A warning to US & foreign companies on Australian patent infringement by common design: Bayer Pharma AG v Genentech Inc [2012] FCA 1467

Date: 2013-01-23

US and other foreign companies that do not have Australian commercial operations will be interested in this decision because it contains prima facie findings that some, perhaps, widely used commercial practices involving Australian companies may establish a liability for patent infringement in the US or other foreign company. Importantly, the decision should serve as a reminder that you do not avoid a liability for Australian patent infringement merely because you have not committed an infringing act in Australia.

A person who has not committed an infringing act in Australia will be liable for patent infringement in circumstances where the person is shown to have engaged in a ‘common design’ with another party who has committed an infringing act.

Under Australian law, common design may be established whether or not a relevant agreement between the parties was made inside or outside of Australia, and it is not necessary that the parties understood that their actions would lead to infringement of a patent, nor whether there has been direct contact between the relevant parties. All that is required is that "each must know...that there is coming into existence, or is in existence, a scheme which goes beyond the illegal act which he agrees to do".

Common design is something more than mere facilitation of the infringement by the party who has not committed an infringing act in Australia. More generally, the party must be shown to have taken some ‘positive step’ designed to produce the infringement.

There are relatively few examples of an Australian Court's consideration of those commercial practices that would suffice to meet the 'positive step' requirement, and that's why this case is of interest.

According to the decision, Regeneron, a US based pharmaceutical company that has no Australian subsidiary and that does not carry on business in Australia, has a collaborative agreement with Bayer HealthCare LLC in relation to a treatment of wet age- related macular degeneration.

The Court made prima facie findings that Bayer Australia, but not Regeneron, had infringed the patent through its impending promotion and sale of ‘Eylea’ (Aflibercept), a treatment that was found to be within the scope of Genentech’s relevant patent claims.

At issue was whether the collaborative agreement had established the requisite positive step for a prima facie finding of common design, and therefore, whether Genentech was entitled to enjoin Regeneron as a defendant to the infringement proceeding. The following aspects of the agreement were found to be relevant to this question:

  • that Regeneron had licensed its intellectual property rights relevant to commercialisation of Eylea to Bayer HealthCare;
  • that Regeneron would manufacture Eylea (outside of Australia) for Bayer HealthCare;
  • that Regeneron would share the development costs and profits of sales in countries including Australia in respect of Eylea;
  • that Regeneron would jointly own copyright in Eylea promotional materials and right to review and comment on relevant documents.

The Court inferred from these aspects of the agreement that Regeneron was to commercialise Eylea in Australia through the local entity of Bayer HealthCare, namely Bayer Australia. This was sufficient for the Court to make prima facie findings that Regeneron and Bayer Australia had formed a common design to sell, promote and profit from the sale of Eylea in Australia. This was the case even though Regeneron’s agreement is with Bayer HealthCare, not Bayer Australia.

What we don’t see in the decision is whether any one of the above mentioned aspects of the agreement was more relevant than others to the prima facie finding of common design. For example, would mere grant by a US or foreign company of a simple royalty based licence to an Australian company to commercialise an invention in Australia be sufficient for a finding of common design, and therefore to establish a liability for patent infringement in the licensor?

Most of the technology that is commercialised in Australia arises from importation of intellectual property under agreement with a US or foreign company. It is in this context that we expect that the findings at the completion of the infringement proceedings will be of particular interest and we hope that the infringement court will comment on those aspects of agreements and commercial practices as between Australian licensees and their respective foreign licensors that are more likely to create a liability for patent infringement in the latter. We wait in anticipation.

The decision is reported in Bayer Pharma Aktiengesellschaft v Genentech, Inc. [2012] FCA 1467 (20 December 2012).