Overview

The year 2024 brought several significant intellectual property judgments in the life sciences and pharmaceuticals sector, particularly in the context of patents and consumer law. In Invisalign v SmileDirectClub, the Full Federal Court found that SmileDirectClub’s comparative advertising contravened the Australian Consumer Law, emphasising the need for accuracy and fairness in health and efficacy claims in comparative advertising. The Full Federal Court also handed down a seminal judgment in Sandoz v Bayer, holding that in the context of the pharmaceutical development process, taking a drug candidate forward in a generally high-risk area is not enough to overcome an obviousness challenge. The same case also provided valuable guidance on the question of ascertainment of prior art documents under the pre-Raising the Bar Patents Act.

Meanwhile, the ToolGen v Fisher decision highlighted the scope for correcting obvious mistakes in patent claims, reinforcing that while the error and its correction must be apparent to a skilled person, the skilled person will be taken to bring all their knowledge to that question. Australia’s highly contentious patent term extension regime was again tested in Novartis v Pharmacor, where the court ruled that Novartis’ term extension should be removed.

The Australian Market

The life sciences sector continued to see significant growth in Australia in 2024, with close to 1,600 biotechnology and medical technology companies now operating there. This year, the federal government announced its Strategic Examination of Research and Development, the first review into R&D in nearly 20 years, aimed at growing Australia’s science and innovation capabilities. The Strategic Examination coincides with an increased push by the industry for policy reforms to strengthen Australia’s capacity for life sciences research, development and commercialisation, with the first National Biotech and Medtech Development and Commercialisation Summit occurring in November 2024.

The year 2024 also saw the government expand on its commitment to ensuring affordable and accessible medication. The government introduced significant new funding (AUD4.3 billion) to the Pharmaceutical Benefits Scheme (PBS), which included AUD3.4 billion allocated for new and amended listings to the PBS, and delivered a funding boost to community pharmacies of AUD3 billion per the commencement of the eighth Community Pharmacy Agreement.

Inherently risky business – the Full Court finds rivaroxaban patents obvious

The Full Federal Court has reversed a decision of Justice Rofe at first instance to invalidate Bayer’s patents for a particular formulation of rivaroxaban and a once-a-day dosing regimen.

The decision held that general risks in the routine drug development process should be understood as part of the background against which the person skilled in the art operates, and are not sufficient, on their own, to defeat an obviousness challenge to formulation patents and dosage regimen patents which would have been arrived at in the course of phase I, II and III clinical trials.

Rivaroxaban is in a class of factor Xa inhibitors, and is the active ingredient in Bayer’s block-buster drug XARELTO. XARELTO is used as a treatment for deep-vein thrombosis and pulmonary embolism. XARELTO is Bayer’s best-selling drug globally, earning around AUD140 million under the PBS in 2024. Internationally, Bayer and Sandoz have been involved in a number of disputes regarding rivaroxaban, including in the UK, where the UK High Court revoked Bayer’s patents.

The case concerned Australian Patent No 2004305226 (the “226 Patent”) for a formulation, and Australian Patent No 2006208613 (the “613 Patent”) for a once-a-day dosing regimen. At first instance, Justice Rofe rejected an obviousness challenge based on the common general knowledge (CGK) together with WO 919, the compound patent which disclosed rivaroxaban as a particularly promising candidate.

In her reasoning, Justice Rofe accepted that WO 919 would be of interest to a drug development team seeking to develop a new antithrombotic drug, and that the skilled reader would likely focus on rivaroxaban when selecting lead candidates to take into further drug development work. Justice Rofe then went on to apply the “reformulated Cripps question”, finding that:

• the well-known standard series of steps of drug development were not routine steps; and
• Bayer’s drug development journey was more akin to a “voyage of discovery” than “working towards the invention with an expectation of success”.

On appeal, the Full Court found that Justice Rofe had placed too much emphasis on “the risk of failure to gain regulatory approval which is inherent in any drug development project”, and what would have been undertaken as a matter of course following the selection of rivaroxaban as a lead candidate.

Further, the Full Court confirmed that the “relevant expectation” should be measured against the ordinary level of expectation and risk inherent in routine work in the field. It is not necessary to know a particular outcome at the outset of the hypothetical task. Rather, the Full Court stated the question as whether a person skilled in the art with the relevant CGK, would have been directly led, as a matter of course, to develop rivaroxaban in the expectation that it might produce a useful alternative (or better drug than) the existing compounds for the treatment of thromboembolic disorders.

In the absence of any evidence of any particular problem or difficulty overcome in arriving at a suitable formulation (using a standard wet granulation process) or an (obviously desirable) once-a-day dosing regimen, the Full Court found that these matters would have been arrived at in the course of conventional clinical trials.

Bayer has applied to the High Court of Australia for special leave to appeal.

Ascertaining prior art for pre-Raising the Bar patents

In the same case, the Full Court addressed the standard to be applied in determining whether the person skilled in the art could be reasonably expected to have “ascertained” a prior art document, which is a prerequisite for considering obviousness in light of the prior art.

At first instance, Justice Rofe had accepted that a person skilled in the art would have conducted searches on patent databases using search terms including factor Xa inhibitors, and that the search would have returned results that included WO 919. She accepted that Sandoz’s expert, Professor Roberts, had reviewed the search of the patent database, identified WO 919 as a top priority, and had done so without the benefit of hindsight. However, Justice Rofe found that Sandoz’s evidence on ascertainment involved a “short cut” because:

• it involved a hypothetical literature search that was limited to one search term (factor Xa inhibitors) and one database; and
• Professor Roberts had been provided with a spreadsheet of search results from which he selected WO 919 as a top priority, but had not been provided with copies of the other documents.

Justice Rofe was critical of the form of this evidence, and found that Professor Roberts had not been provided with “the full suite of results from searches undertaken across all his suggested databases”. Her Honour therefore held that the evidence did not establish that it would be reasonable for the person skilled in the art undertaking a search of the kind described by Professor Roberts, but not restricted to factor Xa inhibitors, to have found WO 919.

On appeal, the Full Court found that, once Justice Rofe accepted that the search results were a subset of the searches that a skilled person would have done, it was not to the point that additional searches might have been performed, or that the skilled person would have been required to review these additional documents or information. It was not, therefore, necessary for evidence to be adduced that the skilled person would select WO 919 over all other information that they would reasonably be expected to have discovered or found out.

Invisalign appeal against SmileDirectClub

In 2024, the Full Court of the Federal Court also weighed in on comparative advertising in proceedings brought by Invisalign against SmileDirectClub.

Invisalign Australia Pty Ltd (“Invisalign”) and SmileDirectClub LLC (SDC) are competitors in the market of clear aligner teeth-straightening products in Australia. Invisalign alleged that SDC made false, misleading or deceptive representations in contravention of ss 18 and 29 of the Australian Consumer Law (ACL) in relation to certain material promoting its clear aligners, which are a type of orthodontic appliance that induces mechanical movement of the teeth (“SDC Aligner Treatment”).

On appeal in Invisalign Australia Pty Ltd v SmileDirectClub LLC [2024] FCAFC 46, the Full Court reversed the first-instance decision of Justice Anderson, finding that SDC had engaged in conduct which contravened the ACL.

Invisalign relied on five groups of representations made by SDC, each of which was considered by the Full Court. These representations and the Full Court’s holdings are summarised below:

1. The comparable treatment representations – the SDC Aligner Treatment was of comparable efficacy to, and would achieve the same or similar clinical outcomes to, traditional braces or Invisalign aligners.

The Full Court did not agree with the primary judge and held that by making the comparable treatment representations, SDC had contravened the ACL, as the dominant impression created by the promotional material was to convey to a consumer that they would end up with the same smile, irrespective of whether they chose braces or SDC Aligner Treatment; that consumers would achieve the same or a similar clinical outcome from SDC Aligner Treatment as they would achieve with Invisalign treatment; and that SDC Aligner Treatment was of comparable efficacy to Invisalign treatment and traditional braces treatment.

2. The price comparison representations – the SDC Aligner Treatment was less expensive in all instances, or was “60% less” or “up to 60% less” expensive for equivalent treatments obtained from an orthodontist or dentist, such as braces or Invisalign.

3. The lower cost representations – the SDC Aligner Treatment provided a comprehensive solution to orthodontic issues, or alternatively all non-severe orthodontic issues, at significantly less cost than that of equivalent treatments with braces or Invisalign.

Again, the Full Court did not agree with the primary judge and held that by making the price comparison representations and the lower cost representations, SDC had contravened the ACL, as the dominant message of the advertisements was that the products were interchangeable or equivalent or had an equivalent effect on consumers’ teeth, but that SDC Aligner Treatment cost “60% less”. This message was not qualified by reference to the severity of the problems with the consumers’ teeth. Further, even though this message did not include express claims that SDC cost 60% less than Invisalign, their Honours held that the ordinary reasonable consumer interested in undertaking treatment for teeth straightening would understand that SDC could only be referring to its competitors.

4. The less than AUD4-a-day representation – the total cost associated with SDC Aligner Treatment was “less than $4 a day” for the duration of treatment.

SDC admitted that it made the representation in its advertising material but that the representation was not referring to the treatment time of an average of four-to-six months as contended by Invisalign, but rather to the 24-month period over which instalments for SDC Aligner Treatment were paid.

The primary judge held that the placement of a footnote above the full stop was sufficiently prominent to alert the ordinary and reasonable consumer to the manner in which the representation had been calculated. Their Honours considered the primary judge had made no error.

5. The total-cost representation – the total cost associated with the SDC Aligner Treatment was either AUD2,825 for upfront payment or AUD3,155 by instalments.

Invisalign alleged that the total-cost representation was misleading as it did not refer to the ongoing costs associated with purchasing retainers at six-monthly intervals after the SDC Aligner Treatment was completed, which was required to keep a consumer’s teeth in their new position. The Full Court agreed with the primary judge that it was clear that the ongoing costs were outside the cost of the SDC Aligner Treatment and therefore that the total-cost representation did not contravene the ACL.

Notably, the only representations which were made by Invisalign were those concerning comparative advertising. This is an important reminder that when engaging in comparative advertising, context is key. It is always prudent to ensure that comparative advertisements have accurate comparisons that compare like products and/or services fairly.

Saved by an obvious mistake – ToolGen’s patent amendments

The decision in ToolGen Incorporated v Fisher (No 3) [2024] FCA 539 serves as a useful reminder of the ability to amend patent claims to correct an “obvious mistake”, even where the effect is to broaden the claims.

Justice Nicholas had previously held that each of the claims of ToolGen’s patent application would, if granted, be invalid. ToolGen sought leave to amend the claims of the patent application pursuant to s 105(1A) of the Patents Act 1990 (Cth) (the “Patents Act”).

ToolGen sought solace in s 102(3)(a) of the Patents Act, arguing that claims 10 and 19 when read together contain an “obvious mistake”. Section 102(3)(a) provides that where an amendment is to correct a clerical error or an obvious mistake, the requirements in s 102 regarding the allowability of amendments do not apply.

The claims of a patent serve to give the public notice of the limits of the monopoly. Because amendments are retrospective, amendments which broaden the claims are not allowed – they would turn earlier non-infringing activities into acts of infringement. The narrow exceptions to this rule are amendments for the purpose of correcting a clerical error or obvious mistake. The theory is that an obvious mistake cannot have misled a person skilled in the art.

Justice Nicholas considered the principles relevant to what constitutes an obvious mistake, including:

• both the error itself and the necessary correction must be obvious to the person skilled in the art;
• “mistake” is a failure to express the real intention of the writer of the specification;
• the correction required does not cease to be “obvious” because there is more than one way of expressing it; and
• it is not an obvious mistake if extraneous evidence, beyond what is required to put the court in the position of a person skilled in the art, is needed to show the mistake.

Justice Nicholas considered that the skilled person would understand there to be a mistake in the “composite claim” (ie, claim 10 when read with claim 19) and that the relevant correction of the mistake was one which would be obvious to the person skilled in the art. His Honour considered that the skilled person would clearly understand from reading the specification that the various embodiments of the system described included embodiments in which the guide RNA was created in vitro before introduction into the cell, as well as embodiments in which nucleic acid encoding the guide RNA was introduced into the cell where the guide RNA was subsequently transcribed. His Honour further considered that the skilled person would understand that claim 10 was directed at embodiments in which the guide RNA was produced in vivo and that claim 19 was directed at embodiments in which the guide RNA was an in vitro-transcribed RNA.

The relevant correction would, therefore, involve re-writing the composite claim to eliminate the inconsistency in language between claims 10 and 19 so that, rather than referring to nucleic acid encoding a guide RNA, the composite claim instead referred to an in vitro-transcribed guide RNA. The result was that claim 10 would continue to include use of a guide RNA produced in vivo and the composite claim would include use of a guide RNA produced in vitro.

Amendments to correct obvious mistakes are an exception to the rule in s 102 of the Patents Act that amendments must not broaden the scope of the claims. Although amendments to correct mistakes can be allowed, even in a manner which broadens the claims, both the mistake and its correction must be obvious.

Term extensions remain in the firing line

As we reported in the 2024 Trends & Developments report in this guide, the patent term extension (PTE) regime continues to be a contentious battleground in Australian litigation.

A patentee may apply for a PTE if certain conditions are met, including that a “pharmaceutical substance per se” is “in substance disclosed” in the specification and “in substance fall[s] within the scope” of the claims.

In Novartis AG v Pharmacor Pty Limited (No 3) [2024] FCA 1307, Novartis sought a PTE in relation to goods containing, or consisting of, the pharmaceutical substance included in the ARTG as: “ENTRESTO sacubitril/valsartan (combined as a sodium salt hydrate complex)”. Novartis obtained the PTE in relation to its patent titled “Pharmaceutical compositions comprising valsartan and NEP inhibitors”, of which claim 1 is to pharmaceutical compositions comprising an NEP inhibitor, such as sacubitril, and an AT 1-antagonist, such as valsartan, and salts thereof.

Pharmacor challenged the validity of the PTE on the basis that Entresto contains “TSVH”, a single crystalline complex of the anionic forms of sacubitril and valsartan. Pharmacor argued that because the claims related to two separate salts of sacubitril and valsartan, TSVH was not disclosed and claimed in the patent.

Novartis responded that the two distinct molecules had not lost their identities in forming the complex, pointing to the ARTG certificate which refers to Entresto as “sacubitril/valsartan (combined as a sodium salt hydrate complex)”.

Justice Yates agreed with Pharmacor, finding that two pharmaceutical substances per se were disclosed and fell within the scope of claim 1, of which Entresto comprised neither. His Honour found that TSVH was a different compound with a unique set of physiochemical properties, and was not disclosed “or even envisaged” in the patent.

Novartis v Pharmacor is yet another decision highlighting the nuances of Australia’s PTE provisions. While the Australian regime has historically been considered a relatively patentee-friendly one, more recent Federal Court judgments have tested its limits.