08 November 2014

High Court Majority Upholds LEXAPRO Patent Time Extension

On 5 November 2014, the High Court of Australia handed down its decision confirming (by a three-to-two majority) that it is possible to obtain an extension of time within which to apply for an extension of the term of a patent relating to a pharmaceutical substance, so long as the extension application is filed prior to expiry of the patent: Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42.

This decision is an important milestone in a long-running saga relating to the antidepressant drug escitalopram, originally marketed in Australia as LEXAPRO, and covered (at least until 13 June 2009) by Australian patent no. 623,144.  The patent is owned by H Lundbeck A/S, which had applied to extend the term of the patent to 9 December 2012, as compensation for delays in obtaining regulatory approval to market LEXAPRO in Australia.  But, for reasons that I explained in an earlier article on the case, Lundbeck required an extension of time to allow its application for an extension of term to be considered, because it was filed about ten years too late!

The issue before the High Court was whether, under the relevant provisions of the Patents Act 1990 and the Patents Regulations 1991, the Commissioner of Patents has the power to extend the time for filing an application for an extension of term in any circumstances.  The Court’s answer to this is, in essence, ‘yes’ – if the application to extend the term of the patent, and the associated request for an extension of time, are filed prior to the patent’s expiry.

This does not, however, bring an end to the matter.  There is a separate question of whether it was appropriate, in the particular circumstances of this case, for the extension of term to be granted, which is still making its way through the appeals process.  Hot on the heels of the High Court’s ruling, a single judge of the Federal Court of Australia has handed the latest round in this part of the dispute to Lundbeck, dismissing an appeal from the Commissioner’s decision to allow the extension:
Alphapharm Pty Ltd v H Lundbeck A/S [2014] FCA 1185.

A great deal of money is at stake in all of this.  A number of generic pharmaceutical companies released their own escitalopram products following the original expiry date of the Lundbeck patent (a risky strategy, given that they were certainly aware of Lundbeck’s extension application by that time).  The patent itself has already been found valid and infringed by a Full Bench of the Federal Court of Australia (in H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70), and all avenues of appeal from that decision have been exhausted.  Thus if the term extension is ultimately upheld (as it has been at every turn so far), damages will be due to Lundbeck for infringement of the patent between 13 June 2009 and 9 December 2012.

General Extension of Time Provisions

Many deadlines for taking various actions are established under the Patents Act and Regulations.  The consequence of missing a deadline is, in a majority of cases, a loss of some right (e.g. the right to apply for a patent, the right to continue with examination of an application, the right to oppose a grant to another party, the right to maintain a patent – or the right to apply for an extension of term of a pharmaceutical patent).

For the most part, however, section 223 of the Act permits these deadlines to be extended, in appropriate circumstances, such as when the failure to complete an action in time was inadvertent and/or beyond the control of the persons concerned.

There are, however, a number of specific exceptions to the provisions of section 223, identified as ‘prescribed acts’ – so-called, because they are prescribed in the Regulations.

Origins of the Dispute – Legislative Ambiguity

The dispute between Lundbeck and Alphapharm (and other generic manufacturers, which did not join in the High Court appeal) arose as a result of somewhat ambiguous language in the Act and Regulations.

The problems stemmed firstly from the fact that there are two distinct conditions that must be satisfied in order for a patentee to request an extension of term.  Section 71(2) states that:

An application for an extension of the term of a standard patent must be made during the term of the patent and within 6 months after the latest of the following dates:
(a)  the date the patent was granted;
(b)  the date of commencement of the first inclusion in the Australian Register of Therapeutic Goods of goods that contain, or consist of, [the patented pharmaceutical substance];
(c)  the date of commencement of this section [i.e. 26 January 1999].

So the two distinct requirements are:
  1. the application for extension of term must be filed before the patent expires (i.e. ‘during the term of the patent’); and
  2. the application for extension of term must be filed no later than six months after the date upon which all three of the requirements (a), (b) and (c) are satisfied.
However, according to regulation 22.11(4), the following is a ‘prescribed act’, to which section 223 does not apply:

(b) filing, during the term of a standard patent under subsection 71(2) of the Act, an application under subsection 70(1) of the Act for an extension of the term of the patent

Everybody agreed that this prohibits an extension of time once the patent has expired.  However, Alphapharm and Lundbeck disagreed as to whether this regulation also bars an extension of time if the patent has not yet expired, but the six-month deadline established by section 71(a) , (b) and (c) has passed.

Part of the problem with the language of the regulation stems from the fact that section 223 is expressed in terms of ‘acts’ to be completed, rather than the corresponding deadlines.  Filing an application for an extension of term is the same ‘act’, regardless of which deadline the applicant is required to meet.

The Majority Reasoning – Extension Available

The majority in the High Court (Crennan, Bell and Gageler JJ) took what might be regarded as a ‘common sense’ approach, in order to interpret the regulation according to its ‘plain English’ meaning.  Specifically, the Court focussed on the time requirements, rather than the nature of the act itself, stating (at [62]):

Time is critical to ss 223(2)(a) and 71(2) and reg 22.11(4)(b). The critical expression in the regulation is ‘during the term of a standard patent’, which must be construed in its immediate context in accordance with the principles expressed by this Court …. The part only of the parenthesis upon which Alphapharm relies so heavily merely identifies the statutory source of the critical time requirement. The text, syntax and immediate context of reg 22.11(4)(b) show that the natural and ordinary meaning of the ‘prescribed action’ identified is the ‘filing (or making) of a s 70(1) application during the term of the standard patent’ (that is, before the term of the patent has expired).

Historical and Policy Factors

The majority also found support for its interpretation in the legislative history, and relevant policy considerations.  There had been provisions in the various Australian Patents Acts since 1903 for extending the term of a patent on general grounds of ‘inadequate remuneration’, the idea being that if there were some good reason why it had not been possible for a patentee to effectively exploit a patent during its normal term (then 16 years), an appropriate extension might be granted.

There had also always been mechanisms to extend deadlines in appropriate circumstances.  However, the courts had been reluctant to extend deadlines after expiry of a patent, given that this might result in ‘resurrection’ of a patent after the general public had good reason to believe that the invention was now freely available for use.

The current extension provisions are limited to patents covering pharmaceutical substances, and the general ‘inadequate remuneration’ requirement has been specifically defined in terms of lost revenue due to the time needed to obtain regulatory approval before marketing a new drug.

The High Court majority noted, however, that the same policy considerations continue to apply, such that if the process to extend the term of a patent has not at least commenced before the patent expires, the public is entitled to proceed on the basis that the invention is no longer protected (see, e.g., paragraph [68] of the decision).

The majority considered that the rationale for the second time limit is completely different, namely ‘requiring a patentee to decide about extending its monopoly as soon as the requisite conditions are aligned’ (at [70]).  While it is obviously desirable to establish certainty sooner rather than later (which is, to varying degrees, the object of most deadlines set within the patent system), section 223 is generally regarded as a remedial provision intended to capture those cases in which, for excusable reasons, a deadline has been missed.

Dissent – the Minority Judgment

The minority judges (Kiefel and Keane JJ) took what might be regarded as a more ‘literal’ approach to the language of the Act and Regulations, in agreeing with Alphapharm that there is no power, in any circumstances, to extend the time for filing an application for an extension of the term of a patent.  They stated (at [113]) that the ‘additional words’ in regulation 22.11(4)(b) (i.e. ‘during the term of a standard patent under subsection 71(2) of the Act’) ‘cannot alter the effect of the operative part of the regulation, which must identify the “relevant act” which is excepted from the operation of s 223(2).’  That is to say, the minority focussed on the ‘act’, rather than the time periods.

The minority was also less inclined to be swayed by extrinsic policy and historical considerations, noting (at [121]) that ‘legislative history and extrinsic materials cannot displace the meaning of statutory text’.

Conclusion – the Law is Settled

The fact that two judges of the High Court would have sided with Alphapharm does not alter the fact that a 3:2 majority of the Court determines the law in Australia just as surely as a unanimous decision.  The majority ruling could only now be displaced by a change to the Act or Regulations, which appears unlikely considering that the result is consistent with the apparent legislative intent, the position of the Patent Office, as well as the conclusions of an officer of the Administrative Appeals Tribunal, three judges of the Federal Court of Australia, and a further three judges of the High Court.

Lundbeck’s entitlement to an extension of time is therefore now confirmed.  As I noted above, the generic manufacturers, including Alphapharm, are continuing to fight the further decision of the Patent Office to grant the application for an extension of term on its merits, and have just lost their appeal to a single judge of the Federal Court.  They will now need to seek leave to appeal that decision to a full bench of the court, and it seems almost certain that they will do so.
My employer, Watermark – Intellectual Asset Management, represented Lundbeck in its application for an extension of term of the LEXAPRO patent, and provided evidence supporting its application for an extension of time.  The views expressed in this article are my own, and do not necessarily reflect those of Watermark or any of its other employees.  (Also see the 'About' page.)


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