Eli Lilly & Co v Amgen Inc

[2000] APO 16

OFFICIAL NOTICE

DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS

Application  :          Nos. 695934 in the name of ELI LILLY AND COMPANY

Title:          Methods for Treating Diabetes

Action:          Application by Eli Lilly and Company for an extension of time under Regulation 5.10(2) to serve evidence-in-answer and objection thereto by Amgen Inc.

Decision:          Issued  .

AbstractLilly and Amgen have been in negotiations for some time regarding the sale of Lilly’s leptin patent portfolio.  Lilly gave, as reasons for the delay in serving evidence, the need for Amgen to conduct further considerations, and their desire to not jeopardise the negotiations.

It was found that the applicant had made out a proper case justifying the extension.  Lilly’s belief that serious negotiations were taking place goes some way to explaining why evidence was not served in time.  Even though the applicant appears to have been influenced more by settlement negotiations than by the actual progress of the evidentiary stages, arguments surrounding the explanation for the delay fall in Lilly’s favour.

It was also considered that the evidence to be served is likely to have an important influence on the outcome of the case.  The interests of the applicant and the public both weigh heavily towards the grant of the extension, and the extension is appropriate in all the circumstances.

The extension of time to serve evidence in answer was granted.

PATENTS ACT 1990

DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS

Re:Patent Application No. 695934 by Eli Lilly and Company and opposition under Section 59 of the Patents Act 1990 by Amgen Inc. for an extension of time under Regulation 5.10(2) in which to serve evidence in answer.

BACKGROUND

Patent application 695934 in the name of Eli Lilly and Company (hereinafter referred to as Lilly) was filed on 26 June 1996 as PCT/US96/10983.  The application was advertised accepted on 27 August 1998.  A notice of opposition to the grant of a patent was filed by Amgen Inc. (hereinafter referred to as Amgen) on 27 November 1998.  A statement of ground and particulars was served on 26 February 1999.

The patent application has also been opposed by The Rockefeller University (hereinafter referred to as Rockefeller).  On 28 April 1999, Amgen and Rockefeller jointly sought a direction from the Commissioner of Patents seeking to cross-rely on each other’s evidence.  Lilly did not oppose this request, and in a letter of 4 May 1999 the Delegate directed that evidence which is served in one opposition is deemed to have been served in the other opposition in respect of application 695934.

Amgen’s evidence in support was completed on 24 May 1999.  Under Regulation 5.8(2), evidence in answer was due on 24 August 1999.  On 24 August 1999, Lilly filed an application for an extension of time of three months till 24 November 1999 in which to serve evidence in answer.  The extension of time was granted without objection.  On 24 November 1999, Lilly filed a further application for an extension of time of three months to 24 February 2000 to serve evidence in answer.  Amgen objected to this extension on 13 December 1999.

The matter came to a hearing in Canberra on 8 February 2000.  Lilly was represented by Ms Shahnaz Irani and Mr John O’Connor, patent attorneys of Spruson & Ferguson, Sydney, and Amgen was represented by Mr Martin O’Sullivan and Mr Gary Cox, patent attorneys of Wray & Associates, Perth.  Both parties appeared by telephone.

THE APPLICATION FOR EXTENSION OF TIME

The possible purchase of Lilly’s leptin portfolio by Amgen is the sole reason provided by Lilly in the application for an extension of time.   The application begins by stating that:

“We, Eli Lilly and Company have been engaged in negotiations with Amgen Inc. the second, joint opponent and licensee of IP rights of the Rockefeller University with a view to selling Lilly’s leptin patent portfolio which includes the presently opposed accepted Australian patent application serial No 695934.  The negotiations tentatively begun in May 1999.”

The application then details the progress of the negotiations from May 1999 to November 1999, and ends by stating:

“As is apparent from the above chronology, the current position is that Amgen and Lilly are still negotiating with Amgen having advised that they cannot give Eli Lilly an answer until some time within the first quarter of next year (2000), as Amgen are still requiring further time to determine their interest in the Leptin project and therefore their interest in purchasing Lilly’s leptin patent portfolio.  Accordingly, further time is required in order that Amgen can conduct further considerations regarding the possible purchase of Eli Lilly’s leptin patent portfolio including the present opposed patent application.”

SUBMISSIONS

Written submissions were provided by both parties prior to the hearing, and I will refer to these where appropriate in the body of my decision.

The applicant also filed a declaration, dated 3 February 2000, by Mr Steven G. Davis, who states as follows:

“2. Since May, 1999, Lilly and Amgen, Inc. (hereinafter ‘Amgen') have been engaged in negotiations directed towards selling Lilly's leptin portfolio of patents and patent applications covering leptin and leptin anologs to Amgen.  As Lilly's Patent Attorney for leptin matters, I am aware of most events which have transpired during-these negotiations.

The most recent contact between Lilly and Amgen regarding this possible sale was the exchange of Voice Mail Messages between Mr. Guy Cipriani and Karol Pessin, Esq. on January 21, 2000.  Mr. Cipriani is from Lilly's Business Development Department and Ms. Pessin is from Amgen's Legal Department.  In his message to Ms. Pessin, Mr. Cipriani inquired whether Amgen was still interested-in purchasing Lilly's Leptin Patent Portfolio.  In her return message to Mr. Cipriani, Ms. Pessin confirmed that Amgen was still interested and stated that she would try to raise the attention of those in her organization who are deciding this issue.”

DECISION

The law on extensions of time under Regulation 5.10

The time for serving evidence in answer to an opposition is three months from the date on which evidence in support is served.  This time may be extended, and regulation 5.10(2) provides that:

(2)       The Commissioner may:
(a)       on the application of a party in the approved form; and
(b)       on such reasonable terms (if any) as the Commissioner specifies;

extend the time within which the party may take a step prescribed in this chapter, not being a step that is taken under regulation 5.3 or paragraph 5.4(1)(a).

Regulation 5.10(5) provides:

(5)       The Commissioner must not give a direction under subregulation (1) or grant an application under subregulation (2) ... unless the Commissioner:
           ...
(c)       ...

(i)        gives the parties a reasonable opportunity to make representations   concerning the application or proposed action; and

(ii)is reasonably satisfied that a direction, an extension of time or the serving of further evidence is appropriate in all the circumstances.

A thorough consideration and summary of the law, as it stands, on the extension of time provisions was given by Burchett J in Ferocem Pty Ltd v Commissioner of Patents (1994) 28 IPR 243 and more recently by Sackville J in A Goninan & Co Ltd v Commissioner of Patents (1997) 38 IPR 213. It is clear from these decisions that regulation 5.10 confers a broad discretion, which cannot be reduced to an imperative compliance with particular requirements. On the contrary it is necessary to give proper, genuine and realistic consideration to all relevant aspects of the case. Relevant aspects include:

(a)The provision of an explanation or justification for the delay in completing the evidence in answer

The reasons why the evidence was not served in time are a relevant consideration, but a satisfactory explanation is not a mandatory requirement.

(b)       The public interest

The public interest in determining a serious opposition on its merits is a relevant consideration.  There is also the efficient and orderly administration of matters before the Patent Office to consider.

(c)       The interests of the parties involved in the opposition

Disadvantages to either the applicant or opponent are relevant considerations.

If I am to be reasonably satisfied that an extension of time is appropriate in all the circumstances, then I must take into account all matters relating to the above aspects when deciding the issue.

Application of the law to the facts

(a)       The provision of an explanation or justification for the delay;

The onus rests with the party seeking an extension of time to justify the need for the extension with sufficient details of the circumstances and reasons for needing the extension. 

The applicant’s reason for needing the extension primarily relates to their belief that negotiations with Amgen, concerning the selling of Lilly’s leptin patent portfolio, were proceeding well and that Amgen required further time to determine their interest in the leptin portfolio.  The extension of time application provides a brief summary and chronology of the negotiations from 12 May 1999 to 3 November 1999.  Submissions made at the hearing indicate that Lilly was unwilling to file evidence in answer as it felt that this might harm the settlement negotiations.

The opponent submitted that the reasons set forth by Lilly do not justify the extension of time sought.  Mr O’Sullivan emphasised that although negotiations had taken place, these concerned Lilly’s leptin portfolio as a whole, and not the instant application.  Amgen’s submissions make it clear that:

“The negotiations do not hinge on the outcome of these opposition proceedings and even if agreement is reached on Lilly’s Leptin portfolio, there is no guarantee that such an agreement will include Australian patents or patent applications or more particularly Application 695934 and thus will resolve the current opposition.”

Though future events may well prove this to be true, I am satisfied that Lilly has been conducting negotiations in the belief that 695934 would form part of any settlement.  Further support for this view comes from the declaration of Steven G. Davis, who has been employed by Lilly as a patent attorney since May 1998.  Mr Davis states that the parties “…have been engaged in negotiations directed towards selling Lilly’s leptin portfolio of patents and patent applications covering leptin and leptin anologs (sic) to Amgen…”.  Though scant detail has been provided by Mr Davis or the application for extension on the exact terms of the proposed settlement, I have no evidence before me to conclude that 695934 would not form part of a negotiated settlement.  Overall, I consider Lilly’s expectation that 695934 would form part of any agreement was reasonable, and that their actions have been consistent with this approach.

Both parties directed my attention to chapter 8.5 of Volume 3 of the Australian Patent Office Manual of Practice and Procedure.  Lilly referred to paragraph 8.5.3 which summarises relevant considerations involved upon an application for an extension of time in these words:

“…relevant factors to consider where an extension of time for filing evidence is requested may include:

l) Parties undertaking negotiations (see para 8.5.7 below)”

Paragraph 8.5.7, to which I was directed by Mr O’Sullivan, is as follows:

“Where it is clear that both parties are involved in negotiations, the Commissioner may be reasonably satisfied that the extension is "appropriate in all the circumstances" provided that:

a) if the extension is for more than 1 month, the application for the extension includes something from the other party to confirm that negotiations are occurring:

b) where negotiations have been occurring for more than 6 months, the Commissioner will expect to be provided with details of why negotiations have not yet been concluded and an indication of when agreement is likely. The Commissioner will not grant indefinite extensions of time to conclude negotiations.”

I note that Lilly has requested an extension of time of more than one month, and that this request was filed in late November 1999, nearly seven months after negotiations had begun.  Negotiations have not yet been concluded because Amgen have advised that they cannot give Lilly an answer until some time within the first quarter of this year.  Based on this assessment, I believe that Lilly’s justification for the extension has some merit.

However, I do not wish to suggest that Lilly has acted in a most prudent manner.  From the submissions made at the hearing, there is clearly a difference in opinion between the parties as to the seriousness of the negotiations, and the likelihood of their success.  It is clear that negotiations have been ongoing for over nine months since 12 May 1999, and that they are not expected to be finalised in the immediate future. 

It would also appear that Lilly’s decision to put a stay on their preparation of evidence in answer was in the hope of expediting a settlement.  However, I can see no reason why negotiations cannot run concurrently with the preparation of evidence, and note that Lilly had located and engaged two experts to act as deponents for Lilly during the negotiations last year.  When questioned at the hearing, Lilly explained that the people responsible for the preparation of evidence in answer have had minimal involvement in the negotiation process.  As far as I am aware, there was no other impediment to the preparation of evidence other than Lilly’s desire to proceed in the manner that they chose.  Thus, I conclude that there was no practical reason why Lily could not continue with the preparation of evidence in answer.  To some extent, I consider that the delay in serving evidence is a result of Lilly’s own inaction, as they appear to have been influenced more by settlement negotiations than by the actual progress of the evidentiary stages.

A similar situation was addressed in Race Lotto Pty Limited v AWA Limited [1998] APO 72, to which I was referred to by Ms Irani. In this case it seems that the opponent, AWA, believed that negotiations with Race, which had extended over eight months, were proceeding well and that settlement was imminent. AWA were apparently unwilling to file evidence in support as it felt that the settlement negotiations would be damaged. The delegate wrote:

“I have some sympathy for AWA and the reasons given for the delay that it did not want to jeopardise negotiations but I must conclude that negotiations have now broken down and that preparation of evidence in support of the opposition should be proceeding. However, since it is not clear exactly when negotiations became untenable, I must give the opponent the benefit of the doubt and find that, because of their understanding of the state of negotiations at the time, their explanation of the delay to be credible.”

Even though I would not characterise the present negotiations as ‘untenable’, they have been drawn out over a similar length of time, and the lack of a successful settlement is just as pronounced.  With so many parallels between the present case and the situation described in Race Lotto I find the delegate’s reasoning quite persuasive.

Mr O’Sullivan suggested that Lilly had not shown due diligence in progressing the opposition, as it appeared that no progress has been made on the preparation of evidence in answer since 24 August 1999.  He also referred to Lilly’s own admission that a third extension of time to complete their evidence in answer was a distinct possibility.  Ms Irani contended that Lilly had diligently pursued the preparation of evidence until it became evident that serious negotiations were being undertaken. 

Overall, I consider the arguments on whether the delay is justified to be slightly in the applicant’s favour.  However, I will note that the Commissioner is unlikely to allow any further extensions based on negotiations being in progress.  Lilly should now proceed diligently in the preparation of evidence in answer.

(b)       The public interest;

The question of the public interest in the granting of extensions of time by the Commissioner has been considered in a number of Federal Court decisions.  From these decisions it is apparent that the public interest is ascertained by weighing often conflicting concerns.  For example the public has an interest in both the need for expeditious disposal of matters in the Patent Office and the concern expressed by Kitto J in Kaiser Aluminium & Chemical V. The Reynolds Metal Company (1969) 120 CLR 136 at 143, viz a serious opposition should be dealt with on its merits rather than be shut out as a consequence of a failure of procedure."  It is also the case that the public has an interest in encouraging innovation and so it follows that the applicant should have the opportunity to defend its patent application on its merits and not have its defence shut out as a consequence of a failure in procedure.

The opponents have argued that a very important point of the public interest is to ensure that pre-grant oppositions proceed in an orderly manner and are not unduly protracted.  Mr O’Sullivan submitted that:

“This purpose of pre-grant opposition proceedings was recently discussed in Genetics Institute Inc v Kirin-Amgen Inc (1999) FCA 742 where the full bench of the Federal Court of Australia clearly directed that pre-grant opposition proceedings should provide a swift and economical means of settling disputes that would otherwise need to be dealt with by the courts in more expensive and time-consuming post-grant litigation; that is, to decrease the occasion for costly revocation proceedings by ensuring that bad patents do not proceed to grant. This purpose was also reflected in the explanation by the Minister for Science for the Federal Government’s policy decision to retain pre-grant opposition proceedings in Australia, despite the recommendation of the 1984 Industrial Property Advisory Committee…that they be abolished.”

I agree that proceedings should not be unnecessarily protracted, and am mindful that granting this second extension will cause a further delay of three months before the substantive hearing.  However, this has to be balanced with the interests of the parties and other public interests.

Ms Irani argued that the public interest is best served by granting the extension on the basis that:

“…negotiations are proceeding between the parties, for the simple reason that should settlement be reached by virtue of these negotiations, then the spending of public money in hearing the opposition is avoided and both time and resources of the Patent Office are saved enabling them to be utilised by other parties.”

Mr O’Sullivan countered with the suggestion that this would only be true if a settlement was reached, and that there was no guarantee that such an event will transpire.  Whilst I appreciate Lilly’s view that a negotiated resolution to this opposition is perhaps the most preferable outcome, I do not believe that the public interest is best served by granting extensions on the basis that an applicant believes a settlement is likely when reasonable doubts about the same have been expressed by the opponent.

I am also mindful that no evidence in answer has yet been served within the extended period currently granted for evidence in answer.  There is a public interest in the applicant not being entirely shut out from presenting any of its evidence.  However, in order for me to give proper genuine and realistic consideration to this aspect, it is necessary to consider the nature of the evidence the applicant seeks to adduce and the significance of it for the opposition proceedings.

In the present case, the applicant has not yet provided any evidence in answer and no submissions have been given concerning the nature of the evidence for which the extension has been sought.  The opponent has served a statement of grounds and particulars which makes it clear that a large part of the opponent’s case relates to grounds where establishing the common general knowledge could be very important.  Establishing the common general knowledge in opposition proceedings was discussed in Nalco Chemical Company v W.R. Grace and Co. –Conn. [1998] APO 65 (23 November 1998). I find the delegate’s comments at page 10 particularly apposite:

“These statement are made in the context of arguments about inventive step which depend on evidence of what is the common general knowledge of an ordinary worker in the art in Australia.  Statements about common general knowledge made by one individual are very liable to a criticism that they are unrepresentative.  In this context statements from other independent declarants, ie statements which corroborate those of another witness, as argued by the applicant, are likely to have an important bearing on the outcome of the case.  I do not believe it is necessary for me to go beyond this and to consider directly the applicant's other evidence.  Stephenson's statements go to the important issue of inventive step and are likely to have an important bearing on the outcome of the case whether they stand alone or whether they provide corroboration of the evidence on common general knowledge of another witness.”

I believe that a similar argument applies in this instance, and that evidence as to the common general knowledge is likely to have a significant impact on this case. 

Accordingly, I think the public interest in this instance favours the applicant being granted an extension of time to complete evidence in answer.  Whilst I sympathise with Amgen’s concerns about the length of time taken so far, I consider that any benefit from the maintenance of an expeditious and orderly opposition process is outweighed by the detriment that would occur by denying Lilly the opportunity to submit their evidence.

(c)       The interests of the parties involved in the opposition;

At the hearing, the opponent argued that there was no guarantee that the applicant, even with this extension, could complete the service of evidence in answer.  Furthermore, Mr O’Sullivan stated that:

“There is no evidence that any action has been taken to prepare evidence in answer beyond the preliminary action taken prior to 24 August.  It is only about 3 weeks until the end of the period of the extension sought.  I submit that any refusal of this extension is unlikely to exclude any evidence that Lilly may otherwise have served if the extension is granted.”

They had not displayed due diligence so far, and any extension, if granted, would unnecessarily protract the proceedings.  Mr O’Sullivan also said that any prejudice to Lilly by not having the extension of time granted essentially derives as a consequence of their own action or lack thereof. 

Whilst this submission has some merit it does not preclude me from considering other relevant factors, such as the prejudice to the applicant, and the public interest.  Indeed, by Mr O’Sullivan’s own submissions at the hearing, I am required to consider all the circumstances relevant to the request for extension. 

The interests of the opponent, Amgen, are clearly in not having the opposition proceedings unduly delay the hearing of the substantive opposition.  I am not aware of any other special circumstances that would specifically disadvantage the opponent if the present extension were granted.  Though Ms Irani intimated that granting the extension would also be of benefit to Amgen, who may be contemplating a settlement, this was refuted by Mr O’Sullivan, who asserted that “If that were the case, clearly we wouldn’t have opposed the extension of time.”  I am more than happy to concede that Amgen are in the best position to determine what course of action is in their best interests.

Clearly the interests of the applicant, Lilly, are in obtaining the extension in order that it may have the opportunity to serve evidence in answer in the opposition.  The facts of the case clearly indicate that the applicant's case would be seriously prejudiced if I were to refuse the extension and preclude it from adducing evidence to address the matters raised in the evidence in support.

On balance, I think the interests of the applicant in having the opportunity to present relevant evidence that would allow the opposition to be decided on its merits outweigh the interests of the opponent in these circumstances.  Though I am mindful of the opponent’s submission that I should give due consideration to the undue delay of the opposition proceedings, this is just one consideration and is not in my opinion the overriding one in the present case.

CONCLUSION

The applicant has made out a proper case justifying the extension.  I have found that even though the issues surrounding the explanation for the delay are finely balanced, they fall slightly in Lilly’s favour.  I also consider that the evidence to be served is likely to have an important influence on the outcome of the case.  The interests of the applicant and the public both weigh heavily towards the grant of the extension, and I believe that the extension is appropriate in all the circumstances.

Accordingly, I grant the applicant Lilly an extension of time from 24 November 1999 to 24 February 2000 to serve its evidence in answer. 

COSTS

Both parties, irrespective of whether the extension was granted or denied, argued that costs should be awarded in their favour.  The power of the Commissioner to award costs is based on section 210 and regulation 22.8.  The power to award costs is discretionary, so I must take into account all relevant considerations.

In the present case Lilly has succeeded in obtaining an extension of time under regulation 5.10(2).  However, I have found that to a large extent, the success of their application for an extension was based on material presented at the hearing.  Because that information was not provided earlier in declaratory form, the opponent was not afforded an opportunity to reconsider whether or not it should maintain its position in objecting to the extension of time.

In these circumstances, I consider it appropriate that I make no award of costs.

R.W.J. FINZI

Delegate of the Commissioner of Patents

Patent attorneys for the applicant:  Spruson & Ferguson, Sydney

Patent attorneys for the opponent:  Wray & Associates, Perth