A.S.R. 4 at 12. 23 Even if "the event" is easily identified, it will not always be just that costs follow the event: see Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107. The notion of costs following the event is not straightforward in the present case. 24 Generally speaking, in the Revocation Proceeding, Lundbeck succeeded in defending the Patent against the attack by Alphapharm. Claim 5 was held invalid, but overall this did not assume great importance. Lundbeck succeeded on its cross-claim for infringement but only to a minor extent, and otherwise Alphapharm succeeded on that cross-claim. 25 Through the Arrow Proceeding, Arrow joined cause with Alphapharm in the attack on the Patent. There was no claim that Arrow had infringed the Patent. 26 In the Revocation Proceeding, the Arrow Proceeding and the Lundbeck Appeal (Extension of Term) Proceeding, Alphapharm and Arrow, as the case may be, succeeded in having the extension of term removed from the Register. 27 Alphapharm submits that the "event" is to be seen as Lundbeck's having been deprived of the monopoly granted by the Patent for the period after the expiry of its original term on 13 June 2009 down to 13 June 2014. Alphapharm submits that Lundbeck has retained its monopoly for only approximately one-sixth of the period from now to 13 June 2014. Another way in which Alphapharm makes the same point is to say: As a result of the judgment, Alphapharm will now be free to make, sell and export its [generic] escitalopram product after the expiry of the term of the Patent, which is now to be 13 June 2009, five years earlier than it was able to prior to the commencement of the proceedings. [emphasis in original] 28 Alphapharm submits that the appropriate exercise of discretion is that there should be no order as to costs, and relies on the following matters: (a) Alphapharm's success on the issue of the infringement and in obtaining revocation of five-sixths of the remainder of the extended term of the Patent as discussed above; (b) time spent in Court on evidence filed by Lundbeck and found by the Court to be irrelevant, namely, evidence going to the extent of the therapeutic superiority of S-citalopram over racemic citalopram, and the post-filing date "unexpected" revelation of this through clinical studies (see my consideration of Alphapharm's "general relevance objection" in the earlier reasons at [741]-[753]); (c) a substantial body of affidavit evidence of Lundbeck that was filed but not read, but which was nonetheless answered, and in relation to whichAlphapharm was obliged to prepare and did in fact prepare for the purposes of cross-examination; (d) certain interlocutory decisions decided in favour of Alphapharm on which costs orders were not made or on which the making of costs orders was expressly reserved. 29 In the alternative, Alphapharm submits that if the Court should be minded to order it to pay some of the costs of the Lundbeck parties, Arrow should have to pay 50% of those costs, that is to say, Alphapharm and Arrow should have to bear equally whatever proportion of Lundbeck's costs are to be paid by them. Alphapharm submits that like itself, Arrow is a generic company, and that the benefit of Alphapharm's labours (the removal of the extension of the term of the Patent) will enure to its benefit too. 30 The Lundbeck parties emphasise that Alphapharm and Arrow challenged the validity of its Patent, and that it succeeded on that issue except in a relatively minor respect (claim 5). Lundbeck points out that much of the evidence related to the issue of obviousness, on which it succeeded. Lundbeck submits that to the extent that the order for costs should reflect the fact that Alphapharm and Arrow succeeded in relation to the extension of term, there should be a reduction of no more than 20%, that is to say, that Alphapharm and Arrow should be ordered to pay 80% of the Lundbeck parties' costs. 31 The Lundbeck parties point out that there was a finding of infringement on claims 1, 3 and 6 of the Patent between at least November 2002 and 27 May 2004, on which date Alphapharm's defence pursuant to s 78(2) of the Act (and from 25 October 2006, s 119A of the Act) arose. They point out further that there was no evidence led by Alphapharm (and therefore little cost incurred) on its defence pursuant to the statutory provisions mentioned, in respect of its conduct occurring after 27 May 2004. 32 Like Alphapharm, Arrow submits that there should be no order as to costs. Like Alphapharm, it relies on what it describes as the reduction of the remainder of Lundbeck's monopoly from approximately six years to approximately one year. 33 Arrow submits that on the basis of the issues decided, the significance of, and time spent on, particular issues leads to a conclusion that the relative successes and failures of the Lundbeck parties on the one hand and Alphapharm and Arrow on the other hand, are approximately equal. 34 Finally, Arrow submits that if a costs order is made, the following matters are relevant to determining the proportion of those costs that Arrow should bear as compared with Alphapharm: there was no cross-claim for infringement against it; its proceeding was commenced well after that brought by Alphapharm; and its involvement in adducing evidence and making submissions was relatively minor by comparison with that of Alphapharm. 35 In the result, Arrow submits that there should be no order for costs against it, but that if the Court decides otherwise there should be an order against it for only a very small part of Lundbeck's costs. 36 I have considered carefully the parties' submissions, including their submissions relating to the time spent on various issues. A considerable amount of the hearing was occupied with the attack on the validity of the Patent on the ground of obviousness. Lengthy and dense evidence both in chief and in cross-examination from Professors Banwell and Davies occupied much time and gave rise to lengthy submissions. Their evidence related largely, but not exclusively, to the issue of obviousness. So did that of Lundbeck employees, Dr Bogeso and Mr Gundertofte. Lundbeck succeeded on that issue. 37 However, the position is complicated by the fact that some of the evidence relating to obviousness also related to other issues. For example, some of the evidence given by Professors Banwell and Davies laid out the groundwork for my understanding of chemistry that underlay the entire case, including, to some extent, the issue relating to the extension of term. 38 Even though it is true that Lundbeck lost its monopoly for most of the term of the monopoly that remained from the hearing to 13 June 2014, I think that a patentee is entitled to defend an attack on its intellectual property, even in so far as it relates to the monopoly that it has enjoyed in the past. The Patent was granted as long ago as 1989. 39 On the other hand, it is not to be ignored that in commercial terms, Alphapharm and Arrow have succeeded to the extent of approximately five-sixths of the extended term of the monopoly remaining. Moreover, there is some force in the submissions made by Alphapharm noted at [27] above, and by Arrow noted at [32] above. 40 Having regard to all of the considerations referred to, I think the appropriate order is that Lundbeck parties recover 40% of their costs, and that Alphapharm pay 30% and Arrow 10% of those costs in order to make up the 40%. (The Lundbeck parties did not press a submission they originally made that Alphapharm and Lundbeck should be jointly and severally liable, irrespective of their rights inter se. The Lundbeck parties indicated that they would be content with several liabilities simpliciter.)

Other matters 41 Alphapharm was found to have infringed the Patent from at least November 2002 down to 27 May 2004, on which date Alphapharm's defence pursuant to s 78(2) of the Act (and from 25 October 2006, s 119A of the Act) arose. There was an issue as to whether Alphapharm should be required to give discovery in relation to damages for infringement (in favour of which Lundbeck has elected). It should, but if Alphapharm promptly appeals, there should be a stay on the orders for payment of damages and for the associated obligation to give discovery. 42 There was an issue as to whether a permanent injunction should be ordered against Alphapharm. Alphapharm submitted that Lundbeck should be satisfied, as it had been in the past, with Alphapharm's undertaking. However, the fact that Lundbeck was willing to accept an undertaking pending trial should not deprive it of the right to seek a permanent injunction in the absence of agreement on an undertaking. There should be a permanent injunction restraining Alphapharm from exploiting the Patent save as allowed by s 78 (or now s 119A) of the Act.

Conclusion 43 The reasons set out above are the reasons why I made the orders in the three proceedings mentioned on 19 June 2008. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate: Dated: 10 July 2008 Proceeding NSD 1120 of 2005 Counsel for the Applicant/Cross Respondent (Alphapharm Pty Ltd): Mr DK Catterns QC, Mr S Burley SC and Mr JS Cooke Solicitor for the Applicant/Cross Respondent (Alphapharm Pty Ltd): Mallesons Stephen Jaques

Counsel for the Respondent/First Cross Claimant Mr D Shavin QC and Ms KJ Howard SC (H Lundbeck A/S) and for the Second Cross Claimant (Lundbeck Australia Pty Ltd):

Solicitor for the Respondent/First Cross Claimant Corrs Chambers Westgarth (H Lundbeck A/S) and for the Second Cross Claimant Lundbeck Australia Pty Ltd):

Proceeding NSD 954 of 2006 Counsel for the Applicant Mr C Dimitriadis (Arrow Pharmaceuticals Pty Ltd):

Solicitor for the Applicant Blake Dawson Waldron (Arrow Pharmaceuticals Pty Ltd):

Counsel for the Respondent (H Lundbeck A/S): Mr D Shavin QC and Ms KJ Howard SC Solicitor for the Respondent (H Lundbeck A/S): Corrs Chambers Westgarth

Proceeding NSD 1078 of 2006 Counsel for the Applicant (H Lundbeck A/S): Mr D Shavin QC and Ms KJ Howard SC

Solicitor for the Applicant (H Lundbeck A/S): Corrs Chambers Westgarth

Counsel for the First Respondent (Commissioner of Patents) Ms M Gaven

Solicitor for the First Respondent (Commissioner of Patents) Australian Government Solicitor

Counsel for the Second Respondent Mr DK Catterns QC, Mr S Burley SC (Alphapharm Pty Ltd): and Mr JS Cooke

Solicitor for the Second Respondent Mallesons Stephen Jaques (Alphapharm Pty Ltd): Dates of Hearing: 3 June 2008

Date of Orders: 19 June 2008

Date of Publication of Reasons: 10 July 2008