Addressing pharma IP law imbalances

Date: 2013-08-23
Authors: Carol Burnton & Emma van Embden

The Australian government’s review of IP law in relation to pharmaceuticals proposes changes to tackle imbalances.

The Australian pharmaceutical market is significant, servicing 23 million people, and is dominated by off-shore companies with a projected market value of $19.2 billion by 2015. The Australian Government has conducted a number of reviews of Australian intellectual property law relevant to the pharmaceutical industry to address alleged imbalances in the system. In this article we discuss recent changesand those under consideration.


Key changes already in effect:

  • experimental use relating to a patented invention is exempted from patent infringement, and
  • use of a Therapeutics Goods Administration (TGA) approved Product Information (PI) document for registration or safe and effective use of a generic medicine is exempted from copyright infringement.

Changes under consideration relating to patent term extension provisions include:

  • replacing patent term extensions with direct R&D subsidies,
  • reducing the length of patent term extensions, and
  • amending the Patents Act 1990 to clarify that extensions of term are to be based on the relevant registered product.

These proposals – as well as others to limit contributory infringement, introduce a manufacture for export infringement exemption, and change the criteria for obtaining compulsory licenses – are currently under consultation with industry. However, it is likely that these proposals will be significantly delayed (or ignored) given the recent significant overhaul of Australia’s Patents Act 1990 and the upcoming federal election.

Law already in effect

A) Patent infringement exemptions

(i) Obtaining regulatory approval for a pharmaceutical product

Since 2006, Australian law has provided that acts done solely for purposes connected with obtaining regulatory approval of a pharmaceutical product are exempted from patent infringement. This provision does not apply to acts done for purposes connected with obtaining regulatory approval of a product for the purpose of export. Below we comment on a proposal relevant to an infringement exemption for manufacturing for export that would address this issue.

(ii) Experimental use relating to a patented invention

Prior to April 2012 there was no legislative provision that exempted acts done for experimental purposes relating to the subject matter of a claimed invention. It was also uncertain if there was a common law defense to infringement (or an implied license) in the relevant circumstances. New law has been created by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 so that acts done predominantly for the purposes of gaining new knowledge, or to test a principle or supposition relating to a patented invention are exempted from infringement. The law applies to acts done on or after April 15, 2012 in relation to patents granted before, on or after this time.

The exemption applies to experimentation on a patented invention but does not cover use of a patented invention in other forms of experimentation. It is irrelevant whether or not the experimentation was done with a view to later commercialize an improvement of the invention. The exemption applies even if an improvement arises from the act and whether or not the person undertaking the experiment was aware of the patent.

Experiments done to bring an improved or modified invention to market remain outside the infringement exemption. These include:

      • ‘market research’ – testing the likely commercial demand for a product, and
      • manufacture for the purpose of sale or use for commercial purposes.

(B) Copyright infringement exemption

Selling a drug requires approval from the Therapeutic Goods Administration (TGA). The TGA is responsible for issuing marketing approval in Australia for pharmaceuticals. The approval process requires a company to submit a Product Information (PI) document containing information about the drug’s characteristics (eg formulation) and its safety and efficacy. This process applies to new drugs and new generic versions of a drug.

Prior to the amendments to Australia’s copyright law in 2011, pharmaceutical companies were able to delay other companies from launching competitor products by claiming copyright infringement of their PI. This strategy was employed in one instance.

Subsequently, Australia’s copyright law was updated in 2011 to exclude from copyright infringement use of a TGA-approved PI for:

(i) the purposes of applying to register a medicine; and
(ii) purposes related to the safe and effective use of a TGA-approved medicine.

Pharmaceutical companies can no longer use the Copyright Act 1968 to prevent a competitor from copying their TGA approved PIs.

Changes to the law currently under review

A) Pharmaceutical patent review

The Australian Government has continued with the trend of reviewing Australian patent law by commissioning a review of laws relating to pharmaceutical patents. The Pharmaceutical Patents Review Panel has released a Draft Report for review which has a particular focus on patent term extensions because such extensions are only available to pharmaceutical patents. The Panel recommended that the extension of term regime be replaced with direct subsidies for research and development. If the extension of term regime is retained, the Panel recommends altering it so that the Australian patent does not expire later than the equivalent overseas patents.

Extensions of patent term

The Panel considered several aspects of the current patent term extension regime and several options for adjusting it.

Replace patent term extensions with direct R&D subsidies

Currently an Australian patent for a pharmaceutical substance may have its term extended for up to five years to increase the effective life of the patent where there has been considerable delay in registration for sale of a product containing that substance.

The Panel recommended that this extension of term regime be replaced with direct subsidies for research and development. Implementation of this recommendation would shift the Government from:

      1. compensating for the diminished effective patent life where regulatory procedures delay the sale of a pharmaceutical product developed anywhere in the world;
      2. providing a specific incentive to conduct research and development in Australia.

Given these two options benefit significantly different parts of industry, this recommendation is likely to be much debated.

Reduce the length of the extended patent term

The Panel reported that the average extended Australian patent expires later than its equivalent in the United Kingdom or United States. The Panel proposed the following mechanisms for calculating patent term extensions so that the Australian patent does not expire later than the equivalent overseas patents:

(i) setting the regulatory approval date for the purposes of calculating patent term extension as the date when approval was first granted in specified countries (eg United States or Europe);
(i) terminating an extension of term at the date it is terminated in specified countries.

The intention is to provide an incentive for pharmaceutical companies to file for registration of their products in Australia promptly so the product is sold in Australia as soon as possible and the length of the effective patent life is maintained.

Extension of term to be based on relevant registered product

In order to qualify for a patent term extension, goods containing, or consisting of, the patented substance must be included in the Australian Register of Therapeutic Goods (ARTG).

The courts have considered the issue of which registered product an extension of term for a patented substance should be based upon. In one case the court held that the correct regulatory approval date related to a product that included the patented substance only as an impurity. In another case the court held that a patent term extension for an enantiomer should be based upon the regulatory approval date of the racemic mixture.

The Panel noted that the effect of these court decisions is that extensions may be obtained based on ARTG listings which bear little relation to the patented product. The Panel recommended that the
Patents Act 1990 be amended to clarify that the ARTG registration on which an extension of term is based is that of the relevant product, the use of which would infringe the claim.

Limit contributory infringement

In Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 3) [2001] FCA 846, a patent for a method for the treatment of psoriasis was held to be infringed by marketing a product for the known treatment of psoriatic arthritis and rheumatoid arthritis. Patents for treatment of psoriatic arthritis and rheumatoid arthritis had expired. The result was based on a finding that a person with rheumatoid arthritis will almost always have psoriasis. This decision was perceived as having the effect of extending the monopoly for treatment of rheumatoid arthritis beyond expiry of the patents protecting that therapeutic use. The decision has been appealed so the final outcome of the case is not yet settled.

Nevertheless, the Panel recommended amending the contributory infringement provisions to make it clear that a pharmaceutical manufacturer does not contribute to infringement of a patent where that manufacturer has taken reasonable steps to avoid infringement. It also recommended that where the labeled indications on the product do not include any infringing indications, there should be a presumption that reasonable steps have been taken. These amendments would be intended to permit ‘carve-outs’ on product labels.

Extension of monopoly with non-active pharmaceutical ingredient (API) patents

As outlined above, selling a drug requires approval from the TGA. This approval depends on data showing the safety and efficacy of a drug, and its formulation, therapeutic use, method of administration etc. Thus, a non-API patent for a TGA-registered product can be as valuable as a primary patent in that it can operate as a bar to market entry.

The Panel considered whether non-API patents are being used to inappropriately extend protection for pharmaceuticals. In this context, ‘ever-greening’ patent protection was noted, as was the categorization of the term as pejorative by some submissions. The Panel considered the filing strategies of originator companies to reflect ongoing innovation and the understandable desire to protect their investment as best they can. Any issues with the grant of inappropriate patents are expected to be addressed by the amendments to the patent law resulting from the Intellectual Property Laws Amendment (Raising the Bar) Act 2012. The Panel recommended the effect of this legislation be reviewed in the near future.

Manufacture for export infringement exemption

The Panel expressed concern that an Australian patent can prevent manufacture of a product in Australia for export to a country without a relevant patent. This situation was considered to cost the Australian economy without providing any benefit. Allowing manufacture for export was not considered to be in accordance with our current international obligations. Thus, the Panel recommends the Government seek to alter the international agreements and, as an interim measure, seek agreement from pharmaceutical companies to not enforce their Australian patents against manufacture for export. This recommendation would, amongst other things, exempt from infringement acts done for purposes connected with obtaining regulatory approval of a product for the purpose of export.

Australian version of Orange Book

To assist with awareness of the patent position in Australia, the Panel recommended development of a public database, similar to the United States Food and Drug Administration (FDA) Orange Book, which identifies patents protecting a specific pharmaceutical product. The extent of the patents included in the database is yet to be outlined.

Under existing law, pharmaceutical companies proposing to launch a generic medicine are required to provide a certificate to the TGA that a valid patent claim will not, in good faith and with belief on reasonable grounds, be infringed by the marketing of their goods. The intention is for the Australian “Orange Book” to put potential competitors on notice of relevant patents protecting a product. The intended result is that a pharmaceutical company proposing to launch a generic medicine will need to review at least the Australian “Orange Book” patents in order to sign their certificate.

Warning of generic launch

In order to provide sponsors of an original product with greater time to assess their position, the Panel is recommending pharmaceutical companies proposing to launch a generic medicine be required to advise the appropriate sponsor when they apply for registration of a generic medicine.

B) Compulsory licensing

Australia’s Patents Act 1990 includes a compulsory licensing provision so that, in a limited range of circumstances, patent owners can be obliged to license their inventions to a third party. The Productivity Commission recently released a commissioned Draft Report on the compulsory licensing regime, which recommends changes to the criteria for obtaining a compulsory license. This review appears to have arisen from the current gene patent debate.

Current  criteria

Currently, if a patentee does not exploit a patented invention for a period of three years from the date of grant, a third party may, under certain circumstances, apply to the Federal Court for a compulsory license to work the invention. In these circumstances, the following conditions must be satisfied:

(i) the third party has attempted for a reasonable period, but without success, to obtain a license from the patentee on reasonable terms and conditions;
(ii) the reasonable requirements of the public have not been met; and 
(iii) the patentee has given no satisfactory reason for failing to exploit the invention.

Alternatively, a third party may apply to the Federal Court for a compulsory license if the applicant can demonstrate that the patentee has engaged in unlawful anticompetitive conduct in connection with the patent.

Applications for compulsory licenses are very rare, and none have been successful.

Recommended criteria

The Commission recommends that a ‘public interest test’ should replace existing criteria based on ‘the reasonable requirements of the public’ to provide access when greater use of a patented invention would deliver a net benefit to the community.

The Commission recommends that when a patent is used to engage in unlawful anticompetitive conduct, a compulsory license should only be available under the Competition and Consumer Act 2010 and that this ground should be removed from the Patents Act.

This article was first published in the July/August 2013 issues of The Patent Lawyer Magazine.