Full Federal Court considers new patent entitlement laws
Reckitt Benckiser Healthcare (UK) Ltd v GlaxoSmithKline Australia Pty Ltd  FCA 583
The Full Federal Court has overturned Justice Rares' decision to grant Reckitt Benckiser Healthcare (UK) Ltd (Reckitt) an interlocutory injunction to restrain GlaxoSmithKline Australia Pty Ltd (Glaxo) from using a bottle neck liner in its dosing system. The decision at first instance and on appeal provide useful guidance on the new patent entitlement provisions which came into effect on 15 April 2013 via the Intellectual Property Laws (Raising the Bar) Act 2012 (Cth).
The case concerned a patent owned by Reckitt for a liquid dispensing apparatus implemented in a dosing system for its Nurofen for Children product. Reckitt alleged that Glaxo infringed its patent through the use of a similar dosing system in its Panadol for Children 1-5 years product. Glaxo contended that there was no infringement and that Reckitt's patent was invalid on the grounds of novelty and entitlement.
After rejecting the novelty argument due to a lack of evidence, Justice Rares also found that there was insufficient evidence to find that the inventors were not entitled to convey their rights to Reckitt's predecessor, Boots, so as to feed the chain of title to Reckitt. In addition, Justice Rares found that the new entitlement provisions also precluded Glaxo from asserting invalidity on this basis. Under the new section 22A of the Patents Act 1990 (Cth) (Act), a patent will not be invalid merely because it was or was not granted to a person who was or was not entitled to it. Further, section 138(4) of the Act provides that a court may only make an order for invalidity if it is satisfied in all the circumstances, it is just and equitable to do so. Justice Rares held that, if the issue of entitlement was tested, that justice and equity would regard the position that the two parties with an interest in the invention had arrived at in their agreement in 2006 should not be disturbed at the suit of a third party (Glaxo).
Upon finding a prima facie case for infringement and rejecting the two grounds of invalidity, Justice Rares granted interlocutory relief in favour of Reckitt.
Transparency in the relationship between healthcare professionals and the pharmaceutical industry
In our May 2013 newsletter, we reported on the progress of the Therapeutic Goods Amendment (Pharmaceutical Transparency) Bill 2013 (the Bill). The Bill sought to replace the Medicines Australia Code of Conduct (the Code) and to subject "regulated corporations" to reporting requirements. It also sought to restrict certain interactions between healthcare professionals and pharmaceutical companies.
On 17 June 2013, the Senate Finance and Public Administration Legislation Committee (the Committee) recommended that the Senate reject the Bill.
The Committee received 25 submissions from interested parties, including government, industry and the Australian Medical Association. Ultimately, the Committee recommended that continuing self-regulation was preferable to the proposed legislation. The Committee's concerns included that the proposed legislation would be of limited application, would restrict appropriate interactions between pharmaceutical companies and medical practitioners, and would lessen existing requirements under the Code.
Since then, the Transparency Working Group established by Medicines Australia developed and published a Transparency Model Consultation and Discussion Paper) with the aim of introducing greater transparency about payments and transfers of value between healthcare professionals and the pharmaceutical industry.
The Discussion Paper proposes that all payments or transfers of value provided by a company to a healthcare professional relating to prescription medicines be reported to Medicines Australia, with a view toall payments made after 1 January 2015 being disclosed on a public register.
The Discussion Paper will be considered as part of the Code review for the 18th Edition of the Medicines Australia Code of Conduct. The reviewcommenced in July 2013 and submissions have been invited by 20 September 2013. The Code review is scheduled to be completed by Q3 2014 and, subject to approval by the ACCC, the 18th edition is intended to be operational from 1 January 2015.
TGA consultation for changes to advertising therapeutic goods
On 31 May 2013 the Therapeutic Goods Administration (the "TGA") released a Consultation Regulation Impact Statement ("RIS") for "Regulating the advertising of therapeutic goods to the general public".
Despite referring to "therapeutic goods", the RIS does not propose any changes to the prohibition on advertising prescription and certain pharmacist-only medicines to the general public. Rather, it focuses on complementary, over-the-counter and herbal medicines and medical devices.
The RIS includes options for changes to the following areas.
? Pre-publication approvals of advertisements. Pre-approvals are currently granted by different industry groups depending on the media in which the advertisement appears. The TGA noted perceptions of subjectivity, inconsistency and bias in the current pre-approval process, and concerns about "new media" advertisements and medical devices falling outside the process. Options include appointing a single independent body to conduct pre-approvals and expanding their ambit to cover medical devices and a broader range of media.
? Complaints handling process. Advertisements can be challenged if a person makes a complaint to the appropriate body. There are multiple complaint-handing bodies, depending on the media in which the advertisement is made. The complaints process is generally regarded as cumbersome and suffering from uncertainty of outcome. An option for change is to appoint a single body to handle all complaints and establish an expert advisory committee with advice on advertising matters.
? Compliance and enforcement tools. There are limited compliance and enforcement tools available for offences relating to advertising. Significant expansion of these tools is suggested, including introducing new offences, imposing criminal penalties and increasing some civil penalties from 60 penalty units ($10,200) to 50,000 penalty units ($8.5 million).
? Advertising of high risk medical devices. Medical devices can be advertised to the general public. As advertising of prescription and certain other medicines is prohibited, an option outlined in the RIS is to prohibit the advertising of higher risk medical devices also.
? Advertising directed to health professionals. Advertising to certain healthcare professionals is excluded from the requirements for advertising to the general public, with the rationale that health professionals are more competent in assessing advertisements regarding therapeutic goods. The option is to restrict this class to groups accredited under the National Registration and Accreditation Scheme (NRAS), which would mean that advertising to groups with no single accredited peak body, such as homoepathic practitioners, naturopaths and some herbalists, would be regulated in the same way as advertising to the general public.
The TGA invited submissions on the RIS. Submissions closed on 19 July 2013. The submissions received by to the TGA generally supported the options to centralise and streamline the pre-approval and complaints processes. On the other hand, the proposed expansion of the compliance and enforcement tools was not supported (despite the TGA seeing "no disadvantage" in this expansion). The proposed prohibition against advertising of high risk medical devices was not supported by the Medical Technology Association of Australia, amid concerns that consumers would seek out information from less reliable sources.
The strongest response was received from groups representing naturopaths, herbalists and homeopathic practitioners. Their concern was that if advertising to those persons was regulated in the same way as to members of the general public, there would be restrictions on the information required to conduct their professions. Other commentators observed that this would be addressed if these groups agreed to consolidated representation and achieved accreditation under the NRAS.
After considering the submissions it has received, the TGA now intends to prepare a final RIS to assist Government consideration of the next steps.
Isolated DNA patent not valid, but cDNA patentable
Association for Molecular Pathology, et al. v. Myriad Genetics, Inc., et al, 569 U.S (2013)
The Supreme Court of the United States held on 13 June 2013 that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but synthetic DNA (cDNA) is patent eligible because it is not naturally occurring. The decision of this landmark case departed from many years of decisions to the contrary from the U.S Patent and Trademark Office (USPTO) who have accepted approximately over 2000 patents on isolated DNA sequences in the United States before this case started.
The plaintiffs, Association for Molecular Pathology, challenged specific patent claims made by Myriad Genetics (Myriad) in relation to its isolated BRCA1 and BRCA2 genes, its diagnostic methods, and its methods of identifying drug candidates, and argued the invalidity of these claims on the basis that they are not patentable subject matter under §101 of Title 35 of the United States Code.
The central issue before the court was whether the Myriad's isolation of DNA claims a "new and useful composition of matter" (as required under §101) or whether it instead claims "naturally occurring phenomena", an important implicit exception to §101 (Mayo v Prometheus, 566 U.S). Noting that the location and order of the BRCA1 and BRCA2 genes existed in nature before Myriad found them, Justice Thomas held that "Myriad did not create anything … it found an important and useful gene, but separating that gene from its surrounding genetic material is not an act of invention". Relying on the decision in Funk Brothers Seed Co. v Kalo Inoculant Co., 333 U.S. 127, Justice Thomas noted that whilst Myrad Genetics did indeed find an important and useful gene, "groundbreaking, innovative or even brilliant discovery does not by itself satisfy the §101 enquiry".
There are two additional points worth highlighting from this decision. Firstly, with regard to cDNA, Justice Thomas held that while "cDNA retains the naturally occurring exons of DNA … it is distinct from the DNA from which it was derived", and as a result, it is not a "product of nature" and is patent eligible under §101. Secondly, Myriad did not bring a "method claim" before the Court. Justice Thomas noted that "had Myriad created an innovative method of manipulating genes while searching for the BRCA1 and BRCA2 genes, it could possibly have sought a method patent". However, the processes used by Myriad to isolate DNA "were well understood, widely used, and fairly uniform in so far as any scientist engaged in the search for a gene would likely have utilized a similar approach."
Interestingly, some feel the Supreme Court's opinion in this decision does not settle all questions about the issue of the patentability of DNA. It appears that the emerging practice in this field is to patent a method or process of working with a gene, rather than trying to isolate and patent the gene itself. It is also important to compare this decision with Australian Federal Court's decision in Cancer Voices Australia v Myriad Genetics  which upheld the validity of Myriad's BRCA1 gene patent. In this decision, the Federal Court concluded that "isolated nucleic acid is the product of human intervention" and is therefore a "manner of manufacture" (a requirement of patentability under section 18(1) of the Patents Act 1990 (Cth). The decision is currently the subject of an appeal to the Full Federal Court.
In need of an equity capital injection?
In good news for small to medium cap companies, the Australian Securities Exchange (ASX) amended its rules in August 2012 to enable certain listed companies to raise increased equity capital via placements. However, there are a number of eligibility conditions, disclosure obligations and shareholder approval requirements which a listed company must satisfy in order to access the benefit of that potential increased placement capacity. As we approach reporting season, companies listed on the ASX should assess their ability to satisfy the applicable regulatory requirements and consider the potential benefits that may be obtained by utilising the increased placement capacity.
Increased Placement Capacity
The ASX Listing Rules, which govern the conduct of companies listed on the ASX, now permit listed companies to issue an additional 10% of their issued capital by way of placements over a 12 month period with shareholder approval (Additional 10% Capacity). This is in addition to the existing placement capacity that listed companies have to issue up to 15% of their issued capital without shareholder approval.
Applicable Regulatory Requirements
To be eligible to seek shareholder approval at its AGM for the Additional 10% Capacity, a company must not have a market capitalisation of more than A$300 million at the time the AGM is held and not be included in the S&P / ASX 300 Index. Further, if it is eligible, the listed company must also comply with the following requirements (amongst others) in order to issue securities under the Additional 10% Capacity:
? at least 75% of the votes cast by shareholders present and voting at the AGM must be in favour of the resolution seeking approval of the Additional 10% Capacity;
? the price at which the securities are issued must not be discounted by more than 25% of the 'market price';
? the Notice of AGM must include details of the following matters (amongst others):
- a statement of the risks of economic and voting dilution for existing shareholders;
- the purpose for which the funds raised by the securities issued will be used; and
- the allocation policy for securities issued (including how the company intends to decide who to offer securities to and whether it intends to offer securities to existing shareholders or new investors).
Approval commonly sought by life sciences companies
To date, at least  ASX listed companies in the life sciences industry have issued equity securities under the Additional 10% Capacity, notwithstanding the regulatory requirements applicable to such placements. This suggests that the disclosure hurdles do not present a significant obstacle to companies obtaining the benefit of the Additional 10% Capacity.
If it is effectively utilised, the Additional 10% Capacity offers eligible listed companies valuable flexibility in accessing capital in a quicker, easier and often more cost-effective manner (particularly as the approval may last for up to 12 months from the date of the AGM).
Strong Investor Demand For Hybrid Securities Expected To Continue
The Australian Securities & Investments Commission (ASIC) expects that strong investor demand for hybrid securities will continue in Australia. This suggests that companies with a strong brand or reputation may wish to consider an issue of hybrid securities in Australia when analysing their capital requirements and funding options (particularly given the beneficial accounting and tax treatment associated with properly structured hybrid securities).
ASIC released its "Report 365 - Hybrid Securities" on 20 August 2013 (Report), which discusses recent offers of hybrid securities (ie. subordinated notes, capital notes and convertible preference shares) in Australia.
Click here to view the report
The Report highlights that more than A$18 billion has been raised by banks and companies during the 20 months to June 2013 (including an issue of A$300m Subordinated Notes by Healthscope Group in March 2013).
In light of the increased issuance and popularity of hybrid securities in the Australian market, ASIC has been focused on ensuring the adequacy of the prospectus disclosure and the accuracy of the selling messages for hybrid securities because retail investors (predominantly self managed superannuation funds) are the key participants in the Australian hybrid securities market. The Report sets out ASIC's findings on those matters arising from its:
? engagement with issuers of hybrid securities through reviewing and commenting on draft prospectuses; and
? targeted review of the selling methods adopted in respect of hybrid securities.