H Lundbeck A/S v Sandoz Pty Ltd - [2018] FCA 1797

FEDERAL COURT OF AUSTRALIA
H. Lundbeck A/S v Sandoz Pty Ltd [2018] FCA 1797

File numbers:

NSD 647 of 2014

NSD 824 of 2016

Judge:

JAGOT J

Date of judgment:

21 November 2018

Catchwords:

PATENTS – construction of claims – (+) and (−)-enantiomers – where patent claims separated (+)-enantiomer – no defence to infringement where only trace, trivial or insignificant amounts of (−)-enantiomer present in infringing products – claims of patent infringed

PATENTS – whether patentee/exclusive licensee prevented from brining infringement proceedings under provisions of the Patents Act 1990 (Cth)

CONTRACTS – construction of settlement agreement – licence to exploit the invention the subject of the patent in suit – licence no defence to infringement

DAMAGES – innocent infringement – discretionary defences – whether award of additional damages appropriate – assessment of damages for patent infringement – object of award of damages to restore patentee and/or exclusive licensee to the position each would have been in but for infringement

Legislation:

Acts Interpretation Act 1901 (Cth), s 12

Australian Consumer Law, s 18

Competition and Consumer Act 2010 (Cth)

Copyright Act 1968 (Cth), s115(4)

Designs Act 2003 (Cth), s 75(3)

Federal Court of Australia Act 1976 (Cth), s 51A

Patents Act 1952 (Cth)

Patents Act1990 (Cth), ss 3, 13, 15AB, 18, 32, 36, 40, 41, 42, 54, 55, 65, 67, 70, 71, 72, 75, 76, 77, 78, 79, 79C, 83, 85, 101E, 101F, 120, 122, 123, 133, 136H, 136J, 142, 143, 143A, 145, 147, 148, 149, 150, 151, 165A, 215, 223, 227 and 228

Trade Marks Act 1995 (Cth), s 126

Trade Practices Act 1974 (Cth)

Federal Court Rules 2011 (Cth), r 39.06

Patents Regulations 1991 (Cth), reg 22.21

Explanatory Memorandum, Patents Bill 1990 (Cth), cl 77

Cases cited:

Actavis Pty Ltd v Orion Corporation [2016] FCAFC 121

Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd [1995] FCA 236; (1995) AIPC 91-129

Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd [2001] FCA 1098; (2001) 52 IPR 305

Alphapharm Pty Ltd vH Lundbeck A/S [2006] APO 18; (2006) 69 IPR 629

Alphapharm Pty Ltd v H Lundbeck A/S [2008] FCA 559; (2008) 76 IPR 618

Alphapharm Pty Ltd v H Lundbeck A/S [2011] APO 36; (2011) 92 IPR 628

Alphapharm Pty Ltd v H Lundbeck A/S [2014] APO 41; (2014) 109 IPR 323

Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42; (2014) 254 CLR 247

Alphapharm Pty Ltd v H Lundbeck A/S [2015] FCAFC 138; (2015) 234 FCR 306

Alphapharm Pty Ltd v H Lundbeck A/S [2014] FCA 1185; (2014) 110 IPR 59

Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd(No 2) [2012] FCAFC 102; (2012) 204 FCR 494

Aristocrat Technologies Australia Pty Limited v DAP Services (Kempsey) Pty Limited (in liquidation) [2007] FCAFC 40; (2007) 157 FCR 564

Aspen Pharma Pty Ltd v Commissioner of Patents [2012] AATA 851; (2012) 132 ALD 648

Aspen Pharma Pty Ltd v H Lundbeck A/S [2013] FCAFC 129; (2013) 216 FCR 508

Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2015] FCA 1372

Black & Decker Inc v GMCA Pty Ltd (No 5) [2008] FCA 1738; (2008) 79 IPR 450

Bristol-Myers Squibb Co v Apotex Pty Ltd [2015] FCAFC 2; (2015) 228 FCR 1

C Van der Lely NV v Bamfords Ltd [1963] RPC 61

Doggett v Commonwealth Bank of Australia [2015] VSCA 351; (2015) 47 VR 302

Facton Ltd v Rifai Fashions Pty Ltd [2012] FCAFC 9; (2012) 199 FCR 569

Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603

Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) [2008] FCA 746; (2008) 76 IPR 763

General Tire & Rubber Co v Firestone Tyre and Rubber Co [1972] RPC 457

Generic Health Pty Ltd v Bayer Pharma Aktiengesellschaft [2018] FCAFC 183

Geneva Laboratories Ltd v Prestige Premium Deals Pty Ltd (No 5) [2017] FCA 63; (2017) 122 IPR 279

Gerber Garment Technology Inc v Lectra Systems Ltd [1995] RPC 383

Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443

H K Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795

H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70; (2009) 177 FCR 151

H Lundbeck A/S v Alphapharm Pty Ltd [2016] FCA 1232

H Lundbeck A/S v Commissioner of Patents [2006] FCA 163; (2006) 150 FCR 269

H Lundbeck A/S v Commissioner of Patents [2017] FCA 56; (2017) 249 FCR 41

Hill v Evans (1862) 1A IPR 1

Industrial Galvanizers Corporation Pty Ltd v Safe Direction Pty Ltd [2018] FCA 1192

Karam v Australia & New Zealand Banking Group Ltd [2001] NSWSC 709

Knott Investments Pty Ltd v Winnebago Industries, Inc (No 2) [2013] FCAFC 117; (2013) 305 ALR 387

Lewis v Condon; Condon v Lewis [2013] NSWCA 204; (2013) 85 NSWLR 99

Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181

Malec v J C Hutton Pty Limited [1990] HCA 20; (1990) 169 CLR 638

Nicaro Holdings Pty Ltd v Martin Engineering Company [1990] FCA 37; (1990) 91 ALR 513

Norm Engineering Pty Ltd v Digga Australia Pty Ltd [2007] FCA 761; (2007) 162 FCR 1

North Australian Aboriginal Justice Agency Limited v Northern Territory [2015] HCA 41; (2015) 256 CLR 569

Pacific Enterprises (Aust) Pty Ltd v Bernen Pty Ltd [2014] FCA 1372; (2014) 321 ALR 715

Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257

Populin v HB Nominees Pty Ltd [1982] FCA 37; (1982) 41 ALR 471

R&J Lyons Family Settlement Pty Limited v 155 Macquarie Street Pty Limited [2006] NSWCA 177

Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd [1999] FCA 898; (1999) 164 ALR 239

Regency Media Pty Ltd v MPEG LA, LLC [2014] FCAFC 183; (2014) 231 FCR 588

Review Australia Pty Ltd v New Cover Group Pty Ltd [2008] FCA 1589; (2008) 79 IPR 236

Roche Therapeutics, Inc v GenRx Pty Ltd [2007] FCA 83; (2007) 71 IPR 546

Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd [2016] FCA 236; (2016) 118 IPR 421

Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 3) [2011] FCA 846; (2011) 196 FCR 1

Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332

Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556

State Bank of New South Wales v Commissioner of Taxation [1995] FCA 1652; (1995) 62 FCR 371

SZOFE v Minister for Immigration and Citizenship [2010] FCAFC 79; (2010) 185 FCR 129

Truong Giang Corporation v Quach [2015] FCA 1097; (2015) 114 IPR 498

TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) [2007] FCA 151; (2007) 158 FCR 444

Unilin Beeher BV v Huili Building Materials Pty Ltd (No 2) [2007] FCA 1615; (2007) 74 IPR 345

Winnebago Industries Inc v Knott Investments Pty Ltd (No 4) [2015] FCA 1327; (2015) 241 FCR 271

Zetco Pty Ltd v Austworld Commodities (No 2) [2011] FCA 848

Date of hearing:

16, 17, 18, 19, 24, 26 and 30 April 2018, 1, 2, 3 and 4 May 2018, 2, 3, 4, 5, 9 and 10 October 2018

Date of last submissions:

10 October 2018

Registry:

New South Wales

Division:

General Division

National Practice Area:

Intellectual Property

Sub-area:

Patents and associated Statutes

Category:

Catchwords

Number of paragraphs:

551

Counsel for H. Lundbeck A/S, Lundbeck Australia Pty Ltd and CNS Pharma Pty Ltd:

AJL Bannon SC with KJ Howard SC, LA Merrick and C Cunliffe

Solicitor for H. Lundbeck A/S, Lundbeck Australia Pty Ltd and CNS Pharma Pty Ltd:

Corrs Chambers Westgarth

Counsel for Alphapharm Pty Ltd, Apotex Pty Ltd and Aspen Pharma Pty Ltd:

DKC Catterns QC with S Habib SC, C Dimitriadis SC, N Murray SC, AR Lang and B Mee

Solicitor for Alphapharm Pty Ltd, Apotex Pty Ltd and Aspen Pharma Pty Ltd:

King & Wood Mallesons

Counsel for Sandoz Pty Ltd:

JM Hennessy SC with PL Arcus and J Adamopoulos

Solicitor for Sandoz Pty Ltd:

Clayton Utz

ORDERS

NSD 647 of 2014

BETWEEN:
H. LUNDBECK A/S

First Applicant

LUNDBECK AUSTRALIA PTY LTD (ACN 070 094 290)

Second Applicant

AND:
SANDOZ PTY LTD (ACN 075 449 553)

Respondent

JUDGE:

JAGOT J

DATE OF ORDER:

21 November 2018

THE COURT ORDERS THAT:
1.Subject to order 2, until 5.00pm on 28 November 2018, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) and on the ground that it is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a), there be no disclosure (by publication or otherwise) of the reasons for judgment delivered on the date of this order in proceedings NSD 647 of 2014 and NSD 826 of 2016 (Proceedings) to any person other than to the external solicitors, expert accounting witnesses, and counsel for the parties in the Proceedings and Lundbeck In-house Counsel and Sandoz In-house Counsel (as defined in the Confidentiality Agreement dated 30 May 2017).
2.The reasons for judgment may be provided to the Patent Office in relation to the Application for Licence to Exploit an Invention made by the Respondent to the Patent Office on 18 December 2013, provided that the Commissioner of Patents makes a direction under regulation 4.3(2)(a) and / or 4.3(2)(b) that the reasons for judgment will not be open to public inspection pending the making of any confidentiality orders referred to in order 6.
3.By 4.00pm on 28 November 2018 any party wishing to claim that any part of the reasons for the judgment should be subject to a further confidentiality order is to notify the Associate to Jagot J and the other parties, by email of the claim including:
(a)details of the matter claimed to be confidential;
(b)a short statement of the reasons the matter is said to be confidential; and
(c)a statement identifying whether the claimant consents to the confidentiality claim being determined by Jagot J on the basis of the email or seeks an oral hearing.

4.If no notice by email is received in accordance with order 3, the reasons for judgment will be published forthwith.
5.If notice is received in accordance with order 3, the reasons for judgment will be published forthwith with the claimed confidential matter redacted pending determination of the confidentiality claim.
6.The parties are to confer and, by 4.00pm on 5 December 2018, are to propose in a joint email (including agreed and disagreed matters) to the Associate to Jagot J further directions to enable the matter to be finalised, including orders to enable the expert accounting witnesses to confer and provide a further joint report, if necessary, in respect of any outstanding issues having regard to the reasons for judgment.
7.Pursuant to rule 36.03(b) of the Federal Court Rules 2011 (Cth), the time within which a party may file and serve any notice of appeal from judgment in these proceedings be extended to and for a period of 21 days after the publication of the reasons for judgment pursuant to orders 4 or 5, or the date of the determination of any outstanding issues raised by the expert accounting witnesses in any further joint report pursuant to order 6, whichever is later.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

NSD 824 of 2016

BETWEEN:
CNS PHARMA PTY LTD (ACN 121 515 400)

Applicant

AND:
SANDOZ PTY LTD (ACN 075 449 553)

Respondent

JUDGE:

JAGOT J

DATE OF ORDER:

21 November 2018

THE COURT ORDERS THAT:
1.Subject to order 2, until 5.00pm on 28 November 2018, pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) and on the ground that it is necessary to prevent prejudice to the proper administration of justice under s 37AG(1)(a), there be no disclosure (by publication or otherwise) of the reasons for judgment delivered on the date of this order in proceedings NSD 647 of 2014 and NSD 826 of 2016 (Proceedings) to any person other than to the external solicitors, expert accounting witnesses, and counsel for the parties in the Proceedings and Lundbeck In-house Counsel and Sandoz In-house Counsel (as defined in the Confidentiality Agreement dated 30 May 2017).
2.The reasons for judgment may be provided to the Patent Office in relation to the Application for Licence to Exploit an Invention made by the Respondent to the Patent Office on 18 December 2013, provided that the Commissioner of Patents makes a direction under regulation 4.3(2)(a) and / or 4.3(2)(b) that the reasons for judgment will not be open to public inspection pending the making of any confidentiality orders referred to in order 6.
3.By 4.00pm on 28 November 2018 any party wishing to claim that any part of the reasons for the judgment should be subject to a further confidentiality order is to notify the Associate to Jagot J and the other parties, by email of the claim including:
(a)details of the matter claimed to be confidential;
(b)a short statement of the reasons the matter is said to be confidential; and
(c)a statement identifying whether the claimant consents to the confidentiality claim being determined by Jagot J on the basis of the email or seeks an oral hearing.

4.If no notice by email is received in accordance with order 3, the reasons for judgment will be published forthwith.
5.If notice is received in accordance with order 3, the reasons for judgment will be published forthwith with the claimed confidential matter redacted pending determination of the confidentiality claim.
6.The parties are to confer and, by 4.00pm on 5 December 2018, are to propose in a joint email (including agreed and disagreed matters) to the Associate to Jagot J further directions to enable the matter to be finalised, including orders to enable the expert accounting witnesses to confer and provide a further joint report, if necessary, in respect of any outstanding issues having regard to the reasons for judgment.
7.Pursuant to rule 36.03(b) of the Federal Court Rules 2011 (Cth), the time within which a party may file and serve any notice of appeal from judgment in these proceedings be extended to and for a period of 21 days after the publication of the reasons for judgment pursuant to orders 4 or 5, or the date of the determination of any outstanding issues raised by the expert accounting witnesses in any further joint report pursuant to order 6, whichever is later.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
JAGOT J:
1. The claims

These reasons for judgment explain why I have decided that the applicants’ claims for patent infringement and misleading and deceptive conduct against the only remaining respondent should succeed and be subject to an award of damages calculated in a manner generally consistent with the approach of the accountant called by the applicants, but subject to a discount of 30% to take account of all relevant risks associated with the past hypothetical cash-flows which underlie the assessment of damages.
2. The essential facts
H Lundbeck A/S (referred to as Lundbeck A/S or Lundbeck DN) is the patentee of Australian patent 623144 (the 144 patent or the Lexapro patent). Lundbeck Australia Pty Ltd (referred to as Lundbeck AU), a subsidiary of Lundbeck A/S, claims to be the exclusive licensee of the 144 patent. Lundbeck AU sells Lexapro and Cipramil in Australia which are manufactured by and purchased from Lundbeck A/S. CNS Pharma Pty Ltd is a subsidiary of Lundbeck AU which sells a generic version of Lexapro in Australia known as Esipram which is also manufactured by and purchased from Lundbeck A/S.
Lundbeck A/S and Lundbeck AU, when there is no need to distinguish between them, are referred to in these reasons as Lundbeck.
The 144 patent is dated 13 June 1989 and thus its term of 20 years under s 67 of the Patents Act1990 (Cth) meant that, if the term was not extended, the patent would expire on 13 June 2009.
Lundbeck A/S applied to extend the term of the 144 patent on 22 December 2003. The Commissioner of Patents granted the extension so that the 144 patent would not expire until 13 June 2014. Alphapharm Pty Ltd contended to the Commissioner that the extension was invalid and that the only extension which could have been granted was until 9 December 2012. The Commissioner agreed with Alphapharm’s contention and scheduled a hearing to decide if the Commissioner should amend the extended term to 9 December 2012.
Alphapharm commenced a proceeding to revoke claims 1 to 6 of the 144 patent and to remove the extension of term until 13 June 2014 from the Register of Patents. Lundbeck commenced a proceeding to prevent the Commissioner from amending the Register by contending that a relevant regulation was invalid. Lundbeck also cross-claimed against Alphapharm for infringement of the 144 patent.
On 1 March 2006 Lindgren J dismissed Lundbeck’s application contending invalidity of the regulation: H Lundbeck A/S v Commissioner of Patents [2006] FCA 163; (2006) 150 FCR 269. In so doing Lindgren J exposed the competing positions of the parties. Lundbeck relied on the registration of escitalopram oxalate on the Australian Register of Therapeutic Goods (ARTG) on 16 September 2003 as the relevant date for the extension. This is known as the Lexapro registration (Lexapro being the brand name of Lundbeck’s escitalopram oxalate product). Alphapharm contended that the relevant date was that on which citalopram hydrobromide was registered on the ARTG, being 9 December 1997. This is known as the Cipramil registration (Cipramil being the brand name of Lundbeck’s citalopram hydrobromide product). As Lindgren J explained at [13]:
Subsection 71(2) of the Act provides that an application for an extension of term must be made during the term of the patent and within six months of the latest of the following dates:
‘(a) the date the patent was granted;
(b) the date of commencement of the first inclusion in the [ARTG] of goods that contain, or consist of, any of the pharmaceutical substances referred to in subs 70(3);
(c) the date of commencement of [s 71].’
In this case, on either of the competing views the latest of those three dates is that referred to in para (b). If the date referred to in para (b) was, as Lundbeck contends, 16 September 2003, Lundbeck had until 16 March 2004 in which to apply for the extension, and therefore its application made on 22 December 2003 was within time. If, on the other hand, the date referred to in para (b) was, as Alphapharm contends, 9 December 1997, Lundbeck had only until 9 June 1998 in which to apply for an extension, and, therefore, its application on 22 December 2003 was made out of time.
On 19 May 2006 the Commissioner decided to amend the Register “to insert the correct extension of the term of the patent, that is 9 December 2012”: Alphapharm Pty Ltd vH Lundbeck A/S [2006] APO 18; (2006) 69 IPR 629 at [35].
In the meantime or thereafter, more proceedings were commenced. Arrow Pharmaceuticals Pty Ltd brought a claim for revocation of claims 1 to 6 of the 144 patent and rectification of the Register by removing the extension of term and recording that the 144 patent will expire on 13 June 2009 or, in the alternative, 9 December 2012. Sandoz Pty Ltd also brought a claim for revocation of claims 1 to 6 of the 144 patent and rectification of the Register by removing the extension of term. Sandoz’s proceeding was settled and discontinued. Lundbeck A/S and Lundbeck AU entered into a deed of settlement with Sandoz in February 2007.
Lindgren J determined the Lundbeck, Alphapharm and Arrow proceedings on 24 April 2008: Alphapharm Pty Ltd v H Lundbeck A/S [2008] FCA 559; (2008) 76 IPR 618 (Lindgren J judgment). These proceedings are referred to in various documents and submissions as the Alphapharm proceedings. In short, Lindgren J dismissed Alphapharm’s and Arrow’s claims for revocation of all but claim 5 of the 144 patent and found that Alphapharm had infringed claims 1, 3, and 6 of the 144 patent. He also held that the extension of term was invalid as the relevant date under s 71(2) was the date of the Cipramil registration, with the consequence that reference to any extension of term of the 144 patent should be removed.

Lindgren J made orders on 19 June 2008. By order 6 Lindgren J ordered rectification of the Register to remove any reference to an extension of term of the 144 patent. By order 7, order 6 was stayed pending determination of an appeal to the Full Court on Lundbeck giving undertakings the terms of which are not now relevant.
On 11 June 2009 the Full Court (Emmett, Bennett and Middleton JJ) dismissed Lundbeck’s appeal against order 6 concerning removal of any reference to an extension of term of the 144 patent. The majority (Bennett and Middleton JJ) also dismissed Alphapharm’s and Arrow’s claims for revocation of claims 1 to 6: see H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70; (2009) 177 FCR 151 (FFC#1).
The Full Court made orders on 12 June 2009 which stayed order 6 of Lindgren J’s 19 June 2008 orders until determination of any application for special leave to appeal to the High Court on the basis of Lundbeck undertaking not, before determination of any such application, commencing or threatening proceedings against any person for infringement of the 144 patent in respect of conduct engaged in after 13 June 2009.
Accordingly, as at 12 June 2009:
(1)The Full Court had held in FFC#1 that all purported extensions of term of the 144 patent, be it to 9 December 2012 or 13 June 2014, were invalid.
(2)Order 6 had been made removing any reference to an extension of the term of the 144 patent from the Register.
(3)Order 6 had been stayed on the basis of Lundbeck not commencing or threatening to commence infringement proceedings for conduct after 13 June 2009.
(4)Without any extension of term of the 144 patent, that patent would expire at the end of its 20 year term on 13 June 2009.
Also on 12 June 2009 Lundbeck A/S applied for an extension of time in which to make an application to extend the term of the 144 patent to 9 December 2012 based on the Cipramil registration. For this purpose the time for making the extension of term application had to be extended to 12 June 2009, being the date on which Lundbeck A/S also applied for the extension of term of the 144 patent to 9 December 2012.
On 13 June 2009, pursuant to s 67 of the Patents Act, the 20 year term of the 144 patent ended.
From Monday, 15 June 2009 onwards, Apotex Pty Ltd, Sigma Pharmaceuticals (Australia) Pty Ltd and Sandoz supplied generic escitalopram oxalate products in Australia.
On 11 December 2009 the High Court refused the applications for special leave to appeal.
On 9 February 2010 the Register was rectified to remove reference to the extension of term of the 144 patent.
Alphapharm, Apotex and Sandoz opposed the extension of time application before the Commissioner, as did Sigma. Sigma was subsequently acquired by the Aspen group of which Aspen Pharma Pty Ltd is part.
On 1 June 2011 the Commissioner decided to extend the time for the making of an application to extend the term of the 144 patent based on the Cipramil registration until 9 December 2012: Alphapharm Pty Ltd v H Lundbeck A/S [2011] APO 36; (2011) 92 IPR 628.
Alphapharm, Apotex, Sandoz and Aspen appealed against the Commissioner’s decision to the Administrative Appeals Tribunal (the AAT). On 4 December 2012, the AAT affirmed the Commissioner’s decision granting the extension of time: Aspen Pharma Pty Ltd v Commissioner of Patents [2012] AATA 851; (2012) 132 ALD 648.
On 18 November 2013 the Full Court dismissed the appeals against the AAT’s decision: Aspen Pharma Pty Ltd v H Lundbeck A/S [2013] FCAFC 129; (2013) 216 FCR 508 (FFC#2).
In the meantime Alphapharm, Apotex, Sandoz and Aspen had filed oppositions to the extension of term of the 144 patent and had applied under s 223(9) of the Patents Act for licences to exploit the 144 patent during its extended term, should its term be extended.
On 25 June 2014 the Commissioner granted the extension of term of the 144 patent to 9 December 2012: Alphapharm Pty Ltd v H Lundbeck A/S [2014] APO 41; (2014) 109 IPR 323.
On 26 June 2014 Lundbeck commenced infringement proceedings against Alphapharm, Apotex, Sandoz and Aspen. On 30 May 2016 CNS Pharma also commenced proceedings against those entities seeking declarations that, by the sale, offering for sale and supply of escitalopram products during the term of the 144 patent, they engaged in misleading and deceptive conduct. Accordingly, CNS Pharma sought damages for the loss it claims to have suffered during the patent term as a result of the alleged acts of infringement by the generic parties.
Having granted special leave to appeal, on 5 November 2014 the High Court dismissed Alphapharm’s appeal against the Full Court’s orders dismissing the appeal to it by a 3:2 majority: Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42; (2014) 254 CLR 247.
Alphapharm, Apotex, Sandoz and Aspen appealed against the Commissioner’s decision to extend the term of the 144 patent and, on 6 November 2014, Rares J dismissed this appeal: Alphapharm Pty Ltd v H Lundbeck A/S [2014] FCA 1185; (2014) 110 IPR 59 (the Rares J judgment).
Alphapharm, Apotex, Sandoz and Aspen appealed against Rares J’s orders dismissing the appeal and on 22 September 2015 the Full Court dismissed that appeal: Alphapharm Pty Ltd v H Lundbeck A/S [2015] FCAFC 138; (2015) 234 FCR 306 (FFC#3).
Alphapharm, Apotex, Sandoz and Aspen applied for, but on 11 March 2016 were refused, special leave to appeal to the High Court against the orders in FFC#3.
On 5 August 2016 Lundbeck A/S applied for an order that the Commissioner had no power to determine the applications for licences under s 223(9) of the Patents Act.
On 21 October 2016 I held that Alphapharm and Aspen were not estopped or precluded by the doctrine of abuse of process from raising the status of Lundbeck AU as an exclusive licensee or not of the 144 patent: H Lundbeck A/S v Alphapharm Pty Ltd [2016] FCA 1232.
On 3 February 2017 Beach J held that the Commissioner did have the power to determine the licence applications and made declarations reflecting this conclusion: H Lundbeck A/S v Commissioner of Patents [2017] FCA 56; (2017) 249 FCR 41.
Before the first tranche of the hearing of the current matters commenced, the claims against and by Alphapharm were discontinued. The claim against Aspen was also subsequently discontinued after the first tranche of the hearing. During the second tranche of the hearing, the claims between Lundbeck and Apotex settled. As a result, the sole remaining respondent is Sandoz.
The fact that Sandoz alone remains as a respondent creates some practical difficulty. To explain, Sandoz did not challenge the validity of the 144 patent, but it did defend Lundbeck’s infringement proceedings on various grounds including the proper construction of the 144 patent. In so doing Sandoz relied on Apotex’s expert evidence and submissions. Apotex’s submissions about construction were part of its case that the 144 patent is invalid or, if valid, should be construed in a manner which meant that Apotex’s products (and thus also Sandoz’s products) did not infringe. As noted, however, the proceedings against Apotex settled, but only after the hearing in relation to the invalidity and the proper construction of the 144 patent.
I sought clarification of Sandoz’s position. Sandoz said that it pressed its non-infringement argument based on the proper construction of the 144 patent as articulated by Apotex, but did not contend the patent was invalid as a result of any particular construction.
The difficulty is that given that the hearing took place in the way that it did it is not possible to identify the construction argument other than in the context of Apotex’s invalidity argument. As a result, in these reasons for judgment I refer to and deal with Apotex’s invalidity argument, but I do so only for the purpose of explaining my conclusions about Sandoz’s construction and associated non-infringement argument. Sandoz’s construction argument relied on one aspect of Apotex’s case, which may be described as the “separated, isolated or pure” (+)-enantiomer argument. Sandoz did not adopt Apotex’s so-called “molecule” construction argument. However, in order to understand the competing constructions, and thus Sandoz’s position as the sole remaining respondent, it is necessary to explain all aspects of Apotex’s arguments.
Sandoz also adopted other submissions of various generic parties about certain issues. For ease of reference I have attributed all of those submissions in these reasons to Sandoz but, in reality, many of the submissions were made by one or other generic party before the cases against them were settled and which Sandoz adopted.
3. Apotex’s challenge to validity of the 144 patent
3.1 The grounds of the challenge
During the first tranche of the hearing, Apotex contended that claims 1 and 3 of the 144 patent were invalid on three grounds.
The first ground was that the invention claimed in claims 1 and 3 was not a patentable invention as the invention was not novel as required by s 18(1)(b)(i) of the Patents Act by reason of the publication of Australian Patent No. 509445 (the 445 or Citalopram patent) on or about 13 July 1978.
The second ground was that if claim 1 of the 144 patent, on its proper construction, is limited to the “separated or isolated or pure (+)-enantiomer of 1-(3-dimethylaminopropyl)-1-(4'-fluorophenyl)-1,3-dihydroisobenzofuran-5-carbonitrile with nothing else present”, then the invention claimed in claims 1 and 3 is not fairly based on matter described in the specification as required by s 40(3) of the Patents Act.
The third ground was that if claim 1 of the 144 patent, on its proper construction, is not so limited then the term “(+) enantiomer of 1-(3-dimethylaminopropyl)-1-(4'-fluorophenyl)-1,3-dihydroisobenzofuran-5-carbonitrile” in claim 1 is not clear and claims 1 and 3 therefore do not comply with s 40(3) of the Patents Act.
Although Apotex’s cross-claim referred to the 1990 Patents Act, as it explained in its written submissions, validity, but not infringement, is to be decided under the provisions of the Patents Act 1952 (Cth) (the 1952 Act). This was not in dispute so it suffices to adopt Apotex’s submission about this issue as follows:
Lindgren J [in the Lindgren J judgment] explained the continued relevance of the Patents Act 1952 (Cth) (1952 Act) at [54]-[55]. This was clarified by Middleton J in Eli Lilly and Company Limited v Apotex Pty Ltd [[2013] FCA 214] (2013)100 IPR 451 at [7]-[18], referring in particular to reg 23.26 of the Patents Regulations 1991, and to ss 233 and 234 of the Patents Act 1990 (Cth) (Act).
For the reasons noted by Middleton J at [16], by a combination of s 228(7) and reg 23.26(2), when a patent has been granted under the Act on an application made under the 1952 Act, the 1952 Act applies to validity but not to infringement.
To the extent relevant to the present matter, the requirement that an invention be novel, and that claims be clear and fairly based on the matter described in the specification under the 1952 Act involve the same considerations as under the 1990 Act.
It is unnecessary to record the uncontroversial scientific facts about stereochemistry, enantiomers, citalopram and escitalopram. There is no material dispute about these matters.
Nor is it necessary to summarise the 144 and 445 patents. This exercise has been done repeatedly in the previous decisions, which are an essential part of the background to the current dispute.
3.2 Construction of claim 1
The Lindgren J judgment identifies the background to the Alphapharm proceedings in uncontroversial terms at [1] to [8]. His Honour said:
1These four proceedings, which were heard together, relate to Australian patent No 623144 (the Patent or the Australian Escitalopram Patent) held by H Lundbeck A/S (Lundbeck), a Danish pharmaceutical company.
2Lundbeck applied for the Patent on 13 June 1989. The application was a Convention application and was said in the application to be based on application No 8814057 for a patent made in the United Kingdom on 14 June 1988 (the UK Escitalopram Patent – see [79] below). The title of the invention in the Patent is: “(+)-Enantiomer of citalopram and process for the preparation thereof”.
3Citalopram is a molecule patented by Lundbeck which is used for the treatment of depression. Citalopram is a chiral molecule, a racemic mixture (or racemate) comprising in equal measure two enantiomers. Enantiomers are non-superimposable mirror images of each other. They are designated “(+)” or “(–)” based on a particular physical property referred to below, and “R” or “S” based on their three-dimensional structure. The correlation between the (+) or (–) and the R or S designations can only be determined, however, through experimentation.
4In the case of citalopram, experimentation subsequent to the priority date has shown that the (+)-enantiomer is in fact the S-enantiomer. It is commonly referred to as “S-citalopram”, and has the International Nonproprietary Name “escitalopram”.
5The Patent discloses processes for obtaining escitalopram, and data showing that (+)-citalopram is therapeutically more active than citalopram itself, and more than 100 fold more active than (-)-citalopram.
6The 20 year term of the Patent was due to expire on 13 June 2009. The term has, however, been extended as discussed at [28] ff below.
7Citalopram is an invention claimed in Australian patent No 509,445 (the Australian Citalopram Patent) dated 5 January 1977, the term of which was sixteen years commencing on that date. The Australian Citalopram Patent was, in turn, said in the application to be based on the application No 1486/76 for a patent filed in Great Britain on 14 January 1976 (the UK Citalopram Patent). The title of the invention in the Australian Citalopram Patent is “phthalanes”, a class of compounds that includes citalopram.
8In various ways, the proceedings before the Court raise issues concerning the relationship between citalopram and escitalopram. Broadly, the issues can be separated into those that relate to patentability (raised in the proceedings brought by Alphapharm Pty Ltd (Alphapharm) and Arrow Pharmaceuticals Pty Ltd (Arrow) for revocation of the Patent), infringement (a cross-claim in Alphapharm’s revocation proceeding) and regulatory aspects (all four proceedings).
Lindgren J identified the claims of the 144 patent as follows:
9 The Patent comprises six claims. …
10 The six claims are as follows:
1. (+)-1-(3-dimethylaminopropyl)-1-(4’-fluorophenyl)-1,3-dihydroisobenzofuran-5-carbonitrile and non-toxic acid addition salts thereof.
2. The pamoic acid salt of (+)-1-(3-dimethylaminopropyl)-1-(4’-fluorophenyl)-1,3-dihydroisobenzofuran-5-carbonitrile.
3. A pharmaceutical composition in unit dosage form comprising as an active ingredient, a compound as defined in claim 1, together with a pharmaceutically accepta[ble] carrier or excipient.
4. A pharmaceutical composition in unit dosage form comprising, as an active ingredient, the compound of claim 2, together with a pharmaceutically acceptable carrier or excipient.
5. A pharmaceutical composition in unit dosage form, according to claim 3 or 4, wherein the active ingredient is present in an amount from 0.1 to 100 milligram per unit dose, together with a pharmaceutically acceptable carrier or excipient.
6. A method for the preparation of the compound of claim 1, which comprises:
(a) reacting a compound of the formula
with an enantiomerically pure acid derivative as an acid chloride, anhydride or labile ester, subsequently separating the resolved intermediate enantiomer for (+)-citalopram having the formula
wherein R is a labile ester group; by HPLC or fractional crystallization, and then treating said intermediate enantiomer with strong base: or
(b) reacting a compound of formula II with the enantiomer of an optically active acid affording the pure enantiomer salt of the compound of formula II for (+)-citalopram, and subsequently performing ringclosure via a labile ester by reacting the pure enantiomer of formula II as a base with an activated acid with simultaneous addition of a base and, if desired, transferring the (+)-citalopram obtained to a pharmaceutically acceptable salt thereof.
Lindgren J construed claim 1 of the 144 patent to mean (+)-citalopram. He stated his conclusion as follows:
116 The symbol (+)- in claim 1 (and in claim 2) indicates the particular enantiomer that is distinguished by the feature of rotating plane-polarised light to the right (under standard conditions – see Section G below). The property of rotating plane-polarised light to the right (clockwise) or to the left (anticlockwise) which distinguishes one enantiomer from the other and each from the racemate, is able to be detected only when that enantiomer is present other than as a part of the racemate. This is because when in a racemic mixture, the polarisation of light by each enantiomer is “cancelled out” by the other enantiomer, and there is thus no net polarisation of light. The skilled addressee in 1988 would have understood claim 1 to refer specifically to (+)-citalopram.
117 In the absence of a context permitting otherwise, the skilled addressee would not have understood the claim to the invention of (+)-citalopram to refer to that compound merely as part of the unresolved racemate. Rather, the skilled addressee would have understood the claim to the invention of (+)-citalopram to refer to that compound as something that had an existence independent of that of the racemate.
His Honour’s reasoning included the following:
118 The only context that I take into account in arriving at this conclusion is that it was part of common general knowledge:
Ÿthat racemates contained in equal parts (+) and (–) enantiomers;
Ÿthat the enantiomers of a racemate were potentially separable, and it was a possibility that an enantiomer might have a stable existence as a compound distinct from being part of the racemate;
Ÿthat some racemates had in fact been resolved into their separate enantiomers; and
Ÿthat racemates were commonly represented by the symbol (±) to indicate the presence of both enantiomers.
119 It is not that the (+)-citalopram compound does not exist when it is part of the racemate. The skilled addressee would understand that it exists whether a part of the racemate or apart from it, and that the purpose of the (+) symbol is only to distinguish it from the (–)-enantiomer and from its being merely part of the racemate or of some other mixture. The (+) or (–) symbol, devoid of any context suggesting otherwise, implies distinctness from the racemate.
…
123 So, the unqualified reference to the (+)-enantiomer of citalopram in claim 1 refers to something different from that enantiomer as an indistinguishable part of the unresolved racemate.
Lindgren J noted the expert evidence relevant to construction at [128]–[140], which founded his Honour’s conclusion at [138] that “chemists at the priority date and now would understand the bare formula of claim 1 to require a compound that was at least 95% pure (+)-citalopram”. Otherwise, in reaching his conclusions as to the proper construction of claim 1, Lindgren J had regard to the body of the specification at [141]–[142]. After rejecting various submissions as to the relevance of other matters, Lindgren J said at [153]:
In summary, the reference in claim 1 to (+)-1-(3-dimethylaminopropyl)-1-(4’-fluorophenyl)-1,3-dihydroisobenzofuran-5-carbonitrile is a specific reference to the enantiomer of citalopram that rotates plane-polarised light to the right, and, there being no context suggesting a different possibility, is not apt to refer to the (+)-enantiomer merely as present in the racemate.
In FFC#1 Bennett and Middleton JJ were in the majority and Emmett J was in dissent.
Apotex argued that the decision of the majority about construction of claim 1, and that of Lindgren J, depended on expert evidence. Thus Apotex pointed to Bennett J’s observation in FFC#1 at [150] that the “[t]he primary judge was entitled to accept the evidence that the skilled addressee would read claim 1 as referring to the isolated (+)-enantiomer. In the context of the whole of the specification, this was in contrast to the (+)-enantiomer as present in the racemate or in a mixture with the (–)-enantiomer” and to what Middleton J said at [252]:
Claim 1 simply identifies the substance (+)-enantiomer. The construction I prefer does not involve reading into claim 1 a limitation of “independently existing” or “existing independently” of the racemate any more than it expands the context in which the (+)-enantiomer is to be found. The mere reference to (+)-enantiomer in claim 1 without more indicates that it is the separated or the isolated enantiomer that is claimed. In other words, it is implicit in the way claim 1 is worded, where the Patent is entitled “(+)-Enantiomer of Citalopram and process for the preparation thereof”, that the claim is only to the isolated or separated (+)-enantiomer.

I am not persuaded that the Lindgren J judgment or FFC#1, insofar as the issue of construction is concerned, depended on expert evidence. As Lindgren J’s reasons disclose, he relied on certain contextual matters at [118], but those matters were not in dispute on the evidence. He also had regard to the body of the specification. But his conclusion did not depend on resolving any contested issue of expert evidence. Nor should anything in the reasoning of Bennett or Middleton JJ in FFC#1 be understood as suggesting to the contrary.
To the extent [131]–[138] of Bennett J’s reasons were relied upon by Apotex, it is apparent that her Honour was recording common ground other than with respect to the 95% purity issue to which Lindgren J referred at [138].
Given this, I am not persuaded by Apotex’s submissions that the construction of claim 1 reached in FFC#1 depended on expert evidence, with the consequence that I am not bound by that construction. To the contrary, I consider Lundbeck to be correct that claim 1 has been conclusively construed in FFC#1 as Lindgren J proposed in [153] of the Lindgren J judgment. In reaching this conclusion Bennett J, having confirmed that Lindgren J was correct at [150], said this at [151]:
That is, claim 1 is to the separated or isolated or pure (+)-enantiomer.
These words “separated or isolated or pure” have taken on their own life in this matter but it is best to understand now that Bennett J was doing nothing more than affirming that Lindgren J’s conclusion at [153] was correct.
In FFC#3, to which Apotex and Sandoz were parties, the Full Court (Bennett, Nicholas and Yates JJ) had to revisit the issue of construction. FFC#3 involved an appeal against the Rares J judgment in which Rares J had dismissed the generic parties’ appeal against the Commissioner’s decision extending the term of the 144 patent until 9 December 2012. Rares J recorded the generic parties’ case on appeal at [6] of the Rares J judgment:
(1) the pharmaceutical substance per se disclosed in claim 1 of the patent was the pure, isolated or separated form of the molecule, being the (+)-enantiomer, for the purposes of s 70(2) of the Act, and that that pure form of the molecule was not included in the goods registered as “CIPRAMIL Citalopram hydrobromide 20mg tablet blister pack” on the ARTG with a start date of 9 December 1997 for the purposes of s 70(3). The Cipramil tablets were produced as an exploitation of the properties of the racemate (the per se issue);
(2) the requirement of s 70(4) of the Act, that the term of the patent had not previously been extended, could not be satisfied because the term of the patent in suit had been previously extended to 13 June 2014 by the delegate and that extension had been recorded in the Register of Patents on 17 June 2004, although, subsequently, on 19 June 2008, Lindgren J had ordered under s 192 of the Act that the Register be rectified by removing the extension of time, and the Full Court upheld that decision (the prior extension issue);
(3) the delegate erred because he exceeded his function of deciding the opposition under s 75(2) by also proceeding to grant the challenged extension of time under s 76(1)(b) of the Act, before this appeal had been determined (the erroneous grant issue).
Section 70 of the Patents Act, as referred to in these paragraphs provides that:
(1)The patentee of a standard patent may apply to the Commissioner for an extension of the term of the patent if the requirements set out in subsections (2), (3) and (4) are satisfied.
(2)Either or both of the following conditions must be satisfied:
(a)one or more pharmaceutical substances per se must in substance be disclosed in the complete specification of the patent and in substance fall within the scope of the claim or claims of that specification;
(b)one or more pharmaceutical substances when produced by a process that involves the use of recombinant DNA technology, must in substance be disclosed in the complete specification of the patent and in substance fall within the scope of the claim or claims of that specification.
(3)Both of the following conditions must be satisfied in relation to at least one of those pharmaceutical substances:
(a)goods containing, or consisting of, the substance must be included in the Australian Register of Therapeutic Goods;
(b)the period beginning on the date of the patent and ending on the first regulatory approval date for the substance must be at least 5 years.
(4)The term of the patent must not have been previously extended under this Part.
…
In FFC#3 the Full Court had to deal with the Lindgren J judgment and FFC#1 (referred to in FFC#3 as the Decision). After referring to claim 1 of the 144 patent, the Full Court in FFC#3 said at [15]:
In essence, in the Decision, the majority concluded that the claim was to the separated enantiomer and that the claim was not anticipated by the Cipramil Patent which described the racemate, as the racemate did not describe or disclose ‘the pure or isolated (+)-enantiomer’, nor was there anything to tell the skilled addressee to resolve the racemate into the two enantiomers, or how to do so. The majority also concluded that the racemate “contained” the (+)-enantiomer for the purposes of s 70(3)(a) of the Act.
The Full Court also referred in [18] to “some relevant aspects of the background chemistry which are not in dispute”, in these terms:
Ÿ(+)-citalopram is the (+)-enantiomer of citalopram;
Ÿ(+)-citalopram is also known as (S)-citalopram or escitalopram;
ŸCitalopram is a racemic mixture that contains equal amounts of the (+) and (–) enantiomers of citalopram;
ŸCitalopram and escitalopram are different chemical entities with different physical properties and different pharmacological activities.
The undisputed nature of this evidence is confirmed by the following statement of the Full Court at [19]:
The background chemistry has been described in some detail in the Decision and does not need to be repeated.
This accords with my conclusion above that, insofar as expert evidence was relevant to claim 1, it was evidence that was not in dispute in FFC#1.
The Full Court also rejected the arguments of the generic parties (repeated here by Apotex) about the reasoning in FFC#1. To understand this aspect of the matter, it is necessary to record the submissions which were rejected in FFC#3. The Full Court recorded the following:
47 Alphapharm accepts that the (+)-enantiomer is a pharmaceutical substance. The essence of its argument is that in the Decision, the subject matter of the claim was construed as the separated, isolated or pure enantiomer, which introduces a further criterion or limitation such that the claim is no longer a claim to the enantiomer per se. This is because the requirement that it be the substance per se means that there must be no further criterion (News Limited v South Sydney District Rugby League Football Club Limited (2003) 215 CLR 563 at [56]). Of course, it says, Cipramil cannot “contain” the separated molecule, the molecule free of the racemate, so it follows that what is contained in Cipramil is not the subject matter of the claim. Putting Alphapharm’s submissions another way, for the pharmaceutical substance per se the subject of the claim to comply with the requirements of s 70(2)(a) of the Act, it would be the isolated enantiomer and there are no goods included in the ARTG containing the pharmaceutical substance as required by s 70(3)(a) because the racemate contains the (+)-enantiomer and the (-)-enantiomer together.
48 Accordingly, Alphapharm submits, Lundbeck is not entitled to an extension of term of the Patent.
49 Alphapharm does not challenge the construction of the claim as adopted by the majority in the Decision. It says that the construction of the claim means that s 70(2)(a) is not satisfied. It points to the conclusion in the Decision that the racemate did not anticipate the separated enantiomer because it did not describe or disclose the separated or isolated or pure enantiomer and says that this means that it could not contain that enantiomer.
50 The issue, as distilled in this appeal, is whether the Decision demonstrates that the claim was held to include the criterion that the (+)-enantiomer was isolated or pure, either as an additional integer or by way of limitation. If so, Alphapharm contends, the claim is not to the molecule or to the compound. If it were, it says, the Lundbeck Full Court would have found, as did Emmett J who characterised the claim as a claim to the molecule, that it was anticipated by the Cipramil Patent which claimed the racemate.
The Full Court rejected these submissions including in the following paragraphs:
72 At [151], Bennett J said: ‘[t]hat is, [the claim] is to the separated or isolated or pure (+)-enantiomer’. It is apparent that, in context, her Honour was not considering levels of purity, as is made clear from the Decision at [157] to [160]. At [157] Bennett J expressly rejected the suggestion that the claim imported a limitation of purity. In that context her Honour drew a distinction between a limitation of purity and an ‘isolated, separated enantiomer, not in a mixture or in a racemate’.
73 It is quite clear that those words “isolated” and “pure” were not intended to add a further qualification or limitation to the claim. Rather, they imported the concept of “separate”, as is evident from [149] where her Honour said:
The invention is also said to be concerned with a method to resolve the racemate into the individual isomers. While the specification refers to the enantiomers, in the plural, it is in the context of their separate identity.
74 Her Honour then referred to the evidence that the skilled addressee would read the claim as referring to the isolated (+)-enantiomer, in contrast to the (+)-enantiomer as present in the racemate or in a mixture with the (–)-enantiomer. Clearly, in context, the word “isolated” referred to a resolution of the racemate into the separate enantiomers…
75 Turning to the alleged anticipation by the racemate disclosed and claimed in the Cipramil Patent, Bennett J said (at [194]) that while the skilled addressee knew that the racemate could be resolved into enantiomers, there was nothing to tell him or her to do so. Her Honour also noted that the Cipramil Patent was silent as to the means of obtaining the enantiomers. That is, Bennett J drew a distinction between the enantiomers unseparated or unresolved in the racemate and separated to yield the (+)-enantiomer of the claim. Justice Bennett took the view that the question that must be asked is whether Cipramil contained the same pharmaceutical substance per se disclosed and claimed in the Patent, namely the (+)-enantiomer.
76 Justice Bennett agreed with Lindgren J that the racemate was a good that contained the pharmaceutical substance (+)-citalopram. This reasoning constituted acceptance of (+)-citalopram as a pharmaceutical substance per se.
…
78 The construction of the claim, as understood by the skilled reader, does not import a limitation of purity. This is also made clear in the reasons of Middleton J. His Honour agreed with the reasons of Bennett J and dealt specifically with the submission that Lindgren J had impermissibly added integers that are not found in the claim. His Honour said at [252] that the claim ‘simply identifies the substance (+)-enantiomer’.
79 This construction did not involve reading into the claim a limitation of “independently existing” or “existing independently” of the racemate any more than it expands the context in which the (+)-enantiomer is to be found. Any reference to the (+)-enantiomer in the claim indicates that it is the separated or isolated enantiomer that is claimed. In other words, it is implicit in the way that the claim is worded, where the Patent is entitled ‘(+)-enantiomer of citalopram and processes for the preparation thereof’, that the claim is only to the isolated or separated (+)-enantiomer.
80 Accordingly, on the construction of the claim determined in the Decision, there is no further limitation imported into that claim. That was the clear conclusion of Bennett and Middleton JJ in the Decision. It is also consistent with their Honour’s reasoning and conclusion as to s 70 of the Act and as to whether citalopram, the racemate, contained the pharmaceutical substance per se, being the (+)-enantiomer or escitalopram disclosed and claimed in the Patent.
Turning to the submissions in FFC#3 the Full Court said this:
82 Alphapharm submits that, because of the evidence accepted by Lindgren J that a skilled person looking at the structure of citalopram would have recognised the presence of two enantiomers and would have been able to depict them, a claim to the enantiomer per se would necessarily have been invalid. Alphapharm then submits that in order to find that the (+)-enantiomer citalopram was novel, Lindgren J and Bennett and Middleton JJ construed the claim as being not to the enantiomer itself but rather to the enantiomer further defined or limited by the requirement that it be separated or isolated or pure. This ignores the wording of the claim, which does not import, in terms, the limitation that it be “isolated” (cf D’Arcy v Myriad Genetics Inc (2014) 313 ALR 627 at [1]).
83 It also ignores the reasoning of each of Lindgren J, Bennett and Middleton JJ in concluding that the racemate did not anticipate the (+)-enantiomer. This was not because the claim should be read as being to the isolated enantiomer but, as explained in the Decision at [193]–[195], the disclosure of the racemate was not a disclosure to the skilled addressee of the (+)-enantiomer. As explained at [193], the skilled addressee would have understood that (±)-citalopram (the racemate) consisted of the (+)-enantiomer and the (-)-enantiomer and would have been able to identify the formulae for the enantiomers but would not have known in the absence of experimentation which was the (+)-enantiomer and which was the (-)-enantiomer. That is, there was no prior disclosure of the enantiomer independently existing. As Bennett J explained at [194], the skilled addressee knew that the racemate could be resolved into the enantiomers but there was nothing to tell him or her to do so. It could not even be said that there were clear and unmistakable directions to obtaining the enantiomers. Accordingly, it does not follow that a claim to the enantiomer per se would necessarily have been invalid.
…
88 Alphapharm also contends that Lundbeck had submitted in the Lundbeck Full Court that the requirement of ‘separated or isolated or pure’ was part of the text of the claim perceived by reading ‘the (+) symbol’. It relies upon the fact that this submission was accepted by Lindgren J at [119] and [123] and on the emphasis on the (+) symbol in Bennett J’s reasons. However, again, Alphapharm ignores Bennett J’s reasoning generally and specifically in rejecting a limitation as to purity (at [157]). Similarly, Middleton J stated that he was not reading into the claim a limitation of “independently existing” (at [252]). However, Alphapharm submits that this is because Lindgren J and Bennett and Middleton JJ considered that the integer or limitation did not need to be read into the claim as it was already part of the claim. Alphapharm also submits that separation, isolation and purification each refers to a process so that the claim is not to the enantiomer in itself, which it repeats would not have been novel, but only to the enantiomer when separated or isolated or purified.
…
91 In seeking to describe the difference between the racemate containing the two enantiomers and the claim to one of the enantiomers, Bennett and Middleton JJ used expressions such as “pure”, “isolated” and “separated”, the same language used by Lindgren J. Another way of describing the subject matter of the claim was ‘specific reference to the (+)-enantiomer, distinct from the (-)-enantiomer and not as present in the racemate mixture’ (the Decision at [131]). In seeking to differentiate between the racemate and the (+)-enantiomer, the word “itself” could just as easily have been used and would have carried the same meaning in context.
92 Justices Bennett and Middleton did not read into the claim an additional integer, nor did they add something to the words of the claim. Their reasoning was that the claim is to the (+)-enantiomer and nothing else. The term “pharmaceutical substance per se” simply means the pharmaceutical substance “in itself”. In Boehringer, Heerey J observed that per se meant ‘by or in itself’ ‘intrinsically’ or ‘essentially’ (at [7]). The Full Court approved that approach on appeal (at [37]).
93 Semantics aside, it is clear that the claim describes a pharmaceutical substance per se. The substance was, as explained by Lindgren J at [536], a new chemical entity. The racemate and the (+)-enantiomer had different physico-chemical interactions manifested in different pharmacodynamics and pharmacokinetics (the Decision at [234]). The claim is to (+)-citalopram, irrespective of how it is produced. The isolated (+)-enantiomer plainly qualifies as a pharmaceutical substance per se and the primary Judge was correct in concluding that it satisfies s 70(2)(a) of the Act.
94 As pointed out by Lundbeck, Alphapharm’s submission that Bennett and Middleton JJ construed the claim to include an additional integer or a limitation, such that the claim was no longer to the (+)-enantiomer as a pharmaceutical substance per se, is wholly inconsistent with their Honours’ conclusion that the subject matter of the claim satisfied s 70(2)(a) of the Act, such that Lundbeck was entitled to an extension of term based upon Cipramil but not on Lexapro.
…
96 It is clear from the Decision that the expressions such as “separated or isolated or pure” did not import any concept of degree of purity. Quite clearly, Bennett J used the expression as a hendiadys, to explain that the (+)-enantiomer alone was claimed – without the (-)-enantiomer or the racemate. That is, it was the enantiomer itself. Put another way, it was the enantiomer per se.
In short, I agree with Lundbeck that Apotex and Sandoz, as parties to FFC#3, are subject to an issue estoppel with respect to the proper construction of claim 1 of the 144 patent. Apotex (and thus Sandoz) is not at liberty to argue, as they did, that claim 1 should be construed as Emmett J, in dissent proposed, in FFC#1. The construction of claim 1 in accordance with FFC#1 and FFC#3 was an essential or indispensable step leading to the dismissal of the appeal in FFC#3. The construction was not based on disputed expert evidence but uncontentious common ground between the parties as to the background science and the terms of the claim construed in the context of the specification as a whole.
Even if these conclusions were incorrect, Apotex’s argument that the evidence is different in the present case is unpersuasive. In short, Apotex relies on the evidence of the experts whom Lundbeck called, Professor Stephen Davies and Dr Alan Robertson, about infringement of the 144 patent to support its case. As Apotex argued, Professor Davies and Dr Robertson, in their evidence as to infringement, looked at the relevant information to identify the mere presence of the (+)-enantiomer. According to Apotex, this is “powerful evidence” that the construction of claim 1 in the Lindgren J judgment, FFC#1 and FFC##3 is wrong and that, rather, claim 1 claims the molecule, the (+)-enantiomer whether or not that molecule is in a mixture, racemic or otherwise, and irrespective of the degree of purity of the mixture.
I do not accept these submissions. Their evidence, taken as a whole, is inconsistent with these propositions. It was not put to Professor Davies or Dr Robertson during the course of these proceedings that the evidence they gave about infringement was inconsistent with the evidence they gave to the effect that they understood claim 1 to mean the (+)-enantiomer separate from the racemic mixture. The only difference between their evidence, and the approach in FFC#3 was that, in common with Lindgren J, they remained of the view that claim 1 would be read by the person skilled in the art as permitting chiral impurity provided that 95% purity was achieved. Bennett J (and thus Middleton J) rejected this in FFC#1 at [154]–[160]. In so doing, however, their Honours did not suggest that 100% chiral purity was required.

Apotex’s arguments to the contrary are not persuasive. As Lundbeck submitted, it was common ground that it is not possible to separate a racemic mixture into 100% pure (+)-enantiomer and (−)-enantiomer. This fact did not mean that Professor Davies and Dr Robertson accepted that claim 1 claimed the molecule, the (+)-enantiomer whether or not it exists in a mixture. Their evidence was to the opposite effect, that claim 1 refers to the separate enantiomer which will not be 100% pure because 100% separation cannot be achieved. When dealing with the issue of infringement, to the contrary of Apotex’s submission, their evidence is not to be understood as focusing on the mere presence of the (+)-enantiomer in the alleged infringing products. Their focus was the presence of the separated (+)-enantiomer which, as the evidence disclosed, was the active ingredient in the respondent’s allegedly infringing products to a very high level of purity. Indeed, the evidence was that it would be near impossible to achieve chiral impurity of the kind posited by Apotex (6% (−)-enantiomer) without simply adding back the requisite amount of the racemic mixture. As Dr Robertson said, to separate the (+)-enantiomer to the high level of purity possible (over 99%) then to add back in the racemate to achieve a lower level of purity would be perverse. Yet Apotex’s approach to construction depends on this kind of reading of the 144 patent, as well as FFC#1 and FFC#3 (despite, it must be said, FFC#3 containing a clear and cogent explanation of how FFC#1 cannot be understood as was proposed in that case and as Apotex proposes again in the present case).
Apotex’s contrary submissions relied on propositions which, in the circumstances had to be, but were not put to Professor Davies or Dr Robertson or otherwise focus on aspects of their evidence taken out of context. For this reason the fact that Dr Robertson did not give evidence before Lindgren J is immaterial. His evidence, understood fairly and in context, did not support Apotex’s molecule construction. The submission unfairly confuses Dr Robertson’s evidence identifying the (+)-enantiomer as the “particular molecule” with Apotex’s case that claim 1 means the (+)-enantiomer whether or not in a mixture. It is plain that Dr Robertson did not accept any such suggestion and that he understood claim 1 to mean the separated (+)-enantiomer (albeit that it could never be 100% pure) and not the (+)-enantiomer within a racemic mixture. Nothing Dr Robertson said in the joint report supports the contrary proposition put by Apotex.
Nor was there any material difference between the evidence given by Professor Davies before Lindgren J and in the present case. He too remained of the view that claim 1 had nothing to do with the (+)-enantiomer in the racemic mixture. He cannot be fairly criticised for taking into account the Full Court’s rejection of his view that claim 1 would be understood as involving a purity of at least 95% in FFC#1. It became apparent that Professor Davies’ view remained that a skilled addressee would understand claim 1 as involving the separated (+)-enantiomer to at least 95% purity.
It is unnecessary to address the evidence of Dr Richard Oppenheim on these matters in detail. Dr Oppenheim agreed that the (+)-enantiomer could not be separated from the racemate to achieve 100% pure (+)-enantiomer. He, wrongly, believed that FFC#1 required claim 1 to be understood as requiring 100% purity, relying on Bennett J’s reference to “separated or isolated or pure”. This belief is not supported by a reasonable reading of FFC#1 and, on no view, can survive the reasoning in FFC#3 which rejected this very proposition.
Leaving aside all these matters, Apotex did not confront the fact that the same construction issue has been the subject of extensive consideration in the Lindgren J judgment, FFC#1 and FFC #3. The argument that claim 1 means the molecule, the (+)-enantiomer whether or not it exists within the racemic mixture has been repeatedly rejected. The further argument (which Sandoz adopted) that, assuming this to be so, claim 1 means the (+)-enantiomer in a form which is 100% pure was also comprehensively rejected in FFC#3 and, in any event, was not open on a fair reading of FFC#1. Given this, why a different approach should be taken in the present matter is not apparent. The submission that the previous decisions relied on expert evidence which is different in the present case, as noted, is without real substance. Ultimately, Apotex (and thus Sandoz) gave no cogent reason to support its case on construction but merely ran the same arguments which have bene repeatedly rejected in the previous decisions.
Once this is recognised, Apotex’s other arguments, based on the specification as filed and as amended, provide no support to its case. The point Apotex attempted to make, that where the specification intends to refer to purity it does so expressly, involves a premise about claim 1 which has been repeatedly rejected, that it is concerned with purity in distinction from the separated (+)-enantiomer.
For these reasons Apotex’s molecule construction must be rejected. However, the rejection of this construction does not mean that claim 1 claims 100% pure separated (+)-enantiomer (as Sandoz would have it). It claims simply the separated (+)-enantiomer.
Apotex (and thus Sandoz) claimed that there is a fundamental contradiction between the fact that the term of the 144 patent was extended (which required the conclusion that Cipramil contained the substance, under s 70(3)(a) of the Patents Act) and the Full Court’s construction of claim 1 in FFC#1 and FFC#3 that “reads ‘(+)-citalopram’ as defining something that is ‘separated, isolated or pure’ and ‘not in a racemate or mixture’ with (–)-citalopram”. Leaving aside the fact that these submissions depended on giving a meaning to “separated, isolated or pure” in the Full Court decisions which they do not bear, the purpose of this submission is not apparent. To the extent it is intended to support the proposition that the Full Court’s construction of claim 1 is wrong, I do not see the contradiction. The fact that Cipramil contains the (+)-enantiomer within the meaning of s 70(3)(a) is a judicially determined fact, not now open to question. It is a fact, moreover, which accords with the evidence in the present case. While Professor Davies’ evidence about the nature of the racemic mixture included concepts that I can best describe as involving an appreciation of chemical ontology far beyond that which would be attributed to the skilled addressee, nothing he said (or could have said), undermines the unassailable conclusion that founded the grant of the extension of term of the 144 patent. The construction of claim 1 which has prevailed in all previous cases, and which I also accept, is not inconsistent with this conclusion. The asserted inconsistency is a construct of Apotex’s making, which pre-supposes both the correctness of its molecule construction and that the claimed (+)-enantiomer carries with it the concept of purity when it does not. All that has ever been said by previous cases, of current relevance, is that it is inherent within the very concept of the (+)-enantiomer that it is separated. This has never carried the freight which Apotex sought to attach to it.
3.3 Clarity
Apotex proposed that if claim 1 is construed as the Full Court in FFC#1 and FFC#3 would have it, and without any limitation as to purity, then the claim must fail for lack of clarity because the boundaries of claim 1 cannot be ascertained. It cannot be known what level of purity would infringe claim 1 because there is no apparent standard by which the claim can be interpreted. The 95% purity standard which Professor Davies proposed, and which Lindgren J accepted, was rejected in FFC#1 at [157]–[160] and is not advanced by Lundbeck in the present case. In any event, whether the proposed 95% purity is chemical, enantiomeric, optical or isomeric is unknown as Bennett J noted at [127] of FFC#1.
Sandoz, I note, did not adopt this aspect of Apotex’s argument or, at the least, did not do so for the purpose of asserting that claims 1 and 3 of the 144 patent are invalid. To ensure that my reasoning for rejecting Sandoz’s construction argument is properly exposed I deal with the clarity issues which Apotex raised below.
According to Apotex Bennett J’s observation in FFC#1 at [159] was prophetic. Bennett J said:
The construction contended for by Lundbeck also raises questions of clarity and uncertainty of infringement.
Her Honour was not referring to her preferred construction, however. She was referring to Lundbeck’s then proposed construction that involved a limitation on the level of purity of 95%. Bennett J (and Middleton J) rejected this limitation because the claim was to the separated enantiomer, the specification referred not to 95% enantiomeric purity (Lundbeck’s then case), but 99.6% and 99.9% optical purity having been achieved in Example 1. Her Honour was not saying that her own preferred construction involved a lack of clarity. Nor was she saying that the claim meant the separated (+)-enantiomer at 100% purity of any kind.
Apotex said that this was not a mere puzzle at the edge of a claim, as referred to in General Tire & Rubber Co v Firestone Tyre and Rubber Co [1972] RPC 457 at 515. The skilled addressee, in the present case, cannot determine where the edge lies but, for the claim to be clear, the skilled addressee must know how much (−)-enantiomer would be too much and infringe the claim.
Contrary to these submissions, I am persuaded that this is precisely the kind of matter to which the observations in General Tire at 515–516 apply. It was there said that:
It is clear in our judgment that the question whether the patentee has sufficiently defined the scope of his claims is to be considered in relation to the facts of each case, that allowance is to be made for any difficulties to which the circumstances give rise, and that all that is required of the patentee is to give as clear a definition as the subject matter admits of. It is also clear in our judgment that, while the court is to have regard to all the relevant facts, the issue of definition is to be considered as a practical matter and little weight is to be given to puzzles set out at the edge of the claim which would not as a practical matter cause difficulty to a manufacturer wishing to satisfy himself that he is not infringing the patent. We accept also that definition of the scope of a claim is not necessarily insufficient because cases may arise in which it is difficult to decide whether there has been infringement or not provided the question can be formulated which the court has to answer in the issue of infringement.
As Lundbeck also noted, in Populin v HB Nominees Pty Ltd [1982] FCA 37; (1982) 41 ALR 471 at 476, the Full Court (Bowen CJ, Deane and Ellicott JJ) said this:
The essential features of the product or process for which it claims a monopoly are to be determined not as a matter of abstract uninformed construction but by a common sense assessment of what the words used convey in the context of then-existing published knowledge.
Approaching the present case as a practical matter, it must be accepted that it was common ground for those skilled in this area of stereochemical synthesis that 100% purity of any kind was not achievable. None of the experts suggested that they did not know that the (+)-enantiomer meant the separated (+)-enantiomer. Professor Davies and Dr Robertson explained that in order to obtain the (+)-enantiomer at some level of purity less than the very high levels disclosed in both the specification and, for that matter, the generic parties’ own batch analyses of their products, it would be necessary to add back in the racemic mixture. The commercial or practical purpose of such an exercise is not apparent. As noted, Dr Robertson described this as perverse, as it is.
Approached from a common sense perspective, in light of the knowledge which would be attributed to the skilled addressee of the 144 patent, the claim is clear. It is a claim to the separated (+)-enantiomer. As such, the racemic mixture, citalopram, falls outside the scope of the claim. As the skilled addressee would know the separated (+)-enantiomer cannot exist in a form that is 100% pure. There will always be trace, trivial or insignificant amounts of the (−)-enantiomer present. It does not matter what descriptor is used. The fact is that, to the person skilled in the art, the presence of insignificant amounts of the (−)-enantiomer is immaterial. Neither Professor Davies nor Dr Robertson (nor, for that matter, Dr Oppenheim once he put to one side what he incorrectly understood FFC#1 to mean) had any difficulty in identifying the separated (+)-enantiomer. They did not need to be instructed about any specific percentage tolerance to know when they were dealing with the (+)-enantiomer in contrast to the racemate.
Apotex’s attempt to blur the boundaries of the claim by referring to Professor Davies’ evidence about 95% purity is unsustainable. The fact that Professor Davies would read the claim as permitting up to 5% enantiomeric impurity (a proposition with which Dr Robertson agreed in oral evidence) does not render the claim unclear. This qualification was rightly rejected in FFC#1. Further, it was clear from the evidence of Professor Davies and Dr Robertson as a whole that they did not consider any specific percentage qualification was essential in order to understand the claim. They addressed the issue because they had been instructed to do so as a result of the dispute between the parties about what “separated, isolated or pure”, as used in FFC#1, meant. This question, of what the majority in FFC#1 meant by this reference, was nothing more than a distraction. As discussed, it is apparent from FFC#1 that the majority were not saying that the (+)-enantiomer had to be 100% pure. But nor were they saying that, as a result, the (+)-enantiomer as claimed was the same as the racemate. Nor were they saying that claim 1, as construed in FFC#1, was or would be unclear.
Once this is accepted, it is apparent that Apotex’s (and thus Sandoz’s) recourse to various percentages of (−)-enantiomer, such as 96%, 95% or 94%, involves the creation of a hypothetical construct divorced from the reality of the relevant science. The skilled addressee would not have any difficulty in knowing when the claim was infringed. If the act involves the (+)-enantiomer, the acts are within the monopoly claimed.
3.4 Novelty
Again, Sandoz did not claim that the 144 patent was invalid for lack of novelty, but explaining Apotex’s arguments and why I reject them may assist in understanding why I also reject Sandoz’s construction and non-infringement arguments.
Apotex’s novelty case may be shortly stated. Its principal case was that if its molecule construction is accepted, there is no question that claim 1 (and dependent claims) of the 144 patent will lack novelty because of the 445 or Citalopram patent. Its alternative case was that if the claimed invention in claim 1 of the 144 patent is merely the separated (+)-enantiomer then the 445 patent, nevertheless, deprives the claimed invention in claim 1 of the 144 patent of novelty.
Apotex submitted that the fact that the 445 patent does not refer to citalopram as having two enantiomers, the (+)-enantiomer and the (−)-enantiomer is irrelevant. The 445 patent disclosed the structural formula of citalopram which, to the skilled addressee, also disclosed that it was a racemic mixture consisting of equal amounts of the (+)-enantiomer and the (−)-enantiomer. The only matter not disclosed in the 445 patent, submitted Apotex, is the method of separating the two enantiomers, which is disclosed in and the subject of claim 6 of the 144 patent.
According to Apotex:
(1)“[w]ith respect to Lindgren J, and the majority in the 2009 Full Court, it is an error to ask whether the prior art contains a direction to the skilled addressee to resolve a racemate into enantiomers, or discloses a means of doing so…”; and
(2)“[t]he acceptance by Lindgren J (at [171]) and Bennett J (FFC #1 at [193]), that ‘the skilled but non-inventive addressee would have understood that [racemic] (±)-citalopram consisted of the (+)-enantiomer and the (–)-enantiomer…’ concludes the inquiry as to the novelty of claim 1, if Apotex’s … submissions on construction are accepted”.
Lundbeck’s answer to Apotex’s novelty challenge involves three aspects.
One, the issue of novelty was decided in the Lindgren J judgment and FFC#1, and there is no reason to depart from the conclusions there reached. The novelty challenge before Lindgren J was the same as that put by Apotex in these proceedings. It failed before Lindgren J and on appeal. Nothing has changed and the reasoning therein should be followed.
Two, in any event, Apotex is estopped from challenging the novelty of the 144 patent because it was a party to FFC#3 and the proper construction of claim 1 of the 144 patent, on which Apotex’s novelty challenge depends, was an essential aspect of the reasoning in FFC#3 on which the judgment depends.
Three, the evidence in the present case means that it is not open to conclude that claim 1 of the 144 patent is invalid because the claimed invention was not novel.
Lundbeck’s second proposition may be rejected immediately. Apotex’s novelty challenge does not depend on its molecule construction being accepted. Apotex also contends that, on the construction which has prevailed thus far and which I also accept, the 445 patent destroys the novelty of the invention claimed in claim 1 (and dependent claim 3) of the 144 patent. Accordingly, there is no relevant issue estoppel which arises from FFC#3.
Lundbeck’s first and third propositions, however, are persuasive and I accept them. I do not accept that Lindgren J and the majority in FFC#1 erred in rejecting the challenge to the novelty of the invention claimed in claim 1 of the 144 patent. Apotex’s arguments are the same as those Lindgren J rejected at [169]–[171] of the Lindgren J judgment. As Lindgren J said at [171]:
The Australian Citalopram Patent did not refer to “enantiomers”. It did not expressly or by implication otherwise disclose the individual enantiomers. It disclosed the racemate and enabled the obtaining of it. Whether this anticipated the present invention turns on my construction of the Patent – see Section C above. The skilled but non-inventive addressee reading the Australian Citalopram Patent would have understood that (±)-citalopram consisted of the (+)-enantiomer of citalopram and the (-)-enantiomer, each as to 50%, and would have been able to identify the formulae for the S and R enantiomers, but would not have known, in the absence of experimentation, which was (+) and which was (-). These facts would not, however, point specifically to the independent existence of the enantiomers which is, according to my construction of the Patent specification, of the essence of claim 1. If I had construed claim 1 as referring to (+)-citalopram when present in the unresolved racemate, the Australian Citalopram Patent would have been an anticipation. But because of my construction outlined at Section C above, a person taught by the Australian Citalopram Patent, although taught to desire to obtain the racemate, would not be taught to desire to obtain the specific (+)-enantiomer in its own right.
In FFC#1 Bennett J, with whom Middleton J agreed, said this:
193 The prior citalopram patent described the racemate. It did not describe the pure or isolated (+)-enantiomer. There is no anticipation unless the disclosure of the racemate was, to the skilled addressee, a disclosure of the (+)-enantiomer. As the primary judge pointed out at [171], the skilled but non-inventive addressee would have understood that (±)-citalopram consisted of the (+)-enantiomer and the (–)-enantiomer and would have been able to identify the formulae for the S and R enantiomers but would not have known in the absence of experimentation which was the (+)-enantiomer and which the (–)-enantiomer. As his Honour said, these facts would not point specifically to the independent existence of the enantiomers. They did not disclose an invention which, if performed, would necessarily infringe the Patent.
194 It is the case that the skilled addressee knew that the racemate could be resolved into the enantiomers but there was nothing to tell him or her to do so. Further, the prior citalopram patent was silent as to the means of obtaining the enantiomers and there were different methods available to try to do so. There were no clear and unmistakable directions to obtain the enantiomers. Some of the available methodology may have been successful, other methods may not.
195 The prior citalopram patent does not render claim 1 of the Patent not novel. It follows that it does not render claims 2, 3, 4 and 5 not novel.

Mr Murray also gave evidence that after the launch of the generic escitalopram products in June 2009 sales of Esipram fell sharply. However, overall sales of escitalopram products continued the trend of consistent growth from 2005 to 2013.
Sandoz did not cross-examine Mr Murray. It did not put to Mr Murray any of the concerns Mr Samuel expressed about the reliability of the budget.
21.4 Discussion
I find Mr Stone’s overall approach to the issue of overheads persuasive.
In particular, I do not consider Mr Samuel’s rejection of the 2009/2010 budget as a starting point for the required analysis to be sound. Mr Stone recognised that the budget represented a contemporaneous document, produced by the entity best placed to know its own business, assuming that the generic escitalopram products did not enter the market in June 2009. This reflects the foundational requirement of the hypothetical analysis which must be carried out in the present case to determine what loss Lundbeck has sustained by reason of Sandoz’s infringement of the 144 patent. Mr Stone’s approach also recognised that as he and Mr Samuel were engaged in a process of estimation there was no sound reason to infer that his starting point for the process would be more reliable than that of Mr Murray who was the person within Lundbeck AU responsible for the preparation of the budget, a document on which Lundbeck AU had been willing to rely for its own commercial purposes. Indeed, to the contrary, Mr Stone appreciated the fact that the budget was a contemporaneous document created for a serious commercial purpose by a person who, given his qualifications, experience, role and responsibilities, meant that the budget would be the best evidence for the start of his hypothetical analysis. I consider that Mr Samuel’s approach, to disregard the budget altogether because of variances between budgeted expenditure and actual expenditure in the most recent year, was unreasonable in the circumstances.
As Lundbeck submitted:
It was open to Sandoz to challenge Mr Murray as to the process by which the budget was prepared and the robustness of the forecasts it contains. Sandoz elected not to cross-examine Mr Murray at all, let alone about these matters. Further, the variances which are evident in a comparison of the 2007 and 2008 budgets are modest, and suggest (as Mr Stone stated) that Lundbeck AU’s budgeting is reliable. Mr Samuel agreed in cross examination that he assumed that the preparation of the budget took account of prior year variations. As submitted above, the contemporaneous budget assessments are a peculiarly valuable piece of evidence for the Court. Mr Samuel’s attempt to discredit the estimates included what he regarded as unsatisfactory responses to requests for documents underlying the budget. But the nature of the requests must be examined. A current absence of working documents in 2017-2018 in relation to a budget estimate created in 2009 is hardly surprising. Estimates by their nature have their embodiment in a final document. There is no logical reason for working documents or drafts or calculations to be kept. The documentary requests make the failure to ask Mr Murray any questions about the budget estimates even more telling. Further, during his oral evidence, it became clear that Mr Samuel’s reservations about the budget were not based on any knowledge of defects in the way it was prepared. Rather, his concerns are based on the possibility that the budget was not prepared in a rigorous and careful manner. Such general and uncertain concerns are insufficient to cause the Court not to accept a contemporaneous budget as reliable. Further, Mr Samuel acknowledged that the budget set out the expenditure that Lundbeck AU intended to incur (exercising its knowledge of the market and its commercial judgment as to the appropriate level of expenditure) during the relevant period.
I have other concerns about Mr Samuel’s approach to overheads which lead me to the view that his calculations are far more likely to over-estimate expenses than Mr Stone’s calculations are to under-estimate expenses.
First, I do not accept his “structural change to the business” position. Escitalopram products were always the vast majority of the business. There had been steady growth in that business since 2005. Lundbeck AU (and its subsidiary CNS Pharma) had managed this annual growth organically without any “structural change”. Until the decision of the Full Court against Lundbeck the companies anticipated continued organic growth. The fact that the entry of generic escitalopram products into the market in June 2009 had such a large impact on sales of Esipram in particular (so that, but for generic entry, there would have been many more sales) does not mean that in the hypothetical analysis it should be assumed that the business would have experienced a structural change. Accordingly, the justification for the “top down” approach which Mr Samuel used does not exist.
Second, I do not accept that it was reasonable to base the kind of increases in overheads which Mr Samuel’s calculations yielded on the variances between 2007 and 2008. As Mr Stone noted, there had been a decrease between budgeted expenses and actual expenses between 2005 and 2006 which Mr Samuel disregarded. Rather, Mr Samuel had “taken one of the highest Variable Overhead Costs per incremental unit over the three years for which he compares the increase in actual units to the ‘increase in actual overheads’”. Further, the sheer magnitude of the increases in overheads posited by Mr Samuel indicates that a more cautious approach was required than his “top down” approach.
Third, the fact that there are so many costs in Mr Samuel’s approach which have been inflated but which, on any reasonable view, would not be variable costs affected by an increase in sales also indicates that his calculations are likely to be unreliable. His defence of his approach, that some costs will be an over-estimate and some an under-estimate, so “cherry picking” is a pointless exercise, was not persuasive. In particular, his approach of including the large one-off cost that was defrayed by Lundbeck A/S for a study, in my view, appears unreasonable.
Fourth, Mr Samuel’s approach to promotional costs did not appear to appreciate the fact that the sales of escitalopram had been consistently increasing over years with a decrease in promotional costs, or that the only promotion possible of the sale of the products themselves is by persuading doctors that the product should be prescribed to patients. As Lundbeck submitted:
Furthermore, there was ample evidence that promotional expenditure by Lundbeck was not a variable cost required to produce the hypothetical escitalopram sales which would have been achieved in the Initial and Springboard Periods. The hypothetical sales are the sales in fact made by the generics generally and for present relevant purposes, Sandoz in particular. The overall market for escitalopram continued to increase after 2009 notwithstanding the fact that in 2009, after the generic launches, Lundbeck AU reduced its promotional activities and laid off promotional and marketing staff. Yet despite that, sales of escitalopram overall continued to increase. That also reflects the evidence of Mr Turner to the effect that Sandoz estimated in June 2009 that the total escitalopram market was growing in size in terms of units sold which evidence was not stated to be dependent on promotional activity by Lundbeck. Similarly, Mr Murray’s unchallenged evidence is that the growth in the escitalopram market was stable before June 2009 and, with the benefit of hindsight, Mr Murray has identified that the forecasted trend was accurate. The projected costs, including promotional expenditure, were set with regard to that forecast. Both Mr Murray’s and Mr Turner’s projections followed market trends. Mr Samuel’s oral evidence was that he did not consider the forecasted sales in the budget. Hence, Mr Samuel’s untutored assumption that increased promotion by Lundbeck would have been required to generate the hypothetical sales of escitalopram is contradicted by not only the budget estimates, but also the objective evidence and Sandoz own assessment. It is to be noted that the generics do not promote escitalopram to doctors. In other words…the infringing sales were not generated by promotional work of the generics in persuading doctors to write prescriptions. The sales were a function of medical perception of the utility of escitalopram in the treatment of depression, no doubt enhanced by prior promotional work of Lundbeck. The cross examination of Mr Stone to the effect that keeping promotional costs at a fixed level was unrealistic proceeded in apparent oblivion to the objective evidence referred to above and Sandoz’ own corporate evidence on the subject.
I also accept Lundbeck’s submission to this effect about promotional costs:
Moreover, the Budget demonstrates that Lundbeck was not planning any promotional expenditure on Esipram. That is reflected in the fact that the fuller form of the budget which shows prior year expenditure demonstrates that Lundbeck did not spend any money promoting Esipram. This is understandable because Esipram was sold by Lundbeck at a lower price and it made more money from Lexapro sales. Despite the lack of promotion of Esipram, were continuing to increase as observed by Mr Turner and had the majority market share in 2009. Lundbeck does not claim any lost sales of Lexapro. The only lost sales were those of Esipram. The objective evidence is that not a single dollar of additional promotional expenditure was required to generate the hypothetical sales of Esipram. None would have been spent by Lundbeck to generate the sales and none was required to generate the sales. Hence, the inclusion of any amount of incremental expenditure for promotion is not required and its inclusion understates considerably Lundbeck’s claim.
Fifth, Mr Samuel appeared to give no weight to the fact that Lundbeck AU was in ultimate control of the kind of overheads which Mr Samuel was considering. The fact that there had been variances in the past does not mean that Lundbeck AU was at the mercy of external forces for these kinds of expenses.
For these reasons, I consider Mr Samuel’s approach to overheads to involve a high likelihood of a substantial over-estimate. I do not accept Sandoz’s contrary submissions. Those submissions do not take account, or sufficient account, of:
(1)The forensic effect of Sandoz deciding not to cross-examine Mr Murray about the budget.
(2)The fact that the budget is a contemporaneous document prepared for a serious commercial purpose by a person with the requisite qualifications, experience and responsibility to ensure that the document was fit for purpose.
(3)The unreasonableness of Mr Samuel’s outright rejection of the budget based on variances between the two most recent years which included one-off costs.
(4)The high risk of over-estimating the overheads inherent in Mr Samuel’s “top down” approach, by treating all costs included in his “basket” as variable.
Given the fact that Lundbeck AU and CNS Pharma functioned as a single budget and accounting entity, I also do not consider Mr Samuel’s approach of allocation of overheads between the companies necessary.
These conclusions do not mean that the issue of a discount for risk in respect of the hypothetical cash flows is irrelevant. Mr Stone recognised this to be the case, despite his ultimate view that no discount need be applied. In their joint report the accountants identified two sources of risk, the first being the cost of goods sold and the second being the overheads. Lundbeck submitted this:
In respect of the cost of goods sold, the potential impact of any estimation risk is relatively small. The potential impact of the cost of goods sold on the overall loss figure is modest. Further, the cost of goods sold for lost unit sales has been calculated by reference to the cost of goods actually sold in the relevant years. The cost of goods sold therefore has a sound foundation.
As regards overheads, the potential for a discount relates only to the loss of Lundbeck AU and CNS Pharma. Having regard to the dispute between Mr Stone and Mr Samuel regarding to assessment of overheads, it is apparent that any risk in respect of overheads is symmetrical. That is, there is a risk of both over and understatement. In those circumstances, and given the need for the Court to adjudicate between the competing contentions relating to overheads, there is no need for a discount in respect of this aspect of the loss calculation. This is particularly so when consideration is had to the conservative assumption that has been applied to Lundbeck’s lost profits claim, namely that each generic sale represents a lost sale to ESIPRAM rather than LEXAPRO.
Sandoz submitted that there should be an overall discount to reflect a number of matters (and, it will be recalled, I have concluded above that there must be a substantial discount of 25% to reflect the fact that some sales of Sandoz’s products may have been taken from other generics rather than from Lundbeck). Apart from this issue, Sandoz referred to the risks associated with the estimation of overheads, the estimation of cost of goods sold, the accuracy of the budget, the risk inherent in hypothetical cash flows, and the relatively high discrepancy between Mr Samuel’s estimation of overheads compared to Mr Stone’s estimation. Of these, I accept that all but the last matter is entitled to weight. As to the last matter, I consider that the size of the discrepancy between the accounting experts is largely a result of Mr Samuel’s unreasonable approach to overheads.
I do not accept Lundbeck’s submission that all of the identified risks are off-set by the fact that the claims relate to lost sales of Esipram only and not lost saes of Lexapro (as well as reduced prices of both Esipram and Lexapro, dealt with by Ms Weber’s unchallenged evidence). I agree that this assumption is conservative. Lexapro, however, was the originator’s premium brand. It was more likely (and the evidence demonstrates) that Esipram was more vulnerable to generic competition than Lexapro. I nevertheless consider it highly likely that some sales made by Sandoz of its escitalopram products represented lost sales of Lexapro. The fact that the claims are founded on this conservative assumption of no lost sales of Lexapro also should be given material weight. Having regard to all of these circumstances, I consider that a further discount for risk of 5% should be deducted from Lundbeck’s claims giving an overall discount of 30%.
22. Interest
Sandoz submitted that pre-judgment interest should not be awarded under s 51A of the Federal Court of Australia Act 1976 (Cth) in the unusual circumstances of this case.
I disagree.
As I have said, Sandoz made a calculated commercial decision to infringe the 144 patent. Before it decided to launch its generic escitalopram products Sandoz knew that Lundbeck intended to seek an extension of time to apply for an extension of term and that, if these were granted, Lundbeck alleged that Sandoz’s escitalopram products would infringe the 144 patent. Sandoz decided to launch in any event knowing that, if Lundbeck succeeded, it would sue Sandoz for damages or an account of profits. Lundbeck’s view that it was entitled to apply for an extension of term based on the registration of Lexapro was reasonable. So too was all of its conduct in seeking to secure its rights. It is not that Sandoz’s conduct in opposing Lundbeck’s applications was unreasonable. What is relevant is that Sandoz made a calculated decision to launch at risk. Its decision-makers did not launch believing that they had a licence to do so (this was a belief limited to Mr Sharkey and some others in Australia who were not the relevant decision-makers). Sandoz launched at risk. Accordingly, this is not a case, as Sandoz would have it, of Lundbeck casting “the effects of a ‘self-inflicted burden’” onto Sandoz (citing H K Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795 at [11]). In all of the circumstances, a “good cause to the contrary” of an award of interest has not been shown.
I note also that:
(1)In State Bank of New South Wales v Commissioner of Taxation [1995] FCA 1652; (1995) 62 FCR 371 at 385 Wilcox J said:
…s 51A(1) is a facultative provision intended to confer power on the Court to do justice between parties in relation to pre-judgment interest; a matter of some importance in these days of high interest rates and extensive delays in finalising litigation. The subsection should be interpreted as widely as its language allows.
(2)The rate of interest is within the Court’s discretion (r 39.06 of the Federal Court Rules 2011 (Cth)), but the Court’s Interest on Judgments Practice Note (GPN – INT) is relevant to the discretionary exercise and informs parties that they should expect the Court to have regard to certain rates. Further, in 2009 Order 35 r 7A of the Federal Court of Australia Rules provided this:
If determining a rate of interest for an order under paragraph 51A (1) (a) of the Act, the Court or a Judge may fix the rate as:
(a)the cash rate of interest set by the Reserve Bank of Australia from time to time during the period mentioned in paragraph 51A (1) (a) of the Act, plus 4 per cent; or
(b)such other rate as the Court or Judge thinks fit.
In Generic Health the Full Court said this:
263 The primary judge calculated pre-judgment interest on pre-tax loss (being the profit from lost sales). Error is said to be displayed in not assessing the tax that would have been payable on the profits that were lost, and only awarding interest on that post-tax sum.
264 It can be accepted that pre-judgment interest is compensatory in nature: Haines v Bendall [1991] HCA 15; 172 CLR 60 at 66 to 67.
265 The proper approach to that compensatory task in the context of a statutory remedy involves a choice or discretion. In Cullen v Trappell [1980] HCA 10; 146 CLR 1 at 22, Gibbs J said that the award of interest should always be approached in a broad and practical way and should not be allowed to assume disproportionate importance in the resolution of the dispute.
266 In Daniels v Anderson (1995) 37 NSWLR 438; 118 FLR 248 at 586, Clarke and Sheller JJA expressed the view that interest should generally be on a pre-tax basis. See also Hodgson v Amcor Ltd [No 9] [2012] VSC 205.
267 One of the reasons for this approach is the limited capacity of the Court, in a case about lost sales and profits, to estimate the tax liability, especially in the absence of the revenue authorities. This may, perhaps, be especially so in circumstances where one may have to attribute intra-group payments for the value of patent rights and assess legitimate intra-group costs and charges.
268 The primary judge’s approach at [338] to [342] saw no call to undertake a taxation exercise. We see no error in her Honour’s approach, in particular in the light of the above considerations.
Justice requires the award of interest given that Lundbeck has been kept out of money which it otherwise would have received for the best part of 10 years.
Sandoz also submitted that because the extension of term was granted on 26 June 2014 Lundbeck’s cause of action for patent infringement first arose on that date so that interest may only be awarded from that date onwards. This is because s 51A refers to interest being awarded on money for the “whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered”.
I considered s 51A in Sigma at [1282]–[1307]. I said this in particular:
1293 Similarly, the words “the date when the cause of action arose” in s 51A(1)(a) also involve a temporal requirement. If there is no period between the date on which the claim may be made for the payment of money and the date of judgment, then the provision cannot apply.
1294 In any event, in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 610 Brennan J said:
There is an imprecision in the meaning of the term cause of action, which is sometimes used to mean the facts which support a right to judgment (see per Williams J. in Carter v. Egg and Egg Pulp Marketing Board (Vict.) (1942) 66 CLR 557, at pp 600, 601); sometimes to mean a right which has been infringed (see Serrao v. Noel (1885) LR 15 QBD 549), and sometimes to mean the substance of an action as distinct from its form (see Krishna Behari Roy v. Brojeswari Chowdranee (1875) LR 2 Ind App 283 ).
1295 In CGU Insurance Ltd v Watson (as trustee of the deed of arrangement in respect of Greaves) [2007] NSWCA 301 Giles JA with whom Spigelman CJ and Basten JA agreed said at [44] that what is “meant by cause of action is notoriously difficult”. His Honour continued at [46]:
In Onerati v Phillips Constructions Pty Ltd (in liquidation) (1989) 16 NSWLR 730, in which a question was whether a proprietor’s second proceedings for breach of contract against the builder for defects discovered after judgment in the first proceedings was barred by res judicata, I said at 738-9 –
“Different forms of words have been used to describe what is meant by a cause of action. Brennan J referred to three descriptions; others are every fact which it would be necessary for a plaintiff to prove, if traversed, in order to support his right to a judgment (Read v Brown (1888) 22 QBD 128 at 131 per Lord Esher); the essential ingredients in the title to the right which it is proposed to enforce (Williams v Milotin (1957) 97 CLR 465 at 474 per Dixon CJ, McTiernan, Williams, Webb and Kitto JJ; Cartledge v E Jopling& Sons Ltd [1963] AC 758 at 783-784 per Lord Pearce); the act on the part of the defendant which gives the plaintiff his cause of complaint (Jackson v Spittall (1870) LR 5 CP 542 at 552 per Brett J for himself, Bovill CJ and Keating and Montague Smith JJ; Bass v The King [1948] NZLR 777 at 781 per Gresson J; Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458 at 467 (PC); and rights which can be enforced, or liabilities which can be redressed, by legal proceedings: Sugden v Sugden [1957] P 120 at 133 per Denning LJ. I do not find minute examination of the verbal formulae particularly helpful. The form of words may vary according to the purpose for which the description is required, and in any event may not be illuminating…

Sandoz’s submissions fail to recognise the operation of s 79 of the Patents Act which provides that once the extension is granted there is the “same rights to start proceedings in respect of the doing of an act during the period” commencing on the expiration of the term of the patent and ending on the day on which the extension was granted. This statutory fiction has effect for all purposes. It means that Lundbeck is taken to have had its rights as at the date Sandoz commenced its infringement of the 144 patent on 15 June 2009. Accordingly, in my view, the requirements of s 51A are satisfied on and from 15 June 2009. This is when the first cause of action arise. The causes of action accrued thereafter annually (for Lundbeck A/S) and on each lost sale for Lundbeck AU. I consider that it would be contrary to the terms of the legislation not to give effect to the clear intention of s 79 of the Patents Act. It follows that good cause has not been shown to confine the period of interest to the period commencing on 26 June 2014.
Sandoz also submitted that Mr Samuel’s approach of calculating losses on a post-tax loss should be adopted in preference to Mr Stone’s approach of calculating interest based on pre-tax losses. Consistent with the reasoning in Generic Health I consider that the appropriate exercise of discretion is for interest to be calculated based on pre-tax losses. The evidence of Lars Fogh, a tax lawyer in Denmark, that Lundbeck A/S would have had to pay an income tax rate of 22% for the years 2017–2019 and a corporate income tax rate of 22% on any award of damages, to my mind, is not evidence to the contrary. Whatever the tax position on the award of damages will be, tax obligations will need to be satisfied. Given the complexity of the group’s tax arrangements this matter is best left to the companies themselves in the first instance and the relevant tax authorities to ascertain.
23. Misleading and deceptive conduct claim
Lundbeck accepted that these claims could not found any award of damages additional to the award for patent infringement if its arguments that Lundbeck A/S and Lundbeck AU were entitled to recover for the full claim period in respect of, relevantly, the lost sales of Esipram by CNS Pharma (which has no entitlement to bring a claim for patent infringement). I have accepted Lundbeck’s arguments above, meaning that the claims for misleading and deceptive conduct can make no difference to the calculation of damages.
In these circumstances I propose to give brief reasons explaining why these alternative claims would also succeed.
The pleadings are to the effect that Sandoz, in supplying its escitalopram products:
Ÿfailed or refused or neglected to warn its customers or potential customers including distributors, pharmacies, medical practitioners, end users and any other person or entity (customers or potential customers) that the exploitation of the Respondent’s Escitalopram Products could infringe AU 144; and
Ÿimpliedly represented to customers and potential customers that the customers or potential customers could use the Respondent's Escitalopram Products without infringing AU 144.
Lundbeck submitted this (by reference to s 18 of the Australian Consumer Law in Sch 2 to the Competition and Consumer Act 2010 (Cth), but recognising that its claims also extend back to the operation of the Trade Practices Act 1974 (Cth)):
Lundbeck alleges that, by its sale and supply of generic escitalopram medicines between June 2009 and December 2012, Sandoz represented to its customers and potential customers that those customers could use those generic escitalopram medicines without the risk of infringing the patent. Lundbeck alleges that, by this conduct, Sandoz contravened s 18 of the ACL.
There is no evidence that Sandoz issued any warning to its customers or potential customers about the possibility of patent infringement. However, at the time of launch, Sandoz was well aware of the risk of infringement. It has long been recognised that such a failure to warn may constitute misleading or deceptive conduct. This case is a clear example of why this is so – there was a long history of uncertainty about the expiry of the patent, but Sandoz nonetheless pursued the commercial benefits of launching without warning its customers of the risks.
It appears that Sandoz might seek to distinguish the authorities referred to …above on the basis that, at the relevant time, the standard term of the patent had ended and the fate of Lundbeck’s efforts to extend the term of the patent was unknown. This does not meet Lundbeck’s case. When it launched ESITALO, Sandoz was well aware of the potential risk of infringing the patent. It analysed that risk at length, both through its internal legal processes and with the aid of external legal advice. It plainly considered that the risk called for careful consideration. Despite that, it did not warn its customers of the potential risk of infringement. In the circumstances, Sandoz’ customers would plainly have expected to be alerted to that risk and to be given the opportunity to make a commercial decision about whether the risk was acceptable.
In support of these submissions Lundbeck referred to Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd [1995] FCA 236; (1995) AIPC 91-129, Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd [1999] FCA 898; (1999) 174 ALR 239, Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd(No 3) [2011] FCA 846; (2011) 196 FCR 1 at [275]–[282], Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd(No 2) [2012] FCAFC 102; (2012) 204 FCR 494 at [91] and Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd [2016] FCA 236; (2016) 118 IPR 421 at [272] – [277].
In Advanced Building Systems [1995] FCA 236 at 38 Hill J said
I am of the view that the failure of Ramset to warn its customers that use of clutches or components in a particular way might constitute an infringement of Advanced’s patent, does constitute conduct in trade or commerce which is misleading or deceptive or likely to mislead or deceive users. It does not seem to me to affect the proposition to say, as counsel for Ramset says, that Ramset had no control over how, when and where components were to be used, or over its customers or their activities. So much may be conceded but does not affect the reasonable expectation that arises of a warning. Nor, in my view, does the conduct of Ramset cease to be misleading and deceptive even if the facts are, as they have been proved to be, that no legal action was ever taken against any contractors or others using clutches or components supplied by Ramset.
However, Hill J declined to order damages because the applicant had not proved loss caused by the failure to warn (in the sense that a customer might have decided to proceed with the purchase in any event).
In Ramset Fasteners [1999] FCA 898 the Full Court agreed with the conclusion that the failure to warn constituted misleading and deceptive conduct: at [66]. The Full Court said:
67. Section 52 requires that a “corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”. Attention has been drawn, in a number of cases, to the fact that the section is not limited to “representations”, a word that does not appear in it, although contravening conduct is generally apt to involve representations: Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 93; Pacific Dunlop Ltd v Hogan (1989) 23 FCR 553 at 585-586; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32, 40-41. Whether or not Ramset’s conduct should be analysed as conveying an implicit misrepresentation, it acted misleadingly when it promoted and sold face-lift tilt-up equipment in the way that it did, without informing its customers of the liability it was inducing them to incur. This was conduct calculated to cause a mistaken impression about a significant consequence of the transaction proposed to those customers. In our opinion, in such a case, it is unnecessary, and may be artificial, to speak of a representation. The orthodox theory would find one, but it is more realistic to see the conduct as misleading, without resorting to a sophisticated analysis in which no one would have engaged at the time.
68. It is plain, on the evidence and the findings of the trial judge, that Ramset’s conduct was engaged in for the purpose of persuading customers to purchase the various forms of equipment it supplied for face-lift tilt-up operations. Many persons did so. For example, Mr Nightingale gave evidence, to which reference has been made, of a big change in the source of supply upon which Brambles Cranes drew to obtain ring clutches. In Como Investments Pty Ltd v Yenald Nominees Pty Ltd (1997) ATPR 43,617 at 43,619-43,620, a full court jointly stated:
“Where a representation is relevant to the decision in question, and in its nature persuasive to induce the making of that decision, it accords with legal notions of causation to hold that it has a causative effect. And where a respondent, who may be taken to know his own business, has thought it was in his interests to misrepresent the situation in a particular respect, the Court may infer that the misrepresentation was persuasive. These inferences arise from the making of the representation followed by the respondent doing the thing it was calculated to induce him to do.”
Those observations may be applied equally to the effect of the misleading conduct of Ramset upon its customers. See also Gould v Vaggelas (1985) 157 CLR 215 at 236; Commission for the New Towns v Cooper (Great Britain) Ltd [1995] Ch 259 at 282; Sibley v Grosvenor (1916) 21 CLR 469 at 473, 478, 481; Krakowski v Eurolynx Properties Limited (1995) 183 CLR 563 at 578; Hanave Pty Ltd v LFOT Pty Ltd (1999) FCA 357 at paras 37, 45. In the present case, the inference should be drawn that Ramset’s misleading conduct did cause damage to Advanced, but it is unnecessary to pursue this point further.
In Sanofi-Aventis [2011] FCA 846 at [281] I accepted that the supply of a drug infringing a patent involved misrepresentations conveyed to medical practitioners, pharmacists and patients of the kind alleged by Lundbeck in the present case.
In the appeal judgment in Sanofi-Aventis [2012] FCAFC 102 at [91] the Full Court said that the misrepresentation issue depended on the existence of the patent infringement.
In Sandvik at [276] Jessup J said:
276. Failure to warn may amount to misleading conduct under s 52 of the TP Act and s 18 of the ACL: Winterton Constructions Pty Ltd v Hambros (1992) 39 FCR 97, 114. In the context of a patent case, in Ramset the Full Court said (164 ALR at 268 [67]):
… Whether or not Ramset’s conduct should be analysed as conveying an implicit misrepresentation, it acted misleadingly when it promoted and sold face-lift tilt-up equipment in the way that it did, without informing its customers of the liability it was inducing them to incur. This was conduct calculated to cause a mistaken impression about a significant consequence of the transaction proposed to those customers. In our opinion, in such a case, it is unnecessary, and may be artificial, to speak of a representation. The orthodox theory would find one, but it is more realistic to see the conduct as misleading, without resorting to a sophisticated analysis in which no one would have engaged at the time.
Sandoz’s submissions to the contrary did not confront these decisions. It is not necessary to go so far as to say that there is a general principle that a failure to warn of a potential patent infringement by the supply of a product is likely to involve misleading and deceptive conduct. It may be accepted that each case turns on its own facts. The problem for Sandoz is that the facts of the present case provide no basis upon which to distinguish the approach in Sanofi-Aventis. Sandoz again ignored the effect of s 79 of the Patents Act when it submitted that in cases in which misleading and deceptive conduct had been found in the context of a failure to warn of patent infringement the patents were in force and effect. Given the terms of s 79 and the facts of the present case, this is not a relevant distinguishing feature. In my view, there is no relevant distinguishing feature. Sandoz achieved its sales to pharmacists on the basis of an implied misrepresentation that its products did not infringe any patent, but the products would infringe if and when the extension of term was granted. The extension of term was granted and thus the products infringed. This is sufficient to constitute misleading and deceptive conduct in the circumstances. No additional damages may be recovered given my conclusions but, consistent with the authorities, if I had reached any different view I do not see why damages would not be recoverable.
To the extent necessary to say so I would also accept Lundbeck’s submissions as follows:
It appears that Sandoz will also contend that the claims pursued by Lundbeck DK and Lundbeck AU under the ACL in proceeding NSD 647 of 2014 are statute barred in respect of events which occurred prior to 10 December 2010. The basis for Sandoz’ contention is that Lundbeck was granted leave to make the amendments introducing these claims on 9 December 2016.
The claims of Lundbeck DK and Lundbeck AU should not be limited in this manner and the amendments to introduce these claims should be given effect from the date of the commencement of proceeding NSD 647 of 2014 (ie 26 June 2014). These claims arise by reason of substantially the same facts as are relied upon to support the patent infringement claim. While it may be accepted that the case under the ACL also involves Sandoz having failed to warn its customers of the possibility of infringement, that matter is uncontroversial and is merely an incident of Sandoz’ allegedly infringing conduct. The Court has the power to treat the amendments as effective from the commencement of the proceeding, irrespective of the timing of the amendments themselves: see Federal Court of Australia Act 1976 (Cth), s 59(2B) and Federal Court Rules, rule 8.21(2). It is in the interests of justice for the Court to do so. Lundbeck DK and Lundbeck AU have been pursuing their rights in respect of the relevant conduct of Sandoz since they commenced proceeding NSD 647 of 2014. The amendments merely approach that conduct in a different manner. In those circumstances, it would be unjust to limit the claims of Lundbeck DK and Lundbeck AU in the manner apparently proposed by Sandoz.
I do not accept Sandoz’s submissions that Lundbeck’s damages (if any were payable which, given my conclusions about damages patent infringement, they could not be) should be reduced. Sandoz said:
If the Court were to find Sandoz liable for contravention of the ACL (or TPA) in respect of any part of the relevant period, the amount of damages awarded ought to be reduced significantly having regard to the Applicants’ own responsibility for any relevant loss or damage they suffered, pursuant to CCA, s 137B; TPA, s 82(1B).
Section 137B of the CCA provides that where a person (claimant) makes a claim under s 236(1) of the ACL in relation to economic loss, suffered by the claimant because of the conduct of another person, and the conduct contravened s 18 of the ACL, and the claimant suffered loss and damage as a result, partly because of the claimant’s failure to take reasonable care, and party of the conduct of the other person, and the other person did not intend to cause the loss or damage (and did not fraudulently cause the loss or damage), the amount of loss of damage that the claimant may recover is to be reduced to the extent to which the Court thinks just and equitable having regard to the claimant’s share in responsibility for the loss or damage.
However, as Lundbeck submitted, and consistent with my conclusions above about Lundbeck’s conduct being reasonable and Sandoz having supplied its products at risk based on its own commercial calculations, Sandoz’s contentions in this regard are without merit as:
Lundbeck did not encourage or countenance the impugned conduct of Sandoz. To the contrary, Sandoz knowingly launched at risk of infringement allegations being made by Lundbeck. In due course, Lundbeck pursued its infringement case at the earliest opportunity.
24. Conclusions
Lundbeck should succeed in its claims for damages for patent infringement generally in accordance with the approach taken by Mr Stone, subject to an overall discount of 30% to take account of the risks which I have identified in these reasons for judgment. I am aware that Mr Stone’s further calculations provided to the Court by email on 13 November 2018 have not yet been reviewed by Mr Samuel. Further orders will provide this opportunity for review to Mr Samuel and for both Mr Stone and Mr Samuel to inform me of any outstanding issues about the calculations provided that these reasons for judgment are used as the basis for them.
I am also aware that Sandoz has pleaded that if it required a licence from Lundbeck to supply its escitalopram products (which, on my conclusions, it did from 15 June 2009 until 9 December 2012 and did not have a licence (which I have concluded it did not), then it has applied for such a licence under s 223(9) of the Patents Act. I have been informed that the application for a licence will be heard on 19 and 20 November 2018. My preliminary view is that the appropriate way to deal with this is for me to make final orders as appropriate once all required calculations are complete and for me to hear and determine any application for a stay of those orders as appropriate.
Before general publication of these reasons for judgment, the parties should also be given an opportunity to consider these reasons for the purpose of deciding if any claim for confidentiality should be made and proposing further directions to bring this long-running litigation to an end as soon as possible.

I certify that the preceding five hundred and fifty-one (551) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.

Associate:
Dated: 21 November 2018

File numbers:	NSD 647 of 2014 NSD 824 of 2016
Judge:	JAGOT J
Date of judgment:	21 November 2018
Catchwords:	PATENTS – construction of claims – (+) and (−)-enantiomers – where patent claims separated (+)-enantiomer – no defence to infringement where only trace, trivial or insignificant amounts of (−)-enantiomer present in infringing products – claims of patent infringed PATENTS – whether patentee/exclusive licensee prevented from brining infringement proceedings under provisions of the Patents Act 1990 (Cth) CONTRACTS – construction of settlement agreement – licence to exploit the invention the subject of the patent in suit – licence no defence to infringement DAMAGES – innocent infringement – discretionary defences – whether award of additional damages appropriate – assessment of damages for patent infringement – object of award of damages to restore patentee and/or exclusive licensee to the position each would have been in but for infringement
Legislation:	Acts Interpretation Act 1901 (Cth), s 12 Australian Consumer Law, s 18 Competition and Consumer Act 2010 (Cth) Copyright Act 1968 (Cth), s115(4) Designs Act 2003 (Cth), s 75(3) Federal Court of Australia Act 1976 (Cth), s 51A Patents Act 1952 (Cth) Patents Act1990 (Cth), ss 3, 13, 15AB, 18, 32, 36, 40, 41, 42, 54, 55, 65, 67, 70, 71, 72, 75, 76, 77, 78, 79, 79C, 83, 85, 101E, 101F, 120, 122, 123, 133, 136H, 136J, 142, 143, 143A, 145, 147, 148, 149, 150, 151, 165A, 215, 223, 227 and 228 Trade Marks Act 1995 (Cth), s 126 Trade Practices Act 1974 (Cth) Federal Court Rules 2011 (Cth), r 39.06 Patents Regulations 1991 (Cth), reg 22.21 Explanatory Memorandum, Patents Bill 1990 (Cth), cl 77
Cases cited:	Actavis Pty Ltd v Orion Corporation [2016] FCAFC 121 Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd [1995] FCA 236; (1995) AIPC 91-129 Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd [2001] FCA 1098; (2001) 52 IPR 305 Alphapharm Pty Ltd vH Lundbeck A/S [2006] APO 18; (2006) 69 IPR 629 Alphapharm Pty Ltd v H Lundbeck A/S [2008] FCA 559; (2008) 76 IPR 618 Alphapharm Pty Ltd v H Lundbeck A/S [2011] APO 36; (2011) 92 IPR 628 Alphapharm Pty Ltd v H Lundbeck A/S [2014] APO 41; (2014) 109 IPR 323 Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42; (2014) 254 CLR 247 Alphapharm Pty Ltd v H Lundbeck A/S [2015] FCAFC 138; (2015) 234 FCR 306 Alphapharm Pty Ltd v H Lundbeck A/S [2014] FCA 1185; (2014) 110 IPR 59 Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd(No 2) [2012] FCAFC 102; (2012) 204 FCR 494 Aristocrat Technologies Australia Pty Limited v DAP Services (Kempsey) Pty Limited (in liquidation) [2007] FCAFC 40; (2007) 157 FCR 564 Aspen Pharma Pty Ltd v Commissioner of Patents [2012] AATA 851; (2012) 132 ALD 648 Aspen Pharma Pty Ltd v H Lundbeck A/S [2013] FCAFC 129; (2013) 216 FCR 508 Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2015] FCA 1372 Black & Decker Inc v GMCA Pty Ltd (No 5) [2008] FCA 1738; (2008) 79 IPR 450 Bristol-Myers Squibb Co v Apotex Pty Ltd [2015] FCAFC 2; (2015) 228 FCR 1 C Van der Lely NV v Bamfords Ltd [1963] RPC 61 Doggett v Commonwealth Bank of Australia [2015] VSCA 351; (2015) 47 VR 302 Facton Ltd v Rifai Fashions Pty Ltd [2012] FCAFC 9; (2012) 199 FCR 569 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (No 2) [2008] FCA 746; (2008) 76 IPR 763 General Tire & Rubber Co v Firestone Tyre and Rubber Co [1972] RPC 457 Generic Health Pty Ltd v Bayer Pharma Aktiengesellschaft [2018] FCAFC 183 Geneva Laboratories Ltd v Prestige Premium Deals Pty Ltd (No 5) [2017] FCA 63; (2017) 122 IPR 279 Gerber Garment Technology Inc v Lectra Systems Ltd [1995] RPC 383 Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443 H K Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795 H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70; (2009) 177 FCR 151 H Lundbeck A/S v Alphapharm Pty Ltd [2016] FCA 1232 H Lundbeck A/S v Commissioner of Patents [2006] FCA 163; (2006) 150 FCR 269 H Lundbeck A/S v Commissioner of Patents [2017] FCA 56; (2017) 249 FCR 41 Hill v Evans (1862) 1A IPR 1 Industrial Galvanizers Corporation Pty Ltd v Safe Direction Pty Ltd [2018] FCA 1192 Karam v Australia & New Zealand Banking Group Ltd [2001] NSWSC 709 Knott Investments Pty Ltd v Winnebago Industries, Inc (No 2) [2013] FCAFC 117; (2013) 305 ALR 387 Lewis v Condon; Condon v Lewis [2013] NSWCA 204; (2013) 85 NSWLR 99 Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 Malec v J C Hutton Pty Limited [1990] HCA 20; (1990) 169 CLR 638 Nicaro Holdings Pty Ltd v Martin Engineering Company [1990] FCA 37; (1990) 91 ALR 513 Norm Engineering Pty Ltd v Digga Australia Pty Ltd [2007] FCA 761; (2007) 162 FCR 1 North Australian Aboriginal Justice Agency Limited v Northern Territory [2015] HCA 41; (2015) 256 CLR 569 Pacific Enterprises (Aust) Pty Ltd v Bernen Pty Ltd [2014] FCA 1372; (2014) 321 ALR 715 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257 Populin v HB Nominees Pty Ltd [1982] FCA 37; (1982) 41 ALR 471 R&J Lyons Family Settlement Pty Limited v 155 Macquarie Street Pty Limited [2006] NSWCA 177 Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd [1999] FCA 898; (1999) 164 ALR 239 Regency Media Pty Ltd v MPEG LA, LLC [2014] FCAFC 183; (2014) 231 FCR 588 Review Australia Pty Ltd v New Cover Group Pty Ltd [2008] FCA 1589; (2008) 79 IPR 236 Roche Therapeutics, Inc v GenRx Pty Ltd [2007] FCA 83; (2007) 71 IPR 546 Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd [2016] FCA 236; (2016) 118 IPR 421 Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 3) [2011] FCA 846; (2011) 196 FCR 1 Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556 State Bank of New South Wales v Commissioner of Taxation [1995] FCA 1652; (1995) 62 FCR 371 SZOFE v Minister for Immigration and Citizenship [2010] FCAFC 79; (2010) 185 FCR 129 Truong Giang Corporation v Quach [2015] FCA 1097; (2015) 114 IPR 498 TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) [2007] FCA 151; (2007) 158 FCR 444 Unilin Beeher BV v Huili Building Materials Pty Ltd (No 2) [2007] FCA 1615; (2007) 74 IPR 345 Winnebago Industries Inc v Knott Investments Pty Ltd (No 4) [2015] FCA 1327; (2015) 241 FCR 271 Zetco Pty Ltd v Austworld Commodities (No 2) [2011] FCA 848
Date of hearing:	16, 17, 18, 19, 24, 26 and 30 April 2018, 1, 2, 3 and 4 May 2018, 2, 3, 4, 5, 9 and 10 October 2018
Date of last submissions:	10 October 2018
Registry:	New South Wales
Division:	General Division
National Practice Area:	Intellectual Property
Sub-area:	Patents and associated Statutes
Category:	Catchwords
Number of paragraphs:	551
Counsel for H. Lundbeck A/S, Lundbeck Australia Pty Ltd and CNS Pharma Pty Ltd:	AJL Bannon SC with KJ Howard SC, LA Merrick and C Cunliffe
Solicitor for H. Lundbeck A/S, Lundbeck Australia Pty Ltd and CNS Pharma Pty Ltd:	Corrs Chambers Westgarth
Counsel for Alphapharm Pty Ltd, Apotex Pty Ltd and Aspen Pharma Pty Ltd:	DKC Catterns QC with S Habib SC, C Dimitriadis SC, N Murray SC, AR Lang and B Mee
Solicitor for Alphapharm Pty Ltd, Apotex Pty Ltd and Aspen Pharma Pty Ltd:	King & Wood Mallesons
Counsel for Sandoz Pty Ltd:	JM Hennessy SC with PL Arcus and J Adamopoulos
Solicitor for Sandoz Pty Ltd:	Clayton Utz