Patent Litigation Trends and Developments
Interim COVID-19 measures brought rapid changes to the work of both the courts and practitioners running patent cases in Australia in 2020, but as we look to the year ahead it seems clear that many of the new ways of working have improved the courts' efficiency and are here to stay.
The Federal Court of Australia moved quickly, in March 2020, to minimise in-person attendance by holding all hearings remotely via online platforms, other than in truly exceptional circumstances approved by the Chief Justice. The Court then rejected a number of applications by parties to vacate hearing dates as a result of COVID-19, and the rapid, widespread adoption of digital tools for court hearings enabled trials and appeals to go ahead as scheduled.
To facilitate electronic filing of documents, the Court has temporarily allowed documents (including affidavits) to be signed electronically and is accepting unsworn affidavits on the understanding that, if required, those documents will be sworn or affirmed at a later date. The Australian Patent Office (IP Australia) also modified its practices by holding hearings using videoconference facilities.
If the number of key decisions in 2020 is anything to go by, the courts appear to be getting through greater caseloads. Indeed, less time in court has seen a rush of judgments, including in some eagerly awaited cases.
High Court of Australia adopts the doctrine of exhaustion of patent rights
The High Court has adopted the doctrine of "exhaustion of rights" for patents, diverging from more than 100 years of application of the "implied licence" doctrine, in Calidad v Seiko Epson  HCA 41. The two doctrines attempt to overcome the inherent tension between the rights of a patentee and those of a purchaser of a patented product: the former by providing that the patentee’s rights in the particular product are extinguished upon first sale; the latter by providing that, subject to any express conditions imposed at the time of sale, the purchaser has an implied licence to use the particular product without infringing the patent.
By a narrow four-to-three majority, the High Court confirmed that the implied licence doctrine is no longer good law in Australia, rejecting it as complicated and reliant on a legal fiction. The majority noted the doctrine’s lack of alignment with fundamental laws relating to personal property, and limited applicability in the face of modern laws prohibiting various forms of anti-competitive conduct. The majority considered the doctrine of exhaustion, on the other hand, to have “the virtues of logic, simplicity and coherence with legal principle”.
In reaching this decision, the majority distinguished between a patentee’s exclusive right to “make” new patented products and a purchaser’s right to “repair” a patented product, including to prolong the life of a patented product to make it more useful or replace non-patented parts. The majority explained the distinction between “make” and “repair” as relieving the tension between the law of personal property and patent law. The majority regarded this as consistent with the new objects clause inserted as Section 2A of the Patents Act 1990 (Cth) in February 2020, one component of which is ensuring the efficiency of the market economy. This is the first patent case to be decided by the High Court since the enactment of Section 2A and demonstrates the Court’s willingness to give effect to the new provision.
The High Court’s decision, whilst a fundamental change to Australian patent law, brings Australia more in line with the long-standing jurisprudence in the USA and Europe. Patentees will need to rely on express contractual restrictions to control the use of patented products after sale. Patenting strategies will need to be adjusted accordingly.
First judicial consideration of the new sufficiency and support requirements
In Merck Sharp & Dohme v Wyeth (No 3)  FCA 1477, Justice Burley has provided the first detailed judicial analysis on the law of support following the “Raising the Bar” (RTB) reforms to the Patents Act 1990 (Cth). Wyeth’s appeal to the Full Court will likely be heard in 2021, but in the meantime the decision sets out a useful contrast between the new law of “support” and the old law of “fair basis”. It also demonstrates the elevated standard for patents under the post-RTB “support” regime and the considerable changes to Australian patent law brought about by the RTB reforms.
Under the old regime, which still applies to patents for which examination was requested before 15 April 2013, the relationship between the disclosure in the body of a patent specification and the breadth of the claims is governed by the legal requirement of “fair basis”. The oft-quoted lines are that there must be a “real and reasonably clear disclosure” of what is claimed and that a claim must not travel beyond the matter in the specification. As a result, if the invention as claimed is broadly described in the specification, the fair basis requirement will typically be met.
In response to concerns that Australia had allowed a proliferation of overly broad patents, the RTB amendments were introduced to bring the Australian position more in line with the corresponding provisions in Europe and the United Kingdom. Under the post-RTB regime, the claims must be “supported by matter disclosed in the specification”. While the new regime has been considered in a number of decisions by the Australian Patent Office, post-RTB patents are only now starting to reach the courts.
Merck sought revocation of three Wyeth patents concerning improvements in Streptococcus pneumoniae vaccines. Two of the patents, referred to as the “Composition Patents”, were related members of the same family. Both the “Parent Composition Patent” and the “Child Composition Patent” had substantially the same specification and similar claims describing a multivalent immunogenic composition comprising 13 distinct polysaccharide-protein conjugates. However, the Parent Composition Patent was subject to the law pre-RTB whereas the Child Composition Patent was subject to the post-RTB regime.
Applying the pre-RTB “fair basis” provisions to the Parent Composition Patent, Burley J held that the claims were fairly based, as the description of the invention in the body of the specification employed the same inclusive language as appeared in the claims. The asserted claims of the Parent Composition Patent were held valid and infringed by Merck.
In applying the post-RTB “support” provisions on the other hand, Burley J referred to the landmark decision of the UK House of Lords in Biogen v Medeva  RPC 1 and observed that the support requirement has come to be understood as falling “under the umbrella of the requirement that the patent specification contain an enabling disclosure” such that a person skilled in the relevant art, armed with the patentee’s specification, is enabled to perform the invention over the whole area claimed without undue burden.
In accepting the construction as advanced by Wyeth, Burley J concluded that the asserted claims of the Child Composition Patent encompassed any polysaccharide-protein conjugate pneumococcal vaccine comprising 13 or more serotypes. However, while there was no dispute that the specification would enable a skilled person in the art to develop and use a 13-valent vaccine, the expert evidence was that it was not possible to extrapolate the data in the specification to other serotypes, and that using the specification to develop and use vaccines containing additional serotypes beyond 13 would be a complex and difficult task. The asserted claims of the Child Composition Patent were, therefore, held invalid for lack of support.
Additional damages for patent infringement
A Full Court of the Federal Court of Australia has provided useful guidance on what constitutes “flagrant” infringement in Oxworks Trading v Gram Engineering  FCAFC 240, suggesting that additional damages will only be awarded in rare cases in Australia.
Section 122(1A) of the Patents Act 1990 (Cth) provides that a court may award additional damages for infringement of a patent if the court considers it appropriate to do so, having regard to:
The purpose of the section is to provide a deterrent to "wilful infringement", but since the provision was introduced in 2007, additional damages have only been awarded in one case.
Although the Full Court dismissed Oxworks’ appeal against the primary judge’s findings on infringement, the Full Court overturned the award of additional damages, stating that the primary judge erred by failing to address the reasonableness of Oxworks’ non-infringement defence.
The Full Court provided further guidance on the application of Section 122(1A), stating that:
The Full Court’s decision suggests it is unlikely that additional damages will be awarded where a party has knowledge of a patent but believes, on an objectively reasonable basis, that its conduct does not infringe the patent or that the patent is invalid.
The best method is best included
The somewhat uniquely Australian "best method" requirement has risen in prominence in recent years, since a Full Court of the Federal Court of Australia found Servier’s patent invalid solely on the ground of lack of best method in Les Laboratoires Servier v Apotex  FCAFC 27. As there is no equivalent ground in the European Patent Convention, and it is not a ground of revocation in the USA, the best method requirement has often been overlooked in international filing strategies. A string of recent cases illustrates the risk of revocation if the requirement is not satisfied.
Under Australian law, a complete specification must disclose the best method of performing the invention known to the patentee at the filing date of the specification. However, it is not necessarily fatal that the complete specification as filed does not disclose that method. Patents with examination dates before 15 April 2013 (that is, to which the RTB reforms do not apply) may be amended to include the best method, it appears even after grant. Patents with later examination dates, however, cannot be amended to include new subject matter.
Amendments sought during litigation, even if technically allowable, are at the court’s discretion and unlikely to be allowed where there has been delay by the patentee. This typically arises where the patentee has been put on notice of the defect by prosecution of corresponding patents in other jurisdictions (see, in particular, BlueScope Steel v Dongkuk Steel Mill (No 2)  FCA 2117). Amendments sought in the Patent Office, on the other hand, must be allowed if they satisfy the technical requirements.
Farewell to innovation patents
The innovation patent system, Australia’s "second tier" patent system, is being phased out. Innovation patents:
From 26 August 2021, applicants will not be able to file new innovation patents. It will, however, be possible to file divisional innovation patent applications having an effective filing date and priority date for each claim that is prior to 26 August 2021. Pending standard patent applications that meet these requirements may also be converted to innovation patent applications. Current rights-holders will not be affected, with the expiry dates of existing innovation patents unchanged, even if they expire after 26 August 2021. The last innovation patent will expire by 26 August 2029.
Patentees will continue to file innovation patents leading up to, and following, 26 August 2021. Innovation patents are cheaper and simpler to obtain than standard patents and can form part of an effective litigation strategy – eg, by filing one or more divisional innovation patents to shore up the claims of the parent patent.
Life Sciences Trends and Developments
While generic launches and small molecule cases continued apace in 2020, the coming year will likely see a growing wave of biosimilar litigation. Although the etanercept case between Pfizer and Samsung Bioepis has been moving at a glacial pace, stalled in interlocutory disputes over preliminary discovery, a number of biosimilars of blockbuster drugs received regulatory approval and came before Australia’s Pharmaceutical Benefits Advisory Committee in 2020, including trastuzumab, adalimumab, bevacizumab and PEG-filgrastim.
Seven of the top ten medicines by reimbursement cost to the Australian government in 2020 are biologicals, each presently without biosimilar competition. Increasing awareness of, and confidence in, biosimilars remains a key policy objective of the Australian government, with both general awareness initiatives and specific update drivers aimed at reducing the overall cost of access. Meanwhile, both policy reform initiatives and some key judicial decisions in 2020 will shape biosimilar litigation strategies on a number of fronts.
TGA’s new “transparency measures” – is the litigation starting line moving?
Patentees in Australia are not usually made aware of potential generic or biosimilar competition until the Therapeutic Goods Administration (TGA) approves the generic or biosimilar product and the registration becomes publicly available. Only then may patentees seek to enforce patent rights, typically seeking urgent interlocutory injunctions to prevent the competitor’s prescription medicine from becoming listed on the Pharmaceutical Benefits Scheme (PBS) before final determination of the proceedings.
Over the last two years, the TGA has undertaken consultation regarding the process for the disclosure of generic and biosimilar medicines under evaluation. In October 2020, the TGA announced that the Australian government has given in-principle approval for measures to be implemented requiring the first applicant for a generic or biosimilar product to provide notification to the patentee upon initial acceptance by the TGA of its application for evaluation. This will effectively give originators an additional notice period of around 8–12 months for small molecule generics, and around 15–24 months for biosimilars.
This measure is expected to be introduced to Parliament in the first half of 2021, but the text of the proposed legislative amendment is not yet available. While the measure has the potential to bring patent disputes forward, there is not proposed to be any time requirement to bring proceedings. Nor is there any requirement for originators to list or publish potentially relevant patents. Unlike the USA, there remains no period of generic exclusivity or other statutory incentive to be the first generic or biosimilar mover.
Swiss-style claims received the full treatment
While methods of treatment are patentable in Australia, many Australian patents include corresponding Swiss-style claims to mirror claims allowable under the European Patent Convention. In Mylan Health v Sun Pharma  FCAFC 116, an enlarged bench of the Full Court of the Federal Court of Australia clarified the law on Swiss-style claims, with implications for both infringement and validity.
The claims in suit related to the use of fenofibrate in the treatment of diabetic retinopathy, a long-term complication of diabetes. The Full Court found that the claims lacked novelty in light of the publication of clinical trial protocol disclosing the hypothesis that the administration of fenofibrate, a known drug, would reduce the rate of development or progression of diabetic retinopathy. The Full Court distinguished Australian law from UK and EPO authorities, which require that the prior art disclose the actual achievement of the therapeutic effect. The claims were also held invalid for lack of inventive step, on the basis that the clinical trial protocol would have directly led a person skilled in the art, as a matter of course, to try fenofibrate for the prevention of treatment of diabetic retinopathy.
Even if the patent were valid, the Swiss-style claims were held not to be infringed by virtue of a skinny label. The Full Court held that the assessment of infringement of Swiss-style claims is an objective one directed to what the product is for, not what the alleged infringer intended to do, having regard to all the circumstances. The decision highlights the value of having both Swiss-style and "method of treatment" claims in Australian patents, as the question of infringement of skinny labelled products involves the application of different tests.
The Full Court will consider the Commonwealth’s appeal for PBS compensation
The Australian government has made clear its interest in seeking compensation from originator pharmaceutical companies where generic competition is delayed by reason of a patent later found to be invalid or not infringed. In two separate proceedings, the Commonwealth sought compensation from Sanofi and Wyeth pursuant to the undertakings as to damages given by those companies in relation to interlocutory injunctions restraining Apotex and Sigma, respectively, from entry into the market. The Wyeth proceeding settled before trial but the Sanofi proceeding went to judgment in Commonwealth of Australia v Sanofi (No 5)  FCA 543.
Under the PBS, the Commonwealth ensures the affordable supply of many prescription medicines by subsidising the cost of those medicines. Once a second brand of a medicine is listed on the PBS (typically a generic), the subsidy paid by the Commonwealth to the supplier is reduced, first by a mandatory statutory price reduction and later by ongoing price disclosure reductions. It is this price difference that was the subject of the Commonwealth’s claims, which in the Sanofi proceeding amounted to approximately AUD325 million.
The principal issue was whether the Commonwealth’s loss would have been sustained but for the grant of the interlocutory injunction. As Apotex’s compensation claim had settled, the evidentiary burden fell to the Commonwealth. On the facts, the Court found that the Commonwealth’s evidence fell short of establishing that Apotex would have sought and obtained PBS listing if the interlocutory injunction had not been granted and, accordingly, dismissed the Commonwealth’s claim for compensation. The Court also found that the Commonwealth’s losses were not a direct consequence of the interlocutory injunction, although they were reasonably foreseeable. This finding turned on the particular form of the orders made when the interlocutory injunction was granted, whereby Apotex undertook not to apply for PBS listing but that undertaking was not supported by any cross-undertaking by Sanofi.
The Court did, however, confirm that originator companies will be liable to compensate the Commonwealth in appropriate cases. The Commonwealth’s appeal, and Sanofi’s contentions against parts of the judgment, will be heard in February 2021. The appeal will impact not only the Commonwealth and innovators but also generic and biosimilar companies, as the Full Court will assess the evidentiary requirements to obtain compensation on an undertaking as to damages.
Patent term extensions remain in hot debate
The patent term extension regime in Australia recognises the length of time that is lost to patentees in the process of obtaining marketing approval for a drug, during which time the patented drug cannot be commercialised. In Re Ono Pharmaceutical  APO 43, the Australian Patent Office confirmed that an application for extension of the term of a patent must be based on the earliest approved pharmaceutical product that is encompassed by the claims, irrespective of whether the product is owned by the patentee or a third party.
The claims of the patent covered two blockbuster drugs with different regulatory approval dates: a product of Ono Pharmaceutical, the patentee, that was registered on 11 January 2016; and a product of Merck Sharp & Dohme that was registered on 16 April 2015. An application for extension of term must be made within six months of the date on which the patent was granted or, relevantly, “the date of commencement of the first inclusion in the Australian Register of Therapeutic Goods of goods that contain, or consist of, the substance”. Ono’s application was filed in time if it could rely on its own product, but not if the relevant product was Merck’s. Given the purpose of the regime, Ono submitted that it would be “manifestly absurd or unreasonable” for a patent term extension to be based on a competitor’s product.
A Delegate of the Commissioner of Patents considered earlier authorities to the effect that the “first inclusion” is not limited to any particular type of inclusion (eg, export-only listing vs registration), and that where two (or more) different drugs fall within the scope of the claims, an extension of term application must be based on whichever of those was first in time. In line with these decisions, the Delegate determined the extension of term provisions were not limited to consideration of only the patentee’s product(s). Ono’s application had, therefore, been made out of time and was refused.
Ono has filed an application for judicial review, due to be heard by the Federal Court in March 2021. In the meantime, patentees will be considering whether other parties’ pharmaceutical substances may fall within the scope of the claims of their patents.
TMT Trends and Developments
The patentability of computer-implemented inventions has been a hot topic in Australia in recent years. The courts and the Australian Patent Office have continued to reject claims which involve the use of computer technology merely as a vehicle to implement a novel method or scheme. Instead, the invention must lie in the computerisation of the method. The outcomes of key appellate hearings in 2020 will shape the approach of the Patent Office and the courts in 2021 and for some years to come.
In Commissioner of Patents v Rokt FCAFC 86, the Full Court of the Federal Court considered a patent application for a digital advertising system and method. The claimed invention involved presenting an “engagement offer” (such as a voucher, survey or chance to win a prize) to a user based on that user’s previous interactions, which if accepted would result in targeted advertising to the user. The aim was to increase engagement with the advertisements themselves, as opposed to engaging consumers directly with a purchase. The Full Court considered that even if this were new and ingenious, it was merely a scheme that was put into effect using existing computer technology in its ordinary way and, hence, was not patentable subject matter. The High Court of Australia refused special leave to appeal, regarding the Full Court as applying established principle.
In Aristocrat Technologies Australia v Commissioner of Patents FCA 778, on the other hand, Justice Burley found a patent to an electronic gaming machine (EGM) valid. The Commissioner of Patents submitted that the claimed invention was no more than a scheme or set of rules for carrying out a game that was implemented using the generic hardware and software components of an EGM to perform their ordinary functions. The Court disagreed, finding that the claimed invention was a machine of a particular construction, the operation of which involves a combination of physical parts and software to implement a gaming function, yielding a practical and useful result. The Court considered it would be “antithetical to the encouragement of invention and innovation” for the use of electronics technology in the circumstances to disqualify the invention from patent eligibility. The Commissioner’s appeal to the Full Court was heard in November 2020, with judgment reserved.
Meanwhile in 2020, Delegates of the Commissioner of Patents have allowed patent applications for a method of allowing a mobile device to work around the "sandboxing" of apps (Facebook Inc APO 19), a system for processing electronic payments (Jagwood Pty Ltd APO 38) and a system and method that uses a graphical user interface to present an augmented reality experience (eBay Inc APO 49).
The test for patent eligibility of computer-implemented inventions remains flexible, which inherently carries with it some level of uncertainty. The use of existing technologies is not inevitably a bar to patentability but it must be made clear that the invention improves or uses computer technology in a new way. We expect the boundaries of patent eligibility to be further tested in 2021.