H Lundbeck A/S v Sandoz Pty Ltd

The parties' contentions 17 Although Sandoz is the moving party in the present application, it is convenient to commence with Lundbeck's opposition to a stay being granted.

Lundbeck's contentions 18 Lundbeck submits that the only issue remaining in this proceeding is the "purely mechanical recalculation of the damages awarded by this Court to reflect the interest and discount decisions". Lundbeck submits that it is appropriate to proceed with that task because: (a) it is efficient to do so (there is unlikely to be any issue in relation to the calculation itself); (b) it would be consistent with the conduct of the proceeding to date (Jagot J proceeded to calculate damages and make a final order for damages notwithstanding that the (then) licence application was pending); (c) it would be consistent with the "structure" of the High Court's final orders made on 9 March 2022, which directed that the matter be remitted for the recalculation of damages and pre-judgment interest payable to Lundbeck, but also contemplated the possibility of a stay application in respect of the orders to be made in the remitted proceeding pending the determination of the licence proceedings; (d) the quantum of damages will be a relevant consideration for the Tribunal in determining whether a licence should be granted to Sandoz; and (e) if the quantification of damages is delayed, Lundbeck will be materially disadvantaged because of the lower interest it would recover. 19 These contentions must be considered in light of Lundbeck's further contention that the question of Sandoz's liability for patent infringement, and Lundbeck's entitlement to damages, are res judicata. According to Lundbeck, the calculation of damages and pre-judgment interest is merely consequential on the orders that have already been made. 20 Lundbeck submits that Sandoz allowed this position to occur through its own forensic decisions. Sandoz was determined to have the Court adjudicate its defence to the cause of action for patent infringement on the basis that, in the absence of a licence from Lundbeck, it did not infringe the patent. Lundbeck submits that given Jagot J's rejection of Sandoz's defences, and given the judgment Lundbeck has obtained, the licence on which Sandoz relies is of no consequence. (I observe that Lundbeck argues this to be so even though it maintains its application for review in the Tribunal.) Lundbeck submits that, as the licence is of no consequence, Sandoz cannot be prejudiced by the Court proceeding to calculate Lundbeck's damages and pre-judgment interest. 21 Lundbeck has made it clear that, should Sandoz not succeed in its present application for a stay, but subsequently apply for a stay of execution of any order that quantifies Lundbeck's damages and pre-judgement interest, Lundbeck will oppose such an application. Once again, Lundbeck contends that, in any such application, Sandoz will need to explain how a judgment which has proceeded to finality can be defeated by "any licence which may be granted by the AAT".

Sandoz's contentions 22 Sandoz contends that, notwithstanding the course adopted by Jagot J (reflected in [550] of her Honour's reasons), a stay of the remitted proceeding should be granted. Circumstances have changed. A licence under s 223(9) of the Patents Act has now been granted and remains in force; Jagot J's order for damages has been set aside; and, at present, the quantum of damages remains to be determined. 23 As to the last-mentioned matter, Sandoz contends that determining the remitted proceeding will require the resolution of a number of complex questions, including: (a) the effect of the licence in relation to the calculation of damages, including its effect should the term of the licence be varied on review by the Tribunal; and (b) the relevance of the licence in light of Lundbeck's contention that the questions of Sandoz's liability for patent infringement, and Lundbeck's entitlement to damages, are res judicata. 24 Sandoz submits, therefore, that the task before the Court in the remitted proceeding will not be the "purely mechanical recalculation of the damages awarded by this Court to reflect the interest and discount decisions", as contended by Lundbeck. 25 Sandoz has made it clear that if its application for a stay is not granted, and the Court proceeds to determine the remitted proceeding, it proposes to rely on the licence and seek to have its legal effect "confirmed". In this regard, Sandoz contends that, because it has a licence, it "did not infringe during the licensed period". It contends, alternatively, that damages should be assessed as nil which, according to Sandoz, would be consistent with the decision of the Supreme Court of the United Kingdom in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46; [2014] AC 160. 26 Sandoz disputes that there is any res judicata. It contends that there is no final judgment of the kind necessary to establish a res judicata: Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (1993) 43 FCR 510 at 514; Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767. It contends that substantive issues, including issues concerning liability, remain and have not been finally resolved. 27 Sandoz contends, in particular, that the legal effect of the (now granted) licence is a "live matter in issue that remains to be determined". It contends that the scope of the remitted proceeding would permit it to agitate these questions. Moreover, it contends that even if questions of liability for infringement are res judicata, this cannot apply in respect of the calculation of damages, which remains open for determination. 28 Sandoz submits that, in these circumstances, Lundbeck will not suffer prejudice if the proceeding is stayed. In fact, it contends that Lundbeck will suffer greater prejudice if the proceeding is not stayed because (on Sandoz's case) the damages and pre-judgment interest payable to Lundbeck will be assessed as nil. This is because Sandoz has the benefit of an extant licence under s 223(9). Further, Sandoz submits that, if a stay is not granted, Lundbeck will be put to the simultaneous tasks of defending the effect of the licence in the remitted proceeding and contesting the validity of the licence in the Tribunal. 29 Sandoz submits that, in all the circumstances, the most efficient course is for Lundbeck's application for review in the Tribunal to conclude prior to the remitted proceeding being determined. In that way, the validity and scope of the licence will have been finally determined before the Court gives a final judgment on damages and pre-judgment interest (on which, it says, the licence must have a direct bearing). 30 Sandoz acknowledges that Lundbeck will continue to argue that Sandoz's liability for patent infringement, and Lundbeck's entitlement to damages, are res judicata. Its concern is that, if the proceeding reaches the stage where Lundbeck has a money judgment, Lundbeck will rely on that fact to reinforce its contention that these matters are res judicata (as I have noted, Sandoz says that, at the present time, there is no final judgment to support a res judicata). This would also enable Lundbeck to press on the Tribunal, with greater assurance, its contention, which Sandoz disputes, that it would be futile to grant a licence to Sandoz under s 223(9) of the Patents Act. The point appears to be that, if the proceeding reaches the stage of a money judgment being given, the outcome of the pending review before the Tribunal could well be prejudiced by enhancing Lundbeck's forensic position. This would be inconsistent with the sentiment expressed by the plurality in the High Court at [78] of their Honours' reasons. 31 Relatedly, Sandoz emphasises that, contrary to Lundbeck's contention, the liberty granted by the High Court was not in respect of a stay of execution of the final orders made as a result of the recalculation of damages and pre-judgment interest. Rather, the liberty was in respect of a stay of the remitted proceeding itself. The remitted proceeding concerns the remitted matter. The remitted matter is the recalculation of damages and pre-judgment interest. 32 Finally, Sandoz contends that, to the extent that the question of delay is relevant, Lundbeck has delayed in seeking a resolution of its application for review in the Tribunal.

Consideration 33 I am persuaded that a stay of the remitted proceeding should be granted, as sought by Sandoz. 34 Despite Lundbeck's contention that Sandoz's liability for patent infringement, and Lundbeck's entitlement to damages, are res judicata, and that the only issue remaining in the proceeding is the "purely mechanical recalculation of the damages awarded by this Court to reflect the interest and discount decisions", I am not persuaded that this is so. A number of interrelated issues are presently before the Court for determination, including the scope of the remitted proceeding itself. 35 Firstly, Sandoz disputes that there is any res judicata. This threshold question will need to be decided. 36 Then, if there is a res judicata, the significance of that finding for the purposes of the remitted proceeding, including as to the scope of the remitted proceeding, will need to be decided. This will raise a difficult question about the interplay between the principles of res judicata and the legal significance (at that time), if any, of a licence granted under s 223(9) of the Patents Act. 37 As I have noted, Lundbeck argues that such a licence can be of no effect on the outcome of the remitted proceeding. As I understand it, this is one reason why Lundbeck contends that the scope of the remitted proceeding is limited (although I note that Lundbeck also relies on the terms of the order for remittal that the High Court made). There are, however, two immediate matters to note in that regard. 38 The first matter is that s 223(9) speaks of the "prescribed provisions" (found in reg 22.21) having effect "for the protection or compensation" of relevant persons. This consideration puts a licence granted under s 223(9) in a particular setting. It is to achieve a particular statutory purpose. Moreover, reg 22.21(5) speaks of the licence being granted by the Commissioner, not by the patentee or the Commissioner on behalf of the patentee. Thus, the licence is a statutory measure to overcome the disadvantage or prejudice that relevant persons suffer in prescribed circumstances. 39 Further, the "prescribed provisions" envisage the grant of a licence where relevant persons have already exploited an invention. As I understand Lundbeck's submissions, this means that no licence under s 223(9) can be justified unless it is established that the patent has been infringed. I observe that, if that be so, it is arguable that the statute envisages that a finding of infringement in court proceedings would not preclude the grant of such a licence. 40 The second matter is that it is certainly open to be argued that, on the face of the orders made on 24 May 2022, the High Court had in mind that the outcome of the remitted matter could be affected by the determination, on review by the Tribunal, of whether a licence should be granted under s 223(9) of the Patents Act. Hence, the concern expressed by the plurality at [78] of the reasons that the orders made by the High Court should not prejudice the outcome of the pending review by the Tribunal of whether Sandoz should be granted such a licence. 41 I have no present view on these matters beyond the fact that they show that the determination of the remitted proceeding will not be, as Lundbeck would have it, a "purely mechanical" matter involving, as it were, only matters of arithmetic. 42 If a stay is granted, and Lundbeck is successful in its review and in subsequent appeals concerning the s 223(9) licence - such that the Commissioner's decision is set aside and there is no licence - then the complications of the scope and effect of a licence under s 223(9) will be removed. Difficult legal questions will fall away. One would then expect the recalculation of damages and pre-judgment interest to be a relatively straightforward matter. 43 If a stay is granted, and Lundbeck is not successful in its review, the complication of the scope and effect of the licence, and the difficult legal questions, will remain. The prospect of a relatively straightforward recalculation of damages and pre-judgment interest will not eventuate. But, apart from the delay in the Court making final orders, the parties will not be worse off. 44 In that connection, the question of further delay must be viewed in the overall context of the prodigious amount of litigation between the parties that has already taken place over a great many years, and the apparent desire of the parties to contest every legal issue that arises in relation to the patent. In the particular circumstances of this case, I do not consider that the question of further delay is a particularly weighty consideration. 45 I do not accept that, if a stay is granted, Lundbeck will be prejudiced in the conduct of the review it has commenced in the Tribunal. As I have noted, Lundbeck contends that the quantum of damages will be a relevant consideration for the Tribunal in determining whether a licence should be granted. Presently, I do not understand how the quantum of damages is relevant to that question. However, should the quantum of damages be relevant, Lundbeck is already in a position to provide the Tribunal with a "straightforward" calculation of damages which does not take into account the effect, if any, of a licence under s 223(9) of the Patents Act. 46 Further, as I have also noted, Lundbeck contends that it will be disadvantaged if there is a delay in the quantification of damages because delay will entail a lower calculation of pre-judgment interest. I do not accept that submission. Section 51A of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) provides that the rate of pre-judgment interest is a matter for the Court to determine. A successful party is not limited to a fixed rate of interest as is the case for post-judgment interest under s 52 of the Federal Court Act. It will remain open to Lundbeck, at the appropriate time, to adduce evidence and advance submissions as to the rate of pre-judgment interest that should apply to any money judgment it obtains, taking into account the fact that a stay of the remitted proceeding has delayed the making of a final order for damages. 47 An additional consideration in favour of granting a stay is that, even if the complication of the scope and effect of the licence and the difficult legal questions remain after the final determination of the review in the Tribunal, uncertainty will be removed as to the precise term of the licence. 48 Further, it is not in the interests of the administration of justice that there be parallel proceedings running when the resolution of one of those proceedings (here, the review in the Tribunal) may well obviate the need to determine a significant number of complex legal issues, or at least provide greater clarity in respect of those issues, in the other proceeding (here, the remitted proceeding). I am satisfied that the efficient use of the Court's judicial and administrative resources, and the efficient disposal of the Court's overall caseload, weigh heavily in favour of a stay of the remitted proceeding being granted as sought by Sandoz: s 37M of the Federal Court Act. 49 Finally, I should add for completeness that I do not accept, as Lundbeck might be suggesting, that it would be appropriate to defer, as it were, Sandoz's application for a stay and put to one side the issues it wishes to contest. The suggestion appears to be that, somehow, the Court should simply proceed to recalculate damages and pre-judgment interest, and make final orders, without considering those questions, in the sure knowledge that Sandoz would then seek a stay of execution of the money judgment, at which time those questions could then be agitated. 50 In my view, to proceed in that manner would be procedurally unfair and unjust. A simple refusal to deal with the stay application on its merits would deny Sandoz the opportunity to make a bona fide application to the Court on legitimate grounds affecting the very question of the amount of damages that should be awarded in the unusual circumstances of this case. An application to stay the execution of a final order is not the procedural equivalent of an application to stay a proceeding in which the order might be made. 51 In this regard, it is clear beyond argument that, when it remitted the proceeding to this Court, the High Court envisaged, by the express grant of liberty, that the Court could and, if asked, would entertain the very application that Sandoz makes. I do not accept that the leave granted by the High Court was in respect of a stay of execution of orders resulting from the determination of the remitted matter. It was a grant of leave to seek a stay of the proceeding that would determine the remitted matter.

Conclusion 52 For these reasons, the stay that Sandoz seeks will be granted. Lundbeck must pay Sandoz's costs of the application. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.