FINAL ORDERS
7 As the principal reasons disclose, in each of the proceedings Wyeth, the patent holder, was wholly successful. Accordingly, Sigma, Alphapharm and Generic Health failed in their claims that the patent was invalid and should be revoked. Wyeth succeeded in its claims against Sigma, Alphapharm and Generic Health for threatened infringement of the patent.
8 There is a limited dispute between the parties about the drafting of the final orders. There is a more extensive dispute, however, about whether the final orders restraining the threatened infringements should be stayed or be made subject to a condition, or whether other orders should be made to protect the interests of Sigma and Alphapharm pending their foreshadowed appeals. I deal with the more extensive dispute first.
9 The more extensive dispute arises in the following circumstances.
(1) Sigma obtained registration on the Australian Register of Therapeutic Goods (ARTG) of its generic extended release venlafaxine hydrochloride product, Evelexa XR, on 26 February 2009.
(2) Alphapharm obtained registration on the ARTG of its generic extended release venlafaxine hydrochloride product, Enlafax-XR, on 30 April 2009.
(3) Wyeth applied for an interlocutory injunction against Sigma on 1 May 2009.
(4) On 3 June 2009 orders were made enjoining Sigma from taking steps to exploit its generic extended release venlafaxine hydrochloride product (Sigma Pharmaceuticals (Australia) Pty Ltd (ACN 004 118 594) v Wyeth (2009) IPR 339; [2009] FCA 595).
(5) Wyeth applied for an interlocutory injunction against Alphapharm on 24 July 2009.
(6) On 25 August 2009 orders were made enjoining Alphapharm from taking steps to exploit its generic extended release venlafaxine hydrochloride product (Alphapharm Pty Limited v Wyeth (2009) 82 IPR 71; [2009] FCA 945).
(7) Generic Health obtained registration on the ARTG of its generic extended release venlafaxine hydrochloride product, "generichealth XR", on 6 August 2009.
(8) On 10 November 2009 consent orders were made enjoining Generic Health from taking steps to exploit its generic extended release venlafaxine hydrochloride product.
10 Wyeth has agreed to undertake not to de-list its extended release venlafaxine hydrochloride product, Efexor-XR, from the Pharmaceutical Benefits Scheme (PBS) pending further order. By this undertaking Sigma and Alphapharm (which have indicated their intention to appeal) are protected from the risk of not being able to list their own generic products on the basis of bioequivalence with Efexor-XR should they succeed in any appeal. Wyeth, however, refuses to give any undertaking as to damages in respect of the period between the making of final orders in these proceedings and the determination of any appeal. Accordingly, if Sigma and Alphapharm succeed in the foreshadowed appeals the undertaking as to damages Wyeth gave in respect of the interlocutory injunctions will operate in respect of loss by reason of those interlocutory orders, but no such undertaking will be in place in respect of loss by reason of the final orders pending the appeal.
11 Wyeth also refuses to undertake not to market and sell a generic extended release venlafaxine hydrochloride product of its own in Australia. Sigma and Alphapharm, in these circumstances, are concerned that they will be exposed to a change in position from the time at which they were enjoined (when there were no generic extended release venlafaxine hydrochloride products on the market, with Sigma being the first and Alphapharm the second to obtain ARTG registration). In short, they contend that without undertakings or orders to protect them from a hiatus in Wyeth's undertaking as to damages and what may be described as a change in the circumstances in which they otherwise would have entered the market except by reason of the interlocutory injunctions against them, they are exposed to an injustice which the Court should not permit.
12 Alphapharm sought to prevent this alleged injustice by a scheme involving the following principal elements: - (i) the grant of a final injunction against Alphapharm, (ii) a stay of that final injunction pending resolution of the foreshadowed appeal, (iii) the grant of an interlocutory injunction largely to the same effect as the final injunction against Alphapharm pending resolution of the foreshadowed appeal, and (iv) Wyeth providing an undertaking as to damages and other undertakings not to remove Efexor-XR from the PBS nor to market or release a generic extended release venlafaxine hydrochloride product of its own in Australia pending resolution of the foreshadowed appeal. If, as is the case, Wyeth is not willing to give the undertakings sought as the price for the interlocutory injunction (leaving Alphapharm free to deal in its Enlafax-XR product) then Alphapharm indicated that it would be willing to give an undertaking as to damages itself to compensate Wyeth in the event that Wyeth should succeed in the foreshadowed appeal.
13 Sigma sought to prevent this alleged injustice by a scheme achieving the same outcome as that proposed by Alphapharm. Sigma, however, proposed reaching this result either by making the final injunction in favour of Wyeth conditional on Wyeth giving the undertakings as sought or the making of interlocutory orders to the same general effect. While Sigma indicated its willingness to give an undertaking as to damages conditional on Wyeth also doing so, Sigma submitted it should not be required to proffer any additional undertaking if Wyeth's position remained that it was willing only to undertake not to remove Efexor-XR from the PBS.
14 Leaving aside the debate about the jurisdictional basis for the interlocutory orders sought (according to Wyeth there was no basis), the applicants agreed that the various schemes proposed were intended to achieve the same result (interim protection for what they described as the status quo pending the resolution of the appeal) and were subject to the same considerations of principle. As Sundberg J said in Hollier v Australian Maritime Safety Authority [1998] FCA 428 the "principle on which the Court acts in applications for injunctions pending appeal is the same as that applicable where a stay pending appeal is sought" (see also Stirling Harbour Services Pty Ltd v Bunbury Port Authority (No 2) [2000] FCA 87 at [13]), albeit by reference to the questions whether there is a serious question to be tried and the balance of convenience.
15 The principles apparent from the decisions on which the parties relied may be summarised as follows:
(1) "A successful party is presumed to be entitled to the benefits of the judgment obtained" (Advanced Building Systems v Ramset Fasteners (Aust) Pty Ltd (1997) 145 ALR 121 at 122).
(2) An "applicant for a stay has the burden of persuading the court that it should be granted" (Advanced Building Systems at 122) but it is not necessary to show special or exceptional circumstances (Henderson v Amadio Pty Ltd (1996) 136 ALR 593 at 595 applying Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685).
(3) "The court, in the exercise of its discretion, will not hesitate to stay proceedings when it is necessary to preserve the subject matter or integrity of the litigation. Nor will the court hesitate to grant a stay where the refusal of a stay could create practical difficulties in terms of the relief which [the] court could grant" (Advanced Building Systems at 122).
(4) It is relevant to consider whether "there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed" (Federal Commissioner of Taxation v Myer Emporium Ltd (No 1) (1986) 160 CLR 220 at 223).
(5) Another relevant consideration is whether the proposed appeal is genuine and based on reasonable grounds (Henderson v Amadio Pty Ltd at 595).
(6) Relevant also is the willingness or not of a party to give an undertaking as to damages. Hence, in Red Bull Australia Pty Limited v Sydneywide Distributors Pty Limited [2001] FCA 1750 at [10] Red Bull's refusal to give such an undertaking, thereby exposing Sydneywide to irrecoverable loss if Sydneywide succeeded in its appeal, was described as "a factor which is clearly relevant to the exercise of the discretion to grant a stay", however it proved insufficient to displace the presumption that Red Bull was entitled to the benefit of its judgment (at [20]).
16 The debate between the parties (other than in respect of the weight to be given to the competing factors informing the exercise of discretion) related to the scope of the jurisdiction available.
17 According to Wyeth, interlocutory orders could not be made because such orders would not be in aid of any substantive right the applicants sought to vindicate in the proceedings or by the foreshadowed appeals. The only claim the applicants had brought against Wyeth was for revocation of the patent. It followed that there was no underlying cause of action sought to be preserved by the proposed interlocutory orders and no capacity to identify any serious question to be tried about that (non-existent) cause of action (Australian Broadcasting Corporation v Lenah Game Meats Pty Limited (2001) 208 CLR 199; [2001] HCA 63).
18 The applicants submitted that the jurisdiction derived from s 23 of the Federal Court of Australia Act 1976 (Cth) and was sufficient for the Court to mould its relief to ensure justice as between the parties pending the resolution of the appeals. The applicants referred to Minnesota Mining & Manufacturing Company v Johnson & Johnson Limited [1976] RPC 671, Kirin-Amgen Inc v Transkaryotic Therapies Inc (No 3) [2005] FSR 41 and Virgin Atlantic v Premium Aircraft [2009] EWCA Civ 1513 in support of this wider jurisdiction. In Minnesota Mining at 676 (cited with approval in Kirin-Amgen at [16] and Virgin Atlantic at [21]), Buckley LJ said:
It is not in dispute that where a plaintiff has at first instance established a right to a perpetual injunction, the court has a discretion to stay the operation of that injunction pending an appeal by the defendant against the judgment. On what principles ought such a discretion to be exercised? The object, where it can be fairly achieved, must surely be so to arrange matters that, when the appeal comes to be heard, the appellate court may be able to do justice between the parties, whatever the outcome of the appeal may be. Where an injunction is an appropriate form of remedy for a successful plaintiff, the plaintiff, if he succeeds at first instance in establishing his right to relief, is entitled to that remedy upon the basis of the trial judge's findings of fact and his application of the law. This is, however, subject to the defendant's right of appeal. If the defendant in good faith proposes to appeal, challenging either the trial judge's findings or his law, and has a genuine chance of success on his appeal, the plaintiff's entitlement to his remedy cannot be regarded as certain until the appeal has been disposed of. In some cases the putting of an injunction into effect pending appeal may very severely damage the defendant in such a way that he will have no remedy against the plaintiff if he, the defendant, succeeds on his appeal. On the other hand, the postponement of putting an injunction into effect pending appeal may severely damage the plaintiff. In such a case a plaintiff may be able to recover some remedy against the defendant in the appellate court in respect of this damage in the event of the appeal failing, but the amount of this damage may be difficult to assess and the remedy available in the appellate court may not amount to a complete indemnity. It may be possible to do justice by staying the injunction pending the appeal, the plaintiff's position being suitably safeguarded. On the other hand it may, in some circumstances, be fair to allow the injunction to operate on condition that the plaintiff gives an undertaking in damages or otherwise protects the defendant's rights, should he succeed on his appeal. In some cases it may be impossible to devise any method of ensuring perfect justice in any event, but the court may nevertheless be able to devise an interlocutory remedy pending the decision of the appeal which will achieve the highest available measure of fairness. The appropriate course must depend on the particular facts of each case.
19 Wyeth contended that these observations did not represent the law in Australia at least insofar as they might suggest the capacity to grant an interlocutory injunction without some underlying cause of action. The applicants submitted that Wyeth's contention was inconsistent with both the decision in Westaflex (Aust) Pty Ltd v Wood (1990) 18 IPR 168 (in which Gray J cited and applied Buckley LJ's observations (at 170)) and the reasoning in Stirling Harbour Services v Bunbury Port Authority.
20 By reason of the outcome of my consideration of the various discretionary factors, it is sufficient that I assume I have the power to mould the terms of relief with the objective of doing justice between the parties pending the resolution of the appeals.
21 As to the question of discretion, relevant factors include the following.
22 First, the nature and complexity of the principal proceedings lead inevitably to the assumption that the foreshadowed appeals are genuine and reasonably arguable.
23 Second, although Wyeth has offered to undertake not to remove Efexor-XR from the PBS pending the resolution of the appeals, that does not protect Sigma and Alphapharm from the risk of harm from the cessation of Wyeth's undertaking as to damages (which Wyeth gave as the price for it obtaining interlocutory injunctions in its favour) or changes in market circumstances. Should Sigma and Alphapharm succeed in the proposed appeals Wyeth's refusal to give a further undertaking will mean that Sigma and Alphapharm are exposed to loss between the date on which the interlocutory injunctions are dissolved and the date the appeals are resolved (on this hypothesis in their favour). Continuing the interlocutory injunctions and refusing to release Wyeth from its undertakings will not assist because Wyeth's undertakings relate only to the consequences of the interlocutory orders. In any event, even if there were a proper basis for adopting that course the discretionary considerations are the same. Accordingly, and as in Red Bull, Wyeth's refusal to give any further undertaking as to damages is a relevant factor weighing in favour of Sigma and Alphapharm.
24 Third, it is relevant that both Sigma and Alphapharm are willing to give undertakings in one form or another in an attempt to protect Wyeth's position pending the resolution of the appeals (Sigma as the price for obtaining the interlocutory orders it sought and only if Wyeth itself gives equivalent undertakings and Alphapharm if a stay is granted without associated interlocutory orders).
25 Fourth, it is also relevant that Wyeth refuses to offer any other undertakings in respect of the prospect of introducing its own generic extended release venlafaxine hydrochloride product. On the evidence, that is not a fanciful prospect. A primary concern of Sigma and Alphapharm is market position. In short, Sigma registered on the ARTG first and, based on the evidence of Robert Ellis (Sigma's General Manager-Business Development), invited the inference that it would have entered the market first with its product. Alphapharm invited the inference that it would have entered the market with, at worst, one other competitor (Sigma's product). Mr Ellis said that entering a market for a generic product first gave a "first mover" advantage in terms of both market share and price. At the time the interlocutory injunction against Sigma was granted it was ready to enter the market first and obtain these advantages. If Wyeth were free to enter the market with its own generic product pending the resolution of the appeals Sigma, said Mr Ellis, would lose these advantages. Wyeth, in turn, would obtain a "significant head start".
26 Mr Ellis's affidavit was expressed at a high level of generality. He provided no specific examples of either the advantages of which he spoke or their likely or potential dollar value over time. Other than describing its generic extended release venlafaxine hydrochloride product as "very important" for Sigma's generic portfolio Mr Ellis provided no information about Sigma's product range, the money it spent on developing its product or its relative importance to Sigma's operations. Alphapharm presented no evidence about these issues, instead relying on Mr Ellis's evidence.
27 Mr Ellis was asked about information derived from IMS Health (see [498] of the principal reasons) in respect of escitalopram and sertraline. These are anti-depressants in the SSRI/SNRI class for which the relevant patent has expired. The statistical information available from IMS Health about these products is capable of different interpretations. On one view the information shows that generic products can readily enter markets (there are seven generic versions of escitalopram and 13 of sertraline). Further, late entry is not an insuperable barrier to obtaining a significant market share, as Sigma's product Lexam shows, although price discounting may be required. Nevertheless, it is obvious that the first generic entrant into a market has an advantage over later entrants simply by reason of the fact that later entrants face more competitors. It follows that I accept that, at the time they were enjoined, Sigma and Alphapharm stood to enter a market with no generic competitor but each other. In contrast, there is now a real (in the sense of not fanciful) risk that Wyeth itself may wish to place a generic product on the market. If Wyeth does so Sigma and Alphapharm will lose whatever benefit they would have obtained by entering a market with no other generic competitor. Whilst I have no details which would enable me to value that benefit or understand its importance to the operations of Sigma or Alphapharm I can infer from the information available in the principal proceeding that the benefit is real and not trivial. Although Sigma registered its product first and intended to be the first generic on the market, I do not know whether it could have done so before Alphapharm or, at the least, sufficiently before Alphapharm to have made any real difference between their two positions. It is also relevant that, within a further period of six months, Generic Health intended to enter the market with its extended release venlafaxine hydrochloride product.
28 Despite the weight to which these factors are entitled, I am unable to conclude that justice requires orders to be made as sought by Sigma and Alphapharm. Sigma and Alphapharm bore the persuasive onus. Neither had in fact entered the market at the time they were enjoined. As noted, had they not been enjoined, they would have entered a market in competition which each other, either immediately or within a very short time. It may be inferred that they also would have faced competition from the generichealth XR product within a relatively short time (perhaps less than six months) thereafter. At the same time, and subject only to Wyeth's willingness to undertake to the contrary (as it did pending the outcome of these proceedings), Wyeth was free to place its own generic product into the market. In other words, the market position which Sigma and Alphapharm wish to protect is a capacity to enter a market where, on entry, each would have been subject to competition one from the other and exposed other changes (including entry by Generic Health and perhaps Wyeth) in any event.
29 Against this background the nature of the interest sought to be protected, the vagueness of the available evidence about harm and the degree of protection afforded by the undertaking Wyeth is willing to give are significant factors.
30 As to the nature of the interest sought to be protected, this is not a case where the subject matter of the appeal will be destroyed unless orders as sought are made. It is also not a case where refusing to make such orders will result in any practical difficulty for the appellate court in making orders to fully and finally resolve all issues in dispute on the appeal. It is not even a case where Sigma or Alphapharm enjoy a known market share (in contrast to the position in Westaflex). At its highest Sigma and Alphapharm had a capacity to enter a market which, given Generic Health's (and perhaps Wyeth's) intentions, was likely to be subject to relatively rapid change.
31 Moreover, neither Sigma nor Alphapharm chose to present evidence enabling any conclusions to be reached about the real extent of the adverse impact on them. There is a material difference between evidence which enables an inference that the benefit lost can be described as "real and not trivial" (the best I can do in this case) and evidence of actual impacts. In Westaflex, for example, the trial judge was satisfied on the evidence that the appellant stood to lose 50% of its entire turnover, could not trade profitably and would be exposed to claims for damages by third parties for failure to fulfil existing contracts (at 171). The defendant was also well established in the market in Minnesota Mining.
32 This is not to say that established market share is a prerequisite to a stay or interlocutory orders pending an appeal. It is merely to recognise that, despite their persuasive burden, Sigma and Alphapharm provided no evidentiary foundation for anything other than a conclusion at a high level of generality that they stood to lose some benefit if the orders they sought were not made.
33 It is also relevant in this regard that, by the regimes they propose, Sigma and Alphapharm sought something that they could never have achieved by the proceedings themselves. If Wyeth's patent is valid (as I have held) then Wyeth has the exclusive right to licence the entry of any generic extended release venlafaxine hydrochloride product onto the market. If Wyeth's patent is invalid (as Sigma and Alphapharm) contend then the result (revocation of the patent) could never prevent Wyeth from marketing its own generic extended release venlafaxine hydrochloride product. Wyeth would have that right irrespective of these proceedings or the foreshadowed appeals. By the regimes they propose, Sigma and Alphapharm want to obtain from the court on an interlocutory basis something they could never obtain on a final basis. The fact that Wyeth was willing to give undertakings to the parties to the same general effect pending the resolution of these proceedings is not to the point. That was a choice Wyeth made, not a result the Court mandated.
34 The effect of the regimes Sigma and Alphapharm propose would be to deprive Wyeth of a right it has always enjoyed and which has never been subject to the outcome of these proceedings. Sigma and Alphapharm, by contrast, never enjoyed any such equivalent right. Unless and until they succeeded in having Wyeth's patent revoked Sigma and Alphapharm had neither a right to enter the market nor, indeed, any capacity to do so. It is one thing to accept that a foreshadowed appeal is reasonably arguable. It is another to recast the circumstances in which Sigma and Alphapharm proposed to enter the market at the time they were enjoined so as to ignore the reality of the full extent of Wyeth's rights at that time - both to enter the market itself and to rely on the validity of its patent unless and until declared otherwise. In other words, if the orders Sigma and Alphapharm sought are granted, they will have done more than preserve the status quo pending the resolution of the appeal. They will be afforded a guarantee of protection from competition by Wyeth, being an advantage they could not have obtained through the proceedings or the appeals and could never have enjoyed but for Wyeth giving undertakings to that effect (after, it might be said, Wyeth had the benefit of interlocutory relief in any event).
35 There are also practical difficulties with the regimes which Sigma and Alphapharm proposed. Sigma's proposed undertaking as to damages is conditional on an equivalent undertaking from Wyeth. Wyeth's position, however, is clear - it will not give any further undertaking as to damages. The stay of final orders in favour of Wyeth would mean Generic Health and other third parties could sell generic extended release formulations of venlafaxine hydrochloride. Generic Health and other third parties would thereby be free to take advantage of the stay without having to proffer any undertakings in Wyeth's favour (Generic Health has not foreshadowed an appeal). Alphapharm's willingness to give undertakings as to damages is not conditional upon Wyeth giving any equivalent undertaking. However, understandably, Alphapharm's proposed undertaking does not extend to loss to Wyeth by reason of the stay generally. It is confined to loss suffered by Wyeth by reason of Alphapharm being able to sell its generic extended release venlafaxine hydrochloride product, Enlafax-XR. Under this regime (the most likely in fact to occur given Wyeth's refusal to give any further undertaking) Wyeth would be exposed to losses from (certainly) any acts of Generic Health and (probably) by Sigma (on the assumption that Sigma's undertaking would not be given as its condition, that is Wyeth's equivalent undertaking, would not be fulfilled). If, in addition to the stay, Wyeth was restrained from itself dealing in its own generic extended release venlafaxine hydrochloride product, the result (combined with the stay) would be that everyone other than Wyeth (the patent holder) would be free to enter the market with their own generic extended release venlafaxine hydrochloride product but Wyeth would be restrained from so doing and may not be able to recover the losses to which it thereby may be exposed. Those outcomes are manifestly unjust to Wyeth, the party with the benefit of both the patent (unless and until revoked) and the principal judgment in its favour.
36 As to the vagueness of the available evidence about harm, little more need be said. I am prepared to infer a "real and not trivial" impact would be suffered by Sigma and Alphapharm if Wyeth were able to enter and establish its own generic product on the market first. When attempting to weigh the significance of that impact on the overall position of Sigma and Alphapharm, however, no inferences are possible. It can be inferred that their respective generic extended release venlafaxine hydrochloride products are but one of a wide range offered by Sigma and Alphapharm. Whilst Mr Ellis described Sigma's product as "very important" to it, he gave no clue about its relative importance compared to other products in the Sigma range or estimated financial importance to Sigma's turnover or profitability. He also gave no indication of the likely impact of Alphapharm entering the market at the same time as or soon after Sigma, nor of the impacts of Generic Health doing so thereafter.
37 As to the degree of protection afforded by the undertaking Wyeth is willing to give, some further observations are necessary. As noted, Wyeth is willing to undertake not to make any application to de-list Efexor-XR from the PBS until further order. This ensures that, if they succeed in the appeals, Sigma and Alphapharm will be able to list their products on the PBS as drugs bioequivalent to an already listed drug. By reason of this undertaking the capacity of Sigma and Alphapharm to enter the market is preserved. Because of the risk that Wyeth may place its own generic product on the market, the market might be different from that Sigma and Alphapharm had hoped to enter in or about mid 2009. But even in mid 2009 Sigma and Alphapharm were facing the certainty of competition between themselves almost immediately, competition from Generic Health soon thereafter and the same risk that Wyeth could enter the market at any time unless Wyeth chose to give undertakings to the contrary.
38 Once the true nature of the risk of harm to Sigma and Alphapharm is assessed it becomes apparent that, as in Red Bull, the risk of harm is "not of an overwhelming nature". When this is considered with the lack of evidence of the real extent of the adverse impact on Sigma and Alphapharm (particularly on the basis of the circumstances that in fact confronted them in mid 2009 in contrast to the hypothetical position that each somehow could have secured and maintained a "first mover" advantage despite the intentions of the other, Generic Health and possibly Wyeth) and the nature of the benefit sought to be secured (the mere capacity to enter a market), the conclusion I reach is that "the highest available measure of fairness" in this case (Minnesota Mining at 676) cannot be achieved by any of the alternative regimes proposed by Sigma or Alphapharm. To the contrary (on the most likely outcome of the various alternatives presented) there would be manifest unfairness to Wyeth. Accordingly, Wyeth is entitled to final relief. Sigma and Alphapharm have not discharged their persuasive onus to obtain a stay and/or the regime of interlocutory orders proposed.
39 The other minor disputes about the form of the orders are resolved as follows. First, I can see no reason why the final injunction should not extend to a common design. The terms of the relief sought in that regard are clear. Wyeth is entitled to relief of that scope. Otherwise the form of the injunction should be as Wyeth proposed. Second, if there is any doubt about the effect of a certificate of validity under s 19 of the Patents Act 1990 (Cth) then the stay of that order as sought should be granted. If it is simply unnecessary, as Wyeth submitted, so be it.