What it means:

  • The Commonwealth’s desire to pursue damages pursuant to the usual undertaking seems firmly entrenched. Pharmaceutical patent holders need to consider this prior to commencing infringement actions.
  • The Commonwealth seems to be guarded regarding the potential success of its two initial claims against originators.

The Commonwealth of Australia’s ongoing battle with originator pharma companies has taken a new turn, with the Commonwealth seeking security for potential damages prior to an appeal regarding the validity of Otsuka’s Abilify® (aripiprazole) patents.  The Commonwealth’s application follows its recent pursuit of damages on undertakings given by pharmaceutical companies in order to obtain the interlocutory injunction, which prevented the launch of generic competitors.

Following the Federal Court finding in Otsuka’s infringement proceedings that the relevant claims of Otsuka’s patent were invalid, Otsuka determined to appeal that decision, and accordingly sought to preserve its interlocutory injunction.

In the context of that application, the Commonwealth sought security for the payment of its damages under the interlocutory injunction undertaking.  This approach was not seen in the two existing matters, since the Commonwealth waited until after the final appeals to launch its claims.

The court found the claims of the Commonwealth were both direct and foreseeable from the injunction.  The court made a number of interesting observations on the merit of the Commonwealth’s claims and the defences to them.  Otsuka was ordered to make a payment of A$6 million as security for the Commonwealth’s damages, with a potential for the Commonwealth to “top-up” this amount depending on the timing of the appeal hearing.

While this application arose in a context where the patent had been initially found invalid, one might well expect that if the existing claims against originators establish the precedent that the Commonwealth is entitled to damages on the basis of the usual undertaking in the context of these cases, that application for security for damages by the Commonwealth might become a feature of all proceedings in which an interlocutory injunction is obtained.