Australian Full Court clarifies the meaning of "first approval" for the purpose of patent term extension (PTE)

Last month, the appeal division of the Australian Federal Court, the Full Court, delivered 2 judgments in two patent term extension (PTE) cases. Both cases dealt with the question of what constitutes a "first approval" for the purpose of PTE. In both cases, the Full Court found that a previous approval, either for one component of a subsequent combination product, or for an earlier product covered by the patent, constituted the "first approval". The date of the first approval is critical for calculating both the deadline for filing a PTE application and the amount of PTE available.

Australian PTE - the basics

In Australia, PTE is available for patents directed to a drug product that is subject to an Australian marketing authorisation (MA). Similar to the SPC Regulation in the EU, Australian PTE law states that PTE must be based on the date of the first MA for the drug product (Australian Patents Act 1990, subsection 71(2)(b)). The date of the first approval determines both the deadline for filing the PTE application and the amount of PTE available. PTE is calculated as the patent filing date minus 5 years, limited to a maximum of 5 years.

Ono: Multiple approved products covered by the same patent

The case in Ono Pharmaceutical v Commissioner of Patents ([2021] FCA 643) related to Ono's PD-1 inhibitor OPDIVO (nivolumab). Following the grant of an Australian MA for OPDIVO, Ono filed a PTE application based on their Australian patent (AU 2011203119) for OPDIVO.


Importantly, the claims of the patent also covered Merck's independently developed PD-1 inhibitor KEYTRUDA (pembrolizumab). KEYTRUDA was approved in Australia nine months before OPDIVO. OPDIVO and KEYTRUDA were therefore both approved and covered by the patent. The question became whether the patentee was entitled to choose which of the MAs to base the PTE application on, or whether PTE based on the later approval was effectively ruled out by the earlier approval. 

The Federal Court ruled that a literal interpretation of "first approval" in the PTE legislation led to “manifest absurdity” (IPKat). Particular, the judge reasoned there was no evidence that Australian PTE law was intended to permit PTE based on a third party approval (so-called "squatter" PTEs). The judge thus found that Ono's approval for OPDIVO, and not Merck's earlier approval for KEYTRUDA, should be considered the first approval for the purposes of PTE. 

Merck v Sandoz: Combination products

The second case of Merck v Sandoz ([2021] FCA 947)  related to the question of what constitutes the first approval where there exist separate approvals for a drug product and a combination product containing the earlier drug product. The case particularly related to granted PTE for Merck's patent covering both the monotherapy JANUVIA (sitagliptin alone) and the combination product JANUMET (sitagliptin and metformin). Merck was granted PTE for the patent based on the later approval for JANUMET. 

As regular IPKat readers will be aware, the question of how to approach combination products is one that, on the other side of the world, has yet to be fully resolved for the purposes of obtaining an SPC (the EU's form of PTE) (IPKat). A very similar situation to that of Merck v Sandoz led to the recent referral to the CJEU on the correct interpretation of the SPC Regulation with respect to combination products (IPKat). 

The Australian Federal Court in Merck v Sandoz ruled that the PTE based on the Australian MA for JANUMET was invalid in view of the earlier approval for JANUVIA. The earlier approval date of JANUVIA meant that no PTE was available based on this approval. 

The case in Merck v Sandoz was, of course, distinct from the situation in Ono given that Merck was the sponsor for both the earlier and later approval, whilst Ono owned only the later approval. Furthermore, in Ono, the two approvals related to different products, as opposed to a monotherapy and combination therapy containing the same drug substance.

Appeal to the Australian Full Court 

Both Federal Court decisions One and Merck v Sandoz were appealed to the Full Court. In Ono ([2022] FCAFC 39), the Full Court did not agree with the reasoning of the primary judge. The Full Court particularly dismissed the argument that a liberal construction of the legislation should be used so as to honour the purpose of the legislation in awarding patentees for the time and cost of drug development. The Full Court instead found that there was, in fact, no bar in the legislation preventing a patentee from applying for PTE based on another party's MA. The PTE based on Ono's later approval was thus found invalid for not being based on the "first approval" of a drug product covered by the patent. 

The Full Court judgement in Ono therefore clears the way for squatter PTEs in Australia. According to the Full Court's interpretation of the legislation, Ono could have validly based a PTE application on Merck's approval for KEYTRUDA (Ono had in fact filed a PTE application based on the KEYTRUDA, but did so after the deadline for doing so had expired). 

Given the unsympathetic stance of the Full Court to the patentee in Ono, its conjoining decision in the Merck v Sandoz ([2022] FCAFC 40will come as no surprise. The Full Court upheld the decision of the primary judge in this case that the first approval for a drug product set the PTE application deadline and available term. As such, PTE based on a subsequent approval for a combination product containing a previously approved drug was not permitted

Final thoughts

The decisions of the Full Court in Ono and Merck v Sandoz are not surprising. Patentees can expect Australian courts to look unfavourably on PTEs that are not based on a first approval, regardless of the form or ownership of the earlier approval. In this respect, the decision of the Federal Court in Ono was an outlier that the Full Court has been quick to overturn. 

Further reading

New SPC referral to the CJEU on the interpretation of Art 3(a) and (c) for combination products (Merck v Clonmel) (7 March 2022)

Australian Federal Court finds literal interpretation of "first approval" in PTE legislation leads to “manifest absurdity” (23 Aug 2021)

Australian High Court overturns 150 years of precedent to adopt exhaustion of rights doctrine for patented products (4 Dec 2020)

Untested hypothesis in a clinical trial protocol destroys novelty of a method of treatment claim in Australia (Mylan v Sun Pharma) (13 Aug 2020)

Australian Full Court clarifies the meaning of "first approval" for the purpose of patent term extension (PTE) Australian Full Court clarifies the meaning of "first approval" for the purpose of patent term extension (PTE) Reviewed by Rose Hughes on Tuesday, April 19, 2022 Rating: 5

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