H Lundbeck A/S v Commissioner of Patents

RELEVANT BACKGROUND 8 By way of relevant background, I should indicate that on 11 April 2019, Dr S D Barker, Deputy Commissioner of Patents in H Lundbeck A/S v Sandoz Pty Ltd [2019] APO 18 made the following decision: I grant to Sandoz Pty Ltd a licence to exploit the invention claimed in patent number 623144. The licence is granted subject to the following terms. 1. The licence commences on 14 June 2009 and continues until the expiration of the term of the patent on 9 December 2012. 2. The licence is personal to Sandoz Pty Ltd in the sense that: a) it belongs to that company; b) it may be transferred with that company if that company changes hands by acquisition or merger, but it cannot be assigned or transferred; and c) it cannot be sublicenced. I direct that details of the licence be entered in the Register of Patents. I award costs in accordance with Schedule 8 of the Regulations against H Lundbeck A/S. Pursuant to section 224(2) and regulation 22.26(3) I give notice to the parties that, subject to the Administrative Appeals Tribunal Act 1975, application may be made to the Administrative Appeals Tribunal for review of this decision by or on behalf of the person or persons whose interests are affected by the decision. 9 I was informed by senior counsel for Lundbeck that while no application had yet been made, Lundbeck proposed to apply to the Administrative Appeals Tribunal for a re-hearing of Dr Barker's decision. 10 In the course of his reasoning, Dr Barker made the following observation: 68. Lundbeck, Sandoz and the Commissioner were parties to the proceedings that led up to the Beach decision, and the declarations relate to the application for a licence that I am considering. The declarations made by Beach J determine between all parties that the applications for licences are not invalid. The declarations are based on a finding that the patent ceased, and it is implicit in the declarations that the applications for licences are valid because of this. It is not reasonable to read the declarations as silent on whether the patent ceased. Also, I do not understand the declarations to go further and determine that the applications for licences must succeed without further consideration of matters that were not considered by the Court (such as the discretionary considerations). I am bound to treat the patent as ceased after 13 June 2009. 69. Sandoz also referred to Regency Media Pty Ltd v MPEG LA, LLC, where the expression "ceased to be in force" in section 145 was understood to include expiry as well as ceasing. However, that is both a different expression, and a different context, which I consider is of little assistance in the present case. 70. For the purposes of this decision I am bound to find that the patent ceased. The consequence of this conclusion is that I will consider the remaining issues in relation to both the ceasing of the patent and the failure to file the application for extension of term in time.

LUNDBECK'S SUBMISSIONS 11 Lundbeck sought to be released from the undertaking for the limited purpose identified above, and to appeal from the Judicial Review Judgment, based upon their submissions as follows: (1) One part of the Judicial Review Judgment addresses the meaning of the word "ceasing" in s 223(9) of the Patents Act 1990 (Cth) (the 'Act'). Justice Beach found, contrary to Lundbeck's submissions, that the word "ceasing" in s 223(9) can include expiry. (2) Subsequently, in an infringement proceeding between Lundbeck (and its subsidiaries) and Sandoz (the 'Infringement Proceeding'), Jagot J considered the meaning of the word "ceasing" in s 223 (and, in particular, s 223(7)-(10)): see H Lundbeck A/S v Sandoz Pty Ltd (2018) 137 IPR 408 (the 'Infringement Judgment'). Justice Jagot upheld Lundbeck's submissions, which rested on a construction of s 223 as a whole and in the context of the Act, and found that the patent in suit (being Patent No 623144 (the 'Patent')) did not "cease" and was not "restored" within the meaning of s 223(10), but rather expired and was subsequently extended, which at [158] of the Infringement Judgment, her Honour accepted was a conclusion that was not reconcilable with Beach J's reasoning in respect of s 223(9) in [the Judicial Review Judgment] to the extent that Beach J concluded at [131] that the "ceasing of the patent" in s 223(9) includes the expiry of the patent. (3) Although the conflict between the Judicial Review Judgment and the ultimately successful argument before Jagot J was recognised by each of Lundbeck and Sandoz in the Infringement Proceeding, none of Sandoz or the other respondents submitted before Jagot J that the declarations made by Beach J constituted declarations as to meaning of the word "ceasing of the patent" in s 223(9) which bound the parties to the Judicial Review Proceeding. Rather, the approach of the respondents including Sandoz before Jagot J was that because the Judicial Review Judgment was a considered decision by Beach J on the meaning of "ceasing" within s 223(9), "the patent ceases" in s 223(10) should be given the same meaning because the section should be read as a whole, and Jagot J ought follow Beach J's reasoning. However, Sandoz now maintains in its licence application before the Commissioner of Patents that the declarations made in the Judicial Review Proceeding bound the parties to that proceeding as to the meaning of "ceasing of the patent" in s 223(9). When Lundbeck raised before Beach J the potential implications of this approach on 20 March 2019 (when Sandoz sought a stay of orders made in the Infringement Proceeding), Beach J observed (in the course of submissions) that he regarded his declarations in the Judicial Review Proceedings as binding declarations as to the meaning of the word "ceasing" in s 223(9). (4) Although Lundbeck does not accept that the wording of the declarations made in the Judicial Review Proceeding constitutes declarations as to the meaning of "ceasing of the patent" in s 223(9), Sandoz's submission and Beach J's observation raise the distinct possibility of Lundbeck being constrained by the principles of estoppel to support on the appeal Jagot J's construction of s 223(10) on a basis that "ceasing of the patent" in s 223(9) has a meaning enshrined in unappealed declarations of Beach J which is a different meaning for which Lundbeck contends in s 223(10) as found by Jagot J. The risk of an estoppel arising and being enforced against Lundbeck cannot be addressed by statements made outside the appeal itself - an estoppel either arises or it does not. This prospect of this awkward position should be avoided. (5) The solution to that is to permit Lundbeck to be released from the undertaking not to appeal Beach J's declarations and for that appeal to be heard at the same time as the appeal from the Infringement Proceeding. Any concerns that once existed as to fragmentation of issues has either evaporated or is outweighed by an approach which advances a wider interest, namely having a single Full Court determine the construction of s 223 as a whole (and in particular s 223(9) and s 223(10)), in a way unconstrained by any declaration not the subject of an appeal. Absent the release of the undertaking and hearing of the two appeals at the same time, the prospect would arise of a second Full Court ultimately having to look at the Judicial Review Judgment in relation to s 223(9) separately. The importance of concurrent appeals is crystallised by the Sandoz contention that the declarations are binding declarations as to the meaning of "ceasing of the patent" within s 223(9) and hence there is a relevant order which can and should be the subject of a concurrent appeal against the possibility that the Sandoz construction of the declarations is accepted. (6) The conflict between the Judicial Review Judgment and the Infringement Judgment as to the meaning of the word "ceasing" in s 223 looms as a very important issue in the ongoing dispute between the parties. Each party has relied and will continue to rely on a construction of s 223 as a whole to support its construction of the "the patent ceases" in s 223(10) in the Infringement Proceeding, and "the patent ceasing" in s 223(9) in the licence application proceedings. (7) Lundbeck should be permitted to pursue its limited appeal of the Judicial Review Judgment now. That course will also result in the efficient use of the Court's resources and will avoid inconsistent approaches to s 223 being continued. Subject to the convenience of the Court, the present three day listing for the appeal from the Infringement Judgment is more than ample, given that the very issues raised in Lundbeck's proposed appeal will, in any event, be before the Full Court.

CONSIDERATION 12 The first matter to consider is whether there should be a release from the undertaking Lundbeck gave to the Court, which is a matter of practice and procedure. 13 In Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 ('Adam P Brown Male Fashions Pty Ltd') the High Court at 177-8 (per Gibbs CJ, Aickin, Wilson and Brennan JJ) said: Considerable argument was directed to the question whether a court has power, otherwise than in the case of mistake operative at the time of giving it to release a party from an undertaking, at least in the absence of the consent of the other party. But in our opinion a court undoubtedly has such a power. Just as an interlocutory injunction continues "until further order", so must an interlocutory order based on an undertaking. A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust. Of course, the changed circumstances must be established by evidence. (Citations omitted) 14 It is apparent that the High Court in Adam P Brown Male Fashions Pty Ltd was not setting out an exhaustive set of circumstances that must exist before a Court may exercise its power to release a person from an undertaking. However, normally there must be a sufficient basis to find material changed circumstances established by evidence. The overriding consideration will be whether the continuation of the undertaking is unjust. 15 In this application, I do not consider that there has been a sufficient change in circumstances to warrant the Court granting the relief now sought, nor am I persuaded that keeping Lundbeck to its undertaking would be unjust. On the contrary, I consider it appropriate for the undertaking to continue according to its terms. 16 As is to be recalled, Lundbeck submitted that if it were not released from the undertaking, it would be estopped from asserting in Sandoz's forthcoming appeal of the Infringement Judgment that the construction of s 223(10) of the Act advanced by Lundbeck and adopted by Jagot J in that decision was correct. 17 I do not consider there to be any possibility of an estoppel in these circumstances, despite the reasoning of Dr Barker or the arguments raised by Lundbeck. 18 The relevant legal principles both in relation to res judicata and estoppel were considered by the Full Court of this Court in Wong v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 146 FCR 10 ('Wong'). There the Full Court said at [36]-[38]: 36. The doctrines of res judicata and issue estoppel are founded on the broad rules of public policy expressed in the maxims nemo debet bis vexari pro una et eadem causa ('a person ought not to be vexed twice for one and the same cause') and interest reipublicae ut sit finis litium ('it is in the interests of the State that there be an end to litigation'). It would be an abuse of process to allow parties to litigate repeatedly matters that have been finally determined by the Court. Also, quite apart from any psychological detriment that might flow from an individual having to undertake litigation of the same issue a second time, the State has an interest in ensuring that, once an issue has been determined according to law and all rights of appeal have been exhausted, that should be an end of the matter. The resources of the community ought not to be expended in the litigation, more than once, of the same issue. 37. A plea in bar may be raised in respect of an issue, not only if the Court in the earlier proceeding was actually required by the parties to form an opinion and pronounce a judgment, but also in relation to every issue that properly belonged to the subject of the earlier litigation and which the parties, exercising reasonable diligence, might have brought forward at the time of the earlier litigation: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 598 and 602. Anshun estoppel arises where the issue now raised for the first time, properly belonged to the subject of the earlier proceeding but, by negligence, omission or accident, was not raised in earlier proceeding. In essence, where the issue was so relevant to the subject matter of the earlier action that it would be unreasonable not to have raised it at that time, it is an abuse of process to endeavour to raise that issue for the first time in a subsequent proceeding between the parties: Anshun at 602. 38. Nevertheless, where an issue has not actually been litigated and decided before, there must be exceptions to that general rule (cf the operation of res judicata and issue estoppel where the action/issue has been determined on a final basis). As foreshadowed in Anshun, there will be instances where, even though there is every reason why the matter should have been raised earlier but was not, there are special circumstances that prevail to permit a party to raise the issue in a subsequent proceeding. The Court therefore has a discretion, if it determines that special circumstances exist, to allow an issue to be raised, even where it is found that the point was unreasonably omitted from the earlier proceeding: see Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 at 558. However, the circumstances in which that would be permitted must, because of the principles referred to above, be exceptional, constituting "special circumstances": see BC v Minister for Immigration & Multicultural Affairs [2002] FCAFC 221. What will be sufficient to constitute special circumstances is by no means fixed and may involve consideration of a wide range of factors, all of which bear upon the general discretion of the Court where justice requires the non-application of the general principle: see BC v Minister for Immigration & Multicultural Affairs (2001) 67 ALD 60 (Sackville J) at [50] referring to Port of Melbourne v Anshun (No 2) [1981] VR 81; see also Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 at 296, 298-299, citing Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581. 19 The main thrust of the submission of Lundbeck on res judicata was that the declaration made has been interpreted so that there is a possibility that the Full Court cannot now determine (as between the parties) that the Patent did not cease for the purposes of s 223(9) of the Act. I do not regard this as a real possibility. 20 Section 223(10) is a different defence from s 223(9) and does not involve a licence granted by the Commissioner. Neither Lundbeck nor Sandoz regard Lundbeck as being bound or estopped from arguing in support of Jagot J's findings in relation to s 223(10). 21 The relevant issue in the Judicial Review Judgment concerned s 223(9). Lundbeck is free to advance its construction of s 223(10) on the forthcoming appeal, just as it was at first instance before Jagot J, where it did so successfully. The declaration properly read (relating to validity and the issues in the proceeding) has not changed this position. The declaration is to be read independently from the reasoning of Dr Barker, and the declaration cannot have any operation other than as reflecting the issues in the Judicial Review Judgment. 22 On the basis that the declaration of the Court must be read in the context of the issues before Beach J in the Judicial Review Judgment, Lundbeck must have anticipated the eventuality of conflicting views, and has failed to establish any material change of circumstances which would make the continuation of the undertaking unjust. 23 Lundbeck knew at the time it gave its undertaking that Beach J was considering the meaning of ceasing within s 223(9) and Jagot J would be considering the meaning of ceasing within s 223(10), and accordingly that there was a prospect that they may come to different views. Whether it would be desirable for a Full Court to consider appeals from both decisions at the same time was a matter for consideration at that time. 24 When Lundbeck recently foreshadowed this application in a hearing before Beach J about the staying of Jagot J's orders, his Honour made the following pertinent and in my view correct observations: MR BANNON: And that application would need to be heard by a Full Court at the same time, which obviously wouldn't include your Honour. HIS HONOUR: It seems like that's all very much over engineered to me, Mr Bannon. I mean the fact of the matter is you put an argument to Jagot J, so you didn't consider yourselves bound before Jagot J on any of this. MR BANNON: Absolutely not, but - - - HIS HONOUR: And if that's right then you're not in any way encumbered before the Full Court, which is only an appeal from Jagot J's decision. If you thought that you were bound you would have had to have said something to Jagot J, but you felt no compunction in terms of putting in a submission that I was not to be followed and you did that, Jagot J delivered her judgment and now there's an appeal from Jagot J. … So you will have a great difficulty under the guise of saying somehow that you're bound by a position in the Full Court because I don't see how you can say that sensibly with how you conducted the proceeding before Jagot J. … HIS HONOUR: Can I say that I'm a member of the Full Court, you should consider yourself free to obviously support to the hilt what you see your position to be in terms of Jagot J's decision and it's a legal point. It will either be accepted or not accepted by one or more members of the Full Court. I don't think anybody is going to say you will be denied the opportunity to support the merits of how Jagot J has determined that legal point. I can't see how that could be sensibly be denied to you. MR BANNON: Your Honour, I don't want to inflate the situation, but the - and, again, it doesn't come from our end of the bar table. HIS HONOUR: Yes. MR BANNON: It came from Monday where it was put that the parties are bound - leaving aside the commissioner, the parties are bound by your Honour's - - - HIS HONOUR: Before the commissioner, before the commissioner. … HIS HONOUR: … I think the parties will be putting these legal arguments, there will be Jagot J's decision, there will be her explanation for why she has put my views to one side and the court will look at them afresh and deal with the point. Nobody will be saying, "Mr Bannon, we can't hear you on this point" because of something that I've said. It's not something that Jagot J was denied the opportunity to consider and you will have the same position before the Full Court as you would have had before her. … HIS HONOUR: … So if you're right - and it's a good point made by Mr Hennessy that her Honour was dealing with section 223(10) and "ceasing". I was dealing with 223(9). Strictly, my decision is about 223(9), rather than (10). So you're free to say whatever you like about subsection (10) and the phraseology or words there, as you did before Jagot J. The Full Court hands down its decision, if there's - if my view of "ceasing" in 223(9) is determinative of something before the Commissioner and - then you will be free to challenge the Commissioner's decision, won't you? And that was always the contemplation. … HIS HONOUR: But if you were to be released from the undertaking, you would then appeal my decision. That would appeal - we would have to - - - MR BANNON: Only insofar as it relates to that part. HIS HONOUR: But that appeal would come on before a Full Court, but it would then - and the same Full Court dealing with Jagot J's judgment. MR BANNON: Yes, yes, if that was to happen. HIS HONOUR: But obviously, if that was the mechanism that was adopted - and perhaps this is your strategy - you would get rid of me because I couldn't sit on that Full Court … HIS HONOUR: I'm not sure, now that I hear what Mr Hennessy says, that you're anywhere close to saying, somehow, that you're constrained in the Full Court about upholding what Jagot J said about subsection (10) and the meaning of "ceasing" by whatever I said about subsection (9) and whatever is happening before the Commissioner, but you can take whatever course you would like and make whatever application you want to to me to lift that undertaking or - I don't know, perhaps you should make that application to somebody else. It's a matter for you. 25 Before I go any further, some background to where we are now is required to be mentioned. 26 Ten years out of time, on the day before the Patent was due to expire (12 June 2009), Lundbeck sought an extension of term of the Patent, and an extension of time within which to make that application. 27 Section 223(9) of the Act permits certain parties to apply to the Commissioner of Patents for a licence to a patent provided certain conditions are met, including that the patent has "ceased". 28 On 18 December 2013, Sandoz applied to the Commissioner for a s 223(9) licence, against the possibility that the term of the Patent would be extended. 29 On 25 June 2014, Lundbeck was granted the extension of term, and on the next day it commenced the Infringement Proceeding against Sandoz (and others). 30 In opposing the s 223(9) licence application, Lundbeck sought to have the Commissioner determine a preliminary point that the licence application was not valid, in particular because the Patent had not "ceased" within the meaning of s 223(9); rather, it had expired. The effect of Lundbeck's choice to agitate this as a preliminary point was to fragment and delay the licence application. The Commissioner accordingly refused to address the issue as a preliminary point and considered that the application should proceed to be determined on all issues. Lundbeck sought judicial review of that decision. On review, Beach J held that the Commissioner made no reviewable error, and in any event proceeded to make a determination at [129]-[134] of the Judicial Review Judgment that the word "ceasing" included expiry. Following a subsequent hearing as to the form of orders, on 14 February 2017, his Honour made final orders, including a declaration that the licence application was not invalid for that reason. 31 As mentioned above, Beach J was concerned that any further appeal by Lundbeck would cause further fragmentation and delay. His Honour's full comments at [66] and [67] were: [66] Sixth, the Generics contend that fragmentation of the substantive issues in dispute in pharmaceutical patent litigation of the size and complexity presented by the present proceedings runs the substantial risk of not ameliorating the possibility of delay in the resolution of the substantive issues in the case, but rather increasing it. This is the only point that has really troubled me. I did have concerns that to proceed to grant declarations may have undesirable consequences in terms of fragmentation, including appeals and consequential delays. I raised this matter with counsel and discussed with Lundbeck the provision of a relevant undertaking to avoid such potential fragmentation. The Generics, as one might expect, refused to give any undertaking. [67] Lundbeck has now proffered an undertaking in the following form, which I consider adequately addresses my fragmentation concerns and notwithstanding the absence of any mirror image undertaking from the Generics… 32 I observe that the undertaking was proffered in writing on 12 December 2016 following consideration after discussion at the hearing on 29 November 2016. There was then a further hearing on 14 February 2017, in which Lundbeck sought and obtained a variation to the form of declaratory relief based on positions it thought it might theoretically take before the Commissioner in the future. No variation to the undertaking was sought. 33 I will proceed on the basis that the form of the declaration and the nature of the undertaking were carefully considered by Lundbeck in the knowledge that the Infringement Proceeding was continuing before Jagot J and the issues in dispute before her Honour included, in particular, a further defence under s 223(10) raised by Sandoz. That subsection provides that infringement proceedings cannot be brought between the date of "ceasing" and the date of restoration of a patent. I have said, it is not a defence involving any application to the Commissioner for a licence under s 223(9). 34 Again, as I have alluded to, in the Infringement Proceeding, Lundbeck argued that "ceasing" for the purposes of s 223(10) did not include expiry. Lundbeck was not estopped from so arguing by Beach J's Judicial Review Judgment, which related to the s 223(9) licence application before the Commissioner. Plainly Lundbeck did not consider itself so estopped. Nor did Sandoz submit that Lundbeck was estopped. I do not consider that 'public policy' in finality (as mentioned in Wong) would cause a court in these circumstances to override the ability of Lundbeck to raise the arguments it wishes to put when no party raises the plea in bar. Sandoz, in the forthcoming appeal from the Infringement Judgment, does not suggest either that Jagot J or Lundbeck was so bound, or that some estoppel operates now upon Lundbeck in the appeal. Lundbeck will be free to defend her Honour's reasoning in the appeal. 35 However, as correctly observed by all, the Judicial Review Judgment is plainly binding upon the Commissioner in the s 223(9) licence proceedings but only according to the proper reading of the declaration. The purpose of Lundbeck's proceedings before Beach J was to provide, as a preliminary step, a determination as to the validity of the s 223(9) licence application, in particular as to whether the Patent had "ceased", so as either to permit or prevent it going forward before the Commissioner. 36 However, just because the Commissioner is bound by the Judicial Review judgment in the same proceedings that "ceasing" includes "expiry" in s 223(9) is not to say that Lundbeck is bound to agree with that proposition in other proceedings, including in relation to a judgment concerning s 223(10) or an appeal from it. Justice Beach stated that he did not think so, and Sandoz did not suggest that it did. In this respect, Lundbeck confuses the binding nature of the decision on the Commissioner in the s 223(9) licence proceedings with a more broadly "binding" effect as to the meaning of the words in s 223(9). 37 Putting these matters to one side, I do not consider that it is necessary in the interests of good case management principles for the Full Court to address the proper construction of "ceasing" within the meaning of ss 223(9) and 223(10) at the same time. Given the decision of Dr Barker on the licence application, as Beach J envisaged when seeking the undertaking from Lundbeck, the efficient way to deal with the issues on the s 223(9) licence application is to address all of them at the same time in any appeal or review of that decision. If, an appeal from the Judicial Review Judgment proceeds, any appeal or review of that decision will proceed on a separate and additional track to the appeal now proposed by Lundbeck. 38 I observe that there is no one perfect appeal management course open in the circumstances now confronting the Court and the parties. Putting aside the release of the undertaking, the hearing of the appeal from the Infringement Judgment is listed for the Full Court sittings in May 2019. The parties have prepared for that hearing, and there would be considerable disruption to the parties and the Court if that hearing were to be adjourned. This is not the sole or determinative consideration, but it is a relevant consideration. 39 If Lundbeck's application to be released from the undertaking was successful, and both appeals were to be heard together, the result would be that the appeal currently listed would need to be adjourned to the Full Court sittings in August 2019. I informed the parties at the beginning of the hearing of the application that this would be one (undesirable) consequence. 40 I understand the advantage in having argument on two related provisions in the one proceeding, and that, as a result of my decision, there may well be 'fragmented' appeals heard by two Full Courts from the two trial decisions. However, this could be ameliorated. For instance, it may be that the same judges (other than Beach J) could hear both appeals, even if heard at different times. However, as I have said, there is no perfect solution. Lundbeck gave its undertaking, and the course set by Beach J in accepting the undertaking was a proper and understandable course and still remains so. There is no compelling reason for the Full Court being delayed to having a hearing in August 2019 considering both ss 223(9) and 223(10) at the same time. After all, the issue before the Full Court in May 2019 will be about the proper construction of s 223(10), not s 223(9). Of course, as with all matters of statutory construction, context is important. The arguments that were put before both trial judges to the extent relevant to each separate issue will undoubtedly be considered by the Full Court in May 2019 and will be dealt with in its ultimate determination of the appeal from the Infringement Judgment. 41 On balance, the appropriate course is to dismiss the application and let the May Full Court hearing proceed. I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.