Novartis AG v Pharmacor Pty Limited

Federal Court of Australia|2023-08-16|Before: Mr J, Yates J

The interlocutory application dated 11 July 2023 as amended by the amended interlocutory application dated 14 July 2023, filed by the applicants (the first interlocutory application), be dismissed.
The applicants pay the respondent's costs of the first interlocutory application.
The interlocutory application dated 26 July 2023, filed by the respondent (the second interlocutory application), be dismissed.
There be no order for costs in respect of the second interlocutory application, with each party to bear its own costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 There are two interlocutory applications before me. 2 The first is an amended interlocutory application filed by the applicants in the principal proceeding, Novartis AG and Novartis Pharmaceuticals Australia Pty Limited (Novartis Australia) (I will refer to both as, simply, Novartis), seeking the separate determination, pursuant to r 30.01(1) of the Federal Court Rules 2011 (Cth) (the Rules), of whether certain paragraphs of the amended statement of cross-claim filed by the respondent, Pharmacor Pty Limited (Pharmacor), and Pharmacor's application for a declaration of invalidity in respect of claim 1 of Patent No. 2003206738 (the patent), should be dismissed to the extent that Pharmacor makes certain allegations of invalidity in respect of the claim. 3 The second is an interlocutory application filed by Pharmacor seeking an order, pursuant to r 21.01 of the Rules, that Novartis be ordered to answer a particular interrogatory.

Background 4 In the principal proceeding, Novartis alleges that Pharmacor threatens to infringe claim 1 of the patent in relation to its apprehended supply of a number of pharmaceutical products entered on the Australian Register of Therapeutic Goods. Pharmacor denies that it threatens to infringe claim 1 and, by its amended statement of cross-claim, alleges that claim 1 is invalid on a number of grounds. It also alleges that, on 5 December 2016, the Commissioner of Patents wrongly granted an extension of the term of the patent to 16 January 2028. Absent that extension, the term of the patent would have expired on 16 January 2023. Pharmacor seeks an order that the Register of Patents be rectified pursuant to s 192 of the Patents Act 1990 (Cth) (the Act) to remove reference to the term of the patent having been extended, and recording that the term of the patent expired on 16 January 2023. 5 The two interlocutory applications are related in that they concern a particular ground on which Pharmacor challenges the validity of claim 1 of the patent - namely, that the complete specification lodged in support of the application for the patent (the complete specification) did not, and does not, disclose the best method known to Novartis AG, as the applicant for the patent, of performing the invention (the best method), contrary to s 40(2)(a) of the Act (in the form which applies in this proceeding). 6 In this connection, paragraphs 6 to 10 of the statement of cross-claim plead that the patent (meaning, the complete specification) does not disclose the best method that was known to Novartis AG before 5 April 2007 (referred to as the Date of Grant) or, alternatively, 28 November 2006 or 28 July 2006 (referred to as the Dates of Amendment) or, alternatively, 16 January 2003 (referred to as the Date of Filing). 7 Pharmacor's case in this regard has two broad strands. 8 The first strand is that, at each of the alleged times, Novartis AG had knowledge of a pharmaceutical composition containing a compound of non-covalently bound valsartan (or a valsartan salt) and a neutral endopeptidase (NEP) inhibitor (or an NEP inhibitor salt), including where the NEP inhibitor was sacubitril (or a sacubitril salt) or sacubitrilat (or a sacubitrilat salt). 9 The second strand is that, at each of the alleged times, Novartis AG had knowledge of Example 8 given in the complete specification, but did not include that example in the complete specification before those dates. Example 8 was introduced by voluntary amendments allowed on 16 January 2020. Novartis admits that it knew the information in Example 8 before the Date of Filing. 10 It is also convenient to note at this point that, on 14 July 2023, I made an order that Novartis AG and Novartis Australia give discovery in respect of the following category of documents: 1. All Documents created during the period from 16 January 1998 to the Date of Filing recording or evidencing the description and/or evaluation of any pharmaceutical composition and/or method of preparing any pharmaceutical composition comprising: (a) valsartan (or a pharmaceutically acceptable salt thereof); and (b) an NEP inhibitor (or a pharmaceutically acceptable salt thereof); and (c) a pharmaceutically acceptable carrier, in which the NEP inhibitor is sacubitril or sacubitrilat, and in which the valsartan (or a pharmaceutically acceptable salt thereof) and the NEP inhibitor (or a pharmaceutically acceptable salt thereof) are associated by non-covalent bonds. 11 I have been informed that the affidavits of discovery given by Novartis AG and Novartis Australia state that neither party has documents responding to that category. 12 Novartis's position is that the obligation to disclose the best method imposed by s 40(2)(a) (in its relevant form) fixes on the patent applicant's knowledge as at the date of filing the complete specification. In that regard, Novartis relies on statements made by the Full Courts in Pfizer Overseas Pharmaceuticals v Eli Lilly & Co [2005] FCAFC 224; 225 ALR 416 (Pfizer) at [375] and [390]; Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; 247 FCR 61 at [111] - [115]; and GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Ltd v Generic Partners Pty Ltd [2018] FCAFC 71; 264 FCR 474 at [184] and [186]. Therefore, in the present case, Novartis AG's knowledge of the best method as at the Date of Grant or the Dates of Amendment is, on its case, irrelevant. 13 Pharmacor's primary position is that, on its proper construction, s 40(2)(a) fixes the patent applicant's knowledge at the point in time immediately prior to grant of the patent (here, 5 April 2007). Pharmacor advances the other dates it has pleaded as no more than alternatives, with the Dates of Amendment its preferred alternative. Pharmacor contends that its position is not foreclosed by the authorities on which Novartis relies. 14 The separate question that Novartis proposes is: Should the cross-claim for the revocation and declaration of invalidity of claim 1 of Australian patent number 2003206738 be dismissed to the extent that it alleges, in paragraphs 6 to 10 of the Cross-Claimant's Amended Statement of Cross-Claim, that for the purposes of section 40(2)(a) of the Patents Act 1990 (Cth) as in force before the amendments brought about by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth), the relevant knowledge of the patent applicant (Novartis AG) is that which is known to it as at any of the Dates of Amendment or Date of Grant as those terms are defined in the Amended Statement of Cross-Claim? 15 The interrogatory proposed in the second interlocutory application is: 1. Please identify the part(s) of the specification of Australian patent no. 2003206738 which describe(s) the best method known to the First Applicant of performing the invention at each of the following dates: a. 16 January 2003; b. 28 July 2006; c. 28 November 2006; and d. 5 April 2007. 16 As events have transpired, Pharmacor no longer presses the second interlocutory application. This is because very recently (late in the afternoon of 9 August 2023) Novartis's solicitors provided Pharmacor's solicitors with a statement (in email correspondence) regarding the best method disclosed in the complete specification. Although the second interlocutory application does not need to be determined, each party seeks its costs of that interlocutory application. 17 Therefore, the questions to be determined are: (a) Should the question proposed by Novartis be heard separately from and before any other question in the principal proceeding? (b) What costs order should be made in relation to the second interlocutory application?

A separate question? 18 Rule 30.01 provides: 30.01 Application for separate trials (1) A party may apply to the Court for an order that a question arising in the proceeding be heard separately from any other questions. (2) The application must be made before a date is fixed for trial of the proceeding. Note 1: The Court may order that a party state a case and the question for decision. Note 2: The Court will give any directions that are necessary for the hearing of the separate question.

Novartis's submissions 19 Novartis contends that it is appropriate that there be a separate hearing and determination of the question it proposes because, firstly, its application has been made promptly and at an early stage of the proceeding. Novartis draws attention to the fact that there has been non-compliance with r 30.01(2) (because the principal proceeding was listed for trial on 7 July 2023 and the interlocutory application was filed on 11 July 2023, three business days later). It contends, however, that, in the circumstances of the present case, the non-compliance is not material and that the requirement of r 30.01(2) should be dispensed with. 20 Secondly, Novartis contends that the question it proposes is precisely formulated and "ripe" for separate and preliminary determination. 21 Thirdly, Novartis contends that the factual issues forming the basis of the question it proposes (namely, the Date of Grant, the Dates of Amendment, and the Date of Filing) are not in dispute. 22 Fourthly, and relatedly, Novartis contends that a determination of the question it proposes will not require resolution of any contested factual issues. It poses "a confined question of law". 23 Fifthly, Novartis contends that the separate determination of the question it proposes will narrow the issues at trial and lead to a significant shortening of the hearing time required, if it is determined in Novartis's favour. 24 In this connection, Novartis submits that the first strand of Pharmacor's best method challenge cannot succeed as a practical matter: ex hypothesi the case based on the Date of Grant and the Dates of Amendment would not be open to Pharmacor, and the case based on the Date of Filing cannot be successfully prosecuted in light of the responses given in the affidavits of discovery. 25 Novartis understands that Pharmacor no longer presses the second strand of its best method challenge. Based on the correspondence that has passed between the parties, Novartis says that Pharmacor stated that, if Novartis does not contend that Example 8 is the best method, then the second strand is "moot". Novartis does not contend that Example 8 is the best method. 26 In the course of oral argument, Pharmacor appeared to indicate that it did not accept that it no longer presses the second strand of its best method challenge. The position was not, however, clarified. 27 Novartis submits that the second strand of Pharmacor's best method challenge cannot succeed in any event. According to Novartis, that challenge appears to be based on the proposition that a complete specification cannot be amended (specifically, after grant) to include a disclosure of the best method. Novartis submits that, if that is how Pharmacor envisages this strand of its best method challenge being advanced, it would be (according to Novartis) contrary to the Full Court's finding in Pfizer at [390]. 28 To round off this aspect of Novartis's submissions, Novartis contends that if the question it proposes is not determined in its favour, that eventuality will not prolong the litigation or add to the total hearing time required. 29 Sixthly, Novartis contends that, if Pharmacor seeks further discovery in relation to the best method issue as it relates to the Date of Grant or the Dates of Amendment, this will likely add a significant burden in respect of the preparation of the proceeding for trial, and likely increase the length and duration of the trial. (This is no longer a consideration because Pharmacor has now said that it will not be seeking this discovery). 30 Seventhly, Novartis contends that the question it proposes is "particularly appropriate" where the point which Pharmacor proposes to run is prima facie foreclosed by Full Court authority.

Pharmacor's submissions 31 Pharmacor advances four main contentions as to why Novartis's interlocutory application should be refused. 32 First, Pharmacor contends that Novartis overstates the advantages of the separate question it proposes. It contends that the potential advantages of the proposed question being determined before trial are "small". 33 In this regard, Pharmacor submits that its evidence will "likely" be confined. Pharmacor's solicitor, Ms Fitzgerald, deposes that the evidence upon which Pharmacor proposes to rely at trial will "not add substantially to the length of the trial". 34 By way of example, I was taken to some of the evidence on which Pharmacor proposes to rely in prosecuting its best method challenge - namely, Exhibit 1 (extracts from United States Provisional Patent Application No. 60/789,332 filed on 4 April 2006) and Exhibit 2 (extracts from a Joint Claim Construction Brief) which were tendered in this application. 35 These documents are among the documents referred to in Pharmacor's particulars referable to the first strand of its best method challenge. They concern a "supramolecular complex" of valsartan and an NEP inhibitor (including sacubitril) in which the two pharmaceutically active agents and any other entity present (such as a solvent) interact by means of non-covalent, intermolecular bonding. It is said that this complex has benefits "with regard to use as first line therapy, ease of formulation and ease of manufacture", compared to mere mixtures of the two pharmaceutically active agents. 36 Novartis admits that it knew the contents of Exhibit 1 before the Date of Grant and the Dates of Amendment. 37 Moreover, Novartis's solicitor, Mr Collins, has given evidence on information and belief regarding the synthesis and development by Novartis AG of trisodium [sacubitril-valsartan] hemipentahydrate (TSVH). As I understand it, TSVH is an exemplification of the "supramolecular complex" referred to in Exhibit 1. 38 Mr Collins's evidence is that Novartis AG first synthesised TSVH in January 2006 following experimental work carried out between March 2005 and January 2006, and that TSVH was developed in a clinical development programme that led to the filing of the provisional patent applications particularised in Pharmacor's amended statement of cross-claim. 39 Mr Collins's evidence should be considered with the fact, noted above, that the affidavits of discovery resulted in no documents being discovered. 40 A further important fact is that Pharmacor has made clear that it does not now seek discovery directed to Novartis AG's knowledge of the best method as at the Date of Grant or the Dates of Amendment. 41 Therefore, there does not seem to be any room for any factual dispute about the timing of Novartis AG's knowledge of the "supramolecular complex" or the contents of the documents on which Pharmacor proposes to rely to advance its best method challenge at trial. 42 Pharmacor submits, further, that the documents it has particularised will be relevant to other aspects of the case, in particular on the question of the construction of claim 1 and whether claim 1 is fairly based. The point of this submission, as I understand it, is to emphasise that Pharmacor's best method challenge will not add substantially to the evidence that is likely to be adduced at the trial in any event. 43 Secondly, Pharmacor draws attention to the fact that, although Novartis has advanced the proposition that a determination of its proposed question in its favour will, in practical effect, obviate the need to consider, at trial, Pharmacor's best method challenge, Novartis does not accept that if the proposed question were to be resolved in Pharmacor's favour, Pharmacor's challenge to the validity of claim 1 will not only succeed, but the entire proceeding will be resolved in Pharmacor's favour (because, as claim 1 will be invalid, Novartis's case on threatened infringement cannot succeed). In short, Novartis's position is that the benefits it advances will only be realised if the proposed question is determined in its favour. 44 Thirdly and relatedly, Pharmacor does not accept that determining the proposed question favourably to Novartis would necessarily mean that Pharmacor's best method challenge would fail. This is because part of Pharmacor's best method challenge is based on Novartis AG's knowledge of the best method as at the Date of Filing. Despite Novartis's submission to the contrary, Pharmacor does not accept that it does not have a viable best method challenge based on Novartis AG's knowledge as at the Date of Filing. I hasten to note that, in this connection, Pharmacor did not seek to meet the substance of Novartis's contention identified at [24] above. 45 Pharmacor contends that, in any event, determining the proposed question favourably to Novartis still leaves open Pharmacor's other challenges to the validity of claim 1, which it describes as being "nearly all the field of controversy". 46 Fourthly, Pharmacor says that, if I were to accede to Novartis's interlocutory application, and if the proposed question were to be determined adversely to it, it would seek leave to appeal. Although its application would be made on an expedited basis, it is possible that seeking leave to appeal could bring into train events that could jeopardise the present listing of the trial to commence on 8 April 2024, or at least disrupt the orderly conduct of that trial.

Consideration 47 Section 37M of the Federal Court of Australia Act 1976 (Cth) requires me to approach the determination of this interlocutory application having regard to the overarching purpose of the Court's civil practice and procedure provisions, which is to facilitate the just resolution of disputes according to law as quickly, inexpensively, and as efficiently as possible, bearing in mind a number of considerations, including: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; and (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. 48 The genesis of the present application appears to be a comment I made at a case management hearing on 6 July 2023 in the context of the parties raising the prospect of a number of interlocutory applications being filed. These concerned a complaint by Novartis about the generality of Pharmacor's pleading of the first strand of its best method challenge, and Pharmacor's expressed intention to seek discovery referable to Novartis AG's knowledge of the best method as at the Date of Filing, the Dates of Amendment, and the Date of Grant. 49 At that time I raised for consideration whether the determination of the relevant time at which a patent applicant's knowledge is to be fixed for the purposes of s 40(2)(a) of the Act (in its relevant form) might best be considered in the context of the determination of a separate question, rather than in the context of a dispute about pleadings or a dispute about discovery. 50 I should also say that, at that time, Novartis was not prepared to identify, with reference to the complete specification, what it was proposing to contend was the best method known to Novartis AG at any date. 51 Since that case management hearing, circumstances have changed considerably. 52 First, although, at that time, Pharmacor was seeking discovery in respect of the first strand of its best method challenge with reference to two time periods - 16 January 1998 to the Date of Filing, and between the Date of Filing and the Date of Grant - Pharmacor subsequently confined its interlocutory application for discovery to the first of those periods: Novartis AG v Pharmacor Pty Ltd [2023] FCA 804. 53 Secondly, Novartis AG and Novartis Australia have now given discovery with respect to the category ordered on 14 July 2023. As I have noted, no documents were discovered. 54 Thirdly, Pharmacor has now made it clear that it will not be seeking further discovery in relation to this strand of its best method challenge (including by way of interrogatories). 55 Fourthly, Novartis has now identified, with reference to the complete specification, what it says was the best method known to Novartis AG as at the Date of Filing. 56 Fifthly, Pharmacor has indicated the general nature of the evidence it proposes to call in relation to the first strand of its best method challenge. It has explained that some of this evidence will be relevant to other issues to be decided at trial. 57 Overall, the case on the first strand of Pharmacor's best method challenge is significantly clearer than it was on 6 July 2023, and a looming problem with respect to discovery has now passed. 58 On balance, I am not persuaded that the just resolution of the substantive question raised by Novartis's separate question - namely, the date fixed by s 40(2)(a) of the Act (in its relevant form) for determining the patent applicant's knowledge of the best method - in accordance with the overarching purpose, favours the hearing of that question separately from and before any other question in the proceeding. I am satisfied that the substantive question is best determined in the context of the trial itself. 59 In my view, the only consideration favouring the separate and prior determination of the question that Novartis proposes is the possibility that, absent the prior and separate determination of the question, ultimately unnecessary evidence might be called at the trial as to whether the "supramolecular complex" was the best method known to Novartis AG as at the Dates of Amendment or the Date of Grant. 60 I am, however, prepared to act on Pharmacor's assurance that the evidence it will call on those particular issues will be relatively limited. As I have noted, there does not seem to be any room for any factual dispute about the timing of Novartis AG's knowledge of the "supramolecular complex" (in particular, TSVH) or the contents of the documents on which Pharmacor proposes to rely to advance its best method challenge at trial. 61 Moreover, as Novartis' position is that Novartis AG's knowledge as at the Dates of Amendment and the Date of Grant is completely irrelevant, there would appear to be, at the present time, no compelling reason for it to answer, by evidence, any case that Pharmacor might seek to advance at trial that Novartis AG had relevant knowledge as at the Dates of Amendment or the Date of Grant. 62 On the other hand, determining Novartis's proposed question separately from and prior to all other issues appears to me to be disadvantageous. First, in light of the various matters I have discussed, I am satisfied that proceeding in that manner would not involve the efficient use of the Court's judicial and administrative resources. Secondly, I am satisfied that proceeding in that manner would also likely involve additional cost in the present case in the event that further applications (specifically, Pharmacor's foreshadowed application for leave to appeal) were to be made. Thirdly, any appeal would bring with it the real possibility of disruption to the date of the presently fixed trial or disruption to the conduct of the trial itself, such as by requiring the deferral of the best method challenge to a later date, outside the presently appointed trial period.

Costs of the second interlocutory application 63 I am satisfied that it is unlikely that Pharmacor would have filed its interlocutory application had Novartis chosen to make clear, much earlier than it did, what it contends to be Novartis AG's compliance with the obligation imposed by s 40(2)(a) of the Act (in its relevant form). In my view, Novartis's earlier refusal to provide this information was unreasonable and not conducive to the efficient conduct of the proceeding. Pharmacor was justified in seeking to interrogate Novartis as to Novartis AG's knowledge of the best method at least as at 16 January 2003. Furthermore, it was appropriate that Pharmacor not proceed with its interlocutory application once Novartis's solicitors provided Pharmacor's solicitors with a statement (in email correspondence) regarding the best method disclosed in the complete specification. 64 On the other hand, had it been necessary for me to determine Pharmacor's interlocutory application, it is unlikely that I would have ordered Novartis to answer the interrogatory in its proposed form, dealing (as it does) with Novartis AG's knowledge not only as at 16 January 2003, but as at 28 July 2006, 28 November 2006, and 5 April 2007 as well. Apart from anything else, it is unlikely that I would have been persuaded as to the utility of an interrogatory in that form, balanced against the burden it would have placed on Novartis AG and Novartis Australia in answering it. 65 In the circumstances, the appropriate order is that there be no order as to costs in respect of the second interlocutory application. The parties should bear their own costs of that application.

Disposition 66 Novartis's interlocutory application will be dismissed, with costs. Pharmacor's interlocutory application will be dismissed, with no order as to costs. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.

Intellectual Property Laws Amendment (Raising the Bar) Act 2012(Cth)

Federal Court Rules 2011(Cth)rr 21.01, 30.01

Patents Act 1990(Cth)ss 40, 192

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