Merck & Co Inc v Sankyo Co Ltd

Re: MERCK and CO., INC.
And: SANKYO COMPANY LIMITED
Nos. G485 and G486 of 1991
FED No. 253
Intellectual Property
(1992) AIPC 90-897
(1992) 23 IPR 415

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Intellectual Property - Patents - meaning and application of "new matter" - whether discovery of the true structural formula constitutes new matter - effect of new matter on priority dates - application of fair basis - role of Commissioner for Patents where no appearance on appeal - right of appearance of Commissioner for Patents.

Patents Act 1952: s. 40, s. 49(4), s. 59, s. 149, s. 159A.

Federal Court Rules: Order 54B rule 3.

HEARING

SYDNEY

#DATE 11:5:1992

Counsel for the Applicant : Dr A.C. Bennett

Solicitors for the Applicant : Williams Niblett

Counsel for Commissioner of : D.L. Ronzani
Patents

Solicitors for Commissioner : Australian Government
of Patents Solicitor

ORDER

Matter No. G485 of 1991

The Court orders that:

1. The appeal be allowed.

2. That the finding of the Delegate of the Commissioner of Patents that the opposition to the grant of Australian Patent Application No. 574695 fails, be set aside.

3. The respondent pay the applicant's costs of this proceeding and of the opposition under s. 59 of the Patents Act 1952 (Cth).

4. Application No. 574695 not be granted unless amended as follows:
(i) In relation to the specification by:

(a) inserting the words "produced in accordance with Example 1 or Example 2" after the words "Compound B-41D" where it appears in each of: Example 3 on page 27, line 11 Example 4 on page 28, line 3 Example 5 on page 28, line 13 Example 6 on page 29, line 3.

(ii) In relation to the claims by:

(a) deleting Claim 1 and renumbering Claims 2 to 5 as Claims 1 to 4 respectively:

(b) amending former Claim 2 as follows:

(i) replacing the words "a compound B-41D-producing microorganism of the genus Streptomyces" in lines 2 and 3 with the words "Streptomyces strain B-41-146 (Ferm 4388)";

(ii) deleting the words "being as defined in Claim 1" in the last line of this claim and replacing with the words "having the formula:" followed by the formula contained in the former Claim 1;

(c) replacing the words "the compound of Claim 1" in former Claim 4 with the words "the compound produced by the process of Claim 1".

Matter No. G486 of 1991

The Court orders that:

1. The appeal be allowed.

2. That the finding of the Delegate of the Commissioner of Patents that the opposition of the respondent to the grant of Australian Patent Application No. 527532 succeeds, be set aside.

3. The respondent pay the applicant's costs of this proceeding and of the opposition under s. 59 of the Patents Act 1952 (Cth).

4. The Commissioner of Patents proceed to seal Australian Patent Application No. 527532 in its present form.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

These are two appeals under s. 60(5) of the Patents Act 1952 ("the 1952 Act") against decisions of the Delegate of the Commissioner of Patents (s. 11 of the 1952 Act confers the requisite powers upon the Delegate).

In appeal G485 of 1991 the Delegate dismissed an opposition by the applicant, Merck and Co., Inc, to an application for a patent by the respondent, Sankyo Company Limited, and directed that the application proceed to grant.
In appeal G486 of 1991 the Delegate allowed an opposition by the respondent to an application for a patent by the applicant and refused to grant the patent without further amendment being made to the application.
Both matters were heard together by consent of the parties before the Delegate, and the two appeals were heard together before the Court by consent of the applicant and the Commissioner, though the respondent did not appear on the hearing of the appeals.
The appellant and the Commissioner are agreed that the appeals to this Court fall to be determined pursuant to the 1952 Act and not the Patents Act 1990 ("the 1990 Act").
The Commissioner appeared before this Court in appeal G486 (but not in G485) and sought to be heard pursuant to the provisions of Order 54B rule 3 of the Court's Rules which provides:

"3. The Commissioner may appear and be heard in any intellectual property case, but shall not be deemed to be a party to the proceedings except on an appeal to the Court from any decision, direction or determination of the Commissioner in proceedings in which there was no party in opposition to the party who is the applicant in the Court."

As the respondent was a party in opposition to Merck in both proceedings before the Delegate, any right which the Commissioner has to appear and be heard on appeal pursuant to order 54B rule 3 would not involve him being deemed to be a party to the proceedings.

The question arose in argument as to whether order 54B rule 3 or s. 149 of the 1952 Act governed the entitlement of the Commissioner to appear before the Court in the present proceedings. Section 149 provides:

"149. The Federal Court may grant to the Commissioner leave to intervene in an appeal to the Court from a decision or direction of the Commissioner."

The relationship between s. 149 and order 54B rule 3 requires examination. Rule 3 applies to intellectual property cases generally; it includes cases in which the Commissioner is a party and cases in which he is not. The rule gives the Commissioner a right of appearance and the right to be heard; but it does not define the issues on which or the extent to which he may be heard. This is a matter for the Court in each case and will vary according to the nature of the issues and the role played by the true adversaries to the litigation. Section 149 is a power given by the 1952 Act to the Court to be exercised in individual cases. It is for the Court to determine the circumstances in which and the extent to which it is appropriate to allow the Commissioner leave to intervene. It seems to me that rule 3 will cover the field in most cases, so there will be a limited need for the application of s. 149, the life of which is almost spent because of the enactment of the 1990 Act.

Under the 1990 Act the Commissioner is given by s. 159 a right of appearance in these terms:

"159. The Commissioner may appear and be heard at the hearing of an appeal to the Federal Court against a decision or direction of the Commissioner even if the Commissioner is not a party to the appeal."

The Commissioner did not suggest that this section applied in the present case because he and the applicant accepted that the 1952 Act is the law that applies in this case. Neither rule 3 nor s. 159 of the 1990 Act confers an unlimited right on the Commissioner, when appearing before the Court, at first instances (rule 3) or on appeal (rule 3 and s. 159), to be heard on any issue and to whatever extent the Commissioner may think fit.

The Commissioner should not as a general rule seek to present a substantive argument to support his decision, whether he is a party or not. In The Queen v The Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13 the High Court (Gibbs, Stephen, Mason, Aickin and Wilson JJ.) said at 36:

"The presentation of a case in this Court (the High Court) by a tribunal should be regarded as exceptional and, where it occurs should, in general, be limited to submissions going to the powers and procedures of the Tribunal."

These observations of their Honours do not directly apply to the Commissioner's right, both to appear and be heard, conferred by rule 3 or s. 159 of the 1990 Act; but they are a salutary reminder that there are difficulties in allowing the Commissioner to pursue an active role in the conduct of a case in the original jurisdiction of the Court (rule 3) or an appeal to the Court from his own decision or direction (rule 3 or s. 159) or from his own determination (rule 3). See also Kerr v Verran (1989) 88 ALR 125 at 153 and BTR plc v Westinghouse Brake and Signal Company (Australia) Limited, 21 February 1992, unreported (Lockhart, Beaumont and Hill JJ., per Lockhart and Hill JJ. at 34-40).
The Commissioner should be heard fully on questions concerning his powers and procedures. His role should be limited when the parties to the proceeding are before the Court and each pursues an active role. His role would then be akin to an amicus curiae. But if a party does not appear or does not argue his case before the Court, the Commissioner should, speaking generally, be allowed more latitude by the Court with respect to the issues which he wishes to address and the extent to which he seeks to present a case. Ultimately it is for the Court to control the proceeding before it. There is one important qualification, and that is that (as rule 3 provides) where there is an appeal to the Court from a decision, direction or determination of the Commissioner in proceedings in which there was no party in opposition to the party who is the applicant in the Court. In such a case the Commissioner is deemed to be a party, with the full rights of a party; otherwise there will be no-one to present a view contrary to that of the applicant in the Court.
The respondent did not appear in either appeal to this Court. The Commissioner did not seek to appear in proceeding G485 because it was common ground between the applicant and the Commissioner that appeal G486 was the more significant appeal of the two and would probably dispose of the essential issues in appeal G485. Though the respondent did not appear in appeal G486, it had played an active role in its opposition to the grant of the patent before the Delegate and I welcomed the assistance of counsel for the Commissioner, but in a role akin to amicus curiae.
The two appeals are appeals in name only. They are proceedings in the original jurisdiction of the Court, being the first judicial proceedings in the two matters which involve opposition to the grant of patents. The appeals must be decided upon the evidence adduced before the Court and they are in the nature of a rehearing (see s. 150 of the 1952 Act; c.f. s. 160 of the 1990 Act). See Kaiser Aluminium and Chemical Corporation v The Reynolds Metal Company (1969) 120 CLR 136 at 142-3.
Appeal G486
I turn first to appeal G486.
On 11 December 1978 the applicant lodged with the Commissioner, patent application No. 42389/78 in the name of the applicant for an invention entitled "chemical processes and products" ("the application as lodged"). The invention relates to the production of antibiotics having antiparasitic and anthelmintic activities. Bacteria are cultured and, after undergoing certain refinements, products are obtained which are in turn dealt with chemically to produce an antibiotic. This invention is concerned with the compounds obtained from particular species of bacteria.
The inventors are John Clifford Chabala, Michael Herbert Fisher and Helmut Hugo Mrozik.
The abstract of the disclosure reads:

"Derivatives of the C-076 compounds are disclosed wherein the 13-position is unsubstituted. The compounds are prepared by removing the glycosyl groups on the 13-position of the C-076 compounds isolated from the fermentation broth of Streptomyces avermitilis, followed by halogenation and subsequent removal of the halogen. The disclosed compounds are antiparasitic, anthelmintic, insecticidal and acaricidal agents."

The inventors make twenty-one claims; some are compound claims and others are process claims. Claim 1 is a compound claim in these terms:

"1. A compound having the formula: (1)

wherein the broken line indicates a single or a double bond;

R1 is hydrogen or halogen; R2 is hydrogen, methyl or loweralkanoyl;

(11) AU-A 42389/78

R3 is n-propyl or sec-butyl; and R4 is present only when the broken line indicates a single bond and represents hydrogen, hydroxy, loweralkanoyloxy, loweralkylthio, loweralkylsulfinyl, loweralkylsulfonyl or loweralkoxy."

Claim 2 is a claim for compounds in which R3 is n-propyl only. Claims 3 to 19 are claims for compounds in which R3 is sec-butyl.
Claim 20 is a process claim for the preparation of a compound having the formula mentioned in claim 1. Claim 21 is also a process claim.
The application claims as the earliest priority date 19 December 1977, being the date on which two earlier applications for patent were filed in the United States. One such patent is No. 4,310,519 in the name of the applicant entitled "Novel substances and process for their production" and is a continuation in part of United States patent application serial number 772,601. On page 1a of the application as lodged, under the title "Background of the Invention", reference is made to this lastmentioned application.
On 18 December 1981 the applicant lodged with the Commissioner patent application No. 527,532 in the name of the applicant which contained certain proposed amendments to the specification included in the application as lodged, the amendments having been lodged pursuant to s. 49(4) of the 1952 Act (this application of 18 December 1981 shall be referred to as "the application as accepted").
There were various amendment made to the application as lodged, but the crucial amendment for the purposes of this case was to change the substituent at the 25-position from n-propyl to iso-propyl to correct a mistake that had been discovered in the structural formula. (The reference to the C-25 position occurs because the compounds have a structure which consists of a number of carbons around chains and there is an order in which carbons are numbered. This particular one is C-25, and that is the structure of the compound at the 25-position.)
The critical question before the Delegate was whether the amendments proposed by the applicant to the application as lodged by it, by changing n-propyl to iso-propyl, involved the introduction of new matter. The applicant asserted that it did not and the respondent asserted that it did.
This question arises because of the provision of s. 49(4) of the 1952 Act (s. 104 of the 1990 Act) which permits an amendment to be made to the specification if the specification would not as a result of the amendment claim matter not in substance disclosed in the specification as lodged. If new matter is disclosed then it constitutes "new matter" within the meaning of s. 159A then the priority date becomes the date on which the new matter was disclosed in the statement of proposed amendments. Section 159A so far as relevant provides that where the application and complete specification have been accepted and in a proceeding before the Commissioner, the Commissioner finds that a claim of a specification claims new matter (that is matter which is in substance disclosed in the specification as a result of amendment of the specification) the Commissioner shall treat as the priority date of the claim the date on which the new matter was disclosed in a statement of proposed amendments of the complete specification lodged under s. 49 (s. 159A(1)).
The respondent's case (accepted by the Delegate) was that the application as accepted included new matter. The significance of this was recognized by the Delegate when she posed the question for her decision in these terms:

"I must therefore determine whether the accepted claims which refer to the substituent at the 25-position as iso-propyl claim matter in substance disclosed in the specification as a result of the amendment from n-propyl which was the original definition of the 25-substituent."

The Delegate rejected an argument advanced by counsel for the applicant that this change in the definition of the compounds of the invention between the application as lodged and the application as accepted did not involve new matter.

The respondent lodged Australian patent application number 61668/80 which was published after 19 December 1977, but before 18 December 1981. The compound B-41D described in that application is identical to the compound in Claim 1 of the applicant's application as accepted in which R3 is iso-propyl. The Delegate dealt with the question whether the respondent's application 61668/80 constituted a prior publication in respect of one compound of the applicant's application as lodged, and found that claims to compounds defined in the applicant's application as accepted in terms of a structural formula in which the 25 substituent is iso-propyl involved new matter and should be accorded a priority date of 18 December 1981. The Delegate found also that the critical claims of the applicant in its application as accepted were directed to new matter and had the priority date of 18 December 1981 and were prior published by the respondent's application 61668/80. The Delegate therefore found that the opposition of the respondent succeeded on the ground of anticipation and she allowed the applicant sixty days from the date of her decision (1 August 1991) to propose amendments with a view to removing the anticipated subject matter. She awarded costs in favour of the respondent.
It is from those findings of the Delegate that the applicant appealed to the Court.
It was accepted by both parties before the Delegate that the amendment to the specification of the applicant as originally lodged is fairly based on the application as lodged. The amendment was allowed on that basis and was not in dispute.
To determine whether proposed additional matter is in substance disclosed in the specification as lodged or constitutes new matter, the courts have applied basically the same test as they apply to determine whether complete specifications are fairly based on provisional specifications or convention patents. The Court of Appeal of the United Kingdom recognised the application of this test of fair basing in Ethyl Corporation's Patent (1972) RPC 169 at 194; and, as that judgment demonstrates, the tendency of the courts has been to give a liberal interpretation to sections such as s. 31(1) of the Patents Act 1949 (UK) (the equivalent of s. 49(4) of the 1952 Act), so as to permit any fair amendment which has already been in substance disclosed: see Ethyl per Denning M.R. at 194, 195. See also Shell Refining and Marketing Co Limited's Patent (1960) RPC 35 and AMP Incorporated v Hellerman Limited (1962) RPC 55; Terrell on the Law of Patents, 13th ed., 1982, para. 8.18.
Whether a matter is in substance disclosed in the specification as lodged is a question of fact to be determined in each case. As Terrell rightly points out in para. 8.19, reference to other decisions is often not very helpful; c.f. F. Hoffman-La Roche and Co Aktiengesellschaft v Commissioner of Patents (1971) 123 CLR 529. See also Minerals Separation Limited v Potter's Sulphide Ore Treatment Limited (1909) 8 CLR 779 per O'Connor J. at 800-801; Ricketson The Law of Intellectual Property para. 47.26.
In the proceedings before the Commissioner the respondent contended that the earliest possible priority date for certain claims of the Merck application is 18 December 1981, not, as the applicant claims, 19 December 1977. The difference between the two dates is crucial.
The evidence adduced on the hearing of the proceeding in this Court consisted of the evidence which had been before the Delegate and certain additional evidence which is important to the resolution of this case.
The evidence of the respondent before the Delegate in support of its opposition consisted of two declarations and accompanying exhibits. One declaration was from Professor Steven Angyal who said, amongst other things, that the terms "n-propyl" and "iso-propyl" are not synonymous. The second declaration was from Dr Martin Horner who in effect agreed with the conclusion of Professor Angyal.

The evidence of the applicant in answer to the evidence of the respondent consisted of three declarations and accompanying exhibits. Two of the declarations were made by two of the inventors in the applicant's application: Dr Michael Fisher and Dr John Chabala. The other declaration was made by Dr Georg Albers-Schonberg, one of the inventors of an Australian patent number 513641 which discloses and claims C-076 compounds. I shall refer to the contents of these declarations later; but it is sufficient for present purposes to say that they declared that the structural formula of the "b substituent at the 25-position in both the C-076 starting compound and the invention was amended from n-propyl to iso-propyl to correct a mistake that had been discovered in the structural formula".
The principal new evidence introduced in this appeal by the applicant is the affidavit of Professor Sever Sternhell, Professor of Organic Chemistry at the University of Sydney and highly qualified in this field.
Professor Sternhell gave detailed evidence which I will not refer to. The critical points that emerge from his evidence are that:-

. Had the name "propyl" been used in the applicant's application as lodged, as in the C-076 patent then, in his opinion the present problem would not have arisen as the name "propyl" can refer to each of the n-propyl and iso-propyl isomers (para. 19); . Given the difficulty at the time in identifying the structural formula of the relevant minor component substituents and the fact that the structural formula of n-propyl rather than iso-propyl fitted in with the rather attractive hypothesised biogenesis scheme for the production of C-076 compounds it was, in his opinion, perfectly understandable that the structural formula of the substituent at the 25-position of the "b" series compounds would have been designated "n-propyl", that is until such time as the hypothesis was proved to be incorrect. The Professor understood that the compound was then later analysed using more sophisticated equipment, namely a 300 MHz1H spectrometer and the substituent at the 25-position was identified as iso-propyl.

The Professor concluded in paragraph 24:

"In my opinion therefore, it is very clear that amending the substituent at the 25-position in the minor "b" component of both starting materials and end products of the invention as described in the Application as Lodged, does not disclose any new substance."

And he concluded his affidavit in these terms:

"In my opinion, in the circumstances, correcting the name of the substituent at the 25-position in the "b" compounds from n-propyl to iso-propyl cannot mean that a new substance has been disclosed. It merely means that the true structure has been determined."

It is necessary to examine in detail the evidence of Professor Sternhell briefly summarised above. He posed the correct question. He said that when on 18 December 1981 the applicant proposed amendments to the application as lodged to change n-propyl to iso-propyl, this raised the issue of the priority dates for the respective relevant claims as amended and the answer to that turns on whether they involve new matter: see s. 159A and s. 49(4) of the 1952 Act.
The Professor said that the question involved considering the application as lodged, the application as accepted, United States Patent No. 4310519 ("the US patent") and Australian Patent No. 513641 in the name of the applicant. The Professor accepted that the US Patent and the Australian Patent No. 513641 clearly outlined the starting compound used in the application as lodged and the application as accepted. This starting compound is described in these terms:

"C-076 is a series of macrolides with potent antiparastic activity. The compounds are isolated from the fermentation broth of Streptomyces avermitilis and the morphological characteristics of the micro-organism as well as the methods employed to isolate the C-076 compounds are fully described in Australian Patent No. 513641."

Professor Sternhell described the C-076 starting compounds as being produced by a micro-organism of the genus Streptomyces avermitilis. He said that the compounds are prepared as a mixture of four pairs of compounds wherein each member of a pair differs from the other member of the pair in the nature of the 25-position substituent. The differences between and "a" and "b" series compounds is constant throughout the C-076 compounds and consists of different substituents at the 25-position.
In each pair of "a" and "b" compounds, the "a" series compound is found in a greater amount than the corresponding "b" series compound and generally exists in a weight ratio of from around 85:15 to 99:1.
In the application as lodged the structure of the 25-position substituent is described as sec-butyl for the "a" series compounds and n-propyl for the "b" series compounds.
In the application as accepted the structure of the 25-position substituent is described as sec-butyl for the "a" series compounds and iso-propyl for the "b" series compounds.
In the C-076 patent, the structure of the 25-position substituent, which the Professor referred to as R3 throughout his affidavit, is described as butyl for the "a" series compounds and propyl for the "b" series compounds.
The application as lodged includes as an invention a compound having the structure set out earlier where:

R1 is hydrogen or halogen; R2 is hydrogen, methyl or lower alkanoyl; R3 is n-propyl or sec-butyl; R4 can represent hydrogen, hydroxy, lower alkanoyloxy, lower alkylthio, lower alkylsulfinyl, lower alkylsulfonyl or lower alkoxy.

The application as accepted includes as an invention a compound having the same structure as set out by the Professor except that in the "b" series compounds, R3 is iso-propyl instead of n-propyl.
The compounds of the invention are derived from the C-076 starting materials by removing the a-L-oleandrosyl-a-oleandrose or disaccharide group and also the hydroxy group at the 13-position that remains after the a-L-oleandrosyl-a-oleandrose group has been removed. The compounds of the reaction are therefore prepared by a series of actions which convert the C-076 starting materials from a 13-position disaccharide series of compounds to the aglycone compounds with hydroxy at the 13- position followed by the conversion of the 13-hydroxy group to the 13- halogen or 13-deoxy derivative.
The structural formula of the C-076 starting materials in the application as lodged is as follows:

Where: R1 is hydroxy

R2 is n-propyl or sec-butyl R3 is methoxy or hydroxy.

There is a difference between the structural formula of C-076 starting materials in the applications as lodged and as accepted, namely, that in the "b" series compounds R2 is shown in the applicaiton as lodged as "n-propyl" or "sec-butyl", whereas in the application as accepted R2 is shown as "isopropyl" or "sec-butyl".
Professor Sternhell referred to R3, rather than R2, in this connection and his reference appears to be a mistake for R2. Also the molecular chain appearing in paragraph 11 of the Professor's affidavit of the structural formula of the C-076 starting materials appears to be in error. However, in my opinion these mistakes have not affected the validity of the Professor's reasoning process and conclusions.
Professor Sternhell noted that it appeared from the declarations of Dr Chabala, Dr. Albers-Schonberg and Mr Fisher that the structural formula of the "b" substituent at the 25-position in both the C-076 starting compound and the invention was amended from n-propyl to iso-propyl after the specification was lodged to correct a mistake that had been discovered in the structural formula.
Professor Sternhell then proceeded to consider the type of mistake referred to by Dr Chabala, Dr Albers-Schonberg and Mr Fisher. He said that, having considered the declarations of both Dr Albers-Schonberg and Mr Fisher, he understood that during the early stages of research into the C-076/avermectin compounds, those compounds were only available for analysis in very small quantities. They were however fractionated and four chromatographically apparently uniform components A1, A2, B1 and B2 were identified. Each of these components was found to consist of a major "a" component together with its isomer being a minor "b" component (paragraph 8 of the Albers-Schonberg Declaration and paragraph 12 of the Fisher Declaration).
The A1, A2, B1 and B2 samples were used for 13 C NMR, 1H NMR and mass spectroscopy analyses. The 1H NMR analysis involved the use of a 100 MHz instrument. The samples consisted of mixtures of "a" and "b" components, the minor "b" component not being able at the time to be separated from the major "a" component. As a result, insufficient data was provided to accurately analyse the structure of the minor "b" components (paragraph 10 of the Albers Schonberg Declaration).
Despite the paucity of the data obtained from the analysis it was thought at the time that the "b" C-076/avermectin compounds carried a saturated three-carbon substituent at the 25-position which was either n-propyl or iso-propyl (paragraph 13 of the Albers-Schonberg Declaration). For this reason the C-076 Patent, being Exhibit "SS-4" specified only "butyl" or "propyl" for the "a" and "b" substituents respectively (paragraph 16 of the Albers-Schonberg Declaration).
A biogenic scheme for the production of C-076 compounds was devised which included the "b" avermectins containing a n-propyl group. This hypothesis was thought to permit a uniform biogenic scheme for the milbemycins and avermectins and also the more conventional macrolide antibiotics produced by microorganisms from acetate and propionate precursors whereas an iso-propyl substituent would have been difficult to explain by this scheme (paragraph 13 of the Albers-Schonberg Declaration).
The hypothesis was shown subsequently to be incorrect. A 300 MHz 1H NMR spectra of the "b" components proved the absence of a straight carbon or n-propyl group and the presence of an iso-propyl group at the 25-position (paragraphs 14 and 15 of the Albers-Schonberg Declaration).
The Professor said it was common and generally necessary in his experience for chemists, when working with biological systems, to formulate such hypotheses as early as possible, in order both to understand biological mechanisms and to assist in predicting accurately the structural formulae of the compounds involved.
He said that by virtue of his experience in analysing organic structures in general and particularly with spectroscopic analysis and techniques, in his opinion the 1H NMR spectroscopy would have been in the late 70s the most appropriate method of analysing and identifying the structural formula of both the "a" and "b" components of the C-076/avermectin starting compounds and the end products of the invention including, of course, their substituents.
NMR spectroscopy can be used in conjunction with other methods to determine the structural formula of a compound. NMR is exhibited by all atomic nuclei having a magnetic moment. When placed in a constant magnetic field, the nuclei absorb energy at a few characteristic frequencies.
Most NMR applications involve protons (1H nuclei) or the minor isotope of carbon (13C). For 1H or 13C nuclei in a chemical compound, the NMR frequency is different because the magnetic field felt by the 1H or 13C differs for the applied field as the result of additional magnetic effects due to other nearby electrons or nuclei. Each chemically different hydrogen or carbon in a compound therefore absorbs at a slightly different frequency and appears as a distinct signal in the NMR spectrum, thereby assisting in the elucidation of the chemical structure.
The Professor considered the results of the NMR spectra from a sample of substantially pure C-076 B2 starting materials prepared according to Example 6 of the C-076 Patent and a sample of C-076 B2 starting materials prepared according to Example 7 of the C-076 Patent. Each of the samples would consist of a mixture of "a" and "b" components.
In the Professor's opinion, analysing these spectra would not be a trivial exercise, as it is a particularly messy and congested trace. He estimated that it would take both himself and a similarly trained expert at least two weeks full time work to analyse the spectra to determine accurately the structural formulae of the "a" and "b" components of the mixture. The obtaining of a number of spectra using different acquisition parameters and at the highest available magnetic field (usually expressed as the operating frequency for hydrogen) would be necessary.
He said that this analysis would, in his opinion, have been especially difficult in view of the compounds which were available for analysis being present in particularly small quantities. Added to this difficulty, the minor "b" component makes up from between only 1 to 15% of the mixture. In his opinion, it would not be a trivial task at all to assess accurately the structural formula of the "a" starting compounds and much more difficult to assess accurately that of the "b" compounds.
Professor Sternhell said that therefore he could understand why the formula of the substituent at the 25-position in the "b" compound was not further analysed at the time, being originally identified as "propyl" in the C-076 Patent. In his opinion, attempting to identify which isomer of "propyl" existed as the substituent of the "b" compound at the 25-position may have involved many extra days work; if indeed it was even possible to further identify, given the mixed nature and the miniscule quantities of the components being analysed and the comparatively unsophisticated 100 MHz 1H spectrophotometer which was the best available at the time.
Had the name "propyl" been used in the application as lodged, as in the C-076 patent, then, in the Professor's opinion the present problem would not have arisen as the name "propyl" can refer to each of the n-propyl and iso-propyl isomers.
Given the difficulty at the time in identifying the structural formula of the relevant minor component substituents and the fact that the structural formula of n-propyl rather than iso-propyl fitted in with the rather attractive hypothesised biogenesis scheme for the production of C-076 compounds, Professor Sternhell expressed the opinion that it is perfectly understandable that the structural formula of the substituent at the 25-position of the "b" series compounds would have been designated "n-propyl", that is until such time as the hypothesis was proved to be incorrect. He understood that the compound was then later analysed using more sophisticated equipment, namely a 300 MHz 1H spectrometer and the substituent at the 25-position was identified as iso-propyl.
The Professor then considered whether the amendment had resulted in the disclosure of any new substances and as to this he said as follows:

"I have considered both the Chabala Statutory Declaration, being Exhibit 'SS-5' and the Fisher Declaration, being Exhibit 'SS-7'. By virtue of these Declarations, I understand that:

(i) The structural formula of a the substituent at the 25-position in both 'a' and 'b' components remains unchanged during the course of the reactions described in both the Application as Lodged and the Application as Accepted (paragraphs 10-19, 22-23 of the Chabala Declaration and paragraph 10 of the Fisher Declaration).

(ii) The structural formulae of the 25-position substituents are, and always have been, iso-propyl for the minor 'b' component and sec-butyl for the major 'a' component.

(iii) The analytical data is consistent only with the structural assignment of sec-butyl for the 25-position substituent of the major 'a' component and iso-propyl for the 25-position of the minor 'b' component. The n-propyl component has never been shown to exist in connection with the C-076/avermectin synthetic research programme (paragraph 12 of the Fisher Declaration). I have considered the reactions specified in both the Application as Lodged and the Application as Accepted including the Examples and the Preparations. By virtue of my experience in organic chemistry and knowledge of chemical reactions, in my opinion none of these reactions could affect the structure of the 25-position substituent. In fact, I find it impossible to imagine how the reactions described for removing sugar groups, reductions and halogenation would have the slightest effect on the structure of the 25-position substituent. If I were asked to produce the invention from the starting compound and at the same time alter the structure of the 25-position substituent, I would probably need to embark upon at least two weeks research before I could devise suitable reactions to achieve the required results. I am strongly of the opinion, having examined the relevant patents and the evidence described in paragraph 6 above, that the Application as Lodged, while misidentifying the substituent at the 25-position of the minor 'b' compound of the starting materials and the end products as 'n-propyl' rather than 'iso-propyl', inevitably would lead to compounds being produced having an iso-propyl substituent at the 25-position. The process descriptions remain the same in the Application as Accepted as those in the Application as Lodged. The structures actually used and prepared always consisted of an iso-propyl substituent at the 25-position of the 'b' compounds and never an n-propyl substituent. In my opinion therefore, it is very clear that amending the substituent at the 25-position in the minor 'b' component of both starting materials and end products of the invention as described in the Application as Lodged, does not disclose any new substance."

I accept the evidence of Professor Sternhell including the accuracy of his opinions.
An important finding of the Delegate was that "the processes described in the original specification inevitably led to compounds with an iso-propyl substituent at the 25-position ..." (pp 21, 22). It is true that in the application as lodged the compounds are defined in terms of the structural formula which nominated n-propyl as the 25-substituent rather than iso-propyl; but the Delegate held that amending the n-propyl substituent in the application as amended to iso-propyl involved new matter. I respectfully disagree. I accept the evidence of Professor Sternhell that if an iso-propyl substituent is inevitably produced by following the reactions described in an application then that application cannot disclose new matter even when the iso-propyl substituent had been misidentified in the application. The iso-propyl substituent had always been present in the starting materials and was always produced irrespective of it originally having been misidentified. I accept the evidence that in the circumstances, correcting the name of the substituent at the 25-position in the "b" compounds from n-propyl to iso-propyl did not mean that a new substance had been disclosed; it merely meant that the true structure had been determined. It follows, in my opinion, that the amendment made in the application as accepted did not result in the disclosure of any new matter. It follows that the relevant priority date is 19 December 1977, not 18 December 1981.
I was referred in argument to various reported cases relating to amendments, but I do not find it necessary to mention them as the case turns essentially on its facts; though I have derived considerable assistance from a judgment which in some ways is quite close to the present case, namely, the judgment of Gibbs J. in Farbwerke Hoechst Aktiengesellschaft Vormals Meister Lucius and Bruning v Commissioner of Patents (1971) 45 ALJR 129.

In matter number G486 of 1991 I would allow the appeal; set aside the finding of the Delegate that the opposition of the respondent to the grant of Australian Patent Application No. 527532 succeeds, set aside the orders of the Delegate including the order for costs, and order that the respondent pay the applicant's costs of the proceeding in this Court and of the opposition proceeding under s. 59 of the Patents Act 1952. I would order the Commissioner to proceed to seal the application in its present form.
Matter No. G485 of 1991
This is an appeal by the applicant from a decision of the Delegate given on 1 August 1991 in opposition proceedings under s. 59 of the Act by the applicant to the grant of a patent in respect of Application No. 574695 in the name of the respondent ("the Sankyo application"). The Delegate dismissed the opposition of the applicant and, subject to any appeal being lodged, directed that the Sankyo application proceed to sealing.
The Sankyo application No. 574695 was lodged by the respondent on 18 July 1984. It is a further application made under s. 51A of the 1952 Act of Application No. 61668/80 (which I mentioned earlier) and which claims priority from an earlier application filed in Japan on 23 August 1979.
The Sankyo application relates to an invention entitled "Compound having anthelmintic and acaricidal activities". The following description of the invention is included in the complete specification:

"The present invention relates to a new compound, designated B-41D, which can be prepared by the cultivation of micro-organisms of the genus Streptomyces and which has valuable acaricidal and anthelmintic activities ..."

There are five claims defining the invention in the following terms:

"1. Compound B-41D, which has the formula:

2. A process for preparing an anthelmintic and acaricidal composition, which comprises cultivating a Compound B-41D-producing microorganism of the genus Streptomyces in a culture medium therefor and concentrating and purifying the culture medium to produce a composition containing at least 25% by weight of Compound B-41D, compound B-41D being as defined in claim 1.

3. A process according to Claim 2, in which said composition contains about 50% by weight of Compound B-41D.

4. A composition which comprises the compound of claim 1 in admixture with an inert carrier therefor.

5. A composition substantially as disclosed in any one of Examples 3 to 6."

Before the Delegate the submissions on behalf of the applicant in support of its opposition were confined to the grounds of anticipation and compliance with s. 40 of the 1952 Act.
The specification indicates that the invention relates to a single new compound designated B-41D which is prepared by the cultivation of microorganisms of the genus Streptomyces, but especially Streptomyces strain B-41-146 which has been deposited with the Fermentation Research Institute, Agency of Industrial Science and Technology, Ministry of International Trade, International Trade and Industry, Japan where it is available under the accession No. FERM1438. The specification gives a detailed description of the preparation of B-41D. This compound has acaricidal and anthelmintic activity and the specification states in detail how it is formulated into insecticidal and acaricidal compositions and how the activity is tested. Of the five claims, claim 1 is directed to compound B-41D per se defined in terms of a structural formula. Claims 2 and 3 are directed to the preparation of a composition of B-41D by cultivation of a microorganism and claims 4 and 5 are directed to compositions containing B-41D.
Much of the evidence relied on in this matter before the Delegate was also evidence in matter G486. It was agreed before the Delegate by both parties that the structure of the respondent's compound B-41D fell within the structure of the compounds of claim 1 of the applicant's application as accepted. The Sankyo application was opposed, before the Delegate, by the applicant on the basis of prior claiming, prior publication and non-compliance with s. 40 of the 1952 Act, specifically in relation to fair basis. Counsel for the applicant argued before the Delegate that the Sankyo application was prior published on 28 June 1979 by the application as lodged by Merck, which was published before the earliest priority date of the Sankyo application (23 August 1979).
I have held in matter G486, the date of priority of the relevant claims of the applicant is not deferred and that the priority date is 19 December 1977. Therefore, the opposition of the applicant to the prior claim of the Sankyo compound must be upheld in so far as it concerns its submission that B-41D is prior claimed by the applicant's application as lodged.
As indicated earlier, the applicant opposed the Sankyo application on the basis, not only of prior claiming, but prior publication and non-compliance with s. 40 of the 1952 Act specifically in relation to fair basis. No reliance was placed in the appeal upon prior publication. It was argued before the Delegate that, since the Sankyo specification mentioned only one example of a B-41D producing microorganism (Streptomyces strain B-41-146) and there was no teaching of other appropriate strains of streptomyces, claim 2 in referring to the broad genus Streptomyces was not fairly based. The terms of claim 2 are set out earlier. It was argued before the Delegate on behalf of the applicant that Streptomyces avermitilis does not produce B-41D, but only a precursor. It was also argued that claim 5 was an omnibus claim and not fairly based unless examples 3 to 6 were amended to indicate that the B-41D employed was produced by fermentation of streptomyces strain B-41-146.
The question before the Delegate was whether there was a basis in the specification for the "compound B-41D-producing microorganisms of the genus Streptomyces". The Delegate accepted the submission of counsel for the respondent that microorganisms are limited to those capable of producing compound B-41D and she concluded that claim 2 was fairly based. She also concluded that claim 5 was fairly based. Examples 3 to 6 she said describe the preparation of a powder, a wettable powder, an emulsifiable concentrate and an oil based preparation respectively containing compound B-41D. The Delegate said that, from reading the specification, she could find no indication that the compound in examples 3 to 6 should be limited to a compound produced by fermentation of a particular strain of streptomyces. The description at pages 14-17 of the Sankyo specification described in general terms how compositions containing compound B-41D may be prepared. She therefore concluded that this is a basis for claim 5 in the specification. The Delegate found that the opposition failed on the grounds of anticipation and compliance with s. 40 and accordingly dismissed the opposition.
An affidavit of Dr Duncan Veal was read by counsel for the applicant on this appeal. It was not before the Commissioner. Dr Veal is a microbial physiologist with a particular interest in microbial interactions and a Senior Lecturer in Biology in the discipline of Microbiology in the School of Biological Sciences at Macquarie University. Dr Veal said that Claims 2 and 3 of the Sankyo application require a compound B-41-D-producing micro-organism of the genus Streptomyces to produce the compound B-41D which is described in Claim 1. Although the Sankyo application states at page 8 that compound B-41D can be prepared by cultivating micro-organisms of the genus Streptomyces, but especially Streptomyces strain B-41-146 (Ferm 1438), Streptomyces strain B-41-146 (Ferm 1438) is the only strain of Streptomyces which is specified in the application as producing the substance B-41D. Dr Veal said that he had considered the patent specifications being Exhibits DV-1 and DV-3 to DV-6 to his affidavit and the extracts from the Journal of Antibiotics being Exhibits DV-7 and DV-8. He concluded that none of the patent specifications, nor the extracts from the Journal of Antibiotics being Exhibits DV-1 and DV-3 to DV-8, identify strains of Streptomyces which produce compound B-41 other than Streptomyces strain B-41-146 (Ferm 1438).
Exhibits DV-1 to DV-8 are as follows:
(i) Australian Patent No. 536,200 in the name of the respondent

entitled "Compound having Anthelmintic and Acaricidal Activities" (exhibit "DV-1");

(ii) The Sankyo application (exhibit "DV-2");

(iii) British Patent Specification No. 1,390,336 in the name of the

respondent entitled "Antibiotic B-41" (exhibit "DV-3");

(iv) United States Patent No. 4,093,629 in the name of the

applicant entitled "Derivatives of Antibiotic Substance Milbemycin and Processes Therefor" (exhibit "DV-4");

(v) United States Patent No. 4,134,973 in the name of the

applicant entitled "Carbohydrate Derivatives of Milbemycin and Processes Therefore" (exhibit "DV-5");

(vi) United States Patent No. 4,144,352 in the name of the

applicant entitled "Milbemycin Compounds as Anthelmintic Agents" (exhibit "DV-6");

(vii) The Journal of Antibiotics Volume 29(3) at pages 76-14

to 76-16 (exhibit "DV-7");

(viii) The Journal of Antibiotics Volume 29(6) at pages 76-35 to

76-42 (exhibit "DV-8").

Dr Veal said:

"None of the patent specifications nor the extracts from the Journal of Antibiotics being Exhibits DV-1 and DV-3 to DV-8 identify strains of Streptomyces which produce compound B-41 other than Streptomyces strain B-41-146 (Ferm 1438).

Apart from the method given on pages 11 to 13 of the Application for recovering compound B-41D from culture broth and the information on pages 7 and 8 of the Patent providing some of the physical and chemical properties of compound B-41D, none of the patents, the extracts from the Journal of Antibiotics, being Exhibits DV-1 and DV-3 to DV-8, nor the Application gives directions for identifying any strains of Streptomyces other than Streptomyces B-41-146 (Ferm 1438) which can produce either compound B-41D or compound B-41."

Under the heading "Difficulties in Identifying Other Compound B-41D Producing Strains of Streptomyces" Dr Veal said:

"By virtue of my experience both in working with a wide variety of microorganisms and in isolating and identifying various metabolites of microorganisms and antibiotics, in my opinion it would be difficult to identify from even a small number of strains of Streptomyces which, if any strains, other than the specified strain, could produce compound B-41D assuming that all strains did not produce the compound. If on the other hand there are many known strains of Streptomyces in existence then, in my opinion, for the reasons discussed in paragraphs 11 to 16 below, it would be impossible to identify the B-41D compound without conducting extremely time consuming and extensive tests. I am aware from the scientific literature, that there are well over 3,000 different known strains of Streptomyces and I refer to page 2465 of 'Bergey's Manual of Systematic Bacteriology', Volume 4 by S.T. Williams, M.E. Sharpe, J.G. Holt, Williams and Wilkins, 1989, a copy of the relevant extract of this book being exhibited to me and marked DV-9.

There are various ways of classifying microorganisms. Systems of classification are generally based upon practical considerations. Traditionally microorganisms are classified into groups, families, genera, species and strains. A strain is the basic unit, consisting of genetically identical clones of the one individual. Strains are groups into species, species into genera, genera into families and families into groups.

I am also aware both from my experience and from the literature that many strains of microorganisms within the one genus, including the genus Streptomyces, will be distinguishable from the other strains by their different properties. Also, I am aware both from the scientific literature and from my background in teaching that the production of antibiotics in particular, is generally strain specific. In my opinion, there is no way of predicting from one particular strain of a Streptomyces which produces a specific antibiotic when cultivated under specified conditions, which if any other strains of the same genus will also produce that antibiotic.

Therefore assuming compound B-41D to be typical of other antibiotics, and I note from pages 974 and 975 of the Merck Index 11th Ed. 1989, copies of which are exhibited to me and marked 'DV-10', that compound B-41D, or Milbemycin D, is an antibiotic having insecticidal and acaricidal activity, in my opinion it is most unlikely that compound B-41D will be produced by all strains of Streptomyces. In fact, it is probable that most strains of Streptomyces, apart from Streptomyces B-41-146 (Ferm 1438), would not produce this antibiotic and it may therefore be necessary to cultivate thousands of different strains of Streptomyces to find even one further strain which can produce the compound B-41D. Even the simplest way of testing each of the many different strains of Streptomyces for compound B-41D production would be onerous and time consuming. It would involve cultivating and screening each strain of Streptomyces for antimicrobial activity and, if activity is present, isolating the antibiotics and then testing each to see if it is the relevant compound.

In order to test each strain of Streptomyces for antimicrobial activity a bioassay would need to be set up to screen each strain. This would, for example, involve incubating the centre of an agar plate containing a suitable medium, with the test strain of Streptomyces and applying a series of B-41D sensitive indicator microorganisms in lines radiating from the centre. After suitable incubation, an inhibition of growth towards the centre of the plate by the various indicator strains would be indicative of antimicrobial activity in the test strain.

Assuming antimicrobial activity to be present in the test strain of Streptomyces, the antibiotics would then need to be purified and their physical and chemical properties analysed and compared with those of compound B-41D. Isolating the antibiotics and then comparing the physical and chemical properties of each with those of compound B-41D described on pages 7 and 8 of the Patent would not, in my experience, be a trivial task. I am aware from my reading of the scientific literature that more than 2,000 antibiotics have been characterised from Streptomyces and I refer to the book titled 'General Microbiology' by Hans G. Schlegel, 7th edition, Cambridge University Press at page 339, a copy of the relevant extract of this book being exhibited to me and marked 'DV-11'. Analysing perhaps as many as 2,000 antibiotics in order to find one specific antibiotic, namely compound B-41D, would in my opinion be equivalent to attempting to find a 'needle in a haystack'. It would be a time consuming, difficult exercise which would take months and even years to accomplish. It may even prove ultimately to be fruitless as, in my opinion, there is no certainty of finding another strain of Streptomyces capable of producing the compound B-41D.

To illustrate the enormity of the task of attempting to identify compound B-41D if it is produced from other strains of the genus Streptomyces I use as an example one of my own projects. I am currently in receipt of a one year grant of $A72,000 to isolate and identify a single antibiotic and then to synthesize that antibiotic. Approximately five months have been spent on this project to date, merely in isolating and attempting to identify the antibiotic. The antibiotic has not as yet been identified.

It is therefore, in my opinion, quite clear that, due to the difficulties in identifying other strains of Streptomyces which can produce compound B-41D, producing compound B-41D from strains of Streptomyces apart from the Streptomyces strain B-41-146 (Ferm 1438) would be extremely difficult and would involve time consuming and extensive testing."

This evidence was not available to the Delegate. I accept it.
Having read the evidence, in particular the affidavit of Dr Veal, I am satisfied that the finding of the Delegate (page 10 of the reasons for decision) that there is some basis in the specification for claiming the compound B-41D producing microorganisms of the genus Streptomyces rather than limiting the microorganisms to Streptomyces B-41-146 (Ferm 1438) is in error. I am satisfied that it is incorrect to assume that, because one strain of Streptomyces and perhaps mutants of that strain produce compound B-41D, other strains of Streptomyces also will produce compound B-41D.
The application, and exhibits DV-1 and DV-3 to DV-8 do not identify or teach any strains of Streptomyces which can produce compounds B-41 and B-41D other than the Streptomyces strain B-41-146 (Ferm 1438) and perhaps mutants of the strain. In my opinion in these circumstances both claims 2 and 3, which claim a process for preparing compound B-41D from "a compound B-41D producing microorganism of the genus Streptomyces", cover a much wider range of microorganisms than the one particular strain which is specified or taught in the Sankyo application. So far as claim 5 is concerned, if the compound B-41D used in example 3 to 6 is not to be limited to a compound produced by fermentation of one particular strain of Streptomyces, as the Delegate suggests in her reasons, then this claim also covers a much wider range of microorganisms than the single strain which is specified or taught.
For these reasons I would allow the appeal, set aside the finding of the Delegate that the opposition to the grant of Australian Patent Application No. 574695 fails; and order the respondent to pay the applicant's costs of the proceeding and of the opposition under s. 59 of the 1952 Act.
I would order that the application not be granted unless amended as follows (this is the form of order agreed in by counsel for the applicant and counsel for the Commissioner):

"1. In relation to the specification by:

(a) inserting the words 'produced in accordance with Example 1 or Example 2' after the words 'Compound B-41D' where it appears in each of: Example 3 on page 27, line 11 Example 4 on page 28, line 3 Example 5 on page 28, line 13 Example 6 on page 29, line 3.

2. In relation to the claims by:

(a) deleting Claim 1 and renumbering Claims 2 to 5 as Claims 1 to 4 respectively:

(b) amending former Claim 2 as follows:

(i) replacing the words 'a compound B-41D-producing microorganism of the genus Streptomyces' in lines 2 and 3 with the words 'Streptomyces strain B-41-146 (Ferm 4388)';

(ii) deleting the words 'being as defined in Claim 1' in the last line of this claim and replacing with the words 'having the formula:' followed by the formula contained in the former Claim 1;

(c) replacing the words 'the compound of Claim 1' in former Claim 4 with the words 'the compound produced by the process of Claim 1'."

[1992] FCA 253

11 MAY 1992