Archive for the ‘Patents’ Category

Rosuvastatin goes to the High Court

Thursday, March 19th, 2015

The High Court has allowed special leave to appeal from the Full Federal Court’s decision in AstraZeneca v Apotex (“Rosuvastatin”).

From the special leave transcript, it looks like the main issue will be the operation of s 7(3) and the basis on which a reference ascertained for the purposes of s 7(3) may be combined with common general knowledge under s 7(2).

In Rosuvastatin, a Full Bench of 5 justices held that the “starting point” identified in the patent could be used as the “starting point” for testing whether the solution in the patent was obvious only when shown to be part of the prior art base. The Full Court nonetheless held the patent was invalid as a s 7(3) reference, the Watanabe paper, was added to the common general knowledge.

From the special leave transcript, it appears that all parties were in agreement that the person skilled in the art would undertake a literature search. The resulting search would have thrown up a number of documents. AstraZeneca argues that the Full Court erred in allowing the Watanabe paper to be used as a s 7(3) reference. Its main argument appears to be that the search would have thrown up at least 2 papers, Watanabe and Aoki. AstraZeneca argues that, before the Watanabe paper can be combined with common general knowledge under s 7(2), it needs to be shown that the person skilled in the art would have chosen the Watanabe paper over Aoki. According to AstraZeneca, however, the evidence did not establish that. Again according to Astrazeneca, there was evidence that the skilled person could choose either paper and, if Aoki was chosen, would fail:

If you had gone down the NK-104 path you fail – a relative fail. If you had gone down the other one, you win. The evidence of Professor O’Brien was – others can reasonably make one choice or another. Dr Reece did not even venture on the issue as to which one he would go down.

A second point that AstraZeneca argues is that to choose Watanabe the skilled person would have needed to refer first to Aoki. That is, it argues that it was necessary to engage in impermissible masoning.

If AstraZeneca succeeds, there will also be a dispute about entitlement issues and the operation of new s 22A and 138(4).

No doubt more will become clearer when the appeal documents are posted on the High Court’s website.

Astrazeneca AB & Anor v Apotex Pty Ltd; Astrazeneca AB & Anor v Watson Pharma Pty Ltd; Astrazeneca AB & Anor v Ascent Pharma Pty Ltd [2015] HCATrans 58

 

What conduct makes novelty destroying information publicly available

Tuesday, March 17th, 2015

In finding (2:1) that the primary judge had wrongly held that most of the claims in Damorgold’s patent were invalid because they lacked novelty, the Full Court confirmed that the novelty test under the 1990 Act is stricter than the old law.[1]

Damorgold’s patent relates to a mechanism for raising and lowering a blind. As characterised by Bennett J at [6], claim 1 was a combination of some 27 integers.

The Full Court upheld the primary judge’s finding that a Mr Horner had imported into Australia and shown to some potential customers a product which embodied all the integers in the relevant claims of Damorgold’s patent notwithstanding the imperfections in the evidence.

Although Mr Horner had been showing the product to potential customers to solicit sales, the evidence was that he did not in fact sell any. Nor did he leave any samples with anyone.

Mr Horner only showed the product to his potential customers in its assembled form. It was not possible, however, to tell how the product worked in its assembled form. To ascertain the internal componentry and how all the parts worked together, it was necessary to dissassemble it – to pull the product apart. And that was never done.

Section 7(1)(a) in the form applicable [2] provided that a claim in a patent was taken to be novel unless it was shown not to be novel in light of prior art information made publicly available in a single document or through doing a single act.[3]

The trial judge considered that a potential customer could have asked to see how the product worked and, if they had done so, Mr Horner would have shown them or allowed them to disassemble it; disassembly (and re-assembly) would have been easy. Therefore, his Honour held the novelty destroying information was made publicly available.

On appeal, Bennett J and Yates J held that the requirement in 7(1)(a) that the information be made publicly available meant the question was what information did the prior use communicate (or make available) to the public. As the demonstrations to the public in the assembled form did not disclose the internal workings of the product, the information communicated to the public did not disclose all the integers of any claim. Therefore, the attack on novelty failed.

Bennett J pointed out at [11] that different consequences flowed from whether the prior art relied on was a document or an act:

The question is whether an act can be identified that did in fact make the information being the integers of the invention publicly available. This is not the same requirement for anticipation by prior publication, which is satisfied if the information is in a document which is publicly available. (emphasis supplied)

In his opinion concurring with Bennett J, Yates J was at pains to stress that nothing he said should be taken as dealing with the situation where there had in fact been a sale or a sample had been given to and retained bya potential customer.

In dissent, Jessup J agreed with the primary judge that the appropriate question was what information would have been conveyed by the use.[4]

Damorgold Pty Ltd v JAI Products Pty Ltd [2015] FCAFC 31


  1. As I was junior counsel for the appellant, this post will aim just to identify the court’s ruling.  ?
  2. The applicable prior art base was the form before the amendments made by the Patents Amendment Act 2001 so acts of prior use had to be done in Australia.  ?
  3. Bennett J’s emphasis.  ?
  4. For example at [61], [64], [68] (emphasis supplied).  ?

Springboard injunctions and patents

Wednesday, March 4th, 2015

In December, Beach J found AUG infringed Streetworx’ innovation patent for a street light fitting. Now, his Honour has granted an injunction restraining AUG from further infringing the patent, but has refused to grant a “springboard injunction” or order delivery up.

Before the trial, AUG had secured contracts with two municipal councils, Monash and Moonee Valley, to supply, respectively, 8,000 and 6,000 infringing light fittings. The lights have yet to be supplied. AUG couldn’t negotiate a royalty or licence fee with Streetworx so it could supply. Therefore, it sought to modify its fittings so they no longer infringed. Streetworx sought the “springboard injunction” to block that supply on the basis that AUG secured the contracts with the infringing product and should not be allowed to take the benefit of that infringement.

Beach J accepted that the Court does have power to order a “springboard injunction” of the kind sought.

Beach J accepted Streetworx’ argument that but for the infringing conduct there would not have been any contract to supply.[1] However, that was not enough to secure the “springboard injunction” as his Honour considered it was also necessary to consider the quality of the advantage obtained by the infringement.

[81] …. The quality of the unwarranted advantage needs to be considered. In the scenario where the relevant integers had no causal significance (ie absent the relevant integers the contract would have been awarded for the product in any event), the nature and quality of the unwarranted advantage is less egregious than if the presence of the relevant integers in the product played a critical role in the decision to award the contract. So, in that more nuanced fashion, it is relevant to consider the causal significance of the presence of the relevant integers to the decision to award the contract. The more the unwarranted advantage is causally tied to the significance of the presence of the relevant integers, the stronger the basis for the injunction and vice versa. The concept of unwarranted advantage contains within it a normative aspect and has a spectrum quality rather than Streetworx’s simplistic binary characterisation of it either being established or not established. In other words, there are degrees of unwarranted advantage which are to be considered and which are not foreclosed from consideration by merely demonstrating “but for” factual causation as Streetworx has demonstrated in the present case.

In this case, Beach J considered that damages or an account of profits would be an adequate remedy.[2] Secondly, the qualitative advantage gained by the infringement was low. So far as the evidence went, the infringing features were not a selling point in AUG achieving the sales. Although there was no evidence directly from the Councils themselves, this was supported by the fact they were prepared to accept the non-infringing products in place of the infringing fittings. Thirdly, his Honour took into account the impact of the proposed injunction on the innocent Councils in a market where there were limited suppliers.

His Honour also refused to order delivery up as the fittings had been modified so that they no longer infringed.

Streetworx Pty Ltd v Artcraft Urban Group Pty Ltd (No 2) [2015] FCA 140


  1. If the fitting to be supplied had not been itself the infringement – a holistic infringement, but rather merely a component such as the brake of a car, Beach J may have been prepared to take the more nuanced approach advocated by AUG at the causation stage.  ?
  2. This is an unusual consideration at the final injunction stage as typically the Courts will not condone future infringing conduct. Here, of course, his Honour found the conduct would not be infringing. His Honour did order that the price of escaping the injunction would be an undertaking from AUG to pay its gross margin from the sales into a trust account pending the damages/account inquiry.  ?

ACCC loses antitrust case against Pfizer

Friday, February 27th, 2015

Flick J has ruled that Pfizer did not breach antitrust rules by trying to maintain sales of Lipitor after it came off patent.

Pfizer’s patent on atorvastatin (Lipitor) was due to expire on 18 May 2012.[1] Its analysis showed it was facing a revenue cliff: from $771 million a year in 2011 to $70 million a years by 2015. Pfizer came up with a 3-part plan:

  1. in the 18 months prior to expiry, it stopped supplying Lipitor through wholesalers and started supplying pharmacies directly (thereby earning the wholesale margin for itself);
  2. it offered a 5% discount to those pharmacies it supplied + a 5% “rebate” credited to an accrual fund. The “rebate” was repayable to the pharmacy if it committed to buy from Pfizer a specified proportion of its anticipated generic atorvastatin needs after the patent expired – the amount of “rebate” repaid would vary according to the proportion of generic needs committed to and the time frame for the commitment. For example, the pharmacy would receive 100% if it committed to taking 75% of its anticipated needs for 12 months. but only 50% if it committed to taking 75% for only 6 months.
  3. Pfizer also made a bundled offer – it could offer to supply both Lipitor and its generic product “atorvastatin Pfizer”.

The ACCC brought action alleging by implementing this plan, Pfizer had contravened:

  • section 46 of the Competition and Consumer Act (CCA), which prohibits a corporation with a substantiall degree of power in a market from taking advantage of that power for proscribed anti-competitive purposes; and
  • section47 of the CCA which prohibits exclusive dealing that has the purpose or effect of substantially lessening competition in a market.

Flick J has dismissed the ACCC’s action.

Relevant market

His Honour found that the relevant market was the market for the supply to community pharmacies in Australia of atorvastatin as the ACCC contended. Pfizer argued the market was the market for the wholesale supply of pharmaceutical products and over the counter products to community pharmacies.

Substantial degree of power in the market

His Honour also found that Pfizer had a substantial degree of power in that market until late 2011 and had taken advantage of that power by implementing its scheme. Pfizer did not have a substantial degree of power in the market from January 2012 on wards.

Before January 2012, Pfizer was the only supplier of atorvastatin and the constraints on the price it could charge imposed by the PBS was “not sufficient to render its market power anything other than “substantial”.” Flick J recognised that there was no precise date which could be identified as the point where Pfizer’s market power ceased to be substantial. By late 2011, however, that power was no longer “enduring” as the expiry date of the patent loomed closer. By February 2012, Ranbaxy was able to enter the market offering its generic atorvastatin for sale[2] and the other intending generic suppliers had registered their products on the Therapeutic Goods Register and were starting sales discussions with potential customers.

Flick J found Pfizer took advantage of its power to impose the direct sales to pharmacies model because the pharmacies were opposed to it, but Pfizer was able to impose it on them as the only possible source of atorvastatin. Similarly, the rebate scheme took advantage of that power because it created an expection of payments in the future on terms that were unclear and yet to be decided. Flick J found that the amount of money accumulated within the rebate scheme by the time the patent expired was very substantial – $35 million – a powerful incentive to buy product from Pfizer. One might wonder, however, why the position would have been any different if the terms on which the rebate could be claimed had been clear.

No anti-competitive purpose

Even in the period before January 2012 when it had a substantial degree of power in the market, however, there was no contravention of 2 46 because it did not take advantage of its market power for a proscribed anti-competitive purpose.

Pfizer also did not contravene s 47 because in implementing the scheme it did not have the purpose of substantially lessening competition.

Rather than having a purpose of deterring competition by the generics, Flick J accepted that Pfizer was motivated by rationale business objectives. For example, selling directly to pharmacies rather than through wholesalers:

But my question, Mr Latham, was directed to Lipitor and generic atorvastatin, not some dream of establishing a generics business? — But once again you’re asking me to make a decision on – on one product, when I have seven products, over $1 billion, coming off patent. And it’s not just Pfizer Australia. It’s around the world. And to try to get the best business organisation that’s going to deliver continuing operations through those generic products, plus, they have these additional benefits of being closer to pharmacy. Going through the licensee doesn’t tick that important box.

The requirement to take 75% of the pharmacies needs to qualify for the “rebate” also did not have an anti-competitive purpose. Rather, Flick J found that the requirement had been reduced from 100% to 75% – sacrificing $30 million in potential revenue – to enable the pharmacy to establish a second source of supply.

s 51(3)

Section 51(3) exempts from s 47 conditions in, amongst other things, licences of patent to the extent they relate to the invention to which the patent relates or articles made according to the invention.

Although its operation did not fall to be determined because there was no contravention of s 47, Flick J would have found it did not apply in this case. His Honour considered that the sale of atorvastatin to the pharmacies would not involve any licence. More importantly, his Honour would have held that the condition was collateral to the patent and so outside the scope of the exemption.

What actually happened

In the event, Pfizer went from selling 100% of the prescribed atorvastatin (as Lipitor) in March 2012, to 32% of prescription in April and settling around 22 – 23% by June 2012. While Pfizer antiticpated marketing advantages in being the only supplier likely to supply generic atorvastatin in pills the same shape, size and colour as Lipitor, the evidence showed it held 100% of the generic market until September 2012, after which its share fell away to 16 – 17% by March/April 2013.

Australian Competition and Consumer Commission v Pfizer Australia Pty Ltd [2015] FCA 113


  1. PBS figures for the year to June 2012 showed Lipitor was the highest cost to the scheme ($593 million) followed by rosuvastatin ($359 million) and ranibizumab ($308 million).  ?
  2. Pfizer and Ranbaxy had settled other litigation on terms which enabled Ranbaxy to enter the market before the patent expired.  ?

IP Australia consults on red tape streamlining and costing

Wednesday, February 25th, 2015

IP Australia has issued to discussion papers:

  • Proposals to streamline IP processes and support small business; and
  • Proposals to streamline IP processes and support small business – Regulatory costs,

apparently following Parliamentary Secretary Karen Andrews’ announcement.

According to IP Australia’s website, the “streamlining” paper:

The … Consultation Paper outlines 22 proposals to align and simplify our IP processes, support small business and make some technical fixes relating to the regulation of IP attorneys.

The first 10 proposals apply across the board (as it were) to patents, trade marks, designs and PBR and relate to matters such as aligning renewals re-examination/revocation, extensions of time, writing and filing requirements.

There are 3 further proposals affecting patents: third party requests for examination, colour drawings and extensions of term – notices to the department of health.

The 14th proposal relates to the acceptance timeframe for trade mark applications.

15 and 16 affect the registration of designs and multiple copies of representations.

There are 6 proposals “supporting small business” including unjustified threats of infringement and trade marks and shelf companies.

And 2 “technical fixes” relating to publishing the personal information of “IP attorneys” and prosecuting “IP attorney” offences.

There are some 84 pages in the paper. So this post is not going to do the paper anything approximating “justice”.

One proposal is to reduce the acceptance period for trade marks from 15 months to 6 months. There are also substantial changes proposed for the regimes relating to extensions of time:

 – Align PBR extensions with those for patents and for a wider range of actions

 – Specify the grounds for the ‘special circumstances’ extension in the trade marks legislation and align circumstances beyond control across the rights

 – Allow extensions of time for renewal grace periods but not renewal dates, for all IP rights

– Make the ‘despite due care’ extension available for all IP rights and have no limit on the period of the extension

– For all rights, limit the ‘error or omission by applicant/owner’ extension to 12 months

 – Streamlined process for short extensions of time

– Simplify and align fees

– Make all extensions of time non-discretionary.

Certificates: you know, things like Certificates of Registration:

The IP legislation would be amended so that certificates would not be required to be issued for examination, registration and grant. Also, the patents and trade marks Acts would be amended to no longer provide that a certificate signed by the Commissioner or Registrar is prima facie evidence of a matter. Instead, the Acts would provide that any document approved by the Commissioner or Registrar (or similar wording) would constitute prima facie evidence of a matter. This would enable IP Australia to continue to provide documents for such purposes, without requiring them to be signed certificates. Signed copies or extracts of the Registers would continue to be admissible in proceedings as if they were the original Register, and therefore prima facie evidence of the particulars on them.

Unjustified threats: this would see removal of the defence under s 129(5) of the Trade Marks Act of bringing infringement proceedings reasonably timely (which is not currently a defence for patent or designs threats), providing the remedy for PBR and introducing a power to award additional damages in respect of blatant and unjustified threats against another party.

Trade marks and shelf companies: this proposal would see amendment of s 27 so that it would not be necessary to incorporate the company that is intended to use the trade mark, but purchase of a shelf company would suffice.

The renewals proposal would see a grace period of 6 months introduced for renewing PBR and provision that all IPR could be infringed during the grace period if subsequently renewed.

In coming up with those proposals, IP Australia has used a costing framework and developed detailed costings which are set out in the “costings” paper. We are being invited to comment on those too.

If you are feeling excited, you should get your submissions in to IP Australia by 7 April 2015.

Proposals to streamline IP processes and support small business (pdf)

Proposals to streamline IP processes and support small business – Regulatory costs (pdf)

High Court to review patenting of isolated genes in Australia

Monday, February 16th, 2015

According to a media release by Maurice Blackburn,[1] the High Court has granted Ms D’Arcy special leave to appeal the decision that Myriad’s BRCA patent for isolated genes is patentable subject matter, as a manner of manufacture, in Australia.

At first instance, Nicholas J upheld the patentable subject matter of the patent. His Honour’s decision was affirmed by a Full Bench of the Federal Court.

The transcript of the special leave application is not yet up.

Lid dips: Phillips Ormonde Fitzpatrick and Dr Summerfield.

D’Arcy v Myriad Genetics Inc.


  1. The law firm representing Ms D’Arcy the appellant. The High Court’s summary (pdf) of Results of Special Leave applications confirms the grant.  ?

Regency still loses its MPEG appeal

Wednesday, December 24th, 2014

Although it rejected the primary judge’s interpretation of s145 of the Patents Act 1990, the Full Court has nonetheless dismissed Regency’s appeal seeking to terminate its licence of MPEG patents.

In 2009, Regency took a licence of a bundle of patents from the MPEG patent pool so that it could make, amongst other things, DVD and Blu-Ray players. All the patents were necessary to make MPEG–2 compliant equipment, but they related to different inventions. By July 2012, some of the patents, but not all, had expired. Regency sought to terminate the licence early, relying on s145.

Section 145 provides:

(1) A contract relating to the lease of, or a licence to exploit, a patented invention may be terminated by either party, on giving 3 months’ notice in writing to the other party, at any time after the patent, or all the patents, by which the invention was protected at the time the contract was made, have ceased to be in force.

(2) Subsection (1) applies despite anything to the contrary in that contract or in any other contract.

The Full Court agreed with Regency that the trial judge`s interpretation of,s145 was wrong but, even so, the right to terminate the licence under s145 did not accrue until all the patents licensed at the time the licence was granted had expired. As there were patents still on foot, therefore, Regency did not have the right under s145 to terminate.

The Full Court considered that the reference to “a patented invention”, an expression not defined in the Patents Act was simply a reference to an invention that was patented, rather than something which was patentable subject matter.

Further, s23(b) of the Acts Interpretation Act 1901 meant that the reference to the singular – a patented invention – could be read as including the plural. While recognising that s145 was intended to protect licensees from being unfairly required to pay licence fees after the patents had expired, Bennett and Pagone JJ pointed out that, as the licensor could also invoke s145, a licensee could be exposed to even greater unfairness if the licence could be terminated after the expiry of one or only some patents:

30 … if MPEG were entitled to terminate the licence when one of the patents or all of the patents for one of the inventions had expired, Regency would be in the position that, having implemented the Standard, it would be required to cease exploitation of the outstanding patents or negotiate a fresh licence.

31 The primary judge recognised the lack of commercial reality and potential unfairness in such circumstances and so do we. It would lead to the absurd result that parties wishing to negotiate for a patent pool would necessarily have to enter into multiple contracts or face the uncertainties and possible damage caused upon the expiry of a single patent of that patent pool. This would be of particular difficulty for a licensee which had “tooled up”, or entered into financial obligations on the faith of the right to exploit the necessary patent, and could also affect third party end users of a product.

Earlier at [25], Bennett and Pagone JJ had emphasised the importance of certainty provided by contracts:

Regency points to commercial and policy reasons why a licensee should not continue to pay royalties where an invention the subject of the licence is no longer the subject of a subsisting patent. However, this possible disadvantage to a licensee can be taken into account during negotiations for a contract. Regency negotiated a licence fee that included patents now expired but must be taken to have been aware of the expiry of patents during the term of the Contract when it negotiated that fee. This is supported by the fact that the October 2009 amendment to the Contract provided for royalty rates, those rates decreasing over specified periods of time in recognition of the ever approaching end to each of the patents (as observed by the primary judge at [11]).

While this case did not explicitly turn on questions of misuse of market power, that analysis does not bode well for the ACCC`s pending antitrust action against Pfizer.

Nicholas J delivered a concurring judgment.

Regency Media Pty Ltd v MPEG LA, L.L.C [2014] FCAFC 183

How long do you have to pay royalties for?

Tuesday, December 2nd, 2014

Vickery J in the Supreme Court of Victoria has had to construe how long an obligation to pay royalties under a sale of patents and technology and associated consultancy agreement lasts: ruling it is as long as the purchaser is using the “invention”.

Roberts came up with the “Roberts Differential Lock”. It enables the driver of a vehicle, such as a 4-wheel drive vehicle, to lock the “dif” from the cabin without having to get out and manually adjust the wheels. The invention could be retrofitted to existing vehicles. Roberts made a provisional patent application for his invention in 1983 and a standard application followed in 1984. Corresponding applications were made in the USA, the UK and Japan in 1985. Roberts and his wife marketed the Roberts Differential Lock though their company, Altair.

In 1987, the Roberts and Altair sold all their rights in the invention to ARB. There was a lump sum payment and royalties to be paid on products made using the invention. Roberts also entered into a Consultancy Agreement for an initial period of 6 months and thereafter until terminated on 30 days’ written notice.

There were two questions before Vickery J:

(1) did ARB have to keep paying roylaties after (presumably) the (1984/1984) patents expired; and

(2) if so, to whom – the Roberts or also Altair?

The terms of the sale agreement

 2. In consideration of the consideration set out in clause 7 of this Sale Agreement and subject to clause 20 hereof, the Vendors hereby jointly and severally sell transfer and assign absolutely to [ARB] all the right title and interest in and to the Roberts Differential Lock including (without limiting the generality of the foregoing) all patent applications, patent rights and proprietary rights relating thereto, and the business name ‘Roberts Diff-Lock’.

11(a). In further consideration of the rights granted hereunder the Company shall pay to the Roberts the following royalties calculated on the net invoice value arising from the sale, lease, hire and use (hereinafter referred collectively as a ‘sale’ or ‘sold’ as the case may be) of the Products by the company and its licensees:-

[a specified dollar amount for each unit sold]. (Those amounts were subject to increase according to increases in the CPI – All Groups Index – Melbourne.)

For this purpose, “Products” were defined to mean:

‘Products’ means the differentials as manufactured pursuant to the patents as specified in the First Schedule

and the First Schedule listed the 1984 Australian patent application and the pending applications in the USA, the UK and Japan – none of which had been granted at that time.

How long?

You will have noticed that clause 11(a) does not say anything about how long the obligation to pay royalties lasted. Vickery J held as a matter of construction the obligation did not end when the “patents”[1] expired. A number of factors led to his Honour’s conclusion.

First, when the sale agreement was executed, the patent terms in the different countries where applications were pending were different. Moreover, as is typical in such agreements, the definition of “patents” extended to divisonals, re-issues, continuations, continuations in part and the like. So, his Honour concluded, the parties contemplated that there would be potentially be different expiry dates in different countries.

Secondly, although the obligation to pay royalties was imposed on sales of Products, what was sold by clause 2 were “all rights in and to the Roberts Differential Lock including … the patents and the proprietary rights relating thereto”. Then “proprietary rights” were defined not just as rights in patents, but also included copyright, confidential information, trade secrets, data, formulae and so on. So ARB was not just buying rights to the patents it was buying all rights to all the technology. Moreover, under the Consultancy Agreement, “all inventions, techniques and improvements developed in the course of the consultancy agreement ‘shall become the sole and exclusive property of ARB …’”

Together, these arrangements indicated the “ambulatory nature” of the proprietary rights ARB obtained.

Thirdly, if ARB was right and its obligations extended only to the “patents”, it had no obligation to pay royalties until at least one of the pending applications was actually registered. However, Vickery J considered it quite clear the obligation to pay was intended to apply to all products ARB sold as soon as the sale took effect whether an application had proceeded to grant or not.

Finally:

109 Further, the object and purpose of the Sale Agreement may be said to be the allocation of the risks and rewards of the patent rights and the proprietary rights to be assigned to ARB by the Vendors. The risk allocation was achieved by means of the mechanism selected for determination of the price to be paid for that assignment.

110 I accept that the Vendors’ construction is commercially sensible in that it provides for an arrangement whereby each party managed its risk as to the proper price to pay (from ARB’s perspective) and to charge (from the Vendors’ perspective) in relation to the bundle of rights sold under the Sale Agreement, which at the time of entry into the contract had a value which was difficult to calculate or even estimate. Accordingly, the Sale Agreement provided for an ambulatory consideration through the royalties regime. If the rights proved to be valuable so that commercialisation of them resulted in a higher number of total sales than anticipated, then ARB would pay a higher total purchase price to the Vendors. On the other hand, if the rights proved to be valuable so that commercialisation of them resulted in a higher number of total sales than initially expected, then ARB would pay a higher total purchase price to the Vendors.

111 I also accept that such a risk-sharing arrangement is not one that had any obvious connection to the life of the patents that might be granted on the assigned patent applications, or to whether any patents became registered at all. In this regard the following is to be noted:

(a) ARB received an immediate and continuing benefit from the sales that it made using the assigned patent rights. In other words, the benefits that ARB received were not contingent upon any patent application listed in the First Schedule of the Sale Agreement proceeding to grant; and

(b) the assigned rights included proprietary rights which did not depend upon a patent proceeding to grant or remaining registered.

Vickery J then rejected ARB’s argument that it would be faced with a perpetual obligation to pay royalties: its obligation was to pay only on products that embodied the invention described in the patents. If it didn’t use that invention, it had no obligation to pay.

Pay the royalty to whom

This is one of those odd arguments where ARB was trying to contend Altair, the Roberts’ company, had no standing to sue. While cl. 11 did say that ARB had to pay “the Roberts”, Vickery J noted that the Roberts and Altair were the “Vendors” as defined and so cl. 11 should be understood as requiring payment to all three.

The conclusions reached by Vickery J, assuming there is no successful appeal, may immediately be contrasted with Maggbury Pty Ltd v Hafele Australia Pty Ltd.[2] One obvious point of difference, is that it appears that patents did actually issue in this case. Moreover, it appears that there was, or may have been, further technology of value apart from the patents – such as copyright, confidential information and further improvements.

The conclusion may also seem at odds with the policy in s 145 of the Patents Act. Even at its strongest, however, that only gives a right to terminate and does not automatically terminate the contract. As we have recently seen, however, the operation of the provision, particularly in a multi-jurisdictional context involving many faceted technologies, is less than clear.[3] In any event, ARB did not invoke the provision and it is not clear from the judgment whether there are other patent, or for that matter other “proprietary”, rights still on foot.

Nonetheless, if ARB could terminate the contract, it is an interesting question how Vickery J’s approach would sit with Maggbury if ARB used only technology now in the public domain.

Finally, as I am sure you have already concluded, if you are acting for the payor in this type of situation this case illustrates the importance of considering very carefully and providing specifically in the agreement for the duration of the obligation to pay royalties and what it is payable on if you are drawing a clause providing for a royalty – especially when the technology comes into the public domain and others may use it royalty free.

ARB Corporation v Roberts & Ors [2014] VSC 495

Lid dip: James McDougall


  1. That is, the patent applications that were pending when the sale agreement was executed.  ?
  2. (2001) 210 CLR 181.  ?
  3. MPEG LA, L.L.C. v Regency Media Pty Ltd [2014] FCA 180  ?

Alphapharm may have a big bill coming

Tuesday, November 18th, 2014

The High Court has dismissed Alphapharm’s appeal from the Full Federal Court’s ruling granting Lundbeck an extension of time to apply to extend the term of the escitalopram patent. It was close though: 3 to 2.

You will recall that Lundbeck applied 10 years late to extend the term of its pharmaceutical patent. So, not only was Lundbeck applying to extend the term of its patent (under s70), it was applying for an extension of time in which to make that application. In granting special leave, the High Court accepted that, if the power were available, the circumstances justified the 10 year extension. The question was a matter of statutory interpretation: was there power to extend.

Section 71(2) specifies when an application to extend the term of a pharmaceutical patent must be made:

(2) 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, any of the pharmaceutical substances referred to in subsection 70(3);

(c) the date of commencement of this section.

Lundbeck’s application was made within the term of the standard patent (with 1 day to spare), but well outside the dates specified in paragraphs (a) – (c).

Section 223 confers a general power to extend the time for making an application. Under s 223(11), however, the power cannot be used to extend time in relation to “prescribed actions”.[1] One of those prescribed actions related to s 71(2):

(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; ….

Crennan, Bell and Gageler JJ, after noting the long history in patents legislation of the power to apply for an extension of time, even after the time had expired, as an important safety valve in the system, ruled that s 71(2) specified 2 requirements. The first time requirement is that the application must be filed within the term of the standard patent. The second time requirement was that the application must also satisfy at least one of the requirements set out in paragraphs (a) – (c).

Crennan, Bell and Gageler JJ held, however, that reg. 22.11 applied only to the first requirement: that the application was made within the term of the standard patent. Their Honours considered this was important otherwise a “gap” could arise between when a patent expired but was then restored. That would be highly undesirable.[2] In contrast, there was no policy reason why reg. 22.11 should apply to the second time requirement. At [71]:

There is nothing in any of the extrinsic materials, or in the long policy debates on simplifying extensions of term, which would suggest any rationale for excluding the second time requirement from the remedial power to extend time under s 223(2)(a). Alphapharm’s senior counsel conceded, correctly, that if Alphapharm’s construction of reg 22.11(4)(b) were correct, the remedial power in s 223(2)(a) could never apply to extend time in relation to the second time requirement, no matter what the quality or provenance of any “error or omission” made in respect of that time. Alphapharm’s construction would introduce an inexplicable asymmetry between a patentee and a competitor opposing a s 70(1) application. An opponent can access the general remedial power to extend times cast upon it in mandatory terms[102]. Had it been the legislature’s intention to exclude the second time requirement in s 71(2) from the general remedial power in s 223(2)(a), that would have been simple to accomplish.

Accordingly, s 223 could be invoked as Lundbeck had satisfied the first time requirement (and so did not need it to be extended) but needed an extension in relation to the second time requirement – which reg.22.11 did not apply to.

In dissent, Kiefel and Keane JJ rather tersely said at [111]:

s 71(2) cannot reasonably be read as referring to two actions. There is but one action referred to in s 71(2) – making an application for extension of the term of a patent. That one action is to be done on a date that satisfies the two requirements as to time set out in s 71(2). It is that action to which s 223(2) would apply, were it not for reg 22.11(4)(b).

Their Honours did explain why they considered policy and historical considerations did not lead to a different conclusion. Of potentially more general interest, however, their Honours took a different stand on the role of statutory interpretation at [121]:

In any event, as was said in Federal Commissioner of Taxation v Consolidated Media Holdings Ltd, legislative history and extrinsic materials cannot displace the meaning of statutory text; nor is their examination an end in itself. (footnote omitted)

While acknowledging the primary role of the text, Crennan, Bell and Gageler JJ invoked the more nuanced role of context espoused in CIC Insurance and Project Blue Sky.

A big bill coming? After the standard term of the patent expired but before the expiry of the extended term, Alphapharm and other generics commenced marketing their own versions of the drug.

Alphapharm Pty Ltd v H Lundbeck A/S [2014] HCA 42


  1. The “prescribed actions” are found in reg. 22.11.  ?
  2. See Crennan, Bell and Gageler JJ at [68].  ?

(Not) patenting business methods

Wednesday, November 12th, 2014

The Full Federal Court has upheld the Commissioner’s refusal to grant Research Affiliates’ patent for a computer implemented method for constructing a portfolio management index.

The central claim reads:

A computer-implemented method for generating an index, the method including steps of:

(a)        accessing data relating to a plurality of assets;

(b)        processing the data thereby to identify a selection of the assets for inclusion in the index based on an objective measure of scale other than share price, market capitalization and any combination thereof;

(c)        accessing a weighting function configured to weight the selected assets;

(d)        applying the weighting function, thereby to assign to each of the selected assets a respective weighting, wherein the weighting:

(i)   is based on an objective measure of scale other than share price, market capitalization and any combination thereof; and

(ii)  is not based on market capitalization weighting, equal weighting, share price weighting and any combination thereof;

thereby to generate the index.

The Court posed the issue before it as being:

whether computer implementation of an otherwise unpatentable business scheme is sufficient to make the claimed method properly the subject of letters patent.

One might think, put that way, there is only one answer. May be. It makes it very important, however, how one determines whether the “scheme” is itself unpatentable.

Another intriguing aspect of the decision is that, before it embarked on analysing whether this was indeed a “manner of manufacture, the Court engaged in a very extensive review of how this issue is approached in other jurisdictions, including the USA and UK.

Time pressures don’t permit extended analysis at this stage. In the meantime:

and no doubt others. It will be interesting to see what happens to the RPL Central appeal.

Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 (Kenny, Bennett and Nicholas JJ)