Merck Sharp & Dohme Corp v Apotex Pty Ltd  FCA 928
Justice Jagot of the Federal Court has granted an interlocutory injunction prohibiting the promotion and sale of Apotex's generic versions of Merck's anti-allergic nasal spray, Nasonex. In granting the injunction, Justice Jagot found that Merck had a prima facie case of infringement notwithstanding Apotex's case on patent invalidity. Her Honour accepted as persuasive the "irreparable harm" evidence adduced by Merck, and considered that the "balance of convenience" favoured the granting of the injunction. The decision provides useful guidance as to the evidence required to support an application for interlocutory relief to prevent generics from entering the Australian market during the patent term.
Merck's "Nasonex" patent
Merck is the owner of an Australian standard patent relating to the once-daily intra-nasal use of an anti-allergen nasal spray comprising the active pharmaceutical ingredient, mometasone furoate (MF). The patent covers Merck's inhaled corticosteroid product marketed and sold under the name "Nasonex".
Apotex's alleged infringement of Merck's patent
In June this year, Apotex secured Australian Therapeutic Goods Administration registration of 5 generic versions of Nasonex. Shortly thereafter, Apotex commenced marketing the products with a view to supplying them in Australia from early September 2012.
After learning of Apotex's activities, Merck issued patent infringement proceedings in the Federal Court of Australia in July 2012 seeking, amongst other things, a preliminary injunction to prevent Apotex from offering to sell and selling its generic MF sprays in Australia.
The 3 things Merck had to establish to obtain interlocutory relief
- there was a serious question to be tried: In patent infringement proceedings, this requires an assessment of the relative strengths of the applicant's infringement case on the one hand, and the alleged infringer's invalidity case on the other;
- damages would not adequately compensate it if an injunction was not granted and it was ultimately successful at trial; and
- the balance of convenience favoured the grant of interlocutory relief. That is, Merck would suffer more if the injunction was refused, than Apotex would suffer if the injunction was granted.
1. Was there a serious question to be tried?
Apotex argued that Merck did not have a prima facie case of infringement because the claimed invention was obvious.
Whilst accepting that Apotex was able to point to "real arguments against validity"1, Justice Jagot was not persuaded that Apotex's case on obviousness was sufficiently strong to deny the existence of Merck's prima facie case of infringement. In reaching this conclusion, Justice Jagot pointed to a number of issues and possible weaknesses in Apotex's invalidity case, including:
- whether Apotex's expert had properly identified the "problem" said to be solved by the invention claimed in the patent, or whether the expert had improperly "assumed away" part of the invention;
- the reliability of the evidence from Apotex's expert as to the common general knowledge relating to MF at the priority date; and
- whether the prior art documents provided clear directions in respect of the use of MF to treat allergic rhinitis without substantial side effects.
2. Would damages adequately compensate Merck?
Merck adduced evidence from its director of sales and marketing in Australia to establish that its loss could not adequately be compensated for in damages if an injunction was refused and it was ultimately successful at trial.
Nasonex is not listed on the PBS and Merck therefore could not rely on the "Pharmaceutical Benefits Scheme (PBS) argument"2 that has been highly persuasive in a number of recent interlocutory injunction applications in pharmaceutical patent cases3. That is, Merck could not argue that it would suffer irreparable harm because the entry of a generic would trigger a mandatory and irreversible price reduction under the PBS.
Nonetheless, Justice Jagot was persuaded that damages would be an inadequate remedy for Merck based on its evidence as to the following factors:
- Merck's orders for Nasonex had decreased by 39% as a result of Apotex's marketing and proposed supply of the Apotex products;
- If Apotex entered the market, Merck could not proceed with its planned price increase for Nasonex and it would be forced to reduce the price of Nasonex below the current level;
- Merck would not be able to raise its prices back to the current level if Apotex was ultimately restrained at trial because to do so would involve a loss of goodwill and a potential negative impact on Merck's corporate reputation;4
- If Apotex was not restrained, Nasonex would become a significantly less profitable product and Merck would be forced to make a number of its experienced Nasonex marketing and sales employees redundant. If Merck was ultimately successful at trial, it would then need to hire and train new marketing and sales staff; and
- The market for these nasal sprays is complex, and it could not be assumed that every sale made by Apotex would have been a sale made by Merck. As such, it would be a very complicated accounting exercise to calculate Merck's loss caused by a refusal to grant an injunction.
Based on these factors her Honour held that Merck would suffer irreparable harm if an interlocutory injunction was not granted. The factors outweighed Apotex's arguments, including that an injunction would cause it to lose the valuable "first mover advantage".5
3. Did the balance of convenience favour the grant of interlocutory relief?
Justice Jagot was also of the view that the balance of convenience favoured the grant of an interlocutory injunction based on the following factors:
- Apotex had no established position in the market, whereas Merck had a substantial existing market;
- Apotex sought to enter the market knowing of Merck's patent rights;
- The "Nasonex" patent is long standing and has not been the subject of challenge by way of re-examination or revocation; and
- Apotex's entry into the market would cause significant and most likely irreversible change to the intra-nasal corticosteroid spray market.
Interlocutory relief granted to Merck
In these circumstances, Justice Jagot considered that Apotex should be enjoined from infringing the Nasonex patent (including by supplying, selling or offering to sell its generic MF sprays) until the final determination of the proceeding.
Lessons for pharmaceutical companies seeking interlocutory (preliminary) relief in Australia
There have been a number of recent cases in which the Federal Court has granted an interlocutory injunction to an originator pharmaceutical company who can rely on the "PBS argument" to show irreversible damage if an injunction is not granted. Justice Jagot's decision suggests that interlocutory relief may also be granted to originators who are unable to rely upon the PBS argument, in circumstances where:
- The originator has a strong prima facie case of patent infringement and can file rational and persuasive evidence to cast doubt on the allegations of invalidity;
- The originator is able to adduce substantial probative evidence of the irreversible damage it has and/or will suffer as a result of the entry of generics in the market, including the difficulty in quantifying its loss; and
- The injunction will preserve the status quo and avoid significant and most likely irreparable upheaval in the existing market.