The first plaintiff held a 1997 patent protecting a compound of leflunomide and terflunomide used principally for the treatment of rheumatoid arthritis (trade name ARAVA). The second plaintiff was the New Zealand distributor under licence. The first Sanofi patent for leflunomide had expired in 1999. Since 2007, the defendant, AFT, had imported from Canada and marketed a generic leflunomide product branded AFT-Leflunomide. 

Sanofi contended that AFT’s leflunomide contained terflunomide in excess of 0.3% of leflunomide by weight and therefore fell within the scope of the 1997 patent. Sanofi sought an interim injunction to restrain AFT from manufacturing, importing or marketing it. 

AFT did not concede infringement. For the purposes of the interim injunction application it did not contest that Sanofi had raised an arguable question. It contended, however, that as a metabolite of leflunomide, terflunomide could emerge fractionally during the shelf life of the tablet.

AFT also counterclaimed for revocation of Sanofi’s 1997 patent on the grounds of lack of novelty, obviousness, lack of inventive step, and lack of fair basis. It contended that the 1997 patent was an illegitimate attempt to hold on to the monopoly right which had ceased in 1999 when its first patent had expired. The New Zealand Government pharmaceutical-purchasing agency, Pharmac, had agreed in April 2002 to fully fund Sanofi’s ARAVA product for five years on conditions. A further two year contract was entered into between Pharmac and Sanofi in April 2007. 

AFT entered the New Zealand market knowing of Sanofi’s 1997 patent but considering that its product did not fall within its claims. In April 2007, Pharmac entered into a conditional contract with AFT. Notice of this conditional contract was given to Sanofi in May 2007 and indeed Sanofi responded to Pharmac’s notice. AFT’s product secured 16.4% of the market in the year to June 2008 and 11.7% in the year to June 2009.

Sanofi tested AFT’s products in November 2008 and then again in February 2009. Analysis in February showed that the AFT product contained in excess of 0.3% terflunomide. Sanofi gave notice of its patents in February 2009 and then issued proceedings alleging infringement. AFT’s contract with Pharmac expired at the end of April 2009 and AFT elected not to tender. At the time of hearing, Pharmac had yet to make any decision as to a supplier but two generic manufacturers, Novartis and Apotex, were seeking a place in the market. 

Pharmac gave an undertaking that it would not reference price Sanofi’s ARAVA to AFT’s product or award sole supply to AFT until the proceedings were resolved by judgment or settlement. Pharmac also advised that it had not agreed to subsidise Apotex’s brand. Pharmac gave subsequent conditional undertakings that are recorded in the judgment. 

Keane J refused to grant an interim injunction:

(1)        Serious question to be tried:

(a)  In asserting that there was a serious question as to infringement, Sanofi was entitled to rely on the validity of its 1997 patent, which was deemed valid until AFT could establish that it was invalid or raised a serious question. The initial onus lay on Sanofi. There would not be a serious question if AFT could demonstrate invalidity. But if the most that AFT could do was raise a serious question as to validity, infringement remained seriously arguable.

(b)  Sanofi had raised a serious question to be tried as to the fact of infringement. All the challenges that AFT made to validity of the patent, apart from that as to obviousness, seemed to be seriously arguable and indeed set the issue as to validity in equipoise with that as to infringement.

(2)        Balance of convenience:

(a)   AFT had been trading since 2006 with the advantage of a Pharmaceutical Schedule listing. As a result, Sanofi could not claim that the status quo to be preserved was that obtaining when AFT entered the market. Sanofi had tolerated that happening and had not asserted its monopoly right for something like 32 months. As a further result, if AFT remained in the market, Sanofi would not suffer irreparable harm. Its loss was readily quantifiable, being the loss of AFT’s now-established market share. AFT was able to meet damages;

(b)   The Court was less convinced that AFT could be compensated in damages if interim relief were granted but if AFT were to succeed at trial;

(c)   All Sanofi’s concerns had been dispelled by Pharmac’s undertakings. Pharmac was entitled to reject what was effectively a call for an undertaking that Sanofi’s price remain as it was with no generic supplier being let into the market at a lesser price until the case was resolved. Such an undertaking would extend well beyond this case and would compromise Pharmac’s ability to discharge its statutory function. Sanofi had an ability to protect itself by injunction proceedings against any other generic entrant.

(3)        Overall justice:

The overall justice of the case pointed decisively against the grant of interim injunctive relief.