28 January 2013

A ‘Common Design’ to Infringe

Bayer Pharma Aktiengesellschaft v Genentech, Inc. [2012] FCA 1467 (20 December 2012)

HandshakeThe Australian Federal Court has ruled that biotechnology company Genentech Inc can serve a claim of infringement of an Australian patent on Regeneron Pharmaceuticals Inc at the address of its New York headquarters.

Regeneron has no local presence in Australia, and is not itself directly engaging in any activities that would infringe Genentech’s Australian patent.  However, the court has found that Regeneron has engaged in a ‘common design’ with pharmaceutical company Bayer Pharma AG, and its Australian subsidiary Bayer Australia Limited, to undertake actions in Australia that would, on the face of it, infringe the patent.

Drawing a foreign company or individual with no local address into Australian litigation, while greatly simplified by the Hague Service Convention, nonetheless requires an application to the court, and a showing that a number of requirements are satisfied, as set out in Rules 10.42 and 10.43 of the Federal Court Rules.  The requirements include:
  1. that the court has jurisdiction in the matter;
  2. that the proceeding has a relevant connection to Australia (as set out in Rule 10.42); and
  3. that the applicant has a prima facie case for all or any of the relief claimed in the proceeding.
The first two of these requirements are clearly met – the Federal Court has jurisdiction over matters arising under the Patents Act 1990, and the proceeding relates to the alleged infringement of an Australian patent by activities occurring in Australia.

In this case, it is the third requirement which is of greatest interest, since Genentech does not contend that Regeneron is itself undertaking, or proposing to undertake, any infringing activities in Australia.  The principal allegation is against Bayer Australia Limited.  Regeneron’s alleged liability arises as a result of an agreement it has entered into with Bayer Pharma AG.

Background

Genentech is the proprietor of Australian innovation patent no. 2012100335 titled ‘Method for treating intraocular neovascular diseases’ (‘the patent’).

Bayer Pharma AG commenced proceedings against Genentech, seeking revocation of the patent.  Genentech has cross-claimed for infringement against Bayer Pharma, Bayer Australia and Regeneron.

The broadest claim of the patent defines a method for treating a degenerative eye disease known as ‘wet form age-related macular degeneration (AMD)’.  The method involves first administering intravitreally (i.e. injection into the eye) two or three first individual doses of a VEGF antagonist at one month intervals.  This then followed by intravitreal administration of a number of second individual doses of the VEGF antagonist, where the second individual doses are administered less frequently than the first individual doses, i.e. more than one month apart.  Additionally, the claim specifies that the VEGF antagonist is a protein that binds to VEGF.

Relevantly, a VEGF antagonist is defined in the patent specification as including ‘fusions proteins, e.g., VEGF-Trap (Regeneron)’.

Prior to the commencement of proceedings, Bayer Australia was preparing to launch a product called EYLEA. 

Given the early stage of the proceedings (i.e. prior to any discovery or formal evidence stages) the evidence available to the court was somewhat incomplete.  However, it was sufficient to indicate that Bayer HealthCare had entered into a collaboration with Regeneron for the global development and commercialisation, outside the USA, of a medicament for treatment of wet form AMD having an active pharmaceutical ingredient known as Aflibercept, which is a VEGF antagonist.  Bayer HealthCare had obtained approval from the Therapeutic Goods Administration (TGA) in Australia to market this medicament under the name EYLEA.

On the face of the available evidence, the court was able to infer that:
  1. Bayer Healthcare (a US company in the Bayer group) had entered into an agreement with Regeneron to develop a treatment for wet form AMD based on EYLEA/Aflibercept;
  2. Bayer Australia is the Australian vehicle by which Bayer Pharma and Regeneron seek to market and sell EYLEA in Australia;
  3. Bayer and Regeneron will share equally in the profits generated from EYLEA outside the USA;
  4. the Product Information associated with Bayer’s listing on the Australian Register of Therapeutic Goods (ARTG) directs that EYLEA be used to treat wet AMD by administering one intravitreal injection per month for three consecutive months, followed by one intravitreal injection every two months; and
  5. accordingly, supply of EYLEA prima facie infringes claim 1 of the patent under the provisions of section 117 of the Patents Act 1990.

A Common Design

Regeneron does not have a corporate presence in Australia.  It does not manufacture or supply Aflibercept in this country.  It did not apply for, nor does it have, a registration of Aflibercept on the ARTG.  It does not provide direction in Australia for the use of EYLEA/Aflibercept in the treatment of wet form AMD.  All of these activities are the responsibility of Bayer Pharma, Bayer HeathCare and/or Bayer Australia.

In short, there is nothing that Regeneron does directly that would infringe an Australian patent.  It does, however, benefit from a 50% share in the profits of these activities.

In Australia, as in the UK and (presumably) other common law countries, there are legal principles that may capture this type of circumstance, even in the absence of any specific legislated category of infringement.  As the court explained (at [27]):

A person may be a joint tortfeasor [i.e. a person who commits a civil wrong] in another’s infringement of a patent. The agreement which is the basis of a common design to infringe in Australia can take place overseas. Genentech draws particular attention to the decision of Graham J in Morton-Norwich Products Inc v Intercen Limited [1978] RPC 501 at 514–515. His Honour recited the activities of the Dutch company and the English company and concluded that there was a ‘concerted design’ to sell the product in question in England. His Honour held that if there is a concerted design to sell goods which in fact infringe the English patent, then the parties who have such design and do so sell are in fact joint tortfeasors and both infringe the patent. His Honour continued to say that provided that the tort is committed in the United Kingdom and there is a common design, it is not relevant that the agreement was made within or outside the jurisdiction.

In other words, two parties (or more) will be jointly liable for infringement if they act with one another in an enterprise pursuant to a common design in the course of which the infringement occurs.

While Bayer and Regeneron have not, at this stage of the proceedings, had the opportunity to present their own evidence, or to defend the allegations of infringement (either jointly, or individually), the court found the available evidence sufficient to establish a prima facie case of joint infringement, such that Genentech should be permitted to serve its claim of infringement on Regeneron in New York.  As the court noted (at [35]) the threshold for establishing a prima facie case in these circumstances is not particularly onerous.

Authorisation – an Alternative Theory

Genentech also put forward an alternative basis for infringement of the patent by Regeneron.  Section 13(1) of the Patents Act 1990 provides that:

a patent gives the patentee the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention.

Genentech argued that Bayer Australia would infringe claim 2 of the patent by importing, promoting and selling EYLEA in Australia, and that Regeneron authorised that infringement.

It is not apparent whether Genentech would be able to establish a prima facie case of authorisation.  The precise relationship between the various Bayer companies does not appear to have been clear from the available evidence, and the question of who may have ‘authorised’ whom to do what may be impossible to answer, even at a relatively low threshold level.

In the event, the court found it unnecessary to decide the issue of authorisation, in view of its finding on joint tortfeasorship.

Conclusion

It is not possible to avoid potential liability for patent infringement in Australia merely by reaching an agreement with a partner organisation whereby the partner will be responsible for handling all of the matters ‘on the ground’.  This is no less true when one or both of the partner organisations are located overseas.

If two entities enter into a ‘common design’ to do something which infringes a patent, they can be held jointly liable.  The significance of this, in the present case, is that if Genentech’s patent is ultimately found to be valid and infringed, both Bayer and Regeneron may be ordered to pay damages to Genetech, and may both be subject to injunctions barring them from further infringing activity, either individually or jointly.

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