FEDERAL COURT OF AUSTRALIA

Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 2) [2012] FCAFC 102

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant pay the respondents’ costs of the appeal to be taxed if not earlier agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Keane CJ

INTRODUCTION

1    Sanofi-Aventis Australia Pty Ltd (the first respondent) supplies leflunomide in Australia under the trade names “Arava” and “Arabloc”. It is also, with Aventisub II Incorporated (the third respondent), the owner of copyright in product information documentation (PID) relating to Arava. Sanofi-Aventis Deutschland GmbH (the second respondent) is the registered owner under the Patents Act 1990 (Cth) (the Act) of Australian Patent No 670,491 entitled “pharmaceutical for the treatment of skin disorders” (the patent). The priority date of the patent is 31 March 1993.

2    The patent has a single claim for:

A method of preventing or treating a skin disorder, wherein the skin disorder is psoriasis, which comprises administering to a recipient an effective amount of pharmaceutical composition containing as an active ingredient a compound of formula I or II …

3    The compound of formula I referred to in the patent is leflunomide. The evidence relevant to the invention of leflunomide and its use in the treatment of PsA and psoriasis is summarised in the reasons of Bennett and Yates JJ.

4    In July 2008 Apotex Pty Ltd (the appellant) obtained registration of Apo-Leflunomide, its generic version of leflunomide, on the Australian Register of Therapeutic Goods (the ARTG) in order to implement its intention to supply it in Australia for use as a medicament for Psoriatic Arthritis (PsA) and Rheumatoid Arthritis (RA).

5    In Australia, a patient who presents with psoriasis to a medical practitioner would be referred to a dermatologist for treatment. Leflunomide is not used in Australia for the treatment of psoriasis alone, and it is not prescribed by dermatologists for that purpose. It is, however, used in the treatment of RA and PsA. To that end, its use is prescribed by rheumatologists.

6    Psoriasis occurs in about 2% of the population. Its occurrence is now known to be associated with the occurrence of RA and PsA. About 25% of cases of inflammatory arthritis are cases of PsA. Approximately 60-70% of cases of inflammatory arthritis are cases of RA. A patient diagnosed as suffering from RA might also have or develop psoriasis; but a person with PsA will almost always have or develop psoriasis. Accordingly, the existence of psoriasis is a diagnostic indicator of PsA. Importantly, as the primary judge said in her reasons for judgment (Reasons) at [130] “if leflunomide is administered to a patient with PsA, that administration would be expected to prevent or treat the patient’s psoriasis, to some extent at least”.

7    The compound leflunomide was the subject of Australian Patent No 529,341 which became publicly available in 1980 and expired in 2004. In these proceedings it has been referred to as “the 341 patent”. In the 341 patent leflunomide was claimed to have, inter alia, antirheumatic and antiphlogistic (i.e. anti-inflammatory) effects and to provide a “method for the treatment of inflammations [and] rheumatic complaints”. The appellant relies upon these disclosures in the 341 patent to challenge the validity of the patent for lack of novelty.

8    The respondents brought proceedings in the Court claiming that the patent is valid and that it would be infringed by the appellant’s supply in Australia of its leflunomide product for the treatment of PsA. The appellant disputed the validity of the patent on a number of grounds, and, in the alternative, denied that the patent excluded the appellant from supplying leflunomide for the treatment of PsA.

9    The primary judge found in favour of the respondents and ordered, inter alia, that the appellant be restrained from “supplying or offering to supply [its generic leflunomide product] … for the treatment of psoriatic arthritis … ” Her Honour proceeded on the footing that use of leflunomide to treat PsA in a patient would infringe the patent because that use would inevitably treat or prevent psoriasis in that patient. The patent would be infringed because of the effect of the drug even though its administration was not prescribed as a method of treatment of psoriasis.

10    In this Court, the appellant argues that the claim in the patent, on its proper construction, does not support the order which was made at first instance as a vindication of the patentee’s rights. That is because it is a method of preventing or treating only the specified ailment psoriasis. The appellant also argues that the patent is invalid, principally on the ground of want of novelty.

11    The respondents also claimed in their proceedings that the appellant had infringed the first respondent’s copyright in product information documentation (PID) relating to Arava by making and supplying to the Therapeutic Goods Administration (the TGA) PID concerning the appellant’s generic leflunomide product which substantially reproduced the first respondent’s PID relating to Arava. At trial, the appellant admitted that it had copied the first respondent’s PID but claimed that it was licensed by it to do so by virtue of widespread industry practice whereby originators of drugs registered with the TGA licensed the reproduction of their PID by suppliers who seek subsequently to register generic equivalents. The primary judge found in favour of the respondents, holding that the evidence adduced by the appellant was not sufficient to found a claim to a licence implied by custom and usage.

12    The primary judge also held that the appellant had contravened the Trade Practices Act 1974 (Cth) (or its successor the Competition and Consumer Act 2010 (Cth)) by failing to warn medical practitioners, pharmacists or patients that use of the appellant’s leflunomide product would infringe the patent in suit. The appellant challenges her Honour’s conclusions in this regard, but accepts that its challenge will stand or fall with the issues relating to the patent.

13    The principal issues arising on the appeal from the primary judge are whether:

(a)    methods of medical treatment of human ailments are patentable; and, if so, whether they are patentable only insofar as the object of the treatment is an integer of the claimed invention;

(b)    the supply of leflunomide for the treatments of PsA infringed the patent in suit: this issue turns upon the proper construction of the claim in the patent;

(c)    the patent in suit was anticipated by the prior publication of the 341 patent;

(d)    the appellant’s reproduction of the first respondent’s PID was authorised under a licence implied as a matter of fact by trade custom.

14    It may be noted here that the Generic Medicines Industry Association of Australia (GMIA) applied for leave to intervene in this appeal to make submissions that the reproduction by the appellant of the first respondent’s PID was exempt from infringement pursuant to s 183 of the Copyright Act 1968 (Cth) (Copyright Act) or was pursuant to a licence implied by law. The Court dismissed that application at the outset of the hearing of the appeal for the reasons given on that occasion: Apotex v Sanofi-Aventis Australia [2012] FCAFC 62.

PATENTABILITY

15    Section 18 of the Act provides relevantly:

(1)    Subject to subsection (2), an invention is a patentable invention for the purposes of a standard patent if the invention, so far as claimed in any claim:

(a)    is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies …

…

(2)    Human beings, and the biological processes for their generation, are not patentable inventions.

16    Section 6 of the Statute of Monopolies 1623: 21 Jac 1 c 3 (Statute of Monopolies) is, in effect, a proviso to the declaration by s 1 of the Statute of Monopolies that:

All Monopolies … heretofore made or graunted, or hereafter to be made or graunted … of or for the sole buyinge, sellinge, makinge, workinge, or usinge of any thinge within this Realme … are and shallbe utterlie void and of none effecte.

17    Section 6 of the Statute of Monopolies provides that no declaration contained in the statute shall extend:

… to any Patents and Graunt of privilege for the tearme of fowerteene yeares or under, hereafter to be made, of the sole working or makinge of any manner of new Manufactures within this Realme, to the true and first … Inventors … which others at the tyme of makinge such … [letters] Patent and Graunt shall not use, soe as alsoe they be not contrary to the Lawe nor mischievous to the State, by raisinge prices of Commodities at home, or hurt of trade, or generallie inconvenient ...

18    Speaking broadly, then, one may say that a patentable invention is an invention that is a “manner of new manufacture” so long as it is not “generally inconvenient”.

19    The patentability of a method or process for the medical treatment of human ailments had been something of a vexed question in the authorities. These authorities were canvassed extensively by Gummow J, sitting as a single justice of the Federal Court in Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 25 IPR 119 and in the judgments on appeal in Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1. In Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 25 IPR 119 and Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1, Gummow, Lockhart, Wilcox JJ were of the view, albeit by way of obiter dicta, that a method of medical treatment of a human ailment is patentable as a manner of new manufacture which is not generally inconvenienced. Sheppard J in Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 took the contrary view.

20    In Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 Lockhart J, after a comprehensive review of the authorities in Australia and overseas, concluded at 19:

In my opinion, there is no justification in law or in logic to say that simply because on the one hand substances produce a cosmetic result or a functional result as opposed to a curative result, one is patentable and the other is not. I see no reason in principle why a method of treatment of the human body is any less a manner of manufacture than a method for ridding crops of weeds as in National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252 (‘NRDC’). Australian courts must now take a realistic view of the matter in the light of current scientific development and legal process; the law must move with changing needs and times. I agree with Davison CJ that the test enumerated in the NRDC case is whether the invention is a proper subject of letters patent according to the principles which have been developed for the application of s 6 of the Statute of Monopolies.

Although a “mere new use for an old thing” is not patentable, a discovery which itself involves ingenuity or novelty, that an old substance may be used so as to produce a new result, may ground a patentable invention. In such a case the old substance is treated as if it were new, its hitherto unknown or unsuspected potential being revealed by the discovery which is itself a consequence of scientific ingenuity (Wellcome Foundation Ltd v Commissioner of Patents [1983] NZLR 385 at 528 (‘Wellcome’)). If a process which does not produce a new substance but nevertheless results in “a new and useful effect” so that the new result is “an artificially created state of affairs” providing economic utility, it may be considered a “manner of new manufacture” within s 6 of the Statute of Monopolies: NRDC at 265 and 277 and Wellcome at 528.

There is no statutory provision in Australia prohibiting the grant of a patent for a process of medical treatment of a human ailment or disease in a human being. It is noteworthy that the Parliament had the opportunity to exclude methods of treating the human body when it enacted the 1990 Act, but the limit of the exclusion was s 18(2), namely: “human beings, and the biological processes for their generation, are not patentable inventions”; cf s 4, Patents Act 1977.

I am satisfied that the application of the respondent is a proper subject of letters patent in accordance with the principles which have been developed for the application of s 6 of the Statute of Monopolies.

21    In Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1, Wilcox J agreed with Lockhart J. Wilcox J went on to say at 42-43:

The important point, it seems to me, is that the Australian Parliament has not been persuaded by the policy considerations arguing against patentability. Parliament has never excluded a method of human medical treatment from patentability or the definition of “invention”; not even in the recent statute, the Patents Act 1990 (Cth) (the 1990 Act), that revised Australian patent law and made a specific provision (s 18(2)) dealing with the patentability of human beings and the biological processes for their generation. I appreciate that both this statute and its predecessor, the Patents Act 1952 (Cth) (the 1952 Act), left intact the principles developed by the courts in connection with the application of s 6 of the Statute of Monopolies 1623 (UK) (21 Jac I c 3): see the definition of “invention” in both Acts and s 35 of the 1952 Act and s 18(1) of the 1990 Act. However, I believe that, in the face of apparently deliberate decisions by Parliament not to build this particular exclusion into its legislation, courts should be hesitant to introduce the exclusion by reference to those very general principles.

22    The question of patentability of methods of medical treatment of human ailments was discussed again in Bristol-Myers Squibb Company v F H Faulding & Company Ltd (2000) 97 FCR 524 (Bristol-Myers Squibb). The judgments in that case confirmed the view expressed by Gummow, Lockhart, and Wilcox JJ in Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 25 IPR 119 and Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1.

23    Before the primary judge in the present case, the appellant reserved its right to challenge the correctness of these earlier decisions. In mounting that challenge in its written submissions in this Court, the appellant eschewed reliance on the ground of “general inconvenience” derived from s 6 of the Statute of Monopolies. It may be noted that it was on this ground that Black CJ and Lehane J focussed in Bristol-Myers Squibb (2000) 97 FCR 524 at [7]-[18] in rejecting the contention that methods of medical treatment are not patentable. In this Court, the appellant seeks to rely upon the reasoning of Sheppard J in Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 at 33-37 to support the proposition that a method of treatment of a human illness is not a “manner of new manufacture” within s 6 of the Statute of Monopolies. The appellant also sought, by a second further supplementary notice of appeal, leave to argue that methods of medical treatment for a “second or later medical use” not limited by the purpose of the treatment are not patentable inventions. Because the argument sought to be raised overlaps with the issue of infringement, I would grant the appellant leave to raise the argument.

24    The respondents contend that the appellant’s arguments that the patent does not claim a manner of new manufacture are not open to the appellant, not only because they were not argued below, but also because they are outside the appellant’s pleaded case. As to the substance of the arguments, it may also be noted that in Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1, Sheppard J ultimately based his conclusion, not on the view that a method of treatment of the human body is not a “manner of new manufacture”, but on the ground of “general inconvenience”: see Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 at 40-41.

25    It is not necessary to reach a concluded view on the respondents’ contentions because of the view I take of the proper construction of the claim in the patent. Further, in oral argument, the appellant did not seek to press, in this Court, the contention that methods of treatment of human ailments were not patentable. That was, in my respectful opinion, an entirely proper course. Little purpose would be served by this Court’s canvassing again the authorities so comprehensively reviewed in the judgments in Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 25 IPR 119, Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 and Bristol-Myers Squibb.

26    Having regard to the passage of time since the decision in Bristol-Myers Squibb, and the ample opportunity afforded to the Parliament on the occasions when it has amended the Act to legislate to deny that methods of medical treatment of human ailments are patentable, I consider that this Court could not now accede to the appellant’s invitation to depart from that view which prevailed in Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 and Bristol-Myers Squibb. There is now even more force in the views expressed by Lockhart and Wilcox JJ in Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 that one cannot attribute to the Parliament the intention that the area of non-patentability of inventions associated with the preservation of the health of human beings is wider than the express statement of non-patentability in relation to “human beings, and the biological processes for their generation”, in s 18(2) of the Act. The competing considerations of policy which bear on the question whether or not that expansion should occur are very much matters for determination by the legislature rather than the judiciary below the level of the High Court of Australia.

27    The appellant did, however, press an argument to the effect that a claim that is said to encompass the accidental or incidental treatment of a disease, when the claim does not explicitly claim to be a method of treatment of that disease, is not a method of manufacture in terms of s 18(1)(a) of the Act. This argument is associated with the issue as to the proper construction of the claim in the patent in the present case. In my respectful opinion it is not necessary to deal with the patentability issue because I have come to the conclusion that the claim in the patent, properly construed, does not extend to the application of leflunomide as a method of treating PsA merely because that treatment will inevitably have some incidental beneficial effect on psoriasis.

28    The primary judge took a different view of the proper construction of the claim, concluding that the invention claimed in the patent is used where leflunomide is administered by a medical practitioner with the result that psoriasis is in fact treated, even though the product is administered as a method of treating PsA. Her Honour held that the use of leflunomide by a medical practitioner to treat or prevent PsA would infringe the patent because that use would necessarily have the effect of also treating or preventing psoriasis. The primary judge’s conclusion in this regard was relevant to, but not decisive of, the issue of infringement by the appellant as a would-be supplier of leflunomide. The arguments which bear on the construction of the claim are conveniently discussed together with the issue of infringement. To that issue I now turn.

INFRINGEMENT

29    At trial the parties advanced a number of possible constructions of the claim in the patent. The primary judge summarised these at Reasons [132]:

The potential constructions of claim 1 included the following:

(1)    A method comprising the administration to a recipient of a pharmaceutical composition [containing leflunomide] by a medical practitioner who intends, by the administration, to prevent or treat psoriasis in the recipient.

(2)    A method comprising the administration by a medical practitioner to a recipient of a pharmaceutical composition [containing leflunomide] where the “objective purpose” of the administration is to prevent or treat psoriasis in the recipient.

(3)    A method comprising the administration by a medical practitioner to a recipient of a pharmaceutical composition [containing leflunomide] to prevent or treat the recipient’s psoriatic arthritis by which, incidentally, psoriasis will also be prevented or treated in the recipient.

(4)    A method comprising the administration by a medical practitioner to a recipient of a pharmaceutical composition [containing leflunomide] where the effect of the administration in fact is to prevent or treat the recipient’s psoriasis.

30    The appellant’s preferred construction of the claim was construction (2). The respondents’ preferred construction was construction (4).

The primary judge’s conclusions

31    The primary judge summarised the issue of construction of the patent at Reasons [151]-[152]:

151    … The essence of the dispute between the parties insofar as it related to the construction of the patent is ultimately whether the claim for a “method of preventing or treating a skin disorder, wherein the skin disorder is psoriasis” by administration of a compound should be construed as involving the purpose, object or aim of the administration (whether that purpose, object or aim be determined subjectively or objectively), or the effect in fact of the administration.

152    …Apotex’s … [preferred construction] … depends on an objective determination of the treating physician’s purpose, object or aim in administering the compound. It asks whether the purpose, object or aim of the treating physician’s administration of the compound can be objectively characterised as preventing or treating psoriasis. … The concept of the “incidental” treatment of psoriasis assumes the existence of another direct or immediate purpose of treatment. By contrast … Sanofi-Aventis’s construction asks whether the administration will in fact have the effect of preventing or treating psoriasis ….

32    In resolving the issue of construction in favour of the respondents, her Honour said at Reasons [154]-[155]:

154    …The difficulty for Apotex’s proffered constructions is that the claim itself says nothing about the purpose of the administration of the compound. The method claimed is a method of preventing or treating the skin disorder psoriasis by administering an effective amount of the compound. The method is described and defined by the result: the prevention or treatment of psoriasis. If there were any ambiguity in the concepts of preventing or treating psoriasis, the definition of those terms in the specification confirms that they mean achieving a particular biological result or effect in the recipient of the administration of the leflunomide. According to the specification, “prevention” is the prophylactic prevention of psoriasis in a susceptible mammal and “treatment” is arresting the development and retarding the progression of psoriasis in a susceptible mammal. As Apotex submitted, the particular disease, psoriasis, is an essential integer of the method claimed. But its essentiality operates in terms of result or effect (the fact of prevention or treatment of psoriasis) and not, as Apotex said, in terms of the purpose of the administration.

155    Accordingly, the claimed method is used where the compound (leflunomide) is administered to a recipient in an effective amount so that the recipient’s psoriasis is in fact prevented or treated. The validity of the patent and, if valid, its infringement are to be determined on the basis of this construction.

33    Earlier, her Honour had said at Reasons [130]:

Leflunomide is a drug used in the treatment of RA and PsA and, for that purpose, is prescribed by rheumatologists. Leflunomide is not used in Australia for the treatment of psoriasis alone and is not prescribed by dermatologists for that purpose. However, if leflunomide is administered to a patient with PsA, that administration would be expected also to prevent or treat the patient’s psoriasis, to some extent at least.

The arguments of the parties on appeal

34    The appellant argues that the invention claimed by the patent is the method or process of using leflunomide to achieve the prevention or treatment of the ailment psoriasis. In developing this argument, the appellant refers to the purpose of the administration of the drug. The appellant argues that this “purpose” is to be determined objectively.

35    The appellant argues that the primary judge’s findings at Reasons [130] that the purpose of a rheumatologist prescribing the use of leflunomide is to treat PsA, and that leflunomide is not prescribed by dermatologists for the purpose of treating psoriasis, serve to demonstrate that it is reasonable and necessary to speak of the purpose for which a drug is prescribed for use.

36    The respondent submits that the manner in which the appellant seeks to support its construction (by referring to the dermatologist’s diagnosis and prescription) postulates an inquiry into the purpose of the user of an invention which is alien to patent law. The appellant’s construction is also said to disregard the definitions of treating and preventing contained in the specification which confirm that the claim is directed to the achievement of a biological result. Further, the appellant’s construction is said to import words not present in the claim, in that the claim does not state that the process is dependent upon a doctor’s diagnosis.

Consideration

37    In my respectful opinion, the construction of the claim which was preferred by the primary judge fails to recognise that the claim is for a method of treating or preventing a specific ailment. The claim in the patent is not for the use of leflunomide in a manner that treats or prevents psoriasis. The claim is not for the discovery of whatever happens in the human body after the drug is administered. Rather, the claim is for a method of preventing or treating psoriasis. The claim is for a method of treatment of a human ailment. That method necessarily presupposes a deliberate exercise of diagnosis and prescription by a medical practitioner. The treatment or prevention of psoriasis by the use of the claimed method presupposes a diagnosis of psoriasis and the consequent prescription of the application of leflunomide. That this is so is hardly controversial: as is apparent from all the potential constructions of the patent advanced by the parties, the claim in the patent involves the application of leflunomide by a medical practitioner.

38    Lord Hoffman observed in Merrell Dow Pharmaceuticals Inc v HN Norton & Company Ltd [1996] RPC 76, 92 that, under the “traditional United Kingdom doctrine of infringement … liability for infringement is … absolute. It depends upon whether the act in question falls within the claims [in the patent] and pays no attention to the alleged infringer’s state of mind.” His Lordship went on to note that this traditional doctrine may be “difficult to apply to a patent for the use of a known substance in a known way for a new purpose”. His Lordship articulated this difficulty in the question: “How does one tell whether the person putting the additive into his engine is legitimately using it to inhibit rust or infringing by using it to reduce friction?”

39    The first point to be made in relation to Lord Hoffman’s observations is that the difficulty identified by his Honour arises because it is now accepted that methods or processes which do not produce a vendible product may nevertheless be patentable: see National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252 at 268-277; Joos v Commissioner of Patents (1972) 126 CLR 611 at 616-617.

40    A claim for a method or process used to achieve a specific result is intelligible only as a teleological proposition. In the case of the patent in question the identification of the object of the application of the method depends on the diagnosis of a medical practitioner. In the present case, of course, no need arises to look into the mind of “the alleged infringer”. All four potential constructions of the claim identified by the parties acknowledge that the claim is for a method which comprises the administration of leflunomide prescribed by a medical practitioner to treat a specific human ailment. Even construction (4), the construction ultimately adopted by the primary judge, proceeds on the footing that the administration of leflunomide is a step in a clinical process of diagnosis and prescription by a medical practitioner. It is natural to construe the claim in the patent as a claim to a method of treatment the object of which is determined by the diagnosis and prescription of the medical practitioner whose area of practice is ailments of the skin. To return to Lord Hoffman’s question, one can readily tell that the person putting the additive into his engine is using it to inhibit rust, rather than to reduce friction, if the person controlling the process is a specialist in rust prevention.

41    The construction of the claim which I prefer is, I think, more in harmony with the philosophy of the Act than the construction urged by the respondents. The Act does not permit the monopolisation of something which is a discovery but not an invention. An invention which consists of a method or process may attract the exclusive rights conferred by the Act in respect of a method of new manufacture only if it involves the suggestion of an act which results in a “new result or a new process”. In Reynolds v Herbert Smith & Co Ltd (1903) 20 RPC 123 at 126, Buckley J said:

Discovery adds to the amount of human knowledge, but it does so only … by disclosing something … Invention also adds to human knowledge, but not merely by disclosing something. Invention necessarily involves also the suggestion of an act to be done, and it must be an act which results in a new product, or a new result, or a new process, or a new combination for producing an old product or an old result.

42    The respondents’ claim to exclusive use of the process of prevention or treatment of psoriasis by the application of leflunomide necessarily depends on the proposition that the application of leflunomide produces a “new result”, namely the treatment or prevention of psoriasis. It is the use of leflunomide as an agent for the prevention or treatment of psoriasis that is new. If one were to construe the claim in the patent as covering the effective prevention or treatment of inflammatory diseases of the joints, the element of novelty would be compromised. Further, the exclusive right to the use of leflunomide granted by the 341 patent would be resurrected after the expiration of the term of that patent.

43    Section 13(1) of the Act is a key provision of the Act. It provides that “a patent gives the patentee the exclusive rights, during the term of the patent, to exploit the invention”. Section 13 embodies the fundamental proposition that the right conferred by a patent is a right to exclude all others from trade in the patented product or process. By virtue of the definition of “exploit” in Schedule 1 of the Act, the exploitation of an invention includes, in the case of a patented method or process, the use of the method or process. The claim in a patent serves to delimit the monopoly claimed by the patentee: British United Shoe Machinery Co Ltd v A. Fussell & Sons Ltd (1908) 25 RPC 631 at 650.

44    The exclusion of a patentee’s competitor from trade is commensurate with the right of exploitation of an invention enjoyed by the patentee. The extent of the patentee’s right – and its competitor’s correlative exclusion from the relevant trade – is marked out by the novelty which gives the invention its patentability. The primary judge’s construction of the claim would allow the respondents to exclude their competitors from an area of trade which does not involve exploitation of the novelty claimed by the patent.

45    Here the monopoly claimed by the patent to the use of leflunomide is a process of treatment involving a deliberate process of diagnosis and prescription directed to the treatment or prevention of psoriasis. Given that the policy of patent law is to reward invention, not serendipity, one should be slow to construe a patent to a method or process as excluding competitors of the patentee from an area of trade by reason of consequences which the patent does not claim.

46    For these reasons, I consider that the patent, on its true construction, would not be infringed by the application of leflunomide upon the prescription of a rheumatologist to prevent or treat PsA.

47    It is necessary now to turn to s 117 of the Act in order to determine whether that section operates to render the appellant liable for infringement, notwithstanding that construction of the patent.

48    Section 117 of the Act provides:

(1)    If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent.

(2)    A reference in subsection (1) to the use of a product by a person is a reference to:

(a)    if the product is capable of only one reasonable use, having regard to its nature or design – that use; or

(b)    if the product is not a staple commercial product – any use of the product, if the supplier had reason to believe that the person would put it to that use; or

(c)    in any case – the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by the supplier or contained in an advertisement published by or with the authority of the supplier.

49    Section 117 may be said to have been designed to capture those who supply a product to persons whose use of a product infringes a patent as infringers themselves. The operative provision of s 117 is s 117(1). The extent of the operation of s 117(1) is informed by the terms of s 117(2). In Northern Territory v Collins (2008) 235 CLR 619 (Collins) at [20]-[21] Gummow A-CJ and Kirby J said of s 117 of the Act:

… Subject to the Act, a patent gives the patentee the exclusive rights to exploit the invention for the term of the patent (s 13). Infringement proceedings may be brought to enforce those rights (s 120) and relief granted by way of injunction, damages or an account of profits (s 122). While the Act establishes some exceptions to infringement (ss 118-119A) and offers protection for innocent infringement (s 123), no definition is given for what constitutes an “infringement” (14). The statutory scheme instead fixes attention on the exclusive rights given by the patent, as illuminated by the definition of “exploit” found in the dictionary to the Act.

Section 117 does not itself speak to the exclusive rights given by the patent. Rather, the provision identifies conduct and prescribes conditions in which that conduct will be an infringement of the patent. The conduct is the “supply of [a] product” by one person to another. The critical condition for the imposition of liability for infringement is that which is stated first. This is that “the use of [the] product” by the person to whom it is supplied “would infringe [the] patent” (s 117(1)). As the reasons of Hayne J demonstrate, this is informed by the application of s 117(2) and consideration of the exclusive rights given by the patent.

50    In Collins (2008) 235 CLR 619 at [34]-[39] Hayne J explained the operation of s 117 of the Act:

34    Section 117(1) is engaged where there is “the supply of [a] product by one person to another”. At the relevant time, the dictionary in Sch 1 to the Act provided that “supply” includes “supply by way of sale, exchange, lease, hire or hire-purchase”. The dictionary did not (and does not) contain any definition of “product” but the dictionary’s treatment of the word “exploit” distinguishes between “where the invention is a product” and “where the invention is a method or process”. Read as a whole, s 117 can be seen to proceed on the footing that the word “product” has its ordinary meaning and is not confined to a patented product or a product that is itself the result of applying a patented method or process.

35    Although s 117(1) is engaged only where there is "the supply of [a] product by one person to another", s 117 is directed to an identified sub-set of such transactions. That sub-set is identified first by the introductory words of s 117(1) – "[i]f the use of a product [the product that is supplied] by a person would infringe a patent" – and second by the amplification in s 117(2) of what is meant by "the use of a product by a person". At the risk of undue abbreviation the amplification provided by s 117(2) can be described as inviting attention, in the particular cases identified in each paragraph of the sub-section, to "only use" (s 117(2)(a)), "known use" (s 117(2)(b)) and "instructed use" (s 117(2)(c)). In many, perhaps most, cases a convenient point at which to begin consideration of an issue about the application of s 117(1) will be to examine what is said to be the use of the product that is alleged to engage the provision. It is that use which must be identified as the use which would infringe the patent because the hinge about which s 117 turns is its introductory words: "[i]f the use of a product by a person would infringe a patent."

36    When the question is approached in that way, it will be observed that to ask whether supply of an input for a patented method or process (or resulting product) is capable of attracting s 117(1) may direct attention away from the relevant statutory questions. Those questions are: is there a supply of a product; what is the use of the product (as use is elucidated in s 117(2)); and does that use infringe the patent?

37    The answer that is to be given to the last of the three questions just identified will, of course, turn upon whether the use in question contravenes the patentee's exclusive rights under s 13 of the Act, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention. And that requires close attention to what is meant by "exploit". In particular, it requires close attention to what is said in the dictionary in Sch 1 to the Act about "exploit", namely that:

exploit, in relation to an invention, includes:

(a) where the invention is a product – make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or

(b) where the invention is a method or process – use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use.

38    The question which the appellant submitted arose in this matter – is the supply of an input for a patented method or process (or resulting product) capable of attracting the operation of s 117(1) of the Act? – was framed as it was in the expectation that it could and should be answered in the negative. When the questions presented by s 117 are identified in the manner set out earlier in these reasons it is apparent that a variety of quite different cases may arise for consideration under s 117. In particular, the different kinds of use that are identified in s 117(2) may present radically different issues about the relationship between the relevant use and the patentee's exclusive rights to exploit the relevant invention. That is reason enough not to attempt some singular answer to a general question about when s 117 may be engaged.

39    It is also reason enough to doubt that differences which may be identified in what was said by Gummow J in Rescare and Black CJ and Lehane J in Bristol-Myers Squibb are usefully expressed in terms of the kind that the appellant's first question employed. Rather, questions about the application of s 117 must be approached with a close focus upon the relevant statutory language. That will require identification of the relevant use of the product and the relevant exclusive rights of the patentee. It is not useful, and may be misleading, to proceed by first seeking to establish a singular and all-embracing explanation of the operation of s 117 by excluding certain types of patent or certain types of product from any possible operation of the section.

(Footnotes omitted).

51    The primary judge concluded at Reasons [264] that a medical practitioner who prescribes the appellant’s generic leflunomide product as a treatment for PsA will directly infringe the patent. That conclusion reflected her Honour’s construction of the claim made by the patent. As has been seen, I do not agree with her Honour’s construction of the claim in the patent. The primary judge also made findings of fact in relation to s 117(2) of the Act which do not depend on the correctness of her Honour’s construction of the claim in the patent. To those findings I now turn.

52    In relation to s 117(2)(c) of the Act, the primary judge considered the terms of the appellant’s PID relating to its generic leflunomide product. Her Honour referred to evidence of the knowledge of the link between psoriasis and PsA and their treatment or prevention by leflunomide. Her Honour also referred to the specific statement in the appellant’s PID that its generic leflunomide product “is not indicated for the treatment of psoriasis that is not associated with manifestations of arthritic disease”. Her Honour concluded relevantly at Reasons [262]:

… The evidence establishes that psoriasis is a diagnostic criterion of PsA. It further establishes that nearly every person with PsA has or will develop psoriasis. The evidence thus establishes that the administration of leflunomide to a person with PsA will treat that person’s PsA and psoriasis (if they have a concurrent case of psoriasis) or treat that person’s PsA and prevent psoriasis (if the person otherwise would have developed psoriasis). Apotex’s approved PI, on any view, instructs a medical practitioner (namely, a rheumatologist) to use Apotex’s leflunomide product for the treatment of PsA. As almost all people with PsA have or will develop psoriasis, psoriasis being one of the diagnostic criteria of PsA, it is apparent that the approved Apotex PI instructs rheumatologists to use leflunomide to treat psoriasis irrespective of the phrase “Apo-Leflunomide is not indicated for the treatment of psoriasis that is not associated with manifestations of arthritic disease”. It does so by reason of the indication for PsA against the background of the undisputed evidence about the relationship between PsA and psoriasis. … I am satisfied in any event that the meaning which Sanofi-Aventis attributes to this phrase is unavoidable. In the context of an indication for PsA, the statement that “Apo-Leflunomide is not indicated for the treatment of psoriasis that is not associated with manifestations of arthritic disease” can mean only that Apo-Leflunomide is indicated for the treatment of psoriasis that is associated with manifestations of arthritic disease. Apotex’s argument to the contrary is not persuasive. It contradicts the ordinary meaning of the indication and is inconsistent with the undisputed medical evidence about the relationship between PsA and psoriasis. It follows from this analysis that the approved Apotex PI gives instructions for the use of Apotex’s leflunomide product for the treatment of psoriasis within the meaning of s 117(2)(c) of the Patents Act.

53    In relation to s 117(2)(b) of the Act, the primary judge said at Reasons [263]:

It also follows from this analysis that Apotex has reason to believe that the person to whom the product is supplied (by inference, a rheumatologist prescribing the product to a patient) will put Apotex’s leflunomide product to use for the treatment of psoriasis, and so that the condition in s 117(2)(b) of the Patents Act is satisfied (if the product is not a staple commercial product, an issue in dispute between the parties dealt with below). In this regard it is apparent from the findings and analysis above that is not the case that Apotex’s leflunomide product merely might treat psoriasis in a percentage of patients with PsA. The evidence of Dr Shumack, Professor Smith and Professor Brooks cannot be so characterised. On their evidence, the administration of an effective amount of leflunomide to a person with PsA will in fact treat or prevent psoriasis, albeit with variable degrees of success depending on the individual patient. From this it follows that Apotex has reason to believe that Apotex’s leflunomide product will be used in a method of preventing or treating psoriasis as claimed in claim 1 of the patent.

54    By reason of the primary judge’s findings of fact in relation to s 117(2)(b) and (c) of the Act, one must conclude that the supply by the appellant of its generic leflunomide product for the use by rheumatologists in the treatment of PsA would infringe the patent. The appellant’s PID instructed the use of leflunomide in the treatment of psoriasis which is associated with PsA, as will commonly be the case. On that basis, s 117(2)(c) is engaged. The appellant’s instruction also means, for the purposes of s 117(2)(b), that the appellant had ample reason to believe that medical practitioners would put leflunomide to use as a method of treating psoriasis which is associated with PsA.

55    The appellant argues that the primary judge misread the following indication in the appellant’s PID for Active Psoriatic Arthritis: “Apo-Leflunomide is not indicated for the treatment of arthritis that is not associated with manifestations of arthritic disease”, in that her Honour read this to mean that “Apo-Leflunomide is indicated for the treatment of psoriasis that is associated with manifestations of arthritic disease”. But her Honour’s reading of the appellant’s PID was not the only reason for the findings of fact at Reasons [262] and [263]. And, in any event, it is enough that the appellant’s PID instructed the use by a rheumatologist of the product to treat psoriasis in combination with PsA for the patent to have been infringed. Use of the product in accordance with that instruction would mean that the product is being used to prevent or treat concurrent cases of psoriasis. That would be so even if the sole object of the rheumatologist’s treatment was PsA. Professor Brooks gave evidence to the effect that in administering leflunomide in the context of the appellant’s PID, he would be treating both psoriasis and PsA.

56    It may be noted here that the appellant did not advance, and indeed expressly disclaimed (apparently in deference to the passage from the reasons of Hayne J in Collins set out above), an argument that s 117 of the Act has no relevant operation in the present case because the application of leflunomide by a medical practitioner as a medicament for the treatment of PsA is not “the use of a product … [that] would infringe a patent”. This argument would be that the invention the subject of the patent is not the product leflunomide; and the medical practitioner applying it as a method of treating PsA is not doing any act mentioned in either limb of the definition of “exploit” in the Act. In particular, the medical practitioner would neither be using a product (as opposed to a method) nor doing any act in respect of a product “resulting from” the use of the patented method. One attraction of this argument would be that it prevents the effective renewal of the expired patent for the product leflunomide. Because this argument was disclaimed by the appellant, it is not necessary or appropriate for this Court to address it.

57    In summary, although the claim in the patent is for a method of treating psoriasis, the appellant had reason to believe that its leflunomide product would be used to treat or prevent PsA. Further, the appellant’s PID did instruct that its Apo-Leflunomide be used in the treatment of psoriasis (at least where it is associated with PsA) as contemplated by s 117(2)(c).

58    Accordingly, I conclude that the supply of the appellant’s generic leflunomide product for the purpose of treating PsA would infringe the patent.

NOVELTY

59    Section 18(1)(b)(i) of the Act provides relevantly:

… [A]n invention is a patentable invention … if the invention, so far as claimed in any claim … when compared with the prior art base as it existed before the priority date of that claim is novel …

60    Section 7 of the Act explains the concept of novelty. It provides relevantly:

(1)    For the purpose of this Act, an invention is to be taken to be novel when compared with the prior art base unless it is not novel in the light of any one of the following kinds of information, each of which must be considered separately:

(a)    prior art information (other than that mentioned in paragraph (c)) made publicly available in a single document or through doing a single act;

(b)    prior art information (other than that mentioned in paragraph (c)) made publicly available in 2 or more documents, or through doing 2 or more related acts, if the relationship between the documents or acts is such that a person skilled in the relevant art would treat them as a single source of that information;

(c)    prior art information contained in a single specification of the kind mentioned in subparagraph (b)(ii) of the definition of “prior art base” in Schedule 1.

61    In the appeal to this Court, the only prior art information on which the appellant relied was that contained in the 341 patent. Claim 4 of the 341 patent was for a “Method for the treatment of inflammation rheumatic complaints or multiple sclerosis by administering to the patient an effective amount of the compound…”.

62    The question is whether the 341 patent disclosed the invention claimed by the patent to a skilled addressee: Bristol-Myers Squibb (2000) 97 FCR 524 at [71]-[72].

63    The details of the disclosures made by the 341 patent are set out in the reasons of Bennett and Yates JJ. The primary judge summarised the evidence of putative skilled addressees at Reasons [209]-[211]:

209    Dr Shumack’s evidence confirmed that the skilled addressee of the 341 patent would have been a rheumatologist rather than a dermatologist. Dr Shumack, a dermatologist, said that the animal models in the 341 patent all concerned immune processes. On his reading of the 341 patent it related to a compound, leflunomide, which might be useful in treating arthritic and inflammatory conditions and multiple sclerosis. As the 341 patent said nothing about proliferative processes, Dr Shumack would not have considered the 341 patent to be relevant to psoriasis. As noted, in 1993 and for a number of years thereafter, psoriasis was generally understood to be a proliferative disease and not an inflammatory or immune-mediated response. It follows that Dr Shumack’s evidence is not that of the skilled addressee.

210    Professors Smith and Brooks are both rheumatologists. Contrary to Apotex’s submissions, Professor Smith did not read the 341 patent as encompassing PsA within the general terms “rheumatic illnesses” and “rheumatic complaints”. Rather, it is apparent from his evidence as a whole that Professor Smith considered those terms to be so broad as to be nearly meaningless if read in isolation. Professor Smith, however, did not do so. As a skilled addressee he had regard to the animal models in order to give meaning to the very general references in the 341 patent to “rheumatic illnesses” and “rheumatic complaints”. Professor Smith was adamant that none of the animal models was relevant to PsA. The models were relevant to RA and, in the case of the AE model, multiple sclerosis. On this basis Professor Smith read the 341 patent as dealing with potential treatments for RA and multiple sclerosis. No material was put to Professor Smith in cross-examination suggesting that his view about the animal models was wrong.

211    Professor Brooks had a different view. As noted, Professor Brooks had used animal models in his own research. He considered the AA model to be relevant to the seronegative arthropathies, including PsA, because of his own research using such models. In his words, however, rheumatologists generally “don’t know too much about animal models”. In common with Professor Smith, Professor Brooks considered various references in the 341 patent to be very broad or, as he put it, capable of including “all of the 150 or so types of arthritic disease”. However, in light of his view of the animal models Professor Brooks concluded that the 341 patent was concerned with inflammatory rheumatic diseases including RA, PsA and other seronegative arthropathies. Professor Brooks thus described claim 4 of the 341 patent as involving a method of treatment of inflammatory rheumatic diseases including RA, PsA and other seronegative arthropathies. Nevertheless, Professor Brooks acknowledged that animal models rarely mimic human disease. Accordingly, the ability to extrapolate from them is limited to an indication that the treatment may work in the relevant human disease. Substantial further work would be required to determine whether leflunomide would be safe or effective to treat any disease in humans.

64    The appellant does not accept that her Honour’s understanding of the evidence of Professor Smith is correct. The appellant argues that passages in the evidence of Professor Smith suggest that he would have read the 341 patent as disclosing a potential treatment for PsA. In my view, it is not necessary to resolve this argument. That is because, on what I regard as the proper construction of the claim in the patent, the appellant’s “reverse infringement” argument, based on the assertion that the 341 patent disclosed the use of leflunomide as a treatment for PsA, is irrelevant. The issue of novelty is concluded against the appellant because the 341 patent does not disclose any suggestion of the use of leflunomide to treat skin diseases such as psoriasis.

65    The 341 patent did not disclose – indeed, it did not even hint at – a method of treating psoriasis by the application of leflunomide. The specification in the 341 patent, after referring to experiments involving the application of leflunomide to non-human animals, asserted that the pattern of action of leflunomide, was more advantageous in the inhibition of immunopathological processes than other antiphlogistic agents, opened up “the possibility of tackling, by medication, rheumatic illnesses in man by more nearly treating the cause…”.

66    If one takes the assertions in the 341 patent at their highest for the appellant, the 341 patent claimed that leflunomide, by virtue of its antirheumatic and antiphlogistic effects, provides “a method for the treatment of inflammations [and] rheumatic complaints”. These assertions of the prospective benefit of the use of leflunomide in “tackling rheumatic illness in man” fall far short of making a disclosure equal, for the purposes of practical utility, with the disclosure of the invention by the patent in suit. These assertions simply do not disclose a method of treatment of psoriasis, an ailment, not of the joints, but of the skin.

67    Accordingly, I conclude that the appellant has failed to show that the invention claimed by the patent was not novel.

THE COPYRIGHT CLAIM: IMPLIED LICENCE

68    Section 36(1) of the Copyright Act 1968 (Cth) provides that the copyright in a literary work is infringed by a person who “without the licence of the owner of the copyright” does or authorises the doing of an act comprised in the copyright.

69    The appellant adduced evidence of a long-standing and widespread practice among pharmaceutical companies in Australia whereby suppliers bringing to the market a second or later brand of a medicine registered by the TGA on the ARTG copied the originator’s PID in respect of the medicine, without provoking an objection from the originator.

70    The appellant argues that the uncontradicted evidence established that:

(a)    Generic pharmaceutical companies in Australia generally copy substantial parts of the originator’s PID for the relevant drug and there is a general understanding in the industry that this occurs.

(b)    The TGA has a long standing practice of approving PID submitted by generic companies that copy substantial portions of the corresponding PID.

(c)    The MIMS Annual contains the full text of the originator’s PID under the originator brand for a particular drug and, under the generic brands, invited the reader to “see other brands/presentations” of the drug.

(d)    Generic companies generally do not file safety and efficacy data in support of regulatory approval for a drug already listed on the ARTG. They file bioequivalence data to demonstrate that the drug for which approval is sought is relevantly the same as the drug already approved. There is a general understanding in the industry of this practice.

(e)    The TGA may require a generic pharmaceutical company to depart from the general practice and file safety and/or efficacy data if it submits PID different in content to that of the already registered brand.

(f)    For each of the respondents’ products in Australia for which there is at least one generic competitor (13 drugs), the generic PID is substantially identical to the respondents’ PID. There was no evidence of any assertion by the Respondents that the conduct of these generic companies was an infringement of copyright.

(g)    Of the top ten drugs (by value) on the PBS sold in Australia for which there is generic competition, in each case the generic brands have PID substantially identical to the originator brand.

(h)    The first respondent itself carries on a business called Winthrop Pharmaceuticals, a generic brand. The PID for each Winthrop brand on the PBS (where the originator is not Sanofi-Aventis) is substantially identical to the originator’s PID. The respondents did not point to any express licence from those originators.

(i)    The generic brands of each of the seven drugs have substantially identical PID to the originator brand. Of these drugs, Escitalopram, Perindopril, Paroxetine, Fexofenadine and Gemcitabine were or are the subject of patent litigation and none of them involve an assertion that the generic PID infringed the originator’s copyright. Cimetidine was the subject of litigation in the Court over whether the TGA’s registration of Alphapharm’s generic brand was lawful. There was no assertion of copyright infringement.

71    The appellant complains that this evidence was uncontradicted and further that if it were truly “equivocal”, as described by the primary judge at Reasons [376], her Honour should have concluded that the respondents’ infringement case failed because they failed to discharge the onus which they bore of negativing a licence in favour of the appellant.

72    It may be said immediately that her Honour was fully alert to the points that the respondent did not call any employee to say that the respondents had not granted any licence to the appellant or were unaware of the practice, and that the evidence adduced by the appellant was uncontradicted. Her Honour noted at Reasons [364]-[365]:

364    Apotex stressed that Sanofi-Aventis filed no evidence in reply to the affidavit of Mr McVicar. Further, Sanofi-Aventis did not call any witness who was in a position to prove that the practice of copying PIs was other than universal. Dr Bruand, according to Apotex, “could offer only some limited confirmation of the practice and no evidence at all to contradict it”….

365    Using Apotex’s words, the evidence establishes that Sanofi-Aventis has “been aware of, participated in, benefited from and never complained about the practice of generic companies making close copies of originators’ PIs.” As such, Apotex said that:

In light of the unchallenged evidence on this matter and the Applicants’ failure even to attempt to discharge their onus (except perfunctorily, at the last minute), their copyright case must fail in limine because an essential element of s 36(1) is not made out.

73    The primary judge proceeded on the footing that while the ultimate onus of disproving a licence lay with the respondents, there was an onus on the appellant to show “a proper foundation for the existence of the implied licence…”. See Reasons [371]. That approach was orthodox. See Lorenzo & Sons Pty Ltd v Roland Corporation (1992) 23 IPR 376 at 380; Acohs Pty Ltd v Ucorp Pty Ltd (2012) 201 FCR 173 at [172].

74    The primary judge concluded at Reasons [372] that the evidence did not establish a proper foundation for the appellant’s assertion of an implied licence. The bases for her Honour’s conclusion are set out at Reasons [373]-[379]. The passage is lengthy, but deserves to be set out in full:

373    First, insofar as the regulatory regime is concerned, it is apparent that the TGA does not require PIs for a generic or later version of a drug to be identical to the PI for the original drug. To the contrary, the Regulatory Guidelines disclose that if the PI is “different in content” or “not identical” to that of the registered brand then safety and/or efficacy data may be needed “depending on the case”. There are also in evidence communications from the TGA articulating its position. According to these communications:

While the expression “requirement” has been used (as in the brief attached to this email), it is not, as you know, a legal requirement that the documents be the same. Relevant to the emergence of that practice may be the fact that any differences in the wording of a draft PI submitted by a generic may indicate to the TGA differences in substance in the medicine itself from the originator’s medicine (which in turn may require additional information and evaluation, and possibly additional fees). Generic companies may well have taken the view that providing a draft PI for a medicine in very similar terms to the approved PI of the originator’s medicine would reduce that risk.

[…]

In summary, in the period 2007-2008 there was a practice in the TGA to approve PIs for generic medicines that contained similar information to that in PIs for the originator medicine. Some generic companies have provided to the TGA draft PIs in very similar terms to the originator’s approved PI. PIs have been approved by the TGA for generic medicines in very similar terms to the approved PI of the originator’s medicine. There was no articulated “policy” as such.

374    It may be accepted that the preparation of safety and efficacy data, if required by the TGA due to differences between innovator and generic PIs, would be likely to involve significant time and expense. However, the Regulatory Guidelines disclose that such data may not be needed even if the PIs are different, it being a matter for the TGA depending on the circumstances of each case. It is also not impossible for such data to be provided if required, albeit at a cost to the generic supplier.

375    Second, insofar as public policy is concerned, it also may be accepted that there is a public interest in PIs for the same or bioequivalent drugs also being the same. These considerations may be inferred to be the reason for the amendment Act. While this public policy issue may explain the TGA’s position, it does not establish the existence of an implied licence for one drug company to copy the PI of another drug company. There are many circumstances in which it might be said that a particular statutory monopoly, on reflection, is contrary to the public interest. The legal consequence of that is not that the statutory monopoly simply ceases to exist on recognition of the inconsistency with public policy. It becomes a matter for the legislature to determine whether the monopoly should continue or be modified. In the present case, the legislature has made its determination and has passed the amendment Act. As the reasoning in Copyright Agency v State of New South Wales (2008) 233 CLR 279 discloses, the balance to be struck between competing policy interests in this context is a matter for the legislature with many options available including, for example, statutory licence regimes (see, for example, [48] and [71]).

376    Third, insofar as the “long-standing practice” of copying PIs is concerned, the evidence is equivocal. It is true that Apotex has discovered PIs where one may infer that the generic company has copied from the innovator PI (including PIs which suggest such copying by Sanofi-Aventis itself). It is also true that, albeit late in the day, Sanofi-Aventis has located other PIs which appear not to have been copied or, at least, not to have been copied to the same extent. It may also be accepted that the MIMS annual takes the approach of cross-referring from a generic drug to the innovator PI for that drug. But the evidence as a whole is simply insufficient to establish either the existence of an industry-wide practice of copying, or anything more than apparent neutrality by participants in the industry as to the copyright implications of such copying (at least until the present case). As to the issue of custom, the evidence does not disclose the proportion of PIs in evidence (tendered by either party) compared to all approved PIs. The PIs in evidence, accordingly, lack any meaningful context. As to mere neutrality, it cannot be inferred from the lack of evidence of any objection until that of Sanofi-Aventis in the present case that participants in the industry implicitly consented to the so-called industry-wide practice of copying. The evidence, at best, indicates a mere lack of objection to apparent cases of PIs being copied. In the circumstances outlined above, lack of objection without a duty to object is equivalent to mere neutrality which, as McHugh J said in Avel v Multicoin (1990) 171 CLR 88 at 123, is not sufficient to establish an implied licence.

377    Fourth, insofar as the care with which PIs are created is concerned, the consequences are far from clear-cut. The fact that originator companies take care when crafting a PI (a proposition which I accept, but which is not readily reconcilable with Apotex’s submissions on the subsistence of copyright in the Arava works in the present case) does not seem to make the alleged industry-wide practice more or less likely. Apotex itself managed to create a draft PI for its leflunomide product (the proposed Apotex PI) which does not copy any part of the approved Arava PI (or any of the other Arava works). The fate of the proposed Apotex PI has not yet been determined by the TGA and, given the commencement of the amendment Act, may never be determined. The point is that, when it considered it might be necessary to do so, Apotex managed to create a PI which had not been copied from the innovator PI, presumably with the same level of care an originator company brings to bear upon that process, and without any evidence of it having been particularly difficult to do so.

378    Fifth, insofar as safety updates are concerned, Apotex sought to make a case based in part on the fact that the originator drug company is the repository of all reports of adverse reactions and thus is best placed to make any required safety amendment to a PI. This may be so. But it is presumably a circumstance which has existed for many years. Generic brands must have PIs. PIs are often amended over the years as more information becomes available. The evidence does not disclose the details of practices by which drug companies review and disclose their safety data or by which drug companies remain apprised of amendments to PIs (including amendments by generic companies which have become aware of some safety issue). While it might be presumed (and hoped) that suitable systems are in place for the disclosure and exchange of safety information, the evidence in this case shows (for example) that some generic PIs contain warnings and safety information, as well as information about adverse reactions and drug interactions, which are not found in the relevant innovator PI. In other words, the evidence about the need for the copying of innovator PIs based on the system for safety notifications is equivocal at best.

379    Taken together these considerations indicate that, in all of the circumstances, a licence to copy innovator PIs for the purposes of obtaining regulatory approval for generic drugs cannot be implied. If, consistent with Avel v Multicoin (1990) 171 CLR 88, the legal onus for disproving the alleged implied licence lies upon Sanofi-Aventis the evidence, taken as a whole, has enabled that burden to be discharged…

75    In relation to her Honour’s view expressed at Reasons [376] that the evidence of the “long-standing practice” of copying PID is “equivocal”, it is apparent from the context in which this observation was made that her Honour was making the point that the evidence was not sufficient to raise a case of an implied licence. Her Honour’s view was amply justified.

76    The evidence did not show that, as a matter of fact, a pharmaceutical company bringing to market in Australia a second or later brand of a medicine registered by the TGA was either required by the TGA or constrained as a matter of practical necessity to engage in substantial reproduction of the originator’s PID in respect of its medicine. The TGA did not require PID for a generic or later version of a drug to be identical to the PID for the original drug. It appears that the appellant itself, on occasion, managed to create a draft PID for its leflunomide product which does not copy the Arava PID. The evidence also showed that some generic PID contains warnings and safety information which is not found in the relevant innovator PID. This is not evidence of a custom or usage applying categorically throughout an area of trade or commerce.

77    The evidence of behaviour in the marketplace on which the appellant relies falls short of showing that all competitors in this market have categorically agreed to participate on the footing that other participants agreed not to assert copyright in PID whenever a participant seeks to supply in the market a different brand of a product which was previously sold in the market by another participant. To say that many competitors have observed a policy of mutual non-objection in relation to the reproduction of PID is distinctly not to say that each participant has agreed to participate in the market on the faith of a universal expectation that all participants will always, come what may, consent to the reproduction of their PID by their competitors.

78    The appellant does not identify any contract or arrangement between the respondent and the appellant and other competitors in the market into which the term is to be implied by custom and usage. The appellant argues that a contract between the parties is not necessary for the implied licence for which it contends; but it does not identify any other legal framework or relationship into which a binding licence might be implied. Originator pharmaceutical companies supplied PID to a statutory body, the TGA, under a statutory registration scheme. That supply did not occur as an incident of a contractual relationship between participants in the industry. Indeed the only relationship between originators and copiers is that they were competitors in the therapeutic goods industry.

79    The decisions in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur (Australia) Ltd (1986) 160 CLR 226 at 236-237, Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 422 and Hawkins v Clayton (1988) 164 CLR 539 at 573, on which the appellant relies, are concerned with the circumstances in which trade custom or usage may form the basis for implication of terms into a contract between counterparties to transactions within that field of trade. This case is not concerned with custom or usage by reference to which counterparties to transactions in a given field of commerce, such as insurers and insured, employers and employees or buyers and sellers in a particular trade, are said to have contracted. The appellant did not cite any case where a trade custom has been held to bind competing traders as between themselves in their dealings with a third party. The absence of any such authority is an indication of the novelty of the appellant’s contention. It may also reflect the common law’s disapproval of horizontal arrangements between traders which might tend to blunt the edge of competition between them.

80    It is a strong thing to hold that all the competitors in a trade have agreed to surrender, in any respect, their liberty to compete. An inference to that effect cannot reasonably be drawn from evidence that many of them have, for some time, refrained from all-out competition. The short answer to the appellant’s arguments, including its complaint that the respondents failed to call any witness to dispute its evidence of industry practice, is that the evidence fell short of showing an agreement from which the parties would not depart if it suited their business interests to do so. Evidence of a policy or practice of non-objection consistent with current perceptions of self-interest does not amount to evidence of a categorical and permanent renunciation of a right to object where later circumstances may be thought to justify a change of policy and the assertion of the right.

81    The parties also devoted considerable attention in argument to the question of whether a licence to reproduce copyright material “will only be implied when there is a necessity to do so”. See Copyright Agency Limited v State of New South Wales (2008) 233 CLR 279 at [81], [91]-[92]. The appellant argued that this issue is immaterial where the implication is said to arise as a matter of fact from custom and usage. The appellant’s point may be accepted for the sake of argument. The difficulty on which the appellant’s argument founders is simply that the appellant did not prove even the ghost of a case of a custom and usage having binding force between all participants in the therapeutic goods industry in Australia.

82    For these reasons, I conclude that the primary judge rightly rejected the appellant’s claim to an implied licence.

CONCLUSION AND ORDERS

83    I would grant the appellant leave to raise the argument raised by its second further supplementary notice of appeal.

84    The appellant has failed to make good its challenge to the decision of the primary judge.

85    The appeal should be dismissed.

86    The appellant should pay the respondents’ costs of the appeal to be taxed if not earlier agreed.

Associate:

Dated:    18 July 2012

REASONS FOR JUDGMENT

BENNETT and YATES JJ

87    This is an appeal from orders made in proceedings in which the appellant, Apotex Pty Ltd (Apotex), was found to have threatened to infringe Australian patent no. 670491 (the patent) and to have infringed the copyright in certain works described as “the Arava works”.

88    The patent is for an invention entitled “Pharmaceutical for the treatment of skin disorders”. It concerns, relevantly, the use of a compound called leflunomide for the treatment of psoriasis. The second respondent, Sanofi-Aventis Deutschland GmbH, is the patentee. The first respondent, Sanofi-Aventis Australia Pty Ltd, supplies in Australia products that contain leflunomide. These products are supplied under the trade names “Arava” and “Arabloc”.

89    At the commencement of the primary proceeding, Apotex intended to supply its own leflunomide products in Australia for the treatment of rheumatoid arthritis (RA) and psoriatic arthritis (PsA). It was this intended supply that was said to constitute the threatened infringement of the patent.

90    In order to supply those products in Australia it was necessary for Apotex to obtain their registration on the Australian Register of Therapeutic Goods (the ARTG). For that purpose, Apotex created and supplied a product information document to the Therapeutic Goods Administration (the TGA). Apotex’s product information document was said by Sanofi-Aventis to be a reproduction of a substantial part of each of the Arava works. The Arava works are product information documents associated with the supply of the Arava products by the first respondent. The first respondent is the owner of the copyright in some of those works. The second respondent and the third respondent, Aventisub II Incorporated, are the joint owners of the copyright in the other Arava works.

91    The primary proceeding also concerned the threatened contravention by Apotex of certain provisions of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)). The primary judge found that case to have been established. The relevant conduct was found to be Apotex’s failure to warn medical practitioners, pharmacists and patients that use of Apotex’s leflunomide products would infringe the patent. The correctness of that finding is plainly dependent on the correctness of the primary judge’s findings about threatened patent infringement. Accordingly, for the purposes of this appeal, the consumer law aspects of Apotex’s conduct do not need to be considered separately from the case of threatened patent infringement.

92    Before identifying the specific issues that arise on this appeal, it is convenient to summarise a number of factual matters that are not presently contentious concerning the nature and treatment of RA, PsA and psoriasis. It is also convenient, in that context, to describe briefly the alleged invention by reference to the complete specification as presently filed in respect of the patent.

93    It is not necessary for the purposes of the appeal to distinguish between the respondents. They are referred to in these reasons as, simply, “Sanofi-Aventis”.

Factual matters

94    The primary judge (at [116]-[130]) made a number of general findings about the nature and treatment of RA, PsA and psoriasis. Those findings, which are not challenged on appeal, were based on expert evidence given by Dr Shumack, a dermatologist; Professor Smith, a rheumatologist; and Professor Brooks, also a rheumatologist.

95     The following is a summary of those findings insofar as they are relevant to the disposition of this appeal:

    Psoriasis is a skin disease that occurs in about 2% of the population. It is characterised by demarcated, red scaly plaques.

    In 1993 the prevailing view of the medical profession was that psoriasis was a proliferative disease in which a genetic abnormality directly influenced the turnover rate of epidermal cells. It was thought that the hyper-proliferation of epidermal cells caused the inflammation observed in psoriasis.

    Although theories were developing about the role of the immune system in psoriasis, the proliferative theory remained the orthodoxy for a number of years.

    It is now known by dermatologists and rheumatologists that the genetic abnormality associated with psoriasis leads to an abnormal inflammatory reaction localised predominantly in the dermis and epidermis of the psoriasis plaques. These localised inflammatory cells secrete cytokines, which are responsible for increased epidermal cell turnover. Thus the proliferation of epidermal cells is a response to, not the cause of, the inflammation.

    Rheumatologists use “arthritis” as a global term to refer to joint disease. There are about 150 types of joint disease which may be described as “rheumatic diseases”.

    Rheumatologists distinguish between inflammatory arthritis and non-inflammatory arthritis. Inflammatory arthritis refers to those forms of arthritis where inflammation of the joint tissues is the underlying cause of damage to the joints. About 2-3% of the population suffers from some form of inflammatory arthritis.

    There are two types of inflammatory arthritis: RA and the seronegative arthropathies.

    RA is associated with the presence of positive rheumatoid factor (RF) in the blood. In this connection, 70% of persons with RA are RF positive. RA occurs in about 1% of the population.

    The seronegative arthropathies are PsA, ankylosing spondylitis, reactive arthritis and inflammatory bowel disease-associated arthritis. Persons with these diseases are RF negative.

    About 60-70% of cases of inflammatory arthritis are RA and about 25% of cases are PsA.

    Although RA and PsA are inflammatory arthropathies, they are distinct diseases, and were known to be such in 1993. They have different diagnostic criteria. Psoriasis is a diagnostic element of PsA but not of RA. A person with PsA will almost always have or develop psoriasis. The incidence of psoriasis in RA is the same as in the general population (namely, 2%).

    In 1993 there was a possibility of not being able to diagnose a patient correctly with RA as opposed to PsA. Since the introduction of a new test in 2003 that is highly specific for RA (namely, the cyclic citrullinated peptide (CCP) test), the possibility of an unclear or misdiagnosis as between RA and PsA has been remote. At the present time RA and PsA can almost always be distinguished by a rheumatologist.

    As at 1993, PsA had not been as intensively studied as RA. RA was known by rheumatologists to be T cell-mediated. In contrast, PsA was not known by rheumatologists to be T cell-mediated. Although they knew that T cells were involved in inflammatory responses to PsA, the nature of that involvement was unclear. Consistent with that position, by 1993 certain inhibitors were being developed for the treatment of RA. It was not until the late 1990s that these inhibitors were explored for the treatment of the seronegative arthropathies.

    Rheumatologists know how to diagnose and treat psoriasis because psoriasis is an element of PsA.

96    The primary judge made the following important findings (at [129] and [130]) concerning the treatment of psoriasis by rheumatologists and the use of leflunomide in that treatment:

… a rheumatologist treating a patient with PsA will know how to treat the patient’s psoriasis as part of the treatment of PsA, either independently or in consultation with the patient’s dermatologist if the patient is also under the care of a dermatologist. However, if a patient has psoriasis alone or psoriasis in combination with a disease other than arthritis a rheumatologist would not consider it appropriate to treat the patient’s psoriasis. The rheumatologist would refer the patient to a dermatologist.

Leflunomide is a drug used in the treatment of RA and PsA and, for that purpose, is prescribed by rheumatologists. Leflunomide is not used in Australia for the treatment of psoriasis alone and is not prescribed by dermatologists for that purpose. However, if leflunomide is administered to a patient with PsA, that administration would be expected also to prevent or treat the patient’s psoriasis, to some extent at least.

The alleged invention as described and claimed

97    The patent claims priority from 31 March 1993 based on a United States patent application filing. The priority date is not in dispute in this appeal.

98    The complete specification of the patent commences by identifying the compound of European patent 13,376 (the equivalent of Australian patent no. 529341 to which further reference will be made) as being “anti-inflammatory” and having immunomodulation properties, so that it is “suitable as [a] pharmaceutical against chronic graft versus host diseases and against autoimmune disorders, in particular systemic lupus erythematosus”. Relevantly, the compound is leflunomide.

99    The specification then identifies and describes psoriasis as a special form of skin disorder characterised by the development of reddish plaques, which tend to be dry and scaly. It lists and describes the common types of psoriasis as vulgaris; eruptive; erythrodermia and pustular. It describes the lesions as being caused by abnormally increased epidermal cell proliferation but says that “the etiology of psoriasis remains elusive, although it appears to have an inherited component”.

100    After noting that the treatment of psoriasis is not entirely satisfactory, the specification describes the use of immunosuppressive agents as a “promising therapeutic approach”. It exemplifies the use, in that regard, of cyclosporine A but teaches that “(t)herapy with immunosuppressive agents is often associated with serious side effects such as toxicities, including neurotoxicity, hypertension, hypomagnesemia, anemia, leucopenia, thrombocytopenia, tendency to acquire infections, renal function impairment and teratogenicity”.

101    The specification teaches that, in an attempt to develop better agents for the treatment of psoriasis, it has been found that leflunomide shows “effective inhibition of keratinocyte proliferation”. Keratinocytes constitute the predominant cell type in the epidermis. The specification teaches that leflunomide is well-tolerated and that during therapy “no decreased resistance to infections, no kidney dysfunction, no relevant changes of laboratory values such as liver enzymes, blood count or body weight have been observed”. It teaches that leflunomide shows “a better risk benefit ratio compared with other immunosuppressive agents, [has] a long lasting effect after withdrawal and [offers] the possibility of short term therapy and longer remission intervals”.

102    The specification then says that “the invention relates to a method of preventing or treating a skin disorder in a patient in need thereof by administering an effective amount” of leflunomide. The specification also says that the invention relates to a pharmaceutical which contains an effective amount of leflunomide and to a process for the preparation of a pharmaceutical for the treatment of psoriasis. This pharmaceutical can be administered orally, topically, rectally or parenterally.

103    The specification goes on to discuss appropriate dosage units and regimes, including for a patient (70 kg) suffering from psoriasis in the early phases of the disorder.

104    It defines the word “preventing” as including “the prophylactic prevention of psoriasis in a susceptible mammal” and the word “treating” as including “arresting the development, and retarding the progression of psoriasis in a susceptible mammal”.

105    The specification provides five examples. The first two examples concern the preparation of compounds (including leflunomide). Example 3 is a screen evaluation of the ability of the compounds of the invention to inhibit in vitro DNA synthesis using normal human epidermal keratinocytes. Example 4 is an acute toxicity study of the compounds after intraperitoneal administration using mice and rats. Example 5 is a randomised double blind study of leflunomide administered to 400 human patients over a six month period.

106    It should be noted that, although parts of the specification refer more generally to “a skin disorder”, its focus is plainly psoriasis and the prevention or treatment of that disorder. It is the prevention or treatment of this skin disorder by the disclosed compounds that is the new result that provides subject matter for the claimed invention. This is the only reasonable reading of the specification. The parties did not seek to suggest otherwise.

107    The specification ends with a single claim (the claim in suit) which, relevantly, is in the following terms:

A method of preventing or treating a skin disorder, wherein the skin disorder is psoriasis, which comprises administering to a recipient an effective amount of [leflunomide].

108    The claim in suit takes its present form from an amendment made under s 105 of the Patents Act 1990 (Cth) (the Patents Act) in 2009, which limited the method of the invention to the prevention and treatment of psoriasis.

The issues on appeal

109    Sanofi-Aventis’s case in relation to threatened patent infringement was based solely on s 117 of the Patents Act. It will be necessary to set out and consider the detail of that provision later in these reasons. It is sufficient to note for present purposes that the provision creates a species of infringement based on the supply of products. Put simply, if the use of a product would infringe a patent then, under that provision, the supply of that product by one person to another will, itself, be an infringement of the patent by the supplier, except where the supplier is the patentee or a licensee of the patent.

110    In the present case, Sanofi-Aventis alleged that the use of Apotex’s leflunomide products by others would infringe the patent. As Apotex was not a licensee of the patent, it followed that its supply of those leflunomide products would constitute an infringement of the patent under s 117 of the Patents Act.

111    Apotex’s first defence was that the use of its leflunomide products by others would not infringe the patent. This was because those particular products were only registered on the ARTG for the treatment of RA and PsA, not psoriasis. In essence its defence was that the use of its leflunomide products for the treatment of RA and PsA would not infringe the patent because the claim in suit was directed specifically to a method of preventing or treating psoriasis, not RA or PsA. Thus its supply of leflunomide products for the treatment of RA and PsA could not infringe the patent.

112    Sanofi-Aventis’s answer was that, when an effective amount of leflunomide is administered to treat active PsA, it will also prevent or treat psoriasis. It contended that the claim in suit is directed to a method of treatment where the effect of the administration of, relevantly, leflunomide is in fact to prevent or treat the recipient’s psoriasis. Thus its case was that the use of Apotex’s leflunomide products would infringe the patent even when those products were being used to treat PsA.

113    The issue between the parties on this aspect was raised by them as a question of construction of the claim in suit. The primary judge (at [151]) identified that dispute as follows:

… The essence of the dispute between the parties insofar as it related to the construction of the patent is ultimately whether the claim for a “method of preventing or treating a skin disorder, wherein the skin disorder is psoriasis” by administration of a compound should be construed as involving the purpose, object or aim of the administration (whether that purpose, object or aim be determined subjectively or objectively), or the effect in fact of the administration.

114    Ultimately, the primary judge accepted Sanofi-Aventis’s contention. Her Honour concluded (at [155]) that the claimed method is used when leflunomide is administered to a recipient in an effective amount so that the recipient’s psoriasis is in fact prevented or treated. The essential basis for her Honour’s finding on construction is contained in the following passage at [154]:

What then is the proper construction of claim 1 of the patent? The difficulty for Apotex’s proffered constructions is that the claim itself says nothing about the purpose of the administration of the compound. The method claimed is a method of preventing or treating the skin disorder psoriasis by administering an effective amount of the compound. The method is described and defined by the result: the prevention or treatment of psoriasis. If there were any ambiguity in the concepts of preventing or treating psoriasis, the definition of those terms in the specification confirms that they mean achieving a particular biological result or effect in the recipient of the administration of the leflunomide. According to the specification, “prevention” is the prophylactic prevention of psoriasis in a susceptible mammal and “treatment” is arresting the development and retarding the progression of psoriasis in a susceptible mammal. As Apotex submitted, the particular disease, psoriasis, is an essential integer of the method claimed. But its essentiality operates in terms of result or effect (the fact of prevention or treatment of psoriasis) and not, as Apotex said, in terms of the purpose of the administration.

115    An important issue that arises on this appeal is the correctness of the primary judge’s conclusion on the question of construction that was raised by the parties.

116    In the primary proceeding Apotex also challenged whether s 117 applied, in any event, to the circumstances of the case. As argued, this challenge, in part, related to the issue of construction that divided the parties. It also depended on whether, in relation to its intended supply, Apotex had given instructions to use its leflunomide products to treat psoriasis and whether it had reason to believe, in any event, that those products would be used to treat or prevent that disorder. These questions concern, once again, the detail of s 117 which, as will be explained later, only applies in certain factual circumstances. It is sufficient to note for present purposes that the primary judge was satisfied, on the evidence, that, in relation to its intended supply, Apotex had given instructions to use its leflunomide products to treat psoriasis and that, separately, it had reason to believe that those products would be used to treat psoriasis, in any event. The primary judge found that either of these circumstances was sufficient to engage s 117 in the present case. There is no issue between the parties as to how s 117 is engaged. However, an issue on the appeal is whether the primary judge erred in making the findings she did with respect to Apotex giving instructions and the existence of Apotex’s belief that its products would be used to treat psoriasis.

117    Apotex also challenged the validity of the claim in suit on a large number of grounds under s 138(3) of the Patents Act. For the purposes of this appeal the only issues that remain in that regard are whether the invention as claimed is novel in light of the prior publication of the complete specification of Australian patent no. 529341 (the 341 specification and the 341 patent, respectively) and whether it is, in any event, a manner of manufacture within the meaning of section 6 of the Statute of Monopolies: see s 138(3)(b) as informed by ss 18(1)(b)(i) and 7(1)(a) and s 18(1)(a) of the Patents Act, respectively.

118    The primary judge found that the invention as claimed was both novel, when compared with the 341 specification, and a manner of manufacture. On this appeal Apotex challenges both findings. In each case, however, Apotex’s challenge is inextricably linked to the question of construction of the claim in suit.

119    In this connection, Apotex accepts that if it be found on appeal that the primary judge erred in her construction of the claim, with the consequence that Apotex’s construction of the claim is to be preferred, the invention will be novel and not anticipated by the publication of the 341 specification. Apotex accepts that the 341 specification does not disclose to the person skilled in the art, expressly or impliedly, the use of leflunomide to prevent or treat psoriasis. Apotex also accepts that, if its construction of the claim is preferred, one basis on which it seeks to contend that the invention is not a manner of manufacture will have been removed. However, it wishes to maintain on appeal a more general contention that an invention claimed as a method of treating the human body is not a manner of manufacture and hence not a patentable invention for the purposes of the Patents Act.

120    Finally, on the question of copyright infringement, the primary judge found that the Arava works were original works in which copyright subsisted. The primary judge found that Apotex had reproduced a substantial part of each of those works without Sanofi-Aventis’s licence and thereby infringed the copyright in those works. No issue arises on appeal concerning the subsistence of copyright or the fact that Apotex had reproduced a substantial part of the Arava works. Apotex contends, however, that the primary judge erred in failing to find that Sanofi-Aventis was bound by a licence implied by custom that permitted it to engage in the acts of reproduction about which Sanofi-Aventis complains.

121    In summary, the issues that arise on appeal are whether the primary judge erred:

    in the construction that her Honour adopted for the purpose of determining the questions of infringement and validity that arise in the present appeal;

    in finding that s 117 applied to the circumstances of the present case and whether, by operation of that provision, Apotex threatened to infringe the patent because of its threatened supply of its leflunomide products;

    in finding that the invention as claimed was novel in light of the publication of the 341 specification;

    in finding that the invention as claimed is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies; and

    in failing to find that Sanofi-Aventis was bound by an implied licence that permitted Apotex to reproduce a substantial part of each of the Arava works.

The question of construction

122    Apotex contends that the primary judge erred in concluding that the claimed method is used when leflunomide is administered to a recipient in an effective amount so that the recipient’s psoriasis is in fact prevented or treated, regardless of the purpose for which leflunomide is administered.

123    In this connection Apotex submitted that the primary judge erred in reasoning (at [154]) that “the claim itself says nothing about the purpose of the administration of the compound”. Apotex submitted that the claim is not the use of leflunomide in a manner that treats or prevents psoriasis, but a method of preventing or treating psoriasis by the administration of leflunomide. It submitted that, as the method is directed to the prevention or treatment of psoriasis, a “purposive inquiry” cannot be avoided: the “objective purpose” of the administration of leflunomide must be to prevent or treat psoriasis in the recipient. It submitted that, in the present context, the method must be viewed as part of the formal, deliberative, medical exercise that involves making a diagnosis and devising a way to treat the diagnosed disorder, not simply a matter of biology or chemistry characterised by whatever happens in the body after leflunomide is administered.

124    In our view the construction of the claim in suit for which Sanofi-Aventis contends, which was accepted by the primary judge, gives it a field of operation, and Sanofi-Aventis a resulting exclusive right under s 13 of the Patents Act, that exceeds the description of the invention in the body of the specification, on which the claim purports to be fairly based: see s 40(3) of the Patents Act.

125    That description shows that the object or end in view of the claimed method is the prevention or treatment of psoriasis by the administration of leflunomide in an amount that is effective to achieve either of those objectives, regardless of any other therapeutic or biological effect that leflunomide might have for the recipient. In this latter regard the specification discloses that leflunomide was already known to have anti-inflammatory and immunomodulation properties that made it suitable as a pharmaceutical agent for the treatment of other disorders. Importantly, however, the new result that is promised, and which purports to provide a patentable invention, is the use of leflunomide in an amount that is effective to prevent or treat psoriasis. Thus what distinguishes the claimed invention from what has gone before is the recognition that leflunomide can be used in a new method of treatment involving a new and different therapeutic use, that bears the characteristics of a patentable invention. Those characteristics include the fact that the invention is useful, novel, involves an inventive step and has not been secretly used in the patent area before the priority date: see s 18(1) of the Patents Act. This new method of treatment, as a patentable invention, can only be realised or expressed through the deliberate administration of leflunomide to prevent or treat psoriasis. It will not be realised or expressed by its administration with some other object or end in view that happens to achieve the result of preventing or treating psoriasis accidentally or as an unsought consequence. To construe the claim as simply requiring the administration of leflunomide that achieves a therapeutic or biological result that includes the prevention or treatment of psoriasis is, in our view, effectively to ignore the governing characteristic incorporated into the express words of the claim that the invention is a method directed to preventing or treating psoriasis – the claimed advance in the art.

126    This construction of the claim in suit accords, in substance, with the construction that Apotex proffers. The primary judge referred to it as a construction involving the purpose, object or aim of the administration, whether that purpose, object or aim be determined subjectively or objectively. So to construe the claim does not lead to the result that infringement rests on the alleged infringer’s state of mind: note in that regard the observations of Lord Hoffmann in Merrell Dow Pharmaceuticals Inc v H N Norton & Co Ltd [1996] RPC 76 at 92. What is involved, however, is the analysis and characterisation of impugned conduct to see whether that conduct possesses all the essential features of the method as defined by the claim in suit.

127    In advancing their respective contentions the parties saw the claimed method as one that would be practised by a medical practitioner. The primary judge found (at [151]) that the skilled addressee of the patent might include dermatologists and rheumatologists to the extent that both had to deal with psoriasis as a routine part of their medical practice in 1993 and thus would have had a practical interest in the subject matter of the patent: Catnic Components Limited v Hill & Smith Limited [1982] RPC 183 at 242-243.

128    Seen in that context, the inquiry, in any given case, is to the object or end in view of the method of treatment involving the administration of leflunomide by the medical practitioner. If the object or end in view includes the administration of leflunomide to prevent or treat psoriasis, and that administration is of an amount of leflunomide that is effective for either of those purposes, then, regardless of any other object to be achieved by the administration, the claimed method will be used. Whether the medical practitioner knows of the patent or knows that his or her conduct involves an infringement of the claim in suit is irrelevant to this process of characterisation.

129    Thus, in our view, the primary judge erred to this extent. It does not follow, however, that the primary judge erred in finding infringement in the present case or in finding that the claim in suit was valid.

The question of infringement

130    Apotex contends that the primary judge erred in concluding that, based on s 117 of the Patents Act, it threatened to infringe the patent because of its intended supply of its leflunomide product called Apo-Leflunomide.

131    The case on infringement turns on the proper construction and application of s 117 in light of the findings of fact made by the primary judge. The case for infringement was based on s 117 because Apotex, itself, was not intending to use Apo-Leflunomide in the claimed method but to be a supplier of that product in circumstances where, according to Sanofi-Aventis, the use of that product to treat psoriasis would infringe the claim in suit.

132    Section 117 of the Patents Act provides:

(1)    If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent.

(2)    A reference in subsection (1) to the use of a product by a person is a reference to:

    (a)    if the product is capable of only one reasonable use, having regard to its nature or design—that use; or

(b)    if the product is not a staple commercial product—any use of the product, if the supplier had reason to believe that the person would put it to that use; or

    (c)    in any case—the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier.

133    The prefatory condition in s 117(1) – “(i)f the use of a product by a person would infringe a patent” – requires particular attention. The “use” to which it refers is given meaning and content by s 117(2), which directs attention to the circumstances posited by each of paragraphs (a) to (c). Each of these paragraphs is directed to a discrete inquiry that is to be undertaken to determine whether there is a “use of a product by a person” within the stated requirements. If so, it is that “use” by that “person” which gives content to the prefatory condition in s 117(1). Section 117(1) then proceeds by asking whether that use by that person would infringe the patent in suit. If so, s 117(1) is then meaningfully engaged with the consequence that the supply of the product, by one person to another, will itself be an infringement of the patent, unless the supplier is the patentee or a licensee of the patent.

134    The issues that fall for consideration on appeal are whether the primary judge erred in finding that s 117(1) was engaged by the application of ss 117(2)(b) and (c). Before turning to deal with those issues it is necessary to refer to another aspect of the way in which Apotex’s appeal was argued.

135    Apotex put to the forefront of its appeal on this question the contention that, in the circumstances of this case, the relevant use for the purposes of s 117(1) was the use of Apo-Leflunomide to treat PsA. It contended that that use would not infringe the claim. Thus, it argued, the prefatory condition of s 117(1) could not be satisfied, with the result that there could be no infringement by it under that provision.

136    This approach misapplies s 117(1) by positing the wrong use and, as a consequence, asking the wrong question. The question is not whether the use of Apotex’s leflunomide product to treat PsA would infringe the claim in suit, but whether the use of Apotex’s product in one of the ways mentioned in ss 117(2)(b) and (c) would infringe.

137    Apotex accepted that the use of its leflunomide product to treat psoriasis or, to put it in the words of the claim, its use as a method of treating psoriasis, would infringe the claim. Thus if, on the facts of this case, one of the uses in ss 117(2)(b) or (c) is the use of Apo-Leflunomide to treat psoriasis, Apotex’s supply of that product will infringe the patent. Attention must be directed, therefore, to the correctness of the primary judge’s findings of fact regarding the application of ss 117(2)(b) and (c) in the present case.

138    In that connection, the primary judge considered, first, the application of s 117(2)(c) of the Patents Act. Fundamental to that consideration was Apotex’s product information document that had been provided to the TGA. The document contained the following statement of indications:

INDICATIONS

Apo-Leflunomide is indicated for the treatment of:

•    Active Rheumatoid Arthritis

•    Active Psoriatic Arthritis. Apo-Leflunomide is not indicated for the treatment of psoriasis that is not associated with manifestations of arthritic disease.

The combined use of Apo-Leflunomide with other Disease Modifying anti-Rheumatic Drugs (DMARDS) has not been adequately studied (see PRECAUTIONS).

139    Given that the evidence established that:

(a)    psoriasis is a diagnostic criterion of PsA;

(b)    nearly every person with PsA has or will develop psoriasis; and

(c)    the administration of leflunomide to a person with PsA will treat that condition and also treat psoriasis (if a person presents with psoriasis) or prevent psoriasis (if that person would have developed psoriasis),

the primary judge reasoned and found that, because the Apotex product information instructs rheumatologists to use Apo-Leflunomide for the treatment of PsA, it necessarily instructs rheumatologists to use the product to treat psoriasis, independently of the express reference to psoriasis in the document.

140    However, separately from that reasoning and finding, the primary judge found that Apotex did give instructions in the product information document to use Apo-Leflunomide for the treatment of psoriasis, by the statement: “Apo-Leflunomide is not indicated for the treatment of psoriasis that is not associated with manifestations of arthritic disease”, where appearing in the passage quoted above.

141    In this connection Apotex argued before the primary judge that the use of the double negative in this statement could not be transformed into a positive instruction. Apotex advanced the same argument on appeal.

142    The primary judge rejected that argument. She found that it contradicted the ordinary meaning to be given to the statement. It was also inconsistent with the undisputed medical evidence about the relationship between PsA and psoriasis: see at [262].

143    We are not persuaded that the primary judge erred in the conclusion to which she came. We are satisfied that it was open to her Honour to find that the statement of indications contained the instruction to use Apo-Leflunomide to treat psoriasis.

144    In this connection Sanofi-Aventis, on appeal, also drew attention to a part of the Apotex product information that immediately preceded the statement of indications we have quoted. That part reported on an analysis of patients treated with leflunomide who were assessed by reference to the Psoriasis Area and Severity Index (PASI). This index is used as a measurement of the efficacy of treatment for psoriasis, not PsA. In the reported analysis, patients were assessed to reflect changes following the administration of leflunomide in the extent and severity of psoriasis lesions as judged by erythema, desquamation, and infiltration. The analysis reports that leflunomide resulted in a significant improvement in PASI scores over a 24-week study relative to placebo.

145    The primary judge did not refer to this part of the Apotex product information when arriving at her finding as to what the quoted passage instructed practitioners to do. In our view it was not necessary for her Honour to do so, although we do note that her Honour specifically referred to the PASI analysis when considering whether Apotex had reason to believe that the persons to whom it wished to supply its product (relevantly, rheumatologists) would put it to an infringing use. Be that as it may, we are satisfied that Apotex’s statement of indications alone provided a sufficient basis for her Honour’s finding under s 117(2)(c). The reporting in the product information of the PASI analysis provides additional matter that fortifies that finding.

146    Apotex accepted that if no error was demonstrated in relation to the primary judge’s findings in relation to the application of s 117(2)(c), then s 117(1) was correctly engaged against it. It follows, therefore, that Apotex’s appeal, insofar as it concerns the question of infringement based on s 117(1) of the Patents Act, cannot succeed.

147    We propose, however, to also consider the second basis on which the primary judge found s 117(1) to be engaged. At trial there was an issue as to whether Apo-Leflunomide was a staple commercial product within the meaning of s 117(2)(b). The primary judge found (at [270]) that it was not a staple commercial product. There is no appeal from that finding. The inquiry under the specific requirements of s 117(2)(b) was thereby engaged: did Apotex have reason to believe that Apo-Leflunomide would be used to treat psoriasis?

148    The primary judge reasoned (at [263]) that, given the instruction in the Apotex product information with respect to the treatment of psoriasis, Apotex had reason to believe that a rheumatologist prescribing Apo-Leflunomide to a patient would in fact put it to that use. In our view, no error is disclosed in that reasoning. Her Honour’s finding was also plainly supported by the evidence.

149    In that connection, Professor Brooks, who was called by Apotex, was cross-examined on this subject. His evidence was that, as a rheumatologist treating a patient presenting with concurrent PsA and psoriasis, he would administer leflunomide with the treatment of both conditions in mind. The primary judge (at [51]) quoted various passages from the transcript of Professor Brooks’s oral evidence, including the following:

Even now, however long after it is from 1993, perhaps if I take you to the date you swore your first affidavit, would still describe your knowledge of psoriasis as being a basic knowledge of psoriasis? Yes, in terms of being able to diagnose it and treat it.

…

And so it was acceptable, in fact, in 1993, for a rheumatologist to have a basic knowledge of psoriasis? Well, it depends what you define as a “basic knowledge”. I would expect rheumatologists to know more than be able to spell the condition. Because they are dealing with making a diagnosis of psoriatic arthritis, they need to be able to diagnose it almost as well as a dermatologist, and they need to be able to treat it almost as well as a dermatologist.

…

… I think that, as I said, rheumatologists need to know about psoriasis probably more than most other specialties apart from dermatologists, because they are dealing with a disease that crosses those two boundaries.

…

Not the way it is written there, really. I mean, as I have just said, rheumatologists have to be able to diagnose psoriasis and know basically how to manage it, because otherwise how can they treat psoriatic arthritis?

Sorry, the diagnosis of psoriasis is effectively a key part of the diagnosis of psoriatic arthritis? Absolutely.

150    This evidence supports the findings made by the primary judge that have been quoted above, namely that:

(a)    a rheumatologist treating a patient with PsA will know how to treat the patient’s psoriasis as part of the treatment of PsA, either independently or in consultation with the patient’s dermatologist if the patient is also under the care of a dermatologist: see [129]; and

(b)    if leflunomide is administered to a patient with PsA by a rheumatologist, that administration would be expected by the rheumatologist to prevent or treat the patient’s psoriasis, to some extent at least: see [130].

151    Professor Smith, who was called by Sanofi-Aventis, was also cross-examined about the use of leflunomide by rheumatologists in the treatment of psoriasis. The primary judge (at [43]) quoted various passages from the transcript of his evidence, namely:

…the question is asking me how effective is leflunomide in psoriasis, and I can’t answer that because I’m not a dermatologist and I don’t treat psoriasis except when it is in the situation of psoriatic arthritis, and, even then, I’m treating the psoriatic arthritis; I’m not treating the psoriasis. So I can’t really honestly answer that question.

When you say, even then, you are not treating the psoriasis, you are treating the psoriatic arthritis – I think that is what you said? Yes.

You mean you are administering the, let’s say, leflunomide for the purpose of treating psoriatic arthritis in that case? Correct.

The joint disease? Yes.

And if it has a benefit, as the TOPAS study suggests, in relation to the patient’s dermatological disease, that’s an incidental benefit? I am certainly pleased with the result for the patient, but that is not my primary aim of treating the patient.

152    This evidence reflects differences in opinion and clinical approach between Professor Brooks and Professor Smith. The fact that these differences exist does not mean, however, that the primary judge’s findings as to Apotex’s “reason to believe” were in error.

153    Apotex also relied upon her Honour’s finding that dermatologists do not prescribe leflunomide for the treatment of psoriasis alone. That reliance, however, is really beside the point once it is accepted that rheumatologists (even if not all rheumatologists) will prescribe leflunomide to treat PsA and psoriasis in patients presenting with concurrent conditions.

154    In oral argument Apotex submitted that the primary judge’s finding – that it had reason to believe that the person to whom its product would be supplied would put it to use for the treatment of psoriasis – was based on reasoning limited to the finding that administration of leflunomide to treat PsA would inevitably treat or prevent psoriasis, and not one more broadly based that involves the purpose for treatment of psoriasis as such. We do not read her Honour’s findings as being so limited. Indeed, Apotex’s product information – effectively stating that its intended leflunomide product was indicated for the treatment of psoriasis associated with manifestations of arthritic disease – cannot be read as an arid instruction that is unrelated to an acknowledged reality that rheumatologists, like Professor Brooks, do seek, and will seek, to treat both conditions when patients present with PsA and psoriasis concurrently.

155    It follows, in our view, that the primary judge’s findings with respect to the application of s 117(2)(b) provide an independent foundation to engage the application of s 117(1) in the present case.

156    Accordingly, this ground of appeal fails.

The question of validity: novelty

Introduction

157    Apotex contends that the primary judge erred in concluding that the patent was novel in light of the 341 patent.

158    Section 138 of the Patents Act provides for the revocation of patents. The grounds of revocation are discrete and specific. One of those grounds is that the invention, as claimed, is not a patentable invention. An invention claimed in a standard patent is a patentable invention if, amongst other things, it is novel when compared with the “prior art base” as it existed before the priority date of the claim: s 18(1)(b)(i). An invention is taken to be novel when compared with the “prior art base” unless it is not novel in light of certain kinds of information, including “prior art information … made publicly available in a single document…”: s 7(1)(a) of the Patents Act.

159    It is accepted by the parties that the 341 specification is a document that contains “prior art information” forming part of the “prior art base” as it existed before the priority date of the claim in suit. The only question is whether the 341 specification disclosed, and made publicly available, “a method of preventing or treating a skin disorder, wherein the skin disorder is psoriasis, which comprises administering to a recipient an effective amount of” leflunomide. If it did, then the claim in suit is invalid and liable to be revoked. Concomitantly, Apotex’s intended supply of its leflunomide product could not ground a threatened infringement of the patent under s 117 of the Patents Act.

160    As we have noted, Apotex’s appeal in relation to this ground of invalidity proceeds on it being found, contrary to Apotex’s contention, that the primary judge was correct in concluding that, as a matter of claim construction, the claimed method is used when leflunomide is administered to a recipient in an effective amount so that the recipient’s psoriasis is in fact prevented or treated, regardless of the purpose for which it was administered. It follows from the view that we have expressed concerning the proper construction of the claim that the basis for Apotex’s challenge to validity in this regard falls away. Nevertheless we propose to consider the ground on the footing that, contrary to our own view, the primary judge was correct in her finding on the question of construction.

161    Proceeding on that basis at trial, Apotex contended that the method as claimed was not novel, based on the following argument recorded by the primary judge at [213]:

(a)    The 341 specification discloses the administration of leflunomide as a method of treatment of (at least) RA and PsA in humans.

(b)    The alleged anticipation is thus the administration of leflunomide as a method of treatment of (at least) RA and PsA in humans.

(c)    Sanofi-Aventis asserts that the claim of the patent will be infringed by Apotex’s proposed supply of leflunomide for use as a method of treatment for PsA.

(d)    If, as Sanofi-Aventis asserts, the claim of the patent includes the use of leflunomide as a method of treatment for PsA, the claim is the same as the alleged anticipation.

(e)    It follows that the alleged anticipation, on Sanofi-Aventis’s own case, infringes the claim of the patent.

(f)    The reverse infringement test is satisfied. Accordingly, the claim of the patent is not novel.

162    For the purpose of considering that argument the primary judge (at [215]) accepted that if performing the teaching of the 341 specification inevitably resulted in the use of the method of the claim in suit then it must follow that the claim was not novel. The primary judge (at [216]) put the position as follows:

… if the teaching of the 341 [specification] is a method of treatment of PsA by the administration of leflunomide to a person suffering from PsA then the following of that teaching will inevitably result in the use of the method claimed in the patent (namely, preventing or treating the skin disease psoriasis by the administration of an effective amount of leflunomide). The fact that the evidence described the proportion of persons suffering from PsA who also have or will develop psoriasis as “almost all” rather than “all” is immaterial. The evidence is sufficient to reach the required certainty of infringement being the “inevitable result” of or “necessarily entailed” by the assumed alleged anticipation. Consistent with principle, on this analysis, it does not matter that no one would have been aware that the administration of leflunomide to a person with PsA would also prevent or treat psoriasis in that person. …

163    The primary judge’s last statement may seem a surprising outcome. Leaving aside the special circumstance provided by s 7(1)(c), which deals with the so-called “whole of contents” ground of objection, s 7(1) requires that an invention be taken to be novel unless it is not novel in light of prior art information “made publicly available” in, relevantly, a single document (here, the 341 specification). The question arises as to how information in a document (the 341 specification) can be “made publicly available” if, by reading that document, the person skilled in the art would not have been aware that the administration of leflunomide to a person would prevent or treat psoriasis in that person. In this connection, Apotex accepts that, as at the priority date, the 341 specification did not expressly or impliedly disclose to the person skilled in the art the use of leflunomide in a method of treatment of psoriasis.

164    The rationale for the approach urged on the primary judge is to be found in the “inevitable result” cases. For example, in The General Tire & Rubber Company v The Firestone Tyre and Rubber Company Limited [1972] RPC 457 the Court of Appeal (at 485-486) said:

If the prior inventor’s publication contains a clear description of, or clear instructions to do or make, something that would infringe the patentee’s claim if carried out after the grant of the patentee’s patent, the patentee’s claim will have been shown to lack the necessary novelty, that is to say, it will have been anticipated. The prior inventor, however, and the patentee may have approached the same device from different starting points and may for this reason, or it may be for other reasons, have so described their devices that it cannot be immediately discerned from a reading of the language which they respectively used that they have discovered in truth the same device; but if carrying out the directions contained in the prior inventor’s publication will inevitably result in something being made or done which, if the patentee’s patent were valid, would constitute an infringement of the patentee’s claim, this circumstance demonstrates that the patentee’s claim has in fact been anticipated.

165    There is a question whether the unyielding logic of the “inevitable result” cases can be applied uncritically in every case of alleged anticipation. If so applied, inventions claimed as new methods of medical treatment involving the administration of a known compound for a hitherto unknown and unexpected, but nevertheless useful, therapeutic use would never stand scrutiny as patentable inventions. This is because, on the logic of the “inevitable result” cases, the disclosure of a given compound for one therapeutic use must equally and inevitably disclose all therapeutic uses of the compound in susceptible recipients, notwithstanding that those uses might not have been discovered at the time of disclosure of the first use, and may never be known. Such an approach may not give true expression to the statutory test that denies novelty only in light of information that is made “publicly available”, a requirement as stated in Hill v Evans (1862) 4 De GF & J 288 at 301; 1A IPR 1 at 7 that “(t)he invention must be shewn to have been before made known”. See also the decision in H Lundbeck A/S v Alphapharm Pty Ltd (2009) 177 FCR 151 at [174] to [190] per Bennett J with whom Middleton J agreed.

166    This appeal does not provide the occasion to explore that question. The parties proceeded on the basis that the rationale of the “inevitable result” cases could apply in the particular way in which Apotex sought to deploy it. In that connection, Apotex assumed the correctness of the construction of the claim in suit proffered by Sanofi-Aventis. It then argued that if, as Sanofi-Aventis contended, the claim in suit would be infringed by administering leflunomide to treat a patient with PsA, the 341 specification anticipated the invention, so claimed, because it sufficiently disclosed that particular method of treatment. The primary judge did not accept that argument. Before turning to consider the correctness of her Honour’s conclusion, it is necessary to summarise what is disclosed in the 341 specification.

The disclosures in the 341 patent

167    The invention the subject of the 341 patent is entitled “An isoxazole derivative, processes for its preparation, compositions containing it, and its use for combating rheumatism”. The isoxazole derivative is leflunomide.

168    The 341 specification discloses that, by virtue of its pharmacological properties, leflunomide “can be used especially as an antirheumatic, antiphlogistic, antipyretic and analgesic agent, and for the treatment of multiple sclerosis”, and can be administered in various identified dosages and dosage forms. The 341 specification discloses that a further use of leflunomide is “to combine it with other suitable active substances, for example anti-uricopathic agents, thrombocyte aggregation inhibitors, other analgesic and other steroid or non-steroid antiphlogistic agents”.

169    The 341 specification gives a number of examples of how leflunomide can be prepared. It also reports on pharmacological tests in several animal models using the compound. The models are described as Adjuvant arthritis, preventive experiment; Adjuvant arthritis, Perper modification; Allergic encephalomyelitis; Acute ulcerogenic action; Sub-acute ulcerogenic action; and Acute toxicity.

170    In these tests, leflunomide was compared with known, closely related isoxazole derivatives and with a known antiphlogistic agent for “their antiphlogistic action, the effect on immunopathological processes, the ulcerogenic activity [sic] and the acute toxicity [sic]”. The 341 specification states that, according to these comparisons, leflunomide “is superior to the known compounds to a surprising degree”. Later, the 341 specification discloses the following findings:

… [leflunomide] differs advantageously in its pattern of action from the tested antiphlogistic agents, in particular in respect of the inhibition of immunopathological processes on animal models which are also relevant to human illness. This is probably equally true relative to other antiphlogistic agents hitherto employed in therapy. This fact opens up the possibility of tackling, by medication, rheumatic illnesses in man by more nearly treating the cause, instead of purely symptomatic treatment as with the antiphlogistic agents used hitherto.

In addition there is a possibility, in view of the histological and immunological parallels between allergic encephalomyelitis of test animals and human multiple sclerosis … of introducing a specific therapy, using the formulation according to the invention, even for this illness which has hitherto been difficult to tackle therapeutically.

171    The 341 specification ends with four claims. Claim 4 is:

Method for the treatment of inflammations, rheumatic complaints or multiple sclerosis by administering to the patient an effective amount of [leflunomide].

The primary judge’s reasons

172    The primary judge explained her approach to an assessment of anticipation and recognised at [183] that it involved an evaluation of what the prior art document communicated or disclosed to the skilled addressee. Her Honour explained her approach to this analysis in detail by reference to a number of decisions including Lundbeck at [173], [180]-[182] and [189]-[191].

173    The primary judge found that the 341 patent did not disclose a method of treatment of PsA by the administration of leflunomide to a person suffering from PsA, for the following reasons.

174    First, the person skilled in the art would not read the 341 patent as disclosing in the sense of directing, recommending or suggesting the administration of leflunomide for the treatment of any disease. At best, her Honour found, the 341 patent discloses only the possibility of treating diseases in humans by the administration of leflunomide: see at [217]-[219].

175    Secondly, in the context of a general disclosure that does not specify PsA or psoriasis, the 341 patent does not, in any event, direct, recommend or suggest the administration of leflunomide for the treatment of PsA. In this connection the choice is to read the reference in the document to “rheumatic complaints” as meaning either all forms of inflammatory arthritis or RA alone, the most common form of inflammatory arthritis. For the reasons fully discussed by the primary judge at [221]-[224], her Honour concluded that the person skilled in the art reading the 341 patent either at the date of its publication (1980) or at the priority date of the claim in suit (1993) would have understood it as being concerned only with the most common form of inflammatory arthritis, RA, and multiple sclerosis, which was expressly mentioned. The primary judge found that the person skilled in the art would not have understood the document as being concerned with the seronegative arthropathies: see at [220]-[225]. The primary judge (at [224]) concluded:

… Hence, if (contrary to the conclusion above) the 341 patent discloses a method of treatment of diseases in humans, it does not disclose as a method of treatment of PsA by the administration of leflunomide. The administration of leflunomide to treat RA or multiple sclerosis, on the evidence, may or may not also treat psoriasis and thus, for the reasons given above, is not a disclosure sufficient to anticipate the invention claimed in the patent. Accordingly, on this basis the 341 patent cannot be said to deprive the patent of novelty.

176    Thirdly, even if, to the person skilled in the art, the description “rheumatic complaints” as used in claim 4 of the 341 patent was broad enough to encompass or include PsA, that disclosure was too broad to deprive the claim in suit of novelty. The primary judge noted that the description “rheumatic complaints”, read literally, would include all 150 or so types of arthritic disease. Her Honour concluded that the description “rheumatic complaints” could not be read as dealing with only RA and the seronegative arthropathies: see at [226].

Conclusion

177    In our view the 341 patent can only be read as disclosing the desirability of administering leflunomide to human recipients in a method of treatment. We would, therefore, respectfully disagree with the first step in the primary judge’s reasoning.

178    However, we can see no error in the primary judge’s finding that the person skilled in the art would have understood the 341 specification as being concerned only with the most common form of inflammatory arthritis, RA, and multiple sclerosis, which was expressly mentioned, and would not have read it as disclosing the administration of leflunomide for the treatment of PsA. The primary judge’s reasons show that she was presented with conflicting evidence on that question, including as to what would be conveyed to the person skilled in the art by the comparative tests undertaken using the animal models that were described in that specification. Her Honour’s reasons show that she carefully weighed that evidence in coming to her finding.

179    The primary judge was also fortified in her view by five considerations which she summarised (at [223]) as follows:

The choice which the evidence presents, accordingly, is between reading the 341 patent’s reference to “rheumatic complaints” as meaning either all forms of inflammatory arthritis or RA alone (the most common form of inflammatory arthritis). To assist in the task of construction it is relevant to note that the 341 patent was published in 1980. It is not necessary to decide whether the relevant date for construction of the 341 patent is 1980 or the priority date of the patent in suit (March 1993) because, on the evidence, there is no material difference between those two dates. The relevant point is that the 341 patent nowhere mentions PsA or the seronegative arthropathies, but it does refer to “arthritis”, “inflammation”, and “rheumatic” illnesses and complaints. With this in mind a number of other key facts must be recalled. First, “arthritis” is a general term applying to numerous types of joint disorders. Second, rheumatologists distinguish between non-inflammatory and inflammatory arthropathies, with the latter term reserved for those forms of arthritis where inflammation of the joint tissues is the underlying cause of damage to the joints. Third, there are two types of inflammatory arthritis, rheumatoid arthritis and the seronegative arthropathies (PsA, ankylosing spondylitis, reactive arthritis and inflammatory bowel disease-associated arthritis). Fourth, RA is associated, amongst other things, with the presence of the positive rheumatoid factor in the blood. The seronegative forms of arthritis, by definition, are associated with a negative RF test. Fifth, and as Professors Smith and Brooks said, for a number of years after the priority date of the claim in the patent (March 1993) little was known about PsA. By March 1993 (and for some years thereafter) most research efforts had focussed on RA as the most common form of inflammatory (as opposed to non-inflammatory) arthritis. The aetiology of RA and PsA was thought to be different. RA was known to be T cell-mediated. PsA was not. The mechanisms underlying RA were known, but those underlying PsA were merely in the course of being investigated and understood. For example, the role of TNF α in RA was emerging but its similar role in PsA was unknown until the late 1990s. Moreover, RA was known to be by far the most common form of inflammatory arthritis (accounting for about 70% of cases of inflammatory arthritis). As Professor Brooks said, research was largely driven by the pharmaceutical industry and the principal focus was thus RA and not PsA.

180    That is, as her Honour said at [224], on the evidence, the skilled addressee would not have understood the 341 patent to concern PsA. In our view the reasoning of the primary judge is persuasive. The skilled addressee would not have understood and applied the prior disclosure necessarily to obtain the invention. The finding to which her Honour came in this regard was plainly open to her.

181    Moreover we can see no error in the primary judge’s further conclusion that, if more broadly read, the expression “rheumatic complaints” lacks sufficient clarity to deprive the claim in suit of novelty. In this connection it is to be borne in mind that, when dealing with so-called paper anticipations, the disclosure must contain “clear and unmistakable directions to do what the patentee claims to have invented … A signpost, however clear, upon the road to the patentee’s invention will not suffice. The prior inventor must be clearly shown to have planted his flag at the precise destination before the patentee.”: see General Tire at 486; ICI Chemicals & Polymers Ltd v The Lubrizol Corporation Inc (2000) 106 FCR 214 at [51] and Lundbeck at [174]-[175]. Here the 341 patent does not “plant the flag” on the use of leflunomide in a method of treatment of PsA. In Hill v Evans, Lord Westbury LC said that “(t)here may be a latent truth in the words of a former writer, not known even to the writer himself; and it would be unreasonable to say that there is no merit in discovering and unfolding it to the world”. Thus Apotex’s “inevitable result” argument cannot run.

182    Finally, it should be emphasised again that Apotex accepted that the 341 specification does not expressly or impliedly disclose the use of leflunomide in a method of treatment of psoriasis.

183    For these reasons, this ground of appeal fails.

The question of validity: manner of manufacture

184    In its further amended particulars of invalidity dated 7 March 2011 Apotex alleged that the invention, as claimed in the claim in suit, was not a “manner of manufacture” within the meaning of section 6 of the Statute of Monopolies because:

(a)    on the face of the specification, the subject matter of the claim lacked the necessary quality of inventiveness and/or was not new; and

(b)    if the claim in suit claims the prevention or treatment of psoriasis occurring incidentally in the use of leflunomide to treat arthritis, including PsA, that use is not a manner of manufacture but no more than the observation of the result of the use of a known substance (leflunomide) for a known purpose (the treatment of arthritis, including PsA).

185    The primary judge dealt with this question of invalidity essentially on the basis of whether, on the face of the specification, the claimed invention lacked the quality of newness and inventiveness that was required: see at [236]-[243]. The primary judge decided that question adversely to Apotex.

186    In its further supplementary notice of appeal, which was filed pursuant to leave granted on 14 March 2012, Apotex raised a somewhat different ground. It contended that the primary judge erred on this question because methods of medical treatment of human beings are not patentable inventions and that the dicta to the contrary effect in Bristol-Myers Squibb Company v F H Faulding & Co Limited (2000) 97 FCR 524 and Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 should not be followed. It is apparent, however, that this significant question of principle was not argued before the primary judge.

187    During the course of the appeal Apotex sought leave to file a second further supplementary notice of appeal in which an additional ground of appeal, in this regard, was sought to be raised, namely that methods of medical treatment for a “second or later medical use” not limited by the purpose of the treatment are not patentable inventions. The question of leave remains to be determined.

188    Sanofi-Aventis contends that Apotex should not be entitled to argue either ground. First, it submitted that Apotex should not be entitled to run a new case on appeal which is not within the scope of its pleading. Secondly, it submitted that the further ground set out in the second further supplementary notice of appeal cannot be made out in any event. In that regard it submitted that, however expressed, the relevant ground must be confined to an assessment of patentability on the face of the specification and that, when that is done, the primary judge’s finding remains good. Apotex accepted that confinement. The point it advanced, however, is that, on the face of the specification in suit, the use of leflunomide to treat psoriasis is disclosed as a subsequent and different therapeutic use for that compound, its use in methods of treatment of other disorders also having been expressly disclosed. Therefore, the only new manner of manufacture disclosed on the face of the specification is the use of leflunomide in a method of treatment of psoriasis. It is that invention that must be claimed.

189    In [143] of her reasons, the primary judge said:

In respect of patents for methods of treatment of humans generally, Apotex reserved its right to challenge the correctness of the decisions in Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 25 IPR 119, Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 … and Bristol-Myers Squibb Co v FH Faulding & Co Ltd (2000) 97 FCR 524; [2000] FCA 316 … (which confirmed the patentability of such methods of treatment). For the purpose of this hearing Apotex said that, if patentable, such methods of treatment must have as an essential integer use for the treatment of a (or the) particular disease: in this case, the skin disease psoriasis. In Apotex’s words, if the objective purpose of treating psoriasis is not an essential integer of the claim then the mere administration of leflunomide for any purpose potentially infringes the patent (as 2% of the population has psoriasis) “and the claim is hopelessly invalid”.

190    It is clear from this passage that, regardless of the precise form of its cross-claim and particulars of invalidity, Apotex did seek to reserve as a matter of substance, for later argument if necessary, the question of whether methods of medical treatment of human beings are patentable inventions. The primary judge appears to have accepted that reservation. As we have noted, leave was also granted, prior to the hearing of the appeal, to permit Apotex to raise that specific ground.

191    Apotex’s presentation of argument before us carried with it a recognition of the apparent strength and persuasiveness, at this level of appeal, of the dicta in this Court in the cases cited by the primary judge at [143], which have accepted the patentability, under Australian law, of methods of medical treatment. It is not necessary, for present purposes, to detail the reasoning in those cases. It is sufficient to direct attention to the following passages: Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 25 IPR 119 at 145-151 (Gummow J); Anaesthetic Supplies Pty Ltd v Rescare (1994) 50 FCR 1 at 6-19 (Lockhart J) and 42-45 (Wilcox J); and Bristol-Myers at [7]-[18] (Black CJ and Lehane J) and [99]-[142] and [161] (Finkelstein J).

192    Nevertheless, as we have noted, Apotex submits that these dicta should not be followed. It submits that the contrary reasoning and conclusion of Sheppard J in Rescare (50 FCR at 33-37) should be followed.

193    We would not depart from the position represented by the dicta in this Court that support the patentability of methods of medical treatment, a position which we regard as representing orthodoxy in Australian patent law. Experience shows that it is commonplace for patents to be granted in Australia that include claims for methods of medical treatment. There is judicial recognition of that fact: Bristol-Myers at [16]. Moreover, as Wilcox J observed in Rescare (50 FCR at 42-43), it is significant that the Australian Parliament has not been persuaded to legislate any change to the Patents Act to give specific effect to policy considerations that argue against the patentability of methods of medical treatment. Indeed, in that connection, it is noteworthy that, when defining what is a patentable invention for a standard patent, the only specific exclusions in s 18 (beyond the generally expressed requirements for patentability in s 18(1)) are “human beings, and the biological processes for their generation”: see s 18(2).

194    We would also grant leave to Apotex to raise the additional ground of appeal. Its determination is inextricably bound up with the question of construction of the claim in suit that was central to the case at trial. Its determination requires no factual findings and creates no prejudice beyond the fact that it is a differently articulated challenge to the validity of the claim.

195    Having said that, we are of the view that, whatever the merits of the ground as a generally expressed proposition (a matter on which we express no view), it cannot succeed in the present case. The face of the specification makes clear that the patentee identifies as its invention a new method for preventing or treating a skin disorder, specifically psoriasis. There is nothing on the face of the specification that would suggest that the invention there described is devoid of the necessary quality of inventiveness to sustain a valid patent. After finding (at [241]) that the prior art references in the specification in suit could not be equated to a disclosure on its face that leflunomide treats PsA or psoriasis, the primary judge (at [242]) found as follows:

The qualities of leflunomide (or its character), on the face of the patent in suit, also could not be described as “known” in the sense that [that] term is used in this context. It is true that the patent in suit discloses leflunomide as being anti-inflammatory, but that general description cannot be said to exhaustively define the actions and thus the characteristics or qualities of leflunomide. This is consistent with the position disclosed by the objective evidence available at that time. …

196    There is no reason to interfere with these findings. Moreover, the plain terms of the claim in suit show that it is limited to a method of treating psoriasis.

197    It follows that these grounds of appeal fail.

The question of implied licence

198    Sanofi-Aventis’s case of copyright infringement of the Arava works arises in somewhat unusual circumstances. As noted, the Arava works are product information documents associated with the supply of the Arava products by the first respondent. The Therapeutic Goods Legislation Amendment (Copyright) Act 2011 (Cth) amended the Copyright Act 1968 (Cth) (the Copyright Act) by introducing s 44BA which provides, amongst other things, that reproducing, in Australia, some or all of the information contained in product information approved under s 25AA of the Therapeutic Goods Act 1989 (Cth) in relation to medicine, is not an infringement of copyright. Section 44BA has effect in relation to acts done on or after 28 May 2011, regardless of when the product information was approved. The parties proceeded on the basis that the Arava works fell within the scope of s 44BA.

199    Apotex does not dispute the fact that it reproduced a substantial part of the Arava works, directly or indirectly, before 28 May 2011. Although at trial it challenged both the authorship and originality of those works as copyright works, the question of copyright subsistence is not an issue in this appeal. The only issue in this appeal is whether the primary judge erred in failing to find that Sanofi-Aventis was bound by a licence which permitted Apotex to reproduce them. In this connection Apotex contends that Sanofi-Aventis was bound by a licence that was implied by custom. It relies upon various statements of principle in Con-Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226; Hawkins v Clayton (1988) 164 CLR 539 and Byrne v Australian Airlines Limited (1995) 185 CLR 410.

200    It should be noted at the outset that these authorities concern the role that trade custom or usage might play in implying terms into a contract. Thus, in Con-Stan the question was whether particular terms should be implied in a contract between insurer and insured dealing with the payment of premiums; in Hawkins the question was whether a term should be implied in a contract between solicitor and (testator) client as to the steps that a solicitor is obliged to take to locate the executor or beneficiaries under a will of which the solicitor has custody at the time of the testator’s death; in Byrne the question was whether a term of an industrial award should be implied in a contract between employer and employee, such as to confer on the employee a right to contractual damages for breach of that term.

201    In Con-Stan the High Court (at 236-238) identified a number of propositions which can be summarised as follows. First, the existence of a custom or usage that will justify the implication of a term into a contract is a question of fact. Secondly, and importantly for present purposes, there must be evidence that the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into that contract. Thirdly, a term will not be implied on the basis of custom where it is contrary to the express terms of the agreement. Fourthly, a person may be bound by a custom or usage notwithstanding that the person has no knowledge of that custom or usage. This is because persons are presumed to know of customs and usages that are so notorious that they can be implied as terms in contracts. In this connection the High Court said (at 238):

… In this way, the issue of notoriety … came to be co-extensive with the question of imputed knowledge. The achievement of sufficient notoriety was both a necessary and sufficient condition for knowledge of a custom to be attributed to a person who was in fact unaware of it. The result is that in modern times nothing turns on the presence or absence of actual knowledge of the custom; that matter will stand or fall with the resolution of the issue of the degree of notoriety which the custom has achieved. The respondent’s contention that industry practices unknown to the assured are incapable of forming the basis of an implied term of the contract cannot be sustained.

202    On appeal Apotex did not seek to explain how the principles discussed in these cases came to apply to its own circumstances. It could not contend, for example, that it had a contract for the supply of goods or services with Sanofi-Aventis or with any of its other competitors into which a term based on trade custom or usage might be implied.

203    Moreover, as Sanofi-Aventis argued, Apotex did not seek to demonstrate how its acts in reproducing the Arava works were “authorized by a licence binding the owner of the copyright” outside the principles of contractual consideration and privity (see s 15 of the Copyright Act and the observations of Gummow A-CJ in Concrete Pty Limited v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577 at [10]), beyond saying, in effect, “everyone does it”. It certainly did not seek to advance any particular relationship between itself and Sanofi-Aventis, or any particular or discrete event or conduct as between itself and Sanofi-Aventis touching upon the Arava works, that would warrant the implication of a licence ad hoc.

204    At trial Apotex sought to rely on what it contended was the “long-standing practice” of the TGA in approving product information documents for generic versions of drugs in essentially the same or similar form to the product information documents approved for the original version of the drug. The primary judge accepted that there was evidence of such a practice but concluded that this did not provide a proper foundation for the implication of a licence. The primary judge found (at [373]) that, so far as the regulatory regime was concerned, the TGA does not require product information for a generic or later version of a drug to be identical to the product information for the original. But perhaps more importantly for present purposes, the primary judge considered the evidence of the “long-standing practice” to be equivocal. In that regard the primary judge said (at [376]):

… It is true that Apotex has discovered PIs where one may infer that the generic company has copied from the innovator PI (including PIs which suggest such copying by Sanofi-Aventis itself). It is also true that, albeit late in the day, Sanofi-Aventis has located other PIs which appear not to have been copied or, at least, not to have been copied to the same extent. It may also be accepted that the MIMS annual takes the approach of cross-referring from a generic drug to the innovator PI for that drug. But the evidence as a whole is simply insufficient to establish either the existence of an industry-wide practice of copying, or anything more than apparent neutrality by participants in the industry as to the copyright implications of such copying (at least until the present case). As to the issue of custom, the evidence does not disclose the proportion of PIs in evidence (tendered by either party) compared to all approved PIs. The PIs in evidence, accordingly, lack any meaningful context. As to mere neutrality, it cannot be inferred from the lack of evidence of any objection until that of Sanofi-Aventis in the present case that participants in the industry implicitly consented to the so-called industry-wide practice of copying. The evidence, at best, indicates a mere lack of objection to apparent cases of PIs being copied. In the circumstances outlined above, lack of objection without a duty to object is equivalent to mere neutrality which, as McHugh J said in [Avel Proprietary Limited v Multicoin Amusements Proprietary Limited (1990) 171 CLR 88 at 123], is not sufficient to establish an implied licence.

205    Apotex submitted that the primary judge erred in making this finding. In so submitting, however, it did no more than advance the contrary proposition that “(t)he evidence showed that there was such a practice and that it was so widespread as to be an industry custom, giving rise to a licence, implied as a matter of fact, that pharmaceutical companies in Australia bringing a second or later brand of a registered medicine to market may copy the originator’s PI”.

206    In our view Apotex has not demonstrated error in the primary judge’s conclusion that the evidence of the asserted “long-standing practice” was equivocal, in the way discussed by her Honour. Indeed, the primary judge’s reasoning is compelling. Thus, apart from the conceptual difficulties that attend the case it seeks to bring for the implication of a licence based on trade custom or usage, the factual foundation to establish the requisite notoriety of which the cases speak is lacking.

207    So to view the matter is not to cast on Apotex the onus of proving the existence of a licence. Plainly the burden of proving the absence of a licence fell on Sanofi-Aventis: Avel Proprietary Limited v Multicoin Amusements Proprietary Limited (1990) 171 CLR 88 at 94. However, that burden was one to be discharged upon the whole of the evidence: Purkess v Crittenden (1965) 114 CLR 164 at 168. It was Apotex that advanced, by way of positive defence, the existence of a licence implied by trade custom or usage. It was for it to make good the factual foundation for that defence. Sanofi-Aventis assumed no evidential burden in that regard: see the discussion in Acohs Pty Ltd v Ucorp Pty Ltd (2012) 201 FCR 173 at [169]-[173]; see also Lorenzo & Sons Pty Ltd v Roland Corporation (1992) 23 IPR 376 at 380.

208    For these reasons, this ground of appeal fails.

Disposition

209    We are of the view that the appeal should be dismissed with costs.

Associate:

Dated:    18 July 2012