Alphapharm Pty Ltd v H Lundbeck A/S & Ors [2014] HCATrans 79 (11 April 2014)

Last Updated: 15 April 2014

[2014] HCATrans 079

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S300 of 2013

B e t w e e n -

ALPHAPHARM PTY LTD ACN 002 359 739

Applicant

and

H LUNDBECK A/S

First Respondent

COMMISSIONER OF PATENTS

Second Respondent

ASPEN PHARMA PTY LTD ACN 075 449 594

Third Respondent

SANDOZ PTY LTD ACN 075 449 553

Fourth Respondent

APOTEX PTY LTD ACN 096 916 148

Fifth Respondent

Application for special leave to appeal

KIEFEL J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 11 APRIL 2014, AT 11.06 AM

Copyright in the High Court of Australia

____________________

MR D.K. CATTERNS, QC: May it please the Court, I appear with my learned friends, MR C. DIMITRIADIS and MR J.S. ZMOOD, for the applicant and the fourth respondent. (instructed by King & Wood Mallesons).

MS K.J. HOWARD, SC: If the Court pleases, I appear with MR R.M. NIALL, SC, for the first respondent. (instructed by Corrs Chambers Westgarth Lawyers)

KIEFEL J: Yes, Mr Catterns.

MR CATTERNS: If it is convenient to the Court, I was going to deal first with the question of unreasonableness and discretion. My learned friend, Mr Dimitriadis, was going to follow, on the power to extend the time.

KEANE J: Yes, that is no job for a gentleman, is it?

MR CATTERNS: Well, your Honour, there is a - - -

KEANE J: - - - or a gentle lady for that matter.

MR CATTERNS: - - - there is a complex question of construction of the regulation which Mr Dimitriadis is the man for your Honour.

KEANE J: Rank has some privileges.

MR CATTERNS: Yes, your Honour.

KIEFEL J: It is very good of you to take on the more difficult question.

MR CATTERNS: Well, thank you, your Honour. So, your Honour, our submission is that it was manifestly unreasonable to grant a 10 year extension of time, in this statutory context, when the person who sought the extension, our friends from Lundbeck, knew there was an alternative course for four years and chose not to take it and it did so for reasons that included commercial reasons. Its other reason was it adhered to its point of view, which was reasonably held, in the face of a series of findings to the contrary.

Your Honours, of course, as the court explained in Li, the standard of reasonableness is indicated by the true construction of the statute. Here that is section 223 and if I could go to that, and just remind your Honours this is a significant – it is in the combined authorities bundle, your Honours, at page 284 – this is a provision that has parallel provisions, almost word for word, in the Trade Marks Act and the Designs Act and it is a provision that is frequently invoked and, in a range of circumstances, ranging from the relatively unimportant to here, the extension of the term of time to apply for an extension of the term of the monopoly.

Your Honours, 223(2) refers to the question of the error or omission. We have not challenged our loss on the question of error, there having been a relevant error or omission, “a relevant act that is required to be done” is not done within that time, and I remind your Honours that our friend’s application was nearly 10 years out of time, as it was held. Then “the Commissioner may” and it is common ground that it is discretionary. Your Honours, just as part of the context, in subsection (4):

The Commissioner must advertise . . .

an application made for an extension of time for more than 3 months -

Under subsection (6), people can oppose it and, your Honours, just for completeness, in certain specific cases in (2A), you can apply within two months and the Commissioner must give it to you, if she is satisfied that you “took due care”. That did not apply in the present case because the maximum extension of time under that is 12 months.

Now, your Honours, the central argument is that the Patents Act, as your Honours know, since 1623, has provided a limited statutory monopoly with a limited term. Section 6 of the statute of monopolies, still referred to in our schedule to our Act, allowed a term of 14 years. Section 5, which protected existing grants of monopolies for inventions, cut them back to 21 years. The term now is 20 years but - - -

KIEFEL J: Mr Catterns, could I just interrupt you for a moment just to clarify what you were really saying at the outset?

MR CATTERNS: Yes, your Honour.

KIEFEL J: Do I understand you to say that unreasonableness of the decision to extend time, assuming statutory power to do so, is you seek to make that out by reference only to the amount of time that is given for the extension, that 10 years in statutory context by any means has to be excessive? I am saying that because looking at your draft notice of appeal, it attacks findings - paragraph 3. Do I take it that you are not attacking reasoning of the court below as so much as saying that there was really only one conclusion which could reasonably have been reached and it certainly was not to grant an extension of 10 years?

MR CATTERNS: Your Honour, we do wish to attack the reasoning and I was going to take your Honours, in particular, to the two central paragraphs of his Honour Justice Yates’ reasoning where we submit his Honour did fall into error. It is not just the fact that it is a 10 year extension, it is in the particular circumstances where the person seeking the extension knew for four years that they could have done what they ultimately did, which is apply for an extension of time, on a contingent basis, that we agreed on both sides would have been stayed, then the position would have been known. Time would have stopped to run and it would have been a very different calculus for Alphapharm, which is the person who started this by putting our friends on notice in July 2005.

KIEFEL J: This is the policy question really that others knew to know and manage their affairs on the basis of what is happening, knowing whether or not it is to be applied for, and you say his Honour discounted that?

MR CATTERNS: Yes, your Honour, I do, in the last two paragraphs of his Honour’s reasoning. Is it convenient to go there your Honour?

KIEFEL J: Yes, thank you.

MR CATTERNS: Your Honours, I beg your Honours’ pardon. His reasoning on the reasonableness ground - it starts a little earlier, but if I can go back to paragraph 155, there his Honour notes our unreasonableness submission, but his Honour deals with it in 156, your Honours, and if I can, so to speak, disentangle that. His Honour accepts first:

that it was open to Lundbeck to make a contingent extension of term . . . including shortly after receiving the Watermark letter.

That was the letter from their attorneys advising that they could - one alternative, could - would be to apply for an extension. Your Honours, as we have submitted, it would have been advertised as the Act contemplates. It would have been stayed. Then, your Honour, the reasons why it did so, is what his Honour refers to in the third line there.

Well, your Honour, first, it was aware it could apply. Secondly, it did not receive any advice that it should not apply. They did receive advice from Corrs that its prospects were good - let us use that as a shorthand - but it was never told by Corrs that it should not apply for a contingent extension of time. Justice Yates makes that clear at paragraphs 115 to 116, without taking the Court to it. Thirdly, it had a firm view of its prospects; that was supported by Corrs and before the AAT by two patent attorneys, but notably not its attorney and, fourthly, the Tribunal accepted it was likely that commercial considerations were taken into account.

Now, your Honours, then his Honour says, they were considered and assessed by the Tribunal - I have just mentioned them - and that is where we say the error occurred. In assessing that, the Tribunal did not take into account such matters as his Honour Justice Jenkinson had pointed out in the Kimberly Clark Case to which we gave a reference quoting the passage in our outline.

So, your Honour, we respectfully submit that that is where the error is. The scope and purpose of this Act make it clear that you make your intentions clear in the way contemplated by the Act. In the last six months, they gave some suggestions in a reply by mentioning something in a trade magazine, but for the period before then they did not follow the procedure.

Now, your Honour, then his Honour goes on, the extension sought was a very lengthy one indeed, and as I submit, we had put our friends on notice. The Commissioner had put our friends on notice. Justice Lindgren had held that their approach was wrong and they applied for the extension of time on the very last day of the patent. By then, our client and our colleague, generic companies, were ready to launch and launched as the Act contemplates they can, on the expiry of the patent.

Then, your Honours, in a sense, the only reasoning that his Honour gives, we submit, against our point is that the circumstances were unusual. Lundbeck and some of the applicants had been engaged in complex litigation, one aspect of which was their entitlement but, your Honours, that was the other extension of term, based on their later product which was five years, which we won on at every stage, not the extension that we are now arguing about.

So then, your Honours, the last point against us is, in effect, it would not be rational, in other words, an imputed knowledge to us. Well, your Honours, fair enough but that - - -

KIEFEL J: His Honour takes the competitors to have been fully aware of the provisions relating to extensions of time - - -

MR CATTERNS: Well, yes, your Honour.

KIEFEL J: - - - so he would have known that it was on the cards.

MR CATTERNS: But, your Honour, their calculus is entirely different on, as I submit, four years earlier but, more importantly, that is not the only consideration. To say somebody must have known is not the question. Our disadvantage is a relevant factor, of course, I accept, but your Honours, the system here is one that requires you to follow these steps; there is publication of advertisements, provision for opposition and so on, and they, our friends, opted out of that system and, we submit, that in those circumstances, to do so was unreasonable, even though they sincerely held their belief in the rightness of their case.

Your Honours, these provisions are an important discourse in the law of intellectual property, not copyright, but in the discourse where there is provision for registration. Justice Jenkinson’s approach of a prompt, frank and full disclosure of the circumstances which would have applied in 2005 has really been what has governed practice in this field for more than 20 years.

KEANE J: On that approach, would it even be relevant to be concerned with whether the other parties anticipated what your client might do?

MR CATTERNS: Yes, your Honour, as part of the balancing exercise, we submit, it would be, but if our friends had put forward in 2005 the error that was ultimately held that they had, namely, they made a mistake as to what was the appropriate good on which to base their extension, if we had seen that in 2005 on a prompt, frank disclosure, the whole situation would have been different.

So, your Honours, we do submit that following on another and the changes in rules of the Federal Court and the Supreme Courts, the whole modern approach to litigation, including in the patent office, involves Justice Jenkinson’s kind of approach and, your Honours, what is sanctioned by the grant of the extension of time here is right outside that.

I have trespassed on our division of time and my learned friend, Mr Dimitriadis, will be taking the Court to section 71(2) which is the

particular time period in the present case. So, we submit, this is more than just a factual question. It does raise an important question of principle. May it please the Court.

MR DIMITRIADIS: Your Honours, in our respectful submission, the Full Court was wrong to conclude that the power to extend time under section 223 was available in this case. The section confers power to extend time for doing a relevant act and that term is given a definition in subsection (11) of the section and it is defined relevantly as:

an action (other than a prescribed action) in relation to a patent –

In our submission, in applying section 223, one needs to, first, identify an action in relation to a patent and, secondly, consider whether that action is a prescribed action. In this case, as to the first step, the action in relation to a patent was the filing by the first respondent of an application to extend the term of its patent. That was an application that was permitted to be filed under section 70(1) of the Act and it was required to be filed within the time period provided for in section 71(2).

KIEFEL J: So you say the Act is a composite of the act of filing and within time?

MR DIMITRIADIS: Yes, your Honour, and as to the second step, of course, one goes to the regulation, regulation 22.11(4), prescribes certain kinds of acts as being excluded from the definition of relevant Act. The test of that regulation, your Honours, is at page 289 of the combined authorities bundle. Your Honours can see on page 289, subparagraph (4) provides for:

the definition of relevant act in subsection 223(11) of the Act, each of the following actions is prescribed . . .

(b) filing, during the term of a standard patent as required by subsection 71(2) of the Act, an application under subsection 70(1) of the Act for an extension of the term of the patent -

In our submission, that is a description of the Act for which an extension of time was sought in this case and it follows from that that the action was a prescribed action and was outside the definition of relevant act. The Full Court avoided that result, your Honours, by treating the action as being not one action but rather two separate actions, and that appears in paragraph 51 of the reasons of Justice Yates in the Full Court which is at application book page 63. At line 35, about two-thirds of the way through the paragraph, his Honour said:

Properly understood, reg 22.11(4)(b) distinguishes between separate actions and prescribes one, not the other. The result is that the action of filing the application under s 70(1) during the term of the patent is prescribed –

So that is one action which his Honour has identified, and then secondly, the “action of filing the application”, which of course is the same application being filed pursuant to section 70(1) of the Act, “within six months of the applicable date is not prescribed”, his Honour was there referring, by the words, “applicable date” to the latest of the three dates set out in section 71(2), paragraphs (a) to (c).

KIEFEL J: In paragraphs 49 and 50, which immediately precede that to which you are presently referring, his Honour places some weight upon the words in the regulation, “during the term of a standard patent”.

MR DIMITRIADIS: Yes, your Honour, his Honour does do that. Can I indicate why we submit that his Honour’s analysis is incorrect? First, we submit it is appropriate to start with the Act before going to the words of the regulation. The effect of the analysis of his Honour is to treat the filing of an application under section 70(1) of the Act as involving two separate actions and, we submit respectfully, that that is an artificial reading that is not supported by the wording of the section. There is only one action which is done once and it involves the filing of the application.

Secondly, the timing requirement in section 71(2) does not affect that position, we submit. Section 71(2) appears at combined authorities bundle page 278 and your Honours can see that it provides for a time limit within which the application to extend the term of the patent must be made. It is a time limit which has a number of conditions but ultimately what it provides for is one time or one deadline by which the action in question must be done. It must be made within the term of the patent and within the six months after the latest of the dates in subparagraphs (a) through to (c). So while that time limit is the product of several conditions, there is only one deadline that is provided for. There are not alternative means of complying with that requirement. Moreover, your Honours, that timing provision does not result in there being two separate actions that are required to be done. There is only one action, filing the application for an extension of term of the patent.

Thirdly, your Honours, we respectfully submit that the Full Court used the wording of the regulation as a basis for finding that the Act, in fact, contemplated two separate actions. That appears from paragraph 51 to which I took your Honours. It was the wording of the regulation which led the Full Court to conclude that there were two separate actions being dealt with. Fourthly, your Honours, as to the wording of the regulation itself, we

submit that that does not lead to the conclusion reached by the Full Court in any event.

The words used, filing during the term of a standard patent as required by section 71(2) naturally comprehend the entirety of the timing requirements of section 71(2). If it did not, your Honours, then the words, as required by section 71(2), would not be necessary in the regulation. Our submission is that that is merely a composite phrase which refers to the whole of the timing requirements as part of a description of the Act in question and that there is only one action that is being prescribed and it is filing the application to extend the term of the patent within that time. I see the time is up, your Honours. Thank you.

KIEFEL J: Ms Howard, we will not need to hear from you in relation to the question of discretion; if you could just address us in relation to the question of power?

MS HOWARD: If the Court pleases, Mr Niall will deal with that issue.

MR NIALL: If the Court pleases, special leave should be refused on two bases. The first is the construction of the regulation adopted by the Tribunal and the Full Court is correct, in particular at paragraphs 49 to 51 and, secondly, because it does not raise an issue of general importance. Now, I identify that second point first. What separates the parties is whether the regulation should be construed broadly as the applicants would have it so as to exclude all applications, or narrowly in the sense that it only prevents an extension of time in respect of the term aspect in section 70. In our submission, the choice of the two constructions does not raise an issue of general importance. It does not determine rights only - - -

KIEFEL J: Why is it not an issue of general importance?

MR NIALL: Because it has not been applied very often. It is not a provision or regulation that is commonly applied. Secondly, it only identifies an application for an extension of time. It does not determine how that will be disposed of.

KIEFEL J: But the extension of a patent is itself an important matter, is it not?

MR NIALL: It is.

KIEFEL J: Very important.

MR NIALL: It is, but if what separates the parties is the regulation, then it is a simple matter, in our respectful submission. The regulation and the Act have worked together for 15 years, for the regulation to be amended. Now, can I come to the question of construction? The critical issue, if the Court pleases, in the analysis of Justice Yates, starts at paragraph 51 with section 223(2) of the Act and there is no question that section 223(2) would apply to an extension of time application in respect of section 70.

The only question would be the extent to which the prescription narrows that. When one looks at section 70, as his Honour Justice Yates and the Tribunal found at first instance, that section 71(2) identifies two time limits, namely, that the application must be made during the term of the patent and, secondly, within six months of the critical dates.

The first of those two is made clearly a time limit by reference to section 67, which identifies the term of patent as a period of years. So in circumstances where the relevant application, under section 71, subject to section 223(2), there is no reason to read down the facility in 223(11) to identify the action by reference to one of the time limits and that is what Justice Yates, with the concurrence of the other two members of the Full Court, held.

That being so, that there is no impediment to identifying an action by reference to one of the two time limits, that is a process of identification, the question then became how did the regulation deal with that, and his Honour identified that when one looks at the language of the regulation in issue, the inclusion of the words “during the term of a standard patent” only made sense if they had some work to do.

KIEFEL J: Did his Honour deal with the words, “filing . . . as required by subsection 71(2)” appearing in the regulation?

MR NIALL: His Honour does not specifically refer to those but in paragraph 49, his Honour identifies the words “during the term of a standard patent”. Now, even if one adds the words “as required by subsection 71(2)”, no utility would be served by identifying, adding those words, if what was to be excluded is the application under section 70 simpliciter.

KIEFEL J: I took Mr Dimitriadis to say that the words, “as required by subsection 71(2)” qualifies the word “filing”, or expounds the word “filing”.

MR NIALL: In our submission, what those words do is the whole of the phrase, starting after the comma and completing at the end of the comma, identify the action and they do it by reference to the particular time limit, so there is a differential treatment by reference to the regulation to enable one time limit to be extended and not the other. The problem with the

applicant’s construction, when married with the Act, is that it gives no flexibility to differentiate in respect of section 71. Either both time limits are extendable, because there is only a single act, or you have to prescribe that single act and both time limits are not extendable.

His Honour makes the point that what is being dealt with is that the differential time limits in section 71 are addressed by reference to the concept of action, which his Honour says is permissible, and the regulation is deliberately crafted in the narrower way than would be the case if it simply intended to exclude the application simpliciter, and that is why his Honour holds at 49 that our friend’s construction effectively ignores the words, we would add ignores all of the words in between the commas so that the same meaning would be given to the regulation if it simply said, “filing . . . an application under subsection 70(1)”.

In our learned friend’s case, they say “filing . . . an application under subsection 70(1)” is the prescribed act. In our submission, there is a deliberate attenuation of the action for the purposes of 223(11), by reference to the different time limits, and his Honour goes on to identify there is some support in explanatory memorandum at 55 and 56.

So, in our respectful submission, his Honour is right to say in paragraph 52 that there is nothing in the broad words of 223(11) that would preclude an action being described by reference to a particular time limit and that is all that has occurred with this regulation and it operates with a narrower effect than that contended for by the applicant. In our submission, that process of construction is correct and no error is established. For those reasons special leave should be refused, if the Court pleases.

KIEFEL J: Thank you, Mr Niall. Anything in reply, Mr Dimitriadis?

MR DIMITRIADIS: Briefly, your Honours, three points. First, in relation to the question of substantial importance, we submit that this question plainly does have very substantial importance. It is a question of the substantive operation of the Act. It has the potential to affect any application to extend the term of a patent, of a pharmaceutical patent, under the provisions of the Act and thereby to impact on the term of such patents and the length of monopolies.

Secondly, as to the question of construction, the first respondent’s submission is to the effect that section 71(2) should be regarded as imposing two time limits. We submit that that is incorrect and there is one time limit and it is a time limit that is a function of multiple conditions as I submitted but they are cumulative conditions that must all be complied with and there is only one time, or one deadline, by which the action in question must be done. But in any event, your Honours, the power to prescribe an action under the regulations relates to the prescription of an action, not a time limit, and there is only ever one action that is required to be done here which is the filing of an application for extension of term of a patent within the time required by section 71(2).

A third aspect of that point, your Honours, is that when one goes to the wording of the regulation, we do submit that the words there comprehend by reference to “filing . . . as required by subsection 71(2)”, all of the timing requirements of that subsection and, thus, what is in fact prescribed is the act accompanied by all of the timing requirements that apply to it, even on the wording of the regulation.

An example of another use of similar language appears in subsection (11) of section 223, your Honours; that is at combined authorities bundle page 286, this is the provision that refers to a prescribed action. Your Honours will see at the end of the latter part of the wording of subsection (11) in the definition of relevant act, it says that a relevant act:

includes the making of a Convention application within the time allowed for making such applications.

That is an example of the description of an act by reference to the time limits that apply to that act and it is a composite description of the act, and that is the same approach that is taken in the regulation where it refers to “as required by subsection 71(2)”.

The third and final point by way of reply, your Honours, relates to the extrinsic material to which my learned friend referred. The explanatory memorandum referred to by the Full Court, in our submission, does not assist the construction reached by the Full Court and supported by the first respondent. What the statement that was relied on in the explanatory memorandum said was that the extension of time provision under section 223 will apply to all acts required to be done under the extension of patent term scheme, provided that the relevant criteria are satisfied.

Now, that does not say that an extension of time will be available or the power to extend time will apply in relation to all such acts, it merely says that section 223 will apply. Section 223 includes subsection (11) and the power to prescribe certain kinds of actions as being excluded from the definition of a relevant act. In any event, your Honours, as we have submitted in writing, the explanatory memorandum was plainly superseded by the introduction of the regulation because that confirms that there was an intention to exclude at least some kinds of actions from the definition of relevant act, in the context of the extension of term patent scheme. Thank you, your Honours.

KIEFEL J: There will be a grant of special leave in this matter, limited to ground 2. It should be a half day matter? It is a very short point.

MR DIMITRIADIS: Yes, your Honour.

KIEFEL J: Do you agree with that, Ms Howard and Mr Niall?

MS HOWARD: Yes, your Honour.

KIEFEL J: Thank you. Would the parties please ensure that they obtain the timetable from the Deputy Registrar before they leave?

MS HOWARD: Yes, your Honour.

KIEFEL J: Thank you.

AT 11.39 AM THE MATTER WAS CONCLUDED