In brief 5 min read
In the latest in Australia's longest-running pharmaceutical patent term extension litigation, the High Court found that Sandoz infringed a patent, owned by Lundbeck, for a drug used to treat anxiety and depression, by selling generic products during an extended term of the patent that was granted after the expiry of its initial term. The judgment hinged on the interpretation of a settlement agreement that gave Sandoz a licence to exploit the patent.
Key takeaways
- In any agreement granting a licence to exploit a patent, expressly address how the parties wish to deal with remote possibilities that may arise in relation to the cessation, disruption and extension of the term of the relevant patent.
- The decision confirms that only a patentee, but not an exclusive licensee, can bring infringement proceedings during the extended term of a patent that's granted after its initial term has expired.
Who in your organisation needs to know about this?
General counsel, legal team.
Background
H Lundbeck A/S, a Danish pharmaceutical company, owns a patent relating to escitalopram, the active ingredient in Lexapro, a drug used to treat anxiety and depression (the patent). Lundbeck's Australian subsidiary, Lundbeck Australia Pty Ltd, held an exclusive licence to exploit the patent.
The patent was granted in 1989 and, with a standard term of 20 years, was due to expire on 13 June 2009. However, the day before its expiry, Lundbeck requested additional time to apply for a patent term extension and, on 25 June 2014, the term of the patent was retrospectively extended until 9 December 2012.
Sandoz Pty Ltd is a supplier of generic pharmaceuticals products and, between 15 June 2009 and 9 December 2012, sold generic escitalopram products.
On 26 June 2014, Lundbeck and Lundbeck Australia commenced proceedings against Sandoz, claiming it had infringed the patent by selling escitalopram during the extended term.
Following earlier proceedings concerning the validity of a prior attempt to extend the term of the patent, the parties entered into a settlement agreement. Clause 3 granted Sandoz 'an irrevocable non-exclusive licence to the patent effective from:
- 31 May 2009 if the Patent expires on 13 June 2009;
- 26 November 2012 if the Patent expires on 9 December 2012;
- 31 May 2014 if the Patent expires on 13 June 2014; or
- 2 weeks prior to the expiry of the Patent if the Patent expires on a date other than a date described in clause 3(a) to (c).'
The High Court issued a joint judgment by Chief Justice Kiefel, and Justices Gageler, Steward and Gleeson and a seperate judgment by Justice Edelman. Both hinged on the interpretation of clause 3 of this settlement agreement.
When did the licence to exploit the patent expire?
The High Court had to consider how clause 3 was to be interpreted given that the term of the patent expired on 13 June 2009 but was retrospectively extended until 9 December 2012. While the Lundbeck parties submitted that the licence expired with the patent's expiration on 13 June 2009, and therefore that Sandoz infringed the patent by selling generic products from 15 June 2009, Sandoz submitted that the licence granted had no fixed end date and was indefinite.
The joint judgment found that the licence expired with the expiration of the patent on 13 June 2009. The majority considered that the internal logic of the settlement clause was that, no matter the date of the expiration of the patent term, the licence granted was to commence two weeks before that date. The court inferred that the parties' intention was to allow Sandoz to sell generic escitalopram products for a limited two-week period before the end of the initial patent term, and that Lundbeck wouldn't have bargained away the commercial benefit of an extension to that term.
Justice Edelman addressed Sandoz's argument that clause 3 didn't expressly provide for an end date for the licence, and that the strictness of the test for the recognition of an implied term wasn't met. He considered that the words 'licence to the Patent' were a 'nonsense', and that what the parties meant instead was 'a freedom to exploit the invention that is the subject matter of the Patent'. His Honour found that the pre‑contractual communications between the parties, including those stating that the licence was intended to be an 'early entry licence', enabled him to make the inference that the freedom to exploit the invention was intended to expire with the parent's initial term .
Accordingly, Sandoz was found to have infringed the patent, and the matter was remitted back to the primary judge for the calculation of damages.
Could the exclusive licensee bring proceedings for infringement which occurred during the extended patent term?
The High Court then considered whether Lundbeck Australia, as exclusive licensee of the patent, had standing to bring proceedings for infringement which occurred during its extended term (or whether only Lundbeck had this standing).
Section 79 of the Patents Act 1990 (Cth) provides that a patentee has the right to bring infringement proceedings for acts that occur during an extended patent term where the original patent term expires before the extension is granted. On the face of the section, the right to bring proceedings regarding that potential infringement is granted only to the patentee (and not an exclusive licensee). This stands in contrast with s120 of the Act, which provides that both a patentee and exclusive licensee have the right to sue for infringement.
The High Court found that the statutory text was unambiguous that an exclusive licensee didn't have the right to bring proceedings under s79 of the Act. The majority considered that whether this could be explained by reference to the patentee alone having a right to apply for an extension of the term, or whether the position of an exclusive licensee was simply overlooked in the framing of the section, didn't ultimately matter.
Accordingly, it was determined that Lundbeck Australia had no right to bring infringement proceedings against Sandoz.
Actions you can take now
- When drafting an agreement granting a licence to exploit a patent, it's important to address expressly the term of the licence in the event the patent term is disrupted, or ends before or is extended beyond the standard term.
- In light of this decision, seek advice from Allens' Intellectual Property team regarding the term of any licences for the exploitation of patent rights .