FEDERAL COURT OF AUSTRALIA

GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No.2) Limited v Apotex Pty Ltd [2014] FCA 1398

THE COURT ORDERS THAT:

1.    The Respondent has leave to amend the undertaking given in paragraph 4 of the 8 October 2014 orders so that it now reads:

"Should the Undertaking referred to in paragraph 1 above not be discharged following the hearing and determination of any relevant application, the Respondent will take all steps necessary to withdraw any application for inclusion of any of the Apotex Products on the Schedule of Pharmaceutical Benefits during the term of the Patent in sufficient time to ensure that none of those products is listed on the Schedule of Pharmaceutical Benefits, and serve on the Applicants an affidavit made by a proper officer of the Respondent identifying the steps that have been taken."

2.    The Respondent's interlocutory application dated 5 December 2014 be dismissed.

3.    The costs of the parties in relation to the Respondent's interlocutory application dated 5 December 2014 be costs in the cause.

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

THE COURT ORDERS THAT:

1.    Paragraph 3 of the undertakings provided by the Respondent on 5 November 2014 (as amended by the orders of 24 November 2014) be varied so that it now reads:

“Pending the determination of the proceeding or further order or the discharge of undertaking 4 given by Apotex in proceeding VID 571 of 2014 on 8 October 2014 (as varied by order 1 of the orders made in proceeding VID 571 of 2014 on 16 December 2014) (whichever is earlier) and should the Undertaking referred to in paragraph 1 above not be discharged following the hearing and determination of any relevant application, the Respondent will take all steps necessary to withdraw any application for inclusion of any of the Generic Partners Products on the Schedule of Pharmaceutical Benefits during the term of the Patent in sufficient time to ensure that none of those products is listed on the Schedule of Pharmaceutical Benefits, and serve on the Applicants an affidavit made by a proper officer of the Respondent identifying the steps that have been taken.”

2.    The Respondent’s interlocutory application dated 5 December 2014 be dismissed.

3.    The costs of the parties in relation to the Respondent’s interlocutory application dated 5 December 2014 be costs in the cause.

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

REASONS FOR JUDGMENT

1    On 6 October 2014, the applicants commenced a proceeding against Apotex Pty Ltd (Apotex) seeking interlocutory and final relief for the threatened infringement of Australian Patent Number 2001260212 (the Patent) (VID 571 of 2014).

2    On 29 October 2014, the applicants commenced a similar proceeding against Generic Partners Pty Ltd (Generic Partners) (VID 638 of 2014).

3    The claims of the Patent the subject of the infringement allegations are claims 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 13, and 14.

4    Both Apotex and Generic Partners admit their intention to supply generic products that have the essential features of claims 1, 4, 5, 6, 8, 9, 10, 11, 13, and 14 (the relevant products). Apotex proposes to supply the relevant products directly to pharmacists and others. Generic Partners proposes to provide exclusive supply of the relevant products to Apotex for on-supply.

5    Both Apotex and Generic Partners have filed cross-claims seeking revocation of the Patent on various invalidity grounds.

6    On 8 October 2014, Apotex gave undertakings to the Court that until the determination of proceeding VID 571 of 2014 or further order, it would refrain from selling the relevant products in Australia. Those undertakings were amended by orders made on 18 November 2014.

7    On 5 November 2014, Generic Partners gave similar undertakings in proceedings VID 638 of 2014. Those undertakings were similarly amended by orders of 24 November 2014.

8    By applications filed on 5 December 2014, Apotex and Generic Partners have applied to be released from their undertakings.

9    It has been convenient to deal with both applications together, and these reasons deal with both applications.

10    In terms of the evidence relied upon, evidence filed in one proceeding has been treated as evidence filed in the other proceeding and vice versa. The evidence relied upon by the parties has been extensive, to say the least. I have listed in an annexure to these reasons the material relied upon.

The Parties

11    The first applicant GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No. 2) Ltd is the patentee of the Patent.

12    The second applicant GlaxoSmithKline Australia Pty Ltd (GSK) sells and supplies originator pharmaceuticals in Australia and is the exclusive licensee of the Patent.

13    Since 2000, GSK has marketed, sold and supplied in Australia 665 mg sustained-release paracetamol tablets manufactured in accordance with the Patent, under brand names including Panadol Back & Neck Long-Lasting and Panadol Osteo (the GSK Products).

14    The GSK products are registered on the Australian Register of Therapeutic Goods (the ARTG). Panadol Osteo has also been listed on the Pharmaceutical Benefits Schedule (the PBS) since 2005.

15    Apotex is a large generic pharmaceutical company in Australia and supplies over 800 generic pharmaceuticals.

16    Apotex is a listed sponsor on the ARTG of the relevant products, and has applied for PBS listing of those products from 1 January 2015; Generic Partners had been the sponsor until transfer of the registrations to Apotex.

17    Generic Partners is an Indian pharmaceutical manufacturer.

18    Generic Partners intends to supply the relevant products to Apotex for supply in Australia under an exclusive agreement.

The Patent

19    The Patent claims a pharmaceutical composition. It comprises “a bilayer tablet having an immediate release phase of paracetamol and a sustained release phase of paracetamol”.

20    As the specification acknowledges, paracetamol is a very widely used painkiller whose pharmacological uses and properties were well known. This included “the conventional dosage regime of 1000 mg every 4 or 6 hours”.

21    The specification says at p 1, lines 25 to 27:

A paracetamol product designed for tid oral dosage should contain enough paracetamol to give close to the maximum daily dose when two tablets are taken three times daily, i.e., about 600mg to 667mg per tablet.

22    The specification describes desirable pharmacokinetic parameters to be achieved in the plasma of patients. These include a “fast onset of action” and a longer “duration of action”. The specification at p 4, lines 12 to 14, refers to the following:

Surprisingly it has now been discovered that such an advantageous pharmacokinetic profile can be provided by a two phase (immediate release and sustained release) formulation of paracetamol which satisfies a unique in vitro dissolution profile.

23    The claims of the Patent are in the following terms:

1.    A pharmaceutical composition comprising a bilayer tablet having an immediate release phase of paracetamol and a sustained release phase of paracetamol, the immediate release phase being in one layer and comprising from about 10 to 45% by weight of the total paracetamol; and the sustained release phase being in the other layer and comprising from about 55% to 90% by weight of the total paracetamol in admixture with a matrix forming polymer or a mixture thereof; said composition comprising from 600 to 700mg of paracetamol per unit dose and a pharmaceutically acceptable carrier, wherein said composition has an in vitro paracetamol dissolution profile (as determined by the USP type III apparatus, reciprocating basket, with 250ml of 0.1M HCl at 37C set at a cycle speed of 15 strokes/min) with the following constraints:

•    30 to 48% released after 15 minutes

•    56 to 75% released after 60 minutes

•    >85% released after 180 minutes.

2.    A composition according to claim 1 in which the in vitro dissolution profile has the following constraints:

•    35 to 47% released after 15 minutes

•    58 to 73% released after 60 minutes

•    >90% released after 180 minutes.

3.    A composition according to claim 1 or claim 2 in which the in vitro dissolution profile has the following constraints:

•    38 to 44% released after 15 minutes

•    62 to 70% released after 60 minutes

•    >95% released after 180 minutes.

4.    A composition according to any one of claims 1 to 3 in which the paracetamol is present in an amount of 630 to 680 mg per unit dose.

5.    A composition according to claim 4 in which the paracetamol is present in an amount of 650 to 667 mg per unit dose.

6.    A composition according to any one of claims 1 to 5 in which the matrix forming polymer is a water-soluble or a water-insoluble polymer or a mixture thereof.

7.    A composition according to claim 6 in which the water-insoluble matrix forming polymer comprises ethyl cellulose.

8.    A composition according to claim 6 in which the matrix forming water-soluble polymer is selected from hydroxypropylmethylcellulose, hydroxyethylcellulose, carboxymethylcellulose, sodium carboxymethylcellulose, methacrylate hydrogels, polyethylene glycols, xanthan gum or a mixture thereof.

9.    A composition according to claim 8 in which the water-soluble matrix forming polymer is hydroxypropylmethylcellulose.

10.    A composition according to any one of claims 1 to 9 in which the matrix forming polymer is present in an amount from 0.5 to 10% by weight of the sustained release phase.

11.    A composition according to claim 10 in which the matrix forming polymer is present in an amount from 1 to 6% by weight of the sustained release phase.

12.    A composition according to claim 11 in which the matrix fanning polymer is present in an amount from 2 to 4% by weight of the sustained release phase.

13.    A composition according to any one of claims 1 to 12 in which the sustained release phase comprises from 60 to 80% by weight of the total paracetamol, and the immediate release phase comprises from 20 to 40% by weight of the total paracetamol.

14.    A composition according to claim 13 in which the sustained release component comprises from 65 to 75% by weight of the total paracetamol, and the immediate release component comprises from 25 to 35% by weight of the total paracetamol.

15.    A composition according to claim 1 substantially as hereinbefore described with reference to the Examples.

GSK’s Market Position

24    GSK sells its Panadol Osteo product both as an over the counter (OTC) product and as a product subsidised through the PBS. The main focus of GSK’s sales is for the relief of pain associated with osteoarthritis.

25    The PBS component of the market is the largest component of GSK’s sales.

26    As I have said, Panadol Osteo became PBS-listed in 2005. At the same time, GSK launched its own generic version under the name Panadol Duatrol SR. In 2007 GSK withdrew its generic version.

27    In late 2012, AFT Pharmaceuticals Pty Ltd (AFT) obtained registration of a modified-release paracetamol product to the OTC market in Australia, which it commenced selling in 2013. But the tablets that it has been supplying are a matrix formulation, and not bilayer tablets. Accordingly they are not within the claims of the Patent. Further, presently AFT has not supplied the larger PBS market in Australia for extended-release paracetamol, although the Pharmaceutical Benefits Advisory Committee (PBAC) is presently considering AFT’s application for PBS listing.

28    Apotex had an approved application for PBS listing of its extended release paracetamol products from 1 December 2014, but withdrew that application in time for its products not to become listed on that date. Apotex has a pending PBS application for the next listing date of 1 January 2015.

29    Pharmacor also had an approved application for PBS listing for its extended-release paracetamol products from 1 December 2014. Although there was uncertainty as to whether GSK would apply to restrain, and would succeed in restraining, Pharmacor from supplying those products from 1 December 2014, GSK made no injunction application seeking such a restraint. Pharmacor did not withdraw its PBS listing for 1 December 2014, which resulted in a price drop occurring when the Pharmacor products became listed. Pharmacor now supplies its generic products into the relevant market(s).

30    On GSK’s application, I made orders for preliminary discovery against Pharmacor in respect of its extended-release paracetamol products ([2014] FCA 1202). GSK apparently determined that it did not have a basis to restrain Pharmacor from obtaining PBS listing for, and then commencing sales of, its products.

31    Pharmacor’s products have been “a flagged” against Panadol Osteo. Its products were “a flagged” because Pharmacor apparently provided evidence to establish to the satisfaction of the Therapeutic Goods Administration (TGA) and of the PBAC that its products were bioequivalent to Panadol Osteo.

Principles – Release from Undertaking and injunctions

32    The Court has the power to release a party from an undertaking at any time before trial. Moreover, the undertakings given by each of Apotex and Generic Partners were given until further order.

33    Even where an interlocutory injunction has been granted, the court may vary or discharge the interlocutory injunction.

34    Interlocutory orders may be varied or set aside even after a contested hearing, where the interests of justice so require. In the present case, of course, at the time the undertakings were given, there was no contested hearing.

35    More generally, interlocutory orders can be varied or injunctions discharged where:

(a)    new material or new evidence not reasonably available when the order was made has come to light;

(b)    a material change in circumstances has occurred;

(c)    some other exceptional circumstance warrants it; or

(d)    generally, the interests of justice require the issue to be revisited.

36    In my view, the entry into the relevant market by Pharmacor of a new generic modified release paracetamol 665 mg product is such a “material change in circumstances” as should allow the question of the suitability of the present restraints to be reopened. The possible entry of another generic supplier of Raloxifene was regarded by Nicholas J in the case before him as likely to amount to “a material change in circumstances” (see Eli Lilly & Co v Generic Health Pty Ltd [2013] FCA 1254 at [66]).

37    Generally, in my view, it is appropriate for this Court to now, in substance, consider the suitability of the present restraints against Apotex and Generic Partners afresh. In substance, I should treat the matter before me as an application for interlocutory injunctions against both Apotex and Generic Partners. If I come to the view that interlocutory injunctions should be made, then as a matter of substance, I will not discharge the present undertakings. Leaving them in place will have the same effect as if I had discharged the undertakings and granted injunctions.

38    I enquired of Apotex and Generic Partners as to whether it mattered, if I thought a continuing restraint was appropriate, as to whether I should leave the undertakings in place or discharge them and grant injunctions. They did not indicate a preference one way or the other.

39    As to the relevant principles to apply on the present applications and given the context, I will apply those principles relevant to the grant of an interlocutory injunction.

40    The applicable principles were recently reviewed by the Full Court in Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238 (Samsung), but are sourced to the observations of Gummow and Hayne JJ in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [65] – [67]. They need no elaborate disquisition.

41    GSK must demonstrate that it has a prima facie case of infringement of the Patent and that the balance of convenience favours the grant of injunctions up to the hearing.

42    The sufficiency of the likelihood of success required is dependent upon the nature of the right being asserted and the practical consequences that are likely to flow if the injunction is granted. Further, as the Full Court observed in Samsung (at [67]), the issues of prima facie case and balance of convenience are related inquiries and should not be considered in isolation. Further, the apparent strength of the parties’ substantive cases is an important consideration to be weighed in the balance of convenience. The Full Court said at [51]:

It is true that an applicant for interlocutory relief need not necessarily show that its case is, on balance, likely to succeed. However, the exercise described in O’Neill may lead to the conclusion that in order sufficiently to recognise the serious consequences for the respondent of the grant of interlocutory relief, the applicant should reasonably be expected to demonstrate such likelihood. Where the merits and the question of convenience are fairly evenly balanced, there will be no injustice in requiring that the party seeking relief demonstrate good prospects of success before imposing almost certain prejudice on the other side.

43    The stronger the prima facie case, the less the need to satisfy the Court on balance of convenience and vice versa.

44    The respondents also rely upon their own prima facie cases of invalidity of the relevant claims of the Patent. They submit that the evidence establishes a strong prima facie case on invalidity of each of the claims alleged to be infringed. Moreover, they point out that there is no presumption of validity of a patent under Australian law. Section 20(1) of the Patents Act 1990 (Cth) (the Act) provides:

20    Validity of patent not guaranteed

(1)    Nothing done under this Act or the PCT [Patent Cooperation Treaty] guarantees the granting of a patent, or that a patent is valid, in Australia or anywhere else.

Where the legislature intends to make provision with respect to a presumption of validity, it has done so (see, for example, the Trade Marks Act 1995 (Cth)). It has not done so with the Act. However, Apotex and Generic Partners do bear the onus of proof in establishing invalidity.

45    The question of the validity of the Patent is an important factor to weigh also in the balance of convenience. See Hexal Australia Pty Ltd v Roche Therapeutics (2005) 66 IPR 325 at [78] where Stone J refused interlocutory relief after taking into account, amongst other things, the fact that the strength of the case on invalidity “probably ha[s] more weight” than the strength of the case on infringement. The question of validity was also determinative in Smith & Nephew Pty Ltd v Wake Forest University Health Sciences (2009) 82 IPR 467.

46    The approach of the Full Court in Samsung also demonstrates this (see in particular [67], [70] and [88]).

47    Before proceeding further, I should make a number of other observations concerning Samsung.

48    First, in Samsung, the parties there accepted that the orders made below were effectively final in that the commercial viability of the Galaxy Tab 10.1 in the Australian market would be lost. That is not at all the present case if I were to leave the existing restraints in place or discharge them and substitute interlocutory injunctions.

49    Second, Samsung referred to considering and evaluating the impact that the grant or refusal of an injunction would have or was likely to have on third parties and the public generally. I have considered this in relation to one of Apotex’s arguments, that the restraints should be discharged because consumers and the public would benefit from its supply of generic products. I found this argument underwhelming, particularly when one considers that ss 26B and 26C of the Therapeutic Goods Act 1989 (Cth) expressly refer to and recognise intellectual property interests. But I have taken into account Apotex’s argument.

50    Third, Samsung discussed the relevance of the offer of an early trial date and the refusal by one party to accept the same. I offered an early trial date to all parties. GSK was enthusiastic, Apotex and Generic Partners less so. But I do not consider that my offer or the parties’ differing responses one way or the other affects the exercise of my discretion on balance of convenience in this case. I should say, however, that I do propose to do what I can to have a trial on the invalidity grounds in or around August 2015.

51    Fourth, GSK urged me to take into consideration that the respondents have sought to launch the relevant products with their “eyes wide open” and that they should have “cleared the way” by applying for revocation of the Patent well before now. Samsung discussed that issue and did not determine it to be irrelevant to the exercise of the discretion to grant an interlocutory injunction. I will address this later. The key question is what the alleged infringer ought reasonably to have done at an earlier time, assuming that they had knowledge of the Patent at an earlier time when they were planning to manufacture and supply their alleged infringing product.

Infringement – prima facie case

52    The respondents admit that the relevant products have all of the essential integers of claim 1 and (insofar as they depend on claim 1) claims 4, 5, 6, 8, 9, 10, 11, 13 and 14 of the Patent.

53    The respondents deny that the relevant products have all of the essential integers of claims 2 or 3 of the Patent. For the purposes of the present applications, I have confined my attention to the claims the subject of admissions.

54    Unless the respondents establish at trial that the relevant claims are invalid, GSK would be wholly successful at trial on the question of infringement of those claims, and entitled to the injunctive relief that it seeks.

55    In summary then, GSK has a very strong prima facie case on infringement, assuming the claims of the Patent to be valid.

56    The question then, in terms of the prima facie limb for the moment, is the strength of the respondents’ cases on the asserted invalidity arguments concerning the relevant claims of the Patent.

57    I was urged by the respondents to find that their invalidity arguments, particularly on the grounds of a lack of inventive step, a lack of fair basis and a failure to disclose the best method, were very strong and at the least were equal to or exceeded in strength GSK’s prima facie case on infringement. I am not so persuaded. It is convenient to turn to each of the asserted grounds for invalidity. But if I am circumspect about my discussion of the detail, it is for the following four reasons. First, as the likely trial judge, it is inappropriate for me to be too definitive in the expression of my views at this embryonic stage. Second, relevant witnesses have not been called and cross-examined. Some of the affidavit material is hearsay, indeed, compounded hearsay. Third, and relatedly, assertion countered by assertion provides little appropriate foundation for me to be definitive on any particular ground of invalidity. Fourth, given the relative urgency with which this matter has been brought on, and the voluminous material that has been filed, in the limited time available I have no choice but to be circumspect.

Invalidity – prima facie case

(a)    Inventive step

58    A patentable invention, so far as claimed in any claim, must involve an inventive step when compared with the prior art base at the priority date.

59    The respondents bear the onus of establishing that the claimed invention lacks an inventive step over the prior art.

60    The Court must find an inventive step, unless “the invention would have been obvious to a person skilled in the relevant art” at the priority date. The word “obvious” means “very plain” (Aktiebolaget Hassle v Alphapharm Pty Ltd (2002) 212 CLR 411 at [34] and [85]). A “scintilla of inventiveness” is sufficient; alternatively expressed, “no smallness or simplicity will prevent a patent being good” (Meyers Taylor Pty Ltd v Vicarr Industries Ltd (1997) 137 CLR 228 at 249 per Aickin J).

61    Whether the invention would have been obvious is determined by comparing the claimed invention with the common general knowledge alone, or with that knowledge and s 7(3) information.

62    Given that expert evidence has been filed on this topic in the present case, I should observe the following.

63    First, it is impermissible hindsight for an expert witness to be led to the invention by a series of specific questions framed by a person with knowledge of the claimed invention.

64    Second, inventive step cannot be assessed by resort to information or knowledge of the invention or information about any prior art gained through knowledge of the Patent. That involves a hindsight enquiry after the priority date, contrary to ss 7(2) and 7(3). In AstraZeneca AB v Apotex Pty Ltd (2014) 312 ALR 1, at [202]-[203], the Court said:

[W]hether a claim of a patent is invalid for lack of inventive step is to be determined by comparing the invention, so far as claimed, against the common general knowledge and any s 7(3) information. The question is then whether the invention would have been obvious to the hypothetical person skilled in the art in light of that knowledge considered separately from, or together with, the s 7(3) information. So understood, it is apparent that the relevant provisions of the Act do not expressly or impliedly contemplate that the body of knowledge and information against which the question whether or not an invention, so far as claimed, involves an inventive step is to be determined may be enlarged by reference to the inventor's (or patent applicant's) description in the complete specification of the invention including, in particular, any problem that the invention is explicitly or implicitly directed at solving.

If the problem addressed by a patent specification is itself common general knowledge, or if knowledge of the problem is s 7(3) information, then such knowledge or information will be attributed to the hypothetical person skilled in the art for the purpose of assessing obviousness. But if the problem cannot be attributed to the hypothetical person skilled in the art in either of these ways then it is not permissible to attribute a knowledge of the problem on the basis of the inventor's "starting point" such as might be gleaned from a reading of the complete specification as a whole…

65    Third, and relatedly, as Aickin J observed in Minnesota Mining & Manufacturing Co v Beiersdorf (Australia) Ltd (1980) 144 CLR 253 at 293:

When once an idea … has been published, it is very easy to say after perhaps months of search and study in the Patent Office and the public libraries that the integers into which the patent might be dissected could be found scattered amongst the prior documents by a person who already knew the solution to the problem and therefore knew what to look for and what to discard. But that process does not demonstrate lack of an inventive step. The opening of a safe is easy when the combination has already been provided.

66    Fourth, an egregious form of impermissible hindsight has been the situation where a witness has been shown the patent specification in suit at a stage prior to that witness giving evidence that there was no inventive step involved (PAC Mining Pty Ltd v Esco Corporation (2009) 80 IPR 1).

67    Much of the respondents’ arguments on this ground of invalidity made much of what had occurred in the US in relation to a corresponding patent application.

68    The respondents made much of the fact that, in assessing the obviousness of the corresponding US patent application, the US examiner noted significant disclosures in each of the Radebaugh (Tylenol) Patent (EP 0 305 051) and the Clemente Patent.

69    The respondents assert that each of the Radebaugh Patent and Clemente Patent are documents that the skilled addressee could, before the priority date of the relevant claims, be reasonably expected to have ascertained, understood, and regarded as relevant to work in the relevant art in Australia (see s 7(3) as it stood at the relevant date).

70    The respondents have pointed to the following matters described in the Radebaugh Patent, considered alone:

(a)    A bilayer tablet (p 5, lines 4-10, example 1), comprising;

(i)    an immediate release phase of Acetaminophen [paracetamol] in one layer (see p 5, lines 4-10, example 1);

(ii)    a sustained release phase of Acetaminophen in another layer (see p 5, lines 4-10, example 1);

(iii)    50% by weight of the Acetaminophen in the immediate release layer (see example 1);

(iv)    50% by weight of the Acetaminophen in the sustained release layer (see example 1);

(v)    a matrix forming polymer in an amount from 0.5 to 10% by weight of the sustained release phase (see p 4, lines 45-47; example 1);

(vi)    600-700mg Acetaminophen per unit dose (see p 7, line 3); and

(vii)    a mean plasma concentration of at least 3mcg/ml for at least 1.3 hours longer than a 500mg Acetaminophen containing immediate release formulation (see Table 2a and 2b, e.g. 3.0 and 4.0 hours post dosing).

(b)    The disclosed formulation is beneficial because it allows for easy modification of sustained release effect (p 4, lines 557-558) so that the rate of release of Acetaminophen may be easily controlled (see p 2, lines 8-10).

71    The respondents also rely upon the fact that the Radebaugh Patent teaches equivalent amounts of 50/50 in the immediate release and sustained release layers. They further point to the fact that the US examiner concluded that “a prima facie case of obviousness exists where the claimed ranges and prior art ranges do not overlap, but are close enough that one skilled in the art would have expected them to have the same properties”.

72    The respondents then pointed to what the US examiner noted concerning the Clemente Patent, which is said to have taught:

(a)    an immediate release phase of Acetaminophen [paracetamol] (see p 11, lines 27-28; p 19, line 21 – p 21, line 32);

(b)    a sustained release phase of Acetaminophen (see p 11, line 28; p 22, line 1–p 25, line 29);

(c)    Acetaminophen concentration of up to 650mg (see p 16, line 30);

(d)    matrix forming polymers such as hyroxypropyl cellulose and ethylcellulose (see p 9, lines 16-17); and

(e)    an in vitro Acetaminophen dissolution profile comprising (see Table 1, p 15).

•    33-49% dissolved after 15 min;

•    43-64% dissolved after 60 min; and

•    59-89% dissolved after 180 min.

73    The respondents say that the dissolution ranges are “strikingly similar” to those of the Patent, in addition to the other aspects of disclosure.

74    In summary, the respondents then contend that it follows that there is a strong prima facie case of a lack of inventive step. I disagree.

75    There seems to be a real doubt as to whether these documents are part of the relevant prior art information. GSK contends that there is no evidence that either of these documents satisfy the criteria of s 7(3). It challenges the assertion that the Radebaugh Patent and the Clemente Patent “could, before the priority date of the relevant claim, be reasonably expected to have [been] ascertained” by “a person skilled in the relevant art”.

76    The respondents relied upon evidence of searches that could have been carried out. But GSK pointed to the fact that Mr Sands’ evidence refers to two Derwent World Patent Index searches conducted by an employee patent attorney (Dr Dryza) with unknown technical qualifications. Mr Roberts noted that in the year 2000 and years since, Derwent had been expanding its index to “back-capture” a large volume of records that would not have been searchable at 2000. GSK said that conducting a Derwent Index search for publications dated on or before 19 April 2000 would not ensure that the relevant publications were actually included in the index as at that date.

77    In any event, the first search produced 146 results, one of which was the Radebaugh Patent. The second search included as a search term the word “McNeil”, the applicant on the Radebaugh Patent. Given that the Radebaugh Patent or its US equivalent were not part of the common general knowledge according to Dr Marshall, and Dr Marshall also was not aware of the Tylenol Extended Relief product, it is said by GSK that it is doubtful that the relevant person skilled in the art would have included “McNeil” in their search, unless they were guided by hindsight. And even with McNeil included in the search, it produced 106 results. Further, amongst the 106 results were two US Patents from the same family as the Radebaugh Patent, but not the Radebaugh Patent.

78    Further, the Clemente Patent was not found in either search. GSK contends that it is clearly not a s 7(3) document.

79    In my view, on the evidence adduced before me, I cannot say that there is a strong prima facie case that the Radebaugh Patent and the Clemente Patent were s 7(3) documents or part of the common general knowledge prior to the priority date. I am also fortified in my preliminary views by the following.

80    First, the Radebaugh Patent was raised during examination of the European equivalent of the Patent, but the examiner concluded that the Radebaugh Patent related merely to the general state of the art and was not relevant to novelty or inventive step considerations.

81    Second, the Apotex cross-claim seeking revocation of the Patent was filed on 30 October 2014. The original cross-claim cited six prior art publications. The Clemente Patent was not one of those cited. It would appear that at the time of preparing its cross-claim, Apotex did not consider the Clemente Patent to be sufficiently meritorious to be included in the cross-claim. The Clemente Patent was raised for the first time by Apotex in its amended cross claim on 11 December 2014.

82    I accept, though, that Generic Partners did make reference to the Clemente Patent at an earlier time.

83    Let me now make some comments on the expert evidence that has been relied upon.

84    Apotex has relied upon two reports of Dr Marshall. GSK has relied upon hearsay evidence as to the views of Professor Davies.

85    GSK has made substantial criticisms of the evidence of Dr Marshall.

86    GSK says that the inventive step case to which Dr Marshall’s evidence is directed is based on the false premise that it is legitimate to treat knowledge of the Tylenol Extended Relief product and its drawbacks as referred to in the Patent as the “starting point”, in circumstances where that knowledge was not information within the common general knowledge of the hypothetical formulator and was not s 7(3) information.

87    Further, it is said that Dr Marshall’s evidence is also wrongly based on knowledge of the Radebaugh Patent and the Clemente Patent.

88    GSK says that the respondents’ evidence does not establish that the Tylenol Extended Relief product, the Radebaugh Patent or the Clemente Patent satisfy the criteria prescribed by s 7(3). As I say, I am inclined to the view that the respondents have not made out a strong prima facie case that this material satisfies ss 7(2) and (3).

89    But putting to one side the common general knowledge and prior art questions, GSK says that the respondents’ evidence is flawed in any event. They say that the respondents’ inventive step evidence proceeds by a series of targeted leading questions designed to produce the required conclusion. It is said that such questions of their expert were posed and advanced with full knowledge of the claimed invention. GSK contends that no attempt has been made to heed the warnings of the dangers of hindsight or the leading of expert witnesses in the impermissible fashion that I have discussed earlier.

90    Further, it is said that there is no evidence that Dr Marshall had any practical experience in the formulation of sustained release formulations as at the priority date.

91    There are other criticisms that I do not need to dwell on.

92    Suffice it to say that, in my view and given the significant doubts that the Radebaugh Patent and the Clemente Patent are s 7(3) information, Dr Marshall’s evidence has significant difficulties. Moreover, as I have said, the respondents have not established that the Tylenol Extended Relief product was part of the common general knowledge or s 7(3) information prior to the relevant date either.

93    GSK has also relied upon the views of Professor Davies. The evidence of Professor Davies’ views was in hearsay form; no report of his was tendered. Such evidence accordingly has diminished weight for that reason alone. But the substance of his views further pointed against the respondents’ contentions.

94    Professor Davies had substantial involvement as a formulator before the priority date. In Professor Davies’ opinion, the discovery of a relationship or in vitro/in vivo correlation between a specifically defined in vitro profile and an advantageous in vivo profile is, apparently, very interesting and surprising, particularly in circumstances where:

    Many formulations do not exhibit an in vitro/in vivo correlation;

    Whether a particular formulation may exhibit such a correlation cannot be predicted from the physicochemical properties or formulation under development or the fact that a correlation exists for other formulations; and

    The existence of an in vitro/in vivo correlation can only be ascertained by comprehensive dissolution testing.

95    As at April 2000, Professor Davies was not aware of whether an in vitro/in vivo correlation had been developed or established for any formulation of paracetamol. As at 2000, Professor Davies considered that he and other formulators would have had no expectation that an in vitro/in vivo correlation could be demonstrated for a sustained release formulation of paracetamol, let alone one that could be effectively used to predict whether such a formulation would possess the advantageous pharmacokinetic properties identified in the Patent.

96    In substance, his views, if ultimately accepted, further point against the respondents’ invalidity case on this ground.

97    In summary, I do not consider that the respondents have made out a strong prima facie case on this ground. Indeed, I consider that their case is quite weak. There is real doubt as to whether the Radebaugh Patent and the Clemente Patent are relevant prior art information. Further, there are significant difficulties in how the evidence of Dr Marshall has been prepared and assimilated. Further, Professor Davies, who is more qualified than Dr Marshall in any event, has valid opposing views. Finally, although the respondents have placed significant reliance on the US Examiner’s views and approach, for my context I consider such views and approach to have little probative value, and more befitting of a jury point.

(b)    Lack of fair basis

98    The principles relevant to the assessment of this ground were considered in Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No 1) (2004) 217 CLR 274 (Lockwood Security (No 1)).

99    The High Court confirmed that what is required is a “real and reasonably clear disclosure”. The claim, as expressed, should not “travel beyond” the matter disclosed in the specification. A comparison is required between the claims which define the scope of the monopoly and what is described in the specification in order to determine whether there has been a “real and reasonably clear disclosure” of the invention claimed, or whether the claims “travel beyond” the invention described. It is a question of comparing the invention claimed with the invention disclosed.

100    It is also appropriate to note, however, what was said in CCOM Pty Ltd v Jiejing Pty Ltd (1994) 51 FCR 260 at 280, that it is not appropriate to adopt an “over-meticulous verbal analysis”.

101    The respondents contend that the Patent fails to demonstrate an in vivo/in vitro correlation over the very broad ranges of dissolution rates that it claims. It is said that the sole relevant disclosure in the Patent is Formulation C; I will address Formulation D later under a separate topic, but it can be put to one side for present purposes. Formulation C has specific dissolution data broadly in the middle of the arbitrary ranges of the claims. It is said that it does not, however, provide a real and reasonably clear disclosure of those ranges.

102    The respondents say that the absence of any disclosure of the broad range of the asserted “unique in vitro dissolution profile” beyond a broad consistory clause(s) means that none of the claims in suit comply with s 40(3). They rely on various observations in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2011] FCAFC 132 at [96]–[100] per Bennett J; [169]–[181] per Nicholas J; and [235]–[249] per Yates J.

103    The respondents have also made much of the fact that amendments were made to the US claims in relation to and in response to a “written description” objection. Apparently, the US claims were narrowed to claims in support of which, as to the polymer matrix, there was an adequate description in the specification. The failure to do this in Australia, Apotex contends, has led to “a monopoly on a patentee for a method of producing [multiple] outcomes [when] the patentee’s disclosure only enables the use of the method to produce some of those outcomes”. Apotex contends that this applies to the multiple compositions claimed with the broad “outcomes” of the dissolution rates of the claims. Again, I must say that I did not find reference to the US experience as being of much assistance to the present applications.

104    Generic Partners has made a further point. It says that the essential features of the pharmaceutical composition of the invention disclosed in the body of the specification are:

    a bilayer tablet having an immediate release phase of paracetamol and a sustained release phase of paracetamol;

    the immediate release phase being in one layer and containing from about 10-45% by weight of the total paracetamol;

    the sustained release phase being in the other layer and containing from about 55-90% by weight of the total paracetamol in admixture with a mixture of matrix-forming polymers; the matrix-forming polymers being of a particular type (for example high and low viscosity and present in a particular amount);

    the composition containing 600-700 mg of paracetamol per unit dose and a pharmaceutically acceptable carrier; and

    the composition having a particular in vitro paracetamol dissolution profile.

105    But it says that the claims are not limited to a pharmaceutical composition containing a sustained release phase containing paracetamol in admixture with:

    a mixture of matrix-forming polymers;

    of a particular type; and

    in a particular amount.

106    Accordingly, it says that the absence of these integers in various of the claims means that they travel beyond the invention disclosed in the body of the specification.

107    Generic Partners has placed much reliance on a passage of the specification at the top of p 6, which reads:

The amount of matrix-forming polymer in the sustained release phase and the relative amounts of paracetamol in the sustained release and immediate release phases are selected so as to provide the desired in vitro dissolution rate as herein before described.

108    Reference is also made by Generic Partners to Example 2, Formulation C, which is within the scope of the invention where there has been such disclosure.

109    It also makes reference to the fact that the stipulation of the amounts of the matrix-forming polymer only occurs in claims 10, 11 and 12. Accordingly, on Generic Partners’ contentions, if good, all of the claims go, except claims 10, 11 and 12. I should say, for completeness, that in relation to claim 12 that can be put to one side, as there is no allegation of potential infringement of claim 12.

110    Further, Generic Partners asserts that the claims travel beyond the specification because the true invention, as it sees it, requires a mixture of polymers, whereas the claims allow for a single matrix-forming polymer (see for example claim 1 which refers to “admixture with a matrix-forming polymer or a mixture thereof”). Further, if that separate point is also good, then all relevant claims, including claims 10 and 11, go because they all allow for a singular matrix-forming polymer.

111    GSK has adduced some evidence on these topics. Professor Davies considers that the features of the advantageous paracetamol formulation are clearly set out in the Patent. He has identified from p 4, line 27, that the Patent states that the pharmaceutical composition of the invention comprises:

[A] bilayer tablet having an immediate release phase of paracetamol and a sustained release phase of paracetamol, the immediate release phase being in one layer and comprising from about 10 to 45% by weight of the total paracetamol; and the sustained release phase being in the other layer and comprising from about 55% to 90% by weight of the total paracetamol in admixture with a matrix forming polymer or a mixture thereof; said composition comprising from 600 to 700mg of paracetamol per unit dose and a pharmaceutically acceptable carrier, wherein said composition has an in vitro paracetamol dissolution profile (as determined by the USP type III apparatus, reciprocating basket, with 250ml of 0.1M HCl at 37C set at a cycle speed of 15 strokes/minute) with the following constraints:

•    30 to 48% released after 15 minutes;

•    56 to 75% released after 60 minutes; and

•    greater than 85% released after 180 minutes.

112    According to Professor Davies, the specified dissolution profile does not represent a mere arbitrary selection of dissolution values, but rather correlates with advantageous in vivo pharmacokinetic attributes, as described in the Patent.

113    Mr Roberts, a patent attorney, considers that the specification of the Patent provides a real and reasonably clear disclosure of the invention claimed in the Patent. As he pointed out:

•    The features of the advantageous formulation are clearly set out in the Patent (see, for example, p 4, line 27 to p 5a, line 8).

•    The claims of the Patent are fairly based on the disclosure of the invention (as identified above) in the Patent. The Specification makes it apparent that the formulation identified as Formulations C and D are mere examples of the invention.

•    Further, the presence or amount of the particular polymer is not an essential feature of the invention. The specification explains, at page 5 line 23, that the sustained release phase comprises a “matrix forming polymer” and provides examples of such polymers from page 5 line 26 to page 5 line 32 (including HPMC).

114    In my view, for the purposes of the present context, there is a relatively short answer to the respondents’ contentions.

115    Fair basis can be established by a comparison with the consistory clause(s). However, even if the claim is based on and mirrors the form of the consistory clause(s), it will not be fairly based if other parts of the specification show that the invention is narrower than the consistory clause(s). What has been described as a “coincidence of language” between a claim and part of the body of a specification does not per se establish fair basing if that part of the language of the specification does not reflect the description of the invention in the light of the specification as a whole (Lockwood Security (No 1) at [87]). Further, it is also appropriate to restate that the complete specification is not to be read in the abstract; it is to be construed in the light of the common general knowledge and the relevant art before the priority date.

116    If one specifically considers the consistory clauses of the specification and generally the body of the specification, there is a good argument for saying that there is no narrowing of the invention as compared with the consistory clauses. Formulation C (and D) are expressed to be examples. Therefore, the assertion of a lack of fair basis made by the respondents is not strong.

117    To be clear about the matter, there are various aspects of the specification potentially demonstrating fair basing, namely:

    It contains the consistory clauses (pp 4-6); and

    The examples dealing with Formulations C and D (pp 12-16) arguably do not demonstrate any indication supporting a narrowing of the consistory clauses.

118    In summary, I do not consider that the respondents have demonstrated a strong prima facie case on this asserted ground of invalidity. Although this ground is relatively stronger than the lack of inventive step ground, nevertheless in my view it still does not rise to the level of a strong prima facie case.

(c)    Utility

119    Generic Partners asserts a lack of utility in relation to the various claims.

120    The steps of its argument are the following:

•    The promise of the Patent is that a bilayer (an immediate release and a sustained release phase) formulation of paracetamol which satisfies the “unique” in vitro dissolution profile of the alleged invention (including Formulation C) provides, inter alia, the Cmax attribute (in both the fed and fasted stated) (ie “mean maximum plasma concentration (Cmax) should be at least 20% lower compared to standard immediate release formulation”).

•    Figure 2 of the Patent depicts a typical pharmacokinetic bioequivalence study, designed to investigate the bioequivalence of different formulations in terms of, amongst other things, Cmax, AUC, and Tmax. Figure 2 depicts the average or mean paracetamol serum concentration (mcg/ml), at each time point, for the 26 subjects. In this context, Cmax is the maximum concentration of drug in the serum after administration. The peak of the ‘curves’ in Figure 2 is, by definition, the mean Cmax of the drug. This is a standard way to measure Cmax. It is reasonable and valid to read the mean Cmax of the drug off the graph depicted in Figure 2.

•    The promise of the patent is that Formulation C provides (in both the fed and fasted states) a mean maximum plasma concentration (Cmax) at least 20% lower compared to standard immediate release formulation. Cmax can be read off the graph depicted in Figure 2. It is apparent from the graph depicted in Figure 2 that Formulation C does not have the Cmax attribute in the fed state. Therefore, the claims of the Patent include within their scope formulations that do not meet the promise of the Patent and thus lack utility.

121    In my view, Generic Partners’ articulation of the promise of the Patent is too narrow. Accordingly, the foundation of its argument has real difficulties. Further, and in this context, it reads too much rigidity into the reference “at least 20%”. There is much to be said for the view that the formulation the subject of the Patent should simply have a lower Cmax compared to a standard immediate-release formulation, and also possess each of the other attributes described.

122    As to the statement “…should be at least 20% lower…”, GSK contends that this must be read in context and, when read in context, does not support the rigidity contended for. GSK points to the words on p 2, “preferably at least 20% lower”. Second, they say that the words “…should be at least 20% lower…” in integer 2 on p 3 appear underneath the prefatory words, “In summary…”. Third, to the extent that Generic Partners refers to Formulation C, they say that the “fasted” plotted line (satisfying the “at least 20%”) and the fed plotted line (not satisfying the “at least 20%”), all point to a degree of flexibility, particularly when, under Figure 2, it is said, “Formulation C met all of the pharmacokinetic criteria outlined above for an ideal sustained-release paracetamol tablet”. Accordingly, flexibility appears to have been intended. Generic Partners says that the statement under Figure 2 was an error, but the other and more coherent reading is how GSK has put its case, namely, that some degree of flexibility was intended.

123    In summary, in my view, although there may be a prima facie case on this ground, it only rises to a level lower than the other asserted grounds of invalidity previously discussed.

(d)    Section 40(2) - sufficiency

124    Section 40(2)(a) of the Act provides that a complete specification “describe the invention fully including the best method known to the applicant of performing the invention”. Let me deal with the first limb.

125    The test for sufficiency has been formulated by the High Court in Kimberly-Clark Australia Pty Ltd v Arico Trading International Pty Ltd (2001) 207 CLR 1 (Kimberly-Clark):

The question is, will the disclosure enable the addressee of the specification to produce something within each claim without new inventions or additions or prolonged study of matters presenting initial difficulty?

126    In Lockwood Security Products (No 1), the High Court said, citing its earlier decision in Kimberly-Clark:

For the purposes of s 40(2)(a), it is not necessary for the inventor to disclose all the alternative means; it is enough that there is disclosure in the sense of enabling the addressee of the specification to produce something within each claim without new inventions or additions or prolonged study of matters presenting additional difficulty.

127    The respondents’ contention is that there is an insufficient description, even to make Formulation C. It is then said to follow that there is an insufficient description to make other formulations within the claims. It is said that the dissolution profile depends on the nature, and amounts, and mixtures, of the matrix-forming polymer.

128    Contrastingly, Professor Davies considered that the disclosure in the specification, for example, the list of ingredients on p 12 for Formulation C, would have enabled him and his colleagues to produce a formulation falling within the scope of each of the claims of the Patent in April 2000. He said that the Patent teaches, for example at p 7, that the ingredients may be used to produce a bilayer tablet using conventional techniques, such as wet granulation or direct compression. Professor Davies said that whilst Formulation C does not specify the particular grades of the identified matrix-forming polymer used, it would be a matter of routine for a skilled formulator to determine the particular viscosity grades of the relevant polymer required to achieve a dissolution profile within the scope of the claims.

129    Mr Roberts also considered that the specification satisfies the sufficiency requirement. As he said, the detailed description and list of ingredients for “Formulation C”, set out on p 12 of the Patent alone, would enable a skilled formulator to prepare, using conventional tableting techniques, a bilayer tablet falling within the scope of the relevant claims (1, 2, 3, 4, 5, 6, 8, 9, 10, 13 and 14 of the Patent).

130    The respondents have sought to counter this material with assertions to the contrary. I cannot decide the merits or strength of these arguments at this level. Accordingly, the respondents have not persuaded me that they have a strong prima facie case on this aspect. It is at the same level of strength (as a prima facie case) as the lack of utility ground.

(e)    Best method

131    Generic Partners (and also Apotex) assert that there is evidence suggesting that the best method has not been disclosed.

132    On 8 September 2000, GSK applied to register its product, Panadol Extend, on the ARTG. Generic Partners says that it may be inferred that the Patent applicant had the same knowledge as GSK at that date and after. The application for the Patent was filed in Australia on 4 December 2001.

133    Generic Partners says that even on GSK’s preferred construction of the Patent, the Patent states (and thus, the patent applicant was aware) that a sustained release formulation of paracetamol should demonstrate a lower Cmax, preferably at least 20% lower, than the conventional immediate release formulation. It says that it does not appear to be disputed that Formulation C, as disclosed in the Patent, does not demonstrate a mean maximum plasma concentration (Cmax) at least 20% lower compared to standard immediate release formulations in the fed state.

134    Generic Partners then says that the patent applicant had, at 8 September 2000, selected “Formulation D” (as described in the Patent, p 15, example 3) for commercialisation. It says that this is to be inferred from the description in GSK’s ARTG application of Formulation D, as to the application formulation, and the fact that Formulation D in the GSK ARTG application had the same “average” dissolution profiles for Formulation D in the Patent, the same amount of total paracetamol, and also the same ratio of sustained release to immediate release paracetamol. Generic Partners asserts that the GSK ARTG application discloses that at the time when the application for the Patent was lodged at the Patent Office (4 December 2001), the Patent applicant was aware that Formulation D had a mean maximum plasma concentration (Cmax) at least 20% lower compared to standard immediate release formulations in both the fasted and the fed state, whereas Formulation C did not.

135    Accordingly, Generic Partners contends that Formulation D was at all relevant times the better method of performing the invention than Formulation C, because it demonstrated a Cmax at least 20% lower than the conventional immediate release formulation in both the fed and fasted states, which Generic Partners asserts is the preferred pharmacokinetic attribute.

136    Generic Partners invited me to find, given the foundation of its argument, that Formulation D was known at the relevant time to be the best method, and that Formulation D was not disclosed to the required level in the Patent. It invited me to draw that conclusion for the following reasons:

    The ingredients in Formulation D are different to Formulation C, in both type and amount.

    It is apparent from a comparison of Formulation B in the Patent and Formulation C in the Patent that differences in the amount of the ingredients and type of ingredients affect the in vitro dissolution profile and the pharmacokinetic profile. At the very least, the amount of matrix-forming polymer is part of the invention of the Patent since it is specifically claimed in claims 10 to 12.

    Reference was also made to Dr Marshall’s report dated 30 January 2014. In this report Dr Marshall set out his assumptions as to the ingredients in Formulation D based on his reading of the Patent. He stated:

As page 15, line 15 states that Formulation D was essentially similar to Formulation C, the relative amounts of paracetamol are adjusted accordingly and the amounts of excipient are assumed to be approximately the same.

Dr Marshall then listed the ingredients he assumed to be in Formulation D as a %w/w of the total formulation. It was then said that if one did a comparison between what Dr Marshall assumed to be Formulation D and what was in fact Formulation D as now known from the GSK ARTG application, that there were considerable differences. That being so, Generic Partners says that this Court should find that the statement in the Patent specification that Formulation D was essentially similar to Formulation C was not accurate and did not amount to an adequate disclosure of Formulation D and, therefore, the best method known to the Patent applicant.

137    GSK has made a number of answers to this contention.

138    First, it challenges the assertion that the Patent does not in fact disclose Formulation D. In my view, as is apparent from the Patent, there is some disclosure. The key attack of Generic Partners is on the adequacy of the description “essentially similar” which is used in describing Formulation D as compared with Formulation C. I agree with GSK’s contention when it says that whether this is an adequate description for the skilled addressee is a matter for an evaluative judgment, which requires expert evidence to be tested and considered by me at trial. Such an issue cannot be resolved on the present interlocutory applications. Moreover, assuming that there are differences, as GSK put it:

Whether there are differences, and whether they are of the slightest significance is at this stage a matter only of conjecture and will remain so until expert evidence has been properly adduced and tested.

GSK says that if there are differences between what has been described as Formulation D in the specification and what appears to be Formulation D in the earlier application for the registration of the product on the ARTG, that any differences may be of little, if any, significance. It also attempted to explain the differences as being produced by a combination of:

(a)    a proportionate reduction in the excipients as a result of a change in the weight of the paracetamol; and

(b)    the presence in both formulations of DC90, which is a form of commercially available paracetamol (see p 9 of the Patent: “DC90 is a commercially available directly compressible paracetamol granulation containing about 90% by weight of paracetamol together with pregelatinised starch, croscarmellose sodium, polyvinylpyrrolidone and stearic acid”).

139    Accordingly, on this argument alone, although the respondents may have a prima facie case on this ground, I cannot conclude that it is a strong prima facie case. I cannot conclude that there is a strong prima facie case that Formulation D has not been properly disclosed in the specification.

140    Second, GSK has challenged whether Formulation D was in fact known to be the best method, including better than Formulation C. GSK asserts that there may be a number of good reasons as to why Formulation D was ultimately adopted and unrelated to whether Formulation C was or was not the better method. There is uncertainty as to which of Formulation C or Formulation D is the better or best method.

141    GSK points out that Generic Partner’s contention that Formulation D was (and was known by the patentee to be) a better method than Formulation C is based on the assertion that Formulation D met what Generic Partners alleges to be the “promise” of the invention, namely to achieve a Cmax that is at least 20% lower than an immediate release formulation, whereas Formulation C did not do so (at least in the fed state). But as I indicated earlier, GSK has submitted that the Patent makes no such promise.

142    Again, it seems to me that GSK’s submissions have some force.

143    In summary, in my view this is all a matter of evidence for trial. Although Generic Partners (and Apotex who also relied on this point) have a prima facie case, I cannot presently conclude that it has a strong prima facie case on this aspect of alleged invalidity. It is stronger than the lack of utility ground but less strong than the lack of inventive step ground.

Summary – Prima Facie Case

144    There is little doubt that GSK has a strong prima facie case on infringement, assuming the relevant claims to be valid.

145    On the question of the respondents’ assertions on invalidity, they of course have the onus ultimately of establishing them.

146    In terms of relative significance as between the various grounds of alleged invalidity, the stronger appears to be the lack of fair basis claim, followed by the lack of inventive step, and then, in order, a failure to disclose the best method, lack of utility and lack of sufficiency.

147    In my view, in summary, the assertions of invalidity seem to have some merit, but I am not satisfied that any of such asserted grounds of invalidity, separately or together, rise to the level of a strong prima facie case on invalidity. In my view, the prima facie case on invalidity is outweighed by the strength of the prima facie case on infringement.

Balance of Convenience

148    It is appropriate to begin by making a number of preliminary observations.

149    First, the status quo is that the respondents are presently not in the market.

150    Second, as GSK points out, this is not a case where granting an interlocutory injunction or not releasing the respondents from their undertakings will practically put an end to this litigation. Not releasing the respondents from their undertakings will only delay the entry by the respondents into the market, although of course such a delay has significant consequences for them.

151    Third, the Patent is of longstanding, having seven years left to run. The respondents have known of the Patent for some time, and that their products may infringe, if the Patent was valid. But they have not, as GSK describes it, sought to “clear the way” by bringing revocation proceedings at an earlier time.

152    Fourth, GSK has an established and very strong market position in relation to its products. The respondents do not.

153    Let me then turn to some specific matters.

(a)    Harm to GSK

154    Generally, the harm that GSK would suffer if an interlocutory injunction were refused in my view is much greater than the harm that the respondents would suffer if one were granted.

155    GSK has, through its marketing of the relevant products, established a long-term substantial position in the Australian market. GSK has sold Panadol Back & Neck Long Lasting in Australia since 2000, and Panadol Osteo since 2005. Annual sales of the relevant products are in the tens of millions of dollars per year.

156    Contrastingly, the respondents have no established position in the market.

157    The only competitive generic products to the GSK products are supplied by:

    AFT; and now

    Pharmacor.

158    The evidence does not establish that any other company (apart from the respondents, if they were to be released from their undertakings) is likely to enter the market with generic products in the short term.

159    Further, I should say that GSK is presently bound by an undertaking not to launch its own generic product and will continue to be bound (or is likely to continue to be bound) whilst the respondents are also restrained.

(b)    Loss of sales and market share

160    If Apotex (and via Apotex, Generic Partners) is allowed to commence selling the relevant products, GSK is likely to suffer a rapid and substantial loss of sales and market share.

161    Mr Rodney Stosic (Mr Stosic), head of healthcare professional and expert communications at GSK, estimated that if Apotex was allowed to enter the market, the market share of GSK could realistically drop :

(a)    to 40% at the end of the first month;

(b)    to less than 30% within a year; and

(c)    to less than 20% within 2 years.

162    These estimates are comparable to losses of market share suffered by originators in the face of competition from large generic companies in case studies cited by Mr Stosic from 2011 and 2012.

163    GSK says that the expected impact of the respondents’ market entry reflects the strength of Apotex in the generic pharmaceuticals market in Australia.

164    Further, GSK says that if the respondents are released from their undertakings and commence supplying the relevant products, it is likely that the price of GSK’s products will be adversely affected. It says that the launch of the relevant products would put downwards pressure on prices. GSK would need to discount to defend its market position, or to release its own generic brand, which would not be sold at a brand premium. The prospect of generic competition has apparently already motivated GSK to offer a 10% discount to customers who have placed orders for Panadol Osteo between 21 November and 18 December 2014. GSK’s arguments have considerable force.

165    Further, it is said that the likely outcome of Apotex’s entry into the market would be to undermine consumer loyalty for the Panadol Osteo brand, which is an important part of GSK’s business. Again, that argument has considerable force.

166    Apotex has made reference to the position of Pharmacor and AFT in the generics market and has asserted that its entry into the generic market would only have a limited impact on GSK. I disagree. Moreover, the evidence does not establish such an assertion. Indeed, it is counter-intuitive. It seems partly to be based on an assertion that Pharmacor and AFT will take all the market share anyway. But that is an assertion with which I disagree. Apotex seems to contend that any market share lost by GSK would be due to Pharmacor and AFT, and that the effect of Apotex’s entry would merely involve a reallocation of such already lost market share. I disagree.

(c)    AFT

167    In my view, AFT is unlikely to become a significant competitor of GSK:

    First, AFT is a very small player in the generic pharmaceutical market, holding 1% market share by volume 0.4% market share of all generic pharmaceuticals. Further, it does not have a distribution network that is comparable to that of Apotex.

    Further, the AFT product is a monolayer tablet. Further, unlike Panadol Osteo, it is not indicated on the ARTG for effective relief from pain for up to 8 hours. Moreover, the AFT product is not currently listed on the PBS. Further, although AFT has been supplying a 665 mg sustained release paracetamol product in Australia since early 2013, the presence of the AFT product has not significantly affected sales of GSK’s products.

168    Second, the respondents gave undertakings to this Court despite AFT’s presence in the market. It appears to me that the respondents have not previously been troubled about being constrained even with AFT’s presence in the marketplace. In my view, the position of AFT for present purposes can be put to one side.

(d)    Pharmacor

169    Pharmacor is also unlikely, at least in the short term, to become a significant competitor of GSK. As GSK points out, Pharmacor is only a very small player in the generic pharmaceutical market, holding about 0.4% market share both by volume and value of all generic pharmaceuticals. The Pharmacor product was listed on the PBS on 1 December 2014, and Pharmacor launched a 665 mg sustained release paracetamol tablet in December 2014. Nevertheless, despite its incentive to gear up to launch with a so-called “first mover advantage”, Pharmacor has not apparently supplied significant quantities of its product. GSK has chosen to maintain a brand premium in response to Pharmacor’s PBS listing, rather than to match the new manufactured price set by Pharmacor. This suggests that it does not perceive Pharmacor to be much of a competitive threat, certainly in the short-term. I should say, however, that in the pre-Christmas period, GSK has been engaging, on the evidence, in some discount activities.

170    Apotex, through its Managing Director, Mr Roger Millichamp, has speculated that Pharmacor, or indeed, AFT, having applied for an ARTG, could obtain registrations on the ARTG for additional brands of their products and transfer those registrations to third party generic companies. This evidence appears to be speculative. But if circumstances such as these occur and there are changed circumstances warranting it, then no doubt any restraints on the respondents could be revisited.

(e)    Harm to the respondents

171    The respondents assert that if they are not released from their undertakings, they will lose the possibility of first mover advantage, either to Pharmacor or other generics.

172    They assert that the harm to the respondents, if they are not released from their undertakings, is in lost sales of the relevant products, and the potential to leverage sales of relevant products with other products.

173    In my view, whilst the loss of first mover advantage is a matter to be weighed in the balance, it is not a decisive consideration in assessing where the balance of convenience lies. As Yates J said in Otsuka Pharmaceutical Co Ltd v Generic Health Pty Ltd (2012) 291 ALR 763 at [178]:

I accept that the evidence discloses a benefit of being the “first mover” in the sense in which the respondent uses that term. It is clear, however, that that advantage is one that derives from what I have found to be a prima facie case of threatened infringement of the 772 patent. Thus it is an advantage that is sought to be derived at the expense of the applicants’ asserted monopoly rights.

174    Further, the risk that Apotex would lose first mover advantage may be overstated. Further, GSK has undertaken not to launch its own generic whilst the respondents are restrained.

175    Further, as I have already said, Pharmacor and AFT are very small players. As Mr Stosic deposed to in his affidavit of 10 December 2014 at [32]:

(a)    when a small "player" launches first, it does not end up with a large or disproportionately large share of the market;

(b)    when there are numerous generics in the market and larger "players" entering the market after smaller "players", no one generic product necessarily obtains a significant market share over the other generics, but the originator brand's sales substantially decrease;

(c)    if a "large" player comes into the market later, it will quickly obtain significant market share. I consider Aspen Pharmaceutical's entry into the valaciclover market illustrates this scenario, as Aspen obtained significant market share despite other large players like Apotex, Alphapharm and Sandoz being in the market at the same time; and

(d)    …if a "large" player comes into the market later and there are only "smaller" players in the market, then I expect that the "large" player will quickly obtain significant market share.

176    Further, as Mr Stosic deposed at paragraphs [41]-[42]:

I believe … [the case studies indicate] that if a large generic company such as Apotex comes into a market after a first "smaller" generic, the larger generic company does not lose an "early mover" advantage. Rather, the larger generic can and will obtain a substantial foothold in the market.

As I explain above, Pharmacor is significantly smaller, in terms of range of products offered, and in terms of distribution reach and therefore sales potential, than Apotex. Accordingly, given all the matters I have described in this affidavit I do not consider that Pharmacor's entry in the PANADOL OSTEO market prior to Apotex will prevent Apotex and Generic Partners gaining market share if Apotex and Generic Partners were free to do so ...

177    Moreover, if Apotex suffers lost sales as a consequence of a loss of “first mover” advantage, Apotex will be able to recover its losses by claiming on GSK’s undertaking as to damages, subject to forensic quantification questions which I will discuss shortly.

(f)    Failure to clear the way

178    GSK contends that the respondents with full knowledge of the Patent chose to take the risk of being restrained. They have proceeded with their “eyes wide open”. I accept that an inference to that effect can be drawn from the existing material.

179    The respondents entered into an agreement on 28 April 2011 for the proposed supply by Generic Partners of the relevant products to Apotex, for sale by Apotex to the Australian market.

180    The supply agreement apparently contemplated that Apotex would conduct a review to determine whether the supply of the relevant products would infringe any patent.

181    On 17 July 2012 the respondents entered into a deed of variation under which Apotex opted for exclusive supply of the relevant products under the supply agreement.

182    Apparently, Apotex had completed its patent review. One inference open is that the respondents knew by no later than mid-2012 that the importation, sale and supply of the relevant products was likely to infringe the Patent (if valid).

(g)    Difficulty of quantifying loss

183    The respondents assert that if they are not released from their undertakings and are successful at trial, it will not be possible to calculate their losses with precision. This can be accepted. But GSK’s losses would be no easier to calculate than the respondents’ losses, assuming that I was to lift the restraint on the respondents. The calculation of potential losses which would be suffered by GSK are likely to be equally complicated. In particular, they include:

    likely damage to brand loyalty; and

    the extent of any loss of business for other GSK products due to pharmacists ceasing to purchase Panadol Osteo.

184    Further, to calculate GSK’s losses suffered as a result of Apotex being in the market, GSK would need to prove that sales by Apotex caused lost sales to GSK. This is likely to be a complicated forensic exercise in circumstances where no doubt Pharmacor and AFT would presumably make some sales and, moreover, Apotex would likely argue that where it had made a sale, it could not be said that this represented a lost sale to GSK. Rather, it is likely to contend that sales lost by GSK were taken by Pharmacor or AFT.

185    In my view, the position is analogous to the context discussed by Jagot J in Merck Sharpe & Dohme Corp v Apotex Pty Ltd (2012) 97 IPR 414, where the relevant market not only included the patented product, but also substitutable products. Jagot J held that in these circumstances the suggestion that there is a different complexity confronting assessment of the generic’s loss compared with the innovator’s loss may lack force.

186    Now Apotex’s interlocutory application offers an undertaking to the Court in the following terms:

In support of order 1 below, the Respondent, by its counsel, offers an undertaking to the Court to maintain records of all sales made by it of all ‘Apotex Products’ (as defined in the Amended Statement of Claim).

187    Apotex submits that if GSK were ultimately able to establish that it had, in fact, lost sales because of Apotex’s participation in the market, then determining the corresponding calculation of damage would likely be quite straightforward, being the amount of profit that GSK was able to show that it would have made in respect of any such lost sales. Further, it says that if GSK instead elected for an account of profits, then that would proceed in the ordinary way and would look at the amount of profit that Apotex made by reason of the alleged infringement and that such an account would be conducted and ascertained by looking at evidence of actual sales and actual profits. Contrastingly, Apotex says that if it is restrained and then succeeds at trial (including any appeal), then trying to assess what levels of sales, and hence profits, Apotex would have made had it not been restrained would be far more difficult. It says that a far greater level of speculation and guesswork would be required by the court in order to assess that loss. As I have said, I do not agree with such submissions. But even if there was some force in them, in my view, that would not tip the balance of convenience in favour of Apotex.

(h)    Generic Partners’ arguments

188    Generic Partners essentially has relied upon Apotex’s submissions concerning balance of convenience but made assertions to similar effect in relation to its own position. Generic Partners asserts that the loss that Generic Partners would suffer if it continues to be prohibited from supplying the relevant products to Apotex is significant. It says that that loss would be very difficult to quantify because the extent of the market share that Apotex would initially win – which determines the volume of sales that Generic Partners would have made to Apotex – is unknown. It then says that on the other hand, GSK’s loss is readily quantifiable.

189    I do not need to say anything further about its arguments, to the extent that they overlap with the arguments of Apotex. My responses to those arguments are the same.

Summary – Balance of Convenience

190    In my view, the balance of convenience clearly favours GSK and maintaining the present restraints. I have said why above, but it is appropriate to draw together some of the most compelling features.

191    First, GSK has a stronger prima facie case on infringement than the respondents do on invalidity.

192    Second, GSK has a very substantial and long-standing business and supply of relevant products into the market. The respondents do not at all. What GSK would lose or be likely to lose is something tangible and very substantial if restraints were not in place. Contrastingly, the respondents currently have no market position.

193    Third, if Pharmacor was not in the market, I would have had no hesitation in refusing the respondents’ applications. But as Pharmacor is now in the market (albeit an embryonic presence), this, of course, has complicated the analysis. But having said that:

    Pharmacor has a very small market presence;

    Further, Pharmacor is not in the position of Apotex and Generic Partners where there is a strong prima facie case against the latter for infringement; and

    Further, as I have already said, GSK is currently restrained and will continue to be restrained from itself supplying generics into the market under a restraint that is co-terminus with the restraints that currently apply to Apotex and Generic Partners.

194    Fourth, Apotex and Generic Partners have and will have the benefit of an undertaking as to damages.

195    Fifth, the forensic problems of the proof of quantum of losses from the perspective of GSK if the respondents were not restrained and from the perspective of the respondents if they are restrained is equally balanced. But as I have said, in any event, even if this factor was more weighted to the prejudice of the respondents, I do not consider that overall this would tip the balance of convenience in favour of the respondents.

Conclusion

196    In my view, the existing restraints should remain in place.

197    As the respondents have taken no position as to form, that is, whether I should leave the undertakings in place or discharge the undertakings and impose injunctions, I will leave the existing regime in place.

198    Accordingly, each of the respondents’ applications to be discharged from the undertakings will be dismissed.

199    I will give counsel an opportunity to make submissions on the appropriate orders.

200    The respondents have also raised the issue of seeking a variation to the undertakings and I will hear the parties on that issue as well as on any question of costs.

Associate:

Dated:    19 December 2014

Schedule

Evidence for interlocutory hearing on 12 December 2014