FEDERAL COURT OF AUSTRALIA

Merck Sharpe & Dohme (Australia) Pty Ltd v Genentech Inc [2016] FCA 324

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed as incompetent.

2.    The applicant pay the costs of the Commissioner of Patents.

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

REASONS FOR JUDGMENT

RARES J:

1    Merck, Sharpe & Dohme (Australia) Pty Ltd commenced these proceedings by filing a notice of appeal (intellectual property) on 2 June 2015 against the decision of the delegate of the Commissioner of Patents given on 12 May 2015 (Merck, Sharpe & Dohme (Aust) Pty LTd v Genentech Inc (2015) 113 IPR 126) (the second decision). The delegate had decided that amendments to the specification and claims in patent application 2003287257 made by Genentech Inc had overcome the deficiencies in various claims made in the original version of Genentech’s specification that the delegate had found in her first decision made on 6 February 2014 (Merck, Sharpe & Dohme (Australia) Pty Ltd v Genentech Inc (2014) 105 IPR 321).

2    The subject matter of the patent application was the inhibition of the production of a protein, interleukin-17 (IL-17). IL-17 is in a class of soluble proteins, known as cytokines, that contributes to the control of mammalian immune responses by promoting inflammation. Sometimes such immune responses, themselves, will amount to an inflammatory disease or disorder, an example being asthma.

Procedural background

3    On 10 March 2010, Merck filed a notice of opposition with the Commissioner pursuant to s 59 of the Patents Act 1990 (Cth) raising a number of grounds. The grounds included assertions that the invention was not a patentable invention because, first, it was not novel and, secondly, it did not involve an inventive step (ss 59(b), 18(b)(i) and (ii)).

4    In the first decision, the delegate found that, relevantly, each of independent claims 1, 4, 5, 14, 15 and dependent claim 28 lacked novelty. That was because she found that three of four pieces of prior art, on which Merck had relied, had anticipated certain, but not all, of the inflammatory diseases, as defined in the specification, the subject of the impugned claims. However, the delegate rejected Merck’s argument, based on the same four pieces of prior art, that the invention did not involve an inventive step. She decided that it was possible for Genentech to amend the impugned claims in order to overcome all the deficiencies that she had found and she allowed it two months to do so.

5    Merck did not, and does not now, seek to appeal to this Court against the first decision, pursuant to s 60(4) of the Act.

6    After Genentech filed an amended specification and claims (the amended application) on 4 April 2014, Merck sought to argue that amended claims 1-14 were not novel and that they lacked an inventive step on the basis of a further piece of prior art that it had not previously raised. The delegate found that her earlier decision was final and had decided all of the issues arising on the notice of opposition. She determined that it was too late for Merck to raise or reargue the issues of novelty and inventive step in accordance with R v Smith (Commissioner of Patents); Ex parte Mole Engineering Pty Ltd (1981) 147 CLR 340.

7    Merck filed its amended notice of appeal in these proceedings on 24 August 2015. The two substantive grounds of the original and amended notices of appeal, were that the invention within the meaning of s 18(1)(b)(i) and (ii) of the Act as claimed in amended claims 1-14 was not a patentable invention because, first, it was not novel and, secondly, it did not involve an inventive step.

8    The Commissioner appeared in exercise of her right under r 34.23 of the Federal Court Rules 2011 (Cth) and contended that the amended notice of appeal is incompetent.

9    The Commissioner submitted that each of Merck’s grounds of appeal had been capable of determination in an appeal against the first decision and that, accordingly, Merck could not raise either ground to challenge the second decision. She argued that this was by reason of the settled construction of how the right to appeal to this Court under s 60(4) of the Act against decisions of the Commissioner (or her delegate) operates.

10    Merck contended that if its appeal were competent, it was entitled, under its interlocutory application, to summary judgment under s 31A(1) of the Federal Court of Australia Act 1976 (Cth) or r 26.01 of the Federal Court Rules 2011 (Cth). It sought an order that amended claims 1-14 be refused and the amended application otherwise proceed to grant. The Commissioner made no submissions on Merck’s interlocutory application.

11    Genentech filed a submitting appearance. However, at the commencement of the hearing of the Commissioner’s objection, counsel for Genentech appeared and stated that, if the objection failed, Genentech would seek leave to withdraw its submitting appearance.

12    For the reasons that follow, I am of opinion that the Commissioner’s argument is correct and that Merck’s appeal is incompetent.

The legislative scheme

13    It was common ground that, because the filing of the request for examination occurred on 15 August 2007, the provisions of the Act relevant to the opposition were those in force prior to the commencement of the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth). The provisions relating to novelty and inventive step were:

7    Novelty and inventive step

Novelty

(1)    For the purposes 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;

…

Inventive step

(2)    For the purposes of this Act, an invention is to be taken to involve an inventive step when compared with the prior art base unless the invention would have been obvious to a person skilled in the relevant art in the light of the common general knowledge as it existed in the patent area before the priority date of the relevant claim, whether that knowledge is considered separately or together with the information mentioned in subsection (3).

(3)    The information for the purposes of subsection (2) is:

(a)    any single piece of prior art information; or

(b)    a combination of any 2 or more pieces of prior art information;

being information that the skilled person mentioned in subsection (2) could, before the priority date of the relevant claim, be reasonably expected to have ascertained, understood, regarded as relevant and, in the case of information mentioned in paragraph (b), combined as mentioned in that paragraph.

…

18    Patentable inventions

Patentable inventions for the purposes of a standard patent

(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:

…

(b)    when compared with the prior art base as it existed before the priority date of that claim:

(i)    is novel; and

(ii)    involves an inventive step;

…

14    The Minister or any other person had a right, under s 59 of the Act, to oppose the grant of a standard patent, in accordance with the Patents Regulations 1991 (Cth), only on one or more of the grounds specified in s 59, including that “the invention is not a patentable invention” (s 59(b)). Critically, s 60 provided:

60    Hearing and decision by Commissioner

(1)    Where the grant of a standard patent is opposed, the Commissioner must decide the case in accordance with the regulations.

(2)    The Commissioner must give the applicant and the opponent a reasonable opportunity to be heard before deciding a case.

(3)    The Commissioner may, in deciding a case, take into account any ground on which the grant of a standard patent may be opposed, whether relied upon by the opponent or not.

(4)    The applicant, and any opponent, may appeal to the Federal Court against a decision of the Commissioner under this section. (emphasis added)

15    Chapter 10 of the Act dealt with amendments. Where the Commissioner granted an applicant leave to amend a patent request, s 104 relevantly provided:

104    Amendments by applicants and patentees

(1)    An applicant for a patent or a patentee, may, subject to this Act, and subject to and in accordance with the regulations, ask the Commissioner for leave to amend the relevant patent request or complete specification, or any other filed document, for any purpose including either or both of the following:

(a)    removing a lawful ground of objection to the request or specification, whether that objection is raised in the course of an examination or re-examination or otherwise;

(b)    correcting a clerical error or an obvious mistake.

(2)    Where an applicant or patentee asks for leave to amend a patent request or complete specification, or any other filed document, the Commissioner must consider and deal with the request in accordance with the regulations.

(4)    The Minister or any other person may, subject to and in accordance with the regulations, oppose allowing an amendment.

(5)    The Commissioner must not allow an amendment that is not allowable under section 102.

(6)    On the allowance of an amendment, the amendment is to be taken to have been made.

(7)    An appeal lies to the Federal Court, against a decision of the Commissioner allowing, or refusing to allow, a requested amendment, other than a prescribed decision. (emphasis added)

16    Chapter 5 of the Regulations dealt with opposition for the purposes of the Act, including under ss 59 and 104(4) (reg 5.1(a)(i) and (iv)). The only ground on which reg 5.3(4) permitted a person to oppose the allowance of a proposed amendment was that it was not allowable under s 102. It was common ground that all of the amendments made by Genentech after the first decision were allowable and that none was prohibited by s 102 (or s 104(5)). Neither Merck nor the Commissioner raised any issue as to whether the power to make regulations as to the grounds for opposing an amendment under s 104(4) can be limited to only what ss 102 and 104(5) prohibit in any event: cf New England Biolabs Inc v F Hoffman–La Roche AG (2004) 141 FCR 1 at 16 [52] and Mole Engineering 147 CLR at 348.

17    Chapter 10 of the Regulations dealt with amendments to, among others, a patent request. An applicant for a patent could apply under reg 10.1(1) and (1B)(a) to amend a patent request to remove a lawful ground of objection. Under reg 10.2(1), the Commissioner, for the purposes of s 104(2), had to report on whether a request for leave to amend and the proposed amendment complied, among other matters, with reg 10.1 and was allowable under s 102.

The original patent application

18    Genentech filed the patent application on 29 October 2003, claiming priority under the Patent Convention Treaty from the date of filing in the United States of America of the related provisional application on 30 October 2002. The patent application was published in the Australian Official Journal of Patents on 1 July 2004 and later advertised as accepted after examination. On 10 March 2010, Merck filed its notice of opposition.

19    The patent application described the field of the invention as concerning the inhibition of the production of IL-17 by T-cells, using an antagonist of interleukin-23 (IL-23) (page 2 lines 6-11). It noted that IL-17 was a pro-inflammatory cytokine. The delegate explained that a cytokine is a class of soluble proteins that form the basis of the immune response in mammals. The specification defined an IL-23 antagonist as a molecule that partially or fully blocks, inhibits, neutralises, prevents or interferes with a biological activity of IL-23 regardless of the underlying mechanism, including in activated T-cells (page 7 lines 1-8).

20    The specification explained that an IL-23 agonist is a molecule that “mimics biological activity mediated by a native sequence IL-23”, such as by inducing the production of IL-17, in activated T-cells (page 7 lines 25-30).

21    The specification stated that:

[a]s used herein, the term “inflammatory disease” or “inflammatory disorder” refers to pathological states resulting in inflammation, typically caused by neutrophil chemotaxis. Examples of such disorders include inflammatory skin diseases including psoriasis … ischemic reperfusion disorders … myocardial ischemic conditions … multiple sclerosis (MS) … autoimmune diseases such as rheumatoid arthritis (RA) … etc. (emphasis added)

22    The definition included several other categories of diseases or disorders and many examples extending over 16 typed lines (page 9 line 11-page 10 line 2). It concluded as follows:

The preferred indications include, without limitation, chronic inflammation, autoimmune diabetes, rheumatoid arthritis (RA), rheumatoid spondylitis, gouty arthritis and other arthritic conditions, multiple sclerosis (MS), asthma, systhemic lupus erythrematosus, adult respiratory distress syndrome, Behcet’s disease, psoriasis, chronic pulmonary inflammatory disease, graft versus host reaction, Crohn’s Disease, ulcerative colitis, inflammatory bowel disease (IBD), Alzheimer’s disease, and pyresis, along with any disease or disorder that relates to inflammation and related disorders. (emphasis added)

23    Both Genentech and Merck accepted, as the delegate found, that this definition also included the inflammatory disease called relapsing experimental autoimmune encephalomyelitis (EAE) and that this disease was characterised by an elevated expression of IL-17.

24    The specification explained that IL-23 antagonists, that had the ability to inhibit the induction of IL-17 production by IL-23, would be candidates for drugs to treat inflammatory conditions characterised by the presence of elevated levels of IL-17 (page 13 lines 25-27). The specification then proceeded with a detailed conventional explanation and description of the invention that is not germane to the resolution of the present issues. It concluded with the following relevant claims:

The claims defining the invention are as follows:

1.    A method for inhibiting interleukin- 17 (IL-17) production by T cells comprising treating said T cells with an antagonist of interleukin-23 (IL-23).

…

4.    A method for the treatment of an inflammatory disease characterized by elevated expression of interleukin 17 (IL-17) in a mammalian subject, comprising administering to said subject an effective amount of an antagonist of interleukin-23 (IL-23).

5.    Use of an effective amount of an antagonist of interleukin-23 (IL-23) for the treatment of an inflammatory disease characterized by elevated expression of interleukin 17 (IL-17), in a mammalian subject.

…

15.    An antagonist of interleukin-23 (IL-23) when used in a method for treatment of an inflammatory disease in a mammalian subject determined to have an elevated level of expression of interleukin-17 (IL-17) compared with a healthy subject, wherein said antagonist is an anti-IL-23 or an anti-IL-23-receptor antibody.

…

28.    A method according to claim 4, use according to claim 5 or antagonist according to claim 15 or 16, wherein said inflammatory disease is selected from chronic inflammation, autoimmune diabetes, rheumatoid arthritis (RA), rheumatoid spondylitis, gouty arthritis and other arthritic conditions, multiple sclerosis (MS), asthma, systhemic lupus erythrematosus, adult respiratory distress syndrome, Behcet’s disease, psoriasis, chronic pulmonary inflammatory disease, graft versus host reaction, Crohn’s Disease, ulcerative colitis, inflammatory bowel disease (IBD), Alzheimer’s disease, and pyresis. (I have added italics to indicate diseases omitted in the amended claims, bold emphasis added)

25    The list of diseases set out in claim 28 was a subset of the far longer, non-exhaustive, list of diseases and disorders that had been set out earlier in the specification in the definition of “inflammatory disease” and “inflammatory disorder”.

The first decision

26    Neither Genentech nor Merck challenged any of the delegate’s findings or her determination in the first decision on any of the issues in the opposition including her decisions on the issues of novelty and inventive step. She stated in her reasons that:

[a]t the hearing, the parties’ submissions were essentially confined to the independent claims and they agreed that the opposition may be determined on this basis. (emphasis added)

27    When Merck later sought to oppose the amended application, it relied on the “agreement” to which the delegate referred in the above emphasised passage as encapsulating the proposition that Genentech had conceded that, if Merck’s opposition to an independent claim were upheld, all dependent claims, such as claim 28, would also be wholly invalid (the alleged concession).

28    The delegate noted that claims 6 to 10 and their dependent claims had not been opposed. The delegate set out her construction of the remaining six independent claims (claims 1, 4, 5, 14, 15 and 34). Claim 34 was an omnibus claim limited by reference to the examples in the specification. She found that the expression “an inflammatory disease characterised by elevated expression of interleukin 17 (IL-17)” in claims 4 and 5, and its analogue in claim 15, encompassed all inflammatory diseases with a distinguishing characteristic of an elevated level of IL-17, “and therefore the number of diseases understood to fall within the scope of the claim may expand if more are identified”.

29    That finding, of the broad inclusive scope of the inflammatory diseases the subject of the original contested independent claims, is crucial to understanding both of the first and second decisions in respect of the issues that the Commissioner has raised as to the competency of Merck’s appeal. The delegate found that Merck had “accepted that Genentech had discovered the link between IL-23 and IL-17 that established the mechanism of action underlying the therapeutic effect of IL-23 modulators”.

30    However, the delegate found that three of the four prior art documents in issue anticipated the use of an IL-23 antagonist in respect of particular inflammatory diseases or disorders and that, accordingly, each of claims 1, 4, 5, 14 and 15 was not novel within the meaning of s 18(1)(b)(i) of the Act. She arrived at those findings in the following way.

31    The delegate found that the Benson publication in March 2002 (Benson, J et al (March 2002) FASEB Journal 16(5): A1045 Abstract 759.12) had disclosed a study that had involved the administration of a specific IL-23 antagonist to treat mammalian subjects, being mice, suffering from the inflammatory disease, EAE, and that this disease was characterised by elevated expression of IL-17 (see [23]-[24] above). She found that, as a result, the Benson publication anticipated, first, claim 1 “insofar [as] it encompasses the in vivo treatment of a mammalian subject with an IL-23 antagonist” and, secondly, “the therapeutic methods of claims 4-5 and claim 15 insofar as this last [scil: claim] encompasses a determination of elevated IL-17 expression based on a positive diagnosis of an inflammatory condition [scil: disease] characterised by such levels”. The parties agreed that the delegate used the word “condition” in this sentence as meaning “disease” having regard to what she had earlier said (105 IPR at 325 [25]) in construing claim 15.

32    The delegate also found that the PCT publication WO 221/018051 (published on 15 March 2001) (the 051 publication) anticipated claim 14. That was because it provided a clear and unmistakeable direction to the method of that claim, being the use of a therapeutic amount of an agonist of IL-23 as a method to modulate the inflammatory response in a mammalian subject.

33    Next, the delegate found that PCT publication WO 2001/085790 (published on 15 November 2001) (the 790 publication) anticipated claims 1, 4, 5, 14 and 15. She found that the 790 publication contained clear and unmistakeable directions to perform a method that would inevitably result in infringement of each of those claims. First, she found that claim 22 in the 790 publication comprised contacting a cell, in vivo or in vitro, with a sufficient amount of an antagonist of IL-23 to modulate the cell’s physiology or development where the cell is from a host that exhibits “signs or symptoms of, relevantly, MS, RA or psoriasis all of which are disclosed in the opposed application as inflammatory diseases characterised by elevated expression of IL-17”. Secondly, she found that performance of that method would result inevitably in the infringement of claims 1, 4 and 5 and, of claim 15 to the extent that it encompassed an inflammatory disease characterised by an elevated level of expression of IL-17 in a mammalian subject based on a positive diagnosis of such a condition. Thirdly, the delegate found that the 790 publication anticipated claim 14 by providing clear and unmistakeable directions to perform a method requiring administration of a sufficient amount of an IL-23 agonist to modulate the physiology and development of a cell to induce the production of IL-17 in a similar way to the method anticipated by the 051 publication.

34    Finally, the delegate found that 16 October 2009 was the priority date of the requirement in claim 15 to test each individual for elevated levels of expression of IL-17. Genentech had accepted that, if the delegate made that finding, then claim 15 in the form of its original claim had been anticipated by the European “text intended for grant” document EP 03781490 (published on 20 February 2009) (the 490 publication).

35    The delegate concluded:

82.    In summary, I have found that the documents raised by [Merck] anticipate independent claims 1, 4, 5, 14 and 15. The parties agreed that the opposition could be heard on the basis of the independent claims, with the dependent claims falling the same way. On this basis, dependent claims 2-3, 11-12, 16-33 also lack novelty.

…

Conclusion

126.    The opposition is successful. I have found independent claims 1, 4-5 and 14-15 lack novelty and with them claims 2-3, 11-12 and 16-33. Claim 15 and all claims dependent on claim 15 lack fair basis insofar as these claims encompass testing each individual subject to determine they have elevated IL-17 expression levels prior to treatment, lack fair basis.

127.    It is possible to overcome the deficiencies I have identified by amendment of the claims. I therefore allow Genentech 2 months from the date of this decision to propose such amendments. (emphasis added)

The amended patent application

36    The amended application retained the same definition of “inflammatory disease” or “inflammatory disorder” as the original application (page 9 line 11 – page 10 line 2). Relevantly, amended claims 1, 2 and 14 were as follows:

1.    An in vivo method for the treatment of an inflammatory disease selected from the group consisting of asthma, systemic lupus erythematosus, adult respiratory distress syndrome, Behcet’s disease, chronic pulmonary inflammatory disease, graft versus host reaction, Crohn’s Disease, ulcerative colitis, Alzheimer’s disease, psoriatic arthritis and pyresis in a human subject which inflammatory disease is characterized by elevated expression of interleukin 17 (IL-17), said method comprising administering to said subject an effective amount of an antagonist of interleukin-23 (IL-23) wherein said antagonist inhibits the production of interleukin-17 (IL-17) by T cells.

2.    Use of an effective amount of an antagonist of interleukin-23 (IL-23) in the manufacture of a medicament used in the in vivo treatment of an inflammatory disease selected from the group consisting of asthma, systemic lupus erythematosus, adult respiratory distress syndrome, Behcet’s disease, chronic pulmonary inflammatory disease, graft versus host reaction, Crohn’s Disease, ulcerative colitis, Alzheimer’s disease, psoriatic arthritis and pyresis in a human subject which inflammatory disease is characterized by elevated expression of interleukin 17 (IL-17) by T cells.

…

14.    An antagonist interleukin- (IL-23) when used in an in vivo method for treatment of an inflammatory disease selected from the group consisting of asthma, systemic lupus erythematosus, adult respiratory distress syndrome, Behcet’s disease, chronic pulmonary inflammatory disease, graft versus host reaction, Crohn’s Disease, ulcerative colitis, Alzheimer’s disease, psoriatic arthritis and pyresis in a human subject which inflammatory disease is characterized by elevated expression of interleukin-17 (IL-17), wherein said antagonist is an anti-IL-23 antibody or an anti-IL-23-receptor antibody and wherein said antagonist inhibits the production of interleukin-17 (IL-17) by T cells.

The second decision

37    The delegate found that amended claims 1, 2 and 14 corresponded to, but narrowed, original claims 4, 5 and 15 respectively. She found that Merck had not disputed that the features of each of those amended claims were present in the corresponding original claim. What was different, was that the amended claims did not extend to all of the diseases comprehended in the original claims’ use of the defined term “inflammatory disease”. Rather, the amended claims referred only to a subset of “inflammatory diseases”, narrower than both the definition and the list in the original, dependent claim 28.

38    Merck contended before the delegate at the hearing concerning the amended application that because of the alleged concession (see [26]-[27] above) at the first hearing, she had necessarily determined that all of the inflammatory diseases specified in the original, dependent claim 28 were incapable of being included in any amended claim because of the finding that original claims 1, 4, 5 and 15 and dependent claim 28 lacked novelty. Merck argued to the delegate that, if Genentech were allowed to retract the alleged concession by relying on the amended claims 1, 2 and 14, then Merck should be allowed to oppose them as lacking novelty and to rely on a new citation of prior art.

39    Merck sought to oppose the grant of a patent in the form of the amended application on the grounds of lack of each of novelty and an inventive step. The delegate refused to entertain those challenges on the basis that:

[i]f there are valid grounds of opposition to [amended] claims 1, 2 and [1]4 on the basis of that subset [of inflammatory diseases listed in those claims], those grounds could have been pursued in the earlier hearing with respect to dependent claim 28. It follows that the amendments do not introduce a new deficiency. In the absence of any new deficiency in the claims, it is not open to me to consider a new citation [of a prior art publication] at this stage of the opposition. (emphasis in original)

40    The delegate found:

It is clear from the earlier decision that my novelty findings were based on the prior disclosure of particular subject matter that anticipates embodiments of the accepted independent claims. On the basis of that same disclosure, and in accordance with the parties’ agreed conduct of the hearing, I found the associated dependent claims also lacked novelty. Regardless of the level of detail involved in considering the validity of each claim in the specification, or the merits of my earlier decision, that decision is final in so far as it determines all issues capable of determination at the time (Ex parte Mole at CLR 349 applied). For the purposes of this final determination, where it identifies the relevant prior disclosure, the earlier decision must be understood as identifying the specific novelty deficiencies to be overcome for all claims found invalid under this ground. (emphasis added)

41    She then explained why she rejected Merck’s other challenges to the novelty of amended claims 1, 2 and 14. Merck had argued that amended claims 1, 2 and 14 lacked novelty over the Benson and 790 publications. I note that Merck did not seek to oppose the amended application before the delegate on the ground that each impugned claim lacked an inventive step, but, because this appeal is a hearing de novo, it will seek to do so if the appeal is competent.

42    The delegate found that amended claims 1, 2 and 14 overcame the anticipation, in the Benson publication, of original claims 4, 5 and 15 of the in vivo use of an IL-23 antagonist to treat EAE and “the inflammatory demyelinating diseases of the central nervous system for which EAE serves as a model”. She made that finding because amended claims 1, 2 and 14 had selected a subset of diseases from those listed in the original claim 28, and none of the new subset included EAE or the other, relevantly, similar diseases for which EAE served as a model. She found that the Benson publication did not disclose the treatment in humans of the inflammatory diseases listed in each of amended claims 1, 2 and 14.

43    She explained that in the first decision she had found that the 790 publication had anticipated claims 4, 5 and 15 by providing clear and unmistakeable directions to the therapeutic in vivo administration of an IL-23 antagonist to a mammalian host exhibiting signs or symptoms of three diseases, namely multiple sclerosis, rheumatoid arthritis and psoriasis. The delegate continued:

Most relevant to overcoming this deficiency, corresponding amended claims 1, 2 and 14 and dependent claims do not encompass the treatment of these three conditions. Although the inflammatory diseases now listed in claims 1, 2 and 14 include psoriatic arthritis, I have no submissions or evidence before me that establishes that in following the directions in [the 790 publication] for the treatment of psoriasis, the person skilled in the art would inevitably, in every case, treat psoriatic arthritis. (emphasis added)

44    The delegate noted that Merck had not suggested that the 790 publication provided clear and unmistakeable directions to the treatment of the specific diseases nominated in each of claims 1, 2 and 14. She also said that she had not made any finding about the treatment of those nominated diseases being anticipated by the 790 publication in the first decision and found that it did not do so.

Merck’s appeal to this Court

45    Merck’s amended notice of appeal challenged the second decision so far as it concerned the novelty and inventive step of each of amended claims 1-14. As I noted (at [41] above), Merck had not challenged the inventive step issue in challenging the amended claims before the delegate. Merck’s grounds for those challenges relevantly asserted that the invention, as claimed in amended claims 1 to 14, was not a patentable invention in that it did not comply with s 18(1)(b) of the Act because:

(i)    it lacked novelty in light of any of:

(a)    PCT publication WO 2000/56772 (published in September 2000) (the new publication);

(b)    the Benson publication;

(c)    the 051 publication;

(d)    the 790 publication; and

(e)    the 490 publication.

(ii)    it lacked an inventive step in light of the common general knowledge before the priority date taken alone and or when considered together with the disclosure of any one or more of:

(a)    the new publication;

(b)    the Benson publication;

(c)    the 051 publication; and

(d)    the 790 publication.

Merck’s submissions

46    Merck argued that there is no provision in the Rules that contemplates that the Commissioner can file a notice of objection as to competency. It argued that, rather, her argument is based on r 26.01(d) (namely, that the appeal should be dismissed as an abuse of process), citing what Merkel J had said in Iluka Midwest Ltd v Technological Resources Pty Ltd (2002) 116 FCR 218 at 231-232 [44]-[45].

47    Merck argued that s 60(4) of the Act gave it an appeal as of right from the second decision. It contended that, in essence, its appeal did not seek to reargue the correctness of the first decision, but rather properly challenged issues that arose only out of the amended claims and the second decision.

48    Merck submitted that the delegate had dealt erroneously with the alleged concession (to which I referred at [26]-[27] above), and that this had caused her to err in finding that claims 1, 4, 5 and 15 lacked novelty in respect of only the particular diseases (rheumatoid arthritis (RA), multiple sclerosis (MS), psoriasis and EAE) on which she had made findings. Instead, Merck contended that the effect of the alleged concession was that those claims lacked novelty in respect of all the diseases listed or comprehended in the specification’s definition of “inflammatory disease” or “inflammatory disorder”. Merck argued that Genentech had accepted, by the alleged concession, that because the original claim 28 was a dependant claim, it also lacked novelty in respect of all of the diseases or disorders listed in that claim, not just the ones I have italicised at [24] above.

49    In other words, Merck submitted that by making the alleged concession Genentech had acknowledged that claim 28, as a dependent claim, did not confer novelty at all, including in respect of all of the diseases that it specified. Merck then contended that this followed from the delegate’s reasoning in [82] of the first decision in the sentence I have emphasised at [35] above; namely that the fate of claims 1, 4, 5, 14 and 15 would determine that of the dependent claims, including claim 28.

50    Merck argued that the delegate’s second decision was “fundamentally flawed” because she had found in [82] of the first decision that the whole of claim 28 lacked novelty. It contended that the delegate erred in not permitting it to argue, and that it is entitled in this appeal to argue, that amended claims 1, 2 and 14 lacked novelty. That was because, so Merck asserted, all the diseases that those claims comprehended had been included in the original claim 28 and the first decision had decided that it lacked novelty in respect of each of those diseases.

51    Merck submitted that its appeal against the second decision related only to its asserted grounds of opposition to the amended claims and did not challenge the first decision at all. It argued that the novelty ground of its appeal arose solely out of the amended claims and did not challenge any matters that were canvassed and decided in the first decision. Thus, Merck submitted it was not precluded from relying on them now by the principles in Mole Engineering 147 CLR 340. Merck argued that it could not have appealed against the first decision on the issue of novelty because all of the delegate’s findings on that ground were in its favour.

52    Merck contended that the alleged concession reinforced this position because Genentech had accepted that claim 28 would “not confer any novelty of subject matter when appended to the independent claims”. Merck submitted that there was a public interest in it being able to challenge the second decision because patent rights operate in rem. It argued that it should not be precluded summarily from pursuing, what it asserted, was an arguable appeal.

53    Merck only pressed the inventive step ground of appeal if I were to find that, contrary to the position that it asserted had been agreed by the Commissioner, there was a material difference between the scope of the original claims and amended claims 1-14. However, I find that, as the Commissioner noted, she accepted only that amended claims 1 to 14 were relevantly the same in scope as the original claims to which they corresponded in the sense that the amended claims had narrowed the scope of the earlier ones.

54    Merck’s application for summary judgment was based on its assertion that a necessary corollary of the rejection of the Commissioner’s argument that the appeal was incompetent, was that the delegate erred in the second decision by not hearing its argument on whether amended claims 1, 2 and 14 lacked novelty. Merck also argued that because amended dependent claims 3 to 13 covered the subject matter of the original dependent claims 21 to 32, the alleged concession meant that the former also lacked novelty. If there were a material difference in the scope of the original and amended claims then, Merck submitted, it should be entitled to have its appeal heard and determined on the merits.

The objection as to competency – consideration

55    The Commissioner’s objection as to competency raised a question as to the jurisdiction of the Court to hear Merck’s appeal. The question arose because Merck sought to invoke a right to appeal under s 60(4) of the Act in respect of the second decision. The Commissioner contended that the relief that Merck sought could not be given in this appeal because the first decision had been a final determination of the subject matter (i.e. the lack of novelty and an inventive step) on which the notice of appeal was based.

56    The legislative scheme governing opposition to the grant of a standard patent reflected the principal features of the similar scheme in the Patents Act 1952 (Cth) that the High Court considered in Mole Engineering 147 CLR 340.

57    There, a delegate gave an “interim” decision that determined that a patent application did not comply with the analogue of s 40 of the Act. The delegate gave the applicant 60 days to lodge a request to amend the patent. The applicant then lodged amendments designed to eliminate the aspects of a claim the subject of the adverse findings in the interim decision. After the original decision-maker had retired, a second decision-maker decided that the amendments were allowable but, he stated that he and the Commissioner had agreed that the applicant should withdraw its amendments and the Commissioner would direct that the whole application be re-heard, since the original decision-maker was no longer available to finalise the opposition. The opponent sought, and the High Court granted, a writ of prohibition against the proposed re-hearing.

58    Gibbs CJ, Murphy and Aickin JJ agreed with the separate, but similar, reasons of Mason J and Wilson J. They held that there was no power for the Commissioner or a delegate to re-hear an opposition proceeding under the analogue of s 60 (147 CLR at 348, 358). Mason J explained that when a provision in similar terms to s 60(1) of the Act required the Commissioner to “decide the case”, any such decision was final. He held that the analogue of s 60(4) gave the applicant and opponent the right to “appeal” against “a decision of the Commissioner under this section”. He reasoned that the Commissioner had no power to re-hear the case, because the previous Act did not contemplate that there could be two decisions under the relevant section of the Act. He said that an impossible situation would arise were this not so. That was because no statutory provision indicated which of any conflicting decisions under the section would prevail (147 CLR at 348; see too at 358 per Wilson J).

59    Importantly, Mason J said that the right of appeal from a “decision” created by the analogue of s 60(4) was quite consistent with a decision that upheld grounds of opposition but did not refuse the application because the objections might be overcome by amendment (147 CLR at 348). He also noted that the 1952 Act provided (unlike the preclusive effect of reg 5.3(4) that I noted in [16] above) that amendments made after an initial decision would be considered under the analogue of Ch 10 of the Act (Pt VIII of the 1952 Act) and that an appeal lay from a second decision, under the former Pt VIII (cf the current s 104(7)).

60    The parties did not argue before me the question of how the second decision (which by reason of the operation of s 104(6) would be a third decision) was, in fact, authorised by s 60 or any other provision of the Act. The second decision appears to be the result of a practice that the Commissioner has developed to overcome the odd preclusion effected by reg 5.3(4) of any consideration of whether an amendment actually overcomes the earlier successful objection. While this practice appears to reflect a desire to afford natural justice and a degree of common sense (not exhibited in reg 5.3(4)), it is difficult to see how the Act permits an amendment to be considered twice, once under s 104(2) and then subsequently under s 60 on different grounds of opposition outside those permitted by the operation of s 104(4) and reg 5.3(4). However, because the parties proceeded as I have indicated and because I consider that the appeal is incompetent in any event, it is not necessary to decide whether the only means of the Commissioner considering an amendment is under s 104(2). If the effect of s 104(4) and of reg 5.3(4) is as it appears to be, the only way in which a person could challenge an amendment that is deemed to have been allowed under s 104(6), but would not have overcome the earlier established ground of opposition, would be in proceedings under s 39B(1) of the Judiciary Act 1903 (Cth) or s 75 (v) of the Constitution. That would hardly serve the purpose of the Parliament providing an appeal de novo in respect of an opposed amendment under s 104(7) on the very much more limited issues under reg 5.3(4).

61    In Mole Engineering 147 CLR at 348-349 (see too per Wilson J at 355-356, 358-359) Mason  J held:

It is a natural consequence of the procedures under Pt V and Pt VIII that an officer who upholds objections to the grant of an application under Pt V will refrain from refusing the application where it appears that the objections may be cured by amendment. Then it is a practical and sensible course to allow the applicant time within which to lodge a request to amend the specification, as [the original delegate] did in this instance. But his decision was nonetheless a final decision on the original unamended application – there was nothing provisional or tentative about the finding on the grounds of objection. It dealt with all the issues arising on the notice of opposition so far as they were capable of final determination. (emphasis added)

62    Thus, an opposition can be decided in stages under the current legislative scheme that reflects in large part (except perhaps for the effect of reg 5.3(4)) the well-established procedural mechanisms that, as Mole Engineering 147 CLR at 349-350, 354-356 showed, have applied to opposition proceedings both in Australia and the United Kingdom for many years.

63    Merkel J held that the right of an appellant to re-agitate issues on a further hearing by the Commissioner or on an appeal depended upon the issues dealt with and decided by the interim (or first) decision, rather than on whether the decision was in favour of one party or the other: Iluka 116 FCR at 231 [44], 232-233 [49]-[50]. He held that, prima facie, the unsuccessful party could not appeal against the delegate’s subsequent decision on an amendment based on new grounds of lack of novelty and fair basis when it had challenged the original application on other grounds of lack of novelty and fair basis. He said that the original decision must be taken to have decided all such grounds (116 FCR at 233 [50]).

64    Subsequently, in Iluka Midwest Ltd (formerly RGC Mineral Sands Ltd) v Technological Resources Pty Ltd (2002) 58 IPR 467 at 477-478 [34] (Iluka No 2)) Merkel J concluded that a finding by the delegate in the interim (or first) decision that the only objections that needed to be overcome by the amendments was a decision adverse to the opponent. He held that the new ground of opposition was one that could have been relied on at the earlier hearing, did not arise as a result of any of the amendments, and could not be raised in an appeal based on the amendments.

65    I am of opinion that in the first decision the delegate determined that claims 1, 4, 5, 15 and 28 lacked novelty only because of the specific matters in the prior art that she found had amounted to anticipations (see the passage from the second decision at [20] that I have quoted in [40] above). Those findings related to only the four particular inflammatory diseases or inflammatory disorders (rheumatoid arthritis (RA), multiple sclerosis (MS), psoriasis and EAE) in the precise factual situations the subject of her consideration of each of claims 1, 4, 5 and 15 and the consequential impact of those findings on the inclusion of each of those four inflammatory diseases or inflammatory disorders in claim 28.

66    The alleged concession simply involved Genentech accepting that, if the delegate found that one of the prior art publications had anticipated an independent claim, a dependent claim such as claim 28 that covered the same subject matter as the established anticipation, would also fail. In making the alleged concession Genentech, as well as Merck, would have been aware of what the four prior art publications disclosed as the alleged anticipations. In particular, both Genentech and Merck would have been aware that each publication related to one or more of the four diseases and the particular way in which Merck relied on the publication as an anticipation of one or more of the original claims. By conceding that were Merck to prove such an anticipation by a prior art publication, Genentech did no more than to accept that if the delegate found anticipation, the opposition would establish that precise anticipation, no more and no less, and the dependant claim that repeated the anticipated subject matter (here, the relevant diseases) necessarily could not be sustained in its then form.

67    However, the delegate found that Genentech could amend claims 1, 4, 5 and 15 to overcome the anticipation. That finding necessarily determined, contrary to Merck’s argument, that those claims, and their dependent claims, including claim 28, could be amended in such a way that the prior art would not anticipate them: Mole Engineering 147 CLR at 348-349, 355-356, 358-359.

68    The flaw in Merck’s argument is that it assumed that all of the claims that the delegate concluded in the first decision at 105 IPR at 340 [126]-[127] lacked novelty, and therefore, they could not be amended to overcome the lack of novelty. The argument simply ignored the delegate’s decision that the claims could be amended to overcome the deficiencies in respect of lack of novelty. That decision was unfavourable to Merck. That determination could, and indeed had to, be challenged by Merck on an appeal under s 60(4) against the first decision.

69    In amended claims 1, 2 and 14 Genentech removed the integers of claims 1, 4, 5, 15 and 28 that the delegate had found lacked novelty. It was not open to Merck to appeal against the allowance of the amendments (probably under s 104(7) or later, if the Act in fact permitted this, under a second exercise of a right to appeal under s 60(4)).

70    Merck’s challenge to the second decision asserting lack of novelty and inventive step was in reality an attack on the first decision that allowed Genetech to amend claims 1, 4, 5, 15 and 28 to overcome the delegate’s findings that they lacked novelty. The attack in the notice of appeal had to be made against the first decision. It could not be made against the second decision by reason of the principle in Mole Engineering 147 CLR 340 and, accordingly, the appeal is incompetent. The delegate’s reasoning in the second decision (assuming she had power to make it) was correct.

Conclusion

71    Merck’s appeal must be dismissed as incompetent. It must pay the Commissioner’s costs of the proceedings.

Associate:

Dated:    1 April 2016