Bayer Pharma Aktiengesellschaft v Generic Health Pty Ltd

REASONS FOR JUDGMENT 1 This is an interlocutory application filed 5 March 2013 and returnable for hearing this morning, the first day of the hearing of this matter. The respondents seek leave to rely upon the affidavit of Terence Clive Burgess sworn 27 September 2012 filed in the proceedings as part of the respondents' evidence in chief on validity. The interlocutory application was filed in response to the applicants giving the respondents notice that there would be objection taken to Mr Burgess's affidavit. 2 The first issue for determination is whether r 34.50 of the Federal Court Rules 2011 is engaged. That rule provides that if a party proposes to tender as evidence in a proceeding experimental proof of a fact, the proponent must apply for orders in relation to the experimental proof, including orders about the matters set out in subparas (a) - (e). By r 34.50(2), evidence of the conduct and results of the experiment is admissible in the proceeding only if either the proponent has complied with subr (1) or with the leave of the court. The applicants' position is that r 34.50 is engaged. The respondents' position is that the rule is not engaged because Mr Burgess's evidence does not constitute experimental proof of a fact. 3 In order to understand this, it is necessary to record that on 3 August 2012, the respondents filed evidence from Dr Rowe, a pharmaceutical formulator. Dr Rowe considered a piece of prior art, a patent titled 'Monophasic contraception method and kit comprising a combination of progestin and estrogen", International Publication No. WO 98/04269, referred to by the parties in shorthand form as Gast. Gast contains an invention and disclosure of information which the respondents maintain anticipates and thus destroys the novelty of the patent in issue in this proceeding. Gast, insofar as relevant for the present interlocutory application, identifies a range of dosage units for an oral contraceptive and notes that the various dosage units which it discloses can be prepared by conventional methodology that is well known to one skilled in the art. Gast provides an example of what is said to be an acceptable composition of a contraceptive progesterone/oestrogen combination of the invention, being Example 1. The evidence of Dr Rowe consists of his description of the formulation that he would develop based upon this example in Gast. Mr Burgess was subsequently provided with the affidavit of Dr Rowe and was asked by the respondents to observe a process undertaken by Lupin Ltd in Pune, India on 20 September 2012, involving the manufacture of tablets said to be in accordance with Dr Rowe's formulation. Those tablets were then subsequently used in dissolution tests upon which the respondents also rely in this proceeding. 4 The position of the applicants is that the manufacture of the tablets as described by Mr Burgess constitutes part of the experimental proof of fact, the ultimate fact in this case concerning the dissolution of the tablets which were manufactured by Lupin Ltd. The respondents' position, in contrast, is that the manufacture of the tablets is not part of the experimental proof of any fact. The experimental proof is limited to the experiment consisting of the dissolution of the tablets which were manufactured in accordance with, in effect, the recipe provided by Dr Rowe, and that Mr Burgess's evidence is a form of confirmation that the manufacturing process by Lupin Ltd was carried out in accordance with that recipe. In respect of this issue, the respondents referred to the decision of Emmett J in Lexmark International v Boomerang Imaging Supplies Pty Ltd (2001) 112 FCR 331; [2001] FCA 833, in particular his Honour's observation at [10] noting various definitions of an experiment including, particularly, "an action or operation undertaken in order to discover something unknown, to test a hypothesis, or establish or illustrate some known truth." According to the respondents, the manufacture of the tablets is no part of an action or operation relevantly to test any hypothesis or establish some known truth, that being limited to the dissolution tests subsequently carried out on the manufactured tablets. 5 I do not agree with the respondents' characterisation of what constitutes the experimental proof of a fact. In this case, the tablets were manufactured for the purpose of carrying out subsequent dissolution tests. It seems to me that the manufacture of the tablets is plainly part of the experimental proof of the fact which the respondents wish to establish in these proceedings. I am unable to see how the manufacture of the tablets does not constitute part of the relevant experimental proof. Accordingly, I consider that r 34.50 is plainly engaged on the facts of the present case. 6 In this regard, I should also note that the issue of engagement of r 34.50 has been alive between the parties since at least 26 July 2012. It is apparent from the evidence before me that as early as March 2012, the respondents were raising the possibility of carrying out an experiment based on Gast, this having been mentioned by counsel for the respondents in a directions hearing before Yates J, then the docket judge in relation to this matter. On 23 July 2012, the respondents by correspondence to the applicants noted that it was their view that the actual tablet preparation from the formulation does not fall within the experimental proof of a fact, but the respondents then welcomed the applicants' comments on this issue. The applicants responded to the effect that the protocol for the experiments "must include the preparation of the claimed oral dosage form as well as the dissolution test". This letter was sent on 26 July 2012. Accordingly, it was clear to the respondents that the applicants' position was that the preparation of the dosage form - in other words, the manufacture of the tablets themselves - was part of the relevant experimental proof. 7 On 1 August 2012, by further letter, the respondents rejected this point of view and set out their argument why the manufacturer of the tablets was not an experiment within the meaning of r 34.50. At the same time the respondents noted that they would be willing to ascertain if Lupin Ltd was agreeable to the applicants nominating an observer of the manufacture process at Lupin Ltd which was then proposed. In this regard, I should note that Lupin Ltd is the parent company of the respondents. On 3 August 2012, the applicants responded to the effect that they were unable to agree with the respondents' contention that the experimental evidence need not deal with the preparation of the tablets to be used in the dissolution testing. Indeed, the applicants said in their letter by way of response, "the method of formulation of the tablets is plainly critical to the rate of dissolution of drospirenone from those tablets." 8 The applicants also made the point that it was unacceptable to them that the tablets be prepared by a party related to the respondents. They made the point that, having regard to the cost of them arranging for an expert to attend and observe the experiments, the overall cost of conducting the experiments in India at the premises of Lupin Ltd would exceed the quote that the respondents had obtained for carrying out the same experiments in Australia. The respondents, for their part, reiterated their position that the manufacture of the tablets was not an experiment for the purposes of the rule on 7 August 2012, but said that they would facilitate an observer at the manufacture of the tablets if the applicant so required. 9 What then occurred, at least insofar as relevant, is that on 9 August 2012, for reasons which are not apparent to me, the respondents said that the applicants' position on the manufacture of the tablets constituting an experiment remained unclear. The respondents said they would seek an extension of time for the filing of evidence of manufacture of the tablets by a third party, which I infer from the material was a reference to the third party manufacturer in Australia as opposed to a manufacture by the parent company of the respondents, Lupin Ltd. In any event, the matter came before Yates J on 10 August 2012. At that time through their counsel the respondents made clear that there had been a hold up in relation to the manufacture of the tablets according to Dr Rowe's formulation, and that such a manufacture could be done very easily and very cheaply at the respondents' parent premises in India, and that while this had been offered to the applicants with the ability for the applicants to observe the manufacture over there, the applicants had not concurred with that approach. 10 The applicants submitted to Yates J that this issue had been raised on 9 March, again on 19 April and then again on 23 July 2012 and still had not been resolved. More relevantly, for present purposes, the applicants noted that the respondents' position that the manufacture of the tablets was not an experiment was "completely untenable". They said that the respondents could not simply leave out the key issue, which is how to create the dosage form from the experimental process, because unless this was included there would be a complete waste of time and money, and the whole purpose of r 34.50, in effect, would be subverted. There followed these observations in an exchange between Yates J and Mr Shavin QC who appeared on that day, which exchange must have been one of which the respondents were aware. Yates J, having heard this complaint from the applicants said, "[n]ow, Mr Shavin, surely the risk is with the respondents on this. If, in fact, there's an obligation - there is an obligation to comply with r 34.50, if it's not complied with, then the risk is with the respondent, is it not?" His Honour then said, "[n]ow, you're in the process of articulating those objections now and, no doubt, they have been articulated in correspondence, or will be." His Honour also said: It seems to me - I mean, I can't force the respondent to put its evidence on in a particular form. It may be, for the sake of argument, that the evidence is deficient in many ways, and it may fail to comply with the rules. If it does, then r 34.50 provides the consequence and, really, it's at the time of determining the admissibility of that evidence that these decisions are to be made. But I don't have any application before me at the moment. The only application that I have before me at the moment is one for an extension of time for the filing of evidence, which has been identified in general terms. 11 His Honour then said, again, "[b]ut it seems to me that the risk is with the respondent on that, not with your client." 12 His Honour also said: The point that I understand is that you say that, so far as the tablet creation, or the oral formulation, the manner in which it's created is part of the experimental proof and a vitally indispensible part of that proof, and that if, in fact, the court has not given approval or leave in relation to that particular aspect, then, on your submission, if accepted, the likelihood is that evidence will not be accepted at trial. 13 Accordingly, it was apparent from the events of the directions hearing before Yates J on 10 August 2012 that the respondents were on notice that the applicants' position was that the manufacturer of the tablets formed not only a part of, but a vitally indispensible part of, the experimental proof. The consequence of that position was that r 34.50 was engaged and that it would be a matter for the respondents to take whatever steps the respondents saw fit to ensure that the evidence was in a form which could properly be admitted at the hearing. In other words, it was left in the respondents' hands at that time. 14 The respondent could have taken a number of actions, including, for example, filing an interlocutory application seeking to bring to a head the question of which it was fully aware, namely, the question of whether the manufacturer of the tablets was part of an experimental proof of a fact. The respondents chose not to do so, leaving that issue for later argument, presumably at the trial. 15 The reason this is relevant is that the respondents now say that they will be seriously prejudiced by the exclusion of Mr Burgess's material because it constitutes a significant part of their evidence in chief on the cross-claim for invalidity and, accordingly, they will suffer considerable prejudice if leave is not granted to them to rely on that evidence. Of course, that must also have been the position the respondents were in throughout July and August 2012 when they presumably made a forensic decision - or failed to make a forensic decision - to not bring the issue to a head and instead simply to rely upon whatever argument they proposed to put at trial as to whether or not the manufacturer of the tablets constitutes part of the experimental proof of a fact within the meaning of r 34.50. 16 That having been said, the subsequent course of events is even more disturbing, as disclosed by the affidavit material. It is apparent that the respondents were having considerable difficulty in arranging for the Australian manufacturer to manufacture the tablets within the timetable which had been fixed by the court. After the directions hearing before Yates J on 10 August 2012 it is apparent that as at 24 August 2012 the respondents were still trying to arrange for manufacture by the Australian manufacturer. However, on 19 September 2012 the respondents forwarded a letter containing a range of information. 17 First, the letter said that the respondents had not been able to arrange for the Australian manufacturer to make the tablets within the required timeframe due to that company's conflicting manufacturing requirements. Apparently that company required an additional four weeks in order to undertake the manufacturing. 18 Secondly, the respondent said that it might be possible to engage an independent laboratory in India to conduct the manufacturing more quickly than the Australian manufacturer. The respondents in this letter said: We understand that your clients have a substantial operation in India, and therefore available persons to observe any such manufacture. If this approach facilitates a faster completion of this stage of this stage of our evidence, please indicate if you would be amenable to this process. 19 Thirdly, the letter of 19 September 2012 also said this: Given the delay in manufacture at IDT Australia Ltd, and in order to in part meet the timetable ordered 31 August 2012, so that any prejudice to your clients' preparation of evidence in answer on invalidity is minimised, a batch of tablets manufactured in accordance with Dr Rowe's evidence is to be manufactured at Lupin Ltd's research laboratories under the supervision of an independent expert. It is these tablets that will be the subject of next week's dissolution experiment. 20 In fact, what is apparent from Mr Burgess's evidence is that he is the independent expert referred to in this paragraph and that he first attended at Lupin Ltd's research park at Pune on Thursday, 20 September 2012 and on that day and the following day, 21 September, observed the manufacture of tablets. In other words, the day after the letter of 19 September 2012, the manufacture at Lupin Ltd's research laboratories was undertaken. The letter of 19 September 2012 did not disclose that the manufacture was to be undertaken the following day. The respondents could not have reasonably expected that the applicants would have responded to this information by the following day, nor could they reasonably have expected that the applicants would have been able to arrange for anyone to attend at Pune in India to observe the manufacture the following day, even if they had made arrangements for a person from their operations in India to be available for this purpose. In any event, this is all moot because the letter from the respondents did not identify that the manufacture was to occur the following day. 21 What is apparent from this is that there is a gap in the sequence of the respondents' evidence between about 24 August 2012 and 19 September 2012. It is obvious that within that time period the respondents decided that Lupin Ltd would carry out the manufacture of the tablets for the purpose of a dissolution test and that the respondents would ensure that Mr Burgess, whom I infer is not resident in India from his affidavit, would attend at Lupin Ltd's research park on Thursday, 20 September 2012 for the purpose of observing the manufacture. However, whether intentionally or not, the position in which the respondents left the applicants was effectively to deny them any opportunity to be present during that manufacturing process and to observe what Mr Burgess had the opportunity of observing. 22 It seems to me that these circumstances are completely unsatisfactory. This would have been the second occasion when the respondents could have brought to a head the issue of the manufacturing process being part of the experimental proof of a fact within the meaning of r 34.50. Not having brought it to a head before Yates J in August 2012 the respondents decided to proceed to have the tablets manufactured in circumstances and at a time when the respondents' conduct effectively made it impossible for the applicants to attend. Indeed, by the time the applicants would have received the correspondence and been able to consider it, the manufacturing process would have already been underway. The fact that when confronted with three options, as set out in the letter of 19 September, the applicants reiterated their objection to the activities of manufacturing to be carried out by Lupin Ltd is unsurprising, the applicants not knowing the true position that the manufacturing was to take place, or was taking place, at the very time that they were writing their letter in response. 23 In terms of discretionary considerations, it could hardly be more clear that whether deliberate or not, the respondent's actions effectively denied the applicants an opportunity to be present to observe the experiment involving the manufacture of the tablets. That said, the respondents maintain that the prejudice to them if the evidence is not admitted will far outweigh the prejudice to the applicants if the evidence is admitted. 24 The respondents drew my attention to the decision of Mölnlycke Health Care AB v Brightwake Limited (2011) FSR 26; [2011] EWHC 140 (Brightwake) where Judge Birss QC was confronted with a situation where notice of experiments had not been served. His Honour noted that the notice would have meant that the defendant knew where they stood and they could have dealt with the evidence and called evidence in response or maybe done their own tests. His Honour said the trouble was that because of the way in which this matter had come before him, that is on the first day of the hearing, the position was not as easy to organise as it might have been. He noted that the defendant said, of course, this was all the claimant's fault and the right thing to do was to exclude the experiments. At [46], his Honour noted that at one stage in the argument it did seem to him that perhaps it was the right thing to do to exclude the experiments but he decided he was not going to do so. Although it was his view that what should have happened is that the matter needed to come before a court before the morning of the trial - the same situation, I should say, being apt for this case - he decided to admit the material. At [48] his Honour said: I do not believe a repeat is necessary. To that extent they are admitted on exactly the same basis that Arnold J admitted unrepeated experiments earlier in these proceedings; that is to say the question of a lack of repeat will go to weight and I shall make it absolutely clear that this is a serious matter. It means that the parties need to be aware that it is possible that if it turns out, having heard the evidence, that a repeat really would have answered various questions, then the court may give these experiments no weight at all. However, it does seem to me that the right thing to do is get on with this case and that is what I propose to do. 25 As I have said, the respondents invited the same approach to be taken in this case. However, I am of the view that the approach is not appropriate in this case for a number of reasons. First, and leaving aside all of the discretionary factors to which I have already referred, it is apparent that Mr Burgess's evidence discloses that the tablets were manufactured essentially by two people, the formulation scientist, Ketan Bhasale, and a supervisor, Subhasis Das. Mr Burgess, on information and belief, deposes to the roles of each of Mr Bhasale and Mr Das. As the applicants pointed out the real difficulty here, which was unlike Brightwake, is that the people who carried out the experiments in this case, or essentially did so, Mr Bhasale and Mr Das, have not given any evidence to explain the experiments. 26 It is true that Mr Burgess has given a fairly detailed explanation of what he observed, but his affidavit is limited to his observations only. Again, as the applicants submitted, there is something distinctly inscrutable about Mr Burgess's evidence. For example, at para 13(b) he says "I satisfied myself that the quantities of" various materials were present in a particular ratio. At para 13(h) he says: "I ensured that I was satisfied each step had been undertaken before being initialled and verified by the formulation scientist and the supervisor." However, we do not have evidence from the formulation scientist or the supervisor. The difficulty for the applicants is the inscrutable nature of this evidence. By inscrutable I mean that it will simply not be possible for there to be any meaningful cross-examination of what was actually done in the manufacturing process which, as Mr Burgess himself said, was essentially undertaken by two other people, Mr Bhasale and Mr Das. Accordingly, in circumstances where Mr Burgess's evidence has this quality of conclusiveness which cannot be effectively tested by cross-examination there is, as the applicants submitted, a real issue not only in terms of r 34.50 but also unfair prejudice to the applicants under s 135 of the Evidence Act 1995 (Cth). 27 The nature of the evidence which the respondents have chosen to file, being evidence from Mr Burgess (the observer) alone, and no evidence from the formulation scientist or the supervisor in circumstances where, I should say, it is apparent that they must be either employees of or at least consultants to Lupin Ltd, being the parent company of the respondents, there is no way that this evidence can be effectively dealt with by the applicants. The fact that it is an important part of the respondents' case, on the description of their solicitor in her affidavit must mean, logically, that it is also an important part of the applicants' defence of the challenge to invalidity. But the circumstances are such that the applicants have been prevented from viewing the manufacturing process by the respondents' conduct when it would always have been in the power of the respondents to give the applicants that opportunity. The applicants have also been presented with a form of evidence which is effectively not capable of meaningful cross-examination about essential decisions, not being decisions made by Mr Burgess and not being matters about which he can give any meaningful evidence. 28 In effect, Mr Burgess's evidence is a classic example of a party being presented with a form of ipse dixit, that is, just a conclusion which cannot be tested in any meaningful way. Accordingly, although I accept that the respondents will be prejudiced by the exclusion of this material, it seems to me that it would be an inappropriate exercise of discretion, given that the applicants will also be considerably prejudiced by the admission of this material, to grant leave pursuant to r 34.50(2)(b). 29 Accordingly, I dismiss the interlocutory application filed 5 March 2013, my conclusion being that the respondents should not be granted leave to rely upon the affidavit of Terence Clive Burgess, sworn 27 September 2012. The respondents are to pay the applicants' costs of the interlocutory application as agreed or taxed. I certify that the preceding twenty-nine (29) numbered paragraphs ares are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot .