H. Lundbeck A-s & Anor v Sandoz Pty Ltd; CNS Pharma Pty Ltd v Sandoz Pty Ltd

[2021] HCATrans 13

[2021] HCATrans 013

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S154 of 2020

B e t w e e n -

H. LUNDBECK A/S

First Applicant

LUNDBECK AUSTRALIA PTY LTD ACN 070 094 290

Second Applicant

and

SANDOZ PTY LTD ACN 075 449 553

Respondent

Office of the Registry
  Sydney  No S155 of 2020

B e t w e e n -

CNS PHARMA PTY LTD ACN 121 515 400

Applicant

and

SANDOZ PTY LTD ACN 075 449 553

Respondent

Applications for special leave to appeal

GAGELER J
GORDON J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 11 FEBRUARY 2021, AT 10.14 AM

Copyright in the High Court of Australia

____________________

MR A.J.L. BANNON, SC:   May it please the Court, I appear with my learned friends, MR L. MERRICK and MS C.I. CUNLIFFE, for the applicants in those two matters.  (instructed by Corrs Chambers Westgarth)

MR N.J. YOUNG, QC:   Your Honours, I appear with MR A.R. LANG, SC, for the respondent.  (instructed by Clayton Utz)

GAGELER J:   Mr Bannon.

MR BANNON:   Thank you, your Honour.  Your Honours, application S154 of 2020 concerns proceedings for infringement of a pharmaceutical patent, by the patentee H. Lundbeck A/S and its exclusive licensee, Lundbeck Australia v Sandoz.  Application S155 concerns proceedings by related companies CNS Pharma v Sandoz for misleading conduct and failing to warn pharmacists that the supply of Sandoz product might infringe the patent. 

GAGELER J:   It raises no question of principle, does it?

MR BANNON:   It follows, yes.

GAGELER J:   It follows from the first.

MR BANNON:   Yes.  If special leave were to be granted, I would anticipate our learned friends would seek ‑ may seek to contest the finding as to whether or not there was a relevant misleading conduct.  That was one of the matters argued in front of the Full Court ‑ ‑ ‑ 

GORDON J:   In the Pharma matter?

MR BANNON:   Yes, that is a fairly sure point, as to whether ‑ ‑ ‑ 

GAGELER J:   So, we are concerned with the question of contractual construction, and we are concerned with the operation of a couple of provisions of the Patents Act.

MR BANNON:   Quite so.  So, the key to both cases is that agreement.  There was also a defence – there were only two defences raised for the patent infringements – or the patent infringement issue.  So, validity was no longer an issue, infringement was no longer issue, in the sense that the products fell within the claims of the patent.  The two defences were the licence agreement and section 223(10).  We won both issues in front of the primary judge, Full Court overturned us on the licence agreement, but would have upheld her Honour’s finding in relation to 223(10).  As your Honour points out, the other two issues, 79 sections, go to questions of interest, and whether the exclusive licensee can get damages. 

EDELMAN J:  But you need to get through the construction or implication issue before you can get to those. 

MR BANNON:   That is quite so.  I was not going to spend much time on those two other issues because I have to satisfy your Honours that the construction issue warrants the grant of leave. 

Now, just to remind your Honours of the fundamental background.  The last day of original term of the patent was 12 June 2009, so it expired on 13 June 2009.  The term of the patent was extended some five years after the expiry of the patent on 25 June 2014, and that was after a contested section 223(2) extension of time to apply for a patent extension based on a Cipramil registration.  That was an issue which came before this Court and the extension was upheld – the power and the extension were upheld three to two.

So, the period of extension was 13 June 2009 to 9 December 2012.  Section 79 of the Patents Act which at application book 303 provides that:

If:

(a)a patentee applies for an extension of the term of a standard patent; and

(b)the term of the patent expires before the application is determined –

So there has to be an expiry of the patent, and that is what occurred here, the original term:

(c)      the extension is granted;

the patentee has, after the extension is granted, the same rights to –

proceed, in effect, during the period as if the extension had been granted from the date of the relevant acts of infringement.

Now, the Sandoz acts which were found to be infringing occurred between 15 June 2009 and 9 December 2012, so that is to say, they commenced after the expiry of the original term and they continued until 9 December 2012.  They were only infringing acts until that time because the extension was only granted until that time.  No doubt they continued to engage in the same…..thereafter.

Now, the relevant licence agreement appears at application book 241 and at the bottom of that page the licence granted:

irrevocable, non‑exclusive licence to the Patent effective from:

(a)      31 May 2009 if the Patent expires on 13 June 2009 –

Then (b), (c) and (d) give different effective dates, depending on different expiry dates and those different expiry dates related to potential extension of term outcomes.

EDELMAN J:   What was the magic in the two‑week period?

MR BANNON:   Each of them involved, on the face of it, a two‑week period.

EDELMAN J:   But why?  Why was two weeks the relevant period chosen?  Is there any explanation for that?

MR BANNON:   Because they wanted a two‑week early entry, a jump on the market.  The background – and I will take your Honours to a couple of brief paragraphs in the Full Court’s judgment which is not controversial – Sandoz at the time of the settlement was party to proceedings, including other generics – Alphapharm and two other generics ‑ ‑ ‑

GORDON J:   You get a better understanding of where it sits rather than taking it out of context if you look at the primary judge’s setting out of, in effect, the actual agreement itself ‑ ‑ ‑

MR BANNON:   Yes.

GORDON J:   ‑ ‑ ‑ which sits at page 92 of the application book.  It explains I think not only the history of how it is this settlement agreement came about, but explains in a sense some – or it would appear on its face to suggest some rationale for the two‑week period.

MR BANNON:   Quite, yes.  The rationale, as both the primary judge and Full Court found, was a two‑week early entry, you get a jump on the market.

GORDON J:   In other words, it was a compromise.  It was a deal done in order to permit them early entry into an activity they would not otherwise be entitled to undertake.  Is that your construction?

MR BANNON:   Exactly, exactly.  In circumstances where Sandoz had been a party to proceedings which were attacking the validity of the patent and also attacking the then grant of extensions.  So, as the primary judge points out, the benefit of having Sandoz out of the equation was there was one less party to deal with but the proceedings to attack the validity of the patent and the validity of the extensions were going to proceed anyway, so it was not the greatest – it was not the sort of benefit which would warrant from Lundbeck’s point of view more than a two‑week early entry.

Sandoz got a two‑week early entry, a jump on the competitors if events turned out which applied a benefit to it, but to translate that agreement into what the Full Court has found was a three and a half year royalty free licence is the leap of faith which, we say, is not justified on the agreement or any proper principle.

GAGELER J:   Everyone seemed to be acting on the assumption that at least by 1 May 2009, the expiration date would be fixed, known by everyone.

MR BANNON:   Yes.

GAGELER J:   As I understand it, if asked, well, could there be a retrospective extension of the patent, the answer would have been, well, possibly, but it is highly unlikely.  Is that the factual scenario?

MR BANNON:   Exactly.  If I can just briefly take your Honours to some paragraphs of her Honour’s judgment which specify that.  Firstly, at 262 at 97, her Honour says knowledge attributable to the parties “was not knowledge”, the three bullet points, that the extension of time could apply ‑ that it was a relevant extension of time.  Second that:

Lundbeck A/S would apply for and be granted an extension –

and those three matters are all important, that was not part of the knowledge.  And in 263 her Honour emphasises, in effect, the implausibility of the outcome.  Sorry, I should not say “implausibility”, the unlikelihood that the parties consider that as something they needed to address, and it includes, for example, about line 40, could the parties have thought or expected that the registration on which the extension was ultimately based which was out of time by several years by the time of the settlement agreement came into place, that the extension of time provision could apply, would apply, and there would have been an extension of time which would have resulted in the extension which generated that.  In other words, that is quite detailed analysis there to explain why it is what we say, and what the primary judge found, is that the agreement was not designed to and did not address the circumstances which eventuated.

GAGELER J:   But you still say it applied, do you not?

MR BANNON:   We say it applied to the patent ‑ ‑ ‑ 

GAGELER J:   You say it applied and only gave the two‑week extension.

MR BANNON:   Correct.  And that the primary judge’s analysis is right, at that time of expiry, that the patent, it did in fact expire, so that thereafter there was no licence which could operate in real time.  So, the patent was on foot, it in fact expired on 13 June 2009, they had the benefit of their licence, according to her Honour.  And after that time, the infringing acts occurred, they did not know they were infringing acts at the time, but there was no licence which could continue, that agreement was spent.

GAGELER J:   So, what was ‑ on the Full Court’s view, what was the licence of?

MR BANNON:   Well, they simply said “patent” means the patent, and as we look at it now, that patent has in fact been extended.

EDELMAN J:   A licence is not actually a conveyance of anything, it is a release from a liability that would otherwise exist, is it not?

MR BANNON:   Well, it is a grant of right to do something which would otherwise ‑ ‑ ‑ 

EDELMAN J:   It is not a right in a strict sense, it is a freedom to do something ‑ ‑ ‑ 

MR BANNON:   Yes.

EDELMAN J:   ‑ ‑ ‑ for which otherwise there would be a liability.

MR BANNON:   Yes, I think that ‑ we have referred to Grain Pool, which is the Court’s analysis of it, namely that, absent any patent, people would be free to do any of this activity; in the existence of a patent, they need a licence, and the characterisation of it is a grant of a freedom to do something which they otherwise would be precluded from doing.

EDELMAN J:   So, from the respondent’s point of view, actually, it does not really matter whether you have the patent or not, they want to be free to be able to conduct their activities from, as it turns out, 13 June 2009 onwards.

MR BANNON:   Yes.  But the patent was not a licence to the invention.  Sorry, the licence was not a licence to the invention, the embodiment of the patent.  And so that, once – it was only ever to the patent.  So it was only ever a licence to the rights, which were constituted by the patent, so once the patent lapsed, the agreement ‑ nobody has suggested the agreement was an agreement to give a licence to conduct the activity, because, as your Honour points out, there is no power in the patentee to grant that licence because people are free to do that.  It is only the relief from the patent.

So, therefore, after 13 June 2009, they were, as a matter of law, in fact free to do what they did.  The agreement did not and could not speak to that activity at that time, because the patent had, in fact, expired.  And what happened was, section 79 operated to operate retrospectively, but as her Honour found, there is no way that that agreement was intended to address the circumstance which eventuated.

EDELMAN J:   Well, at least one possible way of reading the licence is to read it as a grant of a freedom to conduct their activities effective from, and in the events that turned out, 31 May 2009.  Then, what you have to say is, well, there is effectively an implication that the risk is borne by the respondent beyond that two‑week period.

MR BANNON:   We would say it is not a freedom to act which can be divorced from the existence of a patent, because the only interest of anybody was the patent and its effect on people who were not beneficiaries of the patent.  So, we would, with respect, dispute that characterisation and we would also say that none of the courts below, the judges below, adopted that characterisation.  So, could I just – that was 206 ‑ ‑ ‑ 

GORDON J:   If you cut through this, the reality is this, is it not?  If you are right about the two weeks, and your argument really is they were on notice that this patent had expired ‑ ‑ ‑ 

MR BANNON:   Yes.

GORDON J:   ‑ ‑ ‑ there were notices of the application for extension, they made a commercial decision, 79 operated, and the rest follows.  That is your case?

MR BANNON:   Yes, exactly.  And, indeed, as we know, in fact, Sandoz, along with all of the other generics, vigorously opposed the extension of time.

GORDON J:   The extension, I understand.

MR BANNON:   And I understand that is post‑contractual conduct, but it is admissible, up to a point, to prove what was a likely common intention of the parties, pre‑contract.  That proves – that is some evidence that neither party expected that this agreement was directed to the circumstance which eventuated and her Honour’s reasons, in the paragraphs I have taken your Honours to, explain why it is.

In other words, they simply said, this agreement does not address and we are not going to try to address this circumstance because no other party thought it was on the cards.  Effectively, what the Full Court has said, well, look, it is a bit unfair on Sandoz to say that they thought they were going to come in and that they might have to stop, so therefore it cannot operate that way.  But once one analyses it from the point of view of two facts:  firstly, nobody could have thought that there was going to be, on the objective circumstance, what happened; secondly, when one reads the agreement ‑ ‑ ‑

GAGELER J:   Well, it was a possibility, was it not?

MR BANNON:   But not one which anyone decided was part of the reasonable contemplation of the parties as the subject matter of the agreement – I suppose that is the other point I have to add.

GORDON J:   That is why the construction of that agreement is so important.

MR BANNON:  Yes, and we say, as a matter of analysis in terms of real time – and when I say “real time”, if we are standing on 15 June when they start marketing the product, there was no patent.  They could not have had a licence.  The licence which they had under the agreement had expired.  There was no patent, so they made their activities – section 79 comes along and the Full Court simply does not analyse how it is that clause 3(1)(a) gets recharged in some way.

There is zero analysis.  They simply say, “Here is the definition of patent”.  They simply fail to come to grips with it.  We say the only way in which one might be able to address it is the doctrine of fiat of title, which, as far as we can tell, the Court has not considered, which involves the proposition that there is a promise to grant a right and part of that promise involves a representation to the effect that they have the title to grant it.

But you have to construe 3(1)(a) as a promise to grant a licence in respect of a patent which is extended on a later date and you cannot read that into it at all.  The reason we raise fiat of title is to say that it is an interesting point ‑ ‑ ‑

GAGELER J:   Well, it might be, but really nobody has analysed it in those terms.

MR BANNON:   Quite.

GAGELER J:   It really is just a question of construction.

MR BANNON:   Except to say that if – why we say it, your Honour, is because that is the only plausible way ‑ ‑ ‑

GORDON J:   You use it as a counterpoint.

MR BANNON:   Correct.  In circumstances where you have a licence which has been spent for five years and then section 79 comes along, what is the legal analysis which regenerates it?  We say the only thing we can point to, and nobody points to anything else, is fiat of title.

EDELMAN J:   Is your submission on construction effectively that by implication, you say by necessary implication, there is a terminus of the two weeks, no matter what the effective date is in either (a), (b), (c) or (d)?

MR BANNON:   We say it is more than that.  The licence was for two weeks up until the expiry of the patent.  The patent in fact expired.  The document, on its proper construction, was never directed to a post‑expiry date extension.  It did not address that at all.

EDELMAN J:   But that requires one to read it, irrevocable, non‑exclusive licence to the patent for a two‑week period, effective from (a), (b), (c) or (d). 

MR BANNON:   Your Honour, her Honour did not think that was necessary because her Honour says the document was spent.  As at 15 June 2009, there was no patent in respect to which any licence could be given.

EDELMAN J:   Which would make complete sense if you are talking about conveyance of something.

MR BANNON:   Yes.

EDELMAN J:   If you are talking about granting someone a freedom to engage in a particular type of conduct – if one thinks of a licence in those terms – then it does need to have a terminus because a freedom could be freedom for an infinite period of time.

MR BANNON:   Your Honours, could I just point out some paragraphs in relation to the Full Court judgment?  In paragraph 62 ‑ ‑ ‑

GORDON J:   Can I just ask, in response to Justice Edelman’s question, is not your point that there was a terminus ‑ ‑ ‑

MR BANNON:   Yes.

GORDON J:   ‑ ‑ ‑ in the sense that there was a two‑week period and once the patent expired, that was the end of it.

MR BANNON:   Exactly.  That is the ‑ ‑ ‑

GORDON J:   That was not the response you gave Justice Edelman. 

MR BANNON:   No.

GORDON J:   Is that your answer?

MR BANNON:   Yes, it is, your Honour.

GAGELER J:   It is Mr Young’s case that there is no terminus.

MR BANNON:   Yes, yes.

EDELMAN J:   That arises, I think, necessarily, does it not, by implication?

MR BANNON:   If that is the only way it is, then that is what we say is the situation.

EDELMAN J:   It is not expressly there, is it?

MR BANNON:   No, but it does not need to be if the patent is expired.  But, perhaps, I am saying the same thing in different ways.

EDELMAN J:   It is just that that then does bring you within the BP Refinery v Shire of Hastings fivefold requirements.  There may be a question as to whether all five individually need to be satisfied or whether they are indicia of a broader question.

MR BANNON:   Your Honour, if we have to go there, we embrace it, but we submit, we do not.  But, at the end of the day, one picks up this agreement and we see the clauses and the way the Full Court has construed it to say although (b), (c) and (d) expressly deal with extensions and only in the context of extension before the expiry date, yet a reasonable person – business person – looking at (a) would understand that (a) is actually is directed to a licence starting before the expiry and extending to any patent which may be extended thereafter.  No business person would pick up that agreement and interpret that but that is what they have, effectively, done.

In paragraph 62 of their Honours’ judgment at page 252, they expressly say that this agreement is not directed to the possibility of a post‑expiry extension.  Yet, it is exactly what they did.  So, the reason why special leave should be granted is, yes, it is a construction point.  It is important.  We rely on the doctrine of fiat of title to make it more interesting. 

GAGELER J:   …..need to make it more interesting.

GORDON J:   I do not know that is – I would not accept that.

MR BANNON:   It is the visitorial jurisdiction, your Honour.  We just say that this is something which has gone badly wrong. 

GAGELER J:   Thank you.  Mr Young.

MR YOUNG:   This does relate to the construction of specialised language of a particular clause of a settlement agreement.  In our submission, there is no question of general importance.

GAGELER J:   But that is a section 79 question – as one of general importance which we do get to if ‑ ‑ ‑

MR YOUNG:   We would say not, for reasons I will come to, your Honour, which are quite separate from the construction issues.  Our learned friend has left out of account, in his presentation, many factors relevant to construction and also relevant to the way in which the construction arguments were put below which I need to mention.

What the Full Court did was to apply the natural meaning of the language in clause 3(1)(a).  Can I turn to the clause at page 261 of the application book ‑ I am sorry, it is the wrong page I gave – at 241 and point this out.  As a matter of quite conscious choice, it is to be inferred, there is no terminus, there is no terminal date in respect of paragraph (1)(a), in particular, and also paragraph 3(2).  Both are effective from a specified date with no end date.

What the Full Court did was to say that that provision for a licence in those provisions with a commencement date and no end date allows for the objective possibility of an outstanding extension application as at 13 June 2009 subsequently being granted and if it is granted it has the effect of retrospectively imposing liability for infringements in what would otherwise be a gap period.  The effect of that retrospective operation of section 79 in those circumstances would be to negate any utility in the profit of licence that my learned friend says operates for two weeks from 31 May because that would mean there is no freedom to enter the market.  There is, in fact, no release.  There is an exposure retrospectively if an extension is subsequently granted to infringement proceedings.

Now, it is necessary to keep constantly in mind that this is a settlement agreement.  What Sandoz did was to give releases and give up its rights to challenge the validity of the patent and the validity of the extensions then on foot and the quid pro quo was the grant of a licence that granted it certain freedoms.  The language of 3(1) and 3(2) that operates from a particular date means that paragraph (a) is capable as a matter of natural language of operating in two circumstances.

The first is if all extension applications are rejected by the original expiry date of the patent, then there will simply be a licence for two weeks.  But if there is an outstanding application for an extension which might be granted later with retrospective consequences, then there is a grant of a freedom, a release, to do the acts covered by the patent commencing 31 May and continuing.

GAGELER J:   Until when?

MR YOUNG:   Continuing until the patent, if subsequently extended, expires.

GAGELER J:   In terms of the contractual language, you are saying – well, you are focusing on the plain meaning of the language, you have a non‑exclusive licence of a patent if the patent expires and you are saying that the non‑exclusive licence continues after the triggering event of expiration?

MR YOUNG:   Yes, because the patentee holds contingent future rights because of the extant application for an extension which, if granted, will give that patentee an ongoing patent after 13 June with the right retrospectively to sue for actions that take place in what I might call the “gap period”.

EDELMAN J:  In shorthand, it is a freedom from liability or from contingent liability. 

MR YOUNG:   It is, and the patentee had ample standing to grant that because it had an extant patent extension application which, if granted, would confer these rights to bring infringement suits.  So, they had full and complete standing to grant that release – that freedom – in respect of actions that would otherwise be covered by the patent and foreclosed to others.

EDELMAN J:  Does the ultimate question really come down to who bore the risk? 

MR YOUNG:   It does, but that is a question of coming back to the natural meaning of the language because, on the analysis of both courts, there were a range of possibilities that were open.  The likeliest possibility was that you would know the extension position by the original expiry date of 13 June.  But both courts accepted that there was an objective possibility, albeit more remote, that you would have an extant patent extension application not yet dealt with, creating effectively a Sword of Damocles and the threat of retrospective infringement actions, and that was the situation that stipulating an opening date and no end date allowed for.  That follows from the natural language that the parties have adopted in those circumstances.  So, that as the reasoning of the Full Court and it was ‑ ‑ ‑ 

GAGELER J:   The commercial purpose behind that was what? 

MR YOUNG:   Well, there is a confusion in the argument advanced by my learned friends between observations by both courts as to the surrounding circumstances and the objective possibilities, in the context of a settlement agreement where Sandoz gave up its rights to challenge validity and to challenge extension, in return for which they got this licence. 

So, the commercial purpose of the settlement agreement was that compromise:  give up rights in exchange for the benefit of the promised licence.  The question of construction is, what is the scope of the licence?  And you resolve that by looking at the natural language of the provision, having regard to the objective’s surrounding circumstances.  There was no commercial objective of this agreement to give a two‑week licence only, which effectively was an a priori assumption identified by the primary judge and then implemented.  It is open‑ended, as a matter of plain language and that addresses this other possibility. 

To that I would add this proposition in response in Justice Edelman.  In the context where what is being sought is a release, a freedom to do actions otherwise covered by the patent where there is a risk of future infringement proceedings, in view of the unresolved extension application, the notion of a two‑week freedom is without any utility whatsoever.  It offers nothing by way of quid pro quo towards Sandoz because that means it could enter the market in that two weeks, but thereafter it cannot continue because it would be at risk of infringement proceedings, and it would have given up its rights to challenge the validity of the patent by virtue of the settlement agreement. 

GORDON J:   I thought they would know that at the time they entered into the agreement. 

MR YOUNG:   The settlement agreement was 2007, the expiry date was ‑ ‑ ‑ 

GORDON J:   2009. 

MR YOUNG:   Yes.  So, there is two years.

GORDON J:   Yes. 

MR YOUNG:   But when they are negotiating the settlement agreement – and that is what we are concerned with, what is the scope of the settlement agreement ‑ all they can do is look ahead at the various objective possibilities, and what the position might be as of June 2009 – they do not have any certainty.

EDELMAN J:   The two‑week period is not inutile, though, because one might say, well, a two‑week jump on the market is still very valuable if the risk of an extension is miniscule.  It may be a risk that they were prepared to bear.

MR YOUNG:   Well, could I draw attention to this.  Below Lundbeck put the contrary argument, that this was a real ‑ ‑ ‑ 

GORDON J:   Was that to the trial judge, or to the Full Court?

MR YOUNG:   To the trial judge, and to the Full Court, that there was an objective possibility, a real one, that the fate of the extension application would not be known, and therefore there was this outstanding risk.  That is at page 251 of the application book, paragraph 61, the submission of Mr Bannon.  And over the page at 252:

He submitted that it would therefore not be appropriate to interpret cl 3 on the basis that the parties would know the expiry date by 1 May –

That argument led Lundbeck to argue that there was sufficient standing to grant a patent licence that operated for the two weeks leading up to 9 December 2012, that is paragraph 3(1)(b), and so they are arguing that there was sufficient title to grant a future patent for a future two‑week period, and secondly, that the basis for that construction was that there was a real risk and a real objective possibility that things would be unresolved at 13 June of 2009, there would be an exposure to risks.  And so they ran a completely contrary argument to the one that is being presented today.

EDELMAN J:   Was there any finding as to the extent of the risk that might be assumed that a retrospective licence would be granted – sorry, retrospective patent?

MR YOUNG:   It was described in both courts as an objective possibility that was remote, effectively.

GAGELER J:   It is common ground.

MR YOUNG:   I beg your pardon?

GAGELER J:   It has been common ground.

MR YOUNG:   Yes, well ‑ ‑ ‑ 

GAGELER J:   Well, it is now, anyway.

MR YOUNG:   It is now, it is now, I think is the best way of putting it, because Lundbeck put this other argument below, that it was a sufficient risk that the clause should be interpreted in the light of that risk, and to address it which, of course, is our argument.  That really is one vital part of the difference in approach between the Full Court and her Honour.  The other difference is her Honour inserted an a priori assumption that you should treat this as if there were two patent concepts, or two patent phases.  Her Honour construed the clause as if the patent referred only to the patent up until the original expiry date of 13 June.

The Full Court disagreed on the basis the patent was the same patent.  It met the patent for its original term and the term of any extension, whatever the date of the grant of the extension.  In our submission, the Full Court was clearly correct in that regard.  That supposition about two patents was the basis upon which the primary judge arrived at her perception that the true nature of the bargain was a contract for two weeks.  That was effectively by way of a priori assumption rather than by any process of reasoning or construction. 

Can I go to what the Full Court says at page 250, paragraph 56.  This is the one critical difference that led to the difference between the primary judge and the Full Court.  Can I go back then to page 244 and the primary judge’s reasoning that got her there.  Paragraph 34 extracts the reasoning of the primary judge.

GORDON J:   Which page are we on, Mr Young?

MR YOUNG:   Page 244, your Honour.

GORDON J:   Thank you.

MR YOUNG:   The first passage refers to her Honour’s conclusion that “the licence operated for a two week period”.  Towards the end of that passage there is a sentence commencing “What the parties bargained for”.  So, her Honour has arrived at that, not by construction, but by some assumption or perception that that was the real bargain – two weeks.  At paragraph 35 the Full Court points out that her Honour’s reasoning was based upon distinguishing two patent phases.  Can I then turn to ‑ ‑ ‑

GORDON J:   Is it so much a construction question as the Full Court put it, or is it a question of the operation of 79 in relation to the facts as found?

MR YOUNG:   No, it is a question of construction.  Even the primary judge considered that the effect of section 79 was to give contingent future rights to a patentee who at expiry date has an unresolved extension application on foot.  Even the primary judge said that at page 72, paragraph 193.  Her consideration was that a patentee with an unresolved patent extension application the date of expiry, has contingently already vested in it these rights under section 79 if the extension is granted at a later date.

In our respectful submission, that is correct, it has not been doubted.  That is why the feeding ‑ the title concept is a late thought and a bad one by my learned friend.  But ultimately, for the reasons I have referred to, this is an idiosyncratic question of construction of a particular clause of a settlement agreement.  And, in our respectful submission, properly understood, there is no reason to doubt the construction adopted by the Full Court, which gave effect to the natural language chosen by the parties in surrounding circumstances of a degree of uncertainty about future possibilities. 

GAGELER J:   What do you say about the section 79 point? 

MR YOUNG:   Section 79 is explicit in its terms.  The patentee’s rights only arise after the extension is granted.  They render actionable, when that circumstance arrives, actions that took place at an earlier date during what I will call the gap period, but the language of section 79 is explicit.  There is no reason to doubt the reasoning of the Full Court.  The English case has very different language in the provision and that drove that decision in Sevcon.

GAGELER J:   Did section 79 bring with it some elements of section 13?

MR YOUNG:   No.  Section 13, you mean? 

GAGELER J:   Yes, 13. 

MR YOUNG:   I am sorry, I may have misheard.  No, section 79 is an exceptional right conferred in those circumstances.  The language is explicit, it is conferred only on the patentee.  Section 13 sets out the rights of a patent holder.  Those rights that may be accepted would include these contingent future rights under section 79.  But section 13 does not confer any right of action on exclusive licensee.  For the ordinary phase of a patent, that is dealt with explicitly in section 120, and the rights are only conferred on the – are conferred under section 120 on the patentee and the exclusive licensee.  But then you step across to this exceptional retrospective right under section 79 and the language is to the effect that that right is only conferred on the patentee.  And there are probably good reasons of policy because of the retrospective operation of section 79, to confine it to the patentee. 

EDELMAN J:  Is it an assignable one?

MR YOUNG:   I beg your pardon, your Honour? 

EDELMAN J:  Is the right assignable? 

MR YOUNG:   The right under section 79?  Yes, we would say so.  While it attaches to the patent effectively.  I mean, the standard position of a patent

licence is, even without express words, if you grant a licence to the patent it will operate during the term of the patent and any extension of the term of the patent, even if that extension is granted retrospectively.  So, for those reasons, if the Court pleases, in our submission, this is simply a question of construction and there is no reason to doubt the Full Court’s reasons.  It does not raise any question of general importance. 

GAGELER J:   We do not need to hear you in reply, Mr Bannon.  There will be a grant for special leave to appeal in both of these matters.  A one‑day case, gentlemen? 

MR YOUNG:   Yes.

MR BANNON:   Yes.  

GAGELER J:   Yes, thank you.

AT 10.55 AM THE MATTER WAS CONCLUDED