Les Laboratoires Servier v Apotex Pty Ltd
[2016] FCAFC 27
•8 March 2016
FEDERAL COURT OF AUSTRALIA
Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27
Appeal from: Apotex Pty Ltd v Les Laboratoires Servier [2013] FCA 1426
Apotex Pty Ltd v Les Laboratoires Servier (No 2) (2014) 107 IPR 95; [2014] FCA 751
Apotex Pty Ltd v Les Laboratoires Servier (No 4) (2015) 111 IPR 160; [2015] FCA 104
Apotex Pty Ltd v Les Laboratoires Servier (No 5) (2015) 324 ALR 549; [2015] FCA 334
File numbers: NSD 241 of 2015
NSD 247 of 2015
NSD 305 of 2015
NSD 307 of 2015
NSD 346 of 2015
NSD 347 of 2015Judges: BENNETT, BESANKO AND BEACH JJ Date of judgment: 8 March 2016 Catchwords: INTELLECTUAL PROPERTY – PATENTS – best method requirement – construction of Patents Act 1990 (Cth), s 40(2)(a) – whether requirements of s 40(2)(a) met when sufficiency of description satisfied – test in Kimberly-Clark Australia Pty Limited v Arico Trading International Pty Limited (2001) 207 CLR 1 – whether residual requirement to identify best method of performing invention
INTELLECTUAL PROPERTY – PATENTS – best method requirement – where claimed invention is a product – whether best method requirement met by identification of essential integers of product – whether disclosure of method of making product required – whether claimed characteristics of claimed product class required disclosure of method to make a product with those characteristics – relevance of trial and error and choice of parameters
INTELLECTUAL PROPERTY – PATENTS – best method requirement – whether applicant for revocation must prove that alternative method in fact better than that disclosed in the patent
INTELLECTUAL PROPERTY – PATENTS – amendment of patent – whether possible to cure failure to comply with best method requirement by amendment after filing of patent application and grant of patent – whether delay in applying for amendment unreasonable – consideration of matters relevant to exercise of discretion when amendment sought – whether House v The King error established
COSTS – PATENTS – whether leave to appeal from costs orders required – whether House v The King error established in relation to costs orders – whether appropriate to apportion costs according to mixed success on grounds of revocation – whether costs should follow the event – consideration of costs where application to amend a patent
Legislation: Federal Court of Australia Act 1976 (Cth) ss 24(1A), 43
Patents Act 1903 (Cth) ss 36, 86(1)
Patents Act 1952 (Cth) s 40(1)(a)
Patents Act 1990 (Cth) ss 40(2)(a), 105, 138(3)
Federal Court Rules 2011 (Cth) rr 25.14, 34.41
Cases cited: Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Limited (1998) 194 CLR 171
AMP Inc v Utilux Pty Ltd (1971) 45 ALJR 123
Apotex Pty Ltd v Les Laboratoires Servier (No 3) [2009] FCA 1069
Badische Anilin und Soda Fabrik v Levinstein (1885) 2 RPC 73
Biogen Inc. v Medeva Plc [1995] RPC 25
British Dynamite Company v Krebs (1896) 13 RPC 190
British United Shoe Machinery Co Ltd v A Fussell & Sons Ltd (1908) 25 RPC 631
CCOM Pty Ltd v Jiejing Pty Ltd (1994) 51 FCR 260
Comcare v PVYW (2013) 250 CLR 246
Crossley v Beverley (1830) 1 WPC 112
Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397
DSI Australia (Holdings) Pty Limited v Garford Pty Limited (2013) 100 IPR 19
Edison & Swan Electric Light Company v Holland (1889) 6 RPC 243
Elecspess Pty Limited v LED Technologies Pty Limited (2013) 215 FCR 95
Eli Lilly & Co v Pfizer Overseas Pharmaceuticals (2005) 64 IPR 506
Expo-Net Danmark A/S v Buono-Net Australia Pty Ltd (No 2) [2011] FCA 710
Firebelt Pty Ltd v Brambles Australia Ltd (2000) 51 IPR 531
Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 90 ALJR 270
Foots v Southern Cross Mine ManagementPty Limited (2007) 234 CLR 52
Gambro Pty Ltd v Fresenius Medical Care South East Asia Pty Ltd [2000] FCA 407
Gray v Richards (No 2) (2014) 89 ALJR 113
Hockey v Fairfax Media Publications Pty Limited (No 2) [2015] FCA 750
House v The King (1936) 55 CLR 499
Hughes v Western Cricket Association (Inc) [1986] ATPR 40-748
Human Genome Sciences Inc. v Eli Lilly & Co [2013] RPC 22
ICI Chemicals & Polymers Ltd v Lubrizol Corp Inc (1999) 47 IPR 110
Illinois Tool Works Inc v Autobars Co (Services) Ltd [1974] RPC 337
In the Matter of British Thomson-Houston Company Limited’s Patent (1936) 53 RPC 225
Kazarv Kargarian (2011) 197 FCR 113
Kimberly-Clark Australia Pty Limited v Arico Trading International Pty Limited (2001) 207 CLR 1
Kirin-Amgen Inc. v Hoechst Marion Roussel Limited [2005] RPC 9
Les Laboratoires Servier v Apotex Pty Limited (2010) 89 IPR 219
Lockwood Security Products Pty Limited v Doric Products Pty Limited (2004) 217 CLR 274
Mok v Minister for Immigration, Local Government and Ethnic Affairs (No 2) (1993) 47 FCR 81
New England Biolabs, Inc v Hoffmann-La Roche AG (2004) 63 IPR 524
No-Fume Limited v Frank Pitchford & Co Limited (1935) 52 RPC 231
Norbis v Norbis (1986) 161 CLR 513
Norton and Gregory Ltd v Jacobs (1937) 54 RPC 271
Novartis AG v Bausch & Lomb (Australia) Pty Ltd (2004) 62 IPR 71
Novozymes A/S v Danisco A/S (No 2) [2013] FCAFC 55
Oshlack v Richmond River Council (1998) 193 CLR 72
Pfizer Overseas Pharmaceuticals v Eli Lilly & Co (2005) 68 IPR 1
Pharmacia v Merck & Co Inc [2002] RPC 41
Pneumatic Tyre Company Ltd v Leicester Pneumatic Tyre and Automatic Valve Company (1899) 16 RPC 531
Probiotec Limited v University of Melbourne (2008) 166 FCR 30
Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 25 IPR 119
Smith Kline & French Laboratories Ltd v Evans Medical Ltd [1989] 1 FSR 561
Sunbeam Corporation v Morphy Richards (Aust) Pty Limited (1961) 180 CLR 98
Valensi v BRC [1979] RPC 337
Van Der Lely NV v Ruston’s Engineering Company Limited [1993] RPC 45
Vidal Dyes Syndicate Ltd v Levinstein Ltd (1912) 29 RPC 245
Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328
Welch Perrin & Co Pty Limited v Worrel (1961) 106 CLR 588
Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd (12 November 1997, Federal Court of Australia, Sundberg J, unreported)
Woodward v Sansum (1887) 4 RPC 166
Woolworths v BP PLC (No 3) (2006) 70 IPR 270
Aldous G, Falconer D and Aldous W, The Law and Practice Relating to Letters Patent for Inventions (11th ed, Sweet & Maxwell Ltd, 1965)
Aldous W, Young D, Watson A and Thorley S, Terrell on the Law of Patents (13th ed, Sweet & Maxwell, 1982)
Blanco White TA, Patents for Inventions and the Protection of Industrial Designs (5th ed, Stevens & Sons, 1983)
Bodkin C, Patent Law in Australia (2nd ed, Thomson Reuters, 2014)
Terrell C and Corsellis DH, The Law and Practice Relating to Letters Patent for Inventions (7th ed, Sweet & Maxwell Ltd, 1927)
Dates of hearing: 10, 11, 12 August 2015 Registry: New South Wales Division: General Division National Practice Area: Intellectual Property Sub-area: Patents and Associated Statutes Category: Catchwords Number of paragraphs: 335 Counsel for the Applicants in NSD 241 of 2015, the Appellants and Cross-respondents in NSD 247 of 2015 and the Respondents in NSD 305 of 2015, NSD 307 of 2015, NSD 346 of 2015 and NSD 347 of 2015: Mr AJL Bannon SC and Ms CL Cochrane Solicitor for the Applicants in NSD 241 of 2015, the Appellants and Cross-respondents in NSD 247 of 2015 and the Respondents in NSD 305 of 2015, NSD 307 of 2015, NSD 346 of 2015 and NSD 347 of 2015: Allens Counsel for the First Respondent in NSD 241 of 2015, the First Respondent and Cross-appellant in NSD 247 of 2015, the Applicant in NSD 305 of 2015 and the Appellant in NSD 307 of 2015: Mr DK Catterns QC and Mr NR Murray Solicitor for the First Respondent in NSD 241 of 2015, the First Respondent and Cross-appellant in NSD 247 of 2015, the Applicant in NSD 305 of 2015 and the Appellant in NSD 307 of 2015: Herbert Smith Freehills Counsel for the Second Respondent in
NSD 241 of 2015 and
NSD 247 of 2015:The Second Respondent filed a submitting appearance. Solicitor for the Second Respondent in
NSD 241 of 2015 and
NSD 247 of 2015:Herbert Smith Freehills Counsel for the Opponent in
NSD 241 of 2015, the Applicant in NSD 346 of 2015 and the Appellant in NSD 347 of 2015:Mr JS Cooke and Mr D Larish Solicitor for the Opponent in
NSD 241 of 2015, the Applicant in NSD 346 of 2015 and the Appellant in NSD 347 of 2015:Ashurst ORDERS
NSD 241 of 2015
BETWEEN: LES LABORATOIRES SERVIER
First ApplicantSERVIER LABORATORIES (AUST.) PTY LTD
ACN 004 838 500
Second ApplicantAND: APOTEX PTY LTD
ACN 096 916 148
First RespondentSYMBION PTY LTD
ACN 000 875 034
Second RespondentAND: ACTAVIS PTY LTD
Opponent
JUDGES:
BENNETT, BESANKO AND BEACH JJ
DATE OF ORDER:
8 MARCH 2016
THE COURT ORDERS THAT:
1.Grant the applicants leave to appeal.
2.The appeal be dismissed.
3.The applicants pay the respondents’ and Actavis Pty Ltd’s costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 247 of 2015
BETWEEN: LES LABORATOIRES SERVIER
First Appellant and First Cross-respondentSERVIER LABORATORIES (AUST.) PTY LTD
ACN 004 838 500
Second Appellant and Second Cross-respondentAND: APOTEX PTY LTD
ACN 096 916 148
First RespondentSYMBION PTY LTD
ACN 000 875 034
Second RespondentAND BETWEEN: APOTEX PTY LTD
ACN 096 916 148
Cross-appellantLES LABORATOIRES SERVIER
First Cross-respondentSERVIER LABORATORIES (AUST.) PTY LTD
ACN 004 838 500
Second Cross-respondent
JUDGES:
BENNETT, BESANKO AND BEACH JJ
DATE OF ORDER:
8 MARCH 2016
THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The appellants pay the respondents’ costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 305 of 2015
BETWEEN: APOTEX PTY LTD
ACN 096 916 148
ApplicantAND: LES LABORATOIRES SERVIER
First RespondentSERVIER LABORATORIES (AUST.) PTY LTD
ACN 004 838 500
Second Respondent
NSD 307 of 2015
BETWEEN: APOTEX PTY LTD
ACN 096 916 148
AppellantAND: LES LABORATOIRES SERVIER
First RespondentSERVIER LABORATORIES (AUST.) PTY LTD
ACN 004 838 500
Second Respondent
NSD 346 of 2015
BETWEEN: ACTAVIS PTY LTD
ApplicantAND: LES LABORATOIRES SERVIER
First RespondentSERVIER LABORATORIES (AUST.) PTY LTD
ACN 004 838 500
Second Respondent
NSD 347 of 2015
BETWEEN: ACTAVIS PTY LTD
AppellantAND: LES LABORATOIRES SERVIER
First RespondentSERVIER LABORATORIES (AUST.) PTY LTD
ACN 004 838 500
Second Respondent
JUDGES:
BENNETT, BESANKO AND BEACH JJ
DATE OF ORDER:
8 MARCH 2016
THE COURT ORDERS THAT:
1.The appeals be allowed.
2.Set aside Orders 1 and 2 made on 24 March 2015 in proceeding number NSD 51 of 2012 and in lieu thereof order that in proceeding number NSD 51 of 2012:
‘1. Servier pay 75% of Apotex’s and Actavis’ costs of the application to amend Australian patent no 2003200700.
2. Subject to Order 1, any existing orders as to costs and undertakings as to costs thrown away, Servier pay 40% of Apotex’s costs of the proceedings.’
3.The respondents pay the appellants’ costs of the costs appeals.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THE COURT:
Introduction [1] The appeal in respect of the best method decision [4] The Patent [5] The best method issue [11] The primary Judge’s decision [13] The issues on the appeal [48] Issue 1: Section 40(2)(a) of the 1990 Act and the requirement to provide a best method of performing the invention [50] 1. The pleading point [50] 2. Is there a separate or “co-ordinate” requirement to provide the best method known to the patentee of performing the invention? [52] Servier’s submissions [52] The construction of s 40(2)(a) of the Act [59] Provisional applications and complete specifications [62] The cases dealing with a best method requirement in the filing of a complete specification after the filing of a provisional specification [66] Cases on s 40(2)(a), its predecessors and equivalent provisions [67] Conclusion [109] 3. The date on which the best method must be disclosed [111] Issue 2: Whether the method of making perindopril arginine is necessary for disclosure of the best method of performing the invention [117] 1. Submissions [117] 2. Consideration [121] Issue 3: No proven ‘best’ method [142] 1. The evidence [162] 2. Consideration [171] The admissibility of MFI 2 [179] False suggestion [190] The cross-appeal in respect of the declaration decision [192] The appeal in respect of the amendment decision [193] The decision of the primary Judge [201] Issue 1: The construction issue [213] Issue 2: The futility issue [214] Issue 3: The Servier’s knowledge issue [216] Issue 4: The discretion issue [220] Leave to appeal [229] Servier’s submissions [230] Consideration [239] Conclusion [251] Other grounds relied upon by Apotex as relevant to a discretion not to allow amendment [253] Other relevant matters that were not considered by the primary Judge (Notice of Contention, Grounds 11 and 12) [253] Futility (Notice of Contention, Ground 1) [255] Failure to amend at trial (Notice of Contention, Grounds 2 and 3) [263] The 2002 method (Notice of Contention, Grounds 5 to 10) [266] Issue estoppel/Declaration (Notice of Contention, Ground 4) [273] The appeal in respect of the costs decision [277] The decision of the primary Judge [279] The infringement/revocation proceeding: [280] The amendment proceeding [282] Submissions with respect to leave to appeal [284] Consideration: The need to seek leave to appeal [290] Submissions with respect to the costs of the revocation proceeding [292] Consideration: The costs of the revocation proceeding [293] Submissions with respect to the costs of the amendment application [307] Consideration: The costs of the amendment application [311] The offer of compromise and the Calderbank letter [318] Submissions with respect to the offer of compromise and the Calderbank letter [320] Consideration: The offer of compromise and the Calderbank letter [324] Conclusion in relation to costs [329] Concluding remarks and orders to be made [332] INTRODUCTION
Les Laboratoires Servier is the Patentee and Servier Laboratoires (Aust.) Pty Ltd the exclusive licensee (together, Servier or the Patentee) of Australian Patent No. 2003200700 (the Patent) entitled “New salt of perindopril and pharmaceutical compositions containing it”. Apotex Pty Ltd (Apotex) sought revocation of the Patent on a number of grounds, only some of which are relevant to the appeal.
The appeal concerns orders made by the primary Judge in four separate decisions: [2013] FCA 1426 (the best method decision), (2014) 107 IPR 95 (the declaration decision), (2015) 111 IPR 160 (the amendment decision), and (2015) 324 ALR 549 (the costs decision). The best method decision contained his Honour’s reasons for determining that the Patent was liable to be revoked for failure to comply with s 40(2)(a) of the Patents Act 1990 (Cth) (the Act). The declaration decision concerned the form of the declaration made consequently to the best method decision. The amendment decision contained his Honour’s reasons for refusing Servier’s application to amend the Patent following upon his Honour’s declaration as to revocation. The costs decision contained his Honour’s reasons for ordering the successful applicant for revocation and the successful opponents of amendment (Apotex and Actavis Pty Limited (Actavis)) to pay 66.67% of Servier’s costs of the revocation proceedings and to pay 60% of Servier’s costs of its unsuccessful application to amend the Patent.
Apotex has filed a cross-appeal concerning the form of declaration made by the primary Judge as to revocation. Pursued by way of notice of contention are representations asserted by Apotex to be misrepresentations or false suggestions, which the primary Judge characterised as “the shelf life representation” and “the temperature representation”. Apotex argues that the Patent was obtained by these representations and, accordingly, should be revoked on this basis.
THE APPEAL IN RESPECT OF THE BEST METHOD DECISION
Servier points out that certain grounds for revocation under the Act were not relied on before the primary Judge or are not pressed on appeal, in particular:
·There is no alleged false representation as to the promises of the benefits of the invention.
·It is not suggested that the invention as claimed did not fulfil its promises.
·There is no allegation of lack of utility.
·There is no asserted invalidity for lack of sufficiency, in the sense that it is accepted that there is sufficient description to enable a person of ordinary skill to work the invention as claimed. Thus, this requirement of s 40(2)(a) of the Act is fulfilled.
The Patent
The claims of the Patent relevant to the appeal from the best method decision are claims 1 and 2, namely:
Claim 1:
The arginine salt of perindopril and its hydrates.
Claim 2:
Pharmaceutical composition comprising, as active ingredient, the arginine salt of perindopril and its hydrates, in combination with one or more pharmaceutically acceptable excipients.
Claims 8 to 11 are relevant to the amendment decision but the proposed amendment to delete those claims is not opposed.
As the specification explains, the claimed invention relates to a new salt of perindopril, a compound known especially for the treatment of arterial hypertension and heart failure. Perindopril was the subject of a previous patent where it was described in a non-salt form. When addition salts with a pharmaceutically acceptable base or acid were mentioned in the previous patent by way of example, the sodium salt or the maleate was given. The specification of the Patent explains the difficulty in finding a pharmaceutically acceptable salt having not only good bioavailability but also adequate stability to be suitable for the preparation and storage of pharmaceutical compositions. The specification then describes difficulties with earlier salt forms in terms of stability. A particular form is said to have exhibited the best stability compared to other forms studied, being the tert-butylamine salt (perindopril erbumine) but, the specification states, even that form was not capable of providing a complete solution to the problems of the product’s lack of sufficient stability to heat and humidity, in particular, instability resulting in a shorter shelf life and the need for additional packaging measures. Reference is made to ‘the intrinsic fragility of perindopril’.
The specification states that numerous salts were studied and that the salts customarily used in the pharmaceutical sector proved to be unusable. The claimed invention, the arginine salt of perindopril, was said to have ‘entirely unexpected advantages over all the other salts studied’. The arginine salt of perindopril is said preferentially to be the salt of natural arginine (L-arginine). The specification also states that the pharmaceutical compositions according to the invention will preferably be immediate-release tablets. The specification describes long-term stability studies of perindopril arginine, the results of which are presented in tabular form:
Conditions
6 months
tert-Butylamine salt of perindopril
Percentage remaining (%)
Arginine salt of perindopril
Percentage remaining (%)
25°C
60% R.H.
101.0
99.5
30°C
60% R.H.
94.4
98.1
40°C
75% R.H.
67.2
98.6
As to the preparation of the arginine salt, the specification states:
The arginine salt used in this study is the L-arginine salt. It has been prepared according to a classical method of salification of organic chemistry.
Relevantly to the appeal from the best method decision, it can be noted that there is no other detail of the preparation of the claimed arginine salt and that the reference is to ‘a’ classical method of salification, with no specific method referred to by way of citation or otherwise.
The best method issue
Section 40(2)(a) of the Act (as set out in Reprint 3 as agreed to be applicable) provides that the complete specification must:
(a)describe the invention fully, including the best method known to the applicant of performing the invention;
The appeal from the best method decision centres on the finding that s 40(2)(a) included a requirement that the patentee disclose the best method known to the patentee of performing the invention over and above the requirement of sufficiency as set out above, and that Servier had failed to comply with that obligation (the best method issue).
The primary Judge’s decision
The primary Judge determined (at [63]) that the hypothetical person skilled in the art, the skilled addressee, was a non-inventive chemist with scientific qualifications working in a drug development context, whose routine work involved the formulation and making of salts for use in pharmaceutical products. His Honour also stated that it is likely that such a person would have worked in a team, where the person would be conversant with the principles and general practicalities of salt making and salt selection as well as the methods of pharmaceutical tablet formulation and composition.
In dealing with the question of novelty, as to which there is no appeal, his Honour observed at [75] that:
‘All the experts agreed that they would not try arginine in a first salt-screen to make a new perindopril salt. The unpredictability of successfully making a salt with any counter-ion, let alone one that is pharmaceutically acceptable, requires a person skilled in the art to engage in a selection process.’
His Honour pointed out at [97] that the experts, as persons skilled in the art, suggested that a number of options could be explored, for example, new salts. At [98] his Honour referred to the evidence of Professor Byrn, an expert witness relied on by Servier, who said that there were at least five methods of crystallisation that a person skilled in the art could use and that ‘these involved potentially many different variables such as the choice of one or more solvents, heating rate, maximum temperature, whether, and how long, to cool the mixture, the time allowed for crystals to form, type of crystallisation vessel, its surface volume and the mixing rate, to name only some. Each variable can affect the result’.
At [99] his Honour recorded Professor Byrn’s evidence that each crystal structure in which a salt exists can affect a salt’s stability characteristics in a way that is not predictable and that differences in the form of polymorphs or hydrates can also affect stability. There is no certainty that any particular counter-ion will be able to make a salt with an active pharmaceutical ingredient (API) and, secondly, if it does, what the properties of that salt will be (at [100]).
The primary Judge also noted (at [105]) that the experts agreed that ‘successful salt making is sometimes dependent on the maker’s intuitions and interventions with stirring or leaving the mixture.’ His Honour noted that Dr Spargo, on whom Apotex relied, accepted the description that salt making was ‘something of a dark art and you can do it at different times and get different results’. Dr Spargo also agreed that changes in formulation in the salt formation process, or of the tablets, could produce different results and that until a product was tested in tablets one would not know if the new salt would be an improvement on the existing one.
Again, as part of his conclusion on obviousness, which centred on the choice of arginine, his Honour made reference to the conclusion that there are many pitfalls and blind alleys in the making of pharmaceutically acceptable salts. His Honour concluded that he was not satisfied that the selection of arginine as a counter-ion to use in making a salt of perindopril was obvious.
Turning to a consideration of fair basis, the primary Judge made a number of observations also relevant to questions of best method, although not considered in that context. Thus, there is an advantage if a hydrated salt is highly crystalline and, where a pharmaceutical salt could have more than one form, the properties of each form will only be known after empirical studies or testing of the compound (at [128]-[129]).
If perindopril and arginine are subjected to a classical method of salification, the nature of the precipitate that will form (i.e. the form of the crystalline salt, whether it is anhydrous, a monohydrate, dihydrate, polymorph, etc.) could be influenced by the solvent or solvents used and the temperatures of the process. For example, a hydrate could form after salification while the salt was being stored and, if water was the solvent that was present, the resulting salt could be a hydrate.
It is not necessary to consider details of this for the purposes of the best method issue. Rather, they are comments relevant to the variables that can arise using a classical method of salification. The skilled addressee would know that classical salification can use water, which could result in a hydrate form of the salt (at [137]).
His Honour also concluded that the skilled addressee reading the specification as a whole would understand that the Patentee was making a real and reasonably clear disclosure that the invention consisted of the arginine salt and the various forms that it could take, namely hydrates, as well as the salt and its hydrates in pharmaceutical compositions. The inventor had not disclosed the, or any particular, hydration state of the salt as being a feature of the invention. As his Honour stated (at [140]), the hydration state was not a feature of the invention. Rather, the invention was the salt in all of its potential hydration states, including a state where it was not a hydrate at all, which would be understood by the skilled addressee. The skilled addressee reading the specification as a whole would understand that, by claim 2, the invention extended to the salt and its hydrates in pharmaceutical compositions.
As to the disclosure that the arginine salt was prepared according to a classical form of salification of organic chemistry, the experts agreed that a skilled addressee knew that a salt could be produced in this way, using more than one such method. They also agreed that the resulting substance could be in a hydrated form, depending on the precise method used, but that it would be necessary to test the substance to ascertain whether it was a hydrate and what its properties were (at [141]). One of the expert witnesses, Professor Evans, had said that ‘irrespective of whether or not there are different crystal forms of a salt, it is still the salt’ (original emphasis) and that in theory, perindopril arginine could come in several forms.
At [142] the primary Judge said:
‘The first joint expert report explained that once the skilled addressee read that perindopril arginine could be produced by a classical method of salification, first, he or she would expect to be able to make the salt and, secondly, that there are many parameters that could influence the solid form of the salt that might be obtained from such a classic salification. I infer that the skilled addressee would understand that the consistory clause when read with the specification as a whole in light of the common general knowledge, disclosed that the form of the salt so produced (i.e. whether a hydrate or not) made no difference. Hence, the claims for the hydrates were fairly based on the matter described in the specification.’
Apotex relied upon the absence in the specification of a method of preparing a pharmaceutical composition containing perindopril arginine so as to achieve the results of the long-term stability study described in the specification. His Honour set out the relevant descriptions from the specification concerning performance of the invention that are contained in the Patent, as follows (at [143]):
·(in the consistory clause), ‘[t]he present invention relates to the arginine salt of perindopril, its hydrates and also to the pharmaceutical compositions comprising it’ (p 2 lines 15-16);
·the arginine salt is ‘preferentially the salt of natural arginine (L-arginine)’ (p 2 line 17);
·the pharmaceutical compositions ‘comprise the arginine salt of perindopril together with one or more, non-toxic, pharmaceutically acceptable and appropriate excipients’ (p 2 lines 18-20);
·those compositions will preferably be immediate release tablets (p 3 lines 1-2);
·the amount of the salt contained in the compositions is between 0.2 and 10 mg, preferentially from 1 to 10 mg (p 3 lines 6-8); and
·‘[t]he arginine salt used in this study is the L-arginine salt. It has been prepared according to a classical method of salification of organic chemistry’ (p 3 lines 22-23).
The parties do not suggest that any other parts of the specification are relevant to the best method issue.
His Honour noted at [145] that both the inventor, Gerard Damien, and Servier knew that perindopril arginine had been prepared in 1986 and 1991, using slightly different classical salifications. Neither of those methods, known to the Patentee, was referred to in the specification. Mr Damien gave evidence as to the method used in 1986 to make an initially small quantity of perindopril arginine (the 1986 method). The assistant who had been directed to make that compound chose to utilise a two stage process involving:
·A salt-break in which perindopril erbumine was converted, or broken down, so as to extract a quantity of perindopril in a white crystalline form.
·Immediate use of the freeform perindopril with L-arginine in nearly equal proportions, where those three ingredients were mixed in a flask resulting in a “semi-limpid solution” which was stirred for 15 to 20 minutes and evaporated until dry, producing a crystalline residue. That residue was “retaken” in a “trituration” using anhydrous ether.
The experts explained that the process of trituration can be used if no direct crystallisation or precipitation of a salt occurs after the initial mix of ingredients (here, perindopril and arginine) in the solvent (here, permuted water). The resulting solution is evaporated to a low volume or until it is dry. That may yield either a solid or a concentrate. The concentrate may be in a form described by the experts as a “gum” or “glass” or a “foam”. Trituration is used with the intention of converting such a concentrate into a solid that is potentially useable. Trituration involves mixing the concentrate into a solution with a new, volatile solvent that “retakes” the concentrate.
His Honour described retaking at [148]:
‘For example, after the initial mixing, the resulting solid or concentrate may stick to the sides of the mixing flask. The introduction of a new solvent “retakes” that substance into a liquid form. This can separate out impurities that could have impeded the formation of a crystalline salt, so that when the new solvent evaporates, the scientist hopes to achieve a useful crystalline salt. If different solvents are used in triturations, different solid forms of the salt may result, such as a polymorph, hydrate or solvate. The experts also noted that in a classical salification there are many parameters, including the choice of solvent, that could influence the solid form of any perindopril arginine that might be obtained from such a process.’
His Honour then noted that the experts agreed that while this technique may be useful in laboratory conditions, it is not practicable on a large scale or in commercial production. As the 1986 method was carried out by Servier, after the trituration step the product was filtered under a vacuum, washed again with anhydrous ether and dried again in a desiccator under another vacuum to produce a white crystalline substance, being perindopril arginine.
His Honour also recorded that in 1991, a different method was used, directed by Mr Damien (the 1991 method), to prepare another salt-screen which included perindopril arginine. This method involved lyophilisation, another standard procedure, which comprises freeze drying as a way of removing water from the material. The salification in the 1991 method utilised quantities and proportions of perindopril and L-arginine that were different from those used in the 1986 method. In the 1991 salification, the assistants mixed the perindopril, L-arginine and water, dissolved the two solids in the water and then filtered the mixture to eliminate insoluble particles. That filtered solution was then lyophilised, the residue dissolved in anhydrous ethyl ether, stirred and filtered again, before being dried in a desiccator to yield a white crystalline product.
Mr Damien’s evidence was that for the purposes of a later study in 2000, he prepared perindopril arginine with the same excipients and quantities as were used for Servier’s commercial Coversyl product, in which perindopril erbumine was the API. His Honour said at [152] that there was no clear evidence of the details of the salification ingredients or method used in the preparation of perindopril arginine used in that study, but said that it was likely that the method repeated the 1991 method.
His Honour noted at [153] that the experts agreed that the selection of different methods and parameters can influence the precipitation or crystallisation of salt as the outcome of the various classical methods of salification. His Honour then said:
‘[t]hus, there was no certainty that any particular method within the range of classical methods, or the variety of choices, such as solvents, duration, or temperatures within a selected method would necessarily produce a crystalline salt or a particular salt form (such as a hydrate) that could be used in a pharmaceutical composition.’
His Honour noted further at [154] that the experts agreed that if an API is hygroscopic and takes up water, there is a potential for its crystal structure to change to one or more new crystalline forms, that will have different physiochemical properties to those of the anhydrous form. Those differences may not be large but they could affect the substance’s dissolution and solubility, which in turn has the potential to affect the bioavailability. However, his Honour noted that it is also possible that water sorption will have no effect whatever and so will not cause any problem.
The experts agreed that each of the procedures used by Mr Damien’s assistants in the 1986 and 1991 methods was a standard classical procedure for salification. His Honour added that the experts stated that the formulation of an API into a pharmaceutical product introduces factors that may compromise the final product’s stability, such that the ingredients and methods used to make a pharmaceutical composition with an API can have ‘significant consequences for the end product’s stability’ (at [156]).
The primary Judge set out Servier’s arguments, which may be summarised as follows:
·It was necessary that Apotex prove that the alleged non-disclosed best method provided a result that was better than the result of the method disclosed in the complete specification.
·A method was disclosed in the specification because Apotex did not contend that the Patent was revocable for lack of utility, thus accepting that the Patent disclosed a form of the invention that worked to fulfil the promise in the specification.
·Accordingly, a method was disclosed and Apotex had to prove that one or both of the 1986 or 1991 methods of salification was a better method than the one disclosed.
·Apotex had not established that any of the variations between the 1986 and 1991 methods had any effect on the resulting perindopril arginine.
·There was no evidence of a use of a classical method of salification that had produced an arginine salt of perindopril that was materially different or worse than the salts produced by the 1986 or 1991 methods.
·While the experts expressed a unanimous opinion that differences in classical methods of salification and parameters might produce different results, this was a hypothesis which Apotex had not proven.
·Mr Damien gave unchallenged evidence that an inherent property of arginine was that it was not volatile and that the stability of perindopril arginine was not affected by its hydration state.
·There was no suggestion of any material difference between the perindopril arginine produced by the 1986 and 1991 methods.
·There was no evidence that the methods that Servier had used to prepare the arginine salt were special or particular.
·There was evidence from Professor Byrn that classical salification would tend to make the most stable form.
·A patent applicant had no obligation to disclose the best method of making an invention, as opposed to the best method for performing or carrying it out.
·There is no need to disclose a method of making a particular form of the invention if it is sufficiently described, in the sense that a skilled addressee could make it having been told what the form is.
·As the invention was not limited to a particular form of perindopril arginine, the complete specification did not have to describe any form.
·A patent applicant has no obligation to disclose a method of performing the invention beyond providing a full description sufficient to enable a skilled addressee to make something within each claim.
·The patent applicant only has an obligation to disclose a best method of performing the invention where there is in fact a ‘best method’ and it is ‘known to the applicant’.
The primary Judge rejected Servier’s arguments which, he said (at [163]):
‘… ignored the express requirement in s 40(2)(a) that the description in the complete specification include the best method of performing the invention known to the applicant. The statute does not given the applicant any option not to comply with that requirement. If the applicant knows only one method, that is the method that must be described; if more than one, the applicant must include the best one known to him, her or it.’
The primary Judge added that the requirement imposed by s 40(2)(a) that the complete specification describe the best method known to the patentee of performing the invention is fundamental, and that it supplements the co-ordinate requirement in s 40(2)(a) that the complete specification also describe the invention fully. The primary Judge observed that it is not necessary that the best method be identified as such in a complete specification as long as the method is disclosed in the complete specification and is the best method known to the applicant (Pfizer Overseas Pharmaceuticals v Eli Lilly & Co (2005) 68 IPR 1 at [374]). Depending on the invention, that requirement may be satisfied in different ways, such as a detailed description of a preferred embodiment, reference to drawings or structures, or specific process conditions or chemical formulations (Firebelt Pty Ltd v Brambles Australia Ltd (2000) 51 IPR 531 at [53]).
The primary Judge, in his reasons at [167] and following, identified a number of other matters relevant to a consideration of whether an applicant has complied with the statutory obligation to disclose the best method of performing the invention:
·The complete specification must disclose each essential element or feature for performing the invention, even if a skilled addressee would know or could readily ascertain that element (Norton and Gregory Ltd v Jacobs (1937) 54 RPC 271 at 277).
·The requirement is to describe every essential element or feature for performing the invention, as opposed to what a skilled addressee would know from the description actually given in the complete specification about well-known matters (Expo-Net Danmark A/S v Buono-Net Australia Pty Ltd (No 2) [2011] FCA 710 at [14] per Bennett J).
·The parties seeking revocation must prove that the patentee knew of a better method than the one disclosed at the time of filing the complete specification (Expo-Net at [15]).
·The applicant for revocation must show that the method which the patentee failed to disclose is a method of performing the invention; that the method is in fact a better method; that the method was known to the patentee at the time when the application was lodged; that the method is not disclosed in the specification; and that the patentee knew that the method was better than the method described in the specification (Expo-Net at [16]).
·The specification is not read in the abstract but from the vantage point of a skilled addressee.
The primary Judge said that the question in the present case was, in essence, whether Servier’s description in the complete specification of preparing perindopril arginine from L-arginine and perindopril according to a classical method of salification of organic chemistry satisfied the requirement in s 40(2)(a) to state the best method of performing the invention known to it.
The primary Judge rejected the argument that the description of best method had to include the initial salt break, as the obtaining of the ingredients that resulted from that methodology formed no part of the invention.
His Honour accepted Servier’s argument that whatever the particular crystalline form of the arginine salt, it was intended to be part of the invention. The key question, really, concerned the choice that the skilled addressee had to make of parameters to get a result within the ambit of the asserted monopoly.
His Honour then noted the following matters:
·The skilled addressee would have understood that the complete specification disclosed that the excipients used in the study were the same for the two salts and that the only variable was the quantity of the different salts.
·The reference to preparation according to a classical method of salification was ‘pregnant with ambiguity’.
·The result from a classical salification is sensitive to the choices of solvent and many other parameters.
·While each of the 1986 and 1991 methods produced a useful result, there was a lack of detail of either method in the complete specification, leaving the skilled addressee to speculate about the parameters, including the choice of solvents.
The primary Judge rejected Servier’s argument that the onus was on Apotex to prove that a skilled addressee using another classical method of salification would have achieved, or did achieve, a worse result than those achieved in the 1986 or 1991 salifications. His Honour pointed out that Servier was aware of the vagaries of classical salification and aware that the selection of parameters, including solvents, could affect the result.
His Honour concluded that there was insufficient detail to provide a skilled addressee with directions necessary to perform the invention without undertaking potentially extensive trial and error experimentation. While this may have gone more to sufficiency than to best method, his Honour continued to state that a reference to a classical method of salification did not describe the best method of performing the invention. His Honour also stated that the opinion of the six experts was that the variety of choice as to methods and parameters available for selection within classical salification was not merely a hypothetical, but unproven, lacuna in the disclosure made in the complete specification of the best method. His Honour concluded that the mere reference to use of a classical method of salification was ‘wholly inadequate’ and that the bare description of a classical method of salification ‘does not allow the skilled addressee to follow a routine process of deduction from that description because it leaves open too many variables’.
At [180], the primary Judge distinguished between the requirement to include sufficient information to enable a skilled addressee to work the invention and the additional obligation to describe the best method known to the patentee. His Honour found that Mr Damien knew that the 1986 and 1991 methods created the arginine salt in a useable form and that, as a person skilled in the art, he knew that there were many alternatives available from which to choose. His Honour made the additional finding that Mr Damien knew that some methods were likely not to be as good as others.
The primary Judge concluded that the 1986 and 1991 methods were better than what was disclosed in the Patent, because they eliminated the risks as to time and resources needed in the trial and error experimentation potentially involved for a skilled addressee following the variety of possible, but unspecified, methods of classical salification. His Honour also found that there were many potential choices available in classical salifications that may, but need not, lead to the successful preparation of a crystalline arginine salt or hydrate. While the method described in the Patent was sufficient for the skilled addressee to produce something within each claim, his Honour held that it fell short of disclosing the best method of doing so, that is, the best method known to the Patentee that yielded an arginine salt that could be used in a pharmaceutical composition as required by claim 2.
Servier had used a particular method, or methods, of classical salification and parameters that produced a guaranteed result, whereas the complete specification described a broad and very general method of performing the invention that left the choice from the large range of variables to chance. His Honour concluded that by omitting a sufficient description of a successful method that it had employed, Servier had failed to describe in the complete specification the best method known to it of performing the invention. Accordingly, the complete specification did not satisfy one of the essential requirements of s 40(2)(a) of the Act.
The issues on the appeal
The parties agree that Servier satisfied the test enunciated by the High Court in Kimberly-Clark Australia Pty Limited v Arico Trading International Pty Limited (2001) 207 CLR 1, namely that s 40(2)(a) requires a disclosure that would enable the addressee of the specification to produce something within each claim without new inventions or additions or prolonged study of matters presenting initial difficulty (the Kimberly-Clark test).
Servier’s submissions are directed to three issues:
(1)Whether the statutory test in s 40(2)(a) is satisfied if the Kimberly-Clark test of sufficiency of description is satisfied. Servier says that there is no residual requirement to specify any method of performing an invention where that test is satisfied. Such a need only exists where specification of a method is required to enable the skilled addressee to produce something within the claim without new inventions or additions or prolonged study of matters presenting initial difficulty.
(2)Whether any residual best method requirement, if it exists, is satisfied by the identification of the essential integers of the product. Servier submits that a method of making an invention is not a method of performing the invention as required by the statutory test.
(3)Whether, as Servier submits, a method of making the product can only be the “best” if it is demonstrated that such method produces something which is in fact better than that made by the method disclosed in the patent and known to be so by the patentee.
Issue 1: Section 40(2)(a) of the 1990 Act and the requirement to provide a best method of performing the invention
1. The pleading point
In the further amended particulars of invalidity, the ground of lack of best method is, relevantly, set out at [41]-[42] as follows:
41.Further, or in the alternative, if (which is not admitted) the process to make the perindopril arginine salt forms part of the inventive step described in the Arginine Patent, the specification does not describe the best method known to the Patentee of performing the invention as claimed in each claim of the Arginine Patent, being the means of making the perindopril arginine salt so as to obtain the alleged benefits of the invention.
Particulars
…
(e)The confidential particulars set out in paragraph 49 in Annexure A to these Further Amended Particulars of Invalidity.
(f)The Applicant’s case is that the Arginine Patent does not disclose the best method of performing the invention known to the Patentee because:
1.the Arginine Patent discloses no method of carrying out the matters referred to in paragraph 41 above; and
2.the Patentee knew at the date of filing the application of the Arginine Patent of at least one method for performing the matters referred to in paragraph 41 above as set out in the confidential particulars of paragraph 49 of Annexure A to these Further Amended Particulars of Invalidity.
(g)The Applicant does not rely on any method which the Patentee may have had other than the method described in paragraph 49 of Annexure A to these Further Amended Particulars of Invalidity.
42.Further, or in the alternative, if (which is not admitted) the process to make the perindopril arginine salt forms part of the inventive step described in the Arginine Patent, the specification does not describe the best method known to the Patentee of performing the invention as claimed in each claim of the Arginine Patent, as it does not describe which form or forms of perindopril arginine to make so as to obtain the alleged benefits of the invention.
Particulars
…
(d)The Applicant repeats the particulars at paragraph 41(f) and 41(g) above.
Servier takes issue with the scope of the pleaded ground as raised by Apotex. First, it says that, on its face, it is limited to an allegation of a lack of sufficiency. Secondly, it does not plead that the method in the Patent gives rise to a product that is inferior to that of the 1986 and 1991 methods of which Servier knew. The confidential particulars referred to the 1986 and 1991 methods, which are relevant to a claimed lack of best method and not to the Kimberly-Clark test. We reject Servier’s ‘pleading point’. The pleading is clearly directed to the wording of s 40(2)(a) referring to the best method of performing the invention. That is a clear pleading of the failure to provide the best method known to the Patentee and is not limited to a sufficiency claim.
2. Is there a separate or “co-ordinate” requirement to provide the best method known to the patentee of performing the invention?
Servier’s submissions
Servier accepts that the Patent disclosed no specific salification method of making the perindopril arginine salt. There is no dispute that the Patentee knew of the 1986 and 1991 methods. There is no separate best method argument based on claim 2 of the Patent. The parties agree that this question falls to be decided by consideration of claim 1.
Servier submits that, as there is no dispute that the Kimberly-Clark test was satisfied and that the primary Judge so held, Servier complied with its obligations under s 40(2)(a) of the Act. It says that in Kimberly-Clark, it was held that, in order to comply with s 40(2)(a), the specification must enable only one embodiment within each claim. If enablement can be provided by common general knowledge, there is no need to provide disclosure across the entire scope of the claim. Thus, if common general knowledge enables the skilled worker to make something within the claim, there is no requirement to make reference to any method at all of producing a product.
For the purposes of discussion of this issue, we will refer to the “sufficiency requirement” as the requirement that satisfies the Kimberly-Clark test and to the “best method requirement” as encompassing the words set out in the latter part of s 40(2)(a).
In summary, Servier’s submission is as follows:
·one starts with the proposition that if any embodiment of the invention is enabled by the complete specification, that is sufficient;
·the best method requirement is a subset of the ordinary sufficiency requirement;
·there can be no additional requirement to provide a best method, as it would be inconsistent with the lack of the requirement to enable the best embodiment.
Servier draws on a number of decided cases to advance the following submissions:
·When the express reference to ‘best method’ was introduced into the Patents Act1952 (Cth) (the 1952 Act), the High Court (Dixon CJ, Kitto and Windeyer JJ) said, relevantly, in Welch Perrin & Co Pty Limited v Worrel (1961) 106 CLR 588 (at 609-610) that the differences between s 40 of the 1952 Act and its predecessor s 36 of the Patents Act 1903 (Cth) (the 1903 Act) were ‘probably of no importance’ and that the main requirement is that a specification fully describes the invention and the manner in which it is to be performed.
·The reference to ‘the best method known to the applicant of performing the invention’ is part of the requirement to ‘fully describe the invention’, as indicated by the words ‘including the best method’ (AMP Inc v Utilux Pty Ltd (1971) 45 ALJR 123 (at 128C) per McTiernan J).
·There were similar observations in Lockwood Security Products Pty Limited v Doric Products Pty Limited (2004) 217 CLR 274 (at [60]) and Pfizer per French and Lindgren JJ (at [343]) with Crennan J agreeing (at [408]) that ‘the best method is an inclusion in the sufficiency criterion’.
·In Kimberly-Clark, the High Court referred to No-Fume Limited v Frank Pitchford & Co Limited (1935) 52 RPC 231, where Romer LJ’s discussion was in terms of the sufficiency requirement and said that this does not necessarily require a wealth of detail such as manufacturer’s specifications. The UK Act there under consideration did not include a specific reference to ‘best method’, but instead required the patentee to describe the ‘manner in which the invention [was] to be performed’.
·In DSI Australia (Holdings) Pty Limited v Garford Pty Limited (2013) 100 IPR 19 at [334], Yates J said that a patentee’s only obligation under s 40(2)(a) of the 1990 Act was captured by the Kimberly-Clark test.
Servier rejects the suggestion that the reference to best method was specifically added to provide for a separate enquiry. Servier relies upon the word ‘including’ in s 40(2)(a) to submit that there is no separate or additional requirement over that set out in the first part of the sub-section, which is subject to the Kimberly-Clark test.
In answer to the statutory requirement to give the ‘best’ method, Servier responds that it is directed to the proposition that if the knowledge cannot be supplied by common general knowledge, the patentee must inform the skilled reader of the best method known to the patentee of how to make the product. Servier acknowledges that this submission would mean that if there were enough information in the Patent to enable the person of ordinary skill to work the invention, then even if the patentee knew of a better method, it would not be obliged to disclose it.
The construction of s 40(2)(a) of the Act
A number of preliminary observations should be made. First, it must be assumed that all of the words of the section are given meaning. Secondly, fulfilment of the requirements must take into account the invention being described and claimed. That does not lend itself to the apparently easy, but superficial, distinction advanced by Servier, whereby inventions are divided into the categories of product and process. Thirdly, perhaps because the requirement involves a question of fact, being the knowledge of the patent applicant, there are not many cases that have centred on the principles of this aspect of the test compared to those that have considered the requirement of what is commonly called sufficiency, such as Kimberly-Clark. Accordingly, fourthly, in applying principles from decided cases on s 40(2)(a) and its equivalents, it is necessary to understand the issues there discussed and whether or not the reasons extended to a consideration of a statutory provision referring to the best method known to the applicant. Fifthly, there are a number of cases in the United Kingdom where this question and the principles behind the application of the best method requirement have been discussed. Clearly, they are not binding and are based on different statutory provisions. However, much of Australian patent jurisprudence on this and other patent issues was derived from British jurisprudence.
Before embarking on the submissions as to the requirement to provide the best method known to the patent applicant, it is necessary to consider the words of the statute. To reiterate:
A complete specification must describe the invention fully, including the best method known to the applicant of performing the invention. (emphasis added)
Servier’s submission is that the sufficiency requirement encompasses the best method requirement and that best method is a subset of sufficiency and enablement. Put another way, Servier contends that there is no separate, additional or “residual” best method requirement.
Provisional applications and complete specifications
The Act distinguishes between the obligation to describe the invention and the obligation to describe it fully, including the best method known to the patentee of performing the invention.
Different obligations of description of the invention exist for provisional and complete specifications. By s 40(1), a provisional application must describe the invention, but a complete specification must describe the invention fully including the best method known to the applicant of performing the invention (s 40(2)(a)). In a provisional application, the inventor discloses the nature of the invention in order to protect the invention, but is provided with the opportunity to develop the invention before the date of filing.
The proposition underlying a separate and additional obligation on the part of the inventor filing a complete specification is that where an inventor in fact knows of a method at the time of filing the complete patent application, which has taken the methodology to a more satisfactory stage or provides more certainty so that the public may more quickly and easily utilise the invention for which a monopoly is granted, the inventor is under an obligation to disclose that method.
This statutory distinction has provided a basis for the consideration of whether the patentee is under an obligation to provide the best method over and above an obligation to describe the invention.
The cases dealing with a best method requirement in the filing of a complete specification after the filing of a provisional specification
A number of early cases in the United Kingdom concerning the filing of a complete specification have considered that obligation:
·In Pneumatic Tyre Company Ltd v Leicester Pneumatic Tyre and Automatic Valve Company (1899) 16 RPC 531 (at 541) Lord MacNaghten said that if an inventor discovers any better mode of carrying an invention into effect between filing a provisional specification and a complete specification ‘he is bound to disclose it in the complete specification’.
·As put by Lord Tenterden in Crossley v Beverley (1830) 1 WPC 112 (at 116) the patentee thereby ‘renders it more complete’.
·As put by Bailey J in Crossley v Beverley (at 117), if the inventor has made a discovery which will ‘enable it better to effectuate the thing for which the patent was obtained, not only is he at liberty to introduce them into his patent, but …it is his bounden duty so to do’.
·A patent will not be bad simply because a different mode of carrying out the same invention is described in the complete specification from that in the provisional specification: Woodward v Sansum (1887) 4 RPC 166 at 175. In that case, at 175, Cotton LJ said that where, after the filing of a provisional specification but before the filing of a complete specification, a patentee finds out improvements in the way of carrying the invention into effect ‘he is bound to give the public the benefit of what he has discovered as regards the mode of carrying the invention … into effect’.
Cases on s 40(2)(a), its predecessors and equivalent provisions
Many of the authorities dealing with s 40(2)(a) of the 1990 Act and its predecessors, when properly understood, were considering the obligation to describe the invention fully, the sufficiency requirement. Rarely were cases specifically directed to the question of an obligation to provide the best method known to the applicant of performing the invention. As Blanco White pointed out, the best method requirement is not commonly advanced as a ground for revocation: Blanco White TA, Patents for Inventions and the Protection of Industrial Designs (5th ed, Stevens & Sons, 1983) (Blanco White (5th ed)) at [4-514]. In Terrell C and Corsellis DH, The Law and Practice Relating to Letters Patent for Inventions (7th ed, Sweet & Maxwell Ltd, 1927) at 135 under the heading ‘Good Faith and Disclosure of Best Method’, it is stated: ‘[i]f a patentee suppresses anything, or if he misleads, or if he does not communicate all he knows, his patent is bad’.
Many of the cases that purport to deal with s 40(2)(a) do not consider, and make no reference to, the question of the obligation to provide the best method. However, that does not mean that there is no such obligation. It means that the issue was not raised and that the argument was limited to the sufficiency requirement, the subject of the attack. This does not lead to the conclusion that those cases determined that the only obligation under that section was to comply with the Kimberly-Clark test, being a test of sufficiency.
Indeed, the same observation must be made of Kimberly-Clark itself. In that case, the issue was the sufficiency of the description of the invention, a baby’s nappy with elasticised side pockets. Addressing this issue, the Court said (at [25]):
‘[t]he question is, will the disclosure enable the addressee of the specification to produce something within each claim without new inventions or additions or prolonged study of matters presenting initial difficulty?’
Read in context, the Court was not thereby setting out a test for fulfilment of the requirements of s 40(2)(a) as a whole. It was not argued that the patentee had failed to disclose a best method. The test is directed at the issue of sufficiency of description.
As noted above, the Australian approach has followed from the principles established in the United Kingdom.
In British Dynamite Company v Krebs (1896) 13 RPC 190, Lord Hatherley said that where a large field for experiment was left open and the inventor had known of the existence of the best material at the time of filing, where that material was better than other materials specified, then the inventor was bound to give the best means at the inventor’s disposal in order to achieve the result. It would have been an objection to the patent to say that the inventor, ‘being in possession of the best mode of producing the most valuable dynamite, had not informed the public of that method’. This obligation was discussed separately to the question of sufficiency, namely whether or not the description was sufficient to enable the ordinary workman to make and use dynamite. In the legislation in force at that time there was no explicit best method requirement; the patentee was obliged to describe the invention’s ‘manner of performance’.
The link between the extent of the obligations of disclosure and the nature of the invention was made early. For example, in Edison & Swan Electric Light Company v Holland (1889) 6 RPC 243 at 279, the Court of Appeal said that the patentee must state ‘in what manner the patented invention is to be performed’ so that others know how practically to avail themselves of the invention when the patent is expired: ‘how they are to do what is necessary to carry out the new invention’, that is, how the invention is to be performed.
In Vidal Dyes Syndicate Ltd v Levinstein Ltd (1912) 29 RPC 245 at 265 (cited by the Full Court in Firebelt), the Court of Appeal differentiated between two duties incumbent upon a patentee, as provided in the statute. First, the obligation by which the patentee must ‘particularly describe and ascertain the nature of the invention’ and secondly, that by which the patentee must ‘particularly describe and ascertain ‘in what manner the same is to be performed’’. The Court of Appeal made it clear that these two duties are distinct and have distinct objects, the second of which relates to the consideration to the public in return for the grant of the monopoly and the ability to enjoy ‘to the full the benefit of that invention’ (at 265-266). The Court of Appeal dealt with a broad, general description of a method and said, when dealing with the question of sufficiency: ‘to say that an invention consists in causing sulphur alone to react on diamidonaphthols is so vague as to ‘describe and ascertain’ nothing’; it was common ground that no knowledge previously existed of any reaction between sulphur alone and diamidonaphthols. Their Honours characterised such a description of the invention as a general description which included every kind of reaction between the two compounds, however produced. While they concluded that that could not be said to describe and ascertain the nature of the invention, it also failed to perform the second duty of describing the way in which the invention was to be performed. In relation to that second duty, the Court of Appeal said (at 266):
‘[t]hey cannot appeal to common knowledge and say that it would suffice to enable a chemist to carry out the invention, because their own witnesses prove that no knowledge existed at the date of the Patent as to any reaction between sulphur and diamidonaphthols…’
In expanding upon their reasoning (at 269), the Court of Appeal said that:
‘it is settled law that a patentee must act towards the public uberrima fide, and must give the best information in his power as to how to carry out the invention. He is therefore bound to tell the public all the steps that can advantageously be taken in carrying out the invention. But he is not limited to claiming only the best way of carrying it out’.
That is, a patentee was held to be bound to give the best information in his (or her) power as to how to carry out the invention. This was an element of the required good faith on the part of the patentee and the requirement to give to the public the consideration of knowledge of the best method that corresponds with the obtaining of the benefit of monopoly.
In looking to the requirements of best method, Blanco White at [4-502] raises the question of whether a patentee needs to give directions as to techniques of manufacture where the invention claimed is only the finished article: Blanco White (5th ed). This is a reference to Illinois Tool Works Inc v Autobars Co (Services) Ltd [1974] RPC 337, on which Servier relies. Blanco White commented at [4-502] that this case meant that it was not clear whether or to what extent there is such an obligation but questioned the outcome in a footnote. Under the separate heading ‘Meaning of ‘best method’’, there is a statement that the practice is to disclose the most perfect or most complete embodiment known, irrespective of commercial merit. A footnote observes that ‘concealment of simplifications known to be commercially desirable should invalidate’.
In Norton and Gregory Ltd v Jacobs at 277, the Court of Appeal considered the circumstance where an additional requirement to carry out the invention, which would improve its performance, was not mentioned in the specification, the requirement being one that was known to the patentee at the time that the patent was applied for. The Court of Appeal stated that:
‘[i]t was therefore incumbent upon him to disclose it in view of Section 25(2)(j) of the Act and his omission to do so is sufficient of itself to invalidate the Patent. Here again, the fact … that a skilled chemist would know or could readily ascertain the necessity of leaving the print acid or neutral does not in our opinion afford any justification for omitting so essential a matter from the Specification’.
In s 4(3) of the Patents Act 1949 (UK), the obligations were separately provided for:
Every complete specification:
(a)shall particularly describe the invention and the method by which it is to be performed;
(b)shall disclose the best method of performing the invention which is known to the applicant for which he is entitled to claim protection;
(c)shall end with a claim or claims defining the scope of the invention claimed.
It may be accepted that this clear separation of obligations provided the framework for consideration in the cases that followed, but those reasons also demonstrated fidelity to the reasons behind the explicit separate requirements.
Accordingly, one sees observations such as those in Blanco White (5th ed) (at [4-502]) that the specification must in the first place contain such instructions as will enable all those to whom the specification is addressed to produce something within each claim ‘by following the directions of the specification, without any new inventions or additions of their own’ and without ‘prolonged study of matters which presents some initial difficulty’ (citing No-Fume Limited at 243 and Valensi v BRC [1979] RPC 337 at 377 respectively) and an explanation of the nature of the invention as well as the manner of performing it. These are separate requirements, although the description meeting each obligation is not necessarily separate. The commentary continues to state that the necessary instructions to enable a skilled worker to carry out the invention may or may not suffice to make its nature clear, and that ‘somehow or other’ the skilled worker must be told what it is he (or now she) is trying to do to work the invention. Importantly, there is then a further observation that the specification ought to render the working of the invention simple, not merely render it impossible without further invention. Non-disclosure of best method is dealt with separately (at [4-514]) and following, noting that this is not a common objection.
Van Der Lely NV v Ruston’s Engineering Company Limited [1993] RPC 45 contains a discussion about the requirements of s 4(3) of the Patents Act 1949 (UK). Failure to comply with either of those requirements provided a ground for revocation. Lord Justice Nicholls said (at 56) that where the claim in issue was to a product, a power harrow, the best method of performing the invention within s 4(3)(b) was the best example of the implement known to the applicant at the relevant time and for which he was entitled to claim protection, where “best” means best in practice and not in theory. The applicant was not required to disclose the best method of using the invention where the method of use was not a feature that was part of the invention claimed. His Lordship said that the distinction between a product and a process was not meaningful because the best way to use the invention would have a significant bearing on what was the best exemplification of the invention: the best way to use the invention would affect the manner in which the implement would be constructed. Further, the patentee was required to disclose, as an example of the implement, the implement with the better method of operation found to have been known to the patentee.
The analogy with the present case is apparent.
In Human Genome Sciences Inc. v Eli Lilly & Co [2013] RPC 22, Sir Robin Jacob, with whom Lewison and Hooper LJJ relevantly agreed, considered the question of “sufficiency” of a claim to an antibody that specifically binds to a polypeptide. The relevant statutory language by this time was Article 83 of the European Patent Convention which provided that a European patent application ‘shall disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art’. Notably, that does not state a requirement for disclosure of the best method. Nevertheless, Kitchin J had summarised the effect of this provision as including such a requirement. His Honour had said that in the case of a product claim, it means ‘making or otherwise obtaining a product’; in a process claim it means ‘working the process’. The claimed invention encompassed many, probably millions, of antibodies, some of which would bind well and others less so, but they could all be made and isolated (at [13]). Sir Robin said (at [16]) that at the level of generality of the patent, all of the antibodies would have a ‘use’, including uses other than pharmaceutical or diagnostic use, so that each member of the class had potential utility. Sir Robin said (at [23]) that ‘[e]ven if the antibodies to be used for the products of claims 18 and 19 do form a narrower class which cannot be ascertained without undue effort that does not mean that the whole class is not enabled’. However, at [29], Sir Robin turned to discuss an argument based on Pharmacia v Merck & Co Inc [2002] RPC 41, where the claim was to a formula consisting of a large number of compounds with no limitation in the claim as to purpose or use. Lord Justice Aldous had said (at [20]) that when the specification was read as a whole, it was clear that the class of compounds was useful for a specific purpose and that was the contribution that merited the monopoly. The claim was held to be insufficient because it included compounds which did not have the promised activity and was therefore not enabled across its scope even though all the compounds could be made. Sir Robin distinguished Pharmacia by saying (at [31]) ‘the skilled reader [is not] led to expect any specific activity, only a host of possibilities which may or may not in fact be’.
In the present case, the reader of the Patent has been led to expect characteristics comparable to the stability features set out in the specification. Those features are described in the text and highlighted in tabular form, and said to be the advantage of this invention over perindopril erbumine.
Servier relies upon a number of authorities which have dealt with s 40(2)(a) but without any reference to, or consideration of, the words of that section that refer to the best method known to the patentee. For example, in Lockwood Security, the High Court endorsed Kimberly-Clark and reiterated (at [60]) that, for the purposes of s 40(2)(a), it is not necessary for the inventor to disclose all the alternative means by which the thing or result may be achieved, it is enough to satisfy the Kimberly-Clark test.
The characterisation of s 40(2)(a) (or its predecessor s 40(1)(a) of the 1952 Act, in the same terms) as consisting of a first ‘limb’ and a second ‘limb’, with the patentee required to comply with each limb, has been a feature of a number of cases where the totality of the obligation was considered.
Servier submits that there is no scope in the Act, contrary to the consideration of the UK position as set out in Aldous G, Falconer D and Aldous W, The Law and Practice Relating to Letters Patent for Inventions (11th ed, Sweet & Maxwell Ltd, 1965) at [228] concerning questions of good faith. Ultimately, Servier submits that allegations of good faith as a ground of revocation disappeared with the 1952 Act where s 100, as does s 138 of the 1990 Act, provided that patents would only be revoked on the specified grounds. While Dr Bodkin (in Bodkin C, Patent Law in Australia (2nd ed, Thomson Reuters, 2014) at [5270]) says, citing Firebelt, that the obligation to give the best method is to ensure good faith on the part of the patentee, Servier says that this may be the purpose but it is not the best method test.
In Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 25 IPR 119, Gummow J considered the question of best method as a distinct subject in his Honour’s reasons. Justice Gummow traced the history of this requirement as set out in various statutes in Australia and the United Kingdom. His Honour noted (at [133]) that the requirement to disclose the best method persisted despite legislation omitting particular reference to “best method” and had been a ground of appeal under general law even before legislative provision for the inclusion of a best method. This, his Honour said:
‘appeared to have been on the footing both that the requirement of making known the best method ensured good faith on the part of the applicant so that grants would not be obtained on false suggestions or representations, and that the patentee should not get the benefit of a monopoly without giving to the public the corresponding consideration for the best method of performing the invention’.
His Honour observed that it was the enactment of s 40 of the 1952 Act that brought with it, in Australia, express reference to the disclosure of the best method, although differently expressed from the requirement in the Patents Act 1949 (UK). His Honour said:
‘… section 40 uses the words ‘fully describe the invention’ and the requirement of ‘best method of performing the invention which is known to the applicant’ is stated as being included within the obligation to fully describe the invention, rather than being expressed disjunctively’, as it was in para (h) of [s 23(1) of the Patents Act 1949 (UK)].’
That section’s predecessor, s 36 of the 1903 Act, provided:
A complete specification must fully describe and ascertain the invention and the manner in which it is to be performed and must end with a distinct statement of the invention claimed.
Justice Gummow noted that in Welch Perrin & Co Pty Limited v Worrel, Dixon CJ, Kitto and Windeyer JJ had said that the differences between s 40 of the 1952 Act and s 36 of the 1903 Act (which was modelled on the Patents, Designs and Trade Marks Act 1883 (UK)) were ‘probably of no importance’, the main requirements being that the specification shall fully describe the invention and the manner in which it is to be performed. Nevertheless, his Honour concluded that there had been an obligation on the part of an applicant to disclose the best method known by the inventor, notwithstanding the differences in the text between the Australian and UK Acts.
Servier points out that s 86(1) of the 1903 Act provided that ‘[n]o proceeding by way of scire facias’ shall be taken to repeal a patent. Returning to Rescare, Servier points to Gummow J’s commentary at 133, where his Honour discussed the express provision as to the disclosure of best method under the UK Act, which was not introduced into British legislation until 1932. However, from Gummow J’s explanation, the subsequent removal of those words did not alter the position, concerning the consideration provided by the applicant for a patent and that the making known of a best method ensured good faith and such consideration.
In Eli Lilly & Co v Pfizer Overseas Pharmaceuticals (2005) 64 IPR 506, Heerey J considered sufficiency and best method under separate headings. His Honour concluded that the ground of insufficiency as determined by the Kimberly-Clark test was not made out. Justice Heerey then turned to deal with what he clearly considered a question separate to that of sufficiency and the Kimberly-Clark test, namely, the ‘best method’. His Honour addressed a number of questions about the best method: whether it must be identified as the best method known to the patentee, what was the best method known to the patentee, whether the best method was disclosed and, if so, when.
The link between best method and the invention is also explained in Firebelt, where the Full Court (Spender, Drummond and Mansfield JJ) explained (at [48]) the requirement of the obligation to disclose the best method of performing the invention which, notably, their Honours discussed under the heading ‘Non-disclosure of best method of performing the invention’:
‘[this] requirement is to ensure good faith on behalf of the patentee, and to protect the public against the patentee who deliberately keeps to himself something novel and not previously published which he knows of or has found out gives the best results, with a view to getting the benefit of the monopoly without giving to the public the corresponding consideration of knowledge of the best method of performing the invention’.
Actavis adds as a further matter to be taken into consideration what it terms the public interest, in that the present costs order would have the effect of discouraging persons from opposing patent amendment applications, which contradicts the purpose of inviting non-parties to be heard on such applications under s 105(2) of the Act and r 34.41 of the Federal Court Rules.
Consideration: The need to seek leave to appeal
Leave to appeal against costs orders may be required where:
·the substantive proceeding was discontinued;
·where orders are made as to costs thrown away by reason of an adjournment;
·where costs orders are made following a summary dismissal of a proceeding;
·where costs orders are made as to costs thrown away when a Court-ordered mediation is abandoned; or
·where orders are made as to costs of an application for an extension of time within which to file and serve a notice of appeal.
In this case, the costs orders were made as part of the final orders determining the rights of the parties in each of the proceedings concerning applications for revocation and amendment. Leave to appeal is not required. In Probiotec at [79], Rares J (with whom Finn and Besanko JJ agreed) said that he was of the view that, as a judgment under s 24(1)(a) of the Federal Court of Australia Act includes an order, a costs order at the conclusion of a proceeding is a final order made in the exercise of the jurisdiction under s 43. Whether or not the order for costs was interlocutory, in our view sufficient doubt attends the decision and substantial injustice would be caused to Apotex and Actavis if the decision were wrong and leave, if necessary, were refused. Accordingly, to the extent that leave is required, it is appropriate that it be granted, hence our decision to grant such leave as was necessary on 12 August 2015.
Submissions with respect to the costs of the revocation proceeding
Servier’s submissions supporting the order for costs can be summarised as follows:
·Pursuant to the principles of House v The King at 504 to 505, it is not sufficient if Judges comprising the appellate Court consider that, if they had been in the position of the primary Judge, they would have taken a different course.
·The fact that no single Judge of the Court has previously made an order that a successful party in patent proceedings bear a portion of the unsuccessful party’s costs is irrelevant.
·There was no error in failing to apply the guideline that costs follow the event.
·The power to award costs under s 43 of the Federal Court Act is absolute and unfettered, save that it must be exercised judicially.
·The approach taken by the primary Judge is consistent with an approach outlined in Aldous W, Young D, Watson A and Thorley S, Terrell on the Law of Patents (13th ed, Sweet & Maxwell, 1982) at 14.195, citing Badische Anilin und Soda Fabrik v Levinstein (1885) 2 RPC 73 at 118 per Bowen LJ, who observed that if parties in an action raise issues on which they are defeated they ought to do it at their own expense.
·Apotex brought the proceedings for its own financial gain.
·The demands of the community for greater economy and efficiency in the conduct of the litigation should be reflected in the costs order.
·The primary Judge carefully exercised his discretion based on his familiarity with the way in which the trial was conducted.
Consideration: The costs of the revocation proceeding
The fact remains that Apotex was successful in establishing a ground of invalidity and, accordingly, that the patent was liable to be revoked. In order to deal with the best method issue it was necessary for the Court to construe the patent from the perspective of the skilled addressee. That exercise required the identification of the common general knowledge, in particular:
·the evidence and submissions on how salts are made, including on crystallisation parameters;
·how those parameters can affect the final form of properties of a compound;
·polymorphism and hydration states were relevant to the best method issue as well as to other issues such as obviousness, fair basis, novelty and false suggestion, being issues in which Apotex was unsuccessful.
It is not the case that the issues could be segregated as his Honour said at [24]. It is not apparent that any of the issues raised and pursued by Apotex were obviously bad or unreasonably maintained. Apotex abandoned two of the grounds upon which it asserted invalidity after some reflection, which indicates that it chose not to pursue those grounds that it considered to be unlikely to succeed. However, in that regard, Apotex accepted that it did not succeed on its alternative grounds of invalidity and submits that the Court’s discretion would not be misapplied if the Court discounted Apotex’s entitlement to costs in the order of 25%, up to the date of the settlement offers.
The primary Judge did not find that any of the grounds of invalidity relied upon by Apotex were trivial, unreasonable or unmeritorious.
The primary Judge was correct to point out that the Court has a wide discretion in the award of costs. However, that does not mean that there are no principles or practices to be applied in exercising that discretion. Some of those principles are of general application in litigation; others are particularly applicable to complex litigation. Patent litigation frequently falls into this category. In some cases there are long standing practices that have developed arising from the nature of the proceeding. Applications for amendment of a patent are in this category.
There are two general approaches to the award of costs that have general application and have been the subject of numerous decisions:
(1)The successful party is generally entitled to its costs. That is, costs usually follow the event.
(2)It is also the case that a successful party may be awarded less than its costs, or there may be an order apportioning costs, on the basis of success on the issues.
This has been recently reiterated by the High Court (per French CJ, Kiefel, Nettle and Gordon JJ) in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 90 ALJR 270 at [6], where their Honours observed that if the event of success cannot be seen as contestable, having regard to how separate issues have been determined, then:
‘There are no special circumstances to warrant a departure from the general rule, and good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like.’
Section 138(3) of the Act provides a number of separate grounds on which a patent may be revoked. Proceedings for revocation of a patent commonly raise a number of those grounds. Each is recognised as important and if such a ground is established then the patent, which, if valid, grants a monopoly, is liable to be revoked as invalid. It is not only in the interests of the party seeking revocation that an invalid patent be revoked; it is also in the public interest. That is not to say, however, that a party should invoke grounds that cannot be properly and reasonably supported by consideration of the patent and, where relevant, by evidence or grounds which are not seriously arguable.
The practice has developed that where a party relies on grounds that are not established and where time has been expended and costs incurred as a consequence, that party, although it may ultimately be successful, might not recover all of its costs. This, in turn, may depend on whether evidence and argument can be separated. For example, evidence from the skilled worker in the art may be relevant to different grounds of revocation and to an understanding of the patent for the purposes of construction and disclosure. Further, the question of apportionment is a matter of discretion and generally does not lend itself to mathematical precision, by reference to time or to importance. In any event, as the primary Judge recognised, it has not hitherto been the case that such a successful party which obtains an order for revocation of the patent is ordered to pay the patentee’s costs.
On the other hand, Courts have been increasingly concerned, generally, to use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. This has led to decisions whereby the successful party does not recover all of its costs where it has been unsuccessful on a discrete issue or in what is decided to be an unmeritorious objection. While it is acknowledged that, ordinarily, costs follow the event, the wide discretion in awarding costs has led to circumstances where a successful party who has failed on certain issues may be ordered to pay the other party’s costs of them (as discussed in Hughes v Western Cricket Association (Inc) [1986] ATPR 40-748 per Toohey J), although warnings have been stated that care should be taken in such a course and consideration be given to whether the issues on which the successful party failed are clearly dominant or separable (Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330 to 331 per Mahoney JA) and to whether the issues involved different factual enquiries in the one proceeding or multiple causes of action, even if based on a common substratum of fact.
Many of the authorities are discussed in Hockey v Fairfax Media Publications Pty Limited (No 2) [2015] FCA 750 per White J at [85] to [91]. In that case, his Honour found (at [100]) that the applicant failed on the ‘principal focus at trial, and the parties’ work which preceded it’. However, White J noted that the submissions concerning that subject matter were not wholly discrete from the claims on which he succeeded and that he had some success on matters having a common substratum of fact and law. His Honour did not order him to pay some of the respondents’ costs, but instead reduced the costs to which he was entitled.
Without amounting to an absolute rule, the principle remains that, subject to certain limited exceptions generally linked to the disentitling conduct of the successful party, a successful party in litigation is entitled to an award of costs (Oshlack per McHugh J at [67] to [68], in dissent but not in this aspect of the principle and with whom Brennan CJ agreed). That is not to punish the unsuccessful party but to compensate the successful party. There is no absolute rule that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party, nor is there a rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party (Oshlack at [40] per Gaudron and Gummow JJ). However, the Courts have been slow to order a successful party to pay the costs where it has been unsuccessful on some issues. In Mok v Minister for Immigration, Local Government and Ethnic Affairs (No 2) (1993) 47 FCR 81, Keely J was of the view (at 84) that, without attempting to fetter the discretion, this power ought to be exercised only where the Court, on a consideration of all of the circumstances, has concluded that the raising of an issue by the applicant on which it has failed was so unreasonable that it is fair and just to make the order.
As the High Court (per Mason and Deane JJ, with whom Brennan J relevantly agreed) observed in Norbis v Norbis (1986) 161 CLR 513 at 519, discretionary remedies may be transformed into remedies which are granted or refused according to well-settled principles which guide the exercise of a discretion. This transformation promotes consistency in decision-making, the need for which may be a countervailing factor to the width of the discretion. As Gageler J observed in Comcare v PVYW (2013) 250 CLR 246 at [139]:
‘While a rule or principle developed by an appellate court to guide the exercise of a statutory discretion does not itself have the force of law, “[t]here may well be situations in which an appellate court will be justified in setting aside a discretionary order if the primary judge, without sufficient grounds, has failed to apply a guideline in a particular case” and “[w]here there is nothing to mark the instant case as different from the generality of cases, the failure will suggest that the discretion has not been soundly exercised”’.
(references omitted)
However, there is no limitation on the power granted in s 43 that is not found in the words used (Probiotec at [47]). The discretion is unconfined, except insofar as the subject matter, scope and purpose of the legislation indicate otherwise, yet it falls to be exercised judicially (Probiotec at [47], [50]).
We appreciate that the making of the costs orders was an exercise of discretion and that the principles in House v The King apply. In this case, we are of the view that the primary Judge acted upon a wrong principle in awarding costs on the basis of success as to issues and not starting from the position that the successful party is entitled to its costs. Further, in considering the success and failure on individual issues, his Honour failed to consider the extent to which there was a common substratum of fact in respect of issues on which Apotex succeeded and failed. Moreover, his Honour awarded costs on the success of the issues raised without full consideration as to whether the raising of those issues was justified.
Submissions with respect to the costs of the amendment application
As to the costs of the amendment application, Servier submits, in addition to those submissions detailed above, that, in summary:
·The primary Judge carefully exercised his discretion.
·The primary Judge did not err in holding that the costs order against Apotex and Actavis should reflect that the argument that the 2002 method was a better method than the 1986 or 1991 methods was unsuccessful for the reasons given by the primary Judge.
Apotex and Actavis point out that the primary Judge did not find that any of their arguments, in the amendment proceeding were trivial, unreasonable or unmeritorious. Accordingly, it submits the ordinary rule, that the patentee bear the costs of an amendment application, should apply. Apotex also takes issue with the primary Judge’s analysis of the timing required for the hearing of each of the issues raised in the amendment application and the time allocated to Apotex’s arguments.
Apotex also points out that Servier amended its application twice. The first amendment was proposed to specify that the earlier method produced a crystalline substance; the second amendment was proposed to include the 2002 method. Despite the fact that it did not succeed in its arguments as to the 2002 method, which took a significant portion of the hearing and of submissions, Apotex points out that this was so because of Servier’s decision to seek to include that method in the Patent and to file further evidence in support of it. Apotex submits that, in that context, its reliance on arguments concerning that method was not unreasonable.
Actavis responded to an advertisement published by the Australian Government (in the guise of IP Australia) in the Australian Official Journal of Patents (Supplement) (Official Journal) concerning the amendment application. Actavis gave notice that it would exercise its entitlement under r 34.41 of the Federal Court Rules to oppose the amendment application. Actavis submits that the costs order was unreasonable and plainly unjust, that the primary Judge failed to apply the principle of consistency, that he acted upon a wrong principle and took into account irrelevant considerations, as well as failing to take into account relevant considerations, and mistook facts relevant to the exercise of his discretion as to costs. Actavis also submits that it would be contrary to the public interest to allow the costs order to stand. Actavis points out that an opponent’s role in serving the public interest is reflected in the requirement that an amendment application inviting opposition be advertised in the Official Journal.
Consideration: The costs of the amendment application
In Apotex Pty Ltd v Les Laboratoires Servier (No 3) [2009] FCA 1069 Bennett J rejected a submission that the opponent should have less than its full costs (on a party-party basis) because some of its arguments (which consumed half of the hearing time) were unsuccessful. Her Honour observed (at [5]) that, while the opponents in Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd (12 November 1997, Federal Court of Australia, Sundberg J, unreported) and in Gambro Pty Ltd v Fresenius Medical Care South East Asia Pty Ltd [2000] FCA 407 received less than their full costs, some of their objections were found to be unnecessary, trivial or unreasonable.
As to the costs awarded on the amendment application, his Honour failed to take into consideration the principle that amendment of the patent is an indulgence to the patentee and the practice that has long followed that principle. It has long been accepted (for example, In the Matter of British Thomson-Houston Company Limited’s Patent (1936) 53 RPC 225 at 269 per Luxmoore J) that amendment to a patent is an indulgence to the patentee, who should therefore pay the costs. As put by Emmett J in Les Laboratoires Servier v Apotex Pty Ltd (2010) 89 IPR 219 at [59], the power conferred on the Court by s 105, to allow a patentee to validate what would otherwise be an invalid or partially invalid patent, is for the benefit of the patentee, but the exercise of that power is an indulgence. This does not necessarily extend to amendment by deletion (Eli Lilly at [25] per Heerey J). Further, as Luxmoore J said, the Court should not discourage people from assisting the Court and offering ‘such criticisms as are proper to put forward’. A similar approach towards an opponent of amendment was taken in ICI Chemicals & Polymers Ltd v Lubrizol Corp Inc (1999) 47 IPR 110 by Emmett J, who observed (at [19]) that if there had been no opponent, it would have been desirable for the Court to invite a contradictor.
This practice means that the award of costs, simply on the basis that certain grounds of opposition to the amendment were unsuccessful, is an approach which is incorrect in principle, where none of the grounds raised were found to be trivial, unmeritorious or unreasonable.
The primary Judge also failed to take into account Actavis’ confined role in the amendment application. Actavis gave notice of its intention to oppose the amendment application at a time by which Servier had taken steps and incurred costs arising from Apotex’s opposition to the amendment application. Actavis filed no affidavit evidence and did not participate in the joint experts’ process. While Actavis cross-examined Dr Jaguelin, Actavis and Apotex did not engage in double cross-examination.
Further, we note that it was Servier itself that applied to include the 2002 method in its proposed amendment. That reasonably raised the question whether Servier knew it to be a better method than the 1986 or 1991 methods. That, in turn, caused the opponents reasonably to seek disclosure of relevant documents, which the primary Judge recognised in granting leave to serve notices to produce such documents. All of this contributed to the length and cost of the amendment proceeding, yet it involved no conduct on the part of the opponents which could reasonably be impugned.
It follows that his Honour erred in making the order that Apotex and Actavis pay 60% of Servier’s costs of the amendment proceeding.
As to the significance of the declaration and issue estoppel it was said to create, it is not apparent from his Honour’s costs decision that this matter was taken into account as a relevant factor when exercising the jurisdiction under s 43. We do not think it necessary, in light of our conclusions, to consider it further. That being the case, it is unnecessary for us to resolve Apotex’s cross-appeal in relation to the form and appropriateness of the declaration of 29 May 2014.
The offer of compromise and the Calderbank letter
Shortly before the trial commenced, Apotex made two offers of compromise which were substantially the same, the first under r 25.14(3) and the second as a Calderbank offer. The offer, relevantly, was that:
·Apotex’s application for revocation be dismissed;
·Servier’s claim for infringement also be dismissed;
·the interlocutory injunction be discharged and Servier be released from its undertaking as to damages;
·each party bear its own costs; and
·Servier grant Apotex a royalty-free, non-exclusive licence under, and for the remainder of the term of, the patent, including any applicable extension in terms substantially as set out in the offer.
Each offer was rejected by Servier.
Submissions with respect to the offer of compromise and the Calderbank letter
As to Apotex’s offer of compromise and the Calderbank letter, Servier’s submissions support the reasoning of the primary Judge. Servier submits that Apotex was not as successful as its offer under the rules and that its refusal of the Calderbank offer was reasonable.
Apotex submits that the result of the proceeding is a more favourable outcome to it than the terms of the offer of compromise made under the rules because:
·the Patent will be revoked;
·Apotex does not have to enter into a licence with Servier, albeit a royalty free one; and
·Servier is now liable pursuant to the undertaking as to damages which it provided so that it could obtain orders enjoining Apotex from offering its generic product.
Apotex submits that even if the Court were not minded to conclude that the outcome of the litigation was clearly better for Apotex than the offer, so as to attract the ‘automatic consequence’ under the rules, the Court ought to have considered that offer in exercising its general discretion to award costs, as the Full Court did in Novozymes A/S v Danisco A/S (No 2) [2013] FCAFC 55, that being a relevant consideration that his Honour was obliged to take into account in the exercise of discretion. Apotex submits that the outcome which eventuated was better than the offer that it made to Servier, in particular, because it was entitled to claim under the cross-undertaking for three years of being kept out of what is, admittedly, a multi-million dollar market.
Apotex submits that its offer represented the highest that a revoker or potential infringer could offer in patent proceedings, short of capitulation and that a failure to take its offer into consideration is contrary to the public interest, as it is not possible to conceive of an offer that would, short of capitulation, enable a compromise in patent proceedings which could attract costs consequences.
Consideration: The offer of compromise and the Calderbank letter
The primary Judge concluded that it was not possible to ascertain, on the available material, whether the orders revoking the Patent and as to costs amounted to a judgment that was more favourable than the outcome proposed in the offer. Had Servier accepted the offer, his Honour noted, there would have been no trial, no further exposure of either party to further solicitor/client costs and no exposure on the undertaking as to damages for three years’ of Apotex’s lost profits. His Honour said that the financial value of the undertaking was not susceptible to evaluation on the material available. There was no evidence of what damages Apotex may have been entitled to claim, especially with other generic manufacturers on the market.
The automatic consequences of a costs order in favour of the applicant under r 25.14(3) depends upon the existence of the fact that the Court’s judgment is actually more favourable to the applicant, here Apotex, than the terms of the offer. There was no information at all as to what Apotex’s financial position would have been had it had the right to exploit the non-exclusive licence. The primary Judge was, therefore, not satisfied that the operation of r 25.14(3) was engaged.
As to the Calderbank offer, the primary Judge concluded that Apotex had not demonstrated that Servier’s refusal was unreasonable. His Honour said that the fact that the two sides held genuinely different views as to their respective prospects of success did not render Servier’s refusal unreasonable or ‘imprudent or plainly unreasonable’ to use the expression of Besanko and Jessup JJ in Elecspess Pty Limited v LED Technologies Pty Limited (2013) 215 FCR 95 at [16].
The primary Judge was of the view that the available evidence was insufficient to come to the necessary conclusion that the offers of compromise represented a more or less favourable position for Apotex than the alternate result. Accordingly, this uncertainty meant that it could not reasonably be taken into account in Apotex’s favour as a discretionary matter under s 43.
Apotex has not established that his Honour’s consideration was in error.
Conclusion in relation to costs
For these reasons, we are of the view that the primary Judge’s discretion in the awarding of costs in each of the revocation and amendment proceedings miscarried and was erroneous within the principles of House v The King, and that it is appropriate for this Court to intervene. Accordingly, it is necessary for this Court to determine the appropriate orders as to costs.
As to the revocation proceeding, taking account of the issues on which Apotex was unsuccessful, but also having regard to the facts, evidence and submissions that were applied to those issues, and the best method issue on which it was successful and, importantly, Apotex’s success in establishing that the Patent is invalid, Servier should pay 40% of Apotex’s costs.
As to the amendment proceeding, taking account of the nature of a patentee’s application to amend its patent and the course of that application, including the fact that Apotex was only successful in opposing the amendment on one basis, namely the Harris Letter, Servier should pay 75% of Apotex’s and Actavis’ costs of the amendment application.
CONCLUDING REMARKS AND ORDERS TO BE MADE
Having regard to the findings which we have made above, it is unnecessary for us to determine the following:
·Apotex’s notice of contention in proceeding number NSD 247 of 2015;
·Apotex’s notice of cross-appeal in proceeding number NSD 247 of 2015; and
·Apotex’s notice of contention in proceeding number NSD 241 of 2015.
Therefore we do not make orders in respect of these matters.
It follows from what we have said above that Servier should pay Apotex’s and Actavis’ costs of the appeal.
The orders to be made in the different proceedings are as follows:
Proceeding number NSD 247 of 2015 (the revocation appeal)
1.The appeal be dismissed.
2.Servier pay Apotex’s costs of the appeal.
Proceeding number NSD 241 of 2015 (the amendment appeal)
1.Grant Servier leave to appeal.
2.The appeal be dismissed.
3.Servier pay Apotex’s and Actavis’ costs of the appeal.
Proceedings numbered NSD 305, 307, 346 and 347 of 2015 (the costs appeals)
1.The appeals be allowed.
2.Set aside Orders 1 and 2 made on 24 March 2015 in proceeding number NSD 51 of 2012 and in lieu thereof order that in proceeding number NSD 51 of 2012:
‘1. Servier pay 75% of Apotex’s and Actavis’ costs of the application to amend Australian patent no 2003200700.
2.Subject to Order 1, any existing orders as to costs and undertakings as to costs thrown away, Servier pay 40% of Apotex’s costs of the proceedings.’
3.Servier pay Apotex’s and Actavis’ costs of the costs appeals.
I certify that the preceding three hundred and thirty-five (335) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Bennett, Besanko and Beach. Associate:
Dated: 8 March 2016
164
21
5