Bayer Pharma Aktiengesellschaft v Genentech, Inc.

REASONS FOR JUDGMENT 1 The applicant (Bayer Pharma) commenced this proceeding against Genentech, Inc. (Genentech) seeking revocation of Genentech's Australian Innovation Patent No 2012100335 titled "Method for treating intraocular neovascular diseases" (the Innovation Patent). Bayer Pharma also sought revocation of another patent which has since been surrendered. Genentech has cross-claimed for infringement against Bayer Pharma, the second cross-respondent (Bayer Australia) and Regeneron Pharmaceuticals Inc (Regeneron). 2 Regeneron is located in New York in the United States of America (the USA). It is an opponent to the grant of Australian Patent Application No. 2005299701 from which the Innovation Patent was derived as a grandchild divisional patent application. Phillips Ormonde Fitzpatrick, a patent attorney firm (POF), acts for Regeneron in respect of that opposition. In early November 2012, Genentech's solicitors communicated with Phillips Ormonde Fitzpatrick Lawyers (POFL) to see whether POFL had instructions to accept service in this proceeding of the cross claim for Regeneron. POFL advised that they did not have such instructions. 3 Genentech has applied to the Court for leave to serve its cross-claim on Regeneron in accordance with r 10.63 to 10.68 of the Federal Court Rules 2011 (Cth) (the Rules). Although not specifically stated in its application, it has become apparent through oral and written submissions that Genentech applies for leave pursuant to rule 10.43(2) of the Rules, to be effected by the mechanism of r 10.63 to 10.68. Further, or in the alternative, Genentech seeks an order pursuant to r 10.24 of the Rules for substituted service.

Service outside Australia 4 Rule 10.43(3) of the Rules requires that an application for leave to serve an originating application on a person in a foreign country in accordance with the Hague Convention must be accompanied by an affidavit setting out various procedural matters. 5 Rule 10.43(4) of the Rules provides that for r 10.43(2) Genentech must satisfy the Court that: (a) the Court has jurisdiction in the proceeding; and (b) the proceeding is of a kind mentioned in r 10.42 of the Rules; and (c) Genentech has a prima facie case for all or any of the relief claimed in the proceeding. 6 As to the last requirement, Gordon J in Australian Competition and Consumer Commission v Yellow Page Marketing BV [2010] FCA 1218 at [25] observed (in respect of the old O 8 r 3 of the Federal Court Rules 1979 (Cth)): The requirement to demonstrate a prima facie case in this context is not particularly onerous. The question is whether on the material before the Court, inferences were open which, if translated into final findings of fact, would support the relief claimed. A prima facie case exists, provided there is such evidence, even on a hearsay basis, as to sufficient elements of the proceeding leading to any (and not necessarily all) of the relief sought: Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 at [39], [55], [58] and [97]. (emphasis original) 7 Any inference must be clearly and properly drawn and not based on mere speculation: Apotex Pty Ltd v Les Laboratoires Servier (No 2) [2012] FCA 748 at [18]. Nevertheless, as the Full Court in Ho v Akai Pty Ltd (in liq) (2006) 24 ACLC 1526; [2006] FCAFC 159 observed at [10]: 'the prima facie case requirement has to be met at the outset, usually on an ex parte basis, and without the advantage of discovery and other procedural aids to the making out of a case'. 8 As stated by Lee J in Century Insurance (in provisional liquidation) v New Zealand Guardian Trust [1996] FCA 376 and adopted by the Full Court in Ho v Akai at [10], the questions that arise are whether: (a) the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court's processes to resolve the dispute; and (b) causing an overseas respondent to be involved in litigation in the Court in Australia is justified.

Substituted service 9 Further, or in the alternative, Genentech seeks an order initially pursuant to r 10.24 of the Rules for service on Regeneron through service of the documents on POFL. Rule 10.24 allows the Court to make an ex parte order for substituted service where it is not practicable to serve a document on a person in a way required by the Rules. 10 The applicant for substituted service must demonstrate that service is impractical and that the method of substituted service proposed is one which in all reasonable probability, if not certainty, will be effective to bring knowledge of the documents to the person to be served: ACCC v Yellow Page Marketing at [35] (in the context of O 7 r 9 of the Federal Court Rules 1979 (Cth)). The question of impracticability must be considered in the factual context in which the issue arises (Unilever Australia Ltd v PB Foods Ltd [2000] FCA 798 at [13]). As Gordon J also observed in ACCC v Yellow Page Marketing at [32], it is now accepted that, in certain circumstances, an order for substituted service can be made in relation to a respondent that is outside Australia. In British American Tobacco Australasia Limited v Taleb (No 1) [2012] FCA 1065, Dodds-Streeton J discussed the change in language from O 7 r 9 to the current r 10.24 and found that "not practical" did not suggest a more constrained meaning than "impractical" (at [25]-[30]). 11 It is not necessary to consider whether the requirements for substituted service are made out, as Genentech accepts that an order should be made under r 10.43 of the Rules for service on Regeneron in the US. Genentech does not seek substituted service as an alternative to service out of the jurisdiction in accordance with the Rules. It seeks an order additionally, to permit an additional pathway that may notify Regeneron of the notice of cross-claim and statement of cross-claim in a more timely fashion.

Leave to serve outside Australia - accompanying affidavit (r 10.43(3)) 12 I am satisfied that each of the matters in r 10.43(3) are each dealt with in the evidence in support of Genentech's application.

Leave to serve outside Australia - Jurisdiction (r 10.43(4)(a)) 13 The Court has jurisdiction pursuant to ss 120 and 154 of the Patents Act 1990 (Cth) (the Patents Act) to determine a claim for infringement of the Innovation Patent. As such, r 10.43(4)(a) of the Rules is satisfied.

Leave to serve outside Australia - Proceeding of a kind (r 10.43(4)(b)) 14 The proceeding against Regeneron is 'based on a cause of action arising in Australia' (r 10.42, item 1) and 'based on a tort committed in Australia' (r 10.42, item 4). Genentech seeks 'relief or remedy under an Act…' (r 10.42, item 15). Accordingly, the proceedings are of a kind mentioned in r 10.42 and r 10.43(4)(b) of the Rules is satisfied.

Leave to serve outside Australia - a prima facie case (r 10.43(4)(c))

Eylea, the Innovation Patent and Regeneron 15 This case concerns the impending promotion and sale of the product "Eylea" in Australia by Bayer Australia. A Regeneron press release, dated 8 March 2012, stated that Bayer HealthCare plans to launch Eylea in Australia in the second half of 2012 and Regeneron's Chief Executive is reported to have stated that Eylea would be launched beginning by the end of this year in Australia. Bayer Australia is the sponsor of the Australian Register of Therapeutic Goods (ARTG) listing for Eylea. Genentech alleges that various claims of its Innovation Patent will be infringed by the use, promotion and sale of Eylea in Australia. 16 Claim 1 of the Innovation Patent is: A method for treating wet form age-related macular degeneration in a human, the method comprising: (a) administering intravitreally to the human two or three first individual doses of a VEGF antagonist at one month intervals; followed by, (b) administering intravitreally to the human a number of second individual doses of the VEGF antagonist, wherein the second individual doses are administered less frequently than the first individual doses, and wherein the VEGF antagonist is a protein that binds to VEGF. 17 Claim 3 is: A method according to claim 1 or use according to claim 2, wherein the protein that binds to VEGF is an anti-VEGF antibody or a VEGF-Trap. 18 A VEGF antagonist is defined in the specification of the Innovation Patent as including 'fusions proteins, eg., VEGF-Trap (Regeneron)'. 19 The Product Information document for Eylea (the Product Information), dated 7 March 2012 and amended 15 March 2012, identifies the active pharmaceutical ingredient of the medicament as Aflibercept. Aflibercept is a VEGF antagonist. The Product Information directs that Eylea be used to treat wet age-related macular degeneration (AMD) by administering one intravitreal injection per month for three consecutive months, followed by one intravitreal injection every two months. 20 From the Product Information, there is a prima facie case that the method of treatment described in the Product Information falls within the scope of claim 1 of the Innovation Patent. 21 The evidence indicates that Aflibercept binds to VEGF to create a VEGF Trap. There is a prima facie case that the method of treatment described in the Product Information infringes claim 3. 22 There is no need further to consider Genentech's assertion of infringement of claims 2, 4 and 5.

The claim against Regeneron 23 There are two broad claims made against Regeneron by Genentech. First, Genentech asserts that Regeneron is a joint tortfeasor with Bayer Australia (and Bayer Pharma) by acting in concert with Bayer Australia in a common design to carry out Bayer Australia's infringing conduct or aiding, abetting, counselling and procuring and/or inducing and inciting that conduct. Genentech also submits that Bayer Australia has or will authorise, within the meaning of s 13(1) of the Act, healthcare professionals to use Eylea in Australia in accordance with the product information and thereby infringe claims 1 and 3 to 5 of the Innovation Patent. In any event, Genentech says, Bayer Australia will infringe claims 1 and 3 to 5 by reason of s 117 of the Act through the instructions contained in the Product Information. 24 Secondly, Genentech asserts that Regeneron has authorised Bayer Australia to exploit claim 2 of the Innovation Patent (and claims dependent on it) in Australia, relying on principles from Beecham Group Ltd v Bristol Laboratories Ltd [1978] RPC 153 at 200-1 and Saccharin Corp Ltd v Anglo-Continental Chemical Works Ltd (1900) 17 RPC 307 at 319. Genentech asserts that Bayer Australia will infringe claim 2 by the importing, promoting and selling of Eylea in Australia, because the manufacture of Eylea involves the treatment that comprises the method in claim 1 and there is therefore a direct exploitation of claim 2 of the Innovation Patent.

Legal principles relevant to the prima facie case of joint tortfeasorship 25 Pursuant to s 13(1) 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'. "Exploit" in relation to an invention includes (Schedule 1 of the Patents Act): (a) where the invention is a product - make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or (b) where the invention is a method or process - use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use. 26 Infringement by the 'use of a product', is determined by s 117 of the Act, which provides: (1) If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent. (2) A reference in subsection (1) to the use of a product by a person is a reference to: (a) if the product is capable of only one reasonable use, having regard to its nature or design - that use; or (b) if the product is not a staple commercial product - any use of the product, if the supplier had reason to believe that the person would put it to that use; or (c) in any case - the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier. 27 A person may be a joint tortfeasor in another's infringement of a patent. The agreement which is the basis of a common design to infringe in Australia can take place overseas. Genentech draws particular attention to the decision of Graham J in Morton-Norwich Products Inc v Intercen Limited [1978] RPC 501 at 514-515. His Honour recited the activities of the Dutch company and the English company and concluded that there was a 'concerted design' to sell the product in question in England. His Honour held that if there is a concerted design to sell goods which in fact infringe the English patent, then the parties who have such design and do so sell are in fact joint tortfeasors and both infringe the patent. His Honour continued to say that provided that the tort is committed in the United Kingdom and there is a common design, it is not relevant that the agreement was made within or outside the jurisdiction. For present purposes, Genentech accepts the identification of the principles of joint tortfeasorship by common design set out in Apotex at [22] to [26]. In short, it must be found that one party acted with another in an enterprise pursuant to a common design in the course of which a patent infringement is committed.

Evidence of joint tortfeasorship 28 The evidence upon which Genentech relies to establish a prima facie case of joint tortfeasorship is, in terms of corporate structure and involvement, incomplete, as is not unusual for such an ex parte application. In evidence is a license and collaboration agreement between Bayer HealthCare LLC (Bayer HealthCare) a US company and Regeneron, dated 18 October 2006. It is a detailed Agreement which sets out, inter alia, the following: Regeneron owns and has licensed certain Patents, Know-How and other rights related to the VEGF Trap in all countries of the world excluding the USA. Bayer HealthCare and its "Affiliates" possess knowledge and expertise in, and resources for, developing and commercialising pharmaceutical products in, relevantly, Australia, in the relevant Field being shortly the treatment and/or diagnosis of ocular disease or disorder through local administration to the eye. "Affiliate" is defined to include a company controlled by or under common control with any Person, which in turn includes a limited liability company or corporation. The subject matter of the Agreement includes "Regeneron Patent Rights" and "Regeneron Products" which includes, without limitation, the VEGF Trap. Pursuant to the Agreement, Regeneron grants to Bayer HealthCare the 'co-exclusive [with Regeneron and its Affiliates] right and license under the Regeneron Intellectual Property to make, have made, use, develop, import and export Licensed Products' for use inter alia in Australia, and the 'exclusive right and license under the Regeneron Intellectual Property to sell and offer to sell Licensed Products' in the Field inter alia in Australia, 'subject to Regeneron's right to supply Licensed Products to [Bayer HealthCare], as contemplated by this agreement'. Bayer HealthCare has the right to grant sub-licenses with the prior written consent of Regeneron, except that Bayer HealthCare may sub-license its rights to an Affiliate for the purposes of meeting its obligations under the agreement without Regeneron's consent. Bayer HealthCare is responsible for the promotional materials including filing promotional materials with regulatory authorities. Regeneron retains the right to review and comment on all major promotional materials. All rights to all promotional materials are jointly owned, including copyright. Bayer HealthCare is the lead party responsible for approvals and registration filings in, relevantly, Australia and owns approvals and registration filings for any Company Products. Bayer HealthCare oversees and co-ordinates regulatory actions, communications, filings and submissions with regulatory authorities in, relevantly Australia. Bayer HealthCare and Regeneron agree to establish procedures to ensure that they exchange all necessary information to enable the other party and its licensees to comply with regulatory obligations in connection with the development, manufacture and/or commercialisation of the products. Decisions with respect to any recall, market withdrawal or other corrective action related to a licensed product should be made only upon mutual agreement of the parties. Regeneron is to be the supplier of the product and the parties together agree to identify which party or third party will perform the filling, packaging, labelling and testing of the formulated bulk product to supply the finished product for clinical supply requirements and commercial supply requirements. Each party agrees to notify the other party of any allegation of infringement or violation of intellectual property rights and they agree jointly to consider the appropriate course of action with respect to allegations of infringement. While each party shall have the right to defend any action naming it, the parties agree to co-operate and provide reasonable assistance to each other. The parties agree that neither will enter into any settlement of any suit involving licensed products that materially affect the other party's rights or obligations with respect to the product without the other party's prior written consent. 29 On the same date, Bayer HealthCare released a statement on the website of www.pharma.bayer.com announcing a collaboration between Bayer HealthCare and Regeneron for the global development and commercialisation outside the USA of the VEGF Trap for the treatment of eye disease by local administration. There is reference to collaboration 'through an integrated global plan' that encompassed wet AMD and joint commercialisation outside the USA where the parties will share equally in profits from sales. 30 On 8 March 2012, Regeneron and Bayer HealthCare jointly announced that Bayer HealthCare have received approval from the Australian Therapeutic Goods Administration for Eylea injection for the treatment of patients with neovascular (wet) AMD. It is stated that Bayer HealthCare plans to launch Eylea in Australia in the second half of 2012. Again it is stated that Bayer HealthCare and Regeneron are collaborating on the global development of Eylea, that Bayer HealthCare owns the exclusive marketing rights outside the USA and that the companies will share equally in the profits. 31 Other documents from Regeneron refer to the collaboration with Bayer HealthCare on the global development of Eylea. It does seem to be the case, however, from the evidence referred to that while there is a collaboration and Regeneron plays a strategic role in commercialisation, in terms of "feet on the ground", the responsibility is that of Bayer HealthCare. 32 While the written agreement is said to be between Bayer HealthCare and Regeneron, media releases published by Regeneron, Bayer HealthCare (a subsidiary of Bayer AG) (Bayer Germany) and Bayer AG are to the effect that it is the HealthCare arm of Bayer AG in Germany that is in collaboration with Regeneron. The relationship between Bayer HealthCare LLC, Bayer Germany, Bayer Pharma and Bayer Australia is not entirely clear and is likely to be elucidated following discovery. However, in their defence to the Statement of Claim, Bayer Pharma and Bayer Australia admit that they are related bodies corporate and allege that: 'Bayer Pharma has managed the introduction of EYLEA for the treatment of wet form age-related macular degeneration in humans in markets outside the United States of America (including Australia)'. Given the materials published by Regeneron and the Bayer group of companies, the inference that may be drawn is that Bayer HealthCare is the USA vehicle by which Bayer Pharma has engaged with Regeneron, and Bayer Australia is the Australian vehicle by which Bayer Pharma and Regeneron seek to market and sell Eylea in Australia. 33 Genentech also points out that the pharmacodynamic effects and method of administration for Eylea as set out in the Production Information is, in effect, the same as the recommended dose that is the cause of administration for Eylea as set out on the Regeneron website. Further, it is stated in Regeneron's Form 10-Q Quarterly Report for the quarter ended 30 June 2012 that Eylea is also known in the scientific literature as VEGF Trap-I. Similarly, in the Regeneron 1999 Form 10-K Annual Report, what was then a product candidate planned to enter clinical trials included 'VEGF Trap: An antagonist to Vascular Endothelial Growth Factor (called VEGF), which is required for the growth of blood vessels that are needed for tumours to grow. VEGF Trap is a potential treatment for cancer and is expected to enter clinical trials in 2001'.

consideration: the prima facie case of joint tortfeasorship 34 As to the claim of joint tortfeasorship, Regeneron has published various documents by which it may be inferred that Regeneron and Bayer Pharma have entered into an agreement by which they have agreed to collaborate to develop and commercialise, inter alia, Eylea in Australia. The evidence establishes a prima facie case that Regeneron is not simply in a position of a third party manufacturer. In particular, Regeneron has licensed its intellectual property to permit the development and commercialisation of Eylea and will manufacture Eylea. Regeneron will share the development costs and the profits of sales around the world for Eylea, including in Australia (but excluding the USA). Regeneron will jointly own all copyright in the promotional materials and has the right to review and comment on all such material. The inference to be drawn is that Bayer Australia is the local entity through which Regeneron commercialises Eylea. That is, that Regeneron and the Australian affiliate of Bayer HealthCare have formed a common design to sell, promote and profit from the sale of Eylea in Australia. 35 In light of those matters, there is a prima facie case that Regeneron is jointly liable with Bayer Australia for any infringement by Bayer Australia of Genentech's patent. For the purposes of establishing a prima facie of infringement, the establishment of a prima facie case is, as Gordon J observed in ACCC v Yellow Page Marketing, is not particularly onerous (at [25]). The test was described by Collier J in Bell v Steele (2011) 198 FCR 291 at 295 at [21] as a 'relatively low' threshold. 36 Genentech has established a prima facie case that Bayer Australia has infringed, or will infringe the Innovation Patent. There is a prima facie case that the claims encompass the use of the Regeneron product which is, by definition, a product subject to the claimed method. 37 Genentech has established a prima facie case that Bayer Australia will infringe at least claims 1 and 3 by reason of s 117(2)(c) of the Patents Act. The Product Information gives clear instructions to use Eylea in a way that will infringe those claims of the Innovation Patent. 38 Genentech also alleges that Bayer Australia has or will authorise infringements by healthcare professionals. Given my conclusion that there is a prima facie case of infringement of the Innovation Patent by reason of s 117, it is not necessary for me to decide whether Bayer Australia will also infringe by reason of authorisation within the meaning of s 13(1) of the Act.

consideration: the prima facie case of authorisation 39 Since I have found that Genentech has established a prima facie case that Regeneron is a joint tortfeasor with Bayer Australia by common design to carry out Bayer Australia's infringing conduct, there is no need for me to decide also whether there is a prima facie case that Regeneron has authorised the infringing conduct of Bayer Australia. It is not necessary that Genentech establish a prima facie for each cause of action alleged (Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 at [39] and [190]).

Leave to serve outside Australia - a residual discretion 40 As discussed in Apotex at [120]-[126], there is discretion within r 10.43 of the Rules whether or not to grant leave to serve outside Australia. None of the discretionary matters which arose in that case apply here and Genentech says that it is not aware of any other matter which would give rise to an exercise of the discretion against the grant of leave to serve outside Australia. Genentech submits that, if Regeneron is not joined, there is a distinct possibility that it will be unable to recover a significant portion of the profits made from the sale of Eylea in Australia. 41 Regeneron is opposing the grant of the grandparent to the Innovation Patent, namely the Australian Patent application No 2005299701 and has filed a detailed statement of grounds of particulars. 42 I accept that it is a factor in favour of joining Regeneron to these proceedings that it would also bound by any decision as to the validity of the Innovation Patent rather than risk a multiplicity of proceedings. Further, Regeneron is already engaged in, broadly speaking, the subject matter of this proceeding.

Additional order for service 43 Since I will grant leave to serve Regeneron outside Australia, Regeneron ought to be brought into the case swiftly, given that the matter has now been on foot for almost six months and in circumstances where: (a) the cross-respondents will apparently shortly release Eylea into the Australian market; and (b) the Innovation Patent will expire on 21 October 2013. 44 I will make an order for service pursuant to the Hague Convention. While I will not order substituted service, the additional proposed method of service may bring the matter to Regeneron's attention more quickly.

Disposition 45 Following concerns that I raised, Genentech acknowledges that it may be that the proposed grant of leave for service outside Australia would be better expressed to be made pursuant to r 10.43 of the Rules, Genentech now seeks leave in the following form: The Cross-Claimant have leave pursuant to Rule 10.43 of the Federal Court Rules 2011 (the Rules) to serve its Notice of Cross-Claim and Statement of Cross-Claim on the Third Cross-Respondent, Regeneron Pharmaceuticals Inc., at 777 Old Saw Mill River Road, Tarrytown, New York in the United States of America, in accordance with the Hague Convention and Rules 10.63 to 10.68 of the Rules. 46 There is no need for Genentech to amend its interlocutory application, as Genentech has applied for leave and I see it as appropriate to grant leave in those terms. 47 I will make an order for an additional method of service in the following terms: In addition to the method of service in Order 1, the Cross-Claimant have leave to serve the Notice of Cross-Claim and Statement of Cross-Claim on the Third Cross-Respondent by delivering those documents: (a) to the office of Phillips Ormonde Fitzpatrick Lawyers at Level 23, 367 Collins Street, Melbourne, marked to the attention of "Malcolm Bell"; and (b) by email to malcolm.bell@pof.com.au. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett.