Generic Health Pty Ltd v Otsuka Pharmaceutical Co., Ltd & Ors

[2015] HCATrans 220

[2015] HCATrans 220

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S157 of 2015

B e t w e e n -

GENERIC HEALTH PTY LTD

Applicant

and

OTSUKA PHARMACEUTICAL CO., LTD

First Respondent

BRISTOL‑MYERS SQUIBB COMPANY

Second Respondent

COMMONWEALTH OF AUSTRALIA

Third Respondent

Application for special leave to appeal

BELL J
GAGELER J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 11 SEPTEMBER 2015, AT 9.31 AM

Copyright in the High Court of Australia

____________________

MR A.J. RYAN, SC:   May it please the Court, I appear with MR A.D.B. FOX for the applicant.  (instructed by Bird & Bird)

MR A.J.L. BANNON, SC:   May it please the Court, I appear with MS C.L. COCHRANE and MR B.A. MEE for the first and second respondents.  (instructed by Allens)

BELL J:   Yes, Mr Ryan.

MR RYAN:   Your Honours, my client has Therapeutic Goods Act registration for a number of pharmaceutical products containing the active ingredient aripiprazole.  In 2012 my client sought to enter the market and to sell those products for the treatment of schizophrenia.  The patentee, Otsuka, and its then licensee, Bristol‑Myers, made application before the Federal Court to obtain an interlocutory injunction to prevent my client from doing so.  That came before Justice Yates and ‑ ‑ ‑

BELL J:   In March of 2012?

MR RYAN:   Indeed, your Honour, March 2012.  That came before Justice Yates.  There was debate at that stage about the validity of the patent, including whether it was novel and whether it was inventive in the light of, amongst other things, a number of pieces of prior art:  first a US patent, the 528 patent; second, a publication called Saha; and third, a publication called Serper.  The interlocutory injunction was granted and there was an appeal to the Full Court and the Full Court confirmed the decision of the trial judge.

I should say, in dealing with the prior art I just mentioned, Justice Yates on the application for an interlocutory injunction had no evidence before him about how one would interpret the pieces of prior art.  In 2014 there was a trial before his Honour in which case there was evidence from a number of experts, and cross‑examination, and at the end of all that his Honour found that the two relevant claims of the patent notice, the 772 patent, claims 1 and 7, were invalid and liable to be revoked.

His Honour made final orders in July of 2015 which, one, revoked those two claims, 1 and 7, and two, vacated the interlocutory injunction which had been granted in March of 2012.  His Honour on application by our friends then granted what he called a mini‑stay of those orders pending an application by our friends to another judge for the grant of a stay of those orders pending appeal.  That application was heard by Justice Nicholas and his Honour granted a stay pending appeal of the order lifting the interlocutory injunction.

BELL J:   In short, your complaint is his Honour did not embark on a sufficiently detailed analysis of the merits of the proposed appeal and adopted an approach to the determination of the question by asking whether or not there were arguable grounds for the appeal to succeed and a consideration of the balance of convenience?

MR RYAN:   Indeed, your Honour, we make two short points.  We say in an application for a stay of an order lifting an interlocutory injunction, the applicant should satisfy a test equivalent to the test that would apply for the grant of the interlocutory injunction in the first place.  In other words, it should show that there is a prima facie case or a serious question to be tried, and in the present case, the test that his Honour applied, consistently with authority, was something less.  He required to be satisfied merely that the appeal was arguable.

But we say an appeal in these circumstances is special because it creates the incongruous situation whereby, had my client stayed out of the market until after the trial and then sought to go in, our friends would have had to apply for an interlocutory injunction and satisfy the Beecham test but, because they were already enjoined, the continuation of the injunction appears to have required satisfaction of a lesser test.  Secondly, your Honours ‑ ‑ ‑

KEANE J:   But that is not right, is it?  To talk about it as if the trial had not happened and the appeal was not on foot is to create an artificial premise.  The case that came before his Honour and required a decision by his Honour was whether, in all the circumstances, the case was sufficiently arguable to warrant maintaining the stay, given the consequences that might ensue should the appeal succeed.

MR RYAN:   Well, his Honour expressly said he had to be satisfied it was an arguable case ‑ ‑ ‑

KEANE J:   That is right.

MR RYAN:   ‑ ‑ ‑ rather than, for example, a prima facie case or a serious question.  The test ‑ ‑ ‑

KEANE J:   Why would it be a good idea to start using that language again, rather than to allow the judges, asked to exercise a discretion in that sort of case, to be able to look at the matter and say, “Is there a sufficiently arguable case that I should act to prevent what might be a small risk of a serious injustice in the event that the appeal succeeds”, and your client cannot meet its obligations.

MR RYAN:   Because, your Honour, it encourages a superficial look at the merits of the appeal.  His Honour did not look – that is our second point.  Even if it be the case that all that was necessary was that our friends had to show that their appeal was arguable, his Honour did not look at the merits of it.  Our friends relied on assertion that the trial judge was wrong.  There was no attempt before Justice Nicholas to articulate why it was that the passages I had intended to take the Court to in a moment demonstrated any error.

Our friends just said his Honour was wrong, that his Honour ignored certain passages of the relevant claim.  His Honour did not.  His Honour explained why those passages of the claim were either implicit in the prior art or did not need to be mentioned in the prior art, as I will explain to the Court in a moment.  So by adopting the ordinary test in relation to a stay pending appeal, his Honour thereby appears to have avoided any real consideration of the merits of the appeal.

GAGELER J:   Why is not his Honour in paragraph 26 to be taken as evaluating the strength of the appellant’s arguments as arguable and no higher than that?

MR RYAN:   Because, your Honour, as we would submit, one can see from 26 his Honour has not engaged in any analysis of the reasons why it was said that the trial judge was wrong.  I mean, there is nothing in here and our friends did not really advance anything beyond saying, “What his Honour said was wrong and we appeal”, and as I would hope to demonstrate ‑ ‑ ‑

BELL J:   Well, it is unsurprising, is it not, in an interlocutory decision of this nature that Justice Nicholas would have thought it inappropriate to canvass in detail his views about the merits of the appeal?

MR RYAN:   Indeed, because on his view all that was necessary was to show that the appeal was arguable, whereas we say that is the wrong test, but in any event ‑ ‑ ‑

BELL J:   I am sorry, Mr Ryan, I thought you said you accepted it is in accord with principle but you submit that the court should shift to a different and more stringent standard in relation to an application of this kind.

MR RYAN:   Indeed, yes, I did.

KEANE J:   But his Honour was not excluding the possibility that in some cases the court should.  He says it in paragraph 26:

This is not a case in which I think it necessary or desirable to explore the strength of the appellants’ appeal in any detail.

Plainly his Honour is recognising that there can be such cases but in this case, given the consequences of the appeal succeeding and the lifting of the stay, it is not appropriate in the exercise of his discretion to explore the strength of the appeal in any further detail.

MR RYAN:   But, with respect, your Honour, we would say why?  It is a very important matter for my client.  My client is in the position where it has been enjoined since 2012.  It runs a trial.  It wins.  It wants to get onto the market.  Its business is to sell drugs, not to engage in second and third court cases trying to collect, if it can, on an undertaking as to damages.  There was evidence from my client’s Chief Financial Officer, Mr Merchant, that in an another case where it had succeeded and tried to collect on the patentee’s undertaking as to damages, after 37 months they have not got beyond the pleading stage.

BELL J:   But the findings here were that, in the event the appeal was successful, Otsuka’s loss of profit is likely to be very substantial and that there exists a significant risk that it would not be able to recover from Generic Health any loss of profits suffered.  Now, those are significant findings when one looks at the discretionary determination that his Honour was being asked to make.

MR RYAN:   Yes.  Well, we do not shy away from that, your Honour; we do not.  But balanced against what we would submit is the injustice of the continuation of an injunction in circumstances where we had a comprehensive win at trial and there was no real attempt by our friends to explain why, the six pieces of – sorry, the three pieces of prior art which gave rise to five grounds of invalidity were not anticipatory or rendered the patent obvious.  The strength of the victory, we would submit, means that this is one of those cases where one should not in effect continue the injunction unless our friends have demonstrated really that there is more than simply an arguable appeal.  They ought to demonstrate a serious question.

GAGELER J:   Well, the injustice of the continuation of the injunction has to be gauged against the factors that his Honour mentions in paragraph 28, just the practical listing of the appeal for November in the expectation that a judgment will be delivered sometime in the first half of 2016 in a context where the interlocutory injunction has been in place since early 2012.

MR RYAN:   Yes, we recognise that issue of course, your Honour, but what it does mean is that we will have to – I mean, a judgment in the first half of 2016, even that might be optimistic, so we face the serious prospect of being out of the market for another 12 months, for example, in circumstances where we would submit our friends’ case on appeal is weak, seriously weak.  May it please the Court.

BELL J:   Yes, thank you.  Mr Bannon, we do not need to hear from you.

This is an application concerned with a matter of practice and procedure.  We are not persuaded that it warrants the grant of special leave to appeal.  Special leave is refused with costs.

The Court will now adjourn to reconstitute.

AT 9.44 AM THE MATTER WAS CONCLUDED