In Bayer Pharma Aktiengesellschaft v Generic Health Pty Ltd [2017] FCA 250, the Australian Federal Court awarded over AUD 25 million in damages against Generic Health for patent infringement. This decision is interesting because claims for damages or account of profits for patent infringement rarely get to the stage of judicial determination, even in the UK.

Bayer markets the oral contraceptive Yasmin pursuant to a patent which the Court had earlier found Generic Health to have infringed. Generic Health had marketed Isabelle, which was bioequivalent to Yasmin. Straight after Generic Health had been permanently restrained from further marketing Isabelle, Bayer started to market Petibelle, its generic version of Yasmin.

The judgment deals with Generic Health’s three-pronged attack on why Bayer’s damages claim should be reduced for over-compensation, but I will only focus on the most interesting one, the so-called “one for one issue”. Bayer’s claim was based on an assessment of its lost profits in which each sale of Isabelle and of Petibelle is taken to be a lost sale of Yasmin. Generic Health disputed this counter-factual hypothesis, and contended that a number of sales of Isabelle were not in substitution for Yasmin. It further contended that the claim in respect of Petibelle should be rejected based on the requirements of causation and remoteness of damage.

It was clear on the evidence that every sale of Isabelle represented a prescription for Yasmin which resulted in Isabelle rather than Yasmin being prescribed since: (i) in Australia, doctors generally prescribe by reference to the originator brand, and (ii) provided the doctor did not tick the “brand substitution not permitted” box on the prescription, pharmacists could (and, because of the financial incentive / profit opportunity, did) supply Isabelle instead of Yasmin.

Generic Health nonetheless argued that it should be inferred that some sales of Isabelle were not lost sales of Yasmin in circumstances where, for a range of reasons (related to Isabelle’s (slightly) lower price), women purchased Isabelle when they would not otherwise have purchased Yasmin. The Judge sided with Bayer in finding that, whilst it was possible that some sales of Isabelle were made in these circumstances, there was no evidence of any such sales and that in any event any such sales, on the evidence, were likely to be immaterial.

It seemed obvious to the Judge that Isabelle’s market in reality depended on women who were willing to pay the more expensive prices that non-subsidised third generation oral contraceptives (such as Yasmin) commanded. This is the very market that Generic Health’s marketing focussed on – converting women on Yasmin to Isabelle (rather than marketing to the newcomer to Yasmin who would have been surprised by the higher prices, particularly where first or second generation Government-subsidised oral contraceptives were significantly cheaper even compared to Isabelle). This, together with other fact specific considerations, tended to support the inference that Isabelle’s most likely source of sales was women who had been taking Yasmin and would have continued to do so until a good reason arose to change to another molecule.

Moving on to Petibelle, the Judge found that, but for Isabelle, Bayer would never have put the lower priced Petibelle on the market, and Bayer was entitled to take such reasonable steps to rectify the brand damage which Isabelle’s unlawful entry into the market had caused Bayer (those who had been paying for Isabelle would have been aggrieved if they had to pay the full price for Yasmin again). The voluntary introduction by an originator of a generic version was a natural and obvious consequence of generic entry – it was reasonably foreseeable and did not break the chain of causation. The fact that Bayer waited until it had succeeded in having Isabelle removed from the market did not undermine either causation or foreseeability, but rather confirmed that the infringement was the direct and obvious cause of the introduction of Petibelle (which took place within the week of Isabelle’s removal). Bayer as such was entitled to recover the loss resulting from the cheaper price of Petibelle for the reasonable period of two years from its introduction.