Generic Health Pty Ltd v Otsuka Pharmaceutical Co Ltd

REASONS FOR JUDGMENT 1 On 16 March 2012 the respondents, Otsuka Pharmaceutical Co. Ltd ("Otsuka") and Bristol-Myers Squibb Company ("Bristol-Myers"), obtained an interlocutory injunction to restrain the threatened supply by Generic Health Pty Ltd ("Generic Health") of certain generic pharmaceutical products containing aripiprazole. Aripiprazole is an antipsychotic drug used in the treatment of schizophrenia and of manic or mixed episodes associated with bipolar I disorder. The respondents had argued that Generic Health's conduct threatened the infringement of two of its patents in several respects but the primary judge was only satisfied that there was a prima facie case in respect of one patent claim. 2 Generic Health has applied for leave to appeal. Section 25(2)(e) of the Federal Court of Australia Act 1976 (Cth) ("the FCA Act") provides that applications for leave to appeal must be heard by a single judge unless a judge directs that they be heard by a Full Court. Generic Health asks that the leave application be heard by a Full Court (and with, or immediately before, the appeal). When this matter came before me for directions I was given to understand that the respondents neither consented to nor opposed the application. Senior counsel for Generic Health said that that was the respondents' position and the respondents' solicitor, Mr Kerr, did not then dissent. He said that their position was that it was for Generic Health to make out its case. I then directed that the matter proceed by written submissions. In their written submissions counsel for the respondents denied that the application was not opposed. 3 Generic Health relies on affidavits from Jane Owen, its solicitor, sworn on 30 March 2012 in connection with the application for leave to appeal, and from Elmo De Alwis, its General Manager, sworn on 22 February 2012 in the proceeding before the primary judge. It submits that the decision of the primary judge is attended by sufficient doubt to warrant it being reconsidered by the Full Court and substantial injustice would result if leave were refused and the decision were wrong (reflecting the language used in Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397). The request that the leave application be heard by a Full Court with or immediately before the appeal is made on the basis that many of the same issues will arise in the application and on appeal so, that if this course is adopted, there will be a substantial saving of costs to the parties and the resources of the Court. 4 The facts need only to be briefly stated. 5 Otsuka owns the Australian patent No 2005201772 ("772 patent") titled "Substituted carbostyril derivatives as 5-HT1A receptor subtype agonists". Aripiprazole is a carbostyril compound. Otsuka granted to Bristol-Myers an exclusive licence to sell in Australia pharmaceutical products containing aripiprazole which, through its Australian subsidiary, it markets under the name "Abilify". 6 Generic Health obtained registration on the Australian Register of Therapeutic Goods ("ARTG") of a number of products containing aripiprazole. One, with the brand name ARIPIPRAZOLE GH, was approved for supply with the following indication: "the treatment of schizophrenia including maintenance of clinical improvement during continuation therapy". This was one of three indications for which a number of Abilify products were also registered. Generic Health applied to have the product listed on the Pharmaceutical Benefits Scheme from 1 April 2012 in order to supply for that indication only. The applicants submit that the supply in Australia of aripiprazole of the formulation of the applicant's product is not an infringement of any Australian patent, nor is supply for the purpose of treating schizophrenia. But the respondents alleged that in supplying ARIPIPRAZOLE GH Generic Health would infringe (amongst other things) claim 7 of the 772 patent. Claim 7 is concerned with a method of treating certain kinds of patients with disorders of the central nervous system associated with the 5-HT1A receptor sub-type, specifically disorders "selected from cognitive impairment caused by [treatment-resistant, inveterate or] chronic schizophrenia" and which fail to respond to more than one of a number of specified antipsychotic drugs. The method comprises administering to the patient a therapeutically effective amount of a carbostyril compound of a particular formula or a pharmaceutically acceptable salt or solvate of it. 7 Section 117(1) of the Patents Act 1990 (Cth) ("Patents Act") provides that if the use of a product by a person would infringe a patent, the supply of that product is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent. Subs 117(2) relevantly provides: (2) A reference in subsection (1) to the use of a product by a person is a reference to: … (b) if the product is not a staple commercial product - any use of the product, if the supplier had reason to believe that the person would put it to that use; … 8 The respondents contended that aripiprazole was not a "staple commercial product" and that Generic Health had "reason to believe" that its products would be used in the method of treatment the subject of claim 7. In response, Generic Health not only denied these propositions but also challenged the validity of the patent. 9 The primary judge found on the material before him that the respondents had established a prima facie case of threatened infringement of (claim 7 of) the 772 patent based on the application of s 117(1) of the Patents Act. In substance, his Honour's finding was that there was a prima facie case that the products would be used for purposes that included treatment of cognitive impairment caused by chronic or treatment-resistant schizophrenia, including where a patient fails to respond to other antipsychotic drugs in the list in claim 7, and that Generic Health had reason to believe that they would be put to that use. On the basis of the evidence as it stood at the time his Honour also said he was unpersuaded that the challenge to the validity of claim 7 was strong enough to qualify that conclusion and expressed his satisfaction that, at least prima facie, claim 7 "claims patentable subject matter on the face of the specification". He referred to expert psychiatric evidence that aripiprazole is useful and is used to treat the disorders referred to in claim 7. He said that there was no evidence that the method the subject of the claim does not work for the intended purposes stated in the claim. He said he was not satisfied on the evidence as it was that there was a prima facie case that the invention of claim 7 was not useful. Consequently, the challenge to the validity of claim 7 did not qualify his overall conclusion concerning a prima facie case of threatened infringement of the 772 patent. 10 His Honour then proceeded to consider the questions of balance of convenience and justice and to find that the balance lay in favour of the grant of the injunction. 11 His Honour appeared to accept that there could be cases ("perhaps many") of administration of aripiprazole that would not infringe claim 7 of the 772 patent. 12 Ten grounds of appeal are listed in the draft notice of appeal annexed to Ms Owen's affidavit. They challenge the primary judge's findings on both the threatened infringement and the validity of the patent and his assessment of the strength of the invalidity case. They also allege error on his Honour's part in failing "to assess the strength of the probability of ultimate success on the part of the respondents" so as to justify the grant of interlocutory relief. 13 The question for me, of course, is not whether the decision of the primary judge is attended by sufficient doubt to warrant the grant of leave. The question is whether the application should be referred to a Full Court. That decision is entirely discretionary and, apart from the requirement that the power be exercised in the way that best promotes the overarching purpose of the civil procedure provisions of the FCA Act and Rules (s 37M of the FCA Act), there are no limits to it. The starting point, however, is that the Parliament intended that applications for leave be heard by a single judge. Unless there is reason to think that there is "some value, benefit or advantage" in the application being heard by a Full Court the direction should not be made. Cf. Oswal v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [2011] FCA 536 at [12] per Barker J. It is plain that if the proposed appeal is hopeless, as the respondents argue, there is no value, benefit or advantage in referring the application to a Full Court and a leave application of this kind should not be the subject of such a direction: Allphones Retail Pty Ltd v Weimann [2009] FCA 849 at [13] per McKerracher J. 14 There are several factors that tell in favour of Generic Health's application. As I mentioned earlier, the arguments on the leave application and the appeal (and therefore the work involved) are likely to be duplicated. The unchallenged evidence given by Ms Owen is that appeals in patent infringement and invalidity cases can take years to be heard and finally determined. If leave to appeal were refused, Generic Health would suffer substantial injustice because it will be restrained from supplying its product for all purposes, including non-infringing purposes, during that time. Mr De Alwis said that the launch of the "GH" range of aripiprazole products was of critical importance to Generic Health because of the high likelihood of obtaining a "first mover advantage". And the proposed appeal raises at least one issue of general importance - the proper construction of s 117(2) of the Patents Act (see ground 3). 15 Although the grant of an interlocutory injunction involves a matter of practice and procedure and appellate courts exercise "particular caution" in reviewing decisions involving matters of practice and procedure (Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 176-7), where matters of principle are involved, it has been said that "an appeal stands somewhat above the ordinary appeal [of this kind]": Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at [53] per Gummow and Hayne JJ. 16 On the other hand, four arguments are now put against the application. 17 First, the respondents say that there is "a real likelihood" that Generic Health will not obtain leave, so that listing the leave application at the same time as the appeal will involve a substantial waste of the Court's and the parties' resources. The respondents argue that, contrary to Generic Health's submission, it is practicable to separate the question of whether the judgment is attended by sufficient doubt to warrant a grant of leave from the substantive merits of the case. 18 Secondly, the respondents point out that Generic Health does not submit that the interlocutory judgment will have the effect of finally determining the rights of the parties. 19 Thirdly, as the grant of an interlocutory injunction is discretionary, the scope for a successful appeal is limited to the grounds identified in House v R (1936) 55 CLR 499 at 504-5. 20 Fourthly, the respondents submit that the grounds of appeal are "either hopeless per se or hopeless because they fall squarely within the primary judge's discretion". 21 The respondents' submissions have much to commend them. 22 There are obvious difficulties in overturning the judgment. The Full Court said in Samsung Electronics Co. Limited v Apple Inc. (2011) AIPC ¶92-432 at [39] that in an appeal from a discretionary decision such as this there is "a strong presumption" that the decision appealed from is right and should be affirmed that will only be defeated if the appeal court is satisfied that it is "clearly wrong". 23 I accept the respondents' submission to the effect that an appeal of the primary judge's interlocutory decision is not a suitable vehicle for the Full Court to consider the point of principle raised by the proposed appeal. Ground 3 of the draft notice of appeal pleads that the primary judge erred in holding that the GH products were not staple commercial products within the meaning of s 117 of the Patens Act. To the contrary, his Honour made no finding that Generic Health's products are not staple commercial products for the purposes of the section. Indeed, he expressly refrained from doing so. He merely found that there was a prima facie case that they are not. What is more, in making this finding he relied on a decision of this Court in Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 3) (2011) 196 FCR 1, which plainly supported his Honour's conclusion. In that case a prescription medicine in the form of tablets containing leflunomide, registered in the ARTG for the treatment of psoriatic and rheumatoid arthritis, was held not to be a staple commercial product for the purposes of s 117(2)(b) of the Patents Act as it was not "supplied commercially for various uses" (the meaning given to the term "staple commercial product" by Crennan J in Northern Territory v Collins (2008) 235 CLR 619 at [145], Hayne and Heydon JJ agreeing at [41] and [57] respectively). That suggests that ground 3 of the draft notice of appeal is doomed to fail. 24 Generic Health may well have an uphill battle in showing that the decision of the primary judge is attended by any appealable error. On the face of the judgment, which is all I have to go by, the supposed errors in his Honour's decision are not at all obvious. Still, ground 3 aside, I would be loathe to characterise the leave application as hopeless, particularly in the absence of full argument and when the subtleties of the argument may not be immediately apparent. This is not a case, for example, where the draft notice of appeal fails to raise an appealable error. Moreover, in part the challenge to the primary judge's decision is based on an evaluation of the effect of the expert evidence, none of which is before me. 25 I accept, too, that, whilst Generic Health has the benefit of the usual undertaking as to damages, there is the usual uncertainty surrounding its assessment, particularly if it loses the so-called first-mover advantage. Indeed, the primary judge accepted that there may be difficulties in calculating damages. 26 On balance, taking into account the competing considerations, and despite the appeal of many of the respondents' arguments, I am inclined to the view that there is some value and some advantage in referring the leave application to the Full Court. This is not a minor interlocutory squabble. The orders have important consequences for the parties, regardless of whether they finally dispose of their rights (cf. TS Production LLC v Drew Pictures Pty Ltd [2008] FCA 1329 at [7]; Allphones at [29]). As a general proposition I do not see any difficulty in separating out the questions for determination on an application for leave and on appeal. The mere fact that there will be common questions is scarcely a reason for referring a matter to the Full Court. More often than not that will be the case. But the respondents do not contradict the submission that Generic Health will suffer substantial injustice if the decision below turns out to be wrong. Consequently, the argument on the leave application will focus on the merits of the proposed appeal. I sense that it is likely that the merits will be as fully argued on the leave application as they would be on the appeal, as proved to be the case, for example, in Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435, regardless of whether the application were heard by a single judge or a Full Court. There is certainly the potential for considerable duplication. I doubt very much whether the hearing of an appeal would be any longer than the hearing of a leave application. In these circumstances, it is more efficient for the leave application to be heard by a Full Court and, if successful, for the appeal to follow, and that is what I will order. 27 Costs should be reserved. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.