THE PRIMARY JUDGE'S REASONS
18 After setting out a glossary of terms and the relevant parts of the Patent, the primary judge referred to the expert witnesses who gave evidence before her. The GH parties called Dr James Rowe and Dr Susan Walters. The primary judge described their qualifications and summarised the evidence that each of them gave. The Bayer parties called Professor Martyn Davies. Again, the primary judge described his qualifications and summarised his evidence. It is unnecessary for us to summarise this part of her Honour's reasons.
19 The primary judge then turned to consider the grounds upon which the GH parties claimed the Patent should be revoked and she dealt with them, relevantly for the purposes of the appeal, in the order of lack of novelty, lack of inventive step, and lack of fair basis.
20 As far as the alleged lack of novelty was concerned, the primary judge noted that the GH parties' case depended on a single document being Gast (PCT Publication WO 98/04269) "Monophasic contraceptive method and kit comprising a combination of a progestin and estrogen", published on 5 February 1998. She said that, on 11 March 2013, before the hearing commenced, the GH parties sought leave to rely on the affidavit of Mr Burgess. She noted that she refused leave and dismissed the interlocutory application. She noted that, at the commencement of the hearing, the GH parties advised that, as a consequence of her ruling, they would not be pressing their claim for invalidity based on the alleged lack of novelty. No evidence was sought to be tendered relevant to this issue, and it followed that the claim could not succeed. Her Honour said that it did not need to be considered further.
21 As far as lack of inventive step or obviousness is concerned, the primary judge noted that there were two issues of principle between the parties. However, she also noted that, given the factual findings that she subsequently made, the resolution of the issues of principle was unnecessary.
22 The GH parties alleged that the invention was obvious and they relied on the evidence of Dr Rowe and Dr Walters. They claimed that the hypothetical formulator at the priority date, if confronted by DRSP - an acid labile and poorly soluble API - as a matter of course and routine, would carry out a limited or pilot bioavailability test in vivo for the purpose of determining whether there was any bioavailability with the DRSP, and whether an immediate release formulation of DRSP would be sufficiently bioavailable. On this thesis, the hypothetical formulator would not respond to the acid lability and poor solubility of DRSP by immediately proceeding to develop an enteric coated formulation as Professor Davies suggested. If these contentions were correct, then claims 3 and 11 of the Patent were invalid on the ground of the lack of an inventive step or obviousness.
23 The Bayer parties responded to these contentions by contending that a hypothetical formulator would not respond to an acid labile and poorly soluble API such as DRSP by carrying out a pilot bioavailability test, and that, even if the formulator did, they would have no expectation of success. They also contended that the invention, which the GH parties asserted was obvious, was not any immediate release form of any version of DRSP, but included the particular dissolution rate specified in claim 3.
24 The primary judge said that the two issues of principle to which the dispute gave rise were both "founded" on the reasoning of the High Court in Aktiebolaget HÄssle and Another v Alphapharm Pty Ltd (2002) 212 CLR 411 ("Alphapharm"). The first issue of principle was whether the expectation of the hypothetical formulator was a necessary part of the resolution of the issue of obviousness. The Bayer parties submitted that it was, whereas the GH parties submitted that it was not. The GH parties submitted that the only question was whether the hypothetical addressee of the Patent, faced with the same problem, would have taken, as a matter of routine, whatever steps might have led from the prior art to the invention. The primary judge considered the reasoning of the High Court in Alphapharm and of this Court in Pfizer Overseas Pharmaceuticals and Others v Eli Lilly and Co and Others (2005) 225 ALR 416 ("Pfizer") and concluded that, in determining the question of obviousness, it was necessary to consider the expectation of the hypothetical skilled addressee of the Patent.
25 The second issue of principle was whether the expectation of the hypothetical formulator (assuming it to be relevant) must be an expectation of the production of the invention or an expectation relating to "some other useful result" (Alphapharm Pty Ltd v H Lundbeck A/S and Another (2008) 76 IPR 618, at [180]), and if so, what is meant by the words "some other useful result". The primary judge rejected the suggestion that "some other useful result" could be the obtaining of information to ascertain whether there was any bioavailability problem with an immediate release formulation of DRSP. The primary judge rejected the GH parties' contention, and held that "some other useful result" in the context of obviousness must be understood as the claimed invention or at least something very like the claimed invention.
26 On the appeal, the GH parties challenged the primary judge's conclusion with respect to the first issue of principle. They did not challenge her conclusion with respect to the second issue of principle. As senior counsel for the GH parties put it, "we accept - we're trying to get bioavailable drospirenone".
27 The primary judge's approach to lack of inventive step or obviousness was to first consider whether the GH parties had established that the invention would have been obvious to the hypothetical formulator in the light of the common general knowledge which she assumed without deciding included the article referred to as Pilbrant. She identified matters which led her to accept the evidence of Professor Davies in preference to that of Dr Rowe and Dr Walters.
28 First, she referred to the qualifications and experience of the experts who gave evidence before her. She said that, in weighing up the competing expert opinions, it was relevant to have regard to the fact that Professor Davies' experience involved extensive direct engagement with the formulation process as a member of a research drug development team which, according to his oral evidence, extended to new APIs. By contrast, Dr Walters had not been involved in the task of formulating any drug, let alone a new API, since the early 1970s, and her formulation experience from her period of work in industry was limited. Her main experience was as a regulator. Dr Rowe, while having experience as a formulator, did not have experience as to the identification of the appropriate dosage form for a new API.
29 Secondly, her Honour found Professor Davies' evidence cogent and compelling. His evidence did not disclose any inconsistencies, and was measured, thoughtful and precise. By contrast, Dr Rowe's evidence was internally inconsistent and his explanation for the inconsistency was not particularly persuasive. As far as Dr Walters' evidence was concerned, her Honour found that it was not as cogent and compelling as that of Professor Davies.
30 Thirdly, the primary judge said that Professor Davies' evidence was that a hypothetical formulator would perceive it as critical that the DRSP be formulated in such a way that it would be protected from stomach acid, and that the obvious answer in 1999 was that it be enteric coated. This was in a context where, although DRSP, as an oral contraceptive taken on a long term basis, need only be delivered to a patient throughout a 24 hour period, the whole dose of the drug must be effectively delivered in order to obtain the desired therapeutic effects. Her Honour found that neither Dr Rowe nor Dr Walters adequately explained the reasons, in those circumstances, the hypothetical formulator would not perceive it as critical that DRSP be formulated in such a way that it would be protected from stomach acid.
31 Fourthly, the primary judge accepted Professor Davies' evidence that the hypothetical formulator or drug development team in 1999 would not perceive any technical, therapeutic or marketing issue with the enteric coating of an oral contraceptive. The primary judge said that she did not accept the evidence of Dr Rowe and Dr Walters to the extent that it depended on some form of difficulty with enteric coatings and she found that it did so depend "to a considerable extent". She found that by 1999, and indeed well before that date, enteric coatings were routinely used for the purpose of protecting drugs from the acid environment of the stomach and for protecting the stomach from the effects of certain drugs. She found that enteric coatings were seen as a simple and reliable technology to achieve these purposes and that it was well known by 1999 that any fear of dose-dumping could be addressed by enteric coating granules or pellets of the API which could then be made in tablet or capsule form.
32 Fifthly, the primary judge said that Professor Davies had, in reaching his view that the obvious course that the hypothetical formulator would have taken if confronted by all the relevant circumstances as at the priority date was to develop an enteric coated formulation of DRSP, taken into account the circumstances that the drug was an acid labile, poorly soluble drug intended to be used for oral contraceptive purposes. By contrast, the evidence of Dr Rowe and Dr Walters was not, as her Honour said, "persuasively related" to those matters.
33 Sixthly, the primary judge found Professor Davies' evidence of the predictive relevance of in vitro test results clear and more compelling than that of Dr Rowe and Dr Walters. She accepted that a rapid rate of dissolution in vitro was not necessarily predictive of good bioavailability because of the many other factors at play, whereas a poor dissolution rate in vitro is predictive of a poor dissolution rate in vivo and hence poor bioavailability. Her Honour said that Dr Rowe and Dr Walters never adequately explained the reasons, if a dissolution rate in vitro was poor, a hypothetical formulator would have any expectation that DRSP would be bioavailable to a sufficient extent in vivo.
34 Seventhly, and, in our opinion, to some extent echoing the third point, the primary judge said that Dr Rowe and Dr Walters never adequately explained why a more rapid dissolution rate of DRSP (which both accepted was necessary), would not heighten concern about the likelihood of degradation of the API in the stomach.
35 Finally, her Honour considered that Professor Davies gave proper weight, whereas Dr Rowe and Dr Walters did not, to the realities of the process of formulation, including the fact that resources are limited, there is a need to make hard decisions, and there is an aim to reduce the number of human patients required during the drug development process.
36 These eight matters led her Honour to conclude that she should accept Professor Davies' evidence that the hypothetical skilled addressee would not, at the priority date, have carried out the type of bioavailability study described by Dr Rowe and Dr Walters as a matter of routine and thereby be led, as a matter of course, to the invention.
37 Her Honour did not think that the Pilbrant article was "to the contrary". She accepted Professor Davies' evidence that the Pilbrant article confirmed what the hypothetical formulator would already know and expect, that is, that acid labile drugs degrade in the stomach. In that sense, there would not be any expectation of success and, in fact, there was no success for omeprazole in a conventional form, so that the only formulation option would be an enteric coated formulation. As we have said, her Honour did not make a finding as to whether Pilbrant and the results expressed therein about omeprazole were part of the common general knowledge at the priority date. She said that, if it was, what the hypothetical formulator would take from the Pilbrant article is that "the API would degrade in the stomach and needed to be protected by an enteric coating just as Pilbrant says was required for omeprazole". Before this Court, the appeal was argued on the basis that the Pilbrant article and the results therein concerning omeprazole were part of the common general knowledge at the priority date.
38 As we have said, the primary judge found that the hypothetical skilled addressee would not have carried out the type of bioavailability study described by Dr Rowe and Dr Walters as a matter of routine and thereby be led, as a matter of course, to the invention.
39 Her Honour went on to say that, at best, there was a possibility that the hypothetical formulator and drug development team might have carried out a bioavailability study of the type described by Dr Rowe and Dr Walters, but that, even if they did, it would have been with the expectation of failure, not success. She found that that was the effect of Professor Davies' evidence, and she found the effect of the evidence of Dr Rowe and Dr Walters was that the bioavailability study was needed to exclude the possibility, albeit unlikely, that DRSP would prove to be bioavailable in an immediate release form.
40 The primary judge also said that the invention as claimed included the dissolution rate and it is the invention as claimed which must be obvious. She said that there was no evidence to explain why it would have been obvious to the hypothetical formulator as at the priority date to have improved the dissolution of DRSP to the standard specified in claims 3 and 11 as a requirement of the pharmaceutical composition in the oral dosage form as described in those claims.
41 The primary judge then turned to consider prior art information said to be relevant by reason of s 7(3) of Act. For the purposes of the appeal, the only documents that need be considered are Krause I and Krause III.
42 The primary judge found, we think, that the hypothetical formulator would have ascertained Krause I and Krause III and he or she would have treated those documents as a single source of information. However, she appears to have found that the hypothetical formulator would not have regarded Krause I and Krause III "as of any real relevance", or as making any difference, or as making "any material difference to the position of the hypothetical formulator at the priority date". In other words, the hypothetical formulator would not have regarded them as relevant or, if relevant, nevertheless insufficient to satisfy the test of obviousness.
43 Her reasons for reaching that conclusion were as follows. First, Dr Rowe said that Krause I would not have made any difference to the way in which he proceeded, and each of the experts said that they would have carried out their own preformulation studies. Secondly, her Honour noted that Krause I showed that DRSP is acid labile, with 50% or thereabouts of the DRSP degrading over 90 minutes, compared to a 50% degradation of spirorenone in 150 minutes. Thirdly, her Honour accepted Professor Davies' opinion that the in vitro experiments in Krause I were likely to have been carried out at room temperature (25oC), rather than at body temperature (37oC). Finally, her Honour said that the evidence of Dr Walters as to the relevance of Krause I and Krause III was not persuasive. She gave two reasons for reaching that conclusion. The first reason was said by the GH parties, and accepted by the Bayer parties, to be erroneous. Her Honour said that ultimately Dr Walters came to the view that there were key differences between DRSP and spirorenone and that literature about spirorenone was unhelpful in relation to DRSP. Her Honour erred because Dr Walters did not come to that view about spirorenone, but rather about spironolactone, which is a different molecule. The second reason for her Honour's conclusion that Dr Walters' evidence about the relevance and importance of Krause I and Krause III was unpersuasive related to a hypothesis Dr Walters advanced as to the reasons the invention worked. Her Honour said (at [90]):
… When this is considered with Dr Walters' evidence about the stomach it tends to lend even greater weight to the contrary opinions of Professor Davies. Dr Walters attempted to provide a hypothesis as to why the invention claiming the patent [sic] in fact works by reference to the processes of the stomach which depended upon the notion of a limited or fixed amount of hydrochloric acid being present in the stomach for dissolution purposes. Professor Davies' contrary evidence to the effect that the processes of the stomach are dynamic with gastric acid being created by hormonal responses, there being an ongoing process of gastro intestinal transit, was readily able to be understood and far more cogent on this issue than that of Dr Walters.
44 The primary judge concluded her reasons on obviousness with the following observations (at [93]):
However, and as the applicants put it, at the time the formulator would have been making these decisions all the preformulation data that would have been obtained would indicate that an immediate release version would degrade in the stomach and thus not be bioavailable. In the context of an oral contraceptive the idea that the hypothetical formulator would carry out an in vivo study on a formulation that they expected to fail rather than moving forward with an enteric coated formulation they would have been confident would work is unrealistic. The respondents have, as the applicants put it, succumbed to the "seductive clarity of hindsight" (Alphapharm at [21]).
45 With respect to the lack of fair basis, the primary judge referred to the GH parties' submission to the effect that, whilst claims 3 and 11 of the Patent claimed any type of formulation that achieved the specified rapid dissolution parameters, there was no real and reasonably clear disclosure in the specification of what was claimed because the specification was limited to a pharmaceutical composition prepared by micronizing DRSP or spraying from a solution onto particles of an inert carrier. The primary judge found as follows (at [100]):
As the applicants submitted it is clear from the specification when read as a whole that the invention is not limited to compositions created by micronizing and spraying DRSP onto inert carrier particles, these being mere examples of how the required rapid dissolution might be achieved.
46 On that basis, she rejected the GH parties' submission of invalidity due to a lack of fair basis.
47 We turn now to summarise the primary judge's reasons for dismissing the GH parties' interlocutory application dated 5 March 2013.
48 Her Honour said that the first issue for determination was whether r 34.50 was engaged. She noted the context in which that question arose. On 3 August 2012, the GH parties filed evidence from Dr Rowe. Dr Rowe considered Gast and her Honour noted that Gast contained an invention and the disclosure of information which the GH parties maintained anticipated, and thus destroyed, the novelty of the Patent. Her Honour noted that Gast, insofar as relevant for the interlocutory application before her, identified a range of dosage units for an oral contraceptive and noted that the various dosage units which it disclosed could be prepared by conventional methodology that is well known to one skilled in the art. Gast provided an example of what was said to be an acceptable composition of a contraceptive progesterone/oestrogen combination of the invention, being Example 1. Dr Rowe's evidence consisted of a 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 he was asked by the GH parties 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 GH parties also relied in the proceeding. Those dissolution tests were the subject of directions and orders made by the Court on 31 August 2012.
49 The primary judge noted that the submission of the GH parties was that the experimental proof was limited to the experiment consisting of the dissolution of the tablets which were manufactured in accordance with, in effect, the recipe prepared by Dr Rowe, and that Mr Burgess' evidence was a form of confirmation that the manufacturing process by Lupin Ltd was carried out in accordance with that recipe. The GH parties referred her Honour to the decision of Emmett J in Lexmark International Inc and Another v Boomerang Imaging Supplies Pty Ltd and Others (2001) 112 FCR 331 ("Lexmark").
50 The primary judge rejected the submission of the GH parties. She said (at [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.
51 The primary judge went on to consider whether leave to rely on the affidavit of Mr Burgess should be granted under r 34.50(2). She considered a number of matters to be relevant.
52 The first matter was the fact that "the issue of engagement of r 34.50" had been alive between the parties since at least 26 July 2012. The primary judge noted that, in March 2012, the GH parties had raised the possibility of carrying out an experiment based on Gast before the then docket judge. On 23 July 2012, the GH parties in correspondence with the Bayer parties noted that it was their view that the actual tablet preparation from the formulation did not fall within the experimental proof of a fact. The GH parties said that they welcomed the Bayer parties' comments on the issue. By letter dated 26 July 2012, the Bayer parties made it clear to the GH parties that they considered that the manufacture of the tablets themselves was part of the relevant experimental proof. By letter dated 1 August 2012, the GH parties rejected this contention. Correspondence followed in early August 2012. The proceeding came before a judge of the Court on 10 August 2012. At that time the GH parties, through their counsel, made it 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 GH parties' parent premises in India. The judge was informed that, whilst this had been offered to the Bayer parties with the ability for them to observe the manufacture over there, they had not concurred with that approach.
53 The Bayer parties advised the judge that the issue, although raised some time previously, had not been resolved. The Bayer parties contended that the GH parties' position that the manufacture of the tablets was not an experiment was "completely untenable".
54 The primary judge noted that an exchange occurred between the judge and counsel for the Bayer parties at the hearing on 10 August 2012. Her Honour said (at [10]-[12]):
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."
His Honour then said, again, "[b]ut it seems to me that the risk is with the respondent on that, not with your client."
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."
55 The primary judge concluded from these matters that the GH parties were on notice that the Bayer parties' position was that manufacture of the tablets formed not only a part of, but a vitally indispensable part of, the experimental proof.
56 The primary judge observed that the GH parties could have taken a number of actions at that point. They could have filed an interlocutory application seeking to bring to a head the question of which it was fully aware, namely, the question of whether the manufacture of the tablets was a part of the experimental proof of a fact. They chose not to do so.
57 The primary judge said that, in July and August 2012, the GH parties made a forensic decision not to bring the issue to a head, or failed to make a forensic decision to bring the issue to a head, in circumstances in which they now claimed that they would be seriously prejudiced by the exclusion of Mr Burgess' evidence.
58 The primary judge said that the subsequent course of events was "even more disturbing", as disclosed by the affidavit material. She noted that the GH parties 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 a judge of the Court on 10 August 2012, it was apparent that, as at 24 August 2012, they were still trying to arrange for the manufacture of the tablets by the Australian manufacturer. However, on 19 September 2012, the GH parties forwarded a letter containing a range of information. They advised the Bayer parties that they had not been able to arrange for the Australian manufacturer to make the tablets within the required time frame due to that company's conflicting manufacturing requirements. They said that it might be possible to engage an independent laboratory in India to conduct the manufacturing more quickly than the Australian manufacturer. They 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 [sic], please indicate if you would be amenable to this process.
59 They also said:
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.
60 Mr Burgess attended Lupin Ltd's research park in Pune on Thursday, 20 September 2012, and, on that day and the following day, 21 September 2012, observed the manufacture of tablets. As the primary judge noted, in other words, the day after the letter of 19 September 2012, the manufacture at Lupin Ltd's research laboratories was undertaken, and the letter of 19 September 2012 did not disclose that the manufacture was to be undertaken the following day. The primary judge said that the GH parties could not have reasonably expected that the Bayer parties would have responded to this information by the following day, nor could they reasonably have expected that the Bayer parties would have been able to arrange for anyone to attend in 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 that purpose. The primary judge noted that, in any event, this was all moot because the letter from the GH parties did not identify the fact that the manufacture was to occur the following day. The primary judge said that, whether intentional or not, the position in which the GH parties left the Bayer parties was to effectively deny them any opportunity to be present during that manufacturing process and to observe what Mr Burgess had the opportunity of observing. The primary judge considered that the above circumstances were "completely unsatisfactory". She said that, in terms of discretionary considerations, it could hardly be more clear that, whether deliberate or not, the GH parties' actions effectively denied the Bayer parties an opportunity to be present to observe the experiment involving the manufacture of the tablets.
61 The primary judge considered the prejudice which would be suffered by the GH parties if leave was not granted. In that context, she found that they would be prejudiced by the exclusion of Mr Burgess' evidence. However, she said that was insufficient for her to conclude that a grant of leave was appropriate for a number of reasons and leaving aside all of the discretionary factors to which she had already referred.
62 The first matter the primary judge identified was the fact that the people who had carried out the experiments, or essentially did so, being the formulation scientist, Ketan Bhasale, and a supervisor, Subhasis Das, had not given any evidence to explain the experiments. Secondly, although Mr Burgess had given a fairly detailed explanation of what he had observed, his affidavit was limited to his observations only and there was something "distinctly inscrutable" about his evidence. By "inscrutable" her Honour meant that it would 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. Her Honour said (at [26]):
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).
63 Her Honour went on to say (at [27]):
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.