10 December 2017

Pfizer Appeal Success Opens Door for Patent Litigation Over ENBREL Biosimilar

DiscoveryBack in March, I reported on a decision of Justice Stephen Burley denying Pfizer an order for preliminary discovery to confirm its belief that Samsung Bioepis AU (‘SBA’) was infringing a patent covering methods of producing Pfizer’s biological medicine for treatment of autoimmune diseases marketed under the name ENBREL.  At the time, I noted that the decision appeared to create a substantial barrier to enforcing patents relating to methods of producing biologics, since the very characteristics that make biosimilarity difficult to quantify – i.e. that similar physicochemical, biological, immunological, efficacy and safety characteristics may be observed despite variations in the structure of the complex biologic molecules – were what prevented Pfizer from convincing the court that it had a sufficient belief that infringement was occurring.  I therefore indicated that I would not be at all surprised to see the decision appealed.

Pfizer did indeed appeal, and a Full Bench of the Federal Court of Australia has now handed down its decision, with three judges unanimous in overturning Justice Burley’s decision and granting Pfizer preliminary discovery: Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd [2017] FCAFC 193.

The key to Pfizer’s successful appeal lies in the wording of Rule 7.23(1)(a) of the Federal Court Rules, which relates to a precondition for an order for preliminary discovery that ‘the prospective applicant … reasonably believes that the prospective applicant may have the right to obtain relief in the Court from a prospective respondent’ (emphasis added).  The primary judge had determined that evidence provided by an expert witness on behalf of Pfizer did not provide a reasonable basis for its belief that SBA was infringing the Pfizer patents, but rather amounted to ‘mere suspicion’.  On appeal, the Full Court shifted focus away from evaluating the factual correctness, or otherwise, of expert evidence (which was, inevitably, in dispute between the parties), and back to the language of the Rule.

Thus, as Chief Justice Allsop stated (at paragraph [81] of the Full Court decision), ‘[i]t was not a matter of which body of expert evidence to prefer; rather, it was whether Pfizer reasonably believed that it may have a right to relief.’  Or, as Justice Perram observed (at paragraph [134]), ‘[t]he question was not whether [SBA’s expert] Professor Gray was right and Dr Ibarra was wrong. The question was whether the belief held by Mr Silvestri, the Assistant General Counsel and directing mind of Pfizer, was reasonable’.  Both judges also criticised a tendency for applications for preliminary discovery to mutate into ‘mini-trials’, in which a form of fact-finding takes place due to a ‘perceived need to show the reasonableness of a belief that a right to relief exists rather than might exist’ (at [119]).

This decision should provide comfort to patentees of biological processes, and indeed of manufacturing and other ‘hidden’ processes more generally.  It confirms that what a prospective applicant needs to prove in order to be granted preliminary discovery is not a likelihood that infringement is actually occurring, but only that there is some reasonable basis for its subjective belief that infringement may be occurring.  This should not only make preliminary discovery easier to obtain, but also ensure that applications for preliminary discovery do not continue to turn into costly and time-consuming mini-trials.

04 December 2017

New USPTO Data Set Reveals Extent of Patent-Eligibility Confusion and Carnage

Circle of ConfusionA new research dataset released by the US Patent and Trademark Office (USPTO) reveals that since the Supreme Court of the United States (SCOTUS) issued its 2010 ruling in Bilski v Kappos, the rate at which US patent applications are rejected on subject-matter grounds (as compared with other grounds of rejection) has increased from 8% to 13%.  (A hat-tip, by the way, to Dennis Crouch at the Patently-O blog for bringing this new dataset to my attention, and using it to compare rates of anticipation and obviousness rejections over the period covered by the data.)

As interested followers of patent-eligibility (you know who you are) will be aware, during this period the Supreme Court has issued four opinions restricting the scope of patentable subject matter: Bilski v Kappos 130 S.Ct. 3218 (2010), relating to ‘pure’ business methods; Mayo v Prometheus 132 S.Ct. 1289 (2012), relating to diagnostic methods; AMP v Myriad 133 S.Ct. 2107 (2013), relating to isolated genetic materials; and Alice v CLS Bank 134 S.Ct. 2347 (2014), relating to computer-implemented business methods.  Each of these decisions resulted, at least initially, in an increase in subject-matter rejections by the USPTO in the corresponding fields of endeavour.  And while there have been subsequent declines in the rates of Bilski- and Myriad-based rejections, the signs are that rates of rejection based on Mayo and Alice are at least steady, and possibly increasing.

Notably, updates to USPTO examination guidance on subject matter eligibility in July 2015 and May 2016, which were regarded by many as providing much-needed clarification expected to reduce the rates of rejection, do not appear to have had any impact on overall subject-matter rejection rates, or on the rates in the specific fields most affected by Bilski, Alice, Myriad, and Mayo.

Overall, the SCOTUS impact since 2010 appears to have been an increase in the relative number of patent-ineligible inventions for which applications are filed at the USPTO, averaged across all fields of endeavour, of around 60%!  Another, more pragmatic, way of looking at the data is to say that for every 100 applications filed, around five (i.e. one in 20) will now be rejected on subject-matter grounds, that would not have been rejected prior to June 2010.  Of course, the retrospective effect of the Court’s determinations on eligibility means that patents previously granted are not saved by preceding the recent decisions, which is why there has also been carnage in the US Federal Courts.

This all creates additional uncertainty around the availability and value of patents in affected technology areas, to the detriment of investors, innovators, and the patent system itself.

03 December 2017

When Does Importation of Refurbished and Refilled Printer Ink Cartridges Infringe a Patent?

PrinterIf you have purchased a consumer-grade printer at any time during the past decade or so, then you will be well aware that the manufacturers of these products have mostly adopted the so-called ‘razor-and-blades’ business model.  According to this model, an initial item – such as an inkjet printer – is sold at a low price (possibly below cost) in order to increase subsequent sales of consumable supplies – i.e. ink cartridges.  Unsurprisingly, an entire industry has evolved to supply cheaper ‘generic’ versions of these consumables, either by manufacturing copies or, more commonly, by refurbishing and refilling used cartridges.  Printer manufacturers, in their turn, have developed a range of strategies in an effort to thwart generic competition and maintain an effective monopoly on the sale of consumables.

For example, some of the measures employed by original equipment manufacturers (OEMs) are physical, such as forming uniquely-patterned structures (‘interface patterns’) on the exterior of ink cartridges so that they can only be installed into the specific printer models for which they are intended.  Other strategies involve more sophisticated technological measures, such as configuring memory chips installed in the ink cartridges – which perform a legitimate function in monitoring ink usage and level to prevent damage to print heads that results from operating the printer with an empty cartridge – to frustrate efforts to reset the memory contents.  If the memory chips cannot be reset or reproduced by a generic supplier, then even a refilled cartridge will fail to function with a printer that interrogates the memory and finds an indication that it is empty.

Intellectual property rights also play a role in the ongoing struggle between OEMs and generic suppliers.  In some jurisdictions (though not, it must be said, Australia) registered design rights can be used to protect the physical appearance of cartridges – including ostensibly functional interface patterns – and thus prevent the manufacture and sale of copies.  Functional improvements in cartridge technology can also be protected by patents, again enabling the sale of copies to be restrained through infringement actions.

However, refurbishing and refilling of cartridges represents a grey area for IP laws.  The default legal position is that once a product (which the common law would class as a ‘chattel’) has been sold, the purchaser becomes the owner, and is free to deal with it as he or she wishes, including reselling, donating, or disposing of it, whereby any subsequent owner may enjoy the same rights of possession.  This raises the question of whether there can be infringement of an IP right, such as a patent, when instead of making and selling a copycat product, a competitor legally acquires spent ink cartridges and restores them to (roughly) their original condition for resale?  The answer – as I am sure any lawyer will tell you – is ‘it depends’.

A decision issued by Justice Burley in the Federal Court of Australia addresses a particularly interesting variation on this theme.  Seiko Epson Corporation v Calidad Pty Ltd [2017] FCA 1403 concerns the collection, refurbishment, and refilling of ink cartridges for Epson-branded printers outside Australian jurisdiction, and subsequent importation and sale of the refilled cartridges by Calidad.  While the case covers a range of issues, including trade mark infringement, trade practices and contract law, the most substantial aspect of the decision – and the one of greatest interest to this blog, of course – is whether or not importing and selling the refurbished cartridges constitutes infringement of Seiko’s Australian patents covering certain features of its cartridges.

The short answer, according to Burley J, is ‘it depends’!  In particular, it depends upon exactly what is done in the course of refurbishment, and whether this results in the product being ‘materially altered’, insofar as it is ‘an embodiment of the invention as claimed.’  If you want to know what that means, and how his Honour arrived at this unique conclusion, read on.

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