06 December 2015

Patents and the Trans-Pacific Partnership Agreement, Part 2

Peaceful OceanIn addition to provisions relating to the scope of available patent rights and general procedures, which I wrote about in the first part of this series, the Trans-Pacific Partnership (TPP) Agreement prescribes certain minimum standards for terms of protection – including extensions or adjustments to patent term in certain circumstances.  These provisions apply particularly to regulated products, including  pharmaceuticals and biologics (a.k.a biopharmaceuticals).

In this article I will look at three specific aspects of the TPP:
  1. the obligation to provide for adjustment of the patent term to compensate for ‘unreasonable delays’ in the grant of a patent, about which I expect Australia to do nothing;
  2. the obligation to provide for extensions of the term of patents relating to pharmaceutical products as compensation for time lost in obtaining regulatory approval, about which I do not believe Australia needs to do anything; and
  3. the obligation to provide an effective period of at least eight years of data exclusivity, and/or other protection for biologics, in respect of which I think Australia has a real problem following the High Court’s decision in D'Arcy v Myriad Genetics Inc [2015] HCA 35.
To make matters more interesting, on 3 December 2015, the US Industry Trade Advisory Committee on Intellectual Property Rights (ITAC-15) released its report on the IP provisions in the TPP [PDF, 198kB].  The report has been prepared pursuant to a statutory requirement that ‘advisory committees provide the President, the U.S. Trade Representative, and Congress with reports not later than 30 days after the President notifies Congress of his intent to enter into an agreement.’  The Committee is generally positive about the patent-related provisions, however it is not without its criticisms and concerns about those relating to pharmaceutical term extensions and biologics.

‘Unreasonable Delay’ and Patent Term Adjustment

The TPP requires that:

If there are unreasonable delays in a Party’s issuance of patents, that Party shall provide the means to, and at the request of the patent owner shall, adjust the term of the patent to compensate for such delays

An ‘unreasonable delay’ is defined to include:

…a delay in the issuance of a patent of more than five years from the date of filing of the application in the territory of the Party, or three years after a request for examination of the application has been made, whichever is later.

This provision is clearly intended to compel TPP members to implement a system such as already exists in the US.  The US system of term adjustment was created to compensate for delays in the patent examination process that can eat away at the effective term of the patent.  It came into effect when the US patent term was changed from 17 years from the date of grant, to 20 years from effective filing date, in accordance with its obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  As such, the aim of the US approach is to provide a positive term adjustment (i.e. delay the patent expiry date) if grant of a patent is delayed by more than three years from filing (because 20 minus 17 is three, you see).

In practice, applicants are not entitled to any term adjustment on account of their own delays, e.g. in responding to Office Actions, and various other types of delays are treated differently depending on, well, all sorts of things.  The calculation of US patent term adjustment has become a decidedly arcane exercise which even the USPTO does not fully comprehend, as proven by the occasions on which appeals to the US Court of Appeals for the Federal Circuit by applicants against adjustment calculations force changes in the method of calculation (most recently, I believe, in the 2014 decision in Novartis v Lee).

It is likely that Australia will consider it unnecessary to enact any changes to legislation or regulations in view of the term adjustment obligations in the TPP.  There is a similar provision in the IP Chapter of the Australia-US Free Trade Agreement (AUSFTA), which has been in effect since 2004 and has not resulted in the implementation of any term adjustment mechanism.

However, the primary reason why the grant of an Australian patent might be delayed beyond the periods defined as ‘unreasonable’ in the TPP is pre-grant opposition.  The AUSFTA version of a term adjustment provision expressly excludes delays caused by the actions of third-party opponents, whereas the TPP does not.  While there is a reasonable argument to be made that opposition delays fall outside the term adjustment obligation, at least some members of the ITAC-15 do not subscribe to this view, with the Committee’s report stating that:

…certain members felt strongly that the committee should be in a position to provide expert guidance on the implementation of the TPP. For example, these members suggest that U.S. negotiators should work to discourage TPP Parties from adopting or maintaining systems that permit third parties to oppose the grant of a patent prior to its issuance, unless those Parties also provide for adjustments of patent term to compensate patent owners who have prevailed in such proceedings.

Personally, I do not expect to see Australia introduce any patent term adjustment system in implementing of the TPP.

Pharmaceutical Extensions of Patent Term

In relation to ‘conventional’ (i.e. so-called small-molecule) pharmaceuticals, the TPP requires each participant to ‘make available an adjustment of the patent term to compensate the patent owner for unreasonable curtailment of the effective patent term as a result of the marketing approval process’.

This requirement is unlikely to be contentious in Australia, which already has a compliant regime of patent term extensions and other protections to account for regulatory compliance costs and delays in bringing patented products of these kinds to market.  However, the fact that the other 11 TPP members will be required to provide similar extensions and protections – including New Zealand, which currently does not do so – should help to ensure that Australia is not disadvantaged in the region due to its comparative generosity to originating manufacturers at the expense of generic competitors.

Interestingly, the TPP does not provide any guidance on what constitutes ‘unreasonable curtailment’ of patent term, or suggest any particular mechanism for calculating and granting an extension of term.  The Australian system currently allows up to five years to be added to the term of a patent as compensation for a corresponding period of regulatory delay, although a review of the system – initiated by a previous government, and almost buried by the present one – concluded that it would be in Australia’s interests to reduce the maximum available extension.

For its part, the ITAC-15 has this to say about the lack of specific obligations in relation to extensions of term:

ITAC-15 urges U.S. negotiators to promote implementation of appropriate standards to govern patent term adjustment determinations, consistent with U.S. law and practice. … Such measures should be transparent, should provide reasonable procedural conditions, and should ensure that extensions are adequate to compensate patent owners for the loss of effective patent term that arises due to unreasonable delays caused by the requirement for regulatory review and approval of a product subject to the patent.

I note that the US system has the objective of providing most pharmaceutical patent owners with at least 14 years of effective protection, which is doubtless what ITAC-15 would be urging US negotiators to extract from the other TPP members.  Australia’s current systems aims for 15 years of effective protection.  New Zealand has long resisted providing any regulatory extensions at all, and can therefore be expected to resist doing anything more than the bare minimum acceptable to the US.

Data Exclusivity for Biologics

A key sticking point in the final stages of negotiation of the TPP was so-called ‘data exclusivity’ for biologics.  The developer of a new biologic generally has to provide a great deal of data from trials demonstrating that the product is sufficiently safe and effective before being granted regulatory approval for marketing to the public.  A ‘follow-on’ supplier, however, has an easier time, in that it can rely upon the original developer’s data so long as it is able to establish that its own product is ‘biosimilar’.

Data exclusivity refers to a period of time following initial regulatory approval before another manufacturer is permitted to apply for approval of a biosimilar based on the original producer's data.

The US currently provides a 12 year period of data exclusivity.  Australia provides five years, while some other countries provide eight years.  Of course, the US wanted the TPP to enshrine a minimum 12 year data exclusivity period.  In the end, it was unable to negotiate this outcome, and a compromise was reached on eight years.  Sort of.

Why ‘sort of’?  Well, there are two ways in which a TPP member can provide a minimum term of protection.  First, it may elect to provide at least eight years of data exclusivity.  However, in a compromise that I understand to have been strongly backed by Australia, there is an alternative option available, which is to ‘deliver a comparable outcome in the market’ by:
  1. providing at least five years of data exclusivity;
  2. providing market protection through ‘other measures’; and
  3. recognise that ‘market circumstances also contribute to effective market protection’.
Australia already meets the first of these requirements.

The Australian negotiators had good reason to believe that the second requirement was not a big issue when they were working on the TPP.  As Trade Minister Andrew Robb said on 6 October 2015, following conclusion of the TPP negotiations:

We have a very robust system; we’ve got five years of data protection.  We add to that perhaps the most robust and strongest patent system in the world, and we are providing the right balance between looking after biologics, but also making sure that the pharmaceutical companies don’t get a monopoly and push up prices too much.
So I said we have no need to change; the US have a problem with their system where the patent system is not doing what it does in Australia.  They had to change, but I said we don’t need to change.

The ‘problem’ Mr Robb was referring to was the 2013 decision of the US Supreme Court in Association for Molecular Pathology v. Myriad Genetics, Inc, in which the court struck out Myriad’s patent covering the BRCA gene mutation associated with a heightened risk of breast and ovarian cancer, potentially excluding a range of genetic technologies from being the subject of US patent protection.  A corresponding patent had been upheld by an expanded Full Bench of the Federal Court of Australia, allowing Mr Robb and the TPP negotiators to claim that patent protection for biologics is more ‘robust’ in Australia than in the US.

Then, on 7 October 2015, the High Court of Australia blew that argument out of the water, by unanimously declaring Myriad’s BRCA gene claims invalid.  So, the question is now: does Australia ‘need to change’?  And, if so, then how? 

We could simply provide eight years of data exclusivity, however I do not see the government backing away from its ‘tough talk’ on this issue.  It is clear that many among the Australia public were, and are, strongly opposed to any extension to data exclusivity.  The government could change the law in relation to patentable subject matter to overrule the High Court, although in the present political climate this is likely to be quite difficult.  We could look into what else might be encompassed by the rubbery term ‘other measures’.  For example, Australia might argue that its existing provisions for extending the term of patents encompassing pharmaceutical substances ‘when produced by a process that involves the use of recombinant DNA technology’ are sufficient to meet the requirement.

Or, Australia might simply endeavour to rely on the third requirement of recognising the contribution made by ‘market circumstances’ – whatever the heck that means!

Unsurprisingly, this aspect of the TPP is another which ‘certain members’ of ITAC-15 consider to be highly unsatisfactory.  There were, apparently, differing views among the Committee, but some members were concerned that:
  1. eight years of data exclusivity is insufficient; and
  2. that ‘the manner by which the TPP requires the Parties to provide this at least eight-year period of protection is not defined in objective or transparent terms in the Agreement’.
It is difficult to argue with that second point, whatever the merits of the first.  It will be interesting to see how this plays out.

Conclusion – What Needs to be Done?

To sum up the two articles on patents and the TPP, Australia will likely consider that it does not need to do very much – if anything – in order to meet its obligations.  Member countries, such as Australia, that already implement many of the TPP requirements, will benefit from the harmonisation of the laws of other members, particularly in relation to such measures as the provision of a 12-month grace period and pharmaceutical patent term extensions.

For me, the really big question is whether Australia meets its obligations in relation to data exclusivity for biologics, and whether this will again arise as a contentious issue as the Agreement is implemented.  My feeling is that we do not satisfy the ‘spirit’ of the obligation, assuming the objective is at least eight years of ‘effective’ exclusivity in all cases.  However, as the ITAC-15 has rightly pointed out, the language of the relevant provision of the TPP is so subjective and opaque that it is entirely possible that Australia may reasonably argue that we at least meet the ‘letter’ of the obligation.


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