Australian Federal Circuit finds literal interpretation of "first approval" in PTE legislation leads to “manifest absurdity”

The Australian Federal Circuit has overturned a decision of the Commissioner of Patent to reject a patent term extension (PTE) application based on a third party marketing authorisation ([2021] FCA 643). The Federal Circuit found the consequences of enforcing a strict interpretation of "first authorisation" for the purposes of determining the valid authorisation for a PTE application to be wholly unreasonable. The decision appears to bring Australia broadly in-line with the US system for PTE. However, questions remain unanswered with respect to whether Australian PTEs can be based on third party authorisations granted to licensees and/or without the consent of the authorization holder. The Australian patent commissioner has also now appealed the Federal Circuit decision, leaving the legal status of PTEs granted according to the Federal Circuits interpretation of the Patent Act in legal limbo.  

Case Background: Which is the "first approval" for the purposes of an Australian PTE application? 

The case in Ono Pharmaceutical v Commissioner of Patents ([2021] FCA 643) related to the PD-1 inhibitor nivolumab (Opdivo) for the treatment of cancer, owned by Ono Pharmaceuticals (a subsidiary of BMS). After receiving approval for nivolumab in Australia, Ono requested patent term extension (PTE) for their Australian patent covering nivolumab. 

Importantly, the claims of BMS/Ono's patent (AU 2011203119) also covered Merck's independently developed PD-1 inhibitor pembrolizumab (Keytruda), which has a different sequence to nivolumab. Keytruda was approved in Australia nine months before Opdivo. Ono filed a PTE application based on the approval for Opdivo. 

PD-1 inhibitors

The deadline for filing a PTE request in Australia is 6 months from the "first" approval date of the product (Australian Patent Act (1990), Section 77). When Ono filed their PTE applications, more than 6 months had already passed since the Keytruda approval. The question thus became whether the Keytruda approval should be considered the "first" for a product covered by the patent. If Keytruda was the "first" approval, then the deadline for filing a PTE request based on either the Keytruda or Opdivo approval had already expired when the PTE applications were filed. The term of the patent term extension permitted would also be longer if it was based on the Opdivo approval. 

The Australian patent office (APO) found that the deadline had been missed for the PTE application (Ono Pharmaceutical Co, Ltd et al [2020] APO 43). The commission decided (citing the previous decision in Searle [2008] APO 31) that both the deadline for a filing the PTE application and the term of extension permitted was determined by the first approval date for any product covered by the patent. Ono requested judicial review of the decision by the Australian Federal Circuit. Ono particularly argued that, when a patent covered more than one approved product, the Patent Act should be construed as permitting an applicant to nominate which product on which to base the PTE. 

A "Literal" or "reasonable and commercial" construction

For the Federal Circuit judge, the important question was whether a PTE application must be filed within 6 months of the first approval, regardless of whether that first approval had been granted to the patentee. The judge (Justice Beach) found "little to commend" a literal interpretation of the language Patent Act that considered any approval for a product falling under the scope of the patent to be the "first approval". 

The judge described a number of practical problems that would arise if a third party approval could be considered the "first approval" for a product for the purposes of a PTE application. Such an interpretation would place an unreasonable burden on the patentee to monitor the Australian register of approvals for potential "first approvals" falling under the scope of their patent. This would be complicated by the fact that the register does not provide a patentee with all the information they might need to make such an assessment. The patentee might require, for example, details of the chemical and molecular structure and/or functional characteristics of the approved product. A proper assessment might thus require a Court to order discovery of confidential documents from the competitor. Furthermore, the APO itself may be placed under a similar burden when determining what constituted a first approval for a product falling under the scope of a patent for which PTE is requested. 

The judge therefore rejected the APO's literal interpretation of the "precise wording" of the Patent Act. The judge noted that the purpose of the PTE legislation was to compensate patentees for the time, expense and difficulty in developing and commercialising a drug product. There was no evidence, according to the judge, that the legislators intended that a PTE could or should be based on a third party approval. The judge thus agreed with Ono's "reasonable and commercial construction", that the PTE applicant could select which of the "one or more pharmaceutical substances" covered by their patent (Section 70(2)(a)) the "first approval" of Section 77 (setting the 6 month application deadline) related to. 

The judge concluded that the APO's interpretation of the Patent Act led to "manifest absurdity". The Federal Circuit thus found that the PTE application based on the approval for Opdivo should be granted. 

Some unanswered questions

The Federal Circuit decision did not address the situation wherein a marketing authorisation is granted to a licensee of a patent, as opposed to the patent owner. In the case in question, approval for Opdivo was granted to BMS's local subsidiary BMS Australia. The decision therefore inherently seems to imply that a PTE may be based on an approval granted to the licensee of the patent holder. Interestingly, however, Merck is also now a global licensee of the BMS/Ono patents (although this agreement appears to have been reached after the PTE applications were filed). Notably, the Federal Circuit decision also did not directly address whether Ono could have based their PTE application on a third party approval without the consent of the third party, should they have wished to. It is also unclear whether a patentee could select from more than one of their own approvals for products covered by a patent.

The possibility for additional patent term based on a third party authorisation is one that is also of relevance in Europe. There has thus far been a lack of clear guidance from the CJEU on whether Supplementary Protection Certificates (SPCs) (the "PTEs" in the EU), may be based on a third party approval - despite a referral from the CJEU from the High Court of England and Wales asking this very question (IPKat). Nonetheless, following a literal construction of the SPC Regulation, so-called "squatter SPCs" appear to be permitted (C-181/95, Biogen). Furthermore, if the recent decision in Santen (C-673/18, The SPC Blog) is any guide, it appears that the CJEU would favour a "literal" interpretation of the SPC Regulation as opposed to a more "commercial and reasonable" interpretation that patent holders might prefer.  

Following the Federal Circuit decision, the Australian Examiner's Manual has been updated to reflect the decision. The updates appear to interpret the decision as permitting PTE based on third party authorisation, with consent of the third party. Despite these updates, the Australian Patent Office has also now appealed the Federal Circuit decision.