Extension of term – appeal from grant of an application for an extension of time – whether extension available under Patents Regulations 1991 – whether misunderstanding of the law a relevant ‘error or omission’ – whether exercise of discretion justified
The Administrative Appeals Tribunal (AAT) has upheld a decision of the Australian Patent Office granting an extension of time of 121 months for pharmaceutical manufacturer H Lundbeck A/S to request an extension of term of its Australian patent no. 623,144, covering its antidepressant drug escitalopram, marketed in Australia as LEXAPRO.
In the absence of the requested extension of term, the LEXAPRO patent expired on 13 June 2009. With an extension of term – based upon the listing of the earlier drug CIPRAMIL on the Australian Register of Therapeutic Goods (ARTG) – the expiry date of the patent becomes 9 December 2012. Although this extended term will itself have expired before it can even be formally granted, a number of generic pharmaceutical manufacturers have been marketing their own escitalopram products throughout the intervening period, and may therefore be liable to pay damages to Lundbeck corresponding with these sales.
BACKGROUNDThis is just the latest decision in a long-running saga, about which we have written on a number of previous occasions. Initially, Lundbeck had extended the term of the LEXAPRO patent (until 13 June 2014) based upon the listing of LEXAPRO itself on the ARTG on 16 September 2003. However, a successful challenge to this extension of term reached the end of the line on 11 December 2009, when the High Court of Australia refused to grant Special Leave (see  HCATrans 324) to appeal a decision of the Full Court of the Federal Court of Australia handed down on 11 June 2009.
As we reported in Pharmaceutical Extensions and International Inequities, the Full Court had found the extension of term to be invalid, on the basis that LEXAPRO was not the first product to be listed on the ARTG containing escitalopram (the (+)- or S-enantiomer of citalopram), since CIPRAMIL – listed on 9 December 1997 – contains a racemic mixture of escitalopram and the corresponding (-)- or R-enantiomer.
At the same time, the Full Court found the claims of the LEXAPRO patent to be valid and infringed by the generic escitalopram products. Since the High Court refused to hear a further appeal of these aspects of the Full Court’s decision, this finding of validity and infringement stands. The final outcome of Lundbeck’s efforts to secure an extension of term of its patent is therefore of substantial commercial significance, due to the potential to claim damages in respect of around two-and-a-half years’ worth of generic sales.
Having finally established in December 2009 that the listing of LEXAPRO on the ARTG could not legitimately be used as a basis for extension of term of the LEXAPRO patent, Lundbeck had missed the opportunity to base a term extension on its CIPRAMIL listing. The deadline for applying for the extension of term was 27 July 1999 (an explanation of the date can be found in the AAT decision at paragraphs -). On 12 June 2009 – immediately following the judgment of the Full Court, and just one day prior to expiry of the LEXAPRO patent – Lundbeck filed an application for an extension of time of just over ten years to enable it to request an extension of the patent term based on the CIPRAMIL listing.
This raised two questions:
- Do the Australian Patents Act 1990 and Patents Regulations 1991 permit the grant of an extension of time to request an extension of term of a patent?
- If so, then do the circumstances in this case justify exercising the discretion to grant such an extension of over ten years?
With regard to the first question, the Commissioner’s Delegate hearing the matter determined that the general extension of time provisions in section 223 of the Patents Act are applicable, so long as the request is filed prior to the unextended expiry date of the patent.
On the second question, the Delegate found that the original deadline was missed due to an ‘error or omission’ on the part of the patentee, namely a genuine misunderstanding of the law, which was not resolved until at least the decision of the Full Federal Court on 11 June 2009.
Unsurprisingly, given the stakes involved, the generic manufacturers appealed the Patent Office decision to the AAT.
AAT DECISIONIn upholding the decision of the Delegate, the Tribunal found that:
- the power to extend the period within which to apply for an extension of term – so long as an application is made prior to expiry of the patent in question – is consistent with the plain language of the Patents Regulations, with the ‘remedial intent’ of the extension of time provisions in the Patents Act, and with the apparent legislative intent (at -);
- the misunderstanding of the law by Lundbeck – in a view which the evidence showed was widely-held throughout the patent profession – was a relevant ‘error or omission’ which would enliven the extension of time provisions (at -); and
- there was nothing in Lundbeck’s conduct throughout the relevant period, or any other relevant consideration, to justify a refusal to exercise the discretion to grant an extension of time (at -).
SHOULD LUNDBECK HAVE ACTED SOONER?One aspect of the matter which appears to have occupied a significant portion of the Tribunal’s decision-making is the question of whether Lundbeck had failed to act promptly to request an extension of time once the error or omission had been discovered. This was a potentially important issue, because undue delay is one reason for which the Tribunal could have determined that it was not appropriate to exercise its discretion to allow the extension of time.
The question arose because Lundbeck’s patent attorneys (Watermark – see disclaimer below) had suggested in correspondence as early as 14 July 2005 that it might be possible to request an extension of time to base a term extension on the CIPRAMIL listing. The letter is reproduced in full at paragraph  of the AAT decision, and relevantly states:
Reg. 22.11(4)(b) of the Patents Act 1990 appears to preclude seeking an extension of time to lodge an extension of term application. However, we have had advice previously from IP Australia (see letter dated 6 February 2001 attached) that an extension of term application can be subject of an application for an extension of time.
Thus, one immediate action we could take in defence of H Lundbeck’s position in this matter would be to file an belated application for an extension of time to lodge the extension of term application.
… Under the circumstances, we believe an error or omission could arguably be established, and taking this action would certainly complicate Alphapharm’s current intentions somewhat. Please advise if you wish us to elaborate further on this possibility.
… This advice is only preliminary and accordingly, if you require any further assistance, please do not hesitate to revert to us.
Clearly, Lundbeck declined to follow up on this preliminary advice.
After considering the totality of the evidence and Lundbeck’s conduct, the Tribunal determined (at -) that Lundbeck’s in-house attorney Mr Petersen:
… preferred to rely on his consultations with, and advice from, [Lundbeck’s solicitors in the parallel Federal Court proceedings] Corrs and also that he continued at all times to hold the firm belief that Lundbeck should await the final outcome of the Federal Court proceedings, which involved related questions as to the validity of the patent and the extension of term, before taking any further action. He considered that the determination of the patent claim in that Court would be determinative as to both the validity of the Lexapro patent and its extension. We accept that he continued to believe that Lundbeck was entitled to an extension of time based on the Lexapro registration, and the conduct of Lundbeck up to and subsequent to that time was consistent with such a firm belief and in accordance with the advice from Corrs.
In our view, the Watermark letters setting out preliminary views, comments and possible strategic suggestions do not support a conclusion that the conduct of Lundbeck was in any way unreasonable in not making an application for an extension of time at that point.
… Lundbeck acted consistently and reasonably and sought to maintain the 2014 date on the Register. The determination of the expiry date and the extension depended on the final outcome of the Court proceedings.
CONCLUSIONThe decision of the AAT is itself subject to an appeal to the Federal Court, which seems a probable eventuality given the significant sums of money at stake.
It is interesting that the Tribunal found that a deliberate decision not to act immediately on pertinent legal advice does not necessarily constitute unreasonable conduct, or lead to a finding of undue delay. In this case, the suggestions provided by Watermark were of a strategic nature and – although ultimately turning out to be somewhat prescient – did not represent a ‘mainstream’ view of the law at the time, according to other available evidence.
In general, however, this type of enquiry is strongly fact-based. There is, for example, a significant difference between choosing, for sound reasons, not to implement a suggested contingency strategy, and simply ignoring clear and strongly-supported legal advice. There are, no doubt, lessons in this decision for professional advisors, in relation to the way in which advice is presented, as well as for clients, in relation to the importance of carefully considering and weighing-up available information and advice in making critical decisions in the course of a dispute.