Vale Innovation Patent – Australian Government Responds to Productivity Commission IP Report

The Australian Government has issued its response to the Productivity Commission’s final report on its Inquiry into Australia’s Intellectual Property Arrangements, indicating its support for a number of the Commission’s recommendations.  In the area of patents in particular, the Government intends to implement recommendations to further amend the law in relation to inventive step, introduce an ‘objects clause’ into the Patents Act 1990 and ‘phase out’ (i.e. abolish) Australia’s contentious second-tier right, the innovation patent.  It has also indicated its support for a proposal that ‘IP Australia should reform its patent filing processes to require applicants to identify the technical features of the invention in the set of claims’, although it is unclear at this stage exactly what form the implementation of the recommendation will take.

The Government has largely rejected recommendations of the Productivity Commission to set patent fees to promote broader intellectual property policy objectives (as opposed to the current objective of recovering the costs of running the Patent Office), and to restrict the availability of extensions of term for patents relating to pharmaceutical products.  It has, however, indicated support ‘in principle’ for the introduction of a system for transparent reporting and monitoring of settlements between originator and generic pharmaceutical companies to detect potential ‘pay for delay’ agreements, modelled on the US system.

As I will discuss further in this article, the demise of the innovation patent has been on the cards for some time, and is now all but inevitable.  Adding an objects clause to the Patents Act may be little more than window-dressing.  Much will depend on how it is worded (and the Productivity Commission’s proposal will not be popular), and then how much weight it is given by the courts (which might, I would suggest, be very little).  Further enhancing the inventive step standard, which the Productivity Commission has suggested should be based upon the European model, is not hugely controversial, in my opinion. 

As I shall endeavour to explain, however, if there is to be a fight over any of the proposed reforms it is most likely to be over the requirement to identify ‘technical features’ in patent claims.  In combination with raising the inventive step standard to the highest possible level, I believe that this recommendation reflects the Productivity Commission’s general antipathy to the idea that the patent system provides any net economic benefit to Australia, and its belief that patents should therefore be as difficult to obtain as is practicable.  But the potential consequences of a new, and unique, requirement for Australian patent claims could be far-reaching, and detrimental to Australian innovators.

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Tags: Australia, Innovation patent, Innovation policy, Law reform, Patent law, Public policy, Reviews

Extensions of Term for ‘Swiss-Style’ Claims Involving Recombinant DNA Technology? Federal Court Says ‘No’!

A Full Bench of three judges of the Federal Court of Australia has overturned an earlier decision of the Administrative Appeals Tribunal, and has ruled that extensions of patent term are not available for second and subsequent medical uses of pharmaceutical substances that are produced by recombinant DNA technology: Commissioner of Patents v AbbVie Biotechnology Ltd [2017] FCAFC 129 (AbbVie).  In particular, the court found that so-called ‘Swiss-style’ claims are not directed to pharmaceutical substances, and therefore cannot be the subject of a term extension, even if they involve the use of pharmaceutical substances that have been ‘produced by a process that involves the use of recombinant DNA technology’ (to use the terminology of section 70(2)(b) of the Patents Act 1990).

In Australia, the normal maximum term of a patent, i.e. 20 years from its original filing date, can be extended by up to five years in the case of certain pharmaceutical products, to compensate for the time that is typically required to complete trials and obtain the regulatory approvals necessary to actually commence marketing of a commercial drug.  Generally, extensions are available only for patents covering the pharmaceutical substances themselves – patents on methods of making or using the substances are not extendible (section 70(2)(a)).  The one exception to this rule relates to the use of recombinant DNA technology in the production of a pharmaceutical substance (section 70(2)(b)).

The term ‘recombinant DNA’ (rDNA) refers to a process of bringing together genetic material from multiple sources to create gene sequences that are not present in nature.  One well-established medical application of rDNA technology is the production of human insulin for the treatment of diabetes.  By inserting the human insulin gene into a bacterium (such as E. coli) or yeast, the resulting organism becomes a biological insulin factory.  Insulin produced in this way has almost completely replaced the use of insulin from animal sources, such as pigs and cattle. 

The Australian extension of term provisions implement a policy under which even though a pharmaceutical substance (such as insulin) may already be known, a patent directed to the (known) substance when made by a new process involving the use of rDNA technology can nonetheless be awarded an extension of term.  This provides an additional patent incentive for companies to invest in research and development of recombinant techniques for production of medications.

AbbVie Biotechnology Ltd (‘AbbVie’) owns a number of Australian patents relating to a pharmaceutical substance known as adalimumab, marketed under the name HUMIRA, which is produced by a process of rDNA technology.  The drug was originally approved in Australia in 2003, for treatment of rheumatoid arthritis.  It was subsequently demonstrated to be effective for the treatment of rheumatoid spondylitis, Crohn’s disease and ulcerative colitis, and was approved for use in treating these further conditions in 2006, 2007 and 2013, respectively.  AbbVie has patents covering these further medical uses of HUMIRA, each of which includes ‘Swiss-style’ claims.

AbbVie applied to the Australian Patent Office to extend the terms of its three further medical use patents, however a Deputy Commissioner of Patents determined that they were not eligible for extensions of term under section 70(2)(b).  AbbVie appealed to the Administrative Appeals Tribunal of Australia (‘Tribunal’), which reversed this aspect of the Deputy Commissioner’s findings, deciding that Swiss-style claims can form the basis for an extension of patent term.  Nonetheless, AbbVie’s applications for extension of term were still rejected, because the Tribunal agreed with the Deputy Commissioner that they had not been filed within the applicable time limits.

The Commissioner of Patents appealed the Tribunal’s findings in relation to the eligibility of Swiss-style claims to the Federal Court, which has allowed the appeal, and affirmed the Deputy Commissioner’s original decision.  This does not surprise me greatly – when I wrote about the Tribunal’s decision last year, I said that I believed it to be wrong, and that I thought it quite likely that the Commissioner would appeal.

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Tags: Australia, Extension of patent term, Genetic technology, Pharmaceuticals, Public policy

Principles of Patent-Eligibility Continue to Trouble Applicants and Examiners in Australia

The law in Australia regarding patent-eligibility of computer-implemented inventions was supposedly ‘settled’ in May 2016, when the High Court rejected an application for special leave to appeal against a decision of the Full Bench of the Federal Court of Australia, thus leaving Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 and Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 as – for the moment, at least – the last word on the subject.  Yet, clearly, patent applicants and the Australian Patent Office continue to disagree on what, exactly, these decisions mean in particular cases.  In July 2017 alone, there were four decisions issued by the Patent Office resulting from hearings relating to objections against alleged computer-implemented inventions on grounds that each was not for a ‘manner of manufacture’, i.e. patent-eligible subject-matter under Australian law.

In Todd Martin [2017] APO 33, claims directed to a system and method for tracking usage of athletic equipment of an athlete using a GPS-enabled device and a computer server were refused.  In Rokt Pte Ltd [2017] APO 34 claims directed to a computer implemented method for linking a computer user to an advertising message by way of an intermediate engagement offer were refused, following the applicant’s efforts to amend in view of an earlier decision in Rokt Pte Ltd [2016] APO 66.  The claims at issue, and which were also refused, in Discovery Life Limited [2017] APO 36 were directed to a computer implemented method for of managing a life insurance policy with a related medical scheme.  Finally, in Bio-Rad Laboratories, Inc. [2017] APO 38, an examiner’s objections against claims directed to a method of establishing a statistically valid assay mean and assay range for a particular lot of a quality control material were upheld by the Hearing Officer, although Bio-Rad has been provided with an opportunity to amend its application to try to overcome the objections.

I am not particularly surprised by the outcomes in Todd Martin, Rokt, or Discovery Life.  This is not to say that they are necessarily correct – I have not spent the time to review the patent specifications in the detail that would be necessary to form a considered view on the matter.  However, on its face each of the three decisions is consistent with the principles set out in Research Affiliates and RPL Central, i.e. the claims appear to recite the use of generic computer technology as a practical implementation tool, and if this generic technology is disregarded, what is left is a scheme, abstract idea, or business process of the kind that has not generally been regarded as patent-eligible.  The Full Court in RPL Central was very clear about the treatment of such cases: ‘Where the claimed invention is to a computerised business method, the invention must lie in that computerisation. It is not a patentable invention simply to “put” a business method “into” a computer to implement the business method using the computer for its well- known and understood functions’ (at [96]).

Bio-Rad, however, is a different matter.  While the invention in this case involves the development and use of a new statistical analysis procedure, which is conveniently implemented by using a computer for its well-known and understood ability to store information, and to perform computations more rapidly and accurately than a human calculator, it is not apparent that disregarding the computer-implementation leaves only patent-ineligible subject matter.  On the contrary, regardless of how the invention is implemented – and even if it were carried out by a person using a pen and paper for calculation – it would still provide significant economic and technical advantages in terms of reduced cost and resource consumption/wastage in the production of quality control material for use in medical testing.

This is not to say that there are no issues with Bio-Rad’s claims – it is certainly arguable that they are overly broad, and encompass subject matter that does not provide the stated advantages of the invention.  However, these are not conventionally eligibility issues, and it is therefore not clear how or why patent-eligibility came to be the central question in the Bio-Rad case.  This suggests to me that the Patent Office is continuing to grapple with the principles of patent-eligibility set out in Research Affiliates, RPL Central, and D’Arcy v Myriad Genetics Inc [2015] HCA 35, and that applicants therefore still cannot expect predictable or consistent outcomes as examiners endeavour to apply these principles on a case-by-case basis.

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Tags: Australia, Business processes, Computer programs, Patent Office, Patentable subject matter

The Meteoric Rise and Spectacular Fall of Damages for Unjustified Threats of Patent Infringement

On 19 August 2016, a single judge of the Federal Court of Australia issued a ruling awarding damages of A$1,506,859 against the Australian Mud Company Pty Ltd for making unjustified threats of patent infringement proceedings against Coretell Pty Ltd: Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 7) [2016] FCA 991.  Less than a year later, however, a different judge has ‘reluctantly’ dismissed a claim for damages allegedly arising from threats of infringement proceedings made to the public at large via a trade publication: Mizzi Family Holdings Pty Ltd v Morellini (No 3) [2017] FCA 870.  This follows a decision in March of this year, by a Full Bench of the Federal Court on appeal, overturning the Australian Mud damages award.

I first wrote about the Mizzi Family Holdings litigation back in January 2014, following the initial findings in December 2013 of a single judge of the Federal Court that the respondent, Daryl Morellini, had not infringed an innovation patent for a ‘cane billet planter’ owned by Mizzi, and that all prior threats of infringement proceedings were therefore unjustified.

The first relevant threat in the Mizzi case had not been made directly to Morellini, but rather had been directed to the cane growing industry more generally through the combination of an advertisement and an article that appeared in the Canegrowers Magazine of 5 April 2010.  The advertisement had been placed by Mizzi, and included a notice of its patent application.  The article was authored by one Mr Terry Hurlock of Invention Pathways Pty Ltd, who had worked in conjunction with Mizzi’s patent attorneys, and was entitled ‘Infringement Danger’.  This juxtaposition of the advertisement identifying the patent application with the article warning about the potential consequences of infringement was found by the court to constitute ‘unjustifiable threats’, in the circumstance that the patent was not actually infringed.  A second threat was said to have been made in June 2011, after another cane grower, one Mr Girgenti, used Morellini’s planter, and Mizzi made a verbal allegation of infringement and demanded the payment of a royalty.

The initial decision in the Mizzi case was followed by a second judgment of the primary judge, on questions of costs and declaratory relief in relation to the unjustified threats (Mizzi Family Holdings Pty Ltd v Morellini (No 2) [2014] FCA 807), an appeal to a Full Bench of the Federal Court, decided in February 2016 (Morellini v Mizzi Family Holdings Pty Ltd [2016] FCAFC 13), and now the most recent decision on damages related to the threats.  Through all of this, the fundamental original finding of the primary judge – that the patent was not infringed – has remained undisturbed.

The major difficulty for Morellini in demonstrating damage was the requirement, emphasised by the Full Court in Australian Mud, to establish causation between the threats themselves and the damages claimed.  The court found (at [20]) that:

There is no direct evidence that anybody declined to deal with Mr Morellini as a result of the threats. It seems that even before the newspaper article on 5 April 2010, there was a degree of reluctance concerning any such dealings. That reluctance cannot have been attributable to the threats. Mr Morellini has not demonstrated that any adverse effect resulted from either of the threats. The newspaper article may well have been widely read within the sugar industry, but there is no reason to believe that the incident involving Mr Girgenti was a matter of common knowledge. Some people in the industry may have heard of it. In either case such knowledge may have reinforced previous perceptions, but that is largely speculative.

As we shall see, unjustified threats provisions were originally enacted to curb anticompetitive, abusive, coercive, or extortionate use of the patent system.  Yet here in Australia we have two recent cases of patentees acting apparently from a good-faith belief that their patents were valid and infringed, and with an arguable case to this effect at first instance and on appeal before a Full Court, in which the prosecution of unjustified threats claims clearly resulted in proceedings becoming significantly more protracted, complex, and costly, than they might otherwise have been.  For a brief period, we hit a high water mark for unjustified threats with a judge awarding over one and a half million dollars in damages, before this was sensibly and firmly reversed on appeal.  Ultimately, neither accused infringer received any award of damages.

How and why did this happen?  What is wrong with the Australian law in relation to unjustified threats that a Federal Court judge could make an astronomical seven-figure award of damages, when the correct sum was zero?  Or that the parties in long-running infringement proceedings would devote such resources to an argument that ultimately brought no benefit to any of them, under provisions that were not originally intended to apply in such circumstances?  And what can be done to fix this situation?

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Tags: Australia, Damages, Law reform, Unjustified threats