Australia: Application to list on PBS does not constitute patent infringement per se

The Federal Court has recently considered when an offer to supply during the term of a patent constitutes patent infringement. The Court has held that lodging an application for PBS listing is not an offer to supply and does not constitute patent infringement per se.

The Federal Court in Apotex Pty Ltd v Warner-Lambert Company LLC (No 3) [2017] FCA 94 has confirmed that lodging an application for listing on the Pharmaceutical Benefits Scheme (PBS) does not constitute exploitation of a patent and therefore does not amount to patent infringement. However, offers made during the term of a patent to supply infringing products after patent expiry do constitute exploitation of a patent and amount to patent infringement.

The decision has implications for both innovator and generic pharmaceutical companies regarding the preventative and preparatory steps, respectively, that may be taken in the lead-up to patent expiry.

Form of final injunctive relief for patent infringement

The decision concerned the form of injunctive relief that Pfizer was entitled to, given the conclusion of two separate proceedings between Apotex Pty Ltd and Warner-Lambert Company LLC and related entities (together, Pfizer) on one hand, and Pfizer and Generic Partners Pty Ltd on the other, in which the relevant claims of Pfizer's patent for methods of use of the drug pregabalin were held to be valid and infringed by both Apotex and Generic Partners.

Questions considered by the Federal Court

The issue before the Court was whether an application for listing on the PBS by Apotex would amount to infringement of the relevant claims of Pfizer's patent and whether Apotex should therefore be restrained from making such an application prior to expiry of Pfizer's patent. In determining this issue, the Court addressed the following questions:

  1. Does an offer made during the term of a patent to supply infringing products after patent expiry constitute an offer to supply within the definition of "exploit" in the Patents Act 1990 and therefore infringe the patent?
  2. Does making an application for PBS listing constitute an offer to supply or otherwise dispose of infringing products and therefore amount to an act of patent infringement?

Offer to supply after patent expiry made during patent term is an act of infringement

Justice Nicholas held that an offer to supply after patent expiry made during the patent term is one of the exclusive rights to "exploit" the invention given to the patentee under section 13 of the Patents Act. When a person offers a patented product for sale during the term of the patent without the patentee's consent, that person infringes the patent even if no actual sale or delivery of the product occurs before patent expiry.

Justice Nicholas held that whether there has been an "offer" under the Patents Act is broader than the narrow meaning given to the word in contract law and encompasses an expression of a willingness to sell. However, not every expression of a willingness to sell will constitute an "offer" within the statutory definition. For example, it would not constitute an "offer" if a supplier, acting in good faith, merely states that it proposes to offer a product as soon as the relevant patent expires.

Application for PBS listing not an act of infringement

Justice Nicholas then considered whether making an application for PBS listing before patent expiry constitutes the making of an offer to supply during the term of the patent and therefore would infringe Pfizer's patent. Justice Nicholas held that it would not.

By applying for PBS listing, Apotex proposed to engage with the relevant statutory scheme so that it could offer its pregabalin products for sale at subsidised prices once Pfizer's patent had expired. Such steps would fall short of offering to sell or otherwise dispose of the products within the definition of "exploit" in the Patents Act. In coming to this conclusion, Justice Nicholas assumed that Apotex would expressly or impliedly represent to the Minister for Health that it would only make the products available for supply during the guaranteed period upon the Minister making a determination of a brand of a pharmaceutical item under section 85(6) of the National Health Act 1953. This suggests that that an application for PBS listing will only constitute an offer to supply once a determination of a brand has been made by the Minister under section 85(6) of the National Health Act 1953.

Justice Nicholas also held that applying for PBS listing does not otherwise constitute an act of exploitation of the invention. He characterised the making of an application for PBS listing as a mere preparatory step to enable the exploitation of the invention at a later point in time.

He therefore made final injunctive orders in a form which do not prevent Apotex or Generic Partners from taking steps to obtain PBS listing of their pregabalin products. However, an order was made requiring Apotex/Generic Partners to notify the Australian Government Department of Health of the granting of the permanent injunction and its terms.

Does an application for PBS listing provide grounds for seeking interlocutory injunctive relief?

While Justice Nicholas held making an application for PBS listing was not of itself an act of infringement, he was clear in his reasons that making such an application may justify the grant of interlocutory injunctive relief to restrain threatened acts of infringement, for example, restraining the making of a PBS listing application until the determination of the proceeding because of the risk that PBS listing of a product would trigger statutory price reductions and price review mechanisms that may cause harm to the patentee's or exclusive licensee's business. However, the Court was here concerned with the form of final relief.

Implications of the Apotex decision

Parties who are intending to bring patented products to market post-patent expiry, including generic pharmaceutical companies, need to consider carefully whether their conduct may be construed as an offer to supply made during the term of the patent, without the consent of the patentee, and therefore constitute patent infringement. Such conduct includes representations and arrangements that may be entered into. A careful review of any such conduct would be prudent.

Innovator pharmaceutical companies should also be aware that this decision will limit their ability to prevent generic pharmaceutical companies from applying for PBS listing of their products where the listing will take place post-patent expiry. However, the decision does not prevent a patentee from relying on a PBS listing application as a basis for seeking interlocutory injunctive relief to restrain threatened acts of infringement, where the balance of convenience favours the granting of such relief.

This decision has been appealed by Pfizer and Apotex has cross-appealed. The grounds of appeal are unclear at this stage, but it is likely that the conclusions reached by Justice Nicholas regarding what constitutes an offer to supply and therefore patent infringement will be re-considered.

RELATED KNOWLEDGE

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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