Supreme Court New South Wales Medium Neutral Citation: H. Lundbeck A/S v Sandoz Pty Ltd [2011] NSWSC 1297 Hearing dates: Wednesday, 26 October 2011 Decision date: 26 October 2011 Jurisdiction: Equity Division Before: Brereton J Decision: Defendant restrained from disclosing terms of, or part of, settlement agreement between defendant and plaintiff. Catchwords: INJUNCTIONS - Plaintiff and defendant parties to confidential settlement agreement in relation to prior litigious dispute - defendant seeks to disclose terms of agreement to law firm acting for defendant and other parties in proceedings before Administrative Appeals Tribunal - proceedings on foot in Administrative Appeals Tribunal pertain to patent the subject of the settlement agreement - no evidence terms of settlement agreement in public domain - settlement agreement potentially exposes terms on which plaintiff willing to compromise litigation - impossible for law firm acting for defendant and other parties to put out of its mind the terms of the agreement in developing tactics and undertaking negotiations on behalf of and for benefit of its other clients - injunction granted restraining disclosure. Legislation Cited: (CTH) Administrative Appeals Tribunal Act, 1975, s 40, s 43 (CTH) Patents Act, 1990, s 70, s 223 Cases Cited: AG Australia Holdings v Burton [2002] NSWSC 454 Carindale Country Club Estate Pty Ltd v Astill and Others (1993) 42 FCR 307 Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR Maggbury Pty Ltd and Another v Hafele Australia Pty Ltd and Another (2001) 210 CLR 181 Category: Principal judgment Parties: H. Lundbeck A/S (plaintiff) Sandoz Pty Ltd (defendant) Representation: Counsel: Mr D Shavin SC with Mr G Raffell (plaintiff) Mr D Studdy SC with Mr A Fox (defendant) Solicitors: Corrs Chambers Westgarth (plaintiff) Griffith Hack Lawyers (defendant) File Number(s): 2011/269958 Judgment (ex tempore) 1HIS HONOUR: The plaintiff H. Lundbeck A/S ('Lundbeck') is the registered proprietor of an Australian patent which claims a pharmaceutical substance known as escitalopram. In 2006, the defendant Sandoz Pty Ltd ('Sandoz'), applied to the Federal Court of Australia for an order revoking the patent on various grounds. Those proceedings were ultimately settled, as between Lundbeck and Sandoz, on terms and conditions contained in a settlement agreement made in or about February 2007. That agreement contains the following relevant terms: 1. Release by, and obligations of, Sandoz Sandoz: (c) agrees to keep confidential the terms of this Agreement indefinitely and to keep confidential the existence of this Agreement until 20 February 2007. To avoid doubt, as from 20 February 2007, the mere fact that the parties have agreed to settle the Proceedings is not confidential ... ... 2. Release by, and obligations of, Lundbeck Lundbeck Denmark and Lundbeck Australia jointly and severally: (a) agree to keep confidential the terms of this Agreement indefinitely and to keep confidential the existence of this Agreement until 20 February 2007. To avoid doubt, as from 20 February 2007, the mere fact that the parties have agreed to settle the Proceedings is not confidential ... 2Subsequently, further proceedings have ensued. The patent expired on 13 June 2009. On 12 June 2009, Lundbeck applied to the Commissioner of Patents pursuant to (CTH) Patents Act 1990, s 70, for an extension of its term, and for an extension of the time under s 223 by which the s 70 application had to be made. The application for an extension of time was granted by a delegate of the Commissioner, over opposition by Sandoz, Alphapharm Pty Ltd ('Alphapharm') and two other generic pharmaceutical companies, on 1 June 2011. Sandoz and the other generics have appealed to the Administrative Appeals Tribunal ('the AAT') in proceedings 2011/2516 from the decision of the delegate. The AAT proceedings will be by way of merits review of the decision of the Delegate of the Commissioner to extend time to Lundbeck for making the application and the decision to extend the term of the patent [(CTH) Administrative Appeals Tribunal Act, 1975, s 43; Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409, 419 (Bowen CJ and Deane J), 429-430 (Smithers J)]. The proceedings will be a hearing de novo [ Administrative Appeals Tribunal Act, s 40]. Sandoz wishes to tender and rely upon certain terms of the settlement agreement in the AAT proceedings. 3By summons filed on 22 August 2011, Lundbeck claimed the following relief: 1. Interim or interlocutory injunctions in the form of Order 2. 2. An order that until further order, the Defendant, whether personally or by its officers, servants, agents or otherwise, be restrained from breaching clause 1(c) of the agreement entitled "Settlement Agreement" made between the Plaintiff and the Defendant in February 2007 (the Settlement Agreement ) by disclosing any of the terms or part of the Settlement Agreement, including from making such a disclosure to: a. the Administrative Appeals Tribunal; b. the Commissioner of Patents or a Delegate of the Commissioner of Patents; c. any member of the law firm Mallesons Stephen Jaques. 4In short minutes handed to the Court today, the relief claimed was modified, as follows: 1. The Defendant, whether personally or by its officers, servants, agents or otherwise, be restrained from breaching clause 1(c) of the agreement entitled "Settlement Agreement" made between the Plaintiff and the Defendant in February 2007 (the Settlement Agreement ) by disclosing any of the terms or part of the Settlement Agreement to: (a) any member of the firm Mallesons Stephen Jaques (b) any other party to the AAT Proceedings No 2011/2515, 2011/2516, 2011/2517 and 2011/2518, or any legal representative of any such party, pending order of the Administrative Appeals Tribunal in the abovementioned proceedings. 5Significantly, the effect of the amendment of the relief claimed is that this Court is no longer asked to restrain disclosure of the settlement agreement to the AAT, but to make an order in terms which would permit such disclosure subject to the leave of that Tribunal. 6The first issue for resolution is whether the contents of the settlement deed have the requisite character of confidentiality to warrant protection by this Court. The starting point is the agreement of the parties to keep confidential the terms of the agreement and, notably, to do so "indefinitely". 7For Sandoz it was argued, with reference to the judgment of the High Court in Maggbury Pty Ltd and Another v Hafele Australia Pty Ltd and Another (2001) 210 CLR 181, that, given the four and a half years that had elapsed since the agreement was entered into, the information deemed confidential under the agreement was no longer confidential and that Lundbeck bore the onus of establishing that the information, or parts of it, remained confidential. Sandoz placed particular emphasis on a passage from the joint judgment of Gleeson CJ, Gummow and Hayne JJ (at [45]): Ordinarily, the obligations relating to the use and disclosure of the Information would be construed as limited to subject matter which retained the quality of confidentiality at the time of breach or threatened breach of those obligations. An expression of a contrary intent should, as Judge Learned Hand put it in Picard v United Aircraft Corporation , be explicit. This is because: "the applicant is proposing to broadcast the invention to the world at large, reserving as his protection only the claims which he may secure; and there is ordinarily no reason to suppose that he means to exact any greater protection against the promisor than he will have against others. At any rate, if he does, he should say so." 8A number of observations can be made about that passage and its context. First, their Honours were speaking of the construction of the obligations contained in the agreement: in other words, the observation was directed at the approach to be taken to construction of terms of the agreement, not to the quality of confidentiality per se. Secondly, the context was that there had in that case been disclosure of the subject matter of the patent. Thirdly, as I read it, their Honours say nothing as to who bore the onus of proving that something originally agreed to be confidential remained, or no longer was, confidential. 9In the context of the present case, it is to be borne in mind that the agreement was one to resolve a litigious dispute. It is notorious that parties compromising legal proceedings frequently wish to make and keep their settlements confidential; sometimes by the simple means of a provision that "these terms are not to be disclosed", and sometimes by much more comprehensive confidentiality obligations, such as are included in the deed in this case. 10The reason for the popularity of such provisions is not difficult to detect. First, but probably not foremost, are questions of what might be described as 'face'. Parties are reluctant for it to be seen in public, or amongst their competitors, that they have made some concession, or "backed down". Secondly, and more importantly, particularly where one of the parties is liable to be sued by other litigants on similar grounds (as is often the case, for example, with insurers), there is a wish for it not to be known upon what terms that party might be prepared to settle litigation. 11In the context of this case, there remains on foot litigation about the subject patent. There are parties to that litigation - namely, Alphapharm and the other generics - who are not parties to the deed, who it could reasonably be supposed might be very interested to know upon what terms Lundbeck might be prepared to settle litigation about its patent. It is not as if the patent has long since expired, so that the terms upon which such litigation might be settled could no longer be of relevance. In circumstances where the patent - though not currently on foot due to its expiration - may potentially be renewed as a result of pending applications, and litigation concerning it remains on foot, there is not the slightest reason to suppose that such reasons as were thought sufficient to warrant inclusion of the confidentiality provisions when the deed was made are so diminished as not to justify the maintenance of confidentiality at this stage. There is nothing to suggest that the terms of the agreement are in the public domain, let alone as a result of any act or neglect on the part of Lundbeck. 12It was suggested that there was no identification of the precise confidential information that would be protected. But this is not a case in which a plaintiff is seeking an injunction to restrain disclosure of its "confidential information" in any general way. The agreement itself spells out what is to be kept confidential indefinitely, namely, "the terms of this agreement". 13Reference was made in particular to certain dates referred to in clause 3 of the deed, with the suggestion that those dates could not be confidential. However, at least two matters detract from that submission. First, those dates only make any sense at all in context. That context is a term, which is one of the terms on which Lundbeck was prepared to settle the earlier litigation and for that reason, inter alia , no doubt, one of the matters which Lundbeck wished to have kept as confidential. Secondly, those dates may reveal perceived risks that the parties wished to quell through the settlement agreement, which at least Lundbeck might not wish other potential opponents to be alerted to. 14The next argument was that there was a countervailing public interest, essentially sourced in the administration of justice, in the AAT having before it all relevant information and evidence. There is no doubt that private obligations of confidentiality may yield to the public interest in the administration of justice, and in particular in courts and tribunals having before them all relevant evidence. For that reason, whereas legal professional privilege will justify resistance to obligations to produce documents in answer to subpoenas or the discovery process, private obligations of confidentiality have never been an answer to such processes, although courts, of course, retain a discretion based on considerations of confidentiality as to whether and to what extent they will permit documents attended by confidentiality and produced in such circumstances to be deployed. In this case, Lundbeck now agrees that it will be a matter for the AAT to decide whether the document should be received and how it should be deployed and no doubt to whom, for the purposes of the proceedings before it, access should be granted. 15Sandoz has issued a summons for production in the AAT proceedings. The summons calls for the production of, inter alia , the settlement deed. No doubt when the deed is produced to the AAT in answer to that summons - assuming that the summons is not in the meantime set aside - the AAT will decide, having heard argument, whether access should be permitted to it pending the determination of the AAT proceedings. Lundbeck agrees that this Court ought not interfere with that process and, accordingly, such order as I may make will be limited in a way which leaves open to the AAT to determine how the deed may be used for the purposes of the proceedings before it. 16The perceived risk of disclosure which primarily concerns Lundbeck is to the firm of solicitors Mallesons Stephen Jacques ('Mallesons') and to the Commissioner for Patents, who is a party in the AAT proceedings, in which Mallesons act not only for Sandoz, but also for Alphapharm and the other generic pharmaceutical manufacturers. At one stage it seems to have been contemplated that some undertaking might have been proffered on behalf of Mallesons not to use the deed, if provided to them, other than in the interests of Sandoz, nor further to disclose it. Ultimately no such undertaking was proffered, but in any event it seems to me that it would have left Mallesons in a most awkward position. With the best intentions in the world, it is impossible to see how, armed with the information contained in that deed, in the interests of Sandoz -while acting concurrently for Alphapharm and the other generics - Mallesons could have avoided determining strategies, negotiations and tactics, without at least inadvertently taking into account, on behalf of and for the benefit of all their clients, what they took into account of on behalf of and for the benefit of Sandoz. The observations of Drummond J in Carindale Country Club Estate Pty Ltd v Astill and Others (1993) 42 FCR 307 (at 313) are pertinent on this point: ... it has long been recognised that a solicitor who, with the best will in the world, is determined not to make use of one client's confidential information for the benefit of another client may still subconsciously draw on that information to the disadvantage of the former. 17[See also the remarks of Campbell J (as his Honour then was) in AG Australia Holdings v Burton [2002] NSWSC 454, (at [54])] 18In so far as it was submitted that there was no tangible risk of disclosure because the matter was abiding the determination of the AAT on return of the summons for production, that was answered by reference to an email of 19 August 2011, in which Sandoz's solicitors in these proceedings had said: Our client will not make any disclosure of the substance of the 2007 Settlement Agreement ("Agreement") until that time [being midday Monday 22 August]. Our client gives no guarantee of the position relating to the disclosure of the substance of the Agreement after that time. 19A subsequent letter of 22 August 2011 from Sandoz's solicitors in these proceedings to Lundbeck's solicitors stated inter alia : We are instructed that our client wishes to be able to disclose the terms of the Settlement Agreement to the solicitors at Mallesons who are representing our client's interests in the AAT appeal. We have been assured that Mallesons is in a position to protect your client's claim to confidentiality and will not disclose the terms of the Settlement Agreement to any third party including the other appellant parties who may represent it in the AAT appeal. No doubt this agreement could be appropriately formalised. 20As I have said, I do not see how such an agreement could have been appropriately formalised. 21For those reasons it seems to me that the plaintiff has made out its claim for an injunction, albeit one that does not trespass on the ability of the AAT to regulate its proceedings and to decide what evidence should be received before it. 22I turn now to the question of costs. Lundbeck has succeeded in obtaining relief, which it had to come to Court to obtain, there being no indication of any undertaking proffered or offer made that would have averted that necessity. In doing so, Lundbeck succeeded on two significant issues argued: first, that under the deed, it remained entitled to confidentiality; and, secondly, that there was sufficient risk of disclosure to Mallesons and its consequences. On the other hand, Lundbeck abandoned (but only at the outset of today's hearing) its claim for an order that would have prevented disclosure to the AAT, and that claim formed, or attracted, most of the effort so far as Sandoz's case was concerned. For that reason, I think Lundbeck is entitled to some, but not the whole, of its costs. While, as always, approaches to apportionment of costs (unless left to the assessment process, which is even less desirable) are broad brush, it seems to me that the appropriate solution is somewhat less than 50 per cent adverted to by Mr Shavin SC, who appeared on behalf of Lundbeck. 23My orders are as follows: 1. Order that the defendant be restrained from by itself its servants or agents in contravention of clause 1(c) of the agreement entitled 'Settlement Agreement' between the plaintiff and the defendant in February 2007 ("the settlement agreement") disclosing any of the terms of or part of the settlement agreement to any person whatsoever including any member of the law firm Mallesons Stephen Jacques and any other party to Administrative Appeals Tribunal proceedings 2011/2515, 2011/2516, 2011/2517 and 2011/2518 or any legal representative of any such party provided that this order does not prohibit the disclosure of the settlement agreement to the Administrative Appeals Tribunal or such persons as the Administrative Appeals Tribunal in the aforesaid proceedings might authorise subject to and in accordance with the leave of the Administrative Appeals Tribunal. 2. Order that the defendant pay one-third of the plaintiff's costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 November 2011