Judicial Review finds PTEs based on third party products to be “manifestly absurd”
Dr Claire Gregg
The Federal Court of Australia recently conducted a Judicial Review of Australia’s patent term extension (PTE) provisions and found that it is “manifestly absurd” for a PTE to be based on the regulatory approval of a third party product in Ono Pharmaceutical Co, Ltd v Commissioner of Patents  FCA 643 (Ono Pharmaceutical). According to Beach J, this liberal interpretation of the provisions is in line with the beneficial and remedial nature of Australia’s PTE regime and is counter to the more literal interpretation previously adopted by the Patent Office.
The relevant provisions
This decision concerns the interpretation of provisions of the Patents Act 1990 (Cth) (the Act) relating to the eligibility of a patent for PTE (s 70), the timing of a PTE application (s 71) and the duration of PTE (s 77), particularly in relation to the regulatory approval date of the relevant goods.
In particular, s 77 of the Act provides that the term of any extension granted will be equal to the period beginning on the date of the patent and ending on the “earliest first regulatory approval date” of goods containing a relevant pharmaceutical substance, reduced (but not below zero) by 5 years (and with a maximum extension of 5 years). The wording of s 77 “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” (Pfizer Corp v Commissioner of Patents (No 2)  FCA 1176 at ).
The patent at issue (AU 2011203119; the Patent), owned by Ono Pharmaceutical Co., Ltd. and E. R. Squibb & Sons, L.L.C., covers the patentees’ own anti-cancer drug OPDIVO (nivolumab) as well as Merck’s anti-cancer drug KEYTRUDA (pembrolizumab). KEYTRUDA received regulatory approval approximately 9 months before OPDIVO. In view of its later regulatory approval date, a PTE based on OPDIVO would provide a longer extension of term. However, the Patent Office previously determined in G.D. Searle  APO 31 (Searle) that a PTE application must be based on the earliest included goods in the ARTG, regardless of ownership.
Hedging their bets, the patentees filed two alternative applications to extend the term of the Patent – one based on KEYTRUDA and the other based on OPDIVO. As we previously reported, the Patent Office saw no reason to depart from Searle, finding that the regulatory approval date of KEYTRUDA was the “earliest first regulatory approval date” for the purposes of PTE.
The patentees applied to the Federal Court for Judicial Review of the decision pursuant to s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) on the basis that it would be “manifestly absurd or unreasonable” if the Act were to be interpreted so as to rely on a third party product for PTE. Beach J found in favour of the patentees and ordered that the PTE application be granted on the basis of OPDIVO.
In particular, His Honour considered that reliance on the patentees’ own product for PTE would be consistent with both the language and intention of the legislation and address the mischief the PTE provisions are intended to address, namely, to compensate a patentee for the reduced term of effective monopoly caused by delays in obtaining regulatory approval (as well as providing more certainty to interested third parties). Further, Beach J was satisfied that use of the term “earliest” in s 77 prevented a patentee from “picking and choosing” which of its product to use as the basis for PTE in circumstances where more than one product is covered by the relevant patent.
Beach J also agreed with the patentees that if a PTE were to be based on a third party product, a manifestly unreasonable burden would be placed on patentees to review each and every ARTG listing, determine whether those listings contain a relevant pharmaceutical substance and whether the product falls within the scope of the claims (which could require a court order), and to determine whether a relevant product was previously listed on the ARTG and subsequently removed. An unduly onerous burden would also be placed on the Commissioner to monitor third party regulatory approvals to determine whether a PTE application is valid.
However, while Beach J’s “liberal interpretation” may be consistent with the intention of the legislation, it is difficult to reconcile this interpretation with the language used the Act. In particular, the Act defines “first regulatory approval date” as “the date of commencement of the first inclusion in the Australian Register of Therapeutic Goods of goods that contain, or consist of, the substance” (or, if pre‑TGA marketing approval was given in relation to the substance, “the date of the first approval”). The words of the Act in no way indicate an ownership limitation, and to read in such a limitation could be particularly problematic in relation to licensees.
How do licensees fit in?
As is often the case with PTE applications, the patentees’ local subsidiary is the sponsor of the product (i.e., OPDIVO) and the entity to which regulatory approval is granted. Thus, while not explicitly stated by Beach J, it seems inherent in the Ono Pharmaceutical decision that the PTE provisions can be enlivened by the grant of regulatory approval to a licensee of the relevant patent.
Yet, according to the financial reports of Bristol Myers Squibb, Merck was also granted a license by the patentees to exploit the Patent with respect to its KEYTRUDA product as part of a settlement agreement to end worldwide patent infringement proceedings. Does this mean that KEYTRUDA remains the relevant product for the purpose of PTE because it is owned by a licensee of the Patent? Or is it relevant that the license agreement was executed after the first regulatory approval date of KEYTRUDA?
While the issue of licensees (and sponsors) was not addressed in Beach J’s judgement, a pragmatic reading might suggest that the earlier-listed product is only relevant for PTE where it was first included in the ARTG with the approval of the patentee. However, as this is neither reflected in the legislation nor clarified in Beach J’s judgement, it remains to be resolved by the courts or by legislative amendment.
The Ono Pharmaceutical decision represents a marked shift in the way Australia’s PTE provisions are interpreted, although its affect appears to be confined to a fairly narrow set of circumstances. Key takeaways from the decision are as follows:
- PTE can only be granted on the basis of the patentee’s own product (although the extent to which the decision applies to products registered to licensees of the relevant patent is unclear).
- Where the patentee has multiple products registered on the ARTG that fall within the scope of the relevant patent, PTE must be based on the earliest of those products to be registered.
- Where a PTE has been incorrectly granted on the basis of an earlier-listed third party product it may be vulnerable to removal from the Patent Register. However, it may still be possible to request a new PTE based on a product registered by (or on behalf of) the patentee. If the patentee’s product is already registered and the deadline to apply for PTE has passed, it may also be possible to obtain an extension of time to file the new PTE application.
However, it remains to be seen whether the Commissioner of Patents will appeal this decision, so we will continue to monitor for future developments. In the meantime, please contact Dr Claire Gregg (firstname.lastname@example.org) or Michael Caine (email@example.com) if you have any questions about whether this decision could affect your rights in Australia.
Since this article was published, the Commissioner of Patents has (unsurprisingly) filed an appeal against this decision, although it may be some time before an appeal decision is reached. In the interim, the Patent Office will apply the Ono Pharmaceutical decision in assessing PTE applications. Notably, the Patent Office has updated its PTE application form to require that the application be based on the first regulatory approval date of goods included in the ARTG by, or with the consent of, the patentee.