The recent decision in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth  FCA 1556 has clarified, among other things, a number of issues concerning compensation arising from the usual undertaking as to damages that is required for an interlocutory injunction.
Following the decision of the Full Court in on 21 December 2011 finding the relevant claims of the method patent in suit invalid, Justice Jagot considered various claims for compensation made pursuant to the “usual undertaking” as to damages which had been given in the three related proceedings as follows:
to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by any operation of the orders below or any continuation (with or without variation) thereof.
There were ultimately five claimants under the various undertakings, being each of the three generic pharmaceutical companies, Alphapharm, Generic Health and Sigma that had been parties to the original proceedings and two claimants which had not been parties to the original proceedings, being two manufacturers/suppliers of generic venlafaxine (Pharmathen and Alembic).
In the course of finding that certain orders for compensation should be made in favour of each of the claimants, her Honour made some key findings, some of which are discussed further below.
The compensable loss under the usual undertaking
Justice Jagot reviewed the relevant authorities concerning the scope of the usual undertaking as part of her assessment as to which of the claims were compensable. Importantly, her Honour noted that the compensable loss is foreseeable loss that flows from the injunction and that the key questions in determining this are
- What is the loss that is alleged?
- Did that loss flow directly from the interlocutory order?
- Could the loss sustained have been foreseen at the time of that order?
Justice Jagot held that the usual undertaking as to damages does not protect a party from the normal consequences of litigation, only those losses arising “from the operation of an order made by a court before the rights of the parties are able to be fully determined”. In particular, the undertaking does not protect against losses such as those arising from:
- the existence of the patent;
- decisions taken by a person because there is a patent;
- the existence of the litigation; or
- decisions taken by a person because there is litigation (including any steps in anticipation of an interlocutory injunction against them, discussed further below.
Consequently, her Honour rejected the various claimants’ arguments that the assessment of the loss should be based on the fact that Wyeth had asserted invalid patent claims, an approach that would have compensated the claimants for the mere existence of those claims. The award of compensation under the usual undertaking was not intended to be a punishment for losing the proceedings.
An aspect of the assessment of loss concerned the claims by certain claimants with respect to “other” undertakings.
The dates of the various interlocutory injunctions were as follows:
|Sigma Interlocutory Injunction||NSD 1533 of 2010||3 June 2009|
|Alphapharm Interlocutory Injuction||NSD 1603 of 2010||25 August 2009|
|Generic Health Interlocutory Injunction||NSD 1644 of 2010||10 November 2009|
Alphapharm and Generic Health each claimed loss pursuant to the earlier Sigma Interlocutory Injunction on the basis that, as a result of that injunction, they each took certain steps in anticipation that they would also be injuncted.
Justice Jagot did not accept that action taken in mere anticipation of an interlocutory injunction application could engage the undertaking, which in terms concerns only whether a person has been “adversely affected by any operation of the order”.
In the first instance, the order could not operate before it was made, and on this basis, neither claimant was affected by their own orders before those orders were made. Steps taken in anticipation of an interlocutory order are simply part of the normal course of litigation. Similarly, taking such steps just because an interlocutory injunction has been granted against another party is not relevantly an adverse effect of the undertaking.
The Sigma Interlocutory Injunction was, however, relevant to the position of each of Alphapharm, with respect to the Alphapharm Interlocutory Injunction and Generic Health with respect to the Generic Health Interlocutory Injunction, because the Sigma Interlocutory Injunction did determine the initial probabilities and possibilities and the decisions that each of Alphapharm and Generic Health flowed from this.
 The Commonwealth had also brought claims, but settled these after the hearing.
 Generic Health was also a supplier of the Sigma products so its claim of losses arising from these activities was a separate issue.
 The primary claims were for loss of opportunity, requiring both an assessment of the probability that such an opportunity existed and if such an opportunity existed, the possibility that it would occur.