Yesterday the High Court threw some serious grenades into the patent term extension regime.
The decision in H. Lundbeck A/S v Sandoz Pty Ltd (and CNS Pharma Pty Ltd v Sandoz Pty Ltd) [2022] HCA 4 has a long and complex background and involves a 1989 patent in respect of escitalopram and which, in 2014, had its term extended to 9 December 2012. Yes, the patent had been expired for over nine years when yesterday’s decision was handed down! Also, the provisions of the Patents Act relevant to the decision were repealed on 1 July 1995 and new provisions are now in place.
Nevertheless the decision has two very important lessons for patent licensing (especially in the pharmaceutical sector), and it is very much possible that those lessons will apply under the current provisions of the Patents Act.
First, the Court held that, where an extension of term was granted under the then applicable provisions, the rights during the extended term can be enforced only by the patentee. An exclusive licensee has no standing to bring infringement proceedings.
Secondly, whilst the Court held that the effect of an extension of term is to “extend the term” of the relevantpatent (quell surprise!), rather than effect a fresh grant of a new patent for the extended term, they also held that the irrevocable licences granted under following provisions in an earlier settlement agreement between the parties ran for a very short period, only two-weeks in the case of (1) (emphasis added):
(1) Lundbeck Denmark and Lundbeck Australia jointly and severally grant Sandoz an irrevocable non-exclusive licence to the Patent effective from:
(a) 31 May 2009 if the Patent expires on 13 June 2009;
(b) 26 November 2012 if the Patent expires on 9 December 2012;
(c) 31 May 2014 if the Patent expires on 13 June 2014; or
(d) 2 weeks prior to the expiry of the Patent if the Patent expires on a date other than a date described in clause 3(a) to (c).
(2) In addition to the licence granted under clause 3(1), Lundbeck Denmark and Lundbeck Australia jointly and severally grant Sandoz an irrevocable non-exclusive licence to the Patent, effective from the beginning of the calendar month in which the licence granted under clause 3(1) becomes effective, for the sole purpose of manufacturing, importing, marketing and offering to sell (but not selling or supplying) pharmaceutical products containing escitalopram.
(3) For the avoidance of doubt, nothing in this Agreement is to be taken as granting a licence of, or authorisation to exploit, any patent other than the Patent.”
The Court held that the rationale of the arrangement was to allow Sandoz to have a springboard vis-a-vis its competitors of two weeks of in-market sales (and four weeks of preparatory manufacturing and importation) before the end of the standard term of the patent. The Court further held that, when striking the settlement terms, the parties had not considered the possibility of an extension of term. Accordingly, when the Court construed, in context, the terms of a provision which seem very clear on their face, those words did not in fact operate in that clear way.
Interestingly, this conclusion of the Court would be more supportable had it also held that the effect of the extension of term mechanism is to effect a fresh grant of a new patent for the extended term (which, the Court noted, was a discretion the Court had under a previous extension of term regime). This would have more credibly supported the Court’s view that the licence expired at the end of the term of the then extant patent, and did not also grant a licence in respect of the freshly granted patent for the extended term. However for the Court to find that the “Patent” as referred to in the settlement agreement, is the same instrument during the extended term, the decision on the licence duration seems to reach a conclusion at odds with the clear words of the provision.
The full judgment is available at https://eresources.hcourt.gov.au/showCase/2022/HCA/4