09 December, 2015

Full Court finds that usual undertaking for damages is not limited by TG Act

Full Court finds that usual undertaking for damages is not limited by TG Act

Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2015] FCAFC 172

The fact that the Therapeutic Goods Act 1989 contains provisions that permit the Commonwealth, among other parties, to recover compensation in certain pharmaceutical patent infringement proceedings does not preclude the Commonwealth from recovering compensation pursuant to the usual undertaking as to damages, which is a pre-requisite for an interlocutory injunction (Usual Undertaking).

On 7 December 2015, in Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2015] FCAFC 172, the Full Court handed down its decision on a separate question that had been referred to it in connection with claims pursuant to the Usual Undertaking. The terms of the Usual Undertaking are set out in Federal Court Practice Note CM 14.

The “Separate Question” referred to the Full Court was as follows:

  • Is the Commonwealth of Australia precluded, as a matter of law, from recovering compensation pursuant to any of the Undertakings as to Damages by reason of Chapter 3, Part 3-2, Division 2 of the Therapeutic Goods Act 1989 (Cth)?

Background to proceedings

The Usual Undertaking had been given in respect of interlocutory injunctions sought by the Patentees (Sanofi and Wyeth) in two different sets of patent litigation proceedings. Those injunctions prevented the alleged infringers (Generics) from marketing generic pharmaceutical products that were registered under the Therapeutic Goods Act 1989 (TG Act).

The Patentees’ infringement proceedings were unsuccessful, the relevant claims of the patents in suit were found to be invalid and the injunctions were dissolved (see Apotex Pty Ltd v Sanofi-Aventis [2009] FCAFC 134 – special leave refused – and Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2011] FCAFC 132 – special leave refused). Subsequently, the Generics and the Commonwealth sought compensation pursuant to the Usual Undertaking. It is the first time that the Commonwealth has sought compensation pursuant to the Usual Undertaking.

The Commonwealth’s claim concerns the difference between the payments it made under the Pharmaceutical Benefits Scheme (PBS) in respect of venlafaxine and clopidogrel (the pharmaceutical products the subject of the interlocutory injunctions) and the payments that the Commonwealth would have made had the interlocutory injunctions not been in force. As the undertakings prevented the generic products from being listed on the PBS, (which the Commonwealth alleges would have occurred), statutory reductions that would otherwise have reduced these payments did not take effect during the period the interlocutory injunction was in place.



The Patentees argued that the regime created by s 26B, s 26C and s 26D of the TG Act (the key provisions concerned) prevented the Commonwealth from recovering pursuant to the Usual Undertaking because this was a “complete statement of the Commonwealth’s rights to seek compensation of this kind”. The Commonwealth argued that the regime created by s 26B, s 26C and s 26D was in addition to the remedies available pursuant to the Usual Undertaking.



After reviewing the background facts and law, the majority (Kenny and Nicholas JJ)* considered the remedies provided ss 26C(8) and 26D(5) and how they compared with the remedies provided by the Usual Undertaking.

The majority noted that s 26C is engaged when the Patentee and/ or exclusive licensee has given a certificate under s 26C in respect of infringement proceedings commenced by it that the proceedings:

  • (a) are to be commenced in good faith; and
  • (b) have reasonable prospects of success; and
  • (c) will be conducted without unreasonable delay.

If an interlocutory injunction has been obtained and the s 26C certificate is found to have been false or misleading in a material particular or an undertaking given in the certificate has been breached, then (if s 26D does not otherwise apply) the Commonwealth may be able to claim compensation pursuant to s 26C(8). Unlike with the Usual Undertaking, recovery under s 26C(8) is possible even if the main infringement proceedings are settled with no adverse finding to the patent in suit where, for example, the patentee did not have reasonable grounds to believe the patent was valid.

Section 26D may apply when an interlocutory injunction is obtained (instead of s 26C(8)) and a remedy under s 26D(5) may be available if:

  • the proceedings are later dismissed or discontinued by the patentee without consent; and
  • the Court declares, “broadly speaking, that the patentee did not have reasonable grounds to believe that its claim for final relief would succeed”.

The majority found that the Court's power to award a remedy is enhanced by s 26D(5) and is in addition to any other right a party may have. The Commonwealth’s right to claim compensation is not confined by any requirement of foreseeability (contrasting with the Usual Undertaking which requires foreseeability of the kind of loss concerned).

In distinguishing s 26D from the Usual Undertaking, it was significant that the Attorney-General of the Commonwealth (or a State/ Territory) has a right to appear in the proceedings.

The majority considered the Patentees’ argument that the enactment of ss 26B, 26C and 26D was intended to limit the right to recover compensation pursuant to the Usual Undertaking. As to this, the operation of s 26C(8) was not linked to the Usual Undertaking but rather to the s 26C certificate. Further, there was “nothing inconsistent or incompatible” with allowing both s 26D(5) and the Usual Undertaking to operate together.

Finally, the majority found that there were no express words in the legislation or any “necessary intendment” to exclude any other right to recover compensation. Accordingly, the answer to the Separate Question was “no”.

*Dowsett J substantially agreed with the majority.

Latest Tweets

Follow @sprusons on twitter.