H.Lundbeck A/S and Commissioner of Patents
[2024] AATA 3319
•18 September 2024
H.Lundbeck A/S and Commissioner of Patents [2024] AATA 3319 (18 September 2024)
Division:GENERAL DIVISION
File Number(s):2019/2512
Re:H.Lundbeck A/S
APPLICANT
AndCommissioner of Patents
RESPONDENT
DECISION
Tribunal:Honourable Justice Jackman, Deputy President
Date:18 September 2024
Place:Sydney
1.The decision of the delegate of the Commissioner of Patents dated 11 April 2019 be set aside.
2.The respondent be granted a licence pursuant to s 223(9) of the Patents Act 1990 (Cth) and reg 22.21(2) of the Patents Regulations 2001 (Cth) to sell or otherwise dispose of, offer to sell or otherwise dispose of, import and keep for those purposes 49,382 units of ESITALO products (comprising 29,734 10mg units and 19,848 20mg units), being the units which it imported by 12 June 2009.
.................................SGD.......................................
Honourable Justice Jackman, Deputy President
Catchwords
PATENTS – application for review of a decision of the Commissioner of Patents to grant a licence pursuant to s 223(9) of the Patents Act 1990 (Cth) – where patentee was granted an extension of time to apply for an extension of term – whether other party exploited or took definite steps to exploit the invention concerned because of the patentee’s failure to apply for an extension of term within the time allowed – exercise of discretion
Legislation
Patents Act 1990 (Cth) ss 70, 71, 223
Patents Regulations 2001 (Cth) reg 22.21Cases
Abigroup Contractors Pty Ltd v Sydney Catchment Authority [2004] NSWCA 270; (2004) 208 ALR 630
Alphapharm Pty Ltd v H Lundbeck A/S (2008) 76 IPR 618; [2008] FCA 559
Alphapharm Pty Ltd v H Lundbeck A/S (2011) 92 IPR 628; [2011] APO 36
Alphapharm Pty Ltd v H Lundbeck A/S (2014) 109 IPR 323; [2014] APO 41
Alphapharm Pty Ltd v H Lundbeck A/S (2014) 110 IPR 59; [2014] FCA 1185
Alphapharm Pty Ltd v H Lundbeck A/S (2014) 254 CLR 247; [2014] HCA 42
Alphapharm Pty Ltd v H Lundbeck A/S (2015) 234 FCR 306; [2015] FCAFC 138
Alphapharm Pty Ltd v H Lundbeck A/S [2009] HCA Trans 324
Alphapharm Pty Ltd v H Lundbeck A/S [2016] HCATrans 52
Aspen Pharma Pty Ltd v Commissioner of Patents (2012) 129 ALD 18; [2012] AATA 281
Aspen Pharma Pty Ltd v Commissioner of Patents (2012) 132 ALD 648; [2012] AATA 851
Aspen Pharma Pty Ltd v H Lundbeck A/S (2013) 216 FCR 508; [2013] FCAFC 129
H Lundbeck A/S v Alphapharm Pty Ltd (2006) 69 IPR 629; [2006] APO 18
H Lundbeck A/S v Alphapharm Pty Ltd (2009) 177 FCR 1; [2009] FCAFC 70
H Lundbeck A/S v Alphapharm Pty Ltd [2016] APO 45
H Lundbeck A/S v Commissioner of Patents (2017) 249 FCR 41; [2017] FCA 56
H Lundbeck A/S v Commissioner of Patents [2019] FCA 535
H Lundbeck A/S v Sandoz Pty Ltd (2011) 124 ALD 219; [2011] NSWSC 1297
H Lundbeck A/S v Sandoz Pty Ltd (2018) 137 IPR 408; [2018] FCA 1797
H Lundbeck A/S v Sandoz Pty Ltd (2019) 153 IPR 170; [2019] APO 18
H Lundbeck A/S v Sandoz Pty Ltd (2022) 276 CLR 170; [2022] HCA 4
H Lundbeck A/S v Sandoz Pty Ltd (No 2) [2019] FCA 46
H Lundbeck A/S v Sandoz Pty Ltd [2023] FCA 740
Henville v Walker [2001] HCA 52; (2001) 206 CLR 459
I&L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109
Law v Razer Industries Pty Ltd [2010] FCA 1058; (2010) 190 FCR 166
Sandoz Pty Ltd v H Lundbeck A/S (2020) 384 ALR 35; [2020] FCAFC 133
TPT Patrol Pty Ltd v Myer Holdings Limited [2019] FCA 1747; (2019) 293 FCR 29REASONS FOR DECISION
Honourable Justice Jackman, Deputy President
18 September 2024
INTRODUCTION
This proceeding involves an application by H Lundbeck A/S (Lundbeck) for review of a decision of the Commissioner of Patents (Commissioner), given by her delegate, the Deputy Commissioner of Patents, to grant a licence to Sandoz Pty Ltd (Sandoz) pursuant to s 223(9) of the Patents Act 1990 (Cth) (Act) and the regulations under that section to exploit the invention claimed in Lundbeck’s Australian Patent No 623144 (Patent) on particular terms (Licence). The practical point sought to be achieved by the grant of such a licence now is the effect it would have on the quantification of damages payable by Sandoz to Lundbeck for infringement of the Patent, which remains to be determined by the Federal Court.
There is a complex history of proceedings relating to the Patent. These have involved the present parties, being Lundbeck and Sandoz, as well as entities related to Lundbeck (Lundbeck Australia Pty Ltd (Lundbeck Australia) and CNS Pharma Pty Ltd) and other generic pharmaceutical suppliers (Alphapharm Pty Ltd (Alphapharm); Aspen Pharma Pty Ltd, formerly called Arrow Pharmaceuticals Pty Ltd (Arrow); and Apotex Pty Ltd (Apotex) (collectively Other Generics).
By way of background, this history of proceedings arose out of a dispute concerning the validity of an extension of term of the Patent which had originally been granted to Lundbeck based on the regulatory approval of its LEXAPRO product under the provisions of Pt 3 of Ch 6 of the Act. The validity of that extension was challenged on the basis that LEXAPRO was not the first product included on the Australian Register of Therapeutic Goods (ARTG) which contained the pharmaceutical substance disclosed and claimed in the Patent, being the (+)-enantiomer of citalopram or “escitalopram”. It was found that the first product included on the ARTG which contained that pharmaceutical substance was Lundbeck’s CIPRAMIL product. This meant that any application by Lundbeck to extend the term of the Patent ought to have been based on the regulatory approval of CIPRAMIL, not LEXAPRO. Given the date of regulatory approval of CIPRAMIL, the time for making such an application had long since passed; and such an application, had it been granted, would have resulted in a materially shorter extension of term (about 3½ years to 9 December 2012) than that which was originally granted (namely, the full 5 years under s 77 of the Act to 13 June 2014).
The relevant proceedings and the decisions given in them include the following:
(a)proceedings relating to (inter alia) the validity of the extension of term of the Patent based on the regulatory approval of LEXAPRO (Alphapharm Proceedings):
(i)in the Patent Office: H Lundbeck A/S v Alphapharm Pty Ltd (2006) 69 IPR 629; [2006] APO 18 (2006 Barker Decision);
(ii)Sandoz’s claim against Lundbeck in Federal Court Proceeding NSD 714 of 2006, which was resolved by the Settlement Agreement between Lundbeck, Lundbeck Australia and Sandoz in February 2007 (Settlement Agreement);
(iii)in the Federal Court: Alphapharm Pty Ltd v H Lundbeck A/S (2008) 76 IPR 618; [2008] FCA 559 (2008 Lindgren J Decision);
(iv)in the Full Court: H Lundbeck A/S v Alphapharm Pty Ltd (2009) 177 FCR 1; [2009] FCAFC 70 (2009 Full Court Decision); and
(v)in the High Court (on the question of special leave): Alphapharm Pty Ltd v H Lundbeck A/S [2009] HCA Trans 324;
(b)proceedings relating to Lundbeck’s application for an extension of time to apply for an extension of term based on the regulatory approval of CIPRAMIL:
(i)in the Patent Office: Alphapharm Pty Ltd v H Lundbeck A/S (2011) 92 IPR 628; [2011] APO 36 (2011 Ayers Decision);
(ii)in the Tribunal, on a preliminary question about (inter alia) whether Sandoz could rely on the Settlement Agreement: Aspen Pharma Pty Ltd v Commissioner of Patents (2012) 129 ALD 18; [2012] AATA 281;
(iii)in the Tribunal: Aspen Pharma Pty Ltd v Commissioner of Patents (2012) 132 ALD 648; [2012] AATA 851 (2012 Tribunal Decision);
(iv)in the Full Court: Aspen Pharma Pty Ltd v H Lundbeck A/S (2013) 216 FCR 508; [2013] FCAFC 129 (2013 Full Court Decision); and
(v)in the High Court (on appeal): Alphapharm Pty Ltd v H Lundbeck A/S (2014) 254 CLR 247; [2014] HCA 42 (2014 High Court Decision);
(c)proceedings in which Lundbeck sought and obtained an injunction to restrain Sandoz from disclosing the terms of the Settlement Agreement, including to Sandoz’s external lawyers at the time in King & Wood Mallesons: H Lundbeck A/S v Sandoz Pty Ltd (2011) 124 ALD 219; [2011] NSWSC 1297;
(d)proceedings relating to Lundbeck’s application for an extension of term of the Patent based on the regulatory approval of CIPRAMIL:
(i)in the Patent Office: Alphapharm Pty Ltd v H Lundbeck A/S (2014) 109 IPR 323; [2014] APO 41 (2014 Barker Decision);
(ii)in the Federal Court: Alphapharm Pty Ltd v H Lundbeck A/S (2014) 110 IPR 59; [2014] FCA 1185 (2014 Rares J Decision);
(iii)in the Full Federal Court: Alphapharm Pty Ltd v H Lundbeck A/S (2015) 234 FCR 306; [2015] FCAFC 138 (2015 Full Court Decision); and
(iv)in the High Court (on the question of special leave): Alphapharm Pty Ltd v H Lundbeck A/S [2016] HCATrans 52;
(e)proceedings relating to the applications brought by Sandoz and the Other Generics for the grant of licences pursuant to s 223(9) of the Act:
(i)in the Patent Office, on a preliminary question: H Lundbeck A/S v Alphapharm Pty Ltd [2016] APO 45 (2016 Spann Decision);
(ii)in the Federal Court, on judicial review: H Lundbeck A/S v Commissioner of Patents (2017) 249 FCR 41; [2017] FCA 56 (2017 Beach J Decision);
(iii)in the Patent Office, on the substantive application (the decision under review in this proceeding): H Lundbeck A/S v Sandoz Pty Ltd (2019) 153 IPR 170; [2019] APO 18 (2019 Barker Decision); and
(iv)in the Federal Court, on an application by Lundbeck for release from its undertakings given to Beach J: H Lundbeck A/S v Commissioner of Patents [2019] FCA 535 (2019 Middleton J Decision); and
(f)proceedings involving Lundbeck’s claims of patent infringement and contravention of the Australian Consumer Law (ACL) during the extended term:
(i)in the Federal Court: H Lundbeck A/S v Sandoz Pty Ltd (2018) 137 IPR 408; [2018] FCA 1797 (2018 Jagot J Decision);
(ii)in the Federal Court (supplementary reasons): H Lundbeck A/S v Sandoz Pty Ltd (No 2) [2019] FCA 46 (2019 Jagot J Decision);
(iii)in the Full Court: Sandoz Pty Ltd v H Lundbeck A/S (2020) 384 ALR 35; [2020] FCAFC 133 (2020 Full Court Decision);
(iv)in the High Court (on appeal): H Lundbeck A/S v Sandoz Pty Ltd (2022) 276 CLR 170; [2022] HCA 4 (2022 High Court Decision); and
(v)in the Federal Court, on remittal and application for stay: H Lundbeck A/S v Sandoz Pty Ltd [2023] FCA 740 (2023 Yates J Decision).
When Mr Bannon SC began to cross-examine Mr Sharkey (“again”), Mr Sharkey good-naturedly replied: “It’s the case that keeps on giving” (T217.40). In the unlikely event that my calculations are correct, this appears to be the 26th set of proceedings between these parties and the Other Generics in relation to the Patent. I arrived at that figure by adding to the 24 proceedings referred to in the preceding paragraph the decision of the delegate of the Commissioner from which this appeal is brought ([2019] APO 18; (2019) 153 IPR 170) (2019 Barker Decision), and the present appeal. This remarkable achievement is a tribute to the litigious appetites and capacities of the parties, and to the commercial value of the Patent.
SALIENT LEGISLATIVE PROVISIONS
Section 70 of the Act provides relevantly as follows in relation to applications for extensions of the term of patents:
(1) The patentee of a standard patent may apply to the Commissioner for an extension of the term of the patent if the requirements set out in subsections (2), (3) and (4) are satisfied.
(2) Either or both of the following conditions must be satisfied:
(a)one or more pharmaceutical substances per se must in substance be disclosed in the complete specification of the patent and in substance fall within the scope of the claim or claims of that specification;
(b)one or more pharmaceutical substances when produced by a process that involves the use of recombinant DNA technology, must in substance be disclosed in the complete specification of the patent and in substance fall within the scope of the claim or claims of that specification.
(3) Both of the following conditions must be satisfied in relation to at least one of those pharmaceutical substances:
(a)goods containing, or consisting of, the substance must be included in the Australian Register of Therapeutic Goods;
(b)the period beginning on the date of the patent and ending on the first regulatory approval date for the substance must be at least 5 years.
Section 71 deals with the form and timing of applications for extensions of the term of patents and provides relevantly as follows:
(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 (c) Register of Therapeutic Goods of goods that contain, or consist of, any of the pharmaceutical substances referred to in subsection 70(3), as worked out under subsection 70(5A) (if applicable);
(c)the date of commencement of this section.
It is common ground that the applicable date in the present case is that provided for in para (c), namely 27 January 1999, such that the six month period expired on 26 July 1999, consistently with the 2014 High Court Decision at [16] and [25].
Section 223 deals with extension of time generally, and provides relevantly as follows:
(2) Where, because of:
(a)an error or omission by the person concerned or by his or her agent or attorney; or
(b)circumstances beyond the control of the person concerned;
a relevant act that is required to be done within a certain time is not, or cannot be, done within that time, the Commissioner may, on application made by the person concerned in accordance with the regulations, extend the time for doing the act.
…
(9) Where the Commissioner grants:
(a)an extension of more than 3 months for doing a relevant act; or
(b)an extension of time for doing a prescribed relevant act in prescribed circumstances;
the prescribed provisions have effect for the protection or compensation of persons who, before the day on which the application for extension of time is advertised under subsection (4) [ie in the Official Journal], exploited (or took definite steps by way of contract or otherwise to exploit) the invention concerned because of the failure to do the relevant act within the time allowed, the lapsing of the patent application or the ceasing of the patent, as the case may be.
…
(11) In this section:
relevant act means an action (other than a prescribed action) in relation to a patent, a patent application, or any proceedings under this Act (other than court proceedings), and includes the making of a Convention application within the time allowed for making such applications.
The term “exploit” is defined in Schedule 1— Dictionary as follows:
exploit, in relation to an invention includes:
(a)where the invention is a product—make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or
(b)where the invention is a method or process — use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use.
Regulation 22.21 of the Patents Regulations 2001 (Cth) (Regulations) provides in sub-reg (1) that its provisions are prescribed for subss 41(4), 150(4) and 223(9) of the Act. Regulation 22.21 then provides relevantly as follows:
(2) Persons who availed themselves of or exploited, or took definite steps by contract or otherwise to avail themselves of or exploit, inventions:
(a) in the case of inventions to which subsection 41(4) of the Act applies—in the period mentioned in paragraph 41(4)(c) of the Act; and
(b) in the case of inventions to which subsection 150(4) of the Act applies—after the lapse of the applications and before the day on which their restoration was notified in the Official Journal; and
(c) in the case of inventions to which subsection 223(9) of the Act applies—within the period of time extended under that subsection;
may apply, in the approved form, to the Commissioner for the grant of licences to exploit the inventions.
…
(5) The Commissioner, if reasonably satisfied that the application should be granted, must grant a licence to the applicant on such terms as the Commissioner thinks reasonable.
SALIENT FACTS
On 13 June 1989, Lundbeck filed an application for the Patent. On 31 August 1992, the Patent was granted.
Claim 1 of the Patent is to “(+)-1-(3-dimethylaminopropyl)-1-(4’-fluorophenyl)-1,3- dihydroisobensofuran-5- carbonitrile and non-toxic acid addition salts thereof”. (+)-1-(3- dimethylaminopropyl)-1-(4’-fluorophenyl)-1,3-dihydroisobensofuran-5- carbonitrile is the chemical name for (+)-citalopram, the (+)-enantiomer of citalopram. Citalopram is a racemic mixture which contains equal amounts of (+)-citalopram and (-)-citalopram.
On 9 December 1997, Lundbeck’s product “CIPRAMIL Citalopram hydrobromide 20 mg tablet blister pack” was registered on the Australian Register of Therapeutic Goods (ARTG) with registration number 61164.
26 July 1999 was the last date for any application to extend the term of a Patent based on the inclusion of CIPRAMIL on the ARTG.
On 16 September 2003, Lundbeck registered on the ARTG “LEXAPRO escitalopram (as oxalate) 20 mg tablet blister pack”, with registration number 92053, and “LEXAPRO escitalopram (as oxalate) 10 mg tablet blister pack”, with registration number 92051.
On 9 December 2003, Lundbeck made an application to the Commissioner to extend the term of the Patent pursuant to s 70 of the Act, based on the date of inclusion of LEXAPRO on the ARTG, being 16 September 2003. On 15 January 2004 Lundbeck’s application for an extension of term based on LEXAPRO was advertised. On 27 May 2004, Lundbeck’s application for an extension of term based on LEXAPRO was granted without opposition (First Extension of Term), and the term was extended to 13 June 2014. That represented the full five year period of extension permitted by s 77 of the Act.
On 6 July 2005, Alphapharm commenced a proceeding in the Federal Court seeking to revoke the Patent and remove the First Extension of Term from the Register (Alphapharm Revocation Proceeding). On 7 July 2005, Alphapharm wrote to the Commissioner (copying Lundbeck), asserting that the First Extension of Term had been wrongly granted and that CIPRAMIL was the first product registered on the ARTG which contained the pharmaceutical substance claimed in the Patent (AB1/175–6). On 13 July 2005, the Commissioner wrote to Lundbeck (by its patent attorneys, Watermark) stating that it appeared that any extension of term should have been based on the inclusion of CIPRAMIL on the ARTG, and said that the Commissioner considered that she was obliged under reg 10.7(7) to amend the Register to record the term of the Patent as being extended to 9 December 2012, rather than 13 June 2014, and provided Lundbeck with an opportunity to respond (AB1/178–9).
On 14 July 2005, Watermark notified Lundbeck of the letter from the Commissioner and raised the possibility (as an “immediate action” which could be taken in defence of Lundbeck’s position) of seeking an extension of time in which to file an application for an extension of term to 9 December 2012 (AB2/1130–2). That course of action was not taken up until 12 June 2009, about four years later. On 21 July 2005, Watermark gave further advice to Lundbeck outlining its options as being either to consent to the Commissioner’s proposed amendment to the expiry date, or to file submissions by 12 August 2005 and argue that the Register should remain unamended (as to which Watermark regarded the prospect of success as “low”), or filing no submissions, with discussion of the advantages and disadvantages of the various options (AB2/1221–3). Lundbeck forwarded the correspondence from Watermark to Corrs Chambers Westgarth (Corrs) and obtained legal advice regarding the Commissioner’s decision and the Alphapharm Revocation Proceeding (AB2/1167–72). Lundbeck subsequently resisted the proposal to adjust the extended term of the Patent to reflect a 9 December 2012 expiry date.
On 13 April 2006, Sandoz commenced a proceeding seeking to revoke the Patent and to have the First Extension of Term removed from the Register (Sandoz Revocation Proceeding) (AB5/2962). The latter aspect of Sandoz’s claim was deleted from its Amended Statement of Claim filed on 23 May 2006 (AB5/2965).
On 19 May 2006, the delegate of the Commissioner, Dr Barker, made a direction that the Register of Patents should be amended to remove the First Extension of Term and substitute an extension of term until 9 December 2012 (being the 2006 Barker Decision referred to above).
On 6 June 2006, Lundbeck appealed the 2006 Barker Decision to the Federal Court. On 21 June 2006, the Federal Court ordered that the Alphapharm Proceedings be heard and determined together with the challenge to the 2006 Barker Decision. It was thus envisaged that the Court would determine the correct date of expiry of the Patent in those proceedings. Lundbeck contended that the correct date of expiry was 13 June 2014, based on the regulatory approval of LEXAPRO. It did not contend, even in the alternative, that the correct date of expiry was 9 December 2012 based on the regulatory approval of CIPRAMIL, as the Deputy Commissioner had found. Each of Sandoz, Alphapharm and Arrow contended for an expiry date of 13 June 2009, reflecting the end of the original 20 year term of the Patent, on the basis that the extension of term based on the regulatory approval of LEXAPRO was wrongly granted: see the 2008 Lindgren J Decision at [28]–[29], [41], [43], [45], and [53].
In February 2007, Lundbeck and Sandoz entered into the Settlement Agreement in relation to the Sandoz Revocation Proceeding (AB6/3900–8). An email from Mr Maritz, the then Managing Director of Lundbeck Australia, to Mr Sharkey of Sandoz dated 25 January 2007 refers to the then proposed settlement as being based on offering Sandoz a “free exit from the case” and then a 2-week early entry in either 2012 or 2014 depending on the outcome of the case (noting that the reference to “2015” in the email is an obvious error for “2014”) (AB6/3899). Clause 3 of the Settlement Agreement is as follows:
(1) Lundbeck Denmark and Lundbeck Australia jointly and severally grant Sandoz an irrevocable non-exclusive licence to the Patent effective from:
(a)31 May 2009 if the Patent expires on 13 June 2009;
(b)26 November 2012 if the Patent expires on 9 December 2012;
(c)31 May 2014 if the Patent expires on 13 June 2014; or
(d)2 weeks prior to the expiry of the Patent if the Patent expires on a date other than a date described in clause 3(a) to (c).
(2) In addition to the licence granted under clause 3(1), Lundbeck Denmark and Lundbeck Australia jointly and severally grant Sandoz an irrevocable non-exclusive licence to the Patent, effective from the beginning of the calendar month in which the licence granted under clause 3(1) becomes effective, for the sole purpose of manufacturing, importing, marketing and offering to sell (but not selling or supplying) pharmaceutical products containing escitalopram.
(3) For the avoidance of doubt, nothing in this Agreement is to be taken as granting a licence of, or authorisation to exploit, any patent other than the Patent.
By cl 1(b) of the Settlement Agreement, Sandoz agreed not to commence proceedings in Australia seeking revocation of any of the claims in the Patent. The Settlement Agreement also contained an obligation on the part of Sandoz to keep its terms confidential (cl 1(c)), and Lundbeck later took active steps to prevent the Settlement Agreement being disclosed in connection with the extension of time application: H Lundbeck A/S v Sandoz Pty Ltd [2011] NSWSC 1297; (2011) 124 ALD 219 (Brereton J).
On 2 November 2007, Sandoz applied to the Therapeutic Goods Administration (TGA) to register its escitalopram product, ESITALO, on the ARTG (AB2/904–15). An amount of $48,800 (described as 75% of the evaluation fee) was paid at that time by Sandoz for that application.
From 27 December 2007, Sandoz began applying staff time and effort towards preparing for a launch of its ESITALO product in mid-2009. That is the date of the pre-launch check list setting out the relevant regulatory milestones and other important dates prior to launch, which was then stated to be July 2014 with an expected date of shipment in June 2014 (CB5/3057–60). The tasks involved in preparing for the launch of ESITALO included preparing and executing pre-launch checklists, holding meetings and teleconferences, holding product launch meetings, conferring with Regulatory Affairs and Supply Chain teams to prepare to import the product into Australia (which by 25 August 2008 was scheduled as importation into Australia on 1 May 2009 and selling from 1 June 2009: AB5/3087), preparing and executing an “Escitalopram Launch Plan 2009” with detailed steps for a launch by way of selling from 1 June 2009, and establishing with Sandoz Global a Quality Assurance Plan and a Supply Chain Setup (affidavit of Mr Turner of 16 March 2018 at [41]–[49]: AB5/3039–42). In addition, from at least June 2008, Sandoz was engaging with its manufacturing site in India to prepare for manufacturing batches of its ESITALO product for the Australian market, including procuring a manufacturing requirements spreadsheet, a batch figures spreadsheet and certificates of analysis (Turner affidavit at [49]: AB5/3042). On about 20 June 2008, Sandoz filed an application for registration in Australia of the trademark ESITALO.
On 24 April 2008, the 2008 Lindgren J Decision in the Alphapharm and Arrow Revocation Proceedings was delivered. His Honour found that the First Extension of Term (that is, based on the regulatory approval of LEXAPRO rather than CIPRAMIL) was invalid, and that the Register should be rectified omitting any extension of term of the Patent, such that the rectified expiry date of the Patent was 13 June 2009. On 19 June 2008, Lindgren J made orders to give effect to the 2008 Lindgren Decision, and the order for rectification of the Register was stayed pending any appeals. On 10 July 2008, Lundbeck appealed the orders of Lindgren J which related to the removal of the First Extension of Term (AB2/1181–5). Alphapharm and Arrow cross-appealed on other issues. The appeal and cross-appeals were heard by the Full Court in February 2009.
On 15 August 2008, Sandoz conducted an “Escitalopram Update” meeting, at which it was recognised that there was uncertainty about the expiry of the Patent in light of the appeal to the Full Court from the 2008 Lindgren Decision (in which Lundbeck contended that the Patent should expire in June 2014), which was then expected to be heard in November 2008 and decided by February 2009 (AB2/986). Under the sub-heading “Legal”, the minutes record:
If Lundbeck are successful, what do we do with the stock? what is it worth? can we return for supply to another market?
In about September 2008, Sandoz’s marketing and quality assurance teams prepared packaging designs for its ESITALO products to meet Australian regulatory requirements, and engaged a supplier to produce the packaging. On about 20 September 2008, Sandoz placed launch orders for its ESITALO product from its manufacturing site in India. From about October 2008, Sandoz engaged in budgeting for expected sales of the ESITALO product following an assumed 1 June 2009 launch date and a 1 May 2009 commencement of importing, marketing and offering to sell pursuant to the stockpiling licence under the Settlement Agreement, including preparing “Forecast Sales” spreadsheets reflecting those assumptions (Turner affidavit at [50]–[51]: AB5/3042–3). In October and November 2008, Sandoz held a number of “Escitalopram launch telecons”, the minutes of which refer to the Lundbeck appeal being heard in February 2009 with a decision expected in May 2009, and saying (AB5/3063 (Item 4), 3066 (Item 4), 3069 (Item 4) and 3072 (Item 4)):
We need to keep on going for the launch activities while minimising the exposure up until we get the final court decision.
In October 2008 and January 2009, Sandoz made requests relevant to the PBS listing of the ESITALO product and changes to the layout of the product labels and indications for the product (Mr Sharkey’s declaration of 8 July 2017 at [35]–[36]: AB2/892). On 1 May 2009, Sandoz received approval of its PBS listing application (Mr Sharkey’s declaration at [49]).
On about 28 May 2009, Sandoz finalised its order form documents to be provided to its customers, following Sandoz’s copy clearance procedures (Turner affidavit at [56]: 5/3044). Between 5 and 14 June 2009, Sandoz took steps to change the package for the ESITALO product that had already been imported to remove reference to certain medical indications (Turner affidavit at [47]: AB5/3041). On about 12 June 2009, Sandoz’s Supply Chain Manager corresponded with management to confirm the stock that was then ready to launch (Turner affidavit at [57]: AB5/3044). Although I have taken these matters out of their chronological sequence, it is convenient to refer to them collectively, as Sandoz submits that those steps all constitute definite steps to exploit the invention up to 12 June 2009 within the meaning of s 223(9) and reg 22.21(2).
On 26 May 2009, Corrs on behalf of Lundbeck wrote to Mr Sharkey, the then Legal Counsel of Sandoz, putting Sandoz on notice that if the First Extension of Term was not upheld by the Full Court, Lundbeck would seek an order reflecting an extension of term based on CIPRAMIL to 9 December 2012 (AB4/2329; 5/3345–7; and 6/3909–11). The letter referred to cl 3 of the Settlement Agreement, stating that the dates in cl 3 in effect provided Sandoz with a licence from two weeks prior to the expiry of the Patent, but did not deal with the situation where the date on which the Patent would expire was not known with certainty. The letter said that in the context of a fully contested Full Court appeal, and a stay of the order removing the extension of term of the Patent, it was inappropriate for Sandoz to have relied on an assumption that the Patent would expire on 13 June 2009, and to have sought PBS listing of pharmaceutical products containing escitalopram. The letter requested an undertaking from Sandoz that it would not promote or sell any pharmaceutical product containing escitalopram until the Full Court made orders dispensing with the appeal, with a cross-undertaking as to damages by Lundbeck. The letter also stated:
We note that, once the Full Court’s reasons are handed down, should Lundbeck be unsuccessful in its appeal in relation to the extension of term, it will seek an order that the extension of term not be removed but that the extended term of the Patent be amended to record that the Patent expire [sic] on 9 December 2012.
That was said to be on the basis of the date of ARTG registration of CIPRAMIL, rather than from the date of ARTG registration of LEXAPRO. Reference was also made to Lundbeck’s intention to seek special leave to appeal to the High Court if Lundbeck was unsuccessful in its appeal in relation to the extension of term.
Later on 26 May 2009, Mr Sharkey wrote to Dr Neels and Ms Meissner (both in-house Patent Attorneys within the Sandoz group of companies), copying Mr Turner (the then Chief Financial Officer of Sandoz) among others, and stating as follows (AB5/3287–8 and 3405–6):
Sandoz and Lundbeck settled; and Sandoz received 14 days early entry licence from Lundbeck (but the expiry date of the patent was in dispute — so the commencement of the licence was uncertain).
…
Sandoz Australia has taken the steps necessary to be able to launch in Australia from 1 June — on the calculated risk that the first instance decision on the extension of term will be upheld by the Full Court — meaning the patent would expire on 13 June 2009 — (and/or the less likely possibility that the Full Court might overturn the first judge’s decision and revoke the claims of the patent). A launch in June offers a significant commercial advantage as Sandoz would be the first generic (apart from Lundbeck’s own generic) into the market.
The failure of the Court to deliver the judgment before now (when we are so close to the expiry date determined by the first instance judge) creates uncertainty over Sandoz’ rights under the settlement agreement.
On 27 May 2009, Dr Neels responded to Mr Sharkey’s email as follows (AB5/3286):
According to established company policy, any launch-at-risk has to be approved by the IPLC in advance, as should be known …
With regard to the letter received from Lundbeck’s attorney, I noted that the present appeal proceedings do not represent the last instance, but Lundbeck may further appeal to the High Court and intends to do so in case the appeal court will dismiss Lundbeck’s appeal. Should Lundbeck have in fact this option, even a launch after an appeal decision confirming the first instance court opinion on the extension of term would represent a launch-at-risk which requires IPLC approval.
The IPLC was the Intellectual Property Litigation Committee for the global Sandoz group. Although Sandoz thought that approval had already been given by the IPLC, Mr Sharkey referred to that as a misunderstanding, in that the IPLC took a different view: AB5/2868 lines 1–30 (confirmed in Mr Sharkey’s cross-examination before me: T237.43 and 239.15–16), and see Mr Sharkey’s email to Dr Neels of 28 May 2009 referring to “a general procedural deficiency” (AB5/3282).
On 27 May 2009, Mr Sharkey on behalf of Sandoz obtained advice from Mr Condon of Griffith Hack about the matters raised in Lundbeck’s letter of 26 May 2009 (AB5/3380–2, substantially reproduced in an email by Mr Sharkey to Dr Neels of 28 May 2009 at AB5/3282–4). Mr Condon’s advice referred to Lundbeck having said that if it is unsuccessful in its appeal in relation to the extension of term, it will seek an order that the extension of term not be removed but amended to record that the Patent will expire on 9 December 2012, and Mr Condon said that he thought that such a request “made at this very late stage of proceedings is unlikely to succeed” (AB5/3283). Mr Condon later observed that Lundbeck had not argued that, if the trial judge rejected its primary contention, his Honour ought to make such an order, that Lundbeck had not argued for such an order before the Full Court, and that it would be “very unlikely” that the Full Court would make such an order because it would be inconsistent with its dismissal of the appeal (AB5/3284). Mr Condon then said the following (AB5/3284):
Lundbeck, may instead file a motion before the Commissioner under s 223 of the Patents Act. Section 223 provides that the Commissioner may grant an extension of time to comply with a deadline where the deadline was missed as a result of an error or omission. Lundbeck might use the provision to seek an extension of the 6-month deadline under s 71(2) to file a new application for extension of term, based on the TGA registration of citalopram rather than (+) – citalopram. It may say that it is only in view of the Full Court decision, that it has become clear that it made an error when it concluded that, for the purposes of the Patents Act, citalopram did not “contain or consist of” (+) – citalopram.
If it files an application to the Commissioner under s 223 for an extension of the time limit under s 71(2), it would be open for any person, including Alphapharm or Sandoz to oppose that application. In our view, the prospects of a successful opposition would be good, because the effect of allowing the application would be to undermine the decision of the Full Court. In particular, when defending the revocation proceedings Lundbeck had the option of arguing:
(a)that the extension of term to 13 June 2014 was validly granted;
(b)alternatively, even if it were not validly granted, an extension of term until 9 December 2012 should be permitted.
As mentioned above, it seems to us that Lundbeck abandoned this second course, especially having regard to the statement made by Justice Lindgren on 28 November 2006, and subsequent silence on the issue in the trial judgment. Having abandoned that course, any motion to the Commissioner would be an abuse of process, and an attempt to frustrate the consequence of the Full Court’s judgement.
This conclusion depends on what was argued before the Full Court. If you would like us to consider these issues in more detail then we can, of course, do so.
In fact, Lundbeck did refer in its written submissions in reply in the Full Court to its intention, if unsuccessful, to apply for an extension of time under s 223 of the Act to have the term extended to 9 December 2012 (AB2/1194), and Alphapharm’s counsel indicated orally that such an application would be opposed (Ms O’Connell’s declaration of 8.5.17 at [64]–[68] (AB1/146–7). I note that Sandoz was not a party to that appeal, and there is no evidence that it was aware of those submissions.
Mr Sharkey accepted in cross-examination in the infringement proceeding before Jagot J that, as a result of Mr Condon’s advice, he understood that one of the options was for Lundbeck to seek an extension of time to seek an extension of term based on CIPRAMIL (AB5/2865 lines 9 to 16).
On 27 May 2009, Sandoz imported into Australia a quantity of its ESITALO product (being escitalopram), which had been shipped from India on 22 May 2009 (Turner affidavit at [55]: AB5/3044). Those products were entered in Sandoz’s Warehouse Management System on 28 May 2009, and a further batch of ESITALO was imported and entered in that system on 3 June 2009 (AB5/3215 and 3221, a clearer copy of which is at AB4/2434 and 2440). By 12 June 2009, Sandoz had imported a total of 49,382 units of escitalopram (comprising 29,734 10 mg units and 19,648 20 mg units). Those units were in Australian-specific packaging and blistering, such that if the Australian launch did not go ahead then the only economically viable solution would have been to destroy those units, as Mr Sharkey said (T255.16–37).
On 28 May 2009, Corrs on behalf of Lundbeck sent a further letter to Sandoz (which Mr Turner of Sandoz also signed on receipt) setting out undertakings given by both parties (AB5/2976–7). Sandoz gave an undertaking to Lundbeck and Lundbeck Australia in the following terms:
unless released from this undertaking by written notice from Lundbeck or unless the finding of the Full Court of the Federal Court of Australia is to the effect that Australian Patent 623144 expires on 13 June 2009, it will not (without first providing Lundbeck at least 5 days written notice) promote, market, distribute, offer to sell, or sell any pharmaceutical product containing escitalopram.
Lundbeck agreed to give Sandoz an undertaking as to damages and also agreed that:
pending the outcome of the Full Court appeal, Sandoz may import into Australia pharmaceutical products containing escitalopram on the condition that such importation is only into its own possession and not for further distribution.
Lundbeck reserved its rights in relation to any infringement by Sandoz.
On 28 May 2009, Sandoz informed the Department of Health and Ageing that in accordance with the new obligations of Responsible Persons under the National Health Act 1953 concerning guarantee of supply, Sandoz wished to advise the Minister that it would be unable to supply its escitalopram by 1 June 2009. Sandoz stated that although it was otherwise ready and able to launch ESITALO on 1 June 2009, for legal reasons Sandoz was unlikely to be able to launch that product on 1 June 2009 by reason of the issues being determined in the Federal Court and because of undertakings being exchanged between Lundbeck Australia and Sandoz (AB2/978). The letter referred to Sandoz anticipating, based on advice from counsel, that the Federal Court will issue its decision between 1 and 13 June 2009, and unless Lundbeck was successful in overturning the previous decision of the Federal Court, Sandoz would be using its best legal endeavours to launch the product as soon as possible.
On 29 May 2009, Dr Neels sent an email to Mr Sharkey which began by referring to Dr Neels “trying to prepare all the documents necessary for presenting the case to IPLC on June 17, 2009” (AB5/3321). Dr Neels recommended seeking IPLC approval of a launch-at-risk including only two of the four medical indications then being contemplated, namely major depression and obsessive compulsive disorder, deferring the other two indications until the IPLC’s September meeting. Dr Neels’ requests for further information to be provided to the IPLC included (AB5/3322):
An assumption of costs of potential proceedings regarding a motion before the Commissioner (s 223 of the Patents Act) under the assumption that Sandoz opposes the grant of extension of time for filing the request for patent term extension.
Arguments suitable to counter the position that the deadline for filing an application for extension of term was missed as a result of an error and should be extended.
The worst case scenario regarding potential damages has to be presented to IPLC.
The letter concluded with the following (AB5/3322):
Finally, I would like to make you aware of the fact that Lundbeck very aggressively defends its position regarding escitalopram in other countries. In view of this, it has to be expected that Lundbeck will try each and every available legal measure to prevent or delay generic entry also in Australia.
Sandoz decided to adopt Dr Neels’ recommendation to delete two of the four indications for the time being, and communicated that change to the TGA on 9 June 2009 (AB2/964–5). By 14 June 2009, the new consumer medicine information was inserted in all the 49,382 units of ESITALO which had been imported into Australia (AB2/872).
On 3 June 2009, Mr Duken (Mr Sharkey’s successor) on behalf of Sandoz obtained further advice from Mr Condon (AB2/1002–5). The letter said the following (AB2/1004):
As we set out in our 27 May preliminary advice Lundbeck could, as an alternative, seek an extension of the time for making a new application for an extension of term based on the Cipramil ARTG listing. That application would be made to the Commissioner of Patents. Any such application could be opposed by Sandoz. We also consider that an application by Lundbeck of this kind is unlikely to be successful because we consider that Lundbeck would have real difficulty establishing that the failure to make the extension of term application in time was due to a relevant error or omission, rather it was, if anything, due to a mistaken view of the law.
Reference was then made to the likelihood that Lundbeck would seek special leave to appeal to the High Court and would seek an extension of the stay pending the outcome of that application or any appeal resulting from it. Mr Condon then expressed the view that Sandoz would have good arguments against the grant of an interlocutory injunction which Sandoz may seek in order to restrain the launch. Mr Condon said that, if Sandoz were permitted to launch, then “the launch will be at risk”, and that Sandoz’s exposure would be to a damages claim by Lundbeck. Mr Condon then dealt with Dr Neels’ request for advice in relation to the assessment of damages, and in relation to costs estimates. Mr Duken forwarded Mr Condon’s advice to Dr Neels on 3 June 2009 (AB5/3312–3). Mr Duken’s email to Dr Neels referred to Sandoz having decided to refrain from any intervention in the Full Court proceedings and having decided to focus on Sandoz’s defence against a possible application for an interlocutory injunction and opposing a possible application under s 223 of the Act. Mr Duken also told Dr Neels that, based on Mr Condon’s advice, Sandoz had calculated that the maximum (but not necessarily the most likely) damages claim by Lundbeck would be $7 million per annum plus costs (AB5/3133).
On 4 June 2009, Mr Condon gave further advice to Sandoz (AB2/1008 – 10), which Mr Duken forwarded the same day to Dr Neels (AB2/1007). Para 1 of Mr Condon’s advice stated as follows:
It should be understood that the issue of damages for infringement of Lundbeck’s patent only arises assuming the following occurs:
(i) the Full Federal Court of Australia dismisses Lundbeck’s appeal in relation to the extension of term issue;
(ii) Lundbeck does not obtain an interlocutory injunction order preventing Sandoz from proceeding to launch a generic escitalopram product;
(iii) either leave to appeal to the High Court is granted or the court accepts Lundbeck’s 2012 extension of term argument;
(iv) the High Court appeal is successful.
Accordingly, Mr Condon did not refer in that advice to Lundbeck’s possible application to the Commissioner under s 223 of the Act for an extension of time and an extension of term as a risk giving rise to damages for infringement. Mr Duken’s forwarding email to Dr Neels on 4 June 2009 reiterated that Lundbeck would only be in a position to claim damages from Sandoz if Sandoz launches its product and all incidents set out in para 1 of Mr Condon’s advice occur.
On 5 June 2009, Mr Condon gave further advice directly to Dr Neels in response to Dr Neels’ request for him to comment on the circumstances in which an application could be made to the Commissioner for an extension of the time for making an application for an extension of term of the Patent (AB2/1013–4) . Mr Condon advised that an extension of time request can be made to enable the late filing of an application for an extension of term, however in accordance with s 71(2) of the Act, the extension of term application must be made within the original term of the Patent, which would be 13 June 2009 if the Full Court dismisses Lundbeck’s appeal and does not reinstate the Commissioner’s decision extending the Patent to 9 December 2012. In subsequently describing Lundbeck’s “only potential courses of action”, Mr Condon did not refer to an application to the Commissioner, for an extension of time under s 223 to apply for an extension of term.
On 10 June 2009, Dr Neels asked Mr Duken by email whether Alphapharm and Arrow had already obtained marketing authorisations for their escitalopram products (AB2/1017). Mr Duken replied to the effect that the Other Generics and Sigma all had TGA approved escitalopram products (AB2/1016–7).
On 11 June 2009, the Full Court gave the 2009 Full Court Decision, upholding Lindgren J’s finding that the First Extension of Term was invalid and should be removed from the register.
On 11 June 2009, following the 2009 Full Court Decision, Mr Sharkey sought permission for Sandoz to launch from Ms Ackermann, the Global Head Legal and General Counsel of Sandoz AG in Switzerland (AB2/1024–5). Ms Ackermann replied that Sandoz would “still need IPLC approval for the launch as it remains a launch at risk due to the potential appeal” (AB2/1023).
A package of documents was prepared by Dr Neels, with input from Mr Sharkey, for submission to the IPLC, comprising a slide deck (AB5/3275–81; and see the final version at 5/3388–95) and a briefing paper (AB5/3299–3306). The slide deck is entitled “Escitalopram FCT AU Launch-at-Risk”. The draft refers to the expiry of the Patent as being “Under dispute”, with the three possible dates of expiry being 13 June 2009, 9 December 2012 and 13 June 2014. Reference was made to Lundbeck having announced its intention to apply for special leave to appeal to the High Court, and that if it is unsuccessful, Lundbeck “may further attempt to obtain an extension of the 6-month deadline at the Patent Office to file a new application for extension of the patent term based on the citalopram MA” (AB5/3280). “MA” appears to stand for “market authorisation”, being a reference to the ARTG registration. The final version prepared on 14 June 2009 states the following beside the heading “Main Arguments” (AB5/3393):
4 Federal Court judges (one at first instance; and 3 on appeal) have decided that the patent (AU623144) expires on 13 June 2009.
If Lundbeck seeks leave to base its extension request on citalopram (rather than escitalopram), then it is out of time; and Sandoz and other generic companies could oppose the application. External advice is that Sandoz would have good prospects.
Beside the heading “Chances of Winning” the final version states (AB5/3395):
Opposition to “out of time” application by Lundbeck to extend expiry date to 2012 – Sandoz prospects of winning are good.
Lundbeck appeal to have extension to 2014 – Lundbeck’s prospects are poor (4 judges have decided the patent expires on 13 June 2009).
The briefing paper also referred to the possibility of Lundbeck making an application to the Commissioner under s 223 of the Act for an extension of time to seek an extension of term, and in that regard it was stated that Lundbeck may argue that it is only in view of the Full Court decision that it has become clear that it made an error when it concluded that, for the purposes of the Act, citalopram did not “contain or consist of” escitalopram (AB5/3303–4). The briefing paper then states the following (AB5/3304):
If Lundbeck files an application to the Commissioner under Section 223 for an extension of the time limit under Section 71(2), it would be open for any person, including Sandoz to oppose that application. In our view, the prospects of a successful opposition would be good, because the effect of allowing the application would be to undermine the decision of the Full Court. Furthermore, it may be argued that Lundbeck had the option to request an extension of term based on the escitalopram marketing authorization on the one hand and a second extension of term based on the citalopram marketing authorization on the other hand in case any uncertainties about the legal situation existed and to seek clarification by the courts on its own initiative. In any event, Lundbeck should have filed an application to the Commissioner for an extension of the 6-month deadline based on the first instance decision at the latest.
The briefing paper also stated that an extension of term application must be made within the original term of the Patent in accordance with s 71(2) of the Act, and the Patent will expire on 13 June 2009 in the event that the Full Federal Court dismisses Lundbeck’s appeal. The briefing paper expressed the “Overall potential damages (most likely scenario)” as US$3.4 million, which in context appears to relate to the period from the launch of ESITALO in June 2009 to the end of June 2010 (AB5/3305). The same figure appears in the draft and final versions of the slide deck (AB5/3281, 3445).
On 12 June 2009, the Full Court made orders to give effect to the 2009 Full Court Decision. The order for the removal of the First Extension of Term from the Register was stayed pending any application for special leave to appeal.
On 12 June 2009, Lundbeck applied for an extension of the term of the Patent based on the ARTG Registration of CIPRAMIL (Second Extension of Term) and for an extension of time until 12 June 2009 to make that application (Extension of Time). On 12 June 2009, Corrs on behalf of Lundbeck wrote to Sandoz to notify it that Lundbeck intended to apply that day for the Extension of Time and Second Extension of Term (AB1/337). The letter from Corrs did not enclose the documents intended to be filed with the Commission, and did not say how the relevant “error or omission” was to be articulated in Lundbeck’s application. Mr Sharkey forwarded the letter to Ms Ackermann, Ms Meissner and others that day, saying that “There is nothing in here that has not been previously foreshadowed; and the risk profile does not change” (AB2/1027). On 13 June 2009, the original 20-year term of the Patent came to an end.
On 14 June 2009, following receipt by Sandoz of the letter of 12 June 2009, Mr Sharkey and Mr Duken on behalf of Sandoz obtained further advice from Mr Condon (AB5/3353–5). The advice referred to earlier advice that Lundbeck may apply to the Commissioner for an extension of time in which to make such an application for an extension of term, being the action which Lundbeck was now proposing to take. The advice pointed out that Sandoz was able to oppose Lundbeck’s application for an extension of time in the Patents Office and, as previously advised, Mr Condon considered that Sandoz would have “good prospects of succeeding in opposing the extension of time application” and set out various grounds for that view as follows (AB5/3354):
·Lundbeck did not make an error or omission, which resulted in the failure to file a request for patent term extension based on citalopram, within the prescribed period. Rather, Lundbeck made a conscious and deliberate decision not to file the request for patent term extension based on citalopram but rather on escitalopram.
·Once the error was identified, Lundbeck did not act as quickly as possible to rectify the error, having been made aware of the error at least since 2005.
·Lundbeck did not take due care to file the request for patent term extension based on citalopram within the prescribed period because it based the request for patent term extension on (+) – citalopram and disregarded the earlier TGA regulatory approval for citalopram.
·Even after being made aware by the Commissioner of Patents of the error with this request for patent term extension, in that it was not based on the first ARTG registration, Lundbeck only pursued the possibility for patent term extension based on escitalopram and made no concession to accept the possibility that the patent term extension should be based on citalopram. Indeed, Lundbeck did not pursue this argument either in the Federal Court or the Full Federal Court.
·Any deficiencies in the explanation provided by Lundbeck in support of its application for an extension of time for filing a request for patent term extension could also be attacked.
Mr Condon added that the application, if opposed, could take a year to determine. Mr Condon also said that if the extension of time were granted by the Patents Office, Sandoz could also oppose the application for the extension of term.
On 14 June 2009, Mr Sharkey sent an email to Ms Ackermann answering a number of questions posed by Ms Ackermann, including (AB2/1033):
what are the chances that Lundbeck can justify missing the deadline of filing a patent term extension 6 [sic:10] years later? could we get into contact with Griffith- Hack on this?
Mr Sharkey replied:
Answer: Lundbeck’s chances are low. Griffith Hack says: [Mr Condon then set out the relevant portion of Mr Condon’s advice of 14 June 2009]
Mr Sharkey’s email also stated that information received from wholesalers indicated that other generic manufacturers would probably be taking orders from the next day, 15 June 2009 (AB2/1032).
On 14 June 2009, Sandoz was given approval to launch through an urgent review by the IPLC (AB5/3307–9). The launch could not have occurred without that approval unless the global CEO of the Sandoz group, Mr George, approved it: T211.1–4 (Turner); T239.31–34, 258.25–46 (Sharkey). The email chain leading up to that approval includes an email by Mr Thomsen of 14 June 2009 referring to the “VERY URGENT” IPLC proposal from Sandoz for a launch-at-risk for escitalopram in Australia that was scheduled for 15 June 2009 (that is, the next day). The email included the following (AB5/3308):
CIP can support the proposed launch-at-risk, because
1. chances that the High Court will hear the case and reverse the lower Court’s decision [ie the 2009 Full Court Decision] is modest. Any final decision could be expected within 12–18 months according to our information. However, a decision whether to hear the case will be made by the High Court in 3–6 months.
2. Lundbeck’s attempt to cure the late filing for the, in view of the Appeal Court correct, expiry date 2012 have low chances of success as confirmed by outside counsel.
3. some good/very good arguments are available why a Sandoz launch-at-risk at this time would not be a breach of the settlement agreement and it would not be likely that Sandoz would come to a need to argue invalidity of the patent; even then, there would be fair arguments available that those do not constitute a breach of the contract, but Legal may have a more sound view on the contract interpretation
4. similar arguments as discussed and agreed at April IPLC for escitalopram in Europe would apply to AU regarding the correct expiry date of the patent term extension (relationship between enantiomer and racemate).
On Monday 15 June 2009, Sandoz launched its escitalopram product in Australia. On that day, the first batch of ESITALO for commercial sale was sent to DHL for shipping, and was delivered on 17 June 2009 (Turner affidavit at [59]: AB5/3044). Sandoz commenced selling its generic escitalopram product on 16 June 2009 (Declaration of Mr Bombardier of 8.5.17 at [14]: AB2/657). Further batches of ESITALO were imported and entered in Sandoz’s Warehouse Management System on 14 June, 30 June and 7 July 2009 (AB5/3215 and 3221, a clearer copy of which is at AB4/2434 and 2440). Sandoz continued to import those products into Australia and promote and sell them in Australia throughout the extended term of the Patent (that is, through to 9 December 2012), and thereafter.
On 9 July 2009, Lundbeck applied for special leave to appeal from the 2009 Full Court Decision. Alphapharm and Arrow also sought special leave on other issues arising from that judgment.
On 23 July 2009, the Extension of Time application was advertised in the Official Journal of Patents (AB1/385). This is the date referred to in s 223(9) of the Act, which refers to the protection or compensation of persons who “before the day on which the application for extension of time is advertised” exploited or took definite steps to exploit the invention concerned.
On 21 August 2009, Sandoz filed its opposition to the Extension of Time application. That application was also opposed by the Other Generics.
On 11 December 2009, the High Court heard and refused the special leave applications relating to the 2009 Full Court Decision.
On 9 February 2010, the First Extension of Term was removed from the register.
On 2 March 2011, the Extension of Time application was heard by a delegate of the Commissioner. On 1 June 2011, the Commissioner granted the Extension of Time for the filing of the Second Extension of Term application, being the 2011 Ayres Decision referred to above. That extension of time was for approximately 10 years (said to be for 121 months) and covered the period from 26 July 1999 to 12 June 2009.
On 21 April 2011, Lundbeck and Lundbeck Australia gave an undertaking to Sandoz not to seek injunctive relief in the event that the Commissioner grants the application for an extension of time and an extension of term to 9 December 2012 in respect of the Patent (AB6/3934).
On 15 June 2011, Sandoz received further advice from Mr Condon of Griffith Hack in light of the 2011 Ayres Decision (AB5/3364–72). Mr Condon expressed the view that the prospect of a successful appeal on the extension of time issue was greater than the chance of successfully opposing the substantive application for extension of the term of the Patent (AB5/3365 at [7]). Indeed, Mr Condon advised that Lundbeck was likely to “face little difficulty” in making out the requirements of s 70 of the Act if no appeal was undertaken (or if any appeal was unsuccessful) against the 2011 Ayres Decision (AB5/3369 at [20]). Mr Condon advised that if Lundbeck were ultimately to obtain an extension of term, then Sandoz would “undoubtedly be faced with the necessity of having to pay a significant sum of money to Lundbeck either by way of an account of profits or damages” (AB5/3370 at [26]). Mr Condon finally advised on the prospects of an appeal from the 2011 Ayers Decision at [30] (AB5/3371), saying that “on balance” Sandoz and others “ought to prevail” in an appeal, “particularly given the length of the extension of the term granted and the prejudice” to them, although “the outcome is not guaranteed”.
On 28 June 2011, Sandoz and the Other Generics sought a merits review of the 2011 Ayres Decision by the Administrative Appeals Tribunal (AAT). On 19 August 2011, Lundbeck applied to be joined as a party to that merits review. On 26 October 2011, Brereton J of the Supreme Court of New South Wales heard and granted Lundbeck’s application for an injunction to restrain Sandoz from disclosing the Settlement Agreement terms, subject to any leave granted by the AAT: [2011] NSWSC 1297 at [23]. Accordingly, the Settlement Agreement was not before the AAT on the merits review.
On 25 November 2011, Sandoz received advice from Mallesons Stephen Jaques that success by Sandoz and the Other Generics in the AAT in reversing the 2011 Ayres Decision was more probable than Lundbeck succeeding in the AAT on its extension of time (AB5/3243–6).
On 4 December 2012, after a contested hearing, the 2012 Tribunal Decision was delivered, affirming the 2011 Ayres Decision.
On 21 December 2012, Sandoz and the Other Generics appealed the 2012 Tribunal Decision to the Full Court of the Federal Court. In filing their appeal, Sandoz and the Other Generics also filed an interlocutory application to stay the implementation of the 2011 Ayres Decision pending the determination of the appeal of the 2012 Tribunal Decision to the Full Court. On 9 April 2013, that interlocutory application was dismissed.
On 30 May 2013, the notice of acceptance of Lundbeck’s application for the Second Extension of Term was published in the Official Journal of Patents. On 20 August 2013, Sandoz and the Other Generics filed their notices of opposition to the grant of the Second Extension of Term.
On 18 November 2013, the 2013 Full Court Decision was delivered, dismissing an application by Sandoz and the Other Generics for judicial review of the 2012 Tribunal Decision.
On 18 December 2013, Sandoz filed the application to the Commissioner which is the subject of the present proceedings for a licence to exploit the invention claimed in the Patent under s 223(9) of the Act (AB1/111–5). It did so expressly without making any admission as to whether Sandoz and the Other Generics had in fact exploited the invention claimed in the Patent, that being a matter in dispute at that time (CB1/113).
On 28 January 2014, Lundbeck filed a Notice of Opposition to Sandoz’s licence application (AB1/124–5). In its covering letter, Corrs on behalf of Lundbeck noted the Commissioner’s proposal to stay the licence applications until after both the extension of time and the extension of term had been finally resolved, and indicated that it agrees that “it is pragmatic to stay the Licence Applications at this stage” (AB9/83). On 28 February 2014, Lundbeck filed its Statement of Grounds and Particulars of Opposition to Applications for Licences to Exploit an Invention (AB1/126–133). On 5 March 2014, the Commissioner stayed Lundbeck’s opposition to the s 223(9) licence applications pending the final resolution of (a) the appeal in relation to the extension of time, and (b) the extension of term (AB9/93). That stay continued until 11 March 2016.
On 11 April 2014, the High Court granted special leave to Alphapharm to appeal from the 2013 Full Court Decision concerning the grant of the extension of time. The leave granted related to the scope of the Commissioner’s power under s 223 to extend time for the filing of an application to extend the term of a patent.
On 25 June 2014, the Deputy Commissioner delivered the 2014 Barker Decision, granting Lundbeck’s application for an extension of term of the Patent based on the regulatory approval of CIPRAMIL. That decision involved the term of the Patent being retrospectively extended so as to expire on 9 December 2012.
On 26 June 2014, Lundbeck commenced infringement proceedings in the Federal Court against Sandoz and the Other Generics, alleging infringement of the Patent by conduct during the period of the retrospectively granted extension of term. In those proceedings, Sandoz denied that its conduct constituted exploitation of the Patent, and alternatively contended that by reason of the Settlement Agreement, Sandoz had a contractual licence from Lundbeck to exploit the Patent during the extended term of the Patent.
On 8 August 2014, the appeal by Alphapharm from the 2013 Full Court Decision was heard by the High Court. On 5 November 2014, the High Court delivered the 2014 High Court Decision. By a bare majority, the High Court dismissed Alphapharm’s appeal against the 2013 Full Court Decision, such that the exercise of the power to grant an extension of time to Lundbeck under s 223(2) was held to be valid.
On 6 December 2014, the 2014 Rares J Decision was delivered, dismissing an appeal by Sandoz and the Other Generics from the 2014 Barker Decision. The effect of that judgment was to uphold the Deputy Commissioner’s grant to Lundbeck of the extension of term of the Patent based on the regulatory approval of CIPRAMIL. On 7 November 2014, Lundbeck sought to have the stay of the oppositions to the licence applications lifted, and on 26 November 2014 the Commissioner notified Lundbeck that she declined to lift the stay in view of the appeal of the 2014 Rares J Decision (which had been filed on 20 November 2014).
On 22 September 2015, the 2015 Full Court Decision was delivered, dismissing an appeal by Sandoz and the Other Generics from the 2014 Rares J Decision.
On 23 November 2015, Lundbeck requested that the Commissioner dispose of the s 223(9) licence applications on the basis that “they do not (on their face) fulfil the threshold requirements” of s 223(9) of the Act (AB9/94).
On 2 December 2015, the Commissioner declined Lundbeck’s request by reference to the stay of Lundbeck’s opposition to the licence applications, on the basis that while the question of the extension of time had been finally resolved by a decision of the High Court, an application for special leave to appeal to the High Court in relation to the extension of term had been filed on 20 October 2015 but not yet resolved (AB9/119).
On 11 March 2016, the High Court heard and refused the application for special leave made by Sandoz and the Other Generics to appeal from the 2015 Full Court Decision. On 29 March 2016, the Commissioner notified the parties that the stay on the licence applications and the opposition had expired in view of the High Court’s decision (AB9/123). Between 8 April and 16 May 2016, Lundbeck, Sandoz and the Other Generics provided letters, followed by formal written submissions, to the Commissioner in relation to the future conduct of the s 223(9) licence applications, including a request by Lundbeck for separate determination of “threshold issues” for the grant of a licence under s 223(9), and a request by Sandoz and the Other Generics for a continuation of the stay of the s 223(9) licence applications. On 8 July 2016, the Commissioner issued the 2016 Spann Decision, refusing Lundbeck’s request for separate determination of the “threshold requirements”, and also refusing a request by Sandoz and the Other Generics for a continuation of the stay. The Commissioner directed that the s 223(9) licence applications proceed to a hearing on all issues and set a timetable for the exchange of evidence on those applications.
On 5 August 2016, Lundbeck commenced proceedings in the Federal Court seeking judicial review of the 2016 Spann Decision. On 3 February 2017, the 2017 Beach J Decision was delivered dismissing Lundbeck’s application for judicial review of the 2016 Spann Decision. Beach J made orders to give effect to those reasons on 14 February 2017, recording undertakings given by Lundbeck not to challenge his Honour’s decision until certain events had passed (AB4/2593–4). Those undertakings preclude Lundbeck from challenging his Honour’s decision until the commencement of any application for judicial review or appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) of a decision of the AAT on the s 223(9) licence applications (that is, until after the determination of the present proceeding).
On 8 May 2017, Sandoz filed its evidence in chief in support of the s 223(9) licence application in the Patent Office. On about 2 February 2018, Lundbeck filed its evidence in answer in the Patent Office. On 13 April 2018, Sandoz filed its evidence in reply in the Patent Office.
On 21 November 2018, the 2018 Jagot J Decision was delivered, finding that Sandoz had infringed the Patent. In that decision, Jagot J acknowledged the s 223(9) licence application which had been pleaded in Sandoz’s defence, stating at [550]:
I am also aware that Sandoz has pleaded that if it required a licence from Lundbeck to supply its escitalopram products (which, on my conclusions, it did from 15 June 2009 until 9 December 2012 and did not have a licence (which I have concluded it did not), then it has applied for such a licence under s 223(9) of the Patents Act. I have been informed that the application for a licence will be heard on 19 and 20 November 2018. My preliminary view is that the appropriate way to deal with this is for me to make final orders as appropriate once all required calculations are complete and for me to hear and determine any application for a stay of those orders as appropriate.
On 19 February 2019, after delivering supplementary reasons in the 2019 Jagot J Decision, Jagot J made orders consequent upon the 2018 Jagot J Decision, including a declaration that Sandoz had infringed the Patent and contravened the Australian Consumer Law by engaging in misleading or deceptive conduct (the latter finding has since been overturned by the High Court), and an order that Sandoz pay damages and interest in the manner set out in order 2 of those orders (February 2019 Orders).
On 20 March 2019, Beach J granted a stay of the execution of the order requiring Sandoz to pay damages and interest to Lundbeck until 10 May 2019, being the last day for an appeal. The stay was subsequently extended by consent on 7 May 2019 until 28 days after determination of this proceeding.
On 11 April 2019, the Deputy Commissioner issued the 2019 Barker Decision, finding that Sandoz should be granted a licence pursuant to s 223(9) of the Act commencing on 14 June 2009 and continuing until the expiration of the term of the Patent on 9 December 2012. The licence was expressly stated to be personal to Sandoz in the sense that it belongs to Sandoz, it may be transferred with Sandoz if Sandoz changes hands by acquisition or merger but cannot be assigned or transferred, and it cannot be sublicensed.
On 6 May 2019, Lundbeck applied for a review of the 2019 Barker Decision by commencing the present proceeding in the AAT. On 3 February 2020, Lundbeck amended its reasons for application for review in this proceeding, to abandon an argument that the terms of any statutory licence should include a royalty obligation (AB1/15 at 24, noting the deletion of the previous [59]).
On 4 August 2020, the 2020 Full Court Decision was delivered, finding that Sandoz had a defence to infringement based on the Settlement Agreement and setting aside the declaration and order for damages contained in the February 2019 Orders. The Full Court also found that:
(g)if damages were to be awarded to Lundbeck, a 2 to 3% reduction to the damages otherwise payable would be appropriate rather than the 25% reduction determined by Jagot J;
(h)it would have awarded pre-judgment interest to Lundbeck from the date on which the extension of the term of the Patent was granted (namely 25 June 2014) rather than the date of the first infringing acts (said to be 15 June 2009);
(i)Lundbeck Australia had no right to commence proceedings under s 79 for infringements of the Patent occurring between the end of the unextended term of the Patent and the grant of the extension of term; and
(j)the misleading or deceptive conduct claims commenced by Lundbeck and its related companies against Sandoz were dismissed because the patent infringement case failed.
On 25 August 2020, by consent, Lundbeck’s application in the present proceedings was stayed, pending the outcome of a special leave application and any appeal arising therefrom. On 11 February 2021, the High Court granted special leave to appeal from the 2020 Full Court Decision.
On 9 March 2022, the High Court delivered the 2022 High Court Decision in the infringement proceedings. The High Court reversed the 2020 Full Court Decision in part and remitted the proceedings for the recalculation of damages and pre-judgment interest payable to Lundbeck. The High Court also directed that the parties were to be given liberty to apply to the primary judge for a stay of the remitted proceedings pending the determination of the present proceeding before the AAT. In deciding that the matter should be remitted, Kiefel CJ, Gageler, Steward and Gleeson JJ said the following at [78]:
There is also no dispute between the parties that the order remitting the matter to the primary judge for the recalculation of damages should be framed to ensure that it does not prejudice the outcome of a pending review by the Administrative Appeals Tribunal sought by Lundbeck Denmark of the decision by the Commissioner, after the decision of the primary judge but before the decision of the Full Court, to grant a licence under s 223(9) of the Act and reg 22.21 of the Patents Regulations 1991 (Cth).
On 24 May 2022, the High Court made orders as follows:
1. Appeal allowed with costs.
2. Set aside orders 1, 2 and 3 made on 4 August 2020 and orders 1 and 2 made on 30 March 2021 of the Full Court of the Federal Court of Australia and, in their place, order that:
(a)the appeal and cross-appeal from the orders of the primary judge made on 19 February 2019 each be allowed in part;
(b)declare that the second respondent did not have rights to bring proceedings under s 79 of the Patents Act 1990 (Cth);
(c)orders 2 and 3 made by the primary judge on 19 February 2019 be set aside;
(d)declare that the first respondent is entitled to damages and pre-judgment interest calculated thereon;
(e)the matter be remitted to the primary judge for the recalculation of damages and pre-judgment interest payable to the first respondent;
(f)the parties be given liberty to apply to the primary judge for a stay of the remitted proceedings pending the determination of the proceedings relating to the licence granted to the appellant by the Commissioner of Patents on 11 April 2019 under s 223(9) of the Patents Act 1990 (Cth);
(g)the appellant pay the respondents’ costs to date in the proceedings before the primary judge, and costs of the appeal and cross-appeal to the Full Court of the Federal Court of Australia; and
(h)the appeal and cross-appeal be otherwise dismissed.
On 4 July 2023, the 2023 Yates J Decision was delivered, in which his Honour stayed the remitted proceedings pending the final determination of this proceeding (and any appeal therefrom).
IS SANDOZ ELIGIBLE TO APPLY FOR A STATUTORY LICENCE?
It is convenient to deal first with the question whether Sandoz is entitled to apply to the Commissioner for the grant of a licence pursuant to s 223(9) and reg 22.21(2)(c), before dealing with the appropriate terms of such a licence.
It will be observed at the outset that there is a significant difference between s 223(9), on the one hand, and reg 22.21(2)(c), on the other hand, in relation to the time period referred to in those provisions. Section 223(9) refers to acts done before the day on which the application for extension of time is advertised in the Official Journal (which in the present case was 23 July 2009), whereas reg 22.21(2)(c) refers to acts done within the period of time extended under s 223(9) (which in the present case was from 26 July 1999 to 12 June 2009). Both parties accept that those provisions concerning time are cumulative, in the sense that the applicant for a licence must satisfy both of them. I note at this point that it is possible to envisage cases where the date of advertising in the Official Journal might occur before the period of time extended under s 223(9), such as where the application for an extension of time arises in anticipation of an inability in the future to do the required act within time, that being one of the grounds for making an application under s 223(2). However, in the present case, it is reg 22.21(2)(c) which is more restrictive than s 223(9) in terms of the timing of the relevant acts of exploitation or definite steps to exploit.
I note also that, while s 223(9) refers to persons who exploited or took definite steps to exploit the invention, reg 22.21(2) refers also to persons who “availed themselves of” inventions. However, neither party was able to identify any practical significance in the concept of availing oneself of an invention beyond that which is captured by the concepts of exploiting or taking definite steps to exploit the invention. The words “availed themselves of” in reg 22.21(2) appear to have been included so as to reflect the language used in s 41(4) of the Act in relation to micro-organisms, which are dealt with in reg 22.21(2)(a). Further, I note that s 223(9) refers to “protection or compensation”, whereas reg 22.21 refers only to “the grant of licences”. Accordingly, there is a potential for the prescribed provisions to deal with compensation irrespective of the grant of a licence, but the prescribed provisions have not taken up that opportunity afforded by the section.
One question of construction raised by Lundbeck may be shortly disposed of. Lundbeck submits that s 223(9) does not contemplate an exploitation which occurs while the patent is in force and which is authorised. Lundbeck submits that a construction that includes an exploitation occurring while the patent is in force but which is not authorised (that is, an infringement) is counterintuitive. In a related submission, Lundbeck submits that s 223(9) refers only to an exploitation at a time when no patent is on foot (for example, because of the lapsing of the patent for non-payment of a fee).
I reject those submissions. The language used in s 223(9) and reg 22.21 does not require an act of exploitation to be unauthorised or to constitute an infringement. The definition of “exploit” in the Act does not import a requirement that, in order to fall within the meaning of “exploit”, the Act must be unauthorised or unlicensed. As Sandoz submits, that is confirmed by s 13 of the Act, which provides that a patent gives the patentee the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention. Accordingly, an act of exploitation may be licensed or unlicensed, and the definition of “exploit” is not tied to any need for a licence or otherwise. As Sandoz submits, that conclusion is also supported by the reference to “definite steps” in s 223(9) and reg 22.21, in that definite steps are not acts of infringement and do not require a licence. Accordingly, I reject the submission that an act of exploitation must be unauthorised or unlicensed in order to qualify for a licence under s 223(9).
As to the submission by Lundbeck that s 223(9) refers only to exploitation at a time when there is no patent on foot, I am unable to discern any language in s 223(9) which imposes such a limitation. Lundbeck accepted that the express language used in s 223(9) does not limit its application to exploitations at a time when no patent is on foot (T328.38–39), and I do not regard such a limitation as arising by way of implication from the express language used.
The principal controversy as to Sandoz’s entitlement to apply for a licence concerns whether, within the relevant time, Sandoz exploited or took definite steps to exploit the invention concerned “because of” Lundbeck’s failure to apply for an extension of term within the time allowed. As indicated above, the time for Lundbeck to make that application expired on 26 July 1999, approximately 10 years before the application was in fact made.
Lundbeck submitted that there was an absence of evidence from any decision-maker at Sandoz as to how it would have responded in those circumstances. That, however, is not determinative. In Abigroup Contractors Pty Ltd v Sydney Catchment Authority [2004] NSWCA 270; (2004) 208 ALR 630 at [85], Beazley JA (with whom Ipp and Tobias JJA agreed) said that in the case of an express negative statement that something does not exist, which is accepted at face value, it is not necessary in order to prove reliance for there to be an evidentiary statement to the effect that the representation was relied on, in that reliance can be inferred from all the circumstances including from a party’s conduct. In that case, the availability of the thing which was wrongfully represented not to exist would have led to a chain of inquiry being instigated by the claimant (at [79]). The present case raises a similar, but not identical, problem. Lundbeck did not expressly state that it would not apply for an extension of time and term to the Commissioner under s 223, but it had not done so for the decade that had elapsed since the time required for that application expired on 26 July 1999, and would have appeared to Sandoz to be proceeding on the basis that the date of expiry of the Patent was a matter for the Full Court. As I have indicated, there is no evidence that Sandoz was aware of the possibility of Lundbeck applying for an extension of time and term under s 223 until Mr Condon raised that as a possibility on 27 May 2009.
The evidence discussed above confirms that the possibility of Lundbeck applying for an extension of time and term under s 223, once raised by Mr Condon on 27 May 2009, was given careful consideration by Sandoz. As such, the obvious inference is that Lundbeck’s failure to apply for an extension of time and term prior to Sandoz’s decision to import its ESITALO product materially contributed to that decision. This provides an independent line of support for my conclusion that Sandoz’s exploitation occurred “because of” Lundbeck’s default.
It is not necessary for me to deal with the additional question whether Sandoz took “definite steps” to exploit the invention by 12 June 2009. That question raises the issue whether Sandoz’s preparations for its launch of ESITALO constituted “definite steps” in circumstances where the launch was conditional on approval being given by the IPLC (or in the absence of IPLC approval, by the global CEO giving his approval), and the IPLC did not in fact give its approval until 14 June 2009. In light of the fact that I have found that Sandoz actually exploited the invention before 12 June 2009, it is not necessary to decide whether Sandoz also took definite steps to do so.
Nor is it necessary for me to deal with the question whether the concept of “the ceasing of the patent” towards the end of s 223(9) includes the expiry of the patent. Beach J held that it did in the 2017 Beach J Decision at [129]–[133]. Jagot J held that it did not in the 2018 Jagot J Decision at [136]–[159]. The Full Court (of which Beach J was a member) did not need to decide whether “ceasing” in s 223(9) (as distinct from s 223(7) and s 223(10)(b)) included “expiry”: 2020 Full Court Decision at [81]. As Sandoz has established that it exploited the Patent in the relevant timeframe “because of the failure [by Lundbeck] to do the relevant act within the time allowed”, that is sufficient to qualify Sandoz as eligible to apply for a statutory licence.
WHAT ARE THE APPROPRIATE TERMS OF THE LICENCE?
There is an initial question as to the intended purpose and scope of s 223(9) and reg 22.21(2), which in turn informs the decision as to what are reasonable terms for the licence for which I have held Sandoz is entitled to apply. This is in effect a question of construction of those provisions.
Section 223(9) refers to the prescribed provisions (relevantly reg 22.21) as performing the operative function contemplated by the subsection. The purpose of the prescribed provisions is then identified as being for the protection or compensation of persons who, before the day on which the application for extension of time is advertised in the Official Journal, exploited or took definite steps to exploit the invention concerned because of one of the three stipulated matters, which include the failure to do the relevant act within the time allowed. That statement identifies not only the eligibility criteria which qualify persons for the protection or compensation in question, but also identifies the interest of such persons which is contemplated to be the subject-matter of that protection or compensation. Accordingly, the purpose of the statutory licence for which such persons may apply to the Commissioner under reg 22.21(2) is relevantly to protect them for their exploitation (or their taking of definite steps to exploit) the invention within the relevant timeframe because of one of the three alternatives set out at the end of section 223(9). That construction is consistent with the fact that a person who does not exploit (or take definite steps to exploit) the invention until after the applicable timeframe has no entitlement at all to a statutory licence. I note that the 2014 High Court Decision at [64] referred to s 223 as having a “broadly protective and remedial” operation, but that proposition does not justify applying the section beyond its intended purpose.
The timeframe referred to in s 223(9), namely before the day on which the application for extension of time is advertised in the Official Journal, in the present case is the period up to 23 July 2009. However, that is further refined by the prescribed provision, relevantly reg 22.21(2)(c), which refers to matters within the period of time extended under subs 223(9); that is, in the present case, the period from 26 July 1999 to 12 June 2009. Accordingly, in the present case, the purpose and scope of the statutory licence is to protect persons who exploited (or took definite steps to exploit) the invention claimed in the Patent by 12 June 2009 because of Lundbeck’s failure to make an application for an extension of the term of the Patent by 26 July 1999, and the licence should be framed so as to protect any such person for such acts of exploiting (or taking definite steps to exploit) the invention.
Regulation 22.21(5) refers to the licence being “on such terms as the Commissioner thinks reasonable”. However, I do not regard that as being an independent or freestanding provision, to be construed in isolation from subs 223(9) and reg 22.21(2). On the contrary, reg 22.21(5) must be applied consistently with the proper construction of those other provisions.
As I have said above, Sandoz exploited the invention claimed in the Patent by importing 49,382 units of escitalopram into Australia before 12 June 2009 and by keeping those units in its warehouse. As I have said above, those units were packaged in a way that was specific to the Australian market, such that the only commercially viable alternative to selling them in Australia was simply to destroy them. In my view, Sandoz is entitled to a licence entitling it not only to import and keep those units but also to sell those 49,382 units, irrespective of whether those sales took place before or after 12 June 2009. The evidence demonstrates that Sandoz did not launch its ESITALO product until 15 June 2009 and began selling on 16 June 2009, and thus the sales of the 49,382 units all occurred after 12 June 2009.
There was a substantial body of expert accounting evidence directed to the question of the date by which Sandoz’s revenue from those sales exceeded its expenses, so as to formulate a date on which the statutory licence would come to an end. However, I regard Sandoz as entitled to earn its ordinary profit margin on the sales of the 49,382 units, as the appropriate reward for the commercial risks undertaken by Sandoz. Accordingly, I do not regard it as appropriate to frame the statutory licence by reference to an end-date, but simply to express the licence in terms of authorising Sandoz to sell those units in Australia and to take the relevant ancillary steps (namely importing, keeping, offering to sell and disposing of those units).
I note at this point that Sandoz imported further batches of ESITALO into Australia between 12 June and 23 July 2009, and entered them in its Warehouse Management System on 14 June, 30 June and 7 July 2009. Those acts of exploitation occurred before 23 July 2009, being the date of advertising of Lundbeck’s application for an extension of time in the Official Journal. If one were to read s 223(9) in isolation, it would convey the impression that the acts of exploiting the invention up to 23 July 2009 are just as much the appropriate subject of a statutory licence as the acts of exploitation up until 12 June 2009. However, s 223(9) cannot be read in isolation because it refers to the prescribed provisions as having the operative effect for the protection in question, and reg 22.21(2)(c) refers to the different timeframe of 12 June 2009. In any event, neither party submitted as a fall-back that the statutory licence should be framed so as to protect Sandoz for the units imported by 23 July 2009, and to be confined to authorising the sales of those units. Further, as will be apparent from my reasoning below on the alternative construction (which I regard as erroneous) that, once a person is shown to be eligible to apply for a licence the appropriate terms of that licence are at large, I would not as a matter of discretion grant Sandoz a licence for the sale of units imported in the period after the launch of ESITALO was approved by the IPLC on 14 June 2009.
Lundbeck accepted that a licence under s 223(9) is not necessarily confined to permitting the acts of exploitation of (or the taking of definite steps to exploit) the invention within the relevant timeframe, but can extend to subsequent acts if the subsequent acts are causally related to the acts done within the timeframe. In particular, Lundbeck accepted that, in the present case, if the importations and sales made after 12 June 2009 were causally connected to the importations before 12 June 2009 then they might qualify for protection by way of the statutory licence. Lundbeck puts forward the example of a person who might have built a single-purpose machine at great expense as a definite step towards making the invention within the relevant timeframe and would suffer substantially if the machine could not be used to make (in order to sell) the invented product (T286.16–22). Such a person may well be given a licence to sell the invented product after the relevant qualifying period under s 223(9) and reg 22.21(2)(c). However, Lundbeck submits that the importations and sales made by Sandoz after 12 June 2009 were not causally connected with the importations of the 49,382 units which were imported and kept before 12 June 2009. Putting to one side the sale in Australia of those 49,382 units which I have already dealt with, I agree with Lundbeck’s submission for the reasons which follow. With that exception, the evidence is clear that Sandoz would have made the sales on and after its launch on 15 June 2009 irrespective of its pre-12 June 2009 imports, using imports of stock from the period after 12 June 2009.
The oral evidence of Mr Turner given before me, which I note was not available to the delegate of the Commissioner in making the 2019 Barker Decision on the statutory licence, makes it clear that the sales which Sandoz made after 15 June 2009 would have occurred with or without the importation which took place before 12 June 2009. Mr Turner gave unequivocal evidence that if Sandoz had not imported its ESITALO product in the period up to 12 June 2009, it would have imported and sold its ESITALO product on and after 15 June 2009 (T203.34–36). There is no suggestion by Sandoz that the volume of sales which is the subject of Lundbeck’s damages claim would have been different with or without the pre-12 June 2009 importation, and at most there may have been a very minimal (if not negligible) difference in the timing of the sales.
Further, Sandoz submits, and I accept, that there is a substantial body of other evidence to the effect that Sandoz would have entered the escitalopram market after 15 June 2009 without the importation before 12 June 2009. It is clear that Lundbeck, by its sales of products containing escitalopram, had created a significant and valuable market (as Mr Turner accepted: T202.25–27; and see to similar effect Mr Sharkey’s evidence at T220.15–18). Sandoz was interested in entering the escitalopram market as soon as it could, including by seeking to revoke the Patent by the Sandoz Revocation Proceeding, as Mr Sharkey accepted (T221.10–12). Sandoz’s contemporaneous internal assessment of that market was that it was valuable and that Sandoz expected to capture a significant market share, which necessitated imports far in excess of the 49,832 units (see the “Forecast Sales” spreadsheets from October 2008: AB2/660 at [33] and AB2/763–822). A key purpose of Sandoz’s entry into the Settlement Agreement was the securing of the major commercial advantage over its generic competitors of an early entry licence under the Patent, the commencement date of which depended on the date of expiry of the Patent, as Mr Sharkey said in his affidavit evidence (AB5/2947 at [29]). Mr Sharkey also said that the commercial regional head of Sandoz in Singapore wanted Sandoz to enter the escitalopram market (T239.32–34). There is no reference in any of the documents submitted to the IPLC on 14 June 2009 for approval of the launch on 15 June 2009 to the pre-12 June 2009 importation being a reason why the launch should, or needed to, proceed. On the contrary, even after that importation and up until 14 June 2009, Sandoz was not committed to launching ESITALO, and absent approval by the IPLC (or alternatively by the global CEO) Sandoz would not have proceeded with the launch.
Lundbeck submits, and I accept, that the key considerations informing the launch on 15 June 2009 were an assessment of the commercial benefits of entry into a valuable market which Sandoz’s generic competitors were, to Sandoz’s knowledge, also preparing to enter, weighed against its assessment of the ultimate risk of infringement (whether by reason of any successful appeal by Lundbeck to the High Court or success of Lundbeck’s application made on 12 June 2009 to extend time to lodge an extension of term application based on the CIPRAMIL ARTG registration and any consequential extension of term). The IPLC considered those matters on 14 June 2009, being after the end of the relevant period for the purpose of reg 22.21(2)(c), namely up to 12 June 2009.
Further, Sandoz did not adduce any evidence to the effect that it would not have launched ESITALO at all on or after 15 June 2009, or at least not until after 9 December 2012, if it had not imported the stock before 12 June 2009. Mr Turner’s evidence in chief (which I consider further below) did include evidence as to the potential detriment to Sandoz in a hypothetical scenario in which Sandoz commenced to sell ESITALO on 15 June 2009 but stopped the sale of those products on 1 July 2009 and did not re-commence sales until 10 December 2012 (AB4/2691–4). However, as I have said above, Mr Turner accepted that, with or without the importation before 12 June 2009, Sandoz would have launched on or after 15 June 2009.
Accordingly, in the circumstances of the present case, no sufficient basis has been shown for a licence which would permit sales by Sandoz of its escitalopram product after 12 June 2009, except in relation to the 49,382 units which had been imported before that date.
I turn now to consider Sandoz’s application for a licence on the alternative construction of s 223(9) and reg 22.21(2) which is advanced by Sandoz, against the possibility that the construction which I have adopted above is too narrow. Sandoz submits that the timeframes stipulated in s 223(9) and reg 22.21(2) have the effect only of setting out the criteria which qualify a person to make an application for a licence, but do not constrain the purpose or scope of the licence itself. Sandoz submits that, once a person is shown to be eligible to apply for a licence, the discretion conferred by reg 22.21(5) is open-ended and at large. Sandoz thus submits that it should be granted a licence covering the whole of the period of the extension of term from 14 June 2009 to 9 December 2012.
Sandoz emphasises that the term of the Patent was not in fact extended until 25 June 2014, well after the expiry of the period of the extended term. Consequently, the Patent was not in fact in force at any point in time during the relevant period. Sandoz submits that the retrospective extension of the term of the Patent occurred more than five years after the expiry of its original 20 year term, and more than 1½ years after the expiry of the term as ultimately extended, thereby exposing Sandoz to the prospect of infringement allegations in proceedings commenced by Lundbeck well after the expiry of that extended term.
Sandoz submits, and I accept, that the circumstances arose because of Lundbeck’s conduct, in particular Lundbeck’s failure to apply for an extension of term of the Patent based on the ARTG registration of CIPRAMIL by 26 July 1999. Sandoz submits that it was because of that failure that Sandoz was faced with a decision in May and June 2009 as to whether to proceed with the launch of its product, including by taking advantage of the rights it had been granted by Lundbeck under the Settlement Agreement, and the whole process of decision-making (involving the balancing of risks) would not have arisen if Lundbeck had applied for an extension of term within time. Sandoz refers to various points in time after 26 July 1999 when Lundbeck did not attempt to rectify its failure to do the relevant act or notify Sandoz that it would seek an extension of time to do so, including upon being notified of the issue by Watermark in July 2005, upon receipt of the 2006 Barker Decision and upon receipt of the 2008 Lindgren J Decision. Sandoz submits that Lundbeck was well aware of the possibility that CIPRAMIL (as opposed to LEXAPRO) could be held to be the correct basis for any extension of term of the Patent, but at least by the time of the 2008 Lindgren J Decision, it appeared to Sandoz that Lundbeck was not pursuing 9 December 2012 as a possible expiry date. Further, Sandoz submits that, as a practical matter, the question of the extension of time would not be resolved promptly, and that any extension of term based on CIPRAMIL (if granted) would not be granted until years after the event, with the result that if Sandoz had not launched in June 2009, the effect would be to afford Lundbeck the monopoly conferred by the extension of term before Lundbeck had even received it, and in circumstances where it had applied for the extension almost ten years out of time.
Sandoz submits that the position in which it was placed as at 12 June 2009, having regard to the events up to that point in time, was as follows:
(a)in February 2007, after initially challenging the validity of the Patent and the extension of term based on the ARTG registration of LEXAPRO, Sandoz had entered into the Settlement Agreement with Lundbeck, giving up its dispute with Lundbeck in exchange for the grant of an “early entry” licence which was framed by reference to the expiry date of the Patent;
(b)from October 2007, Sandoz had taken numerous other steps towards launching its product, including obtaining ARTG listing, obtaining PBS listing, and making arrangements for manufacturing, packaging and supply of the products;
(c)at least from April 2008, when the 2008 Lindgren J Decision was delivered, the position at law was that the extension of term of the Patent based on the ARTG registration of Lexapro was invalid and that the Patent would expire on 13 June 2009 at the end of the original 20 year term;
(d)by May 2009, Lundbeck’s appeal against the 2008 Lindgren J Decision had been heard but not determined. Sandoz had not been put on notice by Lundbeck (unlike Alphapharm and Arrow months earlier) that Lundbeck intended to file an application for extension of time and a contingent application for extension of term based on the ARTG approval of CIPRAMIL, if Lundbeck’s appeal against the 2008 Lindgren J Decision failed;
(e)in late May 2009, Sandoz had imported product pursuant to its rights under the Settlement Agreement in anticipation of supplying from 1 June 2009;
(f)Sandoz had received correspondence from Lundbeck’s solicitors in late May 2009, requesting that it hold off launching its product until after the Full Court’s decision was handed down, a proposal to which Sandoz reasonably agreed notwithstanding its rights under the Settlement Agreement. That correspondence contained an assertion to the effect that Lundbeck would seek an order from the Full Court for a 9 December 2012 expiry date if its appeal failed (which in fact Lundbeck did not seek and which did not appear to have any proper basis). The correspondence did not notify Sandoz that Lundbeck would seek an extension of time;
(g)in late May and early June 2009, Sandoz received urgent advice from Mr Condon which raised (for the first time and by way of a hypothetical scenario) the possibility of Lundbeck applying for an extension of time, but indicated that the prospects of any such extension being granted in the circumstances were low;
(h)the 2009 Full Court Decision had been handed down on 11 June 2009, with orders being made in the early afternoon of 12 June 2009, dismissing Lundbeck’s appeal against the order removing the extension of term based on the ARTG registration of LEXAPRO and upholding an expiry date of 13 June 2009; and
(i)late in the afternoon of 12 June 2009, Sandoz was notified by Lundbeck (via Corrs) that Lundbeck intended to file a fresh application for extension of term of the Patent based on the ARTG approval of CIPRAMIL, and an accompanying application under s 223 of the Act for an extension of time in which to apply for that extension of term. Sandoz was not provided with copies of those applications or the material filed with them, which had already been lodged with IP Australia.
Sandoz submits, as a result of those matters, that the position on the afternoon of Friday 12 June 2009, objectively assessed from Sandoz’s perspective, included the following considerations, which I accept subject to the qualifications which I indicate below:
(a)the Patent was due to, and would, expire the next day, on 13 June 2009;
(b)Sandoz was ready to launch its product through steps undertaken over a period of many months following its entry into the Settlement Agreement (which I note must be qualified by reference to the fact that Sandoz had not yet obtained IPLC approval);
(c)Lundbeck had for the first time only that afternoon informed Sandoz that it would apply for an extension of time in which to seek an extension of term based on the ARTG registration of CIPRAMIL, but Sandoz was given no details of that application or the basis on which it would be sought;
(d)there were very serious doubts about the merits of any such application, given the length of the extension of time which was required, Lundbeck’s failure to take steps earlier to support or seek a 9 December 2022 expiry date, and its failure to articulate or disclose any basis for an extension of time;
(e)there was an unresolved question about whether there was even a power under s 223(2) to grant an extension of time in which to apply to extend the term of a patent (which was not finally resolved until the 2014 High Court Decision, by a bare majority);
(f)there was at least a reasonably arguable position that, in circumstance where the Patent would expire on 13 June 2009, the Settlement Agreement provided Sandoz with a complete defence to a claim of infringement during the period of any retrospectively granted extension of term (as found in the unanimous 2020 Full Court Decision, which was later overturned by the 2022 High Court Decision); and
(g)at best, the prospect of any extension of term of the Patent being granted retrospectively, after an extension of time, was objectively remote (although I note that that submission does not reflect the more measured and balanced terms of Mr Condon’s advice at the time).
Sandoz submits that, in these circumstances, its conduct in launching its products was plainly reasonable, and submits that it was not reasonable to expect that Sandoz would refrain from launching in those circumstances. Sandoz emphasises that this is not a case in which a generic pharmaceutical company launched an infringing product during the term of a Patent, in the hope that the Patent would later be found invalid and on the risk that it would not. Sandoz had settled the Sandoz Revocation Proceeding against Lundbeck, and agreed not to challenge the validity of the Patent under cl 1(b) of the Settlement Agreement. Sandoz submits that it waited for the Settlement Agreement stockpiling licence to commence before stockpiling, and waited for the Patent to expire before selling.
In relation to the period after 12 June 2009, Sandoz submits that, in circumstances where the Patent was not in force for the whole of the period of the retrospectively granted extension of term until 9 December 2012, the position remained relevantly the same. Sandoz submits, and I accept, that, although the 2011 Ayres Decision to grant an extension of time to Lundbeck was delivered on 1 June 2011:
(a)that decision was subject to merits review as of right before the AAT, and it was plainly reasonable for Sandoz (and the Other Generics) to seek review of that decision, as they in fact did. I note that there might be added to that submission that both Mr Condon on 15 June 2011 and Mallesons Stephen Jaques on 25 November 2011 advised that Sandoz was more likely than not to succeed in the AAT in challenging the extension of time;
(b)the AAT’s decision on review (namely the 2012 Tribunal Decision) was not delivered until 4 December 2012, only five days before the expiry of the extension of term which was later granted following the extension of term proceedings;
(c)the question whether Lundbeck actually had the benefit of the necessary extension of time was not finally resolved until the 2014 High Court Decision; and
(d)once the extension of time was granted, there was a bona fide dispute as to whether the extension of term should be granted, as reflected in the decisions concerning the extension of term, namely the 2014 Barker Decision, the 2014 Rares J Decision and the 2015 Full Court Decision.
Sandoz submits, and I accept, that, in circumstances where the resolution of Lundbeck’s entitlement to an extension of term based on CIPRAMIL was not resolved until after the extended term of the Patent had ended, it was not unreasonable for Sandoz to continue exploiting the invention. Sandoz submits, and I accept, that this is particularly so in light of the evidence of Mr Turner, which establishes that withdrawing Sandoz’s ESITALO product from the market in such circumstances would have had significant detrimental consequences for Sandoz (AB4/2686–2694). Lundbeck did not adduce any evidence in reply to that evidence of Mr Turner, and its attempts to undermine Mr Turner’s evidence in cross-examination were not successful (T205.23–208.11). Mr Turner’s evidence dealt in detail with Sandoz’s relationships with pharmacies, the importance to Sandoz’s pharmacy customers of reliability of supply, the typical circumstances of Sandoz withdrawing a pharmaceutical product from the market (namely where the product in question is loss-making or where there is a quality issue with the product) and the detrimental consequences for Sandoz of a scenario in which Sandoz may have commenced selling its ESITALO products on 15 June 2009, but stopped selling those products on 1 July 2009 and did not re-commence sales until 10 December 2012, especially reputational damage to Sandoz as a reliable manufacturer. Mr Turner said that the same consequences would occur if Sandoz commenced selling ESITALO on 15 June 2009 but stopped selling on 25 August 2009 and did not re-commence sales until 10 December 2012. Sandoz again draws attention to the fact that the extension of term based on the ARTG registration of CIPRAMIL was not granted until 25 June 2014, and the question whether Lundbeck had the benefit of the necessary extension of time in order to seek that extension of term was not finally resolved until the 2014 High Court Decision in November 2014. Accordingly, Sandoz submits, and I accept, that it was reasonable for it to continue to supply its product throughout the period of the retrospectively granted extension of term.
I accept that, at all material times, the conduct of Sandoz was reasonable. There was a range of reasonable responses which Sandoz may have made to the circumstances with which it was confronted, and its decisions to launch its ESITALO product on 15 June 2009, and to continue selling that product in the period to 9 December 2012, was within that range of reasonable decisions. It would also have been reasonable, in my view, for Sandoz to have decided not to launch its ESITALO product on 15 June 2009. The decision was one of commercial and legal judgment for the IPLC, in light of both the objective circumstances known to it and also its particular appetite for risk. However, the fact that Sandoz’s conduct was reasonable is no more than one of the factors to be taken into account in the decision as to what terms are reasonable for the statutory licence, and is not in itself determinative.
I also accept that Lundbeck’s conduct was reasonable. In particular, there was a reasonable basis for Lundbeck to believe that making an application for an extension of time and of term based on the ARTG registration of CIPRAMIL would not accord with the Act. I note that Jagot J expressed that view in the 2018 Jagot J Decision at [335], and I have reached the same conclusion myself (not, I should add, by reason of any perceived issue estoppel). Indeed, Sandoz in its closing submissions expressly did not contend that any aspect of Lundbeck’s conduct was unreasonable (see [86] and [90] of its Supplementary Closing Submissions and T378.34–46). In particular, Sandoz did not submit that Lundbeck’s conduct was designed to maintain uncertainty for Sandoz and the public for as long as possible, in contrast to the position which it took before the delegate of the Commissioner and in at least one other piece of litigation between these parties concerning the Patent, as recorded in the 2019 Barker Decision at [92]–[94]. Although there was considerable debate before me as to whether issue estoppels arose concerning the question of the parties’ reasonableness, I do not regard it as necessary to decide that question.
I note that Sandoz (at least in its Opening Written Submissions at [164]–[167]) submitted that it is relevant to take into account the public interest, and in particular the public benefit in Sandoz launching its generic product and thus saving the Commonwealth money expended on the PBS. I have taken that into account, but have not given it any substantial weight. The extended term of the Patent expired many years ago, and the significance of the present dispute relates to the quantification of damages payable by one commercial party to another. Sandoz did not dispute those propositions. On the contrary, its own submission was that “it is necessary … for the Tribunal to take account of events which have occurred since the period for which a licence is sought. For example, it is relevant that the extension of the term of the Patent based on the regulatory approval of CIPRAMIL was granted only retrospectively, well after the expiry of both the original 20 year term of the Patent and the period of the extended term” (Sandoz’s Supplementary Closing Submissions at [8]).
In my view, the most important factor in deciding the appropriate licence terms on the construction of the provisions advanced by Sandoz is that the IPLC’s decision on 14 June 2009 to approve the launch by Sandoz of ESITALO on 15 June 2009 was one which was taken “at risk” and with actual knowledge of Lundbeck’s application for an extension of time and of term. Sandoz received external legal advice on 27 May 2009 to the effect that Lundbeck could apply for an extension of time in order to make the application for an extension of term based on CIPRAMIL, thereby extending the term of the Patent to 9 December 2012. When Lundbeck made that application on 12 June 2009 following the Full Court’s decision, Sandoz was immediately put on notice and obtained advice on that application. It was not necessary for Sandoz to obtain a copy of the application as filed in order to obtain advice on it. Sandoz obtained advice on numerous occasions on both the potential for Lundbeck to make that application, and on Lundbeck having actually made that application, between 27 May and 14 June 2009. Further, Sandoz itself, guided by the advice of its lawyers, calculated the maximum damages and the most likely damages to which it would be exposed by launching its ESITALO product at risk. After the grant of the extension of time on 1 June 2011 by the 2011 Ayres Decision, Sandoz again obtained legal advice as to the risk which it faced, and decided to continue running that risk.
As I have said, Sandoz’s decision to do so was within the range of reasonable decisions for it to make. However, Sandoz ran a calculated legal risk which subsequently fell in against it, in pursuit of a sufficiently attractive commercial reward to justify running that risk, and with the benefit of the information reasonably available to it as to the potential risk and reward. In the circumstances of this case, I regard the deliberate and informed nature of that decision as having preponderant weight in the determination of reasonable licence terms. In all the circumstances, even if I had been persuaded of Sandoz’s construction of the relevant provisions, I would not have granted Sandoz a licence to sell its ESITALO product from 15 June 2009 to 9 December 2012 (except for the sale of the 49,382 units which had been imported by 12 June 2009).
Sandoz advanced an alternative position in its closing address, which in essence would involve framing the terms of the licence so that Sandoz does not retain the profits which it made from sales of its ESITALO product during the period of the extended term. Sandoz submits that it is open to the Commissioner (and in this review the AAT) to impose such a term, as reg 22.21(5) confers an unfettered discretion to grant a licence to the applicant “on such terms as the Commissioner thinks reasonable”. Sandoz submits that there is no reason why this should not extend to a licence that includes a condition for the disgorgement of profits, if such a licence is considered appropriate. For the purpose of quantifying its profits, Sandoz refers to the evidence by the expert accountant engaged by Lundbeck, Mr Stone, in proceedings in the Patent Office in support of its opposition to Sandoz’s licence application to the effect that Sandoz’s profit (excluding interest) arising from its launch and continued sales of its ESITALO product from June 2009 was approximately $1 million (AB3/1405 and 1405A).
Assuming (but without deciding) that it is open to impose such terms, I do not regard Sandoz’s alternative position as reasonable. In the first place, as I have said, I do not regard it as appropriate to grant a licence to Sandoz for the full term until 9 December 2012, even if I were to accept Sandoz’s construction of the legislative provisions. In any event, adopting Sandoz’s alternative position would constitute a breach of the requirements of procedural fairness, in that the quantification of Sandoz’s profit was not raised by Sandoz as an issue for this hearing, either by way of its Amended Statement of Facts, Issues and Contentions (AB1/47–59) or elsewhere before Sandoz’s closing written submissions were handed up on the second last day of the hearing, as Lundbeck submitted (T440.29–441.8)
CONCLUSION
Accordingly, while I am satisfied that Sandoz is entitled to a licence pursuant to s 223(9), I do not regard it as reasonable for that licence to be for the period from 14 June 2009 to 9 December 2012, and I therefore set aside the decision of the delegate of the Commissioner made in the 2019 Barker Decision. In its place, the terms which I regard as reasonable are that Sandoz be entitled to exploit (including by way of sale) the invention claimed in the Patent in relation to the 49,382 units of escitalopram (comprising 29,734 10mg units and 19,648 20mg units) which it had imported by 12 June 2009. Regulation 22.21(5) thus compels me to grant a licence to Sandoz on those terms.
DECISION
The decision of the delegate of the Commissioner of Patents dated 11 April 2019 be set aside.
The respondent be granted a licence pursuant to s 223(9) of the Patents Act 1990 (Cth) and reg 22.21(2) of the Patents Regulations 2001 (Cth) to sell or otherwise dispose of, offer to sell or otherwise dispose of, import and keep for those purposes 49,382 units of ESITALO products (comprising 29,734 10mg units and 19,848 20mg units), being the units which it imported by 12 June 2009.
I certify that the preceding 149 (one hundred and forty-nine) paragraphs are a true copy of the reasons for the decision herein of Honourable Justice Jackman, Deputy President
................................SGD........................................
Associate
Dated: 18 September 2024
Date(s) of hearing: 22-30 August 2024 Counsel for the Applicant: Mr A Bannon SC, Mr L Merrick SC and Ms C Cunliffe Counsel for the Respondent: Mr C Dimitriadis SC and Ms M Evetts
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