In its second significant recent decision addressing patent term extensions in Australia, the Federal Court of Australia, in Merck Sharp & Dohme Corp. v Sandoz Pty Ltd [2021] FCA 947 (MSD v Sandoz), held that where two or more goods containing pharmaceutical substances (that are disclosed and claimed in a patent) have been included on the Australian Register of Therapeutic Goods (ARTG) by the patentee (or its agent), the calculation of the length of a patent term extension (PTE) must be based on the earliest of those inclusions on the ARTG. 

As discussed in our article regarding Ono Pharmaceutical Co. Ltd v Commissioner of Patents [2021] FCA 643 (Ono), the PTE regime is designed to compensate patentees of pharmaceutical substances for the loss of patent term before which they can exploit their invention because of the regulatory time involved in bringing a new pharmaceutical product to market by extending the term of such a patent (by up to five years).  In Ono, Beach J said this underlying purpose calls for “a liberal rather than a literal construction” of the Patents Act 1990 (Cth) (the Act).  This led to Beach J’s finding that the length of a PTE should be based on the first inclusion on the ARTG of the patentee’s product containing a pharmaceutical substance disclosed and claimed in the patent, even if there was an earlier product containing a pharmaceutical substance disclosed and claimed in the patent included on the ARTG by a competitor.

These decisions in Ono and MSD v Sandoz are highly relevant to pharmaceutical companies when planning patent prosecution and commercialisation strategies for multiple pharmaceutical substances, as discussed in the final section of this article.

Background

MSD is the proprietor of Australian patent 2002320303 (dated 5 July 2002), relevantly claiming two pharmaceutical substances: sitagliptin; and a combination of sitagliptin and metformin (the Patent). 

MSD made applications for “export only” listings on the ARTG for two pharmaceutical products.  As a result:

• Sitagliptin was first included on the ARTG on 16 November 2006 (four years, four month, and 11 days after the date of the Patent); and
• Sitagliptin/metformin was first included on the ARTG on 27 November 2008 (six years, four months, and 22 days after the date of the Patent).

MSD applied for a PTE on the basis of its sitagliptin/metformin product, which was granted by the Commissioner of Patents, extending the term of the Patent from 5 July 2022 until 27 November 2023. 

MSD claimed that Sandoz threatened to infringe the Patent because Sandoz would only provide an undertaking not to exploit the invention claimed in the Patent before 5 July 2022 (refusing to give the undertaking not to exploit until the extended date of 27 November 2023).  Sandoz argued that the PTE was invalid because either: the application for the PTE did not comply with section 71(2)(b) of the Act; or, even if a valid application had been made, the period of the PTE should have been zero pursuant to section 77(1) of the Act.

Relevant legislation

A patentee may apply for a PTE if section 70 of the Act is satisfied, which relevantly provides that:

• One or more pharmaceutical substances per se must in substance be disclosed in the complete specification of the patent and in substance fall within the scope of the claim(s) (subsection 70(2)); and
• Goods containing, or consisting of, at least one of those pharmaceutical substances must be included on the ARTG, and the period beginning on the date of the patent and ending on the first regulatory approval date for that pharmaceutical substance must be at least 5 years (subsection 70(3)).
• Subsection 70(5) defines the “first regulatory approval date” of a pharmaceutical substance as being the date of commencement of the first inclusion on the ARTG of goods that contain, or consist of, the substance.

Pursuant to section 71(2)(b) of the Act, a PTE application must be made during the term of the patent and within 6 months of the date of commencement of the first inclusion on the ARTG of goods that contain, or consist of, any of the pharmaceutical substances referred to in subsection 70(3) of the Act.

Finally, in relation to how much the patent should be extended by, section 77(1) of the Act states that the PTE should be equal to the period beginning on the date of the patent and ending on the earliest first regulatory approval date (as defined by section 70) in relation to any of the pharmaceutical substances referred to in subsection 70(2) reduced (but not below zero) by 5 years.

Based on this, the Commissioner of Patents granted a PTE of one year, four months, and 22 days, calculated using the first regulatory approval date for sitagliptin/metformin. 

The decision of the Federal Court

Jagot J found that subsection 70(2) “establishes the class of relevant pharmaceutical substances”, and covered both sitagliptin and sitagliptin/metformin, but that subsection 70(3) “establishes a smaller subset of that class”.  Jagot J found that only MSD’s sitagliptin/metformin product was able to satisfy subsection 70(3) as it was included on the ARTG more than five years after the date of the Patent (while MSD’s sitagliptin product had been included on the ARTG less than five years after the date of the Patent). 

Jagot J also found that, as subsection 71(2)(b) refers to the pharmaceutical substance in subsection 70(3) of the Act (rather than being a reference to any of the pharmaceutical substances claimed in the patent), the time for making an application must be based on the date of first inclusion of sitagliptin/metformin on the ARTG.

Jagot J further found that, as subsection 77(1) refers to subsection 70(2), which refers to any pharmaceutical substance claimed in the patent, the period of the PTE for MSD’s Patent must be based on the earliest inclusion on the ARTG of any of the patented pharmaceutical substances.  The earliest pharmaceutical substance to be included on the ARTG was sitagliptin.  As such, using the method of calculation set out in subsection 77(1) of the Act, the PTE was zero.

MSD argued that a PTE of zero was an absurd result and could not have been intended by the legislature.  However, Jagot J noted that the reference to the PTE period being reduced “but not below zero” in subsection 77(1) indicated the legislature had indeed contemplated that a PTE of zero may apply in some circumstances. 

Jagot J differentiated the facts of MSD v Sandoz from those in Ono on the basis that in Ono the earlier inclusion on the ARTG of a pharmaceutical substance claimed in the patent was by an unrelated entity of the patentee (thus Beach J found that absurdity would arise if the earlier inclusion of a competitor’s product on the ARTG deprived a patentee of its ability to obtain a PTE).  Jagot J stated, at [56], that:

“It is one thing to conclude that it is absurd for a patentee to be denied any term of an extension due to an earlier regulatory approval by another unrelated party of which the patentee may not have known and over which the patentee would have had no control. … It is another to conclude that it would be absurd for a patentee to be denied any term of an extension due to an earlier regulatory approval by the patentee or its agent of which the patentee must have known and over which the patentee had control. In such a case, the patentee, by definition, will not have been delayed in obtaining regulatory approval for a substance or the substance in its patent for at least five years.” 

Implications of the decision

In view of the significance of the MSD v Sandoz decision, MSD has already appealed the decision.  However, if that appeal is unsuccessful, the MSD v Sandoz decision will have significant implications for pharmaceutical patentees. 

The MSD v Sandoz decision makes clear that where two or more goods containing pharmaceutical substances (that are disclosed and claimed in a patent) have been included on the ARTG by the patentee (or its agent), the calculation of the length of a PTE is based on the earliest of those inclusions on the ARTG.  In light of this decision, pharmaceutical companies should consider strategies that allow them to maximise the time one or more products will be protected by a patent, including separating different pharmaceutical substances into divisional patent applications or delaying applications for regulatory approval of certain products in view of the company’s development pipeline.

As we anticipated in our article regarding the Ono decision, that decision has also been appealed (by the Commissioner of Patents). 

We will provide further commentary on the developing area of PTEs in Australia following the outcome of the appeals in these cases.