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Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [ 2022] FCAFC 40  (18 March 2022)

Federal Court of Australia - Full Court

Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [ 2022] FCAFC 40  (18 March 2022)

Last Updated: 18 March 2022

FEDERAL COURT OF AUSTRALIA

Merck Sharp & Dohme Corp. v Sandoz Pty Ltd  [2022] FCAFC 40 

ORDERS

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. Subject to order 3 below, the appellants pay the respondent’s costs of the appeal as agreed or taxed.

3. Any party wishing to vary order 2 may, within 7 days, file and serve written submissions not exceeding three pages identifying the costs order sought and the reasons in support. If any such submission is filed the other party may, within 7 days thereafter, file and serve written submissions in answer not exceeding three pages identifying the costs order sought and the reasons in support, whereupon the question of costs will be determined on the papers.

REASONS FOR JUDGMENT

THE COURT:

1. INTRODUCTION

1.1 Background

1 The principal issue in this appeal is the validity of an extension of term of a patent granted by the Commissioner of Patents pursuant to Part 3 of Chapter 6 of the Patents Act 1990 (Cth), which is entitled “Extension of term of standard patents relating to pharmaceutical substances”.

2 The proceedings were initiated by the appellants, Merck Sharp & Dohme Corp. and Merck Sharp & Dohme (Australia) Pty Ltd (collectively, MSD) against the respondent, Sandoz Pty Ltd, for threatened infringement of Australian patent 2002320303, which relates to the treatment or prevention of diabetes. The primary judge dismissed MSD’s application and made orders allowing a cross-claim advanced by Sandoz to the effect that the Register of Patents be rectified pursuant to s 192 of the Patents Act so as to remove all references to the term of the patent having been extended to 27 November 2023 or at all, and recording that the term of the patent will expire on 5 July 2022; Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2021] FCA 947; 162 IPR 409 (J).

3 MSD contends that the primary judge erred in construing s 77(1) of the Patents Act and instead should have upheld the extension of the term granted by the Commissioner. In its notice of appeal, MSD contends that the primary judge erred in her construction of the provisions of Pt 3 of Ch 6 by construing the statutory language in s 77 in a way that did not give effect to the statutory scheme. In a late amendment to the notice of appeal, MSD gave notice of a challenge to the correctness of the decision of the Full Court in Pfizer Corp v Commissioner of Patents [2006] FCAFC 190; 155 FCR 578 (Emmett, Allsop and Greenwood JJ) insofar as that decision held that the words “first inclusion in the Australian Register of Therapeutic Goods” in s 70(5) encompassed inclusion of a good listed under s 9A(3)(b) of the Therapeutic Goods Act 1989 (Cth) (TG Act), and specifically, goods listed for “export only”.

4 Sandoz defends the decision of the primary judge. The Commissioner was also an active party before the primary judge, and made separate submissions on appeal in support of the primary judge’s decision.

5 For the reasons set out below, we dismiss the appeal.

1.2 Agreed facts – construction of s 77 of the Patents Act

6 The following agreed facts are material to the consideration of the issues in dispute arising under s 77 of the Patents Act:

(1) The “date of the patent” is 5 July 2002; s 65;
(2) Unless extended or revoked, the term of the patent expires 20 years from the date of the patent, being on 5 July 2022; s 67;
(3) On 19 November 2009, the term of the patent was extended by the Commissioner until 27 November 2023, pursuant to Pt 3 of Ch 6;
(4) Sitagliptin is a “pharmaceutical substance” pursuant to Sch 1 of the Patents Act;
(5) The composition sitagliptin/metformin is a different “pharmaceutical substance” to sitagliptin, pursuant to Sch 1;
(6) The patent discloses and claims each of sitagliptin and sitagliptin/metformin;
(7) On about 16 November 2006, goods containing or consisting of sitagliptin were included in the Australian Register of Therapeutic Goods (ARTG) as an “export only listing”;
(8) The period beginning on the date of the patent (5 July 2002) and ending on the date of commencement of the first inclusion in the ARTG of goods that contain or consist of sitagliptin (16 November 2006) is four years, four months and 11 days;
(9) On about 27 November 2008, goods containing or consisting of the composition of sitagliptin/metformin were first included in the ARTG as an “export only listing”;
(10) The period beginning on the date of the patent and ending on the date of commencement of the first inclusion in the ARTG of goods that contain or consist of sitagliptin/metformin (27 November 2008) is six years, four months and 22 days.

1.3 Agreed facts – challenge to Pfizer Corp

7 The following additional agreed facts are material to the consideration of the challenge based on the alleged error of the Full Court in Pfizer Corp:

(1) On 14 January 2008, goods containing or consisting of sitagliptin were included on the ARTG under the brand name JANUVIA, which is five years, six months and nine days from the date of the patent;
(2) On 30 April 2009, goods containing or consisting of sitagliptin/metformin were included on the ARTG under the brand name JANUMET, which is six years, nine months and 25 days from the date of the patent;
(3) On 27 May 2009, MSD applied to extend the term of the patent based on the JANUMET listing of sitagliptin/metformin.

2. LEGISLATION

8 The relevant statutory provisions of the Patents Act were as follows:

3 (Sch 1 – Dictionary)
pharmaceutical substance means a substance (including a mixture or compound of substances) for therapeutic use whose application (or one of whose applications) involves:

(a) a chemical interaction, or physico-chemical interaction, with a human physiological system; or
(b) action on an infectious agent, or on a toxin or other poison, in a human body;

but does not include a substance that is solely for use in in vitro diagnosis or in vitro testing.
...
70 Applications for extension of patent

(1) The patentee of a standard patent may apply to the Commissioner for an extension of the term of the patent if the requirements set out in subsections (2), (3) and (4) are satisfied.
(2) Either or both of the following conditions must be satisfied:

(a) one or more pharmaceutical substances per se must in substance be disclosed in the complete specification of the patent and in substance fall within the scope of the claim or claims of that specification;
(b) one or more pharmaceutical substances when produced by a process that involves the use of recombinant DNA technology, must in substance be disclosed in the complete specification of the patent and in substance fall within the scope of the claim or claims of that specification.

(3) Both of the following conditions must be satisfied in relation to at least one of those pharmaceutical substances:

(a) goods containing, or consisting of, the substance must be included in the Australian Register of Therapeutic Goods;
(b) the period beginning on the date of the patent and ending on the first regulatory approval date for the substance must be at least 5 years.

Note: Section 65 sets out the date of a patent.

(4) The term of the patent must not have been previously extended under this Part.
(5) For the purposes of this section, the first regulatory approval date, in relation to a pharmaceutical substance, is:

(a) if no pre-TGA marketing approval was given in relation to the substance—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
(b) if pre-TGA marketing approval was given in relation to the substance—the date of the first approval.

(6) For the purposes of this section, pre-TGA marketing approval, in relation to a pharmaceutical substance, is an approval (however described) by a Minister, or a Secretary of a Department, to:

(a) market the substance, or a product containing the substance, in Australia; or
(b) import into Australia, for general marketing, the substance or a product containing the substance.

71 Form and timing of an application
Form of application

(1) An application for an extension of the term of a standard patent must:

(a) be in the approved form; and
(b) be accompanied by such documents (if any) as are ascertained in accordance with the regulations; and
(c) be accompanied by such information (if any) as is ascertained in accordance with the regulations.

For this purpose, document includes a copy of a document.
Timing of application

(2) An application for an extension of the term of a standard patent must be made during the term of the patent and within 6 months after the latest of the following dates:

(a) the date the patent was granted;
(b) the date of commencement of the first inclusion in the Australian Register of Therapeutic Goods of goods that contain, or consist of, any of the pharmaceutical substances referred to in subsection 70(3);
(c) the date of commencement of this section.

9 Section 72 provides for the Commissioner to publish notice of an application by a patentee for an extension of the term in the Official Journal. Section 73 provides for the withdrawal of an application for an extension by a patentee.

10 Section 74 is relevantly as follows:

74 Acceptance or refusal of application
Acceptance

(1) If a patentee of a standard patent makes an application for an extension of the term of the patent, the Commissioner must accept the application if the Commissioner is satisfied, on the balance of probabilities, that the requirements of sections 70 and 71 are satisfied in relation to the application.

...
Refusal

(3) The Commissioner must refuse to accept the application if the Commissioner is not satisfied, on the balance of probabilities, that the requirements of sections 70 and 71 are satisfied in relation to the application.

11 Section 75 provides that the Minister or any other person may oppose the grant of the extension on the grounds that one or more of the requirements of ss 70 or 71 are not satisfied.

12 Sections 76, 77 and 78 of the Patents Act relevantly provide:

76 Grant of extension

(1) The Commissioner must grant an extension of the term of a standard patent if:

(a) there is no opposition to the grant; or
(b) in spite of opposition, the Commissioner’s decision, or the decision on appeal, is that the extension should be granted.

...
77 Calculation of term of extension

(1) If the Commissioner grants an extension of the term of a standard patent, the term of the extension is equal to:

(a) the period beginning on the date of the patent and ending on the earliest first regulatory approval date (as defined by section 70) in relation to any of the pharmaceutical substances referred to in subsection 70(2);

reduced (but not below zero) by:
(b) 5 years.
Note: Section 65 sets out the date of a patent.

(2) However, the term of the extension cannot be longer than 5 years.

78 Exclusive rights of patentee are limited if extension granted
If the Commissioner grants an extension of the term of a standard patent, the exclusive rights of the patentee during the term of the extension are not infringed:

(a) by a person exploiting:
(i) a pharmaceutical substance per se that is in substance disclosed in the complete specification of the patent and in substance falls within the scope of the claim or claims of that specification; or
(ii) a pharmaceutical substance when produced by a process that involves the use of recombinant DNA technology, that is in substance disclosed in the complete specification of the patent and in substance falls within the scope of the claim or claims of that specification;

for a purpose other than therapeutic use; or
(b) by a person exploiting any form of the invention other than:

(i) a pharmaceutical substance per se that is in substance disclosed in the complete specification of the patent and in substance falls within the scope of the claim or claims of that specification; or
(ii) a pharmaceutical substance when produced by a process that involves the use of recombinant DNA technology, that is in substance disclosed in the complete specification of the patent and in substance falls within the scope of the claim or claims of that specification.

13 It will be noted that s 71(1) provides that the application must be in the approved form and accompanied by documents and information as ascertained in accordance with the Patents Regulations 1991 (Cth).

14 Regulation 6.8 provides:

(1) This regulation applies to an application under section 70 of the Act for an extension of the term of a standard patent for a pharmaceutical substance.
(2) For paragraph 71(1)(c) of the Act, the application must be accompanied by information showing that goods containing, or consisting of, the substance are currently included in the Australian Register of Therapeutic Goods.
(3) The application must also be accompanied by information identifying the substance, as it occurs in those goods, in the same way (as far as possible) as the substance is identified in the complete specification of the patent.

3. THE DECISION OF THE PRIMARY JUDGE

15 There was no dispute before the primary judge (or on appeal) concerning the operation of s 70 of the Patents Act.

16 The primary judge found that s 70(2) was satisfied in respect of MSD’s application for an extension of term in that both sitagliptin and sitagliptin/metformin are pharmaceutical substances per se disclosed and are claimed in the patent.

17 Only sitagliptin/metformin also satisfied s 70(3), because goods containing or consisting of sitagliptin/metformin were included in the ARTG on 27 November 2008, which is more than five years (in fact six years, four months and 22 days) from the date of the patent.

18 The term of the patent had not been previously extended as provided for in s 70(4).

19 Before the primary judge the fact that the inclusion of the goods in the ARTG was for “export only” was immaterial, having regard to the reasoning of the Full Court in Pfizer Corp. Accordingly, there was no dispute as to the “first regulatory approval date” identified in s 70(3)(b) and defined in s 70(5).

20 The dispute before the primary judge centred primarily on the construction of the following words in s 77(1)(a): “the earliest first regulatory approval date (as defined by section 70) in relation to any of the pharmaceutical substances referred to in subsection 70(2)”.

21 Two constructions were advanced by MSD. Its primary construction was that those words mean the earliest first regulatory approval date of any substance satisfying s 70(3). In its alternative construction, those words were said to mean the earliest first regulatory approval date of all substances satisfying s 70(3). The primary judge noted that on both constructions the earliest first regulatory approval date of any and all pharmaceutical substances in the patent satisfying s 70(3) was 27 November 2008, which was when sitagliptin/metformin was included in the ARTG. On this basis, the term of the extension under s 77 must equal the period beginning on 5 July 2002 and ending on 27 November 2008 reduced by five years. This gives a term of the patent expiring on 27 November 2023, as was granted by the Commissioner.

22 The argument advanced by Sandoz and the Commissioner was that the relevant words in s 77(1) mean what they say: the earliest first regulatory approval date in relation to any of the pharmaceutical substances in the patent as referred to in s 70(2) is 16 November 2006, being the date of inclusion in the ARTG of sitagliptin. On this basis, the primary judge noted that the term of the extension must equal the period beginning on 5 July 2002 and ending on 16 November 2006 reduced by five years but not below zero. This gives a term extension of zero, with the patent expiring on 5 July 2022.

23 Sandoz also advanced an argument before the primary judge concerning the construction of s 71(2)(b), which the primary judge rejected. Although it will be necessary to return to that section when considering the scheme of Pt 3 more generally, we do not address it here in the context of the arguments presented by the parties, because Sandoz does not contend in this appeal that her Honour’s rejection of its argument was incorrect.

24 Before considering the construction of the sections in issue, the primary judge observed that ss 70, 71 and 77 of the Patents Act recognise that a patent may disclose and claim more than one pharmaceutical substance. The possible permutations are, her Honour noted at J[31], infinite, but the basic pattern is as follows, if it is assumed: (a) no previous extension of the term of the patent has been granted (s 70(4)), and (b) the relevant regulatory approvals were obtained by the patentee or its agent. The primary judge raised the second qualification because of the reasoning in Ono Pharmaceutical Co, Ltd v Commissioner of Patents [2021] FCA 643 (Beach J), a decision upon which MSD relied heavily, and to which we return below.

25 In a first permutation, a patent may disclose one substance, which the primary judge called substance A. If the period between the date of the patent and the first regulatory approval date for goods containing substance A is less than five years, the patentee may not apply for an extension given s 70(1). If the period between the date of the patent and the first regulatory approval date for goods containing substance A is at least 5 years, the patentee may apply for an extension. In that event, the term of the extension under s 77(1) will be the period from the date of the patent until the first regulatory approval date, which will also be the earliest first regulatory approval date. Accordingly, the competing constructions will make no difference to the outcome.

26 In a second permutation, a patent may disclose two substances, substance A and substance B. If the period between the date of the patent and the first regulatory approval date for goods containing substance A is less than five years and substance B is at least five years or more, the patentee may apply for an extension of time given the terms of s 70(1), relying on substance B. However, the term of the extension under s 77(1) would depend on which of the three arguments advanced by the parties is accepted.

27 The primary judge records that on MSD’s two arguments, the term of the extension under s 77(1) will be from the date of the patent until the first regulatory approval date of substance B which is also the “earliest first regulatory approval date” of substance B. On the argument advanced by Sandoz and the Commissioner, the term of the extension will be from the date of the patent to the first regulatory approval date of substance A or substance B, whichever is the earlier. In this example it is necessarily substance A. Because substance A had a first regulatory approval date of less than five years, the term of the extension in this case will be zero.

28 In a third permutation, a patent may disclose substances A, B and C. If the period between the date of the patent and the first regulatory approval date for goods containing substance A is less than five years and substance B and substance C is at least five years or more, the patentee may apply for an extension of term given the terms of s 70(1) relying on substance B or substance C. The term of the extension on the basis of the arguments advanced by MSD on its primary construction will be the period from the date of the patent until the first regulatory approval date of substance B or substance C as nominated by the patentee which is also the earliest first regulatory approval date of substance B or substance C (within s 77(1)(a)). On MSD’s alternative construction the extension will be the period from the date of the patent until the first regulatory approval date of substance B or substance C whichever is the earliest in fact.

29 The primary judge noted that on the construction propounded by Sandoz and the Commissioner, the extension will be the period from the date of the patent until the first regulatory approval date of substance A or substance B or substance C whichever is earlier, which is necessarily substance A. Because substance A had a first regulatory approval date of less than five years, the term of the extension in every such case will be zero.

30 The primary judge then gave a further example where the patent discloses three substances, A B and C. If the period between the date of the patent and the first regulatory approval date for goods containing substances A, B and C is at least five years or more, the patentee may apply for an extension of term given the terms of s 70(1) relying on substances A, B or C.

31 On the basis of MSD’s primary construction, the term of the extension under s 77(1) will be the period from the date of the patent until the first regulatory approval date of any of substances A, B or C as nominated by the patentee which will also be the earliest first regulatory approval date of those substances. On the basis of MSD’s alternative construction, the extension will be the period from the date of the patent until the first regulatory approval date of substances A, B or C whichever is earlier in fact. On the construction advanced by Sandoz and the Commissioner the extension under s 77(1) will be from the date of the patent until the first regulatory approval date of whichever is the earlier of substances A, B or C. Because that period will necessarily be more than five years, the term of the patent will be extended by more than zero and will equal the period from five years after the date of the date of the patent until the grant of the earliest first regulatory approval date for substance A, B or C.

32 The primary judge then turned to consider the construction of the relevant provisions. She noted that the underlying policy of Pt 3 of Ch 6 is explained in the Explanatory Memorandum, Intellectual Property Laws Amendments Bill 1997 (Cth) and, after quoting parts of it said at J[48]:

The Explanatory Memorandum does not focus on any distinction between patents involving only one or more than one pharmaceutical substance. But it does explains [sic] one thing which is important. This is that the legislature considered that a period of time of less than five years between the date of the patent and the date of inclusion in the ARTG was not unacceptable and did not justify an extension of term of the patent.

33 MSD submitted before the primary judge that the decision in Ono favoured its construction. However, her Honour distinguished that case on its facts, noting that there the Court was considering the circumstance where the earliest first regulatory approval date on which the Commissioner relied to refuse the grant of an extension of term was that of the product of a third party competitor of the patentee. MSD challenges that reasoning.

34 The primary judge found that there was no merit in the primary construction advanced by MSD, namely that the earliest first regulatory approval date within s 77(1) meant the earliest first regulatory approval date of any substance satisfying s 70(3). Her Honour found that the notion of any involved the concept of the patentee selecting or nominating the relevant pharmaceutical substance for the purpose of the application for an extension. Whilst in practical terms it is for the patentee to identify a pharmaceutical substance which satisfies ss 70(2) or (3) as reg 6.8 of the Regulations provides, the statutory scheme does not operate by reference to a nomination or selection of a pharmaceutical substance by the patentee:

65 ...It operates by reference to the facts. There either is or is not a pharmaceutical substance per se disclosed and claimed in the patent for the purposes of s 70(2). There either is or is not goods containing or consisting of that substance included in the ARTG where the period beginning on the date of the patent and ending on the first regulatory approval date for the substance is at least five years for the purposes of s 70(3). The patent either has or has not been previously extended as referred to in s 70(4). The application for the extension of term either is or is not made within six months of the dates specified in s 71(2). The nomination or selection of a pharmaceutical substance by the patentee cannot affect these objective facts.

35 The primary judge then turned to and rejected MSD’s alternative construction, which was that the words “the earliest first regulatory approval date (as defined by section 70) in relation to any of the pharmaceutical substances referred to in subsection 70(2)” as they appear in s 77(1) mean the earliest first regulatory approval date of all substances satisfying s 70(3).

36 Her Honour first noted that s 77 referred in terms to s 70(2) not s 70(3). Section 70(2) establishes the class of relevant pharmaceutical substances and s 70(3) establishes a smaller subset of that class, confined to pharmaceutical substances as referred to in s 70(2) which also satisfy s 70(3). Any reference to s 70(3) is also a potential reference to s 70(2), but the converse does not apply. Section 77(1) inescapably refers to s 70(2) and not s 70(3).

37 The primary judge found that MSD’s approach to s 77(1) involved replacing the reference to s 70(2) with a reference to s 70(3) as if the reference to s 70(2) were a drafting error. Her Honour said:

86 However, it is by no means clear that refusing to read the reference to s 70(2) as if were a reference to s 70(3) would defeat the object of the provision. To the contrary, it is strongly arguable that reading the reference to s 70(2) as if [it] were a reference to s 70(3) would result in something the legislature never intended. This is because, as I have said, it is clear that the legislature considered a delay of less than five years in the capacity to exploit a patent disclosing and claiming a pharmaceutical substance was acceptable and did not require a capacity for an extension of term of the patent. There is no reason to infer that the legislature intended that a patentee with a patent disclosing and claiming more than one pharmaceutical substance intended that there could be an extension of term if the patentee obtained inclusion of one or more pharmaceutical substances in the ARTG within five years of the date of the patent but then also obtained inclusion of one or more pharmaceutical substances in the ARTG five years or more after the date of the patent. Provided one pharmaceutical substance has been included in the ARTG within five years of the date of the patent, the patentee has had the benefit of the monopoly afforded by s 13 of the Patents Act within the period of delay the legislature considered acceptable.

38 The primary judge found at J[87] that the facts of the present case demonstrate the overreach in the construction propounded by MSD. In the present case, substance A is sitagliptin. MSD has been able to exploit its monopoly in respect of sitagliptin since 16 November 2006 when that substance was included in the ARTG. The period from the date of the patent (5 July 2002) until the date of inclusion of that substance in the ARTG (16 November 2006) was less than five years. If matters had remained thus, MSD would never have been able to satisfy s 70(3). MSD then obtained inclusion in the ARTG of the composition sitagliptin/metformin more than five years after the date of the patent (on 27 November 2008). On MSD’s construction of s 77(1), MSD could obtain an extension of term of the patent for the period of time from 5 July 2002 until 27 November 2008 reduced by five years. The result would be that MSD obtains a monopoly over sitagliptin for more than 20 years in circumstances where it never suffered any unacceptable delay in its capacity to exploit sitagliptin.

39 The primary judge also found that it was not possible to read the reference in s 77(1) to s 70(2) as a reference to a pharmaceutical substance referred to in s 70(2) which also satisfies s 70(3) in conformity with the authorities cited by MSD, namely Director of Public Prosecutions v Leys [2012] VSCA 304; 44 VR 1 (Redlich and Tate JJA and Forrest AJA), Taylor v The Owners – Strata Plan No 11564 [2014] HCA 9; 253 CLR 531 (French CJ, Crennan, Bell, Gageler and Keane JJ), and R v A2 [2019] HCA 35; 269 CLR 507 (Kiefel CJ, Bell, Gageler, Keane, Nettle, Gordon and Edelman JJ). That was because the primary judge considered that the modified meaning that MSD sought to give to s 77(1) was not “consistent with the language in fact used by the legislature” (Taylor at [39] (French CJ, Crennan and Bell JJ)) having regard to the explicit reference to s 70(2). Nor did the language of s 77(1), in her Honour’s view, “accommodate a range of meanings” in accordance with A2 at [125] (Bell and Gageler JJ).

40 The primary judge accepted that there may seem to be an oddity if the construction advanced by Sandoz and the Commissioner were to be accepted. This was because the statutory scheme would: (a) enable a patentee to apply for an extension of term as provided for in s 70; (b) enable a patentee to make an application within time as prescribed by s 71(2)(b); (c) require the Commissioner to accept the application under s 74(1); (d) require the Commissioner in fact to grant the extension of term under s 76; and (e) then provide a method for the calculation of the extension of term which results in an extension of term of zero.

41 MSD submitted that the only case in which there could be a zero term of an extension is when the earliest first regulatory approval, on its construction, was precisely five years after the date of the patent. It would be absurd, MSD submitted, if a large number of extension term applications resulted in a zero term of extension.

42 However, the primary judge found that oddness or even absurdity are not free-standing concepts. They must be addressed in context. She found that it cannot be concluded that the statutory scheme is odd or absurd in circumstances where, on its face, s 77(1) expressly contemplates not only that the extension of term may be zero, but also provides that the extension of term may not be “below zero”. Her Honour found that those words in s 77(1) expose the fact that a zero term of an extension is within the contemplation of the statutory scheme. Moreover, it was not apparent to her Honour that many or only some of the applications would result in a zero term of an extension if her preferred construction were adopted. She considered that an obvious answer to that proposition is that it may be understood that the legislature inferred that a patentee would not make an application at all if, under s 77(1), the term of the extension would be zero.

43 In this context, it may be noted parenthetically that the primary judge resolved a dispute as to the correct construction of s 71(2)(b) of the Patent Act in favour of an argument advanced by MSD and the Commissioner, and against Sandoz. Her Honour found that where s 71(2)(b) requires that an application for an extension of term must be made during the term of the patent and within 6 months after the date of commencement of the first inclusion in the ARTG of “goods that contain, or consist of, any of the pharmaceutical substances referred to in subsection 70(3)”, this was a reference to substances that satisfy both of the requirements of ss 70(3)(a) and (b), rather than a reference to the pharmaceutical substances identified in the chapeau to s 70(3).

44 Accordingly, her Honour concluded that by operation of s 77(1), the term of extension of the patent is zero and that the Register should be rectified.

4. THE APPEAL

4.1 The grounds of appeal

45 MSD’s amended notice of appeal contains two grounds. The first is that the primary judge erred in law in construing the provisions in Pt 3 of Ch 6 of the Patents Act by construing the statutory language in s 77 in a way which did not give effect to the statutory scheme. The second is that the primary judge erred in concluding that the patent was only entitled to a term extension of zero. The outcome of this ground depends on the success or failure of Ground 1.

46 MSD also advances, as an alternative basis for supporting Ground 1, a challenge to Pfizer Corp insofar as the Full Court held that the phrase “inclusion in the Australian Register of Therapeutic Goods” within s 70 was not confined to the inclusion of goods in the part relating to “Registered Goods”. The challenge to Pfizer Corp is addressed at 4.5 below.

4.2 MSD’s submissions regarding s 77 of the Patents Act

47 MSD submits that the primary judge should have held, consistently with the construction adopted by Beach J in Ono at [29], [135], [136], [144], [161], [162] and [182], that the term of the extension provided by s 77 is calculated by reference to the “earliest first regulatory approval date” of any of the pharmaceutical substances referred to in s 70(2) which is the subject of a compliant application for an extension of term.

48 Alternatively, it submits that the “earliest first regulatory approval date” in s 77(1) refers to the earliest date of first inclusion in the ARTG of all of the pharmaceutical substances in s 70(2) that are eligible for extension having regard to s 70(3).

49 MSD contends that the extension of term scheme is beneficial and remedial legislation which is to be given a “fair, large and liberal” interpretation rather than a “literal or technical one”, citing IW v City of Perth [1997] HCA 30; 191 CLR 1 at 12 (Brennan CJ and McHugh J) and at 52 (Kirby J), and Ono at [135]. It submits that the primary judge erred in failing to apply such an approach. In particular, it contends that this Court should prefer the approach of Beach J in Ono to avoid the absurd result which follows if two different substances might be used for the purposes of ss 71 and 77. In this context, MSD submits that the primary judge erred in finding that the reasoning in Ono upon which it relied was obiter dicta. However, regardless of whether or not that characterisation was correct, MSD submits that the primary judge erred in failing to find as absurd a construction of Pt 3 of Ch 6 whereby an application for an extension of term can proceed based upon a pharmaceutical substance satisfying the conditions in s 70(2) and s 71(2)(b) and yet then be granted an extension of term by s 77(1) of zero. This provides, it submits, a senseless paradox in that Pt 3 of Ch 6 provides comprehensive mechanisms for the assessment and grant of an extension of term by the Commissioner only to lead to zero terms.

50 MSD submits that the primary judge erred in drawing support from the Explanatory Memorandum in circumstances where more than one pharmaceutical substance per se is disclosed and claimed in a patent. It submits that the passages relied upon by the primary judge did not address that circumstance. MSD also submits that the effect of the primary judge’s construction is to prescribe an additional criterion for the grant of an extension beyond zero.

51 It is by reference to its alternative construction argument that MSD addresses attention most closely to the language of Pt 3 of Ch 6. It submits that the introductory words of s 77 identify that the term of the extension is calculated only where the Commissioner has granted an extension, being where the pharmaceutical substance enabling the application to be made complies with s 70(3) (and, we interpolate, also s 71(2)(b)). The universe of pharmaceutical substances to which s 77(1)(a) is addressed is accordingly those substances that satisfy s 70(3) and that were the subject of an application that complies with s 71. MSD does not contend that the reference in s 77(1) to s 70(2) is an obvious error, or invite the Court to take an approach of “judicial legislation, not judicial construction”, but rather contends for a construction to reflect the fact that s 70(3) is not drafted in a way where there could be a direct reference to it, because it applies to conditions rather than the pharmaceutical substances in s 77. Accordingly, when construing s 77 it is necessary to give effect to the broad reference to s 70 in s 77(1) and its place in the context of the statutory scheme. The phrase in s 77 “the earliest first regulatory approval date (as defined by section 70) in relation to any of the pharmaceutical substances referred to in section 70(2)”, on MSD’s alternative construction, should be construed as referring to the earliest date of first inclusion in the ARTG of the pharmaceutical substances disclosed and claimed (as per s 70(2)) for which application may be made for extension pursuant to the requirements of s 70(3). This, MSD submits, gives work to the word “earliest”.

52 MSD submits that the reduction in s 77 will result in an extension of zero term only in the exceptional circumstance where the period beginning on the date of the patent and ending on the first regulatory approval date for the substance is exactly five years.

53 MSD submits further that the practical consequence of the primary judge’s decision is that a patentee in the position of the patentee in Ono, which had a single patent covering two antibodies, cannot obtain an extension of term based on the second product to be commercialised. However, it could at an early stage of development of the second substance amend its patent to exclude the second substance from the claims, make a divisional application claiming that second substance, and thereby preserve its right to apply for an extension in relation to that second substance, because it would still have been disclosed in the specification of the parent patent. This, it submits, places form over substance and would have a perverse effect. Set against this unfairness, the fact that, on its construction, some patentees in some cases may have a patent term of more than 20 years for some products (subject to s 78) is a minor disadvantage with an overall benefit to the public in avoiding “the impost on the Commissioner and the wastage of resources”.

4.3 The respondents’ submissions regarding s 77 of the Patents Act

54 Sandoz submits that the primary judge was correct to find that the “earliest first regulatory approval date” referred to in s 77(1) is the date of the earliest regulatory approval in relation to any pharmaceutical substance per se that is disclosed and claimed in the patent. It generally supports the primary judge’s reasons. It submits that the present case provides a stark example of the policy considerations at play. The primary and alternative constructions advanced by MSD would give it a monopoly over sitagliptin for more than 20 years, in circumstances where it never suffered any unacceptable delay in its capacity to exploit that substance. This would prevent Sandoz from exploiting its products, which contain sitagliptin, after the 20 year term, despite the benefit that MSD has enjoyed by reason of its export sitagliptin listing since November 2006. Indeed, on the construction advanced by MSD, a patentee could secure a term of up to 25 years of effective monopoly in relation to a pharmaceutical substance, if the substance was the subject of regulatory approval at or around the date of the patent simply by relying on a later regulatory approval granted 10 years or more into the patent term in relation to a different pharmaceutical substance that was disclosed and claimed in the patent. Such an outcome, it submits, was plainly not envisaged by the legislature, noting the observation of Lindgren J in Alphapharm Pty Ltd v H Lundbeck A/S [2008] FCA 559; 76 IPR 618 at [23]: “[t]his provision reflects the view that, ordinarily, ARTG registration should mark the beginning of exploitation”.

55 Sandoz submits that the primary judge correctly distinguished the facts from Ono in the present case, because Ono concerned a situation where the earliest first regulatory approval on which the Commissioner relied to refuse the grant of an extension of term was that of a third party. It submits that it was the position in Ono that where a patentee has regulatory approvals in relation to multiple pharmaceutical substances disclosed and claimed, s 77 requires that the earliest of those approvals be used to calculate the extension.

56 The Commissioner also supports the decision of the primary judge and adopts the submissions advanced by Sandoz. She notes that a striking feature of the construction advanced by MSD is that the words “(but not below zero)” in s 77(1) would be entirely redundant; the reduction by 5 years could never cause the term to fall below zero because the only pharmaceutical substances which would be included are those that met the qualifications of s 70(3)(b).

57 In relation to MSD’s primary construction, the Commissioner submits that, in Ono, the Court appeared to proceed on the footing that the patentee could not pick and choose which s 70(2) substance is to apply for the purposes of s 77, otherwise the word “earliest” in the expression “earliest first regulatory approval date” in s 77 would be redundant. The Commissioner submits, however, that, for other reasons, Ono was incorrectly decided. We do not think that this submission accurately records the reasoning in Ono, which proceeds on the basis that the patentee can exercise choice, albeit at a stage anterior to the application of s 77 itself.

58 In response to MSD’s alternative construction, the Commissioner adds that “substances” are not eligible for extension. Rather it is a patent that is eligible. The effect of an extension is to extend the patentee’s monopoly (subject to s 78) to all of the s 70(2) substances, not merely those that meet the additional characteristic of s 70(3). Further, not only is the reference in s 77 to s 70(2) different from the reference in s 71(2)(b) to s 70(3), the “earliest first regulatory approval date” in s 77 does not mean the same thing as “first inclusion in the [ARTG] of goods that contain or consist of” in s 71(2)(b). The latter operates by reference only to the inclusion of goods in the ARTG, whereas s 77’s reference to “earliest first regulatory approval date (as defined in section 70)” picks up both the inclusion of goods in the ARTG (s 70(5)(a)) and pre-TGA marketing approval. Accordingly, the Commissioner submits that s 77 simply has a different field of operation from s 71(2)(b), and MSD’s attempts to equate them is at odds with the statutory scheme.

4.4 Analysis – construction of s 77 of the Patents Act

59 The scheme of Pt 3 of Ch 6 of the Patents Act provides that a patentee may apply for an extension of the term of a patent provided that the requirements of ss 70(2) – (4) are satisfied. It is to be noted that the term extension ultimately calculated under s 77 is for the patent as a whole, and not particular claims or particular substances.

60 The requirements under s 70(2) are that one or more pharmaceutical substances per se (or pharmaceutical substances when produced by a process that involves the use of recombinant DNA technology) must in substance be disclosed in the complete specification of the patent and in substance fall within the scope of the claim or claims of that specification. The requirements under s 70(3) are that two conditions must be satisfied in relation to at least one of those pharmaceutical substances: (a) goods containing or consisting of the substance must be included in the ARTG; and (b) the period beginning on the date of the patent and ending on the first regulatory approval date for the substance must be at least five years. The term “first regulatory approval date” is defined in s 70(5).

61 An application for an extension must be made by the patentee in the form required in s 71(1) and within 6 months of the latest of the three times identified in s 71(2). The first is the date the patent was granted. The second is the date of commencement of the first inclusion in the ARTG of goods that contain, or consist of, any of the pharmaceutical substances referred to in s 70(3). The third is the date of commencement of s 71.

62 Sections 74 and 75 address the acceptance of the application by the Commissioner, advertisement and opposition. Opposition is confined to the ground that one or more of the requirements of ss 70 and 71 are not satisfied; s 75(1). If the Commissioner is satisfied that the application is in accordance with these requirements, pursuant to s 76 the Commissioner must grant the extension. The term of the extension is determined by the formula set out in s 77.

63 The primary judge found that this section means what it says: the extension to be granted is equal to the period beginning on the date of the patent (here, 5 July 2002) and ending on the earliest first regulatory approval date (as defined in s 70) in relation to any of the pharmaceutical substances referred to in s 70(2). In the present case both sitagliptin and sitagliptin/metformin were substances per se referred to in s 70(2), but the earliest first regulatory approval date was for sitagliptin (16 November 2006) and not sitagliptin/metformin (27 November 2008). As a consequence, the term of the extension was 4 years, 4 months and 11 days, less 5 years, but not below zero, yielding an extension of zero.

64 In this context, the primary judge found that s 77(1) “inescapably” referred to s 70(2) and not s 70(3). In so doing, the legislature nominated that the “earliest” first regulatory approval date is the date on which (here) the first of the two substances obtained a first regulatory approval date.

65 The duty to resolve an issue of statutory construction is a text-based activity, although questions of policy can inform the Court’s task of statutory construction; Alphapharm Pty Ltd v Lundbeck A/S [2014] HCA 42; 254 CLR 247 at [42] (Crennan, Bell and Gageler JJ); s 15AA of the Acts Interpretation Act 1901 (Cth). It is accordingly appropriate to consider policy considerations, but not insofar as they deflect from a consideration of the policy and purpose of the scheme by reference to the language of the legislation itself; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) [2009] HCA 41; 239 CLR 27 at [47] (Hayne, Heydon, Crennan and Kiefel JJ).

66 The primary judge noted that the underlying policy is explained in the Explanatory Memorandum as follows:

P3
Extensions of up to five years on the standard 20 year term are available for pharmaceutical patents in the United States, the European Union and Japan in recognition of the exceptionally long development time and regulatory requirements involved in developing and commercialising a new drug. The aim is to provide an ‘effective patent life’, or period after marketing approval is obtained during which companies are earning a return on their investment, more in line with that available to inventions in other fields of technology.
...
20
Section 77 sets out how the length of the extension of term is to be calculated. The maximum length of the extension will be 5 years. The length of the extension is equal to the period between the date of the patent and the date of the first regulatory approval less 5 years. For example, where the period between those two dates is 5 years or less, a patent will not be eligible for an extension of term, while a period of 10 years or more would allow a full 5 year extension.

67 MSD submits that apart from the present case and Ono, no decision has considered the circumstance where a single patent discloses and claims multiple substances. It contends that no legislative intention can be discerned from the Explanatory Memorandum that a patentee is adequately compensated where a patent discloses and claims multiple substances, one of which is included as a listed good on the ARTG within 5 years of the date of the patent. It submits that the primary judge erred in concluding that the legislature “had accepted that anything under 5 years from the date of grant until the ability of the patentee to exploit the patent (by inclusion in the ARTG) is acceptable”. We disagree.

68 Extension of term regimes have long formed a part of patent law. They were included in the Patents Act 1903 (Cth) and the Patents Act 1952 (Cth). The provisions under both of those Acts required consideration by the Court of whether or not a patentee had received inadequate remuneration for the patent during its normal term. The onus lay heavily on the patentee to establish this, and also that all of the circumstances, including the nature and the merits of the invention, warranted the grant of the extension. The grant of extensions was rare, and proceedings for extensions of terms were famously complex and expensive. As a result, extensions of term, and the need to balance the competing interests of patentees and the public (including competitors) became the subject of sustained policy debates in Australia and abroad for some 20 years, before a modern version of the Patents Act came into force; Alphapharm at [47] (Crennan, Bell and Gageler JJ).

69 The somewhat complex development of the present form of Pt 3 of Ch 6 of the Patents Act is summarised in Alphapharm at [49]-[57]. When the Patents Act originally replaced the Patents Act 1952 (Cth), it provided for the term of a standard patent to be 16 years. By amendment made in Act 154 of 1994, the term was extended from 16 to 20 years (s 67). The present extension of term scheme was instituted by the Intellectual Property Laws Amendment Act 1998 (Cth), the purpose of which was described in the Explanatory Memorandum to be to give effect to the government’s decision to provide for an extension of term scheme for pharmaceutical patents whereby an extension of up to five years would be available; Alphapharm at [57]. The rationale was explained in the Explanatory Memorandum at 3-4:

The development of a new drug is a long process, estimated to average around 12 years, which requires a new chemical entity to be patented early in the process in order to secure its intellectual property rights. However, considerable research and testing is still required before the product can enter the market. As a consequence, patentees of new drugs usually have considerably fewer years under patent in which to maximise their return.
It is expensive to bring a drug to market, around US$380 million, and involves considerable risk. As such, research based pharmaceutical companies rely heavily on patents to generate the substantial cash flows needed to finance the development of new drugs from the discovery stage, through the pre-clinical and clinical development phases, to eventual marketing.
A country’s patent system is also an important factor in contributing to a company’s decision on whether to invest or not. If Australia has a weak patent system, relative to it’s [sic] competitors, there is a risk that investment in research and development will be lost to those offering stronger patent protection.
The objective of this proposal is to provide an ‘effective patent life’ – or period after marketing approval is obtained, during which companies are earning a return on their investment – more in line with that available to inventions in other fields of technology. It is also intended to provide a patent system which is competitive with other developed nations.

70 In Alphapharm, the Court noted that the purpose of the extension of term scheme is to balance the competing interests of a patentee of a pharmaceutical substance whose exploitation of monopoly has been delayed (because of regulatory delay) and the public interest in the unrestricted use of the pharmaceutical invention (including by a competitor) after the expiration of the monopoly (that is, the term); Alphapharm at [60] (Crennan, Bell and Gageler JJ) and at [120] (Keifel and Keane JJ).

71 This conclusion is consistent with the recently introduced objects clause set out in s 2A of the Patents Act, which provides:

The object of this Act is to provide a patent system in Australia that promotes economic wellbeing through technological innovation and the transfer and dissemination of technology. In doing so, the patent system balances over time the interests of producers, owners and users of technology and the public.

72 The current form of the Patents Act is simplified by comparison with the previous law. As the majority noted in Alphapharm, the consideration of whether there had been inadequate remuneration for the patent during its normal term, and whether, in the Court’s discretion, “other circumstances” warranted an extension were replaced so that:

48 ... regulatory delay is now the proxy for inadequate remuneration and merit is now assumed for a pharmaceutical substance suitable for human use. Once the Commissioner is satisfied that the conditions in s 70 and the procedural time requirements in s 71 have been met (subject to opposition), the Commissioner can directly proceed to consider the date of the patent and the date of the first regulatory approval and apply s 77 to calculate an extension of term.

73 The primary judge was correct to note at J[48] that the legislature contemplated the circumstance that where the period between the date of the patent and the date of the first regulatory approval date is less than 5 years, a patent will not be eligible for an extension of term. As much is expressly stated in the Explanatory Memorandum. Whilst that document does not focus on any distinction between patents involving only one pharmaceutical substance and those involving more than one pharmaceutical substance, there is no reason to suppose that the statement set out was not an expression of general policy.

74 More importantly, the text of s 77 provides support for this approach. First, because s 77(1) refers in terms to s 70(2) and not s 70(3). Secondly, because s 77(1) explicitly contemplates that an extension of term may be zero, but not less than zero. Thirdly, because s 77(1) identifies that the relevant calculation takes into account the “earliest” first regulatory approval date. We develop these points below.

75 MSD criticises the primary judge’s construction as failing to take into consideration the scheme of Pt 3 of Ch 6 of the Patents Act. It submits that an application for an extension must be made within 6 months of the three dates identified in s 71(2), and notes that a valid application may satisfy s 71(2)(b) if any one of the pharmaceutical substances identified in s 70(2) satisfies the two requirements of s 70(3). In the present case this meant, as the primary judge found, that a valid application for an extension was made on the basis of the sitagliptin/metformin substance. The application was duly accepted by the Commissioner pursuant to s 74 and the extension granted under s 76, yet at the final hurdle the primary judge found that the term of the extension was zero, because goods containing sitagliptin were included in the ARTG at an earlier point in time, and before the effluxion of five years from the date of the patent. MSD submits that this produces an odd result that Beach J described in Ono “as absurd”.

76 As the primary judge explained, the reference in s 77(1) to s 70(2) was not an obvious error, and accordingly s 77(1) must be understood to refer to the superset of pharmaceutical substances that may be identified as pharmaceutical substances per se disclosed in the complete specification that in substance fall within the scope of the claims, rather than the subset identified in s 70(3). On appeal, MSD does not challenge the finding that the reference to s 70(2) was not an error, but submits that the reference in s 77(1)(a) to s 70(2) relates to pharmaceutical substances in the context of the patent that is being extended. Section 77 deals only with the length of an extension after grant, being where a substance is contained in goods that have met the conditions of s 70(3). The definition of the term of the extension should be characterised by reference to that subset falling within s 70(2) that would be eligible for extension by reference to goods satisfying the condition in s 70(3). In this way, MSD contends that the reference in s 77(1) to the “earliest first regulatory approval date (as defined by section 70) in relation to any of the pharmaceutical substances referred to in subsection 70(2)” must be confined to those pharmaceutical substances identified by reference to s 70(3).

77 However, the language of s 77 does not support MSD’s approach. By making reference to s 70(2), attention is drawn to any of the pharmaceutical substances per se that may fall within the superset of s 70(2). The construction that MSD propounds would have the reference to s 70(2) read down by reference to s 70(3) such that only pharmaceutical substances in respect of which goods were included in the ARTG “at least 5 years” after the date of the patent would be under consideration. However, that is not what s 77(1) says.

78 Nor does that construction make allowance for the fact that s 77(1) expressly contemplates that an extension of term can be zero or, were it not for the words “but not below zero”, below zero. An extension of term could not be zero or theoretically below zero unless the ARTG listing was obtained within five years of the date of the patent. As the primary judge said at J[57], those words expose the fact that a zero term of an extension is within the contemplation of the statutory scheme. That could only be the case if s 77(1) meant what it said, namely that any extension of term is to be calculated by reference to the earliest first regulatory approval date in relation to any of the pharmaceutical substances referred to in s 70(2). The construction propounded by MSD is not only contrary to a straightforward reading of s 77(1), it would also render the words “reduced (but not below zero)” redundant.

79 Where, as in the present case, more than one pharmaceutical substance per se is in substance disclosed and claimed in the relevant patent and there are multiple regulatory approvals for goods that contain or consist of those substances, the length of the extension is to be calculated from the earliest first inclusion in the ARTG of goods relating to any of those substances. That is in accordance with a policy objective of achieving a balance between the competing interests of a patentee of a pharmaceutical substance whose exploitation of monopoly has been delayed, and the public interest in unrestricted use of the pharmaceutical invention.

80 The primary judge correctly observed that there is a degree of oddity about a statutory scheme that would permit an application to be made within s 71 but which is nonetheless resulted in an extension of term under s 77 of zero. However, the choice is between the language chosen by the legislators and conjecture as to a policy said to be discerned not from the language used but rather vague notions about what a sensible construction should be. In the present case, the primary judge rightly chose the former, observing that it may be understood that the legislature inferred that a patentee would not make an application under s 71(1) at all if the term of the extension would be zero.

81 Policy considerations further support the approach of the primary judge. One may be demonstrated from the facts of the present case. MSD has been able to exploit its monopoly in respect of sitagliptin since 16 November 2006, when that substance was included in the ARTG. As the High Court noted in Alphapharm at [48], regulatory delay is now the proxy for inadequate remuneration and merit is assumed for a pharmaceutical substance suitable for human use. The period from the date of the patent until the date of inclusion of sitagliptin was less than five years. At that point the regulatory delay had been less than five years. It was not until MSD obtained inclusion in the ARTG of the composition sitagliptin/metformin, more than five years from the date of the patent (on 27 November 2008), that it became eligible under s 70(3) to apply for an extension of term. However, the effect of the extension would be to extend the monopoly rights under the patent not only for the composition sitagliptin/metformin but also for sitagliptin and indeed any other pharmaceutical substance disclosed and claimed in the patent.

82 Another example might be where a single patent disclosed ten pharmaceutical substances per se within s 70(2). For six of those, goods containing the substances were included in the ARTG within s 70(3)(a) but all within a period of less than five years from the date of the patent. For a seventh, goods containing the substance were included in the ARTG more than five years from the date of the patent. On the basis of the constructions propounded by MSD, a term extension within s 77 would be available on the basis of the ARTG registration for the seventh pharmaceutical substance. However, the effect of the extension would be to extend the term of the patent generally, with the result that the monopoly protection afforded in respect of all of the earlier six substances would also receive the benefit of the extension.

83 Nor do we consider that the ‘practical consequence’ of filing a divisional application to avoid the substantive effect of this construction would produce the absurd outcome predicted by MSD. The consequence of the grant of an extension under s 77 is that the term of the whole of the patent is extended, not only insofar as it concerns the substance included in goods that are included within the ARTG more than five years after the date of the patent within s 70(3). As a result, the narrower the disclosure of the specification and the scope of the claims of the patent, the more likely the patentee is to benefit from the extension. In the present case, had MSD filed a separate patent – whether divisional or otherwise – wherein a combination of sitagliptin/metformin was disclosed and claimed but not sitagliptin, then it could have had the benefit of an extended term, but the patentee would not also have had the benefit of an extended term in respect of claims that covered sitagliptin alone. That outcome would appear to us to meet the balance that Parliament sought to achieve between the interests of the patentee and the public interest, including by a competitor, in the unrestricted use of a pharmaceutical invention.

84 Accordingly, we see no policy reason to divert from the language of s 77(1) in determining the term of the extension.

85 MSD relies on the reasoning of Beach J in Ono to support its primary construction and, in particular, that s 77 should not be read literally because absurd results follow if different substances might be used for the purposes of s 71 and s 77. Ono was concerned with the proper construction of ss 70(3) and 71(2)(b) of the Patents Act, not s 77 as such. In that case, Beach J reasoned that, implicitly, s 77 must operate on an anterior choice, made by the patentee, as to which pharmaceutical substance can be used for the purpose of applying the timing requirement of s 71(2)(b). That choice, made with respect to the pharmaceutical substance or substances that satisfy the conditions of s 70(3), would identify the goods to which s 71(2)(b) refers. The consequence of his Honour’s reasoning is that s 77 would not operate with respect to approval dates for pharmaceutical substances that do not satisfy both conditions stipulated in s 70(3), even if such pharmaceutical substances satisfy s 70(2). His Honour’s reasoning with respect to the proper construction of ss 70(3) and 71(2)(b), permitting choices to be made by patentees, has now been found to be erroneous: Commissioner of Patents v Ono Pharmaceutical Co. Ltd [2022] FCAFC 39. Thus, Ono cannot provide the support for which MSD contends.

86 For the reasons set out above, the primary judge was correct to conclude that the Register of Patents should be rectified to record an extension of term of the patent of zero.

4.5 The challenge to Pfizer Corp

4.5.1 The submissions

87 As an alternative basis for supporting Ground 1 of its appeal, MSD contends that the decision in Pfizer Corp was wrong insofar as the Full Court there found that the “first regulatory approval date” defined in s 70(5) includes an “export only” listing. MSD submits that s 70(5) was intended to deal with marketing approval and that, in light of certain extrinsic materials, the words “date of commencement of the first inclusion in the ARTG of goods that contain or consist of the substance” in s 70(5)(a) refer to an inclusion in the ARTG as registered goods not listed goods.

88 MSD did not challenge the correctness of Pfizer Corp before the primary judge and relied on the considerations in Linkhill Pty Ltd v Director, Office of the Fair Work Building Inspectorate [2015] FCAFC 99; 240 FCR 578 at [30]- [38] (North and Bromberg JJ) to argue that it was appropriate to raise the issue on appeal. In its written submissions Sandoz opposed MSD raising the argument for the first time on appeal. However, in oral submissions Sandoz urged this Court to address the substantive question raised to give the parties certainty, withdrew its opposition to the amendment on procedural grounds, and made substantive submissions in opposition to the argument. In this circumstance, and having regard to our view that the challenge to Pfizer Corp is misplaced, we consider it appropriate to address the question of whether this Court should decline to follow that decision.

89 MSD contends that the Full Court erred in its reasoning in focussing on the concept of exploitation. It submits that the issue that was considered by the Pharmaceutical Industry Commission’s Report (Report) and accepted in the Explanatory Memorandum was not “exploitation” in Australia by generating a manufacturing profit but rather whether one is able to market and supply in Australia, being within the territory of the patent. MSD also submits that the Full Court wrongly approached the construction of s 70 and the meaning of “first inclusion” from the perspective of the TG Act. It submits that there are provisions in the Patents Act which refer to a section having a meaning as in another Act, such as s 119A(1)(a)(ii), which refers to medical devices as defined in the TG Act, or s 133(2)(b), which provides for a compulsory license to be ordered where the patentee has contravened or is contravening Part 4 of the Competition and Consumer Act 2010 (Cth). MSD submits that where the legislature intended to pick up a word as defined from another Act, it does so explicitly. However, s 70(5) has no definition of the word “inclusion”, nor does it explicitly say that “first inclusion in the [ARTG]” must be as it was used in the TG Act. It submits that the Full Court incorrectly adopted that approach. MSD urges this Court to construe the word “inclusion” in s 70(5) in its context, being for the purpose of ensuring that a patentee may market within Australia. In taking this approach, MSD seeks to distinguish the approach to construction taken by the patentee in Pfizer Corp by submitting that it is not the concept of exploitation that gives rise to the need for an extended term, but the ability to market within the jurisdiction.

90 MSD further submits that the Court should exercise its powers under s 192 of the Patents Act to amend the entry on the Register based on the JANUVIA products so that the patent term expires on 14 January 2023. In reply, it submits that if the Court considers that it lacks power under s 192 to permit rectification, or that there should be an opportunity for evidence to be led in relation to the exercise of discretion under s 192, then MSD could make an application under s 223 of the Patents Act for an extension of time to seek an extension of term or the Court could remit the matter to the primary judge for determination of this issue.

91 Sandoz submits that MSD has not established that the decision in Pfizer Corp was in fundamental error, or plainly wrong, citing Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 [2021] FCAFC 153 at [1]- [20]. Sandoz submits that Pfizer Corp was a decision of three judges of the Full Court who carefully reasoned and applied uncontroversial principles of statutory construction. Special leave to appeal to the High Court was refused. It submits that the challenge advanced by MSD does not address the statutory text, but arises from selective reference to extrinsic materials, which in any event are not themselves as clear as MSD submits.

92 Sandoz also submits that any extension based on the JANUVIA product listing is out of time. Section 71(2)(b) requires any application for an extension of term to be made within 6 months after the commencement of first inclusion in the ARTG of any of the substances referred to in s 70(3). That date would, on the basis of MSD’s alternative case, be 6 months after 14 January 2008. However, MSD did not make its application for an extension of term until 27 May 2009. Accordingly, a valid application has not been made pursuant to s 71 of the Patents Act and as such it must be refused pursuant to s 74(3). In those circumstances the Commissioner would have been obliged to refuse the application granted, even if Pfizer Corp was wrongly decided. The result is that the Court would have no power under s 192 to amend the Register or there would be powerful reasons for it to decline to exercise its discretion to do so.

93 The Commissioner generally supports the submissions advanced on behalf of Sandoz and adds additional arguments going to the operation of the scheme under Pt 3 of Ch 6. She also refers to the operation of s 70(5A) of the Patents Act to indicate how amendments to the legislation since Pfizer Corp have embraced the Court’s interpretation of s 70(5)(a). The Commissioner submits that s 70(5A) assumes that listed goods for export will fall within s 70(5)(a) and excludes a subset of those goods, being those exported in accordance with Australia’s obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). As a result, interpreting s 70(5)(a) as referring to the inclusion of registered goods on the ARTG would render s 70(5A) entirely superfluous as, on MSD’s argument, the entire export list would not be encompassed in the concept of “inclusion” in the ARTG.

4.5.2 The Full Court judgment

94 In Pfizer Corp the patentees applied under s 70 of the Patents Act for the extension of the terms of four patents. The Commissioner accepted the applications pursuant to s 74 and extensions were granted under s 76 without any opposition on the basis that the “first regulatory approval date” in relation to each of the patents was the date on which the relevant pharmaceutical substance was entered in that part of the ARTG that related to registered goods. However, each of the relevant pharmaceutical substances had previously been entered in that part of the ARTG relating to listed goods. This gave rise to the following issue under s 70:

56 The question is whether, in the present circumstances, since no pre-TGA marketing approval was given in relation to the relevant goods, the date of commencement of the first inclusion in the Therapeutic Register of the goods was the date on which they were entered in the part relating to listed goods, rather than the date on which they were entered in the part relating to registered goods.

95 The Full Court began by considering the relevant provisions of the TG Act. It noted that under the then current s 9A of the TG Act the Secretary is to cause the ARTG to be maintained which is to have three parts; a part for goods to be known as registered goods, a part for goods to be known as listed goods and a part for medical devices. Section 9A(4) provided that regulations may prescribe the therapeutic goods, or the classes of therapeutic goods, that are required to be in each part of the ARTG. The Therapeutic Goods Regulations 1990 (Cth) (TG Regulations) contained such prescriptions. Regulation 10 provided that goods of the kind mentioned in Schedule 3 are to be included in the part of the ARTG for registered goods and therapeutic goods of a kind mentioned in Part 1 of Schedule 4 are to be included in the part of the ARTG for listed goods. Item 1 of Schedule 4 consisted of therapeutic goods manufactured in Australia for export only and 17 other items. Item 1 of Schedule 3 consisted of medicines not mentioned in Item 1 of Schedule 4.

96 The Full Court noted that Part 3-2 of Chapter 3 of the TG Act regulated certain dealings with therapeutic goods. Division 1 of Pt 3-2 related to the importing of therapeutic goods into and the exporting of therapeutic goods from Australia and also to the manufacture and supply of therapeutic goods in Australia for use in humans. In general terms, it was an offence to do any of these things unless the goods were registered goods or listed goods or otherwise exempt; s 19B of the TG Act. The Full Court noted that Division 2 of Pt 3-2 of the TG Act dealt with registration and listing of therapeutic goods. The Full Court noted that under s 25, where an application was made for the registration of a therapeutic good, the goods were to be evaluated for registration having regard to a number of factors, which it defined as the “Relevant Factors”. Section 26 dealt with the listing of therapeutic goods. Under that section, where an application was made for the listing of therapeutic goods and certain prerequisites were satisfied, then the Secretary was not to refuse to list the goods except where the Secretary was satisfied as to certain matters. The Full Court noted that the prerequisites corresponded in large part to the Relevant Factors and that the distinction between the prerequisites for the registration of therapeutic goods and those for the listing of therapeutic goods was, in one sense, a difference in onus.

97 The Full Court then turned to the question of construction. It commenced by saying at [57]:

As a matter of ordinary English, “first inclusion in” the Therapeutic Register means the first time when goods are included in the Therapeutic Register pursuant to Division 2 of Part 3-2, irrespective of the part of the Therapeutic Register in which they are included. In the present case, the relevant goods were first included in that part of the Therapeutic Register relating to listed goods. That was when they were first included in the Therapeutic Register.

98 It referred to Pfizer’s arguments, first that the language of s 70(5)(a) should be read as though the following additional words appeared in it:

The date of commencement of the first inclusion in the [ARTG] for marketing in Australia of goods that contain, or consist of, the substance.

99 Next, the patentees in Pfizer Corp argued that pre-TGA marketing approval is concerned only with the marketing of goods in Australia and that the underlined words should be implied in order to ensure conformity between ss 70(5)(a) and (b). Where there had been no such marketing approval then the first regulatory approval date would be the date of the commencement of the first inclusion in the ARTG of a relevant substance that enabled the substance to be marketed in Australia. This was said to conform with the purpose of the Patents Act. Thirdly, the patentees submitted that there is a higher degree of scrutiny required for registered goods than required for listed goods, which they submitted supports the contention that there is a distinction to be drawn between listing and registration.

100 The Full Court rejected those arguments, finding that the distinctions made between listed and registered goods do not necessarily lead to a conclusion that s 70(5) of the Patents Act, when referring to first inclusion in the ARTG, should be understood as referring to inclusion for marketing in Australia. Nothing in s 70(5) indicated that there should be any qualification to the clear and unequivocal words found in that provision. Regardless of whether it is more difficult to have goods in the part related to registered goods than in the part relating to listed goods, if the goods are included in one or other of the parts they are, the Full Court considered, nonetheless included in the ARTG.

101 The Full Court noted at [64] of its reasons that the Government’s response to the Report on 22 April 1997 indicated that the proposed extension of term was a recognition of the long development times and regulatory requirements that erode the time available for exploitation of a patent. It said:

64 ...While the Government’s response accepted an extension of up to five years, it made no reference to marketing approval.
65 The revised explanatory memorandum promulgated in relation to the Bill for the Amending Act that introduced the current regime for extension of patents for pharmaceutical substances refers both to the Industry Commission Report and the Government’s response to it. It states that an extension of up to five years will be available for a standard patent relating to a pharmaceutical substance that is the subject of first inclusion on the Therapeutic Register, thereby simply using the language of the Bill, which was ultimately included in s 70. The Minister’s speech on the second reading of the Bill for the Amending Act refers to the time taken to register and market a new product. The Minister observed that the development of a new drug is a long process and that the objective of the relevant part of the Bill was to provide an effective patent life. However, no mention was made of marketing in Australia.
(Emphasis in original.)

102 The Full Court relevantly concluded:

66 It is tolerably clear that the policy that underlay the introduction of the new regime for extension of the term of a patent was to provide an additional effective term for the exploitation of a patent. The substance of the Patentees’ contentions is that inclusion in that part of the Therapeutic Register relating to listed goods does not permit exploitation. That is a misconception.
67 Manufacture in Australia of goods, pursuant to a patent, is part of the monopoly granted by the patent. Under s 13 of the Patents Act, a patent gives the patentee the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention. Exploiting an invention that is a product includes making, selling or otherwise disposing of the product and keeping it for the purpose of doing such things. Clearly, manufacture in Australia of therapeutic goods for export, if the goods are the subject of a patent, involves the exploitation of the invention of the patent.
68 The purpose of the relevant provisions of the Patents Act, in providing for extension of the term of a patent relating to pharmaceutical substances, is to ensure that the term during which the patent can be exploited is not eroded by a delay in the administrative process that will permit exploitation. Until goods are included in the Therapeutic Register, they cannot be supplied or marketed in Australia or exported and, therefore, cannot be exploited commercially. However, export of goods is clearly commercial exploitation. The fact that the prerequisites for export may be less stringent than the prerequisites for supply, or marketing, in Australia, is known to a patentee. Even if a patent can be exploited earlier, by export of listed goods, than by the supply, or marketing, in Australia of registered goods, there will nevertheless be exploitation.
69 For example, there may be goods for which there is no real market in Australia but a very substantial market elsewhere in the world. It may be in the commercial interest of a patentee, therefore, to ensure that it can exploit its patent by exporting goods as soon as possible. On the other hand, if a patentee wishes to ensure a longer period of exploitation by supply in Australia, it is within the power of the patentee to seek inclusion of goods in the Therapeutic Register relating to registered goods before seeking inclusion in that part of the Therapeutic Register relating to listed goods.

4.5.3 Analysis

103 The submissions advanced by MSD invite this Court to depart from the reasoned decision of the Full Court in Pfizer Corp. Intermediate appellate courts should not depart from decisions of intermediate appellate courts on the interpretation of Commonwealth legislation unless they are convinced that the interpretation is plainly wrong; Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; 177 CLR 485 at 492 (Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ). Consideration of what may be “plainly wrong” involves striking a balance between the risk of perpetuation of error in too rigid a stance in reconsideration of earlier decisions and the importance of the stable operation of the doctrine of precedent and the predictability of the law; FAK19 at [7]-[9] (Allsop CJ).

104 In FAK19, Allsop CJ said at [10]:

... a decision to depart from earlier authority involves not only a consideration of the jurisprudential nature and character of the error that leads to the conviction of past error, but also other considerations such as, by way of example, whether the earlier decision rested on principle carefully worked out and whether the earlier decision had been otherwise acted upon.

105 MSD rightly does not criticise the summary in Pfizer Corp of the TG Act, the TG Regulations or the Patents Act. Nor do they criticise as a matter of principle the approach taken by the Full Court to statutory construction. Rather, as we have noted, they submit that the words “the date of commencement of the first inclusion in the [ARTG]” should be read down to refer to registered goods, not listed goods. Although couched in different terms, there is no substantive difference in approach between that taken by MSD and that adopted by the unsuccessful patentee in Pfizer Corp. Both require the language of s 70(5)(a) to be recast by reference to the secondary materials, replacing the broad reference in s 70(5)(a) to “first inclusion in the [ARTG]” with a narrow meaning not justified by the language used or the apparent legislative policy underlying it.

106 In our view the reasoning in Pfizer Corp provides a compelling basis for rejecting MSD’s proposed approach as a matter of substance.

107 Section 70(5)(a) does not define the first regulatory approval date by reference to “registered goods” but by “first inclusion” in the ARTG. The Patents Act, both in its current form and in the form that it was at the time that s 70(5) was introduced, includes a definition of the ARTG as meaning “the register maintained under [the relevant section, then s 17, now s 9A] of the TG Act”. In our respectful view, it cannot be said that the Full Court erred insofar as it referred to the legislative scheme under the TG Act in its consideration of what is said to be “included” within it.

108 Nor do we consider that error lay in the Full Court’s consideration of the concept of “exploitation” in the context of considering inclusion within the ARTG. The Minister’s second reading speech referred to the fact that the development of a new drug product is a long process and that the objective of the relevant part of the Bill was to provide “an effective patent life” for a patent. This must be understood in the context of the benefit that accrues to a patentee from a patent, which is the exclusive right to exploit the invention within the meaning of that term in s 13 of the Patents Act. That concept extends beyond marketing in Australia and includes, as the definition in the Dictionary (Schedule 1 to the Patents Act) provides, the making, selling or otherwise disposing of the product and keeping it for the purpose of doing such things.

109 Furthermore, the argument advanced by MSD tend to overlook the content of s 78 of the Patents Act, which provides (broadly) that if the Commissioner grants an extension of term, the exclusive rights of the patentee during the term of the extension are not infringed by a person who is “exploiting” either (a) a pharmaceutical substance per se within the claimed scope of the extended patent for a purpose other than a therapeutic use; or (b) any form of the invention that is not a pharmaceutical substance per se disclosed in the specification and within the scope of the claims. Plainly enough the exclusive rights of the patentee, as defined in s 13 of the Patents Act by reference to the definition of “exploit”, are curtailed during the extended term. The Full Court in Pfizer Corp was in our respectful view correct to identify a correlation, as a matter of policy, between the disputed words in s 70(5)(a) and the notion of exploitation of the invention.

110 The submissions advanced by MSD also direct attention to the Report, which was handed down in May 1996 and was also relied on by the patentee in Pfizer Corp (Full Court at [64]-[65]). MSD relies in particular on a passage at page 442 of the Report which is as follows:

The Government is committed to providing 15 year effective life patent protection for pharmaceuticals in line with US and European standards. This means extending the term of a patent to up to 25 years depending on when the new drug was authorised for marketing in Australia. In detail this equates to extending the term of the patent by a period that does not exceed five years, but would otherwise be equal to the period between the date of the patent...and the day on which registration of the new drug in the Australian Register of Therapeutic goods commenced (as set out in s 25(5) of the Therapeutic Goods Act 1989), reduced by five years.
(Emphasis added.)

111 However, the Explanatory Memorandum referred both to the Report and also the Government’s response to it and chose to use the language of “first inclusion” rather than “first registration”, as did the Act. The Full Court’s observations at [65] provide an apt response to the recast argument now advanced by MSD.

112 Furthermore, it cannot be said that the Report uniformly supported an approach that a first regulatory approval date should be tied to marketing. In chapters 16.2 and 16.3 of the Report, reference is made to the interests of both manufacturers and developers, and maximising the benefit of Australia’s internal and export activities. The Report is not unequivocal as to a purpose of benefiting only those who market in Australia or that the legislative intention was to identify only “registered” rather than “listed” goods. It provides a shaky foundation for departing from the language used in the Explanatory Memorandum and the section itself.

113 Our view that a carefully reasoned decision by an intermediate court is not plainly wrong is sufficient basis to reject this aspect of the appeal. However, for completeness we note that it is apparent that since 2006 the decision in Pfizer Corp has been acted upon by the Commissioner and relied upon by parties utilising the extension provisions, including by MSD in the present case until its more recent volte-face. Since 2006 Parliament has not considered it necessary to amend the language used in s 70(5). Parliament has amended the TG Act such that the ARTG is no longer confined to parts relating to goods known as registered goods, listed goods and medical devices (see s 9A of the TG Act, as amended by the Therapeutic Goods Amendment (Medical Devices) Act 2002) but now consists of five parts, one for registered goods, another for listed goods, another for biological medicines, another for medical devices, and a part for provisionally registered goods (see s 9A of the TG Act as amended by the Therapeutic Goods Amendment (2009 Measures No. 3) Act 2010 and the Therapeutic Goods Amendment (2017 Measures No. 1) Act 2018). As the Commissioner submits, the construction advanced by MSD would mean that goods included in four out of five of those parts would not be eligible for an extension of term at all. No material advanced in this case suggests that this is an intended consequence of those amendments.

114 In the result, we are not satisfied that it is appropriate in this case to depart from the decision in Pfizer Corp. In light of this conclusion, it is unnecessary to consider whether it might have been suitable to exercise the discretion under s 192 of the Patents Act to amend the entry on the Register based on the JANUVIA products.

5. DISPOSITION

115 The appeal must be dismissed. Sandoz asks to be heard on the question of costs of the appeal. In the normal course, we would order that MSD pay the respondents costs of the appeal. However, against the prospect that any party seeks a different order we will put in place a timetable for the making of submissions going to the question of costs.

Associate:

Dated: 18 March 2022