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Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618 (5 June 1968)

CATCHWORDS

HEARING

DECISION

2. Besides, there is a serious preliminary question arising from the argument as to the construction of the "licensing agreement", a copy of which was tendered to the Court on behalf of the defendant. The right of the defendant to import and sell hetacillin in Australia without incurring liability to be sued for infringement of the plaintiff's patent rights depends upon the determination of this question. I think that this is an additional reason for refusing to make an order for an injunction on this motion. If either party is desirous of having an early trial or of having the question of the construction of the "licensing agreement" decided as a preliminary point such party is at liberty to make an application to the Court. The defendant by its counsel offered at the hearing of this motion to submit to an order that it keep an account of all moneys received or to be received by it, by reason of the sale or use of hetacillin in Australia. The Court does not see fit to make an order upon the motion other than that the defendant keep such account and that the costs of the motion be costs in the cause. (at p620)

3. From this decision the plaintiff appealed to the Full Court. (at p620)

4. K. A. Aickin Q.C. (with him B. J. Shaw and J. P. Graham), for the appellant. The balance of convenience here is in favour of the grant of an interlocutory injunction. The status quo should be preserved, and the goodwill of the plaintiff protected accordingly. There is a distinction between stopping the establishment of a new trade, and stopping the continuance of an old trade : Plimpton v. Spiller (1876) 4 ChD 286 ; and see Harman Pictures N.V. v. Osborne (1967) 1 WLR 723 ; Donmar Productions Ltd. v. Bart (1967) 1 WLR 740 . The interests of persons other than the parties cannot be looked to in proceedings for interlocutory injunctions. (at p620)

5. R. K. Fullagar Q.C. and R. H. Searby, for the respondent. (at p620)

6. R. K. Fullagar Q.C. An interlocutory injunction will be awarded only if the court is convinced that the plaintiff will succeed at the final hearing. It is not sufficient that he show merely a probability of success : see Challender v. Royle (1887) 36 ChD 425, at p 436 . The case is different where it is desired to preserve particular property in statu quo pending a trial : cf. De Mestre v. A. D. Hunter Pty. Ltd. (1952) 77 WN (NSW) 143 . (at p620)

7. (KITTO J. When it is said that the plaintiff must show a probability of success, that does not mean that he must show that it is more probable than not that he will succeed. It is enough that he show a sufficient likelihood of success to justify in the circumstances the preservation of property.) (at p620)

8. R. H. Searby. The defendant offers to keep full accounts of all sales made of hetacillin. This is an additional factor which tends to show that the balance of convenience is against granting an interlocutory injunction. Further, there is evidence that the drug of the defendant is in some respects superior to that of the plaintiff, and this is a most important consideration to be taken account of by the court when exercising its discretion. (at p620)

9. J. P. Graham, in reply. If the defendant is permitted to market hetacillin it will be likely that the reputation of the plaintiff as a reputable drug manufacturer will be affected if it obtains a perpetual injunction as to a product with an established market. If marketed, hetacillin may well be sold in very large quantities before this case is eventually disposed of. Further, it is not clear that the drug marketed by the defendant is in any respect superior to that of the plaintiff.

Cur. adv. vult. (at p621)

1968, June 5.

THE COURT delivered the following written judgment:-
This is an appeal from an order refusing an application for an injunction

2. The patents are for the penicillin nucleus in isolation, called for short 6-a.p.a., for a semi-synthetic penicillin known as ampicillin which is a broad-spectrum antibiotic derived from 6-a.p.a., and for certain processes for their production. The alleged infringements consist in the advertising, offering for sale, selling and supplying in Australia of a semi-synthetic penicillin preparation called hetacillin (or Versapen) which is manufactured out of Australia. Hetacillin is of a chemically different structure from that of ampicillin, but it is produced by a process which starts with 6-a.p.a., though not in isolation, and in the course of which ampicillin comes into existence and is treated with acetone. When the resultant substance, hetacillin, is taken into the human body, the process is reversed ; the hetacillin dehydrolyses, or breaks down, to produce ampicillin again ; and to that, at least in the main, its therapeutic effects are apparently due. The plaintiff contends that if hetacillin were produced in Australia some of the claims of the patents would be infringed both by the manufacture and by the use of the substance. This it alleges on the two grounds that ampicillin is used in the manufacture of hetacillin and that, since it is released in the use of hetacillin, the latter is to be considered substantially an equivalent of ampicillin. In fact it is produced elsewhere, under a licence which does not in terms extend to Australia, but the plaintiff says that nevertheless its sale in Australia is an infringement. The defendant's main defences may be summarized as being that hetacillin is a different substance from ampicillin and is not in any relevant sense an equivalent of it ; that the temporary or transient production of ampicillin in the process of obtaining hetacillin and the ultimate production of ampicillin in the human body are irrelevant to any question of infringement of the plaintiff's patents ; and that no infringement is involved in any use in Australia of a substance which has been produced abroad under the licence referred to. (at p622)

3. Thus there are substantial questions of fact to be determined, and at least two questions of law will arise for consideration, namely whether the principle of the Saccharin cases, Saccharin Corporation Ltd. v. Anglo-Continental Chemical Works Ltd. (1900) 17 RPC 307 ; Saccharin Corporation v. Reitmeyer & Co. (1900) 17 RPC 606 ; Wilderman v. F. W. Berk & Co. Ltd. (1924) 42 RPC 79 applies in respect of a patent for a substance, and whether the present case is governed by the principle of Betts v. Willmott (1871) LR 6 Ch App 239 or of the Tilghman Case (Societe Anonyme des Manufactures de Glaces v. Tilghman's Patent Sand Blast Co.) (1883) 25 ChD 1 . (at p622)

4. It is as well to begin consideration of the appeal by recalling the principles to be observed in dealing with applications for interlocutory injunctions in patent cases. The jurisdiction is discretionary, being a part of the jurisdiction under s. 31 of the Judiciary Act 1903-1965 (Cth) to make all such orders as are necessary for doing complete justice in the cause. The Court addresses itself in all cases, patent as well as other, to two main inquiries. The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief : Preston v. Luck (1884) 27 ChD 497, at p 506 ; Challender v. Royle (1887) 36 ChD 425, at p 436 . How strong the probability needs to be depends, no doubt, upon the nature of the rights he asserts and the practical consequences likely to flow from the order he seeks. Thus, if merely pecuniary interests are involved, "some" probability of success is enough : Attorney-General v. Wigan Corporation (1854) 5 De GM & G 52, at pp 53, 54 [1854] EngR 309; (43 ER 789) and in general it is right to say, as Roper C.J. in Eq. said in Linfield Linen Pty. Ltd. v. Nejain (1951) 51 SR (NSW) 280, at p 281 :

"There are disputes of fact as to a number of matters . . .
but this being an application for an interlocutory injunction
I look at the facts simply to ascertain whether the plaintiff
has established a fair prima facie case and a fair probability
of being able to succeed in that case at the hearing."

". . . the Court, not forming an opinion very strongly
either one way or the other whether there is an infringement
or not, but considering it as a fairly open question to be
determined
at the hearing, and not to be prejudiced by any
observation
in the first instance, reserves the question of infringement
as one which will have to be tried at the hearing, and which
it will then have to consider."

". . . for that" - he said - "is what the Court has to do -
to keep things in statu quo - until the final decision of the
question." (at p623)

5. This is generally true, but in a particular case it may be that although the plaintiff has shown a probability of success other considerations make it unjust to grant an injunction, especially if another form of interlocutory relief is possible. The second inquiry is directed to this aspect of the matter. It is whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted. It is of course to be remembered that if an injunction be granted it will be upon terms of the plaintiff submitting, in the event of his ultimately failing, to such order as to damages as the Court may make in order to compensate the defendant for any injury caused by the injunction ; and likewise it is to be remembered that if the injunction be refused the defendant may be required to keep an account of the profits he makes from the course of conduct of which the plaintiff complains, so that, if he loses the case and the plaintiff elects under s. 118 of the Patents Act to recover the amount of those profits rather than damages, the quantum will be readily ascertainable. (at p623)

6. The first of these inquiries in the present case is not complicated by the special considerations which generally arise in a patent action where there is a substantial issue to be tried as to the validity of the patent. In such an action the plaintiff's prima facie case must be a strong one so far as the question of validity is concerned, for he asserts a monopoly and must give more proof of the right he claims than is afforded by the mere granting of the patent : Smith v. Grigg Ltd. (1924) 1 KB 655 per Atkin L.J. (1924) 1 KB, at p 659 ; Bonnella v. Espir (1926) 43 RPC 159 . The general practice in that kind of case has long been to refuse an interlocutory injunction unless either the patent has already been judicially held to be valid or it has stood unchallenged for a long period : Smith v. Grigg Ltd. (1924) 1 KB 655, at p 658 . Even if the patent is an old one - which for this purpose is generally taken to mean more than six years old - it has been said that an interlocutory injunction will generally be refused provided that the defendant shows by evidence "some ground" for supposing that he has a chance of successfully disputing the validity of the patent at the trial : Marshall and the Lace Web Spring Co. Ltd. v. Crown Bedding Co. Ltd. (1929) 46 RPC 267, at p 269 . This should be read, however, with Sir George Jessel's statement in Dudgeon v. Thomson (1874) 30 LT 244 which divides into three classes the cases in which an injunction may be granted before the hearing in such a case. They are : (1) cases where the patent is an old one and the patentee has been in long and undisturbed enjoyment of it ; (2) cases where its validity has been established elsewhere and the court sees no reason to doubt the propriety of the result ; and (3) cases where the conduct of the defendant is such as to enable the court to say that, as against the defendant himself, there is no reason to doubt the validity of the patent. As to the first, it is enough to say in the present case that the plaintiff has adduced strong prima facie evidence in support of the validity of the patents. As to the second, it is to be observed that the complete specifications were lodged in July 1958, September 1959 and May 1961 respectively ; the patents are convention patents, the convention dates being in August 1957, May 1959 and May 1961 ; and the priority dates of the relevant claims range from 2nd August 1957 to 25th August 1960. Thus the element of age is present in all cases, and during the life of the patents the plaintiff has been in active and undisturbed enjoyment of its rights thereunder. Moreover, although the validity of the patents has not been judicially established either in Australia or elsewhere, the courts of several countries, notably the Court of Appeal in England, have considered the plaintiff's rights to be sufficiently strongly supported to warrant the granting of interlocutory injunctions. Thirdly, the defendant's attitude on the question of validity before the learned primary Judge and in the course of the appeal provides ample ground for inferring that the plaintiff is very likely to establish the patents at the trial; for before the Judge the defendant's counsel, while not conceding validity, expressly disclaimed any intention of attacking it, and in this Court he modified, or perhaps explained, his disclaimer to the extent of arguing that the first claim in the complete specification for the first patent (which is a claim for a product) should be construed, so as to avoid invalidity, as impliedly referring not to the product in general, as it purports to do, but only to the product when produced by one or more of the processes referred to in other claims of the same specification or in the body of it. This argument is prima facie unimpressive. While this appeal has been pending the defendant has obtained leave to amend its defence so as to put validity in issue, but no particulars of invalidity have yet been given, and so far as appears the new defence is contemplated purely in support of the argument as to construction. In view of all these considerations the case presents itself as one in which the issue of validity ought not to be regarded as standing in the way of an injunction. (at p625)

7. The chief questions to be decided at the trial concern the issue of infringement. We have had in the course of the argument a detailed review by counsel of the respective contentions of the parties under this head, but we think it neither necessary nor desirable to discuss them here. All that can be said without danger of prejudicing the ultimate decision is that upon the material at present before the Court the plaintiff has shown, in our opinion, so substantial a probability of succeeding in the action that it is entitled to have the status quo preserved. The defendant offered before McTiernan J., and has offered again on this appeal, to submit to an order that it keep full and proper accounts of all sales of its substance hetacillin, showing the quantities sold, the sale prices, the profits therefrom and the manner of calculating the profits, every sale of hetacillin being treated as having been made in place of a sale of the plaintiff's substance ampicillin. The order under appeal, as drawn up, is a bare order that the defendant keep an account of all moneys received or to be received by it by reason of the sale or use of hetacillin in Australia. A variation of the order would therefore be necessary in any event; but the substantial question is whether the balance of convenience will be better served in the circumstances of the case by adopting that course or by granting an injunction until the trial. (at p625)

8. The learned Judge expressed the opinion that on the evidence it would seem that the balance of convenience would be strongly against the grant of an injunction, but he did not elaborate the statement. With great respect, we think the problem ought to be considered as Brett J.A. considered the corresponding problem in Plimpton v. Spiller (1876) 4 Ch D 286, at pp 292, 293 . He said :

". . . if you assume that the defendant is in the right, there
is no doubt that an injunction is a great hardship upon him ;
but if you assume that the plaintiff is right, then the mere
keeping of an account by the defendant seems to me to be a
great hardship on the plaintiff, for he would be driven to
commence actions against the purchasers from and customers
of the defendant, which would obviously lead to a multiplication
of suits. There will be a hardship on the one side or on the
other, and the question is, on which side does the balance
appear to lie? Now if the trade of a defendant be an old and
an established trade, I should say that the hardship upon him
would be too great if an injunction were granted. But where,
as here, the trade of the defendant is a new trade, and he is
the seller of goods to a vast number of people, it seems to me
to be less inconvenient, and less likely to produce irreparable
damage, to stop him from selling, than it would be to allow
him to sell and merely keep an account, thus forcing the
plaintiff to commence a multitude of actions against the
purchasers. Therefore, as a rule of conduct, I think that in
such a case as this it is better, where the trade of the defendant
is a new one - and not an old established trade - and where
there are likely to be many customers of the new trade, to
say that you will act against the new trader by injunction,
whereas if he were carrying on an old trade you would act
in the other way." (at p626)

9. The facts which appear to us to be decisive on this question may be stated quite briefly. In April 1967, after the plaintiff had been building up in Australia a substantial business in ampicillin over a period of several years, the defendant announced its intention of marketing hetacillin in Australia. The plaintiff on 10th May 1967 warned the defendant that if it began to do so proceedings for infringement of the patents would be taken. It was in the face of this warning that the defendant commenced the acts now complained of, and the action was thereafter instituted without delay. Any goodwill the defendant may since have built up for hetacillin would of course be destroyed or damaged by granting an injunction, but that was a risk the defendant took with its eyes open. If it be not restrained, it will presumably take advantage of the time before the hearing to subject the goodwill of the plaintiff's established trade in ampicillin to the prejudice of competition from a product which the defendant maintains has some points of superiority. In no meaningful sense could matters be said to be kept in statu quo if in these circumstances the defendant were left free to pursue its course, merely keeping an account of the profits it makes. (at p626)

10. There is a further point. The defendant's conduct out of which this action arises is a part only of a campaign in which the defendant and its associated companies, after having worked for some years under agreements designed to divide the world market in ampicillin between the plaintiff and its associates on the one hand and themselves on the other, have set out to capture for hetacillin the trade which the plaintiff and its associates have enjoyed under those agreements. The campaign has resulted in litigation in several jurisdictions, in each of which, outside Australia, an interlocutory injunction has been granted to the present plaintiff or the party corresponding with it, after full consideration of the balance of convenience. We are persuaded upon the like consideration that the interests of justice will best be served by adhering to the general pattern of granting the patentee an injunction to keep the invader of its existing market at bay until a decision has been reached as to whether the invasion is lawful or not. (at p627)

11. For these reasons we allow the appeal, discharge the order appealed from, and make an order as sought in the notice of motion. (at p627)

ORDER

Order appealed from discharged.

In lieu thereof orders as follows:-

1. The plaintiff by its counsel undertaking to abide by
any order this Court may make as to damages in
case this Court shall hereafter be of opinion that the
defendant shall have sustained any, by reason of this
order, which the plaintiff ought to pay, ORDER that the
defendant its directors officers servants and agents be
restrained until judgment or further order from
advertising offering for sale selling or supplying the
antibiotic Versapen or hetacillin or any preparation
containing the same or otherwise infringing the
plaintiff's
patents of the Commonwealth of Australia
numbered respectively 232,312, 238,912,and 254,284
or any of them.
2. The plaintiff's costs of the motion to be its costs in
the cause.