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.

The Law Relating to Preliminary Discovery

A convenient summary of the law relating to preliminary discovery applications in Australia is to be found at paragraphs [120]-[121] of the Full Court’s judgment (per Perram J):
  1. the prospective applicant must prove that it has a belief that it may (not does) have a right to relief;
  2. it must demonstrate that the belief is reasonable, either by reference to material known to the person holding the belief or by other material subsequently placed before the Court;
  3. a person deposing to the belief need not give evidence of the belief a second time to the extent that additional material is placed before the Court on the issue of the reasonableness of the belief;
  4. assessing whether the belief is reasonable requires asking whether a person apprised of all of the relevant material could reasonably believe that they may have a right to obtain relief; and
  5. it is important to keep in mind that one might believe that a person may have a case on certain material without one’s mind being in any way inclined to the notion that they do have such a case.

In practice, to defeat a claim for preliminary discovery it will be necessary either to show that the subjectively held belief does not exist or, if it does, that there is no reasonable basis for thinking that there may be (not is) such a case. Showing that some aspect of the material on which the belief is based is contestable, or even arguably wrong, will rarely come close to making good such a contention. Many views may be held with which one disagrees, perhaps even strongly, but this does not make such a view one which is necessarily unreasonably held. Nor will it be an answer to an application for preliminary discovery to say that the belief relied upon may involve a degree of speculation.

In other words, while it will generally be possible to contest the alleged facts upon which the applicant’s belief may be based, e.g. by bringing forth experts with contrary views, any controversy surrounding the factual basis is largely irrelevant.  All that matters is the reasonableness of the applicant’s belief.  Unless the alleged facts plainly fail to support the belief (perhaps, e.g., because they are not pertinent, or are plainly implausible) it is likely that, as here, an order for preliminary discovery will be appropriate.

Admissibility of ‘Opinion’ Evidence

By way of a notice of contention, SBA raised an issue regarding the admissibility of certain aspects of Pfizer’s evidence.  In support of its argument that Mr Silvestri (Pfizer’s assistant General Counsel) held a reasonable belief that SBA was infringing its patents, Pfizer called upon Dr Ibarra, who is Director and Group Leader of Process Development, Manufacturing Science and Technology of Pfizer Ireland Pharmaceuticals.  Among other things, Dr Ibarra gave evidence that Pfizer used the processes described in the three patents to make ENBREL.  This was said to form part of the basis for Mr Silvestri’s belief.

SBA’s objection to this evidence was essentially that it was inadmissible because it amounted to expert evidence that lacked sufficient identification of the facts and assumptions on which it was based.  Generally speaking, opinions are inadmissible as evidence.  An exception to this rule is made for expert opinions which are based upon the application of the expert’s specialised skills and knowledge to underlying facts, and where any necessary assumptions made by the expert are explicitly acknowledged.  ‘Merely’ stating that Pfizer’s process followed the patents, without details of the process itself and how Dr Ibarra reach this conclusion was, according to SBA, insufficient to render the opinion admissible.

At first instance, the judge had accepted this argument, but determined that for the purposes of an application for preliminary discovery it was appropriate to waive strict application of the rules of evidence.  On appeal, the Full Court has rejected this approach, finding instead that the evidence is admissible in view of what the applicant is required to prove.  In particular, it was not incumbent upon Pfizer to establish that its process used its patented approach.  Rather, it was required to show that Mr Silvestri’s belief was reasonable, and the fact that a senior employee with detailed knowledge of the process used to make ENBREL informed him that this process followed the patents formed part of the basis for his belief. 

The key question was therefore not whether Dr Ibarra was right or wrong, but whether it was reasonable for Mr Silvestri to believe her (see, e.g., the Full Court decision at [154], per Perram J).  The primary judge was therefore wrong to determine that Dr Ibarra’s evidence on this matter would have been inadmissible, notwithstanding his decision to waive the rules of evidence.

Exercise of Discretion

Notwithstanding his finding that Pfizer had not established its case for preliminary discovery, despite his decision to admit Dr Ibarra’s evidence, the primary judge further determined that he would have exercised a discretion to refuse the application in any event.  His reason for this was that Pfizer had been less than fully candid about the process it uses to manufacture ENBREL, despite seeking discovery of similar information from SBA.  The Full Court also rejected this reasoning as a basis to deny preliminary discovery, e.g. at [84] (per Allsop CJ):

It can be accepted that an applicant must show the Court that it has done what it can to find out whether it has a right to relief. Here, that was done, and was not affected by the absence of primary documents to substantiate, in an evidential sense, the opinion of Dr Ibarra, if her opinion was being used as evidence of a fact to which her opinion was directed.

Conclusion – Accessible Preliminary Discovery is a Good Thing

Barring an application by SBA for special leave to appeal the Full Federal Court’s decision to the High Court (which seems improbable), the court has ordered that Pfizer be granted preliminary discovery, and the matter now return to the primary judge to determine the terms and nature of the orders necessary to protect any legitimate claims for confidentiality.

More generally, it is pleasing to see the Full Court rein in the scope and complexity of applications for preliminary discovery.  The court was clearly frustrated with the fact that this case, in particular, involved two days of hearing at first instance, and then a further two days on appeal, with extensive canvassing of evidence (see, e.g., at [4] and [82] per Allsop CJ). 

It is also, notable that modern innovations in biotechnology, electronics, and software are often difficult to access directly and/or to reverse engineer, and many can only be effectively protected by process claims rather than claims covering publicly-available products.  Thus, while the general approach to preliminary discovery is the same for all technologies, in these fields it may be particularly important that access to the preliminary discovery process be efficient and affordable.

While preliminary discovery in patent cases should not be available in the absence of some reasonable basis to believe that infringement is occurring, nor should it be unreasonably refused.  Indeed, improved accessibility of preliminary discovery may even serve to keep many disputes out of court altogether by making it more difficult for an accused infringer to avoid a full trial by strategically resisting preliminary discovery rather than seeking to negotiate a resolution with the patentee.


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