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Full Court clarifies rules for extending the term of pharmaceutical patents

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Introduction

The Patents Act 1990 (Cth) (the Act) contains a highly important legislative scheme that permits patentees to extend the term of patents relating to pharmaceutical substances for up to 5 years.

The legislative scheme recognises that for patentees, “regulatory delay is now the proxy for inadequate remuneration”,[1] and as such, the purpose behind the scheme is to “balance the competing interests of a patentee of a pharmaceutical substance whose exploitation of monopoly has been delayed (because of regulatory delay) and the public interest in the unrestricted use of pharmaceutical invention…”.[2]

The operation of the extension of term regime and how the Patent Office and Courts have applied it in practice is, at best, complicated. This is particularly so where patents concerning two or more pharmaceutical substances are involved.

In this insight, we consider two recent decisions by the Full Court of the Federal Court which have significant implications for patentees seeking to extend the term of their pharmaceutical patents.

Jump to the full court's decision in Commissioner of Patents v Ono Pharmaceutical Co Ltd [2022] FCAFC 39.

Jump to the full court's decision in Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40.

Key Takeaway Points

  • Pharmaceutical patentees must be wary in circumstances where there is:
    • More than one pharmaceutical substance per se disclosed and falling within the claims of the patent; and/or

    • multiple goods included in the Australian Register of Therapeutic Goods (ARTG) that contain or consist of a pharmaceutical substance claimed in a patent.

An application to extend the term of a patent must be based on the earliest entry in the ARTG of goods containing a pharmaceutical substance that falls within the scope of the claims of the patent. This is so regardless of whether the sponsor of the goods included in the ARTG and containing the substance is the patentee or another entity (including a competitor!) and regardless of in which category of the ARTG the goods are included.   

  • Determining the relevant entry in the ARTG for an application to extend the term of a patent is significant because:
    • The application to extend the term of a patent must be made within six months of the relevant entry being made in the ARTG or the date the patent was granted (whichever of these dates is later); and

    • The length of the patent term extension is calculated based on the date of the relevant entry in the ARTG; and
  • The current position in Australia is that a patent will only be extended if there is at least 5 years between the date of the patent and the date of first regulatory approval of goods containing a pharmaceutical substance disclosed and claimed in the patent. Where more than one substance is disclosed and claimed in a patent and there are multiple regulatory approvals for goods that contain or consist of those substances, the length of the patent term extension is to be calculated from the earliest first inclusion in the ARTG of goods relating to any of those substances.

  • Accordingly, when considering whether an extension of term is possible, it is important to identify each pharmaceutical substance falling within the claims of the patent and the first regulatory approval date of goods on the ARTG containing each relevant pharmaceutical substance.

  • Going forward, patentees, pharmaceutical companies and key stakeholders in the industry should ensure due consideration is given before filing a patent claiming two or more pharmaceutical substances.

First Instance

Ono successfully applied for judicial review of the Commissioner’s decision. Ono argued that under the Act, an application for an extension of the term of a patent should be based on the first regulatory approval date of its own goods – not the goods of a third party. [4] In contrast, the Commissioner argued that the application should be based on the date of inclusion of any goods containing a pharmaceutical substance falling within the scope of the patent – irrespective of whether they are the goods of the patentee or the goods of a third party. [5]

His Honour Justice Beach agreed with Ono’s construction of the relevant provisions. He found that Ono’s construction was preferable and correct. He described the Commissioner’s construction as “seeking to sell a literal form of textualism”, that was “lacking commerciality”.[6]

Full Court’s Decision

The Commissioner appealed his Honour Justice Beach’s decision on the basis that the primary judge erred in construing the relevant provisions of the Act. The Commissioner argued that Justice Beach’s construction was not supported by the words of the Act. It required the inclusion of words into the Act that are “not in the text and are not necessary to give the provision a sensible operation”.[7]

The Full Court found in favour of the Commissioner and held that the first regulatory approval date is “the date of commencement of the first inclusion in the ARTG of goods that contain, or consist of, [the relevant] substance”.[8] If there are multiple goods that meet the requirements for an extension under s 70, the first regulatory approval date is the first regulatory approval date out of all the entries in the ARTG of the goods containing pharmaceutical substances that satisfy the conditions in s 70. The Full Court confirmed that the first regulatory approval date does not necessarily have to relate to the goods of the patentee and may relate to the goods of a competitor.

In coming to its conclusion, the Full Court examined both the text and the object of the Patents Act. The Court emphasised that the extension of term regime “seeks to balance a range of competing interests, not just the interests of the patentee” and “whilst it may be accepted that the object of the extension of term regime is to compensate a patentee of a pharmaceutical substance for time lost in obtaining regulatory approval before it can exploit its invention, it does not follow that ss 70, 71, and 77 should be construed so as to achieve what might be described as a commercial outcome for a patentee”. [9]

Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40

In Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40, the Full Court of the Federal Court considered an appeal brought by Merck Sharp & Dohme Corp. and Merck Sharp & Dohme (Australia) Pty Ltd (collectively, MSD) in relation to the validity of an extension of term of a patent granted by the Commissioner, which was subsequently found to be invalid at first instance.[10]

Facts

MSD is the patentee of Australian Patent No. 2002320303 dated 5 July 2002, which relates to the treatment or prevention of diabetes. The patent discloses and claims two different pharmaceutical substances: sitagliptin alone and sitagliptin in combination with metformin (sitagliptin/metformin).

MSD’s anti-diabetic medication containing or consisting of sitagliptin, ‘Januvia’, was first given regulatory marketing approval in Australia and included in the ARTG as an “export only listing” on about 16 November 2006. The same occurred around two years later on about 27 November 2008 for MSD’s anti-diabetic medication containing or consisting of sitagliptin/metformin, ‘Janumet’.

The term of the patent is due  to expire on 5 July 2022. On 19 November 2009, the term of the patent was extended by the Commissioner until 27 November 2023, based on the ARTG inclusion of Janumet.

First Instance

MSD had initiated proceedings against the respondent, Sandoz Pty Ltd (Sandoz), for threatened infringement of its patent and Sandoz brought a cross-claim seeking rectification of the Patents Register on the basis that the expiry date of the patent recorded on the Register was incorrect as the extension term granted by the Commissioner was invalid.

At first instance, her Honour Justice Jagot dismissed MSD’s application and found in favour of Sandoz, allowing the cross-claim.[11] The dispute before the primary judge (and again before the Full Court, which is explored in more detail below) centred on the construction of s 77 of the Act.

Her Honour agreed with the construction put forward by Sandoz and the Commissioner - that the words of the provision mean what they say, therefore the formula to determine the term of the patent extension refers to and should take into consideration any of the pharmaceutical substances in the patent that satisfy the requirements under s 70(2).[12] The Judge concluded that both sitagliptin and sitagliptin/metformin satisfied these requirements, however, Januvia containing the compound sitagliptin was given regulatory approval before Janumet, which contained sitagliptin/metformin.[13] As such, the primary judge held that the first regulatory approval date that should be used to determine the term of extension of the patent is the date Januvia was included in the ARTG. This meant that the term of the extension that should have been granted by the Commissioner was zero i.e. the original patent expiry date applies.[14]

Full Court’s Decision

On appeal to the Full Court, MSD argued that the primary judge had erred in law in construing the statutory language in s 77 of the Act in a way which did not give effect to the statutory scheme, and that the primary judge erred in concluding that the patent was only entitled to a term extension of zero.[15]

MSD relied on its primary and alternative constructions of s 77 put forward at first instance, namely that the words mean the earliest first regulatory approval date of any or all substances satisfying s 70(3).[16] As it was found at first instance only the sitagliptin/metformin compound satisfied the requirements under s 70(3),[17] the practical effect of MSD’s construction is that the term of the patent extension would be calculated based on the later date of the listing of goods containing the sitagliptin/metformin substance, which would result in the extension as granted by the Commissioner.[18]

The Full Court ultimately upheld the primary judge’s finding that the Register of Patents should be rectified to record an extension of term of the patent of zero.[19] The Full Court found that the language of s 77 does not support the construction for which MSD argued, stating that MSD’s approach is “contrary to a straightforward reading of s 77(1)” and “would render the words…redundant”.[20] Rather, the primary judge was correct in adopting Sandoz and the Commissioner’s construction, as the provision expressly refers to s 70(2) and not s 70(3), explicitly contemplates that an extension of the patent term may be zero but not less than zero, and identifies that the relevant calculation takes into account the “earliest” first regulatory approval date.[21]

The Full Court also considered an argument that the first registration of Januvia should be disregarded because it was for export only.  This argument was rejected and the Court confirmed that the first inclusion of goods in any part of the ARTG is relevant.

The Full Court went on to point out that the consequence of the grant of an extension is that the term of the whole of the patent is extended.[22] Based on MSD’s construction, the effect of the extension would be to extend MSD’s monopoly rights under the patent not only for the composition sitagliptin/metformin but also for sitagliptin and indeed any other pharmaceutical substance disclosed and claimed in the patent and also extends all exploitation rights held by the patentee.[23] Therefore, the Full Court considered that the view taken by the primary judge “is in accordance with a policy objective of achieving a balance between the competing interests of a patentee of a pharmaceutical substance whose exploitation of monopoly has been delayed, and the public interest in unrestricted use of the pharmaceutical invention”.[24]

The Full Court observed that had MSD’s patent confined itself to the single pharmaceutical substance sitagliptin/metformin, then it could have relied on the first regulatory approval date of goods containing that pharmaceutical substance as the basis for extending the term. 

Conclusion

Based on these decisions, it is now clear that where there are two or more pharmaceutical substances that are disclosed and claimed in a patent, the calculation of the term of the extension of the patent will be based on the earliest date of ARTG inclusion of goods containing any of the substances.  This will be the case regardless of whether the goods incorporating the substance are registered to the patentee or another party.

Thus it is crucial to identify all pharmaceutical substances per se that are disclosed and claimed in a patent and to determine which of them is contained in goods included on the ARTG.  The first regulatory approval date of relevant goods will be the one to consider for the purposes of an extension of term.

Going forward, this will also be relevant to patentees when drafting patents, as they may wish to ensure that where multiple substances are disclosed in a specification, the claims relating to each are separated into divisional patents.   This should ensure that only the pharmaceutical substance per se that falls within the claims of each divisional patent is to be considered for the purpose of determining any extension of term of that divisional patent.

It is very likely that these decisions may be the subject of applications for special leave to appeal to the High Court, so there could be further developments in relation to interpretation of the extension of term provisions of the Patents Act.  We will continue to report on any further steps in these cases.

References

[1] Alphapharm Pty Ltd v H Lundbeck A/S (2014) 314 ALR 182, [48].
[2] Alphapharm Pty Ltd v H Lundbeck A/S (2014) 314 ALR 182, [60].
[3] Commissioner of Patents v Ono Pharmaceutical Co Ltd [2022] FCAFC 39, [8].
[4] Ono Pharmaceutical Co Ltd v Commissioner of Patents [2021] FCA 643, [27].
[5] Ono Pharmaceutical Co Ltd v Commissioner of Patents [2021] FCA 643, [27].
[6] Ono Pharmaceutical Co Ltd v Commissioner of Patents [2021] FCA 643, [28]-[29].
[7] Commissioner of Patents v Ono Pharmaceutical Co Ltd [2022] FCAFC 39, [64].
[8] Commissioner of Patents v Ono Pharmaceutical Co Ltd [2022] FCAFC 39, [123].
[9] Commissioner of Patents v Ono Pharmaceutical Co Ltd [2022] FCAFC 39, [115].
[10] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2021] FCA 947.
[11] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2021] FCA 947, [96].
[12] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2021] FCA 947, [92].
[13] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2021] FCA 947, [18] to [19].
[14] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2021] FCA 947, [30].
[15] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40, [45] to [46].
[16] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40, [21].
[17] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2021] FCA 947, [19].
[18] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40, [28].
[19] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40, [86].
[20] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40, [77] to [78].
[21] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40, [74].
[22] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40, [83].
[23] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40, [81].
[24] Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40, [79].

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