Analysis
134 The applicants' construction of ss 70, 71 and 77 is the correct one.
135 The extension of term regime is beneficial and remedial. It is designed to compensate a patentee of a pharmaceutical substance for the loss in time before which it can exploit its invention. It is designed to remedy the mischief of a shortened period for an effective monopoly that has been caused by delays in obtaining regulatory approval. Accordingly, a liberal rather than a literal construction is to be preferred.
136 Let me begin with s 71(2)(b) where reference is made to the first inclusion in the ARTG of goods that contain or consist of "any of the pharmaceutical substances referred to in subsection 70(3)".
137 If one looks at s 70(3), it refers to "the substance". But "the substance" is that chosen from "at least one of those pharmaceutical substances", that is, the "one or more pharmaceutical substances" referred to in ss 70(2)(a) or (b). So the word "any" in s 71(2)(b) and by reference back to s 70(3) just reflects that it is the one chosen which then becomes "the substance" under s 70(3). The one chosen is "the substance" under s 70(3) if it meets the condition(s) of s 70(2). And it is "the substance" under s 70(5)(a).
138 Clearly, provided the conditions of ss 70(3)(a) and (b) are satisfied, s 70(3) does not impose any additional conditions or restrictions on which of the "at least one of those pharmaceutical substances" may be used to satisfy the requirements of s 70(3). Further, s 70(3) is not free-standing in the sense that it is to be read with and in the context of s 70(2).
139 Further, s 71(2)(b) substantially mirrors s 70(5)(a) save that it refers to "any of the pharmaceutical substances referred to in subsection 70(3)" rather than "the substance". But this is because the substance specified by the patentee to satisfy s 70(3) can be any pharmaceutical substance that is in substance disclosed and claimed in the patent.
140 Accordingly, it is for the patentee under s 71(2)(b) to stipulate the pharmaceutical substance. But of course in so stipulating, the requirements of s 70(3) read in the light of s 70(2) must be satisfied. But although the patentee has that freedom to stipulate, there are other broader constraints such as under s 70(4) and also under s 77(1)(a) concerning the calculation of the term which uses "the earliest first regulatory approval date" (my emphasis).
141 Now what I have just said fits nicely with s 77, which operates once an application for an extension of term meets the conditions for acceptance. Of course it is not dealing with the criteria for the grant of any extension.
142 Now the Commissioner has sought to finesse much from the fact that whilst s 71(2)(b) cross-refers to s 70(3), s 77(1)(a) cross-refers to s 70(2).
143 But s 71 is a timing provision. Understandably it refers back to s 70(3), which concerns timing requirements for a candidate pharmaceutical substance. Section 77 contains its own timing requirements expressly within s 77(1)(a). In any event, both ss 71 and 77 ultimately cross-refer back to the pharmaceutical substances referred to in s 70(2) in the light of the implicit cross-reference in s 70(3) back to s 70(2).
144 Further, the modified second scenario posited by the Commissioner, which I have set out at [118], demonstrates the inappropriateness of the construction for which the Commissioner contends. The Commissioner on the corollary of that construction identifies the circumstances in which different substances might be used for the purposes of s 71 and s 77, namely, where the substance with the earlier ARTG registration date did not satisfy the requirements of s 70(3)(b). But in the Commissioner's modified second scenario, the term of the extension will always be reduced to zero by virtue of s 77, because goods comprising the earlier substance would have to have been included in the ARTG less than 5 years after the date of the patent, if they did not (by definition of this scenario) satisfy s 70(3)(b). The effect of the Commissioner's construction is that the only circumstance in which a substance with a later-in-time ARTG registration might be used for the purposes of s 71 is one in which the extension application would not result in any extension of term. That construction leads to an absurd result.
145 But there are also other scenarios. Say the competitor's product was approved at year 6, so 1 year after the 5 years in s 70(3)(b). Say the patentee's product is approved at year 9 and is the subject of a s 71(2)(b) application. Now come to s 77. On the applicants' construction the patentee gets a 4 year extension. On the Commissioner's construction the patentee gets a 1 year extension. Further, a different application by the patentee would have needed to have been made under s 71(2)(b) within a different timeframe. Possible scenarios of disadvantage to the patentee can be multiplied.
146 Further, in my view, Pfizer does not assist the Commissioner. In Pfizer, Bennett J was not required to construe the meaning of s 77 in the context of a patent which in substance disclosed and claimed more than one pharmaceutical substance. The issue in Pfizer was whether the first inclusion in the ARTG was the date of listing for export only or the date of registration enabling Pfizer to market the substances in Australia. Pfizer contended that the relevant date was that of registration, not of any listing in the ARTG. Her Honour held that an inclusion in the ARTG, including an export only listing as listed goods, was an inclusion in the ARTG for the purposes of s 70. In doing so, her Honour rejected Pfizer's submission that the relevant approval must be one which allows marketing in Australia, observing that inclusion in the ARTG as listed goods still permitted the patentee to exploit the patent and thus enabled a commercial return to the patentee. But that is a different case to the one before me. Now the Commissioner says that the fact that the skirmish in Pfizer centred on a construction of whether the "first inclusion in the ARTG" depends on a particular type of approval (or the absolute first inclusion) does not reduce the applicability of her Honour's reasoning in the present context. But I disagree. The fact is that her Honour was not focused on what I have to consider. There is nothing in her Honour's reasons, particularly at [21], [22] and [30] to [34] suggesting that she was doing anything other than talking about Pfizer's goods at all times.
147 Further, the applicants' construction is supported by the extrinsic materials relating to the introduction of Ch 6 Pt 3 of the Act that I have set out earlier.
148 Now in Alphapharm Crennan, Bell and Gageler JJ said (at [60]):
The purposes of the extension of term scheme are to balance the competing interests of a patentee of a pharmaceutical substance whose exploitation of monopoly has been delayed (because of regulatory delay) and the public interest in the unrestricted use of the pharmaceutical invention (including by a competitor) after the expiration of the monopoly (that is, the term).
149 Further, Kiefel and Keane JJ (albeit in dissent) said (at [120]):
There is no doubting that the purpose behind s 70(1) is to benefit and encourage research and development. Other provisions of the 1990 Act, including those for advertisement of and opposition to applications for extension of the term of a pharmaceutical patent (156), recognise that there are interests, other than those of a patentee, which are affected by an extension. The Explanatory Memorandum for the 1989 Amendment Act said as much, in its statement as to the policy behind s 160(4A), when extension provisions for pharmaceutical patents were introduced. Against this background, the requirements of s 71(2), the strictness of which is reinforced by the effect of reg 22.11(4)(b), may be taken as intended to provide those other interested persons with a level of certainty as to whether an application for extension of the term of a patent is to be made by a patentee.
150 So I accept that the extension regime sought to balance a range of competing interests and purposes. The compensation of some time lost due to regulatory hurdles is a purpose of the regime. But it is not the sole purpose. Accordingly, ss 70(3), 71(2) and 77(2) reflect a balancing of purposes.
151 But even so accepting and even if I was to consider the later introduced object clause in s 2A, which I take to reflect the then existing goals of the patent system at the time of the introduction of s 2A, in any event the applicants' construction is to be preferred. It reflects the mischief which the extension of term regime is intended to address. The evident purpose of the extension of term provisions is to provide the patentee with an effective patent life by restoring the time lost by the patentee prior to gaining market approval, thereby compensating the patentee for the additional time, expense and difficulty in commercialising its new product.
152 Further, Ms Fiona Roughley, counsel for the Commissioner, made another point in support of the Commissioner's construction. She said that the right to sue the competitor for infringement would be a suitable remedy, as part of striking a balance, if on the Commissioner's construction there could be no extension because of the earlier ARTG approval of the competitor's product. But in my view such a right would not be adequate compensation for being denied an extension of term. Patent litigation can be tricky and quite expensive. Further, compensation is not a perfect substitute even as against the alleged infringer. Moreover, the extension of term benefits the patentee more broadly for the period of the extension subject to the s 78 exclusive rights limitations. And the extension disincentivises potential future infringers.
153 Let me now say something about s 76A.
154 At the time the current extension of term regime was introduced, Ch 6 Pt 3 of the Act included s 76A as I have said. Section 76A was introduced into the extension of term provisions by an amendment proposed in the Senate to the Intellectual Property Laws Amendment Bill 1997 (Cth), which became the 1998 Amendment Act. The aim of the amendment was to "assess whether what the government is trying to do is actually working and whether the money that we are spending … is being put to best use … It is additional information from the company that is applying for the patent" (Commonwealth, Parliamentary Debates, Senate, 9 July 1998, 5330). The government agreed to the amendment, observing that "this additional data may be useful to the government in assessing the benefits and the costs of extending effective patent life. This would include links between R&D conducted in Australia and extended patent life" (Commonwealth, Parliamentary Debates, Senate, 9 July 1998, 5331 (Minister for Resources and Energy)).
155 Later, as I have said, s 76A was repealed on the basis that the provision was no longer required as "[a]lternative sources of data are now available that can provide the same type of information that section 76A was intended to collect": Explanatory Memorandum, Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill 2018 (Cth) at [95].
156 It is self-evident from the requirements of the former s 76A that "the drug which was the subject of the application" was intended to be the drug of the patentee, not that of a third party. The patentee would only have available to it the requisite information relating to its (or its licensee's) drug. How could it sensibly be assumed that a patentee would have such information relating to a third party's drug, or that a patentee would have to somehow obtain that information, for the purposes of meeting its obligations under s 76A?
157 In my view the introduction of the former s 76A as part of the extension of term regime and howsoever it was "tacked on" in the Senate, supports the applicants' position that it was the legislature's intention that the scheme provided by Ch 6 Pt 3 limits consideration to only those substances developed by the patentee.
158 Now the Commissioner says that reference to the former s 76A does not add any material support for the applicants. It says that s 76A uses different language. It refers to the "development of the drug", whereas the present extension of term regime is predicated on "pharmaceutical substances" and "goods that contain" such a substance. But the disconformity of language between s 76A, which refers to a "drug", and references elsewhere in Ch 6 Pt 3 to a "good" or "goods" does not detract from the relevance of the former section. The Commissioner contends that it is axiomatic that different words used within an Act have different meanings. But the Commissioner does not suggest what different meaning the word "drug" has. Further, in Spirit Pharmaceuticals Pty Ltd v Mundipharma Pty Ltd (2013) 216 FCR 344, the proposition that the word "drug" in the former s 76A had a different meaning to the phrase "pharmaceutical substance per se" was rejected As Rares J said (at [54]):
In ordinary English, Endone and OxyContin are both "drugs", even though oxycodone is the common active pharmaceutical ingredient used in each of their formulations. The word "drug" as used in s 76A did not narrow or elucidate the meaning of "pharmaceutical substance per se" as used elsewhere in Div 2 of Pt 3 of Ch 6 of the Act. It is likely that the two expressions referred to the same subject matter. This is reinforced by the qualification of "drug" used in s 76A that it "was the subject of the [extension] application". This demonstrated only a circularity in the statutory language, namely that the "drug" in s 76A was whatever satisfied the condition in s 70(2)(a), namely "one or more pharmaceutical substances per se" the subject of the extension application.
159 Moreover, it is to be recalled that s 76A was brought about by an amendment moved in the Senate by the then leader of the Australian Democrats, and endorsed by Senator Bob Brown. It is clear, and unsurprising if I may say so, that they were making little if any distinction between "drugs" and "pharmaceutical substances". Indeed, the latter referred to "drug companies".
160 Further, the Commissioner says that perhaps cognisant of the reference to "drug" in s 76A, the report of the Productivity Commission that led to the repeal of s 76A stated relevantly that "s 76A created uncertainty as to … the drug in question … [p]harmaceutical patent extensions are related to a particular patent, and not tied to a particular drug (as noted above one drug can be associated with multiple patents)"; see the Productivity Commission Inquiry Report No. 78, Intellectual Property Arrangements (23 September 2016) at 308. But the observations in that report are of little assistance. That report was published in September 2016. It is difficult to see how it could assist in understanding the legislative intent at the time the extension of term regime was introduced years earlier. In any event, there is no suggestion that the authors were cognisant of the issue raised by the applicants that the drug the subject of the application was not actually developed by the patentee. Further, the authors were concerned with the fact that a particular drug can be associated with multiple patents, not that a single patent can be associated with multiple drugs including drugs not developed by the patentee.
161 In summary, in my view the applicants' construction can fit within the ordinary meaning of the statutory language and is consonant with the legislative purpose. But if I am wrong, let me now address questions of absurdity or unreasonableness if the Commissioner's position was to be accepted.
162 As I have already indicated, if the "earliest first regulatory approval date" included a third party's ARTG registration, it would be manifestly unreasonable as a patentee in the applicants' position would be, contrary to the clear legislative intention, denied compensation for the time lost in securing marketing approval for its product; indeed the extension term may be reduced to zero in some cases as I have already discussed. But in addition, if a third party's ARTG registration can be a "first regulatory approval date" for the purposes of ss 70, 71(2) and 77, this would have the following consequences.
163 First, the patentee would need to review each and every approval granted on the ARTG. It would need to monitor regulatory approvals granted to third party products in order to determine if a particular pharmaceutical substance fell within the scope of one or more claims. Further, even if keyword searches are conducted, an efficient search would require a detailed knowledge of competitor companies and/or the therapeutic targets of those third party products. Even those searches may fail to capture third party products that have been on the ARTG for some time.
164 Second, upon reviewing the ARTG public summary, a patentee would only find details of the active ingredient, product type, product name, sponsor, conditions applicable to the goods, indications, warnings, container information, pack size/poisoning information, dosage form, route of administration and visual identification. The ARTG public summary does not provide details necessary to determine whether the product falls within the scope of a patent, for example the chemical or molecular structure of a competitor product or the therapeutic target of a competitor product. Further, the ARTG public summary does not indicate whether a third party product is itself protected by patent(s).
165 Third, determining whether a product falls within the claims of the patent is a complex task. Let me elaborate by reference to claim 3 of the patent. Let it be assumed that the patent discloses monoclonal antibodies that can be designated 17D8, 2D3, 4H1 and 7D3. Let it further be assumed that the patent discloses a monoclonal antibody, or an antigen-binding portion thereof, which cross-competes for binding to PD-1 with a reference antibody or reference antigen-binding portion thereof comprising 17D8, 2D3, 4H1 or 7D3. In other words, the monoclonal antibody or an antigen-binding portion thereof has a higher affinity than the reference antibodies. Now claim 3 of the patent which I have already set out claims:
A monoclonal antibody, or an antigen-binding portion thereof, for use in treating a human subject which cross-competes for binding to human PD-1 with a reference antibody or reference antigen-binding portion thereof comprising:
a) … [17D8];
b) … [2D3];
c) … [4H1]; or
d) … [7D3], and
…
166 The forensic question would be whether the competitor's product uses a pharmaceutical substance which is a monoclonal antibody, or an antigen-binding portion thereof, that cross-competes with 17D8, 2D3, 4H1 or 7D3 to be determined by using PD-1 binding assays. Here claim 3 refers to determining a KD value below a particular point using a surface plasmon resonance (Biacore) analysis to determine the particular binding of that monoclonal antibody or antigen-binding portion to human PD-1. To so determine would be a task of some complexity.
167 Fourth, determining whether a product falls within the claims of a patent may also require information which can only be provided by the competitor if the Court were to order discovery of relevant documents. But to obtain discovery of the necessary confidential documents regarding biological medicines is a non-trivial task to say the least.
168 Fifth, the TGA may remove products from the ARTG in certain circumstances, including upon request by the sponsor. Therefore the ARTG is not necessarily a complete database of all the possible "first regulatory approval dates" in existence. There may be products with regulatory approval dates which have since been removed from the ARTG and are instead recorded on separate databases of cancelled products.
169 Sixth, even if the patentee conducts comprehensive searches using reasonable care and skill, there is a risk that third party products will simply not be picked up by such searches.
170 Seventh and similarly, if the Commissioner were required to monitor regulatory approvals granted to third party products in order to determine if a pharmaceutical substance is disclosed in a patent specification and in substance falls within the scope of one or more claims of that patent, the Commissioner may face an unduly onerous burden.
171 In summary, if the Commissioner's construction was to be accepted, there would be very serious practical problems which would be unduly onerous and not beneficial to any patentee. In my view, the legislature should not be taken to have intended such consequences.
172 Now the Commissioner suggested that any forensic difficulties could be answered by s 75 opposition proceedings after there had been s 74 acceptance of an extension application. But Mr Bruce Caine QC, counsel for the applicants, made the following submission which in my view effectively disposed of the point:
There are three reasons why an opposition might not even take place. First of all is that the third party would have to undergo expensive and time-consuming tests and face other forensic difficulties, and they have to do that within three months after acceptance. So they have to undertake an extensive process in order to determine whether their drug is caught by the description and claims of the patent that's seeking the extension. That makes it difficult if not also doubtful. The second is, as is often likely, [that the] third party would not readily give up an opportunity to contend that their product had a defence to infringement because that's exactly what they're admitting if they come forward and say their product is as described. Thirdly, it would be most likely that someone in that position, at least potentially, having a drug that falls within the scope of the patentee's patent, would be reluctant to publicise that their product does infringe. So the utility of opposition proceedings to enhance the forensic inquiry necessary, we say, your Honour, doesn't go far at all.
173 Let me deal with some other points.
174 First, it is not the applicants' position that a patentee should be permitted to wait and elect to apply for an extension based on a good that may be second, third, or last on the ARTG. Nor is it the applicants' position that a patentee should be permitted to pick and choose which of its products to nominate as the substance for the purposes of s 70. The applicants' position, both before the delegate and now, is as conveniently illustrated by the flowchart reproduced in the decision at [21], which is the following:
175 I should stress that I am only including this diagram as an aid to comprehension, nothing more, whatever I may have floated with counsel during the course of the hearing.
176 As the delegate observed (at [21]):
As is clear, in the patentee's submission, where there are two different claimed substances, Ab1 and Ab2, and each has multiple dates of inclusion in the ARTG of goods that contain, or consist of, the substance, then, for each of Ab1 and Ab2, the earliest date of inclusion is identified and then the earliest of these earliest dates is used to determine the length of the extension.
177 The delegate went on to observe (at [23]):
It was the patentee's position that, even if the requirements of section 70 may have been satisfied at an earlier point in time in relation to another substance owned by a 3rd party, an application for an extension of term could be made by the patentee at a later point in time on the basis of another pharmaceutical substance satisfying the requirements of section 70 which had been developed by the patentee. To conclude otherwise, in the patentee's opinion, would be a result that was manifestly absurd or unreasonable. The patentee submitted that it was only logical, given that the regime is beneficial and remedial, that it can only be about rewarding patentees for their work (and, by implication not the work of others) …
178 That remains the applicants' position.
179 Second, I posed the question to Mr Caine QC as to why the legislature in ss 70 and 71 had not seen fit to explicitly refer to the patentee's goods rather than to leave it implicit. The first response was to flip the question back on me as to why the legislature had not made explicit reference to a competitor's goods, if that was what was intended; after all, such an inclusion was an unusual feature to say the least if that was what was intended. The second response was a resort to history and the now superseded petitioning process where an extension could be sought based principally on inadequate remuneration concerning the patentee's product and a public benefit in working the preferred embodiment. Now the extension of term statutory regime was designed to be cheaper and more efficient including by making regulatory delay a proxy for inadequate remuneration. But nevertheless, so it was said, that regime was informed by that historical foundation, which had little to do with a competitor's products. At the end of the day, no completely satisfying answer was given.
180 Third, there was some discussion before me concerning the role and need for a "sponsor" in relation to therapeutic goods under the Therapeutic Goods Act 1989 (Cth). I must say that this discussion did little to illuminate the construction issues that I needed to decide.
181 Finally, the Commissioner contended that the extension of term regime is generally restricted to new and inventive substances. But the OPDIVO application does not offend that proposition. Pembrolizumab is marketed under the name KEYTRUDA by Merck Sharp. Pembrolizumab and nivolumab are not the same. Each of them is a separate and distinct monoclonal antibody. The fact that both pembrolizumab and nivolumab are in substance disclosed in the complete specification of the patent and fall within the scope of claim 3 does not mean that nivolumab is not new and inventive.