Katarina Klaric, Principal, Stephens Lawyers & Consultants
| Australian courts will award substantial damages for patent infringement where the amount claimed by the patentee can be substantiated by evidence of loss suffered. A patentee can elect to either claim damages or an account of profits.[i] Businesses seeking to launch new products into the Australian market can limit their risk of patent infringement by appropriate due diligence, patent searches and seeking expert advice in the field. |
In the recent Federal Court of Australia case, Bayer Pharma Aktiengesellschaft and Bayer Australia Limited v Generic Health Pty Ltd and Lupin Australia Pty Ltd [ii], pharmaceuticals company Bayer Pharma Aktiengesellschaft (“Bayer”) claimed damages of $25,751,336 plus interest for patent infringement of claims 3 and 11 of Australian Patent 780330 for a pharmaceutical combination of ethinylestradiol and drospirenone for use in a contraceptive. Bayer manufactured and sold in Australia the oral contraceptive Yasmin pursuant to the patent. The court at first instance and on appeal held that Generic Health and Lupin (together referred to as “Generic Health”) had infringed the patent by manufacturing and selling the contraceptive marketed under the brand Isabelle. Isabelle was registered on the Australian Register of Therapeutic Goods (“ARTG”) on the basis of bioequivalence to Yasmin.[iii] Generic Health commenced selling Isabelle on 23 January 2012 and ceased on 19 June 2014 following a court order to cease selling.
Bayer’s damages claim was based on its assessment of lost profits, in which the company claimed that each sale of Isabelle was a lost sale of Bayer’s oral contraceptive Yasmin.[iv] Generic Health contended that each sale of Isabelle was not a lost sale of Yasmin given the availability of other oral contraceptives and therefore a discount should be applied to Bayer’s assessment.[v] The court refused to apply a discount although the evidence was that some woman who bought Isabelle would not have bought Yasmin, however this group was likely to be small on Bayer’s evidence.[vi] The court also appeared to give insufficient weight to the evidence that sales of Yasmin had declined because of other factors. More specifically, Bayer had diverted its marketing efforts from Yasmin to the Yaz and Yaz Flex contraceptive, the successor brands to Yasmin and the Yasmin molecular received adverse publicity about having a greater risk of deep vein thrombosis than other contraceptives.
Bayer’s damages claim also included lost profits for Petibelle for a period of two years from 26 June 2014. Bayer introduced Petibelle on the market after Generic Health was ordered by the court on the 19 June 2014 to cease selling Isabelle.[vii] Bayer claimed that each sale of Petibelle was a lost Yamin sale. Bayer claimed that it had introduced Petibelle to rectify the brand damage which Isabelle’s unlawful entry into the market had caused. In response, Generic Health contended that Bayer’s claim for damages in respect of Petibelle should be rejected based on the principles lack of causation and remoteness of damage. If the damages were maintainable in respect of Petibelle, the claim should be limited to a period of months and not years as claimed by Bayer.[viii] The court rejected this contention and held that patent infringement was a direct and obvious cause of the introduction of Petibelle, despite there being a lapse of over 2 years from the commencement of the infringing conduct and the introduction of Petibelle on the market. The court rejected Generic Health’s contention that the loss was too remote because the originator companies usually introduce their own generic while the competing generic is on the market and not after it has been removed from the market.[ix]
Bayer’s assessment of lost profits was accepted by the court except that the court applied a discount of 2% on the amount claimed to account for the risks associated with uncertainty about Bayer’s costing when calculating damages.[x] Bayer’s lost profits claim was based on its standard costs for the production and sale of Yasmin including determining its fixed and variable costs. Generic Health contended that Bayer’s standard costings should not be applied without a discount.[xi]
Generic Health has lodged an appeal against the court findings and the assessment of damages.
Principles applied in assessing damages for patent infringement
The assessment of damages in patent infringement can be complex. Each case is determined on its facts with reference expert evidence and relevant legal principles. The relevant legal principles applied by Australian courts include the following:
- The purpose of an award of damages for patent infringement is compensatory rather than punitive.
- The appropriate quantum of damages so far as possible should put the patentee in the same position as if no infringement had occurred.
- In addition to direct losses, the patentee is entitled to recover indirect losses (such as damage to goodwill and reputation) where the indirect losses results from the infringing conduct, are foreseeable and are not unduly speculative.[xii]
- There must be a causal link between the infringing conduct and the loss and damage suffered.
- The patentee claiming damages bears the onus of proof in establishing the quantum of compensation claimed and that it results from the infringing conduct.[xiii]
- If there is any real doubt in the factual evidence concerning the damages assessment methodology, the matter is to be resolved in the favour of the patentee and not the wrongdoer.[xiv]
Expert evidence concerning the relevant market, product substitutability, pricing sensitivity, market disruption and methodology are used to calculate the damages claim and can all impact on final damages awarded for patent infringement. Australian courts place significant reliance on expert evidence in assessing damages claim. The decision in Bayer indicates that if there is any doubt as to the evidence, the court will resolve the matter in favour of the patentee, rather than the wrongdoer.[xv]
Limiting the risk of patent infringement
Businesses seeking to launch new products into the Australian market can limit their risk of patent infringement by appropriate due diligence, patent searches and seeking expert advice in the field.
Individuals and companies involved in innovation and development of new products should also undertake patent searches and be involved in the ongoing monitoring of databases for patent applications and registrations to minimise the risk of infringing a valid patent when the product is launched in the Australian market. Not all registered patents are valid and their registration may be able to be challenged on grounds including lack of novelty and inventive step.
[i] Patent Act 1990 (Cth) s 122(1).
[ii] [2017] FCA 250.
[iii] Ibid[11].
[iv] Ibid [4].
[v] Ibid [5].
[vi] Ibid[301]-[302].
[vii] Ibid [4], [17].
[viii] Ibid [5].
[ix] Ibid [314]-[316].
[x] Ibid[345]-[346].
[xi] Ibid[4]-[5].
[xii] Ibid[309]-[310].
[xiii] Ibid[192]-[196].
[xiv] Ibid [192]-[196].
[xv] Ibid [302].
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For Further Information Contact:
Katarina Klaric
Principal/Director
Stephens Lawyers & Consultants
Suite 205 Suite 546 Collins Street
Melbourne, Victoria, Australia 3000
Ph (613) 86369100
Email: [email protected]
Disclaimer: This Update is not intended to replace obtaining legal advice.
Copyright June 2017, Stephens Lawyers & Consultants.