Two decisions of the Full Federal Court (comprising the same panel of judges) have made it abundantly clear that an application for a patent term extension (PTE) may only be based on the first goods included on the Australian Register of Therapeutic Goods (ARTG) which are disclosed and claimed in the patent.

This is the case regardless of:

• whether the goods are sponsored by the patentee or another person
• whether the patent discloses and claims multiple pharmaceutical substances and different products containing, or consisting of, the substances are included on the ARTG at different times
• the manner in which the products are included on the ARTG (registered, listed, listed for export-only, etc).

The decisions provide welcome clarity in this highly contentious space and curtail increasingly common PTE strategies.

Background

We reported on the two first instance decisions here. In brief:

• In Ono Pharmaceutical Co. Ltd v Commissioner of Patents [2021] FCA 643, the primary judge found that only the patentee’s products are relevant when determining a PTE. Thus, despite the fact that a competitor’s product (Keytruda) was disclosed and claimed in the patent and included on the ARTG before Ono’s product (Opdivo), Ono was able to base its PTE application on Opdivo. The primary judge considered it would be “manifestly unreasonable” for a patentee to be denied a PTE due to another party obtaining earlier marketing approval for a different product.
• In Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2021] FCA 947, Merck’s patent encompassed two of its products included on the ARTG, one comprising sitagliptin and the other comprising both sitagliptin and metformin. The primary judge found that only the first product included in the ARTG (i.e. sitagliptin) could be relied upon for a PTE. The primary judge considered that a patentee ought not be allowed to extend its monopoly simply because a second pharmaceutical substance is later included in the ARTG.

The appeal decisions are:

• Commissioner of Patents v Ono Pharmaceutical Co. Ltd [2022] FCAFC 39
• Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2022] FCAFC 40

The appeals

Statutory construction

The fates of the two appeals rested on the correct construction of the PTE regime as set out in the Patents Act 1990 (Cth) (the Act).

In Merck v Sandoz, the Full Court described statutory construction as “a text-based activity” but noted that questions of policy can inform the task. The latter cannot, however, deflect from a consideration of the policy and purpose of the scheme by reference to the language of the legislation itself.

In Ono, the Full Court accepted that the object of the PTE regime is to compensate a patentee of a pharmaceutical substance for time lost in obtaining regulatory approval before it can exploit its invention. However, this does not mean that the regime “should be construed so as to achieve what might be described as a commercial outcome for a patentee”. Rather, the Full Court considered that the regime sought to balance a range of competing interests. The Full Court also considered that the language used by the legislature to strike this balance was clear and should not be altered by recourse to a process of reasoning that prefers “a liberal rather than literal construction”.

Whose goods?

The Full Court in Ono considered the requirements set out in section 70(2)-(4) of the Act, which must be satisfied before a patentee can apply for a PTE, to be matters of objective determination:

• one or more pharmaceutical substances per se must be in substance disclosed and claimed in the patent;
• goods containing, or consisting of, the substance must be included in the ARTG;
• the period from the date of the patent to the first regulatory approval date for the substance must be at least five years; and
• the term of the patent must not have been extended previously.

There is no element of choice. The second and third requirements above refer only to the state of the ARTG. Thus, it is irrelevant who is the sponsor of the relevant goods included in the ARTG.

This holding makes both practical and commercial sense. As the Commissioner noted, the contrary construction would give rise to all manner of difficulties, including (at [74]):

A patentee could [license] a third party to exploit the patent to develop a significant pharmaceutical product, but delay from obtaining registration itself of a different product for many years. the patentee could then obtain a significant extension of term based on ‘the patentee’s goods’. Alternatively, a patentee could bring infringement proceedings in relation to a third party product and use that to obtain licence fees over many years, and then delay registering its own product and use that product to obtain a significant extension of term, which would include an extension of the licence fees.

Further, as the Commissioner noted, if a third party is able to obtain regulatory approval for a product before the patentee, then this suggests that any delay in obtaining approval for the patentee’s product is not a regulatory delay at all (being the underlying reason for granting PTEs for pharmaceutical substances), but the patentee’s own delay or perhaps its own business choices in bringing products to market.

Earliest first or later first?

Section 77 of the Act provides that the length of a valid PTE is equal to the period beginning on the “date of the patent” and ending on the “earliest first regulatory approval date” “reduced (but not below zero) by 5 years”. Merck submitted that it was absurd to construe the legislation as allowing a PTE application to proceed (for a product included on the ARTG less than five years after the date of the patent) only to be granted an extension of zero days.

The Full Court in Merck v Sandoz considered there to be a degree of oddity in this result but not absurdity. The oddity could be resolved by understanding that the legislature had inferred that a patentee would not make a PTE application if the extension would be zero. In any event, section 77 expressly contemplates a zero extension of term.

The Full Court understood policy considerations to further support this approach. Take the scenario where a single patent discloses and claims a number of pharmaceutical substances. For some of those, goods containing the substances were included in the ARTG within the period of less than five years from the date of the patent. For another, goods containing the substance were included in the ARTG more than five years from the date of the patent. On Merck’s construction, a PTE would be available based on the latter substance, with the effect that the term of the patent would be extended generally and the monopoly protection afforded in respect of all of the earlier substances also being extended. Accordingly, the Full Court could see no policy reason to divert from the language of section 77.

Merck also sought to challenge earlier Full Court authority^[1] that the 'first regulatory approval date' includes an 'export only' listing. Merck submitted that, instead, it refers only to registered goods (i.e., those approved for general marketing in Australia). The Full Court also dismissed this aspect of Merck’s appeal.

Key takeaways

These two Full Court decisions have now settled that the provisions of the PTE regime in the Act mean what they say.

Following Ono, patentees will need to keep an eye out for the potential for earlier inclusion of competitor products on the ARTG, and consider their filing and prosecution strategies accordingly. While this is unlikely to be an issue for small molecules, broad claims regarding biologics may capture a competitor’s structurally different product.

Following Merck v Sandoz, patentees will need to consider their current portfolios and future patenting strategy for patents encompassing multiple pharmaceutical substances. Patentees will need to consider limiting the claims of individual divisional applications to each of the substances on which a PTE may be based.

Finally, as we reported recently, Bayer appealed the decision of the Australian Patent Office to remove the term extension of Bayer’s patent over YAZ and YAZMIN. In light of the Full Court’s decision in Merck v Sandoz, it appears that Bayer’s appeal is doomed to fail.

These two decisions of the Full Court are likely to confirm the invalidity of a number of PTEs granted based on second generation or combination products and thus bring forward entry opportunities in Australia for generics and biosimilar developers.

^{[1] Pfizer Corp v Commissioner of Patents (2006) 155 FCR 578; [2006] FCAFC 190.}