Sanofi-Aventis Deutschland GmbH v Alphapharm Pty Ltd

1. The Notice to Produce dated 4 October 2018 be set aside.
2. The respondent pay the applicants' costs of this interlocutory application from 23 October 2018 onwards on a party/party basis, to be taxed unless otherwise agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BURLEY J: 1 On 20 August 2018, the applicants (Sanofi) filed an originating application seeking relief against the respondent (Alphapharm) for infringement of Australian Patent No. 2009304105, entitled "Drug delivery device and method of manufacturing a drug delivery device" (patent). The impugned Alphapharm device is the SEMGLEE insulin glargine (rDNA) 100 IU/mL, 3mL solution for injection injector pen (SEMGLEE injector pen), which was registered on the Australian Register of Therapeutic Goods on 28 March 2018. 2 In its originating application, Sanofi seeks interlocutory relief in the form of orders restraining Alphapharm from making; importing; selling, supplying or otherwise disposing of; offering to sell, supply or otherwise dispose of; using or otherwise exploiting; or keeping for the purposes of any of the preceding acts, the SEMGLEE injector pen (or authorising, procuring, inducing or joining in a common design with any other person to do the same). It also seeks an order requiring Alphapharm, in effect, to withdraw its application for the listing of the SEMGLEE injector pen on the Pharmaceutical Benefit Scheme (PBS). The hearing of the interlocutory application is listed for 2 November 2018. 3 On 18 September 2018 Alphapharm served a notice to produce (first notice) in the following terms: The Respondent requires you to produce for inspection the following documents mentioned in the affidavit of Alan John Brindell affirmed 20 August 2018 (the Brindell affidavit): 1. The Special Pricing Arrangement for Lantus mentioned in paragraph 56 of the Brindell affidavit. 2. The Special Pricing Arrangement for Toujeo SoloStar, mentioned in paragraph 59 of the Brindell affidavit. 4 On 4 October 2018 Alphapharm served a second notice to produce (second notice) in the following terms: The Respondent requires you to produce the following documents or things to the New South Wales Registry of the Federal Court of Australia, Level 17, Law Courts Building, 184 Phillip Street, Queens Square, Sydney NSW 2000: 1. The document(s) constituting the written agreement(s) (including any deed(s)) between Sanofi Australia and the Australian Commonwealth Government in respect of the Special pricing Arrangement(s) for Lantus and Lantus SoloStar during the period 1 October 2006 to 1 June 2018 as referred to in paragraphs 56, 57 and 58 of the Affidavit of Alan John Brindell dated 20 August 2018. 2. The document(s) constituting the written agreement(s) (including any deed(s)) between Sanofi Australia and the Australian Commonwealth Government in respect of the Special Pricing Arrangement(s) for Toujeo SoloStar as referred to in paragraph 59 of the Affidavit of Alan John Brindell dated 20 August 2018. 3. One or more documents recording all of the reasons for Sanofi Australia terminating the Special Pricing Arrangement(s) for Lantus and Lantus SoloStar as referred to in paragraph 58 of the Affidavit of Alan John Brindell dated 20 August 2018. 4. The correspondence between Sanofi Australia and the Australian Commonwealth Government constituting the termination of the Special Pricing Arrangement(s) for Lantus and Lantus SoloStar as referred to in paragraph 58 of the Affidavit of Alan John Brindell dated 20 August 2018. 5 On 10 October 2018 Sanofi filed an interlocutory application seeking to set aside the second notice. Sanofi had earlier, in correspondence, challenged the validity of the first notice on the basis that the Brindell affidavit did not "mention" the documents sought in compliance with rule 20.31(1) of the Federal Court Rules 2011 (Cth) (FCR). Alphapharm now seeks an order pursuant to rule 20.31(3) of the FCR for production of the documents sought in the first notice. 6 Rule 20.31 of the FCR provides as follows: (1) A party (the first party) may serve on another party (the second party) a notice to produce, in accordance with Form 39, for the inspection of any document mentioned in a pleading or affidavit filed by the second party. (2) The second party must, within 4 days after being served with the notice to produce, serve the first party with a notice: (a) stating: (i) a time, within 7 days after service of the notice, when the document may be inspected; and (ii) a place where the document may be inspected; or (b) stating: (i) that the document is not in the second party's control; and (ii) to the best of the second party's knowledge - where the document is and in whose control it is; or (c) claiming that the document is privileged and stating the grounds of the privilege. (3) If the second party does not comply with paragraph (2)(a) or (b) or claims that the document is privileged, the first party may apply to the Court for an order for production for inspection of the document. 7 The reference to "mentioned" in rule 20.31(1) of the FCR has been the subject of consideration in a number of cases. In Apotex Pty Ltd v ICOS Corporation (No 2) [2017] FCA 589, Besanko J said, at paragraphs [15] to [19]: [15] The previous rule (Federal Court Rules 1979 (Cth) O 15 r 10) used the word "refers" whereas the present rule uses the word "mentioned". Neither party suggested that there is any material difference between the two words. [16] In Australian Competition and Consumer Commission v Australialink Pty Ltd (2009) 177 FCR 35; [2009] FCA 265, Spender J discussed the previous rule. His Honour referred to the following observations of Heerey J in Australian Competition and Consumer Commission v Visy Industries [2006] FCA 136; (2006) ATPR 42-102 at [33]: In contrast to discovery under O 15 rr 1, 5 or 8, production under O 15 r 10 does not depend on any leave being given by the Court. The reason is obvious enough. When a document is directly relied on by an opposing party, basic procedural fairness would require that a party be able to inspect the document, if only to see whether it is what it is alleged to be. … [17] Justice Spender referred to a lengthy passage from the reasons for judgment of Moore J in King v GIO Australia Holdings Ltd [2001] FCA 1487 and then said (at [20]): The observations by Moore J in King from [12]-[17] … make it plain that there has to be a direct allusion to a document or documents. It is insufficient to refer to a transaction or information, even though it appears almost certain that the transaction must have been effected by, or the information contained in, a document. [18] That approach has been applied in later cases (Welker v Rinehart [2012] NSWSC 588 at [14] per Brereton J; Oztech Pty Ltd v Public Trustee of Queensland (No 10) [2016] FCA 970 at [13] per Yates J). [19] I do not consider that a document has been mentioned in paragraph 6 of Professor Polli's affidavit. There is no direct allusion to a document in the relevant sense. A reference by inference or an implied reference (if that be different) is not sufficient and the fact that a document almost certainly exists is not sufficient. Another way of approaching the issue leads to the same result. If one considers the matter from the point of view of "basic procedural fairness" there would be no procedural unfairness in this case because the statement appears to have been made to describe Professor Polli's prior involvement with the parties to the proceeding and not with a view to bolstering or supporting in some way his expert opinion. 8 In Oztech Pty Ltd v Public Trustee of Queensland (No 10) [2016] FCA 970 at [12] and following, Yates J said as follows: [12] …Indeed, in Australian Competition and Consumer Commission v Australialink Pty Ltd [2009] 177 FCR 35; [2009] FCA 265, Spender J said (at [20]): The observations by Moore J in King from 12 to 17... make it plain that there has to be a direct allusion to a document or documents. It is insufficient to refer to a transaction or information even though it appears almost certain that the transaction must have been effected by, or the information contained in, a document. (Emphasis added) [13] In that case, Spender J was dealing with a notice seeking the production of "complaints" that had been referred to in an affidavit. His Honour observed (at [20]) that "complaints" can easily comprehend both written and oral complaints. However, the word "complaints", as used in the affidavit, could not be said to be a reference to a document, even though there may have been strong grounds for thinking that some of the complaints may have been in writing. 9 At paragraph [43], Yates J said (citations omitted): [43] I now turn to consider paragraph 7 of the Affidavit Notice. In my view, the "mention" of the "four files" in paragraph 31 of Mr Kelly's affidavit is such that r 20.31(1) FCR is engaged. I am satisfied that Mr Kelly's reference to the "four files" in this paragraph is a direct allusion to the documentary record maintained by the PTO, not simply to the broader notion of "matters" with which the respondent was then dealing. However, the Court retains control over its process. Paragraph 7 of the Affidavit Notice can stand in no better position than paragraphs 4 and 8 of the Production Notice. Thus, as with paragraphs 4 and 8 of the Production Notice, the applicant must establish the apparent relevance of the "four files" as a body of documents. 10 A notice to produce must seek documents that are relevant. The documents sought must be "[r]easonably likely to add, in the end, in some way or other, to the relevant evidence in the case"; Seven Network v News Limited (No 11) [2006] FCA 174 at [6]. 11 At the hearing of the interlocutory injunction application on 2 November 2018, one important issue will be the question of the balance of convenience, an aspect of which will be whether any loss suffered by Sanofi as a result of the launch of the SEMGLEE injector pen will not be able to be adequately compensated by an award of damages. 12 In relation to the first notice, Alphapharm contends that the reference to the confidential Special Pricing Arrangement (SPA) in the Brindell affidavit is a reference to a document within rule 20.31 of the FCR. The relevant passages of the Brindell affidavit are paragraphs [35] and [56] to [59]: [35] Some products may however be the subject of a special pricing arrangement (SPA). A SPA involves an agreement between the sponsor and the Commonwealth Government for a confidential ex-manufacturer price lower than the [approved ex-manufacturer price (AEMP)] that makes up the Dispensed Price on the Schedule. The sponsor sells the product to wholesalers / pharmacists at the AEMP and the Commonwealth Government reimburses pharmacists according to the Dispensed Price on the Schedule. However, the sponsor pays a "rebate" to the Commonwealth Government. This is described as follows at the PBS website (accessible at and last updated on 15 November 2017, and and last updated on 15 November 2017): The Commonwealth may enter into confidential Special Pricing Arrangements with a sponsor for the supply of a medicinal product formalising a 'published' versus 'effective' pricing component. The difference between the published price in the Schedule of Pharmaceutical Benefits and the price actually paid by the Commonwealth (the 'effective' price), is managed through a rebate arrangement. … The deeds that cover SPAs are put in place so that Australia is able to have access to medicines at prices recommended by the PBAC as cost-effective, whereby due to international reference pricing or various other commercial reasons, sponsors are not able to supply the medicine at a particular publically available price. The deeds for SPAs involve the Department recovering a percentage of expenditure (through a rebate) at the listed price to reflect the outcome of the cost-effective recommendation by the PBAC. The existence of SPAs are made publicly known, however the content of these individual arrangements is confidential and commercially privileged information. Products the subject of a SPA are identified in the Schedule, however, the actual confidential ex-manufacturer price is not publicly disclosed. … [56] Lantus was first listed on the PBS on 1 October 2006 following four submissions to the PBAC and a special meeting of the PBAC. At the time it was listed, Lantus was the subject of a confidential SPA. [57] Lantus SoloStar was first listed on the PBS on 1 August 2007. The SPA for Lantus also applied to Lantus SoloStar from its listing date. [58] The SPA for Lantus and Lantus SoloStar was terminated at Sanofi Australia's request effective 1 June 2018. [59] Toujeo SoloStar was first listed on the PBS on 1 April 2018. I note that Toujeo SoloStar is currently the subject of a confidential SPA. 13 As I have noted, some "direct allusion" is required. Sanofi submits that there is no direct allusion in the Brindell affidavit and that the present position is like the examples in the cases of references to a transaction or a complaint. Alphapharm submits that Mr Brindell, at paragraph [35] of his affidavit, indicates that the SPA is constituted by a deed and that there is no other aspect of the "arrangement" as between the Commonwealth and the sponsor. Accordingly, Alphapharm submits that the reference in Brindell at paragraph [56] to the "confidential SPA" can only be to a deed. 14 I consider that the reference is not a direct allusion to the SPA, but, rather, a reference to the transaction generally. Whilst the Brindell affidavit does refer to the SPA, I do not consider that the use of that term is a direct reference to the document in the form of the deed or arrangements underlying it. 15 I turn now to consider the question of the relevance of the documents sought, both in the first notice and the second notice. Alphapharm contends that the documents the subject of the notices to produce are relevant to the assessment of the balance of convenience, and in particular the loss suffered by Sanofi as a result of the launch of the SEMGLEE injector pen and whether that will be adequately compensated by an award of damages. It submits that Sanofi relies on the revenue that has been and is likely to be obtained from sales of Lantus and Toujeo, and refers to paragraphs [58] and [60], and confidential exhibits KB-14 and KB-15 of the affidavit of Kym Bramich, dated 20 August 2018. As Sanofi subsequently informed Alphapharm, that revenue takes into account the rebates pursuant to the Lantus SPA and the Toujeo SPA. 16 Alphapharm submits that, given that the SPAs involve the sponsor of the drug - here, Sanofi Australia Pty Ltd - paying a confidential rebate to the Commonwealth in relation to products the subject of the SPAs, the details of those arrangements are relevant to the alleged threat to revenue relied on by Sanofi. In particular, Alphapharm submits that without knowing the periods over which the rebates are calculated, the timing of the payments, their nature and any qualifications or exemptions that might apply, it is not possible for Alphapharm to verify the bald conclusionary assertions made in confidential exhibits KB-14 and KB-15. I am not persuaded by this argument. 17 Without disclosing in these reasons the contents of confidential exhibits KB-14 and KB-15, it is sufficient to note that the revenue figures cited are very substantial. Sanofi has confirmed in separate correspondence that those figures include, and take into account, the SPA rebates. The figures are, to some degree (at least, as to their general magnitude), supported by the content of figures referred to in the evidence of Alphapharm in confidential exhibit MM-2 to the affidavit of Maria Mollica dated 27 September 2018, which are obtained from a separate source. In an interlocutory application of this type, estimates of projected financial harm arising from the release of an allegedly infringing product will, necessarily, be broad-brush. I am not satisfied that the type of forensic inquiry foreshadowed by Alphapharm is warranted, nor am I satisfied that the production of the documents of the type sought would particularly assist. 18 Alphapharm next submits that the documents are relevant because they go to whether Sanofi is deliberately trying to phase down the Lantus market (another factor which may be relevant to the balance of convenience assessment). Sanofi Australia terminated the Lantus SPA some months prior to initiating patent infringement proceedings against Alphapharm. Sanofi have provided no explanation for that termination. Alphapharm submits that Sanofi is switching patients from Lantus to Toujeo, thereby increasing Toujeo's market share at the expense of Lantus. Alphapharm is concerned that this is part of a deliberate course of action to phase down the Lantus market and Sanofi may apply to remove Lantus from the PBS Schedule in the future. 19 In response, Sanofi points to an affidavit of Ms Bramich, where she first acknowledges the fact that Toujeo is a second-generation insulin product that has various clinical advantages over Lantus; and, secondly, states that Sanofi has a substantial market for the Lantus products and that Sanofi has no intention of withdrawing these products from the PBS. In these circumstances, I do not consider that the documents are reasonably likely to add, in the end, in some way, to the relevant evidence in the case to warrant production. In the context of this argument, I agree with the submission advanced by Sanofi that the second notice has the appearance of fishing for information. 20 In oral argument, Alphapharm advanced a further argument centred on the detail of the SPAs. On 1 June 2018, before commencement of the proceedings, Sanofi elected to terminate the SPA for Lantus and Lantus SoloStar. Before that time, the published AEMP was $72.15, but it was unknown how much rebate Sanofi paid to the Commonwealth pursuant to the SPA. Accordingly, it was unknown what the effective price was, because that was, and remains, confidential. Since approximately 1 June 2018, the published AEMP for Lantus products has dropped to $42.28. The drop in price is significant to a generic such as Alphapharm, because it is by offering pharmacists a price lower than the AEMP that they gain a competitive advantage over the originator, thereby enabling the pharmacist to make additional profit per sale. 21 Alphapharm contends that there is a likelihood that, taking into account the SPAs payable to the Commonwealth, the effective price for Lantus products before 1 June 2018 was above $42.28 (being the AEMP and effective price post 1 June 2018). If so, it submits, that Sanofi itself has taken steps to drop its effective price lower than the pre 1 June 2018 price in anticipation of the launch of an Alphapharm generic. In those circumstances, Alphapharm submits that the economic loss cannot be said to be caused by the launch of the SEMGLEE injector pen. It submits that unless it obtains the documented SPA, it will not be able to advance that submission. 22 In my view, this is drawing too long a bow. The relevant time for considering the status quo for the purposes of the interlocutory injunction hearing is at the time of the threatened launch of the SEMGLEE injector pen, being 1 December 2018. The reduction of the effective price prior to that date might well signify, in addition to other matters, that Sanofi has taken steps to market Toujeo in preference to Lantus products, but I do not see how being aware of how the effective price to the Commonwealth of the Lantus products has shifted from before 1 June 2018 to after 1 June 2018 assists Alphapharm in this regard. In my view, this further argument does not operate to render the documents sought in the notices sufficiently relevant to warrant their production. Having regard to these matters, it is apparent that the documents sought in both the first and the second notices are insufficiently relevant to warrant production. Accordingly, I would allow the orders set out in Sanofi's interlocutory application and refuse the application by Alphapharm. 23 Whilst Sanofi has been successful in relation to this interlocutory application, in my view, it is appropriate that Alphapharm only pay Sanofi's costs from 23 October 2018 onwards. This is because it was not until 22 October 2018 that Sanofi informed Alphapharm by letter that the figures in confidential exhibits KB-14 and KB-15 include, and take into account, the SPA rebates. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Burley.