Merial, Inc. v Intervet International B.V. [2016] FCA 1047 | Case summary

Background facts 6 The proceeding is an appeal by Merial from a decision of the Commissioner of Patents (by her delegate) in relation to a patent application by Intervet in respect of an invention described as "compositions and process for delivering an additive". By its third amended notice of appeal (intellectual property), Merial appeals from the whole of the decision of the Commissioner of Patents; specifically, the decisions of the Commissioner that the invention the subject of each of the claims of the application: (a) is novel within the meaning of s 18(1)(b)(i) of the Patents Act 1990 (Cth) (the Patents Act); and (b) involves an inventive step within the meaning of s 18(b)(ii) of the Act. Merial also opposes the grant of a patent on certain additional grounds, including lack of entitlement. 7 In relation to its third amended interlocutory application, Merial relies on the affidavits of Grant Fisher (a partner of the solicitors acting for Merial) dated 5, 9, 16 and 19 August 2016. In opposition to the application, Intervet relies on the affidavits of John Afaras (a principal of the solicitors for Intervet) dated 10 and 19 August 2016. (I note that there are two affidavits of Mr Afaras dated 10 August 2016, but it is only the first of those affidavits that is relevant to this interlocutory application.) On the basis of those affidavits, the background facts for present purposes are as follows. The affidavits of both parties were prepared on the basis of information and belief. 8 Three of the documents the subject of the present application are annexures KS-3, KS-4 and KS-5 to the affidavit of Dr Stumm dated 24 June 2016. Dr Stumm holds the position of Counsel, Intellectual Property Group Animal Health MSD - Office of General Counsel of Intervet. Dr Stumm's affidavit has been filed by Intervet as part of its evidence for the hearing of the proceeding. 9 In relation to annexure KS-3, Mr Afaras states in his affidavit dated 10 August 2016 that the document is a product development report that was generated for Intervet by a company known as Pharma Chemie; the report discloses a large number of placebo soft chew formulations; the report contains redacted (that is, confidential) information which consists of the results of evaluations of these formulations with respect to the variations of excipients used, the addition of alternative excipients and the sourcing of excipients from various sources, which evaluations were undertaken to assess the impact on processability and palatability of the formulations in dogs. Omitting words which are not relevant for present purposes, Mr Afaras states that: 7. If such confidential information were disclosed … to a competitor of the Respondent that is also selling and developing soft chew formulations (such as the Appellant), the Respondent may suffer material prejudice. This is because there is a risk that knowledge obtained from the confidential formulation development history may inadvertently or innocently be used to the Respondent's detriment in developing competing soft chew formulations, including drafting or advising on the Appellant's patent applications in related technology areas, in competition with Intervet. 8. In particular, the Respondent is in direct competition with the Appellant with respect to the formulation, production and manufacture of soft chew products for dogs. The primary selling point of these products is palatability in dogs and the formulations used in these products are subject to ongoing further development to optimise palatability. As a result, the redacted formulation development history contained in the report annexed as Annexure KS-3, including the evaluations of the excipients used in the formulations, is highly proprietary to the Respondent and disclosure to its competitors … may cause significant harm to the Respondent. Intervet would be assisted with its own product development work if it were to obtain access to equivalent research and development work that had been conducted by any of its competitors, including the Appellant. 10 In relation to annexure KS-4, Mr Afaras states in his 10 August 2016 affidavit that the document is a product development report that contains information similar to the information in annexure KS-3 and which builds upon that work; that the placebo soft chew formulations recorded in annexure KS-4 contain alternative excipients to those excipients added to the formulations described in the product development report annexed as annexure KS-3; in addition, the redacted (that is, confidential) information contained in the report annexed as annexure KS-4 discloses formulations that have been more recently used in the course of developing a new product, "Panacur Plus"; this confidential information was included in a confidential dossier submitted to the US Food and Drug Administration (FDA) for the purposes of obtaining marketing authorisation for the Panacur Plus product; the confidential dossier has been maintained confidential by the FDA and is not otherwise obtainable on a freedom of information request. Mr Afaras states: 12. As for Annexure KS-3, the Respondent considers that the confidential information contained in Annexure KS-4 is highly proprietary to the Respondent and disclosure to its competitors … may cause significant harm to the Respondent. 11 In relation to annexure KS-5, Mr Afaras states in his 10 August 2016 affidavit that annexure KS-5 is a product development report that contains information similar to the information in each of annexures KS-3 and KS-4, and which builds upon that work; the formulation development history contained in the product development report annexed as annexure KS-5 discloses alternative formulations to the formulation contained in the patent application which is the subject of this proceeding; these alternative formulations and the assessments of these formulations have not been disclosed to the public and are confidential to Intervet. Mr Afaras states: 15. As for Annexures KS-3 and KS-4 above, Intervet considers that the confidential information contained in Annexure KS-5 is highly proprietary to the Respondent and disclosure to its competitors … may cause significant harm to the Respondent. 12 The 21 November 2002 Report was provided by Intervet to Merial on 15 August 2016. It appears that Intervet proposes to rely on the report as evidence at the hearing of the proceeding. In relation to the 21 November 2002 Report, Mr Afaras states in his 19 August 2016 affidavit that this is a product development report that was generated by Pharma Chemie for Intervet; the report discloses a number of placebo soft chew formulations; the report also contains redacted (that is, confidential) information which consists of the results of evaluations of formulations with respect to the variations of excipients used, the inclusion of alternative or new excipients and the use of excipients from various sources, for purposes unrelated to the invention defined in the claims of the patent application that is the subject of this proceeding; the information redacted from the report has not been disclosed to the public and is confidential to Intervet. Mr Afaras states: 13. Intervet considers that the confidential information contained in the 21 November 2002 Report is highly proprietary to the Respondent and disclosure to its competitors may cause significant harm to the Respondent. 13 Mr Fisher in his 5 August 2016 affidavit makes the following statements about Dr Jarecki-Black: 16. I am informed by Dr Jarecki-Black, and I believe, the following matters: (a) Dr Jarecki-Black's position at Merial is Global Head, Intellectual Property. She has held this position since joining Merial in 2002. (b) Since 1998, Dr Jarecki-Black has been a member in good standing of the state bars of Georgia and South Carolina. She is admitted to practice before a number of courts including the Supreme Court of the United States (since 2013), the US Court of Appeals, Federal Circuit and the US Court of Appeals, Sixth Circuit. Additionally Dr Jarecki-Black is admitted to practice before a number of additional Federal and State Courts including, among others, the Georgia Supreme Court, Georgia Court of Appeals, the South Carolina Supreme Court and the Court of Appeals for South Carolina. (c) As an Attorney-at-Law, Dr Jarecki-Black is subject to professional obligations including those of confidentiality. (d) In other patent litigation between Merial and its competitors, including other patent litigation between Merial and Intervet (or their affiliates), Dr Jarecki Black is or has been permitted to see "attorney eyes only" documents and information because multiple courts have held that she was not a competitive decision maker at Merial and, hence, she should not be denied access to confidential information. See, Intervet, Inc. v. Merial LTD., 241 F.R.D. 55 (D.D.C. 2007) (Intervet v Merial); Merial LTD. v. Virbac S.A., C.A. No. 4:10-cv-181-Y, D.I. 40 (N.D. Tex. June 10, 2010); and Merial LTD. and Merial S.A.S. v. Ceva Sante Animale, S.A. and Horizon Valley Generics, Inc., Case No. 3:12-cv-00154-CDL (Middle District of Georgia, Athens Division, November 25, 2013) (Merial v Ceva). … (e) In the above cases, the courts held that Dr Jarecki-Black is not a competitive decision maker in part because she is not involved in pricing decisions, product design, selection of vendors, purchasing decisions, marketing or overall corporate decision-making at Merial: Intervet v Merial at 58; Merial v Ceva at 1-2. Further, in Intervet v Merial the Court noted that Dr Jarecki-Black had participated in other cases and settlement discussions where confidential material was made available to her and that it had never been suggested that, in any of those cases, she had ever misused or revealed confidential information: Intervet v Merial at 56. The Court further found that Dr JareckiBlack does not personally prosecute patents or patent applications as that is done by associates, outside counsel and patent agents: Intervet v Merial at 56. Moreover, it was noted that Dr Jarecki-Black functions as a crucial member of the litigation team and has scientific expertise and animal health experience that was not available to other members of the litigation team: Intervet v Merial at 56. Hence, her inability to have access to all information will significantly impair her ability to participate as a member of the trial team, and thereby prejudicing Merial's ability to represent itself fully. (f) As noted in sub-paragraph (e) above, Dr Jarecki-Black does not play a substantive role in Merial's patent prosecution. Rather, this work is assigned to in-house patent attorneys and agents and occasionally outside counsel, who conduct this work and interact with inventors for the purpose of pursuing patent protection for Merial inventions. Dr Jarecki-Black's roles at Merial are legal, administrative or organizational in nature. Accordingly, Dr Jarecki-Black does not personally prepare or prosecute patent applications or interact with inventors for the purpose of preparing or prosecuting patent applications: Intervet v Merial at 56. 14 The annexures to Mr Fisher's 5 August 2016 affidavit include (at p 36) a deed of undertaking executed by Dr Jarecki-Black in relation to annexures KS-3, KS-4 and KS-5 in the following terms: I, Dr Judy Jarecki-Black, of Merial … undertake that: Annexures KS-3 to KS-5 (and the contents thereof) will not be disclosed to anyone other than the independent legal advisors, patent attorneys/agents and counsel of the Appellant in Proceedings No. VID399 of 2015 (Federal Court Proceedings), and will not otherwise be used for any purpose other than for the Federal Court Proceedings, unless otherwise agreed to by the Respondent or ordered by the Court. 15 In a confidential exhibit to his 9 August 2016, Mr Fisher sets out his comments on annexures KS-3, KS-4 and KS-5. It is not necessary for present purposes to set these out. 16 Mr Fisher's 16 August 2016 affidavit annexes as GF-38 the 21 November 2002 Report and two other reports that are no longer in issue for present purposes. The statements relating to the need to obtain instructions in relation to an application to amend have been overtaken by events and are no longer relevant. 17 In Mr Fisher's 19 August 2016 affidavit, he states, in reference to the product developments reports which are annexures KS-3, KS-4 and KS-5 and annexure GF-38 (the Product Development Reports): 4. I refer to paragraph 16 of my [5 August 2016] Affidavit. I am further informed by Dr Jarecki-Black, and I believe, the following matters: … (b) Dr Jarecki-Black intends to travel to Australia to attend the appeal hearing in person, in order to provide instructions to Ashurst and counsel and to participate in strategy discussions in relation to the hearing. She is the employee of Merial who will be attending the appeal hearing. (c) Dr Jarecki-Black has only ever had legal roles at Merial since she first became employed by Merial in 2002, and has never had a competitive decision making, patent drafting or product development role at Merial. (d) Dr Jarecki-Black has no plans, and does not expect, to go into a competitive decision making, patent drafting or product development role at Merial in the future. Nor does she have any plans or expectations to do so elsewhere. (e) Dr Jarecki-Black is the person who is responsible for making decisions on behalf of Merial in relation to the conduct of this litigation. She is very concerned that her ability to do so will be prejudiced if she does not have access to the Product Development Reports, noting that Intervet has indicated that it intends to rely on those reports in evidence on the central issue of entitlement. (f) As stated at paragraph 16(d) of my [5 August 2016] Affidavit, in other patent litigation between Merial and its competitors, including other patent litigation between Merial and Intervet (or their affiliates), Dr Jarecki-Black is or has been permitted to see "attorney eyes only" documents and information and has never been accused of misusing confidential or "attorney eyes only" information. 5. Merial intends to make submissions about the Product Development Reports at the appeal hearing and it is apparent to me that Intervet intends to do the same. I am also aware that Intervet has submitted to the Court that it intends to cross-examine at least one of Merial's witnesses on the Product Development Reports … Intervet's counsel indicated at the hearing on 18 August 2016 that the Product Development Reports go to the issue of lack of entitlement, which is a central issue. In my opinion, my ability to obtain instructions from Dr Jarecki-Black in relation to this proceeding will be significantly hampered if Dr Jarecki-Black is unable to access the unredacted versions of the Product Development Reports for the purpose of submissions and cross-examination at the appeal hearing. It is also likely that Dr Jarecki-Black will also be unable to attend significant portions of the hearing, when the courtroom will need to be closed.

Application of principles to the present case 20 For the reasons set out below, the application of these principles to the facts of the present case leads to the conclusion that Dr Jarecki-Black should be permitted to have access to unredacted copies of the relevant documents, subject to execution of a deed of undertaking in respect of the documents and subject to Merial giving an undertaking as discussed below. 21 I am satisfied on the basis of the material filed by Intervet that the relevant documents are confidential to Intervet. Although the affidavit material filed by Intervet does not specifically address the age of the documents (they are dated 2002 and 2003), I am satisfied on the basis of the descriptions of the documents in the affidavits of Mr Afaras (set out above) that they are commercially sensitive notwithstanding their age (cf Australian Competition and Consumer Commission v Air New Zealand Limited (No 3) [2012] FCA 1430 at [34]-[37] per Perram J). 22 The confidentiality of the documents having been established, the question whether access should be permitted involves a balancing exercise in which the competing considerations are the risk of inadvertent or accidental disclosure on the one hand, and the benefits of a party having access to relevant information so that appropriate advice can be given to the client and informed instructions can be received from the client, on the other. 23 The evidence set out above establishes that Dr Jarecki-Black has only ever had legal roles at Merial and has never had a competitive decision-making, patent drafting or product development role at Merial. The evidence also establishes that multiple courts have found that she is not a competitive decision-maker because she is not involved in pricing decisions, product design, selection of vendors, purchasing decisions, marketing or overall corporate decision-making at Merial. I take it from this evidence that she is not involved in competitive decision-making or product development at Merial. The evidence also establishes that Dr Jarecki-Black does not play a substantive role in Merial's patent prosecution; her roles at Merial are legal, administrative or organisational in nature; she does not personally prepare or prosecute patent applications or interact with inventors for the purpose of preparing or prosecuting patent applications. I note that Mr Afaras's 19 August 2016 affidavit, at paragraph 19, contains some contrary evidence about Dr Jarecki-Black's role, on the basis of information provided to Mr Afaras by Dr Stumm. The affidavit quotes a letter from Intervet's solicitors to Merial's solicitors which stated: "We are instructed that Dr Jarecki-Black is directly involved in preparing and drafting patent applications and interacts with inventors at Merial in relation to technology directly competitive with Intervet's technology, the subject of the patent in suit." However, the basis for Dr Stumm making these statements is not set out in the affidavit. I prefer the affidavit evidence of Mr Fisher on the scope and extent of Dr Jarecki-Black's role, as this is based on information provided to him by Dr Jarecki-Black herself. On the basis of Mr Fisher's affidavit evidence as to the scope and extent of Dr Jarecki-Black's role at Merial, she is not involved in competitive decision-making or product development. I note also that she has no plans, and does not expect, to go into a competitive decision-making, patent drafting or product development role at Merial in the future. 24 Dr Jarecki-Black has executed a deed of undertaking in relation to annexures KS-3, KS-4 and KS-5 (see p 36 of Mr Fisher's affidavit of 5 August 2016). It is proposed by Merial that she execute a deed of undertaking in the same form in relation to the 21 November 2002 Report. I take it from Dr Jarecki-Black's execution of the deed, and from Merial putting forward the deed as the basis of its application, that Dr Jarecki-Black does not owe any contractual, statutory or fiduciary duties to Merial which are or would be inconsistent with the undertaking set out in the deed. 25 The evidence establishes that Dr Jarecki-Black is a legal practitioner of good standing and has participated in confidentiality regimes a number of times in the past. Further, no issues have arisen in the past relating to her receipt of confidentiality information. 26 The evidence does not address the security systems in place at Merial to protect the confidential information contained in the relevant documents. However, I am prepared to infer from the evidence generally that Dr Jarecki-Black will take appropriate steps to ensure that no one else at Merial is able to access the relevant documents. The safest way for this to occur would be for her to receive only hard copies (rather than electronic copies) of the relevant documents (which are not bulky) and to store them in a secure place (such as a safe) to which no one else has access. The documents should be destroyed at the conclusion of the proceeding. Given the nature of Dr Jarecki-Black's role and her participation in confidentiality regimes in the past, I assume that she is familiar with proper processes to secure confidential information, including ensuring that no one else at Merial can have access to it. 27 At the hearing of this application, Merial relied on the statement of principles in AstraZeneca, set out above. These principles refer to undertakings given by the proposed recipient of the confidential information or the party seeking disclosure (in this case, Merial) to meet any loss caused by inadvertent or accidental disclosure. The orders in the AstraZeneca case indicate that an undertaking was given by the relevant party. I raised with senior counsel for Merial whether Merial would be prepared to give a like undertaking in the present case, namely an undertaking to be liable for any direct or indirect loss, damage, costs or expenses to or suffered by Intervet in the event of disclosure of the confidential information in the relevant documents by Dr Jarecki-Black to any person other than a person subject to the confidentiality regime in place in respect of this proceeding. Having obtained instructions, senior counsel for Merial said that Merial was prepared to give such an undertaking but noted certain matters by way of context: first, that the undertaking is given having regard to the Court's enquiry; secondly, that the undertaking is given without any admission or acceptance that Dr Jarecki-Black is relevantly in any different position from the other people who have access to confidential documents in connection with the proceeding; thirdly, that had such an undertaking been sought in respect of such other individuals, there would have been no difficulty in giving such an undertaking; fourthly, certain other individuals who have access to confidential documents in connection with the proceeding were identified, including a patent attorney. Senior counsel for Merial emphasised that these matters were not intended to detract from the force of the undertaking. 28 On the basis of the matters discussed above, I am satisfied that, if the relevant documents are disclosed to Dr Jarecki-Black, the risk of accidental or inadvertent disclosure is very low. 29 The reason put forward by Merial for Dr Jarecki-Black to have access to the documents is the need to obtain instructions from her, on behalf of Merial, in relation to the proceeding. Dr Jarecki-Black is attending the hearing of the proceeding and is the person who will be giving instructions on behalf of Merial. No other person from Merial has had, or is proposed to have, access to unredacted copies of the relevant documents. Dr Jarecki-Black will have access to all the other evidence in the proceeding. In circumstances where the documents are likely to be deployed in evidence by Intervet, the need for informed instructions to be given on behalf of Merial in relation to the proceeding provides a strong reason for permitting Dr Jarecki-Black to have access to the relevant documents. I have considered whether it would be sufficient for Dr Jarecki-Black to have access to redacted versions of the documents. A copy of the redacted version of annexure KS-5 was provided to me. It is apparent that substantial parts have been redacted. I think it is likely to be difficult to understand the import of annexures KS-3, KS-4, KS-5 and the 21 November 2002 Report in relation to the issues in the case (in particular, the issue of entitlement, which appears to be the issue in respect of which Intervet seeks to rely on the documents) without access to unredacted copies of those documents. While it is true that Merial's external lawyers have access to unredacted copies of the relevant documents, important decisions in relation to the running of the case are to be made by the party rather than by external lawyers. I note for completeness that, at an earlier stage, Merial relied (in support of its contention that Dr Jarecki-Black should have access to unredacted copies of the documents) on a need to obtain instructions from her on a possible amendment to the grounds relied on by Merial in the proceeding. However, that basis is no longer relevant. A confidential note about the documents was prepared by Merial's lawyers and Intervet consented to the note being provided to Dr Jarecki-Black. Instructions were then obtained to make the application for leave to amend, and that application has now been dealt with. 30 Taking into account the above matters, I am satisfied that it is appropriate for Dr Jarecki-Black to have access to unredacted copies of the relevant documents, subject to execution of a deed of undertaking (in the form in evidence) in relation to the relevant documents, and subject to Merial providing an undertaking as discussed in paragraph [27] above. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.

Merial, Inc. v Intervet International B.V.

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Judgment (7 paragraphs)

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Cases Cited (9)

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