Merck Sharp & Dohme Corp.

[2012] APO 25

IP AUSTRALIA

AUSTRALIAN PATENT OFFICE

Merck Sharp & Dohme Corp. [2012] APO 25

Patent:670300

Title:Benzoxazinones as inhibitors of HIV reverse transcriptase

Patentee:  Merck Sharp & Dohme Corp.

Delegate:  P M Spann – Deputy Commissioner of Patents

Decision Date:  21 February 2011

Hearing Date:  25 October 2011, 1 February 2012

Catchwords:  PATENTS - section 223 – request for extension of time of 10 years and 4 months to file an application under section 70 (extension of term for a pharmaceutical substance) – error or omission – error identified immediately but decision not to apply for an extension of time for commercial reasons – extension application reflects changed commercial interests – discretionary factors considered –extension inconsistent with the purpose of section 223 and the intended operation of the extension of term scheme – extension refused.

Representation:  Patentee:         S Irani, patent attorney,

Spruson & Ferguson, Sydney

IP AUSTRALIA

AUSTRALIAN PATENT OFFICE

Patent No.:670300

Title:Benzoxazinones as inhibitors of HIV reverse transcriptase

Patentee:  Merck Sharp & Dohme Corp.

Date of Decision:  21 February 2012

DECISION

I refuse the application for an extension of time under subsection 223(2)(a).

REASONS FOR DECISION

1. This matter concerns an application for an extension of time under subsection 223(2)(a). It is for the purpose of extending the period for filing an application for an extension of term provided for in subsection 71(2) and the period of extension sought is 10 years and 4 months. The question to be answered is whether, pursuant to subsection 223(6A), I should refuse the application. If I decide that is not appropriate, the consequence is that the application will be advertised pursuant to subsection 223(4) and any subsequent decision to refuse or allow the extension will be made in light of any opposition filed under subsection 223(6).

Background

1. Patent application 44496/93 was filed on 6 August 1993. It claims certain compounds said to be useful for the inhibition of HIV reverse transcription to treat or prevent HIV infection or AIDS. The application was accepted and the present patent subsequently granted by the Commissioner on 29 October 1996. It is in force and, subject to payments of renewal fees, will expire on 6 August 2013.

1. A compound disclosed in the patent specification and within the scope of the claims is 6-chloro-4-cyclopropylethynyl-4-trifluoromethyl-1,4-dihydro-2H-3,1-benzoxazin-2-one also known as Efavirenz. Efavirenz is the active ingredient in a pharmaceutical product known as Stocrin. This product in various forms is included in the Australian Register of Therapeutic Goods (ARTG) including both as a Registered Medicine and export listings. The earliest inclusions for the product have the ARTG commencement date of 9 April 1999.

1. Part 3 of Chapter 6 of the Patents Act 1990 provides for an extension of term for certain patents that disclose and claim one or more pharmaceutical substances per se and for which exploitation of the patent is delayed because of the requirements for regulatory approval.  The term of the available term extension is provided by section 77 and is determined based on the “earliest first regulatory approval date”. This, in turn, is defined by section 70 and in most cases is the date of commencement of the first inclusion in the ARTG of goods that contain or consist of the pharmaceutical substance.

1. In the present case, the potential term extension based on the date of the patent, here 6 August 1993, and the first ARTG commencement date of 9 April 1999, is 8 months 3 days. Accordingly, the expiry date for the patent would become 9 April 2014. However, one of the conditions for the grant of an extension of term is that the extension be applied for during the period provided for in section 71(2). That period expired for the present patent on 9 October 1999, that is, six months after the first inclusion in the ARTG, but no application was filed.

1. On 3 February 2010 the patentee (Merck) filed an application for an extension of term of the patent based on the inclusion in the ARTG for the goods Atripla. This is a combination of the active ingredients Efavirenz, Emtricitabine and Tenofovir Disoproxil Fumarate. The application itself pointed out the earlier inclusions for Efavirenz and the examiner, in assessing the application, objected that the application was made out of time. In this regard the relevant period is determined under subsection 71(2) on the basis of the first inclusion of goods that contain or consist of any pharmaceutical substance meeting the requirement for extension, as I found in Pfizer Italia S.r.l. [2007] APO 2. Here the first inclusion is for the goods Stocrin not Atripla. The examiner in any event also found that Tenofovir disoproxil fumarate, and therefore the combination in Atripla, was not in substance disclosed in the patent specification.

1. In response to the examiner’s report, the patentee on 29 June 2010 filed the present application for an extension of time under section 223 to file the extension of term application. As indicated above, the extension of time was for 10 years and 4 months being the period from 9 October 1999 to 9 February 2010.

1. A delegate of the Commissioner, Dr Barker, considered the request and wrote to the patentee indicating reasons why, in his view, section 223(2) was not enlivened. Consequently Merck requested that the matter be set for hearing. In addition to the evidence already filed and as a result of matters raised at the hearing, I allowed Merck a further opportunity to file evidence. This was completed on 1 February 2012 and the evidence and Merck’s submissions are referred to as appropriate in the following reasons.

The evidence

1. The application itself does not set out the basis for the extension sought but rather the grounds are apparent from two subsequently filed declarations and Merck’s submissions. The first of the declarations was made by a US patent attorney, Kenneth R Walton (dated 22 December 2010), and the other by the patentee’s Australian attorney, Shahnaz Irani (dated 4 January 2011). I will not summarise these declarations in detail but rather set out what I accept as the key facts relevant to the present matter.

1. Firstly, the person most directly responsible for obtaining extensions of terms in Australia was at the relevant time Mr Ian Hiscock, a patent attorney employed by Merck in the UK. Mr Hiscock, in turn, used the services of Spruson & Ferguson, Sydney to file the applications in Australia. John O’Connor was the principle attorney at Spruson & Ferguson for this work.

1. On 12 July 1999 Mr Hiscock emailed various persons seeking information relevant to the filing of an application for an extension of term in Australia in relation to the product Stocrin (KRW1-3). Then on 28 July 1999 he advised Angela Bayley at Merck’s Australian subsidiary (MSD Australia) that “The extension of the corresponding Australia patent therefore needs to be filed by 9 October 1999. I will ensure that John O’Connor is sent appropriate instructions in due course.” A copy of this email (KRW-4 and SSI-4) was also forwarded to Mr O’Connor.

10.However it appears instructions were not sent and an extension of time was not applied for within the prescribed period. On 17 November 1999 Mr Hiscock emailed Mr O’Connor asking whether the extension application had been filed and whether the deadline had been missed (KRW-13 and SSI-5). Mr O’Connor responded on the same day (KRW-14), indicating that the application had not been filed and that the deadline, 9 April 1999, had been missed. He further indicated however that “In view of the short potential extension of this patent (8 months) weighed against the extended springboarding opportunity (14 years), we were not unduly concerned when we did not receive instructions to extend the patent”. Nevertheless he further indicated that, if necessary, the application could be made together with a section 223 extension of time application.

11.Mr Hiscock subsequently sought and was given advice from MSD Australia about this (KRW-15) and on the 29 November 1999 was in a position to advise Mr Walton that MSD Australia had decided not to apply for an extension of term (KRW-16). This decision was confirmed by letter from Mr Hiscock to Mr O’Connor on 17 December 1999 (KRW-20).

12.A further matter referred to in Mr Walton’s declaration was that in 2006 the Intellectual Property Laws Amendment Act 2006 came into effect allowing “springboarding” of pharmaceutical patents, whether or not the term of the patent had been extended. Prior to this amendment “springboarding”, the ability to exploit the invention for the purpose of obtaining regulatory approval without infringing the patent, was only available if the term of the patent was extended. That exemption however applied from the time the extension of term was granted, not merely during the term of the extension. Hence the advice given by Mr O’Connor reflected the view that value of the short term extension available would not outweigh the effect on the patentee’s interests of the ability for generic drug manufacturers to springboard during a substantial part of the normal term of the patent.

13.Section 119A of the revised Act however provides a general springboarding exemption for pharmaceutical patents with only the exemption of the act of exporting goods for the purpose of obtaining foreign regulatory approval conditional on the granting of an extension of term. It applied from 25 October 2006 to all patents in force at or after that time, including the present patent. As a result, from that date steps could be taken to obtain regulatory approval in relation to the patent without infringement and Mr O’Connor’s advice concerning the extension of term application therefore ceased to have relevance.

14.While Mr Walton suggests at para 28 of his declaration that “Merck’s post-filing deadline decision not to file for an extension has proved to be an error in judgement in that the springboarding issue became irrelevant as a result of the change in the pertinent law in 2006”, this was not pressed at hearing as a relevant error or omission for the purpose of section 223.

15.The further evidence filed by Merck following the original hearing comprises a further declaration made by Ms Irani. It is based on a review of a number of extensions of term cases conducted by Sprusons in the relevant period and tends to confirm Mr Hiscock’s role as the responsible person in Merck for providing instructions to the Australian attorney on extensions of term. It also tends to confirm the significant decision making role that MSD Australia had in relation to potential extensions in Australia (SI-B) and that Mr Hiscock was aware at least as of 8 July 1999 that a short extension of term might be outweighed by the commercial disadvantage that would result by the triggering of the springboarding exemption (SI-D). 

Law

16.Section 223(2) provides:

“Where, because of:
(a) an error or omission by the person concerned or by his or her agent or attorney; or
(b) circumstances beyond the control of the person concerned;
a relevant act that is required to be done within a certain time is not, or cannot be, done within that time, the Commissioner may, on application made by the person concerned in accordance with the regulations, extend the time for doing the act.”

17.A "relevant act" for the purposes of section 223 is defined in section 223(11) and means:

“an action (other than a prescribed action) in relation to a patent or patent application, or any proceedings under this Act (other than court proceedings), and includes the making of a Convention application within the time allowed for making such applications.”

18.Regulation 22.11(4) then prescribes the following actions as being excluded for the purposes of section 223(11):

(4) For the definition of relevant act in subsection 223 (11) of the Act, each of the following actions is prescribed:
(a) an action or step prescribed in Chapter 5, other than an action or step taken under regulation 5.3 or 5.3AA, paragraph 5.4 (a), subparagraph 5.8 (1) (a) (i) or regulation 5.9A;
(b) filing, during the term of a standard patent as required by subsection 71 (2) of the Act, an application under subsection 70 (1) of the Act for an extension of the term of the patent;
(c) an action or step prescribed in Chapter 20.

19.The meaning of subregulation (4)(b) has been considered by the Commissioner previously and most recently in Alphapharm Pty Ltd v H.Lundbeck A/S [2011] APO 36. The delegate in that case decided that subregulation 22.11(4)(b) does not exclude section 70 applications from section 223 provided these are filed within the term of the patent as required by section 71(2). While that decision is now subject to appeal to the Administrative Appeals Tribunal, I consider the delegate’s finding to be correct and have no reason to depart from that construction for present purposes.

20.Jenkinson J in Kimberly-Clark Ltd v Commissioner of Patents (No 3) 13 IPR 569-584 considered the scope of an “error or omission” in the context of the equivalent provisions of section 160 of the Patents Act 1952. He stated:

"It is in my opinion difficult to suppose that only the inadvertences and accidental steps, and not errors resulting from faulty reflection, of the former class of persons were intended by the draftsman to be within s 160(1). Further, the word 'error' is not easily assigned a clear meaning restricted by reference to one or several particular categories of flawed mental function. The attempt is likely to lead to the drawing of fine and often unrealistic distinctions. And some errors of judgement by agents and attorneys may be as bizarre and as little to be anticipated as lapses of memory and accidental slips."

21.Jenkinson J rejected the argument that section 160(2)(a) excluded errors or omissions that were the products of deliberation. Consequently, the concept of what constitutes an error should be interpreted broadly and includes an error of judgement. But Jenkinson J also made the following comments at page 580:

"By no means every judgement by the "person concerned" or by "his agent or attorney" which can be shown to have been mistaken will answer the description "error or omission" in the ordinary meaning of those words, which in their context carry, in my opinion, a connotation of obviousness in error."

22.At page 583 Jenkinson J further found that, in order to make out a proper case justifying an extension:

"... an applicant would in my opinion have to go beyond a disclosure of the processes by which an agent's errors came to be committed, and would have to expose frankly, inter alia, all the conduct, knowledge, beliefs and mental processes (or, in the case of corporation aggregate, of the relevant officers and other agents) relevant to an understanding of the way the failure to do the act or take the step occurred, or relevant to an evaluation of the reasonableness of that conduct."

23.Justice Spender in G S Technology Pty Limited v Commissioner of  Patents [2004] FCA 1017 at [62] considered that the Administralitve Appeals Tribunal in Sanyo Electric Co Ltd v Commissioner of  Patents (1996) AIPC 91-283 at 37,844 had usefully summarised the principles to be adopted concerning the exercise of the discretion to extend time. That is at paragraph 16 of that decision:

“The decisions of the courts concerning the approach to be taken to the exercise of a discretion to extend time are now well-established and include:

·in the absence of nominated factors against which the discretion is to be exercised, regard should be had to the “subject-matter, scope and purpose of the Act” - per Mr Justice Mason (as he then was) in Minister for Aboriginal Affairs and Another v Peko-Wallsend Limited and Others [1986] HCA 40; (1986) 162 CLR 24 at 39-40. A further exposition of this is provided by the comments of Mr Justice Davies in Chalk v Commissioner for Superannuation [1994] FCA 1063; (1994) 50 FCR 150 at 154 where he said “. . . the discretion should be exercised by reference to the words of the statute and the context within which the discretion is conferred”;

·while the applicant has the burden of placing before the Tribunal the circumstances which it claims will justify the grant of an extension of time, that does not amount to a burden of proof and it is not appropriate that it should be so described (McDonald v Director-General of Social Security [1984] FCA 57; (1984) 1 FCR 354 per Mr Justice Woodward at 357 and Jenkinson J at 368-369, Australian Broadcasting Tribunal v Bond Corporation Holdings Ltd and Others (1989) 86 ALR 424 per Mr Justice Burchett at 432;

·it is “more important to consider the consequences of extending or refusing to extend time than to debate the reasons why the act was not done in time” (per Davies J in Chalk’s case, at 156, with whom Chief Justice Black and Mr Justice Cooper agreed. Similar comments are to be found in Comcare v A’Hearn [1993] FCA 498; (1993) 119 ALR 85, particularly at 88);

·actions of the agent of a principal should not necessarily be regarded as being the actions of the principal (A’Hearn’s case);

·a legislative provision providing for the exercise of a discretion to extend time is beneficial in nature and should be applied beneficially (Davies J in Chalk’s case at 155).”

24.The AAT further outlined a number of issues relevant to the exercising of the discretion provided by section 223(2) in Aristocrat Australia Pty Ltd and Commissioner of Patents and IGT [2009] AATA 873 [35]-[56]. From this it is evident that while understanding principles applied in other cases may be useful they should not be seen as hard and fast rules and, ultimately, the question is whether, in the particular circumstances, the extension of time is appropriate. This fundamentally requires a consideration of the interests that would be affected by allowing or refusing the extension.

25.In Alphapharm Pty Ltd v H.Lundbeck A/S ,supra, an extension of a very similar nature was considered and the discretion applied on the basis of an assessment of the interests of the patentee, third parties and the public. To the extent that absence of unreasonable delay was also considered as a discrete discretionary factor it would seem this is relevant only to the extent that delay impact on the relevant interests not as a special rule or precondition for an extension of time. In any event an extension of 121 months was granted by the delegate where the need for the extension arose because of a finding by the Full Court that an extension of term had been obtained an the basis of an incorrect first regulatory approval date and that an application based on the earlier correct first regulatory approval date was out of time. Relevantly the delegate considered that the parties opposing the extension who had commenced marketing generic versions of the patented drug had done so as a deliberate strategy with a known commercial risk. She also found that while the effect of granting the extension would mean members of the public would face higher drug prices for a further 3.5 years this would also have been the case if the correct extension of time had been granted in the first place. The higher cost to consumers was in her view “offset by the broader public interest in encouraging research into new and useful drugs”. Again it should be noted that an appeal of the delegate’s decision is pending.

Is there a causative error to enliven section 223?

26.It is not surprising that with the passage of more than 10 years there is not a greater volume of evidence concerning Merck’s dealings with the current patent and indeed both Mr Hiscock and Mr O’Connor are apparently not available to provide evidence, even if they were in a position to recall the events that transpired at the time.

27.Nevertheless, from the documentation available to me, I am prepared to accept that Merck, through its employee Mr Hiscock, had an intention in July 1999 to file an application for an extension of term based on the listing of Stocrin. This intention apparently survived past the due date for the filing of the application but then changed after advice provided by Mr O’Connor and MSD Australia caused him to come to the view that an extension should not be sought. Why the application was not filed is not readily apparent but I assume arose from some error of procedure or judgement on the part of Mr Hiscock that resulted in instructions not being given to Mr O’Connor.

28.It might be thought possible that instructions may otherwise have been given to Mr O’Connor not to proceed, for example by MSD Australia. However the correspondence subsequent to the passing of the due date supports the view that Mr O’Connor did not receive instructions (KRW-14) and nothing otherwise suggests that such instructions were otherwise given. Consequently I find that the available evidence is consistent with an error occurring that prevented the filing of the application rather than a deliberate decision not to apply and I therefore accept that a causative error exists that might support an extension of time.

29.Before further considering whether the application should be refused on discretionary grounds I note that the thing required to be done by 9 October 1999 was an application for extension of time based on the ARTG listing of Stocrin. The application filed 3 February 2010 was based on the more recent listing (3 August 2009) of Atripla. Arguably therefore the act to which section 223 applies still has not been done. If this is the case, the deficiency presumably could be rectified easily by filing a new extension of term application and a new extension of time application covering the further period of time required. Given my finding below however it is not necessary to resolve this point

Should the extension be refused on discretionary grounds?

30.In considering this question, it is clear from the above that I must take into account the interests that would be affected by allowing or refusing the extension including those of the patentee, third parties and the public. I also need to have regard to the “subject-matter, scope and purpose of the Act”.

31. Efavirenz is categorised as a “highly specialised drug” for the purposes of the Pharmaceutical Benefits Scheme and presumably has significant commercial value for Merck in Australia (see for example Australian Statistics on Medicines 2009, Department of Health and Aging, pg19). In its submission Merck suggested that there were no third party producers of generic Efavirenz products that would be adversely impacted by the extension of term and therefore by an extension of time under which it might be pursued. If there are no generic competitors in a position to enter the market at the end of the normal term then arguably a relatively short patent term extension will not be a significant commercial advantage to Merck. Merck’s actions in seeking the extension in the current circumstances however suggests the opposite. At the end of its patent term Merck faces potential completion from generic pharmaceutical companies and a reduction of pricing under the Pharmaceutical Benefits Scheme (National Health Act1953). Consequently delayed entry of competitors in the market that might be effected by an extension of term, even for as short a period as 8 months, may well be of very significant advantage to Merck. Furthermore it is an advantage that Merck argues it is intended to have under the operation of the pharmaceutical term extension scheme and, obviously, if the extension of time is refused, an extension of term cannot be obtained. In any event clearly Merck’s interests lie strongly with the granting of an extension of time such that it can seek to obtain an extension of term.

32.While Merck indicates there are no third party producers, interested third parties may also include generic pharmaceutical companies that are considering production and/or marketing of drugs on expiry of the patent and who may be in the process of seeking ARTG listing. If so I would expect that the commercial advantage to those parties in an extension of term not being granted would also be significant. This however is the case with all applications involving potential extensions of term. The distinction here is that the extension of term scheme imposes time limits and, an application not being made in time, third parties might well have an expectation that no term extension will be obtained, particularly so after 10 years and relatively close to the end of the normal patent term. In that case, steps may have already been taken which will be frustrated by the granting of an extension of time. It is true that I have no evidence of that and indeed, because the current application has not been advertised for opposition, the opportunity for third party objections has not yet arisen. Nevertheless the potential for a significant detriment to third parties arising from the granting of the extension of time of such a significant period is clearly apparent. This is particularly so given that no protection and compensation mechanism applies in these circumstances, unlike that provided by the provisions of sub-section 223(9) (and regulation 22.21) had the patent ceased, and the extension of time had the effect of restoring the patent.

33.The public interest lies in the efficient and orderly operation of the patent system which is generally met by adherence to statutory timeframes. It also however lies against the thwarting of the objectives of the patent system through inadvertent circumstances, including errors in judgement, where an act required to be done cannot be done in the time specified. This is the reason the extension of time provisions of section 223 exist. Relevantly in this case, there is a further public interest in balancing the incentives for innovation in medical research, inherent in the period of market exclusivity provided by the patent system, with reasonable access to and affordability of new drugs. This balance of interests is reflected in extension of term scheme that was implemented by parliament in its passing of the Intellectual Property Laws Amendment Act 1997. As indicated above that Act made as a condition of the granting of an extension of term the filing of an application within the period specified by sub-section 71(2), which in this case is the period 6 months after commencement of the relevant inclusion in the ARTG.

34.It is evident that the timing provisions of the extension of term scheme are intended to provide certainty surrounding the maximum term of a pharmaceutical patent, not the least so that generic manufacturers have the ability to prepare for the marketing of generic drugs at the time the rights in the patent expire. At the same time the extension of time scheme under section 223 applies to that scheme and those provisions, according to the authorities, are to be applied beneficially particularly so that rights provided to a party under the Act are not lost inadvertently. In the present circumstances while I can accept that an error occurred that prevented the filing of an extension of term application by 9 October 1999, a decision was made at least by 17 December 1999 that it was not to Merck’s advantage to obtain an extension of term and therefore it should not seek an extension of time for that purpose. Merck has, after approximately 10 years, come to a different position but has not clearly indicated why. Potentially its actions may have been related to advantage identified by Mr O’Connor being removed with the passing of the Intellectual Property Laws Amendment Act 2006, but there is no evidence of that or reasons why action has not been taken in the intervening period.  Neither is it suggested that Merck has acted in ignorance of its initial decision and, in this regard, the recent extension of term application was filed in full knowledge of the implications of the first regulatory approval for Stocrin. Therefore I can only conclude on the evidence that Merck is pursuing an extension of term at this stage simply because it has changed its mind about where its commercial interests lie.

35.Merck in its submissions appears to recognise the difficulties it faces in a discretionary consideration but in relation to the issue of certainty points out that at all times the patent has been, and is currently, in force. This however misses the point. The certainty sought in the extension of time scheme is not merely about the existence of rights but the point at which they will expire so as to inform the activities of generic suppliers. If this was not important, parliament could well have simply prescribed that an extension of term be applied for before the end of the normal term of the patent. Therefore I do not consider that this contention addresses the potential detriment to third parties identified above.

36.Otherwise Merck relies on the intended benefits of the pharmaceutical extension scheme to encourage research and development by allowing a 15 year effective term for pharmaceutical substances. This is an important consideration however, as I have indicated above, those benefits are conditional on the patentee meeting the requirements of the scheme including applying in the specified time frame. In the present case where it is apparent that Merck made a conscious decision immediately after the due date not to proceed with an extension of term application, and is now seeking to change that position over 10 years later, it is difficult to see any reason that the discretion under section 223 should be exercised in its favour. Merck’s current position is clearly of its own making and in that regard is in a very different situation to that considered in Alphapharm Pty Ltd v H.Lundbeck A/S, supra, where apparently the patentee had acted at all material times with the intent of obtaining an extension of term. Here, in my view, the effect of granting an extension of time would be to exempt Merck from the timeframes contained in the extension of term scheme over an extensive period based solely on the changing of Merck’s commercial interests over time and contrary to strong opposing interests. As such I find that to grant an extension of time in these circumstances would be clearly contrary to the balance of interests in this matter and indeed inconsistent with the purpose of section 223 and the intended operation of the extension of term scheme.

37.Sub-section 223(6A) requires that if the Commissioner is satisfied that an application under sub-section 223(2) would not be granted, even in the absence of opposition, the Commissioner must refuse to grant the application. As I am satisfied that the Commissioner’s discretion should not be exercised in favour of the patentee, it follows that I am also satisfied that the application would not be granted. Consequently I must refuse the application. 

P M Spann
Deputy Commissioner of Patents