Good news for pharmaceutical innovators – Federal Court confirms patent term extensions should be based on patentee's own product

In brief 8 min read

In the appeal decision Ono Pharmaceutical Co, Ltd v Commissioner of Patents [2021] FCA 643 (the Ono decision) the Federal Court of Australia has overturned the decision of the Australian Patent Office in Ono Pharmaceutical Co Ltd et al. [2020] APO 43 (the APO decision) and confirmed that an application for patent term extension (PTE) should be based on the patentee's own product, not that of a third party or competitor product.

This takes away the onerous burden of performing comprehensive searches and monitoring of product listings on the Australian Register of Therapeutic Goods (ARTG) to identify products that fall within the scope of the patent claims. The Ono decision is welcome news for pharmaceutical innovators.

The Commissioner of Patents has since appealed the Ono decision. In the meantime, however, the Australian Patent Office will be applying the findings in the Ono decision when assessing new PTE applications.

Watch this space for further significant developments!

Key takeaways

• When a patent claims more than one pharmaceutical product which has received regulatory approval, it is the 'earliest registered product' that must be used to determine PTE eligibility and to calculate the length of extension – however, in this context the 'earliest registered product' does not refer to goods registered by an unrelated competitor.
• From the perspective of pursing PTE, patentees will not be required to conduct searches and monitor listings on the ARTG to identify competitor products that fall within the scope of the patent claims.
• The Ono decision did not discuss the circumstance where the sponsor of the relevant product listed on the ARTG is a licensee of the patent for which PTE is sought, however it would seem implicit from Beach J's reasoning that the PTE provisions are intended to capture such 'friendly' arrangements in which the patentee has a commercial interest in the listed product.
• The PTE regime is beneficial and remedial and a liberal rather than a literal construction of the provisions is to be preferred.

Legislative framework

In order to be eligible for PTE. the following threshold requirements must be satisfied:

1. The patent must relate to a pharmaceutical substance per se or a pharmaceutical substance when produced by recombinant DNA technology. The pharmaceutical substance must be disclosed in the specification and must fall within the scope of at least one claim – ss 70(2).
2. Goods containing the pharmaceutical substance must be listed on the ARTG before the standard 20-year term of the patent expires, and at least five years must have elapsed between the date of the patent (ie the ultimate filing date) and the 'first regulatory approval date' of a product containing the pharmaceutical substance – ss 70(3).
3. The term of the patent must not have been previously extended – ss 70(4).

Subsection 71(2) prescribes a deadline for applying for PTE which is six months from the date of grant of the patent, or six months from the date of first inclusion of pharmaceutical goods containing the relevant pharmaceutical substance in the ARTG (this reference to the 'first inclusion' was of particular significance in the Ono decision).

Under section 77, the length of PTE is equal to the period between the date of the patent and the first date on which a product containing a pharmaceutical substance covered by the claims was listed on the ARTG, reduced by five years (with the maximum term of the extension being five years).

Background

Ono Pharmaceutical Co., Ltd and E.R. Squibb & Sons, L.L.C (the patentee) applied for PTE in relation to Australian Patent No 2011203119 which covers monoclonal antibodies that bind to PD-1. The patentee filed two PTE requests:

• the first was based on its own product OPDIVO, which had an ARTG listing date of 11 January 2016 – this was the patentee's preferred option as it would provide a longer PTE period;
• the second was based on KEYTRUDA, a competitor product of Merck Sharp & Dohme, which also contained a pharmaceutical substance covered by the patent claims, and had an earlier ARTG listing date of 16 April 2015. Ono filed this PTE application as a contingency in view of the reference to 'the first inclusion' in ss 71(2). This second application had a further complication in that if KEYTRUDA was found to be the correct product upon which to seek PTE, the Commissioner would also need to grant an extension of time as the PTE application had been filed more than six months after the first regulatory approval date of KEYTRUDA.

The Examiner who initially assessed the PTE application found that since KEYTRUDA had an earlier ARTG start date, it should form the basis of the PTE application. The patentee disagreed and requested a hearing. At the hearing, the key thrust of the patentee's submissions was that the reference to the 'first regulatory approval date' in s 71(2) in the context of PTE eligibility should be construed as the regulatory approval date of its own product, OPDIVO. The Delegate was unpersuaded by the patentee's submissions and refused the patentee's request for PTE based on OPDIVO.

Rather than pursuing the PTE application based on KEYTRUDA, the patentee requested Judicial Review in the Federal Court under s 5(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth). In the Federal Court, Justice Beach found that the patentee's construction of the relevant provisions is the correct one and that the Delegate's decision should be set aside.

Decision

Justice Beach analysed both the patentee's construction of ss 70, 71 and 77 and the supporting extrinsic materials and that of the Commissioner's. His Honour referred to the patentee's construction as 'reasonable and commercial', while the Commissioner's construction was referred to as 'dictated by strict textualism'. Relevantly, Justice Beach rejected the Commissioner's reasoning that none of the provisions impose a requirement that there be any relationship between the patentee seeking the extension and the entity that holds the ARTG approval for the relevant goods listed on the ARTG.

In reviewing the extrinsic materials, Justice Beach noted that such materials cannot drive the analysis of construction, but it can assist. His Honour referred to the Explanatory Memorandum, Intellectual Property Laws Amendment Bill 1997 (Cth) (the 1997 EM) and the second reading speech to the Bill that became the Intellectual Property Laws Amendment Act 1998 (Cth), which introduced the PTE scheme in the Act and explained that the purpose of the PTE provisions was to restore the time lost by patentees in gaining marketing approval, and to compensate the patentee for the additional time, expense and difficulty in developing and commercialising a new pharmaceutical substance. On this basis, Justice Beach accepted the patentee's submission that it would be 'manifestly absurd or unreasonable' if the Act were to be interpreted in such a way that a PTE application could be based on a product owned by an unrelated third party rather than a product developed by the patentee. Justice Beach agreed with the patentee's reasoning that this was only logical, given that the regime is beneficial and remedial. Turning to his Honour's observations in this regard, Justice Beach said at [135]:

'The extension of term regime is beneficial and remedial. It is designed to compensate a patentee of a pharmaceutical substance for the loss in time before which it can exploit its invention. It is designed to remedy the mischief of a shortened period for an effective monopoly that has been caused by delays in obtaining regulatory approval. Accordingly, a liberal rather than a literal construction is to be preferred.'

In the APO decision, the Delegate had principally relied upon the decision of Justice Bennett in Pfizer Corporation v Commissioner of Patents (No 2) (2006) 69 IPR 525 (Pfizer (No 2)) where her Honour was required to determine the meaning of 'first inclusion in the ARTG' (s 70) and the 'earliest first regulatory approval date' (s 77). In Pfizer (No 2), the Commissioner directed amendments to the Register of Patents to shorten the terms of four Pfizer patents. In that case, the terms of the Pfizer patents had been extended on the basis of date that the pharmaceutical substances had received marketing approval. However, the products had previously been listed on the ARTG as export-only goods prior to receiving marketing approval. On appeal, Justice Bennett held that, in respect of s 70, the 'first inclusion' on the ARTG includes any relevant listing and is not limited only to listing in the ARTG upon receipt of marketing approval. The appeal was therefore dismissed. Despite the differences in the factual situations, the Delegate found that he could not ignore the words expressed in Pfizer (No 2) at [34] – that is:

'Section 77 refers to the ‘earliest first regulatory approval date’ (emphasis added). This recognises that the patent may cover more than one pharmaceutical substance and provides that the term of the extension is based on the earliest of the approval dates that apply to the patent.'

On that basis, the Delegate concluded it was not open to the Commissioner to calculate the term of the extension only on the basis of goods sponsored by the patentee, and maintained that the appropriate product on which to base the PTE application was Merck's KEYTRUDA product.

Justice Beach disagreed and stated that Pfizer (No 2) did not assist the Commissioner as the underlying factual scenario was different. Notably, his Honour found there is nothing in Justice Bennett's reasons suggesting she was doing anything other than talking about Pfizer's goods at all times.

In reaching his decision, Justice Beach summarised that the patentee's construction fit within the ordinary meaning of the statutory language and was in harmony with the legislative intent. Importantly, Justice Beach reaffirmed that it is not possible to pick and choose the pharmaceutical registration on which to base a PTE request, finding that PTE must be based on the first regulatory approval date of a patentee's own pharmaceutical product, which is covered by the claims.

His Honour went on to provide reasons as to why the Commissioner's position, if accepted, would be absurd or unreasonable, primarily because both the patentee and the Commissioner would be faced with an onerous burden of conducting comprehensive searches and monitoring regulatory approvals of each and every product listed on the ARTG, and even if such searches and monitoring processes were performed with care and skill, there was a risk that third party products will simply be missed.

Accordingly, Justice Beach accepted the patentee's more liberal construction of the statutory framework, rather than the Commissioner's approach which was, in his Honour's words, dictated by 'strict textualism'.

Implications

• The Ono decision provides welcome clarity for pharmaceutical patentees that the 'earliest first regulatory approval date' is with reference to the patentee's own product, and does not refer to an unrelated third party's ARTG registration. Interestingly, the Ono decision did not discuss the circumstance where the sponsor of the relevant product listed on the ARTG is a licensee of the patentee. However, it would seem implicit from Justice Beach's reasoning that the PTE provisions are intended to capture such 'friendly' arrangements between sponsors/licensees/patentees in which the patentee has a commercial interest in the product listed on the ARTG by its commercial partner.
• The good news following on from the Ono decision is that patentees will no longer be faced with the burden of monitoring product listings on the ARTG to avoid situations where their PTE request is forced to be based on an unrelated third party product, resulting in a shorter extension of term than if the request had been based on the patentee's own product.
• The Commissioner of Patents has appealed the Ono decision. Until further notice, the Australian Patent Office will be adopting the findings in the Ono decision when assessing new PTE applications.