FEDERAL COURT OF AUSTRALIA

Merial, Inc. v Intervet International B.V. (No 3) [2017] FCA 21

ORDERS

THE COURT ORDERS THAT:

1.    Subject to paragraph 2, by 4.00 pm on 3 February 2017, the parties file an agreed minute of proposed orders to give effect to these reasons.

2.    If the parties cannot agree, then by 4.00 pm on 10 February 2017, each party file and serve a minute of proposed orders to give effect to these reasons, together with a short outline of submissions in support of those proposed orders.

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

REASONS FOR JUDGMENT

MOSHINSKY J:

Introduction

1    On 31 July 2009, the respondent (Intervet) filed in Australia an application for a standard patent titled “Compositions and process for delivering an additive” (Application AU 2009203180 C1) (the Patent Application). The invention described in the application, in simple terms, is a soft chew formulation for administering an anti-parasite pharmaceutical to certain animals. The inventors named on the application are Sebastien Huron, Mark Pieloch and Susan Cady.

2    The Patent Application is a divisional of application number PCT/US2003/025358 filed pursuant to the Patent Cooperation Treaty on 13 August 2003 (the PCT Application) designating Australia (among other jurisdictions).

3    Both the Patent Application and the PCT Application claim priority to provisional application number 60/403,201 filed in the United States of America on 13 August 2002 (the First US Provisional Application) and provisional application number 60/433,677 filed in the United States of America on 16 December 2002 (the Second US Provisional Application). Both provisional applications (the US Provisional Applications) name Mr Huron, Ms Cady and Mr Pieloch as the inventors.

4    On 28 October 2011, the appellant (Merial) served a notice of opposition to the Patent Application. Merial’s grounds of opposition, as pursued at the hearing before a delegate of the Commissioner of Patents (the Delegate) in June 2015, were lack of novelty, lack of inventive step and failure to satisfy the “manner of manufacture” requirements. On 10 July 2015, the Delegate decided that Merial’s opposition failed on all grounds and directed that the application proceed to grant (the Delegate’s Decision).

5    Merial ‘appeals’ to this Court against the Delegate’s Decision pursuant to s 60(4) of the Patents Act 1990 (Cth) (Patents Act). Although called an ‘appeal’, the proceeding is in the original jurisdiction of this Court and involves a hearing de novo on the grounds and evidence before the Court. In this Court, Merial has raised a ground of opposition not raised before the Delegate, namely lack of entitlement. Although at the commencement of the hearing Merial relied on four grounds (lack of entitlement, lack of novelty, lack of inventive step, and grounds under s 40 of the Patents Act), in closing submissions it confined its case to two grounds, namely lack of entitlement and lack of inventive step (each of which provides an independent basis for the refusal of the Patent Application). These two grounds can be summarised as follows:

(a)    Merial contends that Intervet is not entitled to the grant of a patent for the alleged invention on the basis that it does not derive title to the alleged invention from Mr Pieloch, who Intervet admits is an “actual inventor” of the alleged invention; and

(b)    Merial contends that the alleged invention does not involve an inventive step on the basis that it was obvious in the light of the common general knowledge when combined with United States patent US 6,387,381 dated 14 May 2002 (Christensen).

6    Merial, as the opponent, bears the onus in relation to each ground of opposition. The authorities establish that, for an opposition to be upheld, it must be “clear” (or “practically certain”) that the patent, if granted, would not be valid.

7    In relation to the lack of entitlement ground, I note the following facts and matters:

(a)    On 7 July 2011, Intervet filed a notice of entitlement under the Patents Act in connection with the Patent Application (the Notice of Entitlement). This stated that Intervet had an entitlement from the “actual inventors” on the following basis:

[Intervet] is the assignee of Akzo Nobel N.V. Akzo Nobel N.V. as the parent company of Intervet Inc at the relevant time and by virtue of a Contract of Employment between actual inventors Huron and Cady as employees and Intervet Inc. as employer, is the person which would be entitled to have the patent assigned to it if a patent were granted on an application made by actual inventors Huron and Cady.

Pharma Chemie by virtue of a contract of employment between actual inventor Pieloch as employee and Pharma Chemie as employer, is the person which would be entitled to have the patent assigned to it if a patent were granted on an application made by actual inventor Pieloch. [Intervet] by virtue of a contract with Pharma Chemie has entitlement to the invention of actual inventor Pieloch.

(b)    The evidence does not suggest that Mr Huron or Ms Cady (both of whom worked at Intervet Inc, a related company of Intervet, in 2002) played any, or any substantial, role in developing the alleged invention. However, it is unnecessary to determine whether or not Mr Huron and Ms Cady played a role. There is no issue that, if there was an invention, Mr Pieloch was either the inventor or one of the inventors. Accordingly, for Intervet to have title to the alleged invention, it needs to have acquired title from Mr Pieloch.

(c)    At all relevant times, Pharma Chemie Inc (Pharma Chemie) was owned and controlled by Mr Pieloch.

(d)    In early 2002, Ms Cady (on behalf of Intervet Inc) engaged Pharma Chemie to develop a ‘soft chew’ for horses containing the active ingredient, ivermectin (the Horse Project).

(e)    Also in 2002, Intervet Inc engaged Pharma Chemie to develop a soft chew for dogs containing the active ingredients, ivermectin, praziquantel and fenbendazole (the Dog Project).

(f)    In 2002, Intervet Inc and Pharma Chemie entered into an agreement, referred to in correspondence as a Manufacturing and Supply Agreement, in relation to the joint development of a veterinary pharmaceutical product. A copy of this agreement cannot be located.

(g)    In August 2003, Intervet Inc’s patent attorney sent Mr Pieloch a patent application with a request that he sign an inventor’s declaration. Mr Pieloch refused to sign the declaration. In September and October 2003, Pharma Chemie’s lawyers sent letters and documents to Intervet Inc. In that correspondence, Pharma Chemie’s lawyers stated that Pharma Chemie invented the soft chew technology described in the patent application; that all of the work on this technology was completed prior to Pharma Chemie’s entry into an agreement with Intervet Inc in 2002; and that Pharma Chemie was therefore the owner of the technology described in the patent application. Mr Pieloch gave evidence in this proceeding to the same effect. No witness gave contradictory evidence.

(h)    Intervet has not produced any agreement by which Pharma Chemie assigned to Intervet (or Intervet Inc) rights in an invention in terms of any of the claims in the Patent Application or rights in any invention that resulted from the Horse Project or the Dog Project.

8    I have concluded that the lack of entitlement ground is clearly established. My reasons, in summary, are as follows.

(a)    First, I have found that Pharma Chemie was not engaged by Intervet Inc to develop a soft chew dosage form – it was engaged to incorporate Intervet Inc’s active ingredients into a formulation, using Pharma Chemie’s soft chew technology; and that Pharma Chemie had already developed the soft chew technology described in the relevant patent applications before it was engaged by Intervet Inc to carry out the Horse Project and the Dog Project.

(b)    Secondly, I have found that there was no express assignment from Pharma Chemie to Intervet Inc of an invention in terms of any of the claims in the Patent Application; that the Manufacturing and Supply Agreement referred to in the correspondence did not contain an express assignment of rights from Pharma Chemie to Intervet Inc in any invention that resulted from the Horse Project or the Dog Project; and that no other agreement contained an express assignment from Pharma Chemie to Intervet Inc of rights in any invention that resulted from the Horse Project or the Dog Project. It follows that, even if an invention did result from or arise in the course of the Horse Project or the Dog Project, there was no express assignment of that invention from Pharma Chemie to Intervet Inc (or Intervet).

(c)    Thirdly, I am satisfied that a term is not to be implied in any agreement between Intervet Inc and Pharma Chemie requiring Pharma Chemie to assign to Intervet Inc an invention as described in the claims in the Patent Application or any other relevant invention. Both parties proceeded on the basis that the agreement (or agreements) between Intervet Inc and Pharma Chemie was (or were) governed by the law of a State of the United States and principles of US law were therefore relevant to the implication of a term. The relevant principles of US law are to be determined as a question of fact in this proceeding. There was an issue between the US law experts as to whether the “hired to invent” doctrine was capable of application where the relevant person is an independent contractor rather than an employee. Having considered the competing positions, I am not satisfied that the “hired to invent” doctrine could not apply to such a situation. Proceeding on the basis that the doctrine is capable of application, it was emphasised in the expert evidence on US law that what “controls” is the nature of the contractual relationship between the parties and how the invention was made; and that the critical fact is whether the contract specifically required the invention to be made. In the present case, I have found that Pharma Chemie was not engaged by Intervet Inc to develop a soft chew dosage form; it was engaged, rather, to incorporate Intervet Inc’s active ingredients into a formulation, using Pharma Chemie’s soft chew technology. Further, in light of the express provisions of the Manufacturing and Supply Agreement, there is no room to imply a term (in this or any other agreement relating to the Horse Project or the Dog Project) requiring Pharma Chemie to assign to Intervet Inc any invention resulting from the projects.

9    In light of that conclusion, it is unnecessary to determine the lack of inventive step ground. Nevertheless, for completeness, I have considered this ground. In summary, I have concluded that the ground of lack of inventive step is made out in relation to claim 1; is not made out in relation to claims 2, 3, 10, 11, 12 and 14; and is partially made out in relation to the balance of the claims.

Applicable principles in relation to the proceeding generally

10    As noted by Heerey, Kenny and Middleton JJ in Commissioner of Patents v Sherman (2008) 172 FCR 394 at [18], the fundamental principles governing an appeal against a decision of the Commissioner of Patents on an opposition to a grant of a patent are well settled. Their Honours stated (at [18]-[22]):

18    … First, an appeal under s 60(4) of the Patents Act is not an appeal in the strict sense. Rather, it is a proceeding in the original jurisdiction of the Court and is conducted as a rehearing (sometimes referred to as a hearing de novo): see Jafferjee v Scarlett (1937) 57 CLR 115 at 119 per Latham CJ; and Kaiser Aluminum & Chemical Corporation v Reynolds Metal Company (1969) 120 CLR 136 at 142 per Kitto J. The Court upholds the opposition only if clearly satisfied that the patent, if granted, would be invalid: see Commissioner of Patents v Microcell Ltd (1959) 102 CLR 232 at 251 per Dixon CJ, McTiernan, Fullagar, Taylor and Windeyer JJ; and Denison Manufacturing Company v Monarch Marking Systems Inc (1983) 76 FLR 200 at 201 per Smithers J and 215 per Franki J. An appeal under s 60(4) of the Patents Act is different from some other “appeals” (as referred to in some other enactments) against administrative decisions that may be brought to this Court, where the Court decides whether the decision was correct in law, having regard to the evidence that was before the decision-maker at the time of making the decision. In an appeal under s 60(4) of the Patents Act, the Court does not ask this question.

19    Secondly, on an appeal under s 60(4) of the Patents Act, subject to the Court’s direction, the parties may lead evidence-in-chief. The position of the opponent is relatively clear. As Emmett J said in F Hoffman-La Roche AG v New England Biolabs Inc (2000) 99 FCR 56 at [30], “[i]t would … be open to an opponent simply to tender the material that was before the Commissioner” and the “Court could, subject to all proper objections, admit that evidence”, although the opponent is not bound to this course.

20    Thirdly, the only evidence to be taken into account at the hearing of an appeal under s 60(4) will be the evidence tendered or admitted at the hearing: see Caroma Sales Pty Ltd v Philmac Pty Ltd (1972) 46 ALJR 324 at 324; [1972-73] ALR 427 at 428; Brickwood Holdings Pty Ltd v ACI Operations Pty Ltd [1983] 2 VR 587 at 588-589 per King J; European Community v Commissioner of Patents (2006) 68 IPR 539 at 543 per Young J; and Cadbury Schweppes plc v Effem Foods Pty Ltd (2006) 69 IPR 584 at 586 per Lindgren J. This is the evidence on which the Court acts. As Kitto J said in Kaiser Aluminum 120 CLR at 142-143, in relation to the same kind of proceeding under the former Patents Act 1952 (Cth), the outcome of a proceeding such as this “must be decided upon the evidence adduced before [the] Court”, even if a different case than that made before the Commissioner. We return to this proposition below, which is virtually decisive of the outcome of this appeal.

21    Fourthly, whilst the Court will make its own decision on the basis of the evidence before it, in deciding whether the applicant (here, Mr Sherman) has made out his case on the balance of probabilities, the Court will take into account the nature of the proceeding and the fact that the proceeding concerns the decision of an expert administrative decision-maker: see Commissioner of Patents v Emperor Sports Pty Ltd (2006) 149 FCR 386 at [24]; EI Du Pont de Nemours and Company v ICI Chemicals & Polymers Ltd (2003) 128 FCR 392 at [28] per Emmett J; EI Du Pont de Nemours and Company v ICI Chemical Industries plc (2002) 54 IPR 304 at [17] per Branson J; Neumann v Sons of the Desert SL [2008] FCA 1183 at [2] per Ryan J; and s 140 of the Evidence Act. The Full Court in Emperor Sports 149 FCR 386 at [24] explained that:

The Commissioner is an administrative decision-maker equipped with technical expertise. Subject to the rules of natural justice both common law and statutory … he or she is entitled to make use of that expertise, and draw inferences that may be rationally drawn from technical knowledge, including how skilled persons of various descriptions may act in their respective occupations … On an appeal by way of hearing de novo the judge would not be a person credited with technical expertise of his or her own. In such an event the judge may be able to take into account conclusions of the Commissioner based on his or her expertise, subject of course to the rights of other parties to call rebutting or supporting evidence.

Also in Emperor Sports 149 FCR 386 at [33], the Full Court noted that, when the identification of the relevant prior art is in dispute, “it is necessary to have either evidence or, which amounts to the same thing, reliance by an administrative decision-maker of expertise appropriate to the office”. Naturally enough, the weight given by the Court to the Commissioner’s findings will be affected by the extent to which the Court permits evidence to be adduced before it that was not before the Commissioner: see Du Pont 128 FCR 392 at [28] and Du Pont 54 IPR 304 at [17]. We return to these matters on the question of the admissibility of the evidence in question under the Evidence Act.

22    Fifthly, where a ground of opposition depends on proof of a fact, the onus of proof lies on the party seeking to make out the ground. Usually the party bearing this onus will be the opponent, but sometimes, as in the present case, it will be the Commissioner: see Titan Mining & Engineering Pty Ltd v Arnall’s Engineering Pty Ltd (1988) 12 NSWLR 73 at 75 per McLelland J.

11    The Court, in hearing an appeal under s 60(4) of the Patents Act, may consider any ground that could, under s 59 of the Act, be raised in opposition to the grant of the patent, whether or not that ground was raised before the Commissioner: EI Du Pont de Nemours and Company v ICI Chemicals & Polymers Ltd (2003) 128 FCR 392 at [21] per Emmett J.

12    The grounds on which the grant of a standard patent may be opposed are set out in s 59 of the Patents Act. These in turn require consideration of other provisions of the Act, including s 15 (in relation to lack of entitlement) and s 7 (in relation to inventive step). Section 7 was amended by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth). However, by reason of the applicable transitional provisions and the date of filing of the Patent Application, the version of s 7 that was in force immediately prior to the passing of the amending Act continues to apply to the Patent Application.

13    The opponent bears the onus in relation to each ground of opposition. The authorities establish that, for an opposition to be upheld, it must be “clear” (or “practically certain”) that the patent, if granted, would not be valid: Commissioner of Patents v Sherman at [18]; F Hoffman-La Roche AG v New England Biolabs Inc (2000) 99 FCR 56 at [29], [67] per Emmett J; see also Commissioner of Patents v Microcell Ltd (1959) 102 CLR 232 at 244-245, 251 per Dixon CJ, McTiernan, Fullagar, Taylor and Windeyer JJ.

14    While, for an opposition to be upheld, it must be “clear” that the patent if granted would not be valid, the standard of proof that applies is the standard generally applicable in civil proceedings, namely that prescribed by s 140 of the Evidence Act 1995 (Cth): Commissioner of Patents v Sherman at [16], [21]. Section 140 is in the following terms:

(1)    In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.

(2)    Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:

(a)    the nature of the cause of action or defence; and

(b)    the nature of the subject-matter of the proceeding; and

(c)    the gravity of the matters alleged.

15    In Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466, Weinberg, Bennett and Rares JJ stated at [30]:

The mandatory considerations which s 140(2) specifies reflect a legislative intention that a court must be mindful of the forensic context in forming an opinion as to its satisfaction about matters in evidence. Ordinarily, the more serious the consequences of what is contested in the litigation, the more a court will have regard to the strength and weakness of evidence before it in coming to a conclusion.

16    In the present context, the Court approaches the task of fact finding mindful of the ultimate issue to be determined, which is whether the opponent has clearly satisfied the Court that a patent, if granted, would not be valid.

17    While there was some debate as to the standard of proof to be applied at an earlier stage, in closing submissions senior counsel for Intervet accepted the propositions set out in [14]-[16] above. I took Merial’s submissions to be consistent with these propositions.

The Patent Application

18    The complete specification of the Patent Application takes the form required by the Patents Act, consisting essentially of two parts: a description (pp 1-28 and Figures 1a, 1b, 2 and 3) and a series of claims (pp 29-30).

19    For the purposes of the grounds of opposition, attention is to be directed to the alleged invention as claimed. Where, as here, there is more than one claim, each claim provides a separate definition of the invention having its own scope and subject-matter. Nevertheless, the claims in a broad sense “relate to one invention only” (s 40(4)).

20    The title of the alleged invention is “Compositions and process for delivering an additive”. The claimed priority date is 13 August 2002, based on the First US Provisional Application. The background to the invention is set out at pp 1-4 and proceeds on the basis that chewable dosage forms for drug delivery were well known to pharmaceutical technology before the claimed priority date (p 1, lines 9-10). Various matters relevant to chewable dosage forms are discussed. It is said that the act of chewing increases the surface area and may increase the rate of absorption of the active pharmaceutical ingredient (p 1, lines 10-12) and that chewable systems are also advantageous where it is desirable to make an active ingredient available topically (p 1, lines 13-14). It is said that palatability and “mouth feel” are important characteristics to be considered in providing such a chewable dosage form, but many pharmaceuticals and other active ingredients have a bitter or otherwise unpalatable taste or unacceptable mouth feel, due to the grittiness or chalkiness of the compound, or both (p 1, lines 18-22). It is stated: “These characteristics make it difficult to incorporate such active ingredients into the current state of the art for chewable dosage forms because the objectionable taste and/or mouth feel make it less likely to obtain compliance by the user” (pp 1-2).

21    The Patent Application states that several approaches have been tried in attempting to overcome these problems. Reference is made to compressed, chewable tablets, but these are said generally to “suffer from less than desirable mouth feel, i.e., chalkiness, grittiness, and a dry, powdery taste” (p 2, lines 3-21).

22    The Patent Application states that there have been attempts to coat compressed active particles in compressed tablets with oils or fats, but that these have certain disadvantages, and that “[a]ccordingly, the art field is in search of a process of manufacturing a soft chew whereby compression and subsequent product loss may be minimised or lessened” (p 3, lines 1-10).

23    The Patent Application also states that problems have been experienced delivering additives/active ingredients to organisms (ie, animals) because of palatability issues, and that “[a]ccordingly, the art field is in search of a method and/or composition of delivering an additive to an organism in a palatable format” (pp 3-4).

24    As these disclosures indicate, the emphasis in the Patent Application is on the palatability of the formulation.

25    A number of prior patents disclosing chewable dosage forms are referred to in the Patent Application (p 1, lines 16-17, p 4, line 4). The patent referred to and discussed at some length at p 4 is the patent referred to as Christensen in these reasons. It is stated that this product “is limited to an extrudate and not available in a tablet form of formulation”. (It is convenient to note at this point that an “extrudate” is something produced by extrusion, which typically refers to a process involving heat, pressure and mixing, where the substance is then pushed through a nozzle.)

26    Under the heading “Summary of the invention”, the Patent Application provides a series of so-called “consistory clauses” which describe the invention in terms that reflect the wording of the claims. The first of these reflects the wording of claim 1 (set out below). The following clauses include descriptions referable to some of the dependent claims.

27    The detailed aspects of the description follow. These include definitions of various terms, specification of various options for components and features for inclusion in the soft chew formulation, and a description of the processes used to make it. The expression “soft chew” is defined to mean and refer to an edible composition (p 7, lines 1-2). It is stated that the term “emulsifier component”, as used in the application, means and refers to “an emulsifier or emulsifiers, humectants and the like and is considered a liquid component, whether or not actually liquid” (p 9, lines 5-7). But, as Dr Pougnas points out in his first affidavit, emulsifiers and humectants perform different functions.

28    In connection with a description of embodiments containing a flavouring component, it is stated that a suitable source for an apple-molasses flavouring component is Pharma Chemie under a product name Sweet-Apple Molasses Flavoring, product code PC-0555 (p 12, lines 11-13). (It is convenient to note at this point that at all material times Pharma Chemie sold ‘proprietary’ flavouring components. The composition of these flavouring components was a trade secret of Pharma Chemie.) The description states that a preferred meat flavouring component is commercially available at Pharma Chemie as Artificial Beef Flavor, product code PC-0125 (p 12, lines 18-19). It is stated that: “A flavoring component is typically chosen based upon consideration related to the organism that will be ingesting the soft chew. For example, a horse may prefer an apple flavoring component, while a dog may prefer a meat flavoring component.”

29    The Patent Application states that various embodiments comprise an emulsifier component (p 13, line 8). It is stated that a suitable emulsifier component is glycerine, glycerine fatty acid ester, sorbitan monostearate, sucrose fatty acid ester, lecithin, polyethylene glycol (PEG), mixtures thereof, and the like. The description continues: “However, emulsifier components are well-known in the art field and any emulsifier component may be used. Generally, the amount of emulsifier component added may affect the stickiness of the soft chew” (p 13, lines 11-13).

30    Next, reference is made to a moisture component. It is stated that in an embodiment, a moisture component comprises about 0.0 percent to about 15 percent (p 13, lines 19-20). I note that the range is broader than that specified in claim 1 (between 5.0 and 7.5 percent wt). It is stated that in an alternate embodiment, a moisture component comprises about 5.0 percent to about 7.5 percent (p 13, lines 22-23).

31    The description next refers to an additive component, selected from the group “consisting of a pharmaceutical, a nutraceutical, a vitamin, a mineral and/or a filler that can be orally administered” (p 14, lines 1-3). (I note that claim 1 refers to a pharmaceutical for control of a parasite.) Exemplary pharmaceuticals, including ivermectin, fenbendazole and praziquantel, are then listed (p 14, lines 5-9).

32    After describing an embodiment of a process for forming a soft chew of the present invention, it is stated that, in a further embodiment, the process further comprises mixing an emulsifier component (p 16, lines 19-20). It is stated that the emulsifier component may be chosen to act as a humectant and/or a forming agent (p 16, lines 20-21). It would appear that the expression “forming agent” is used in the same sense as a binder. It is then stated that in an embodiment, a forming agent of choice is PEG. The description continues: “Moreover, depending upon the desired consistency of the soft chew, different molecular weight PEG may be utilized. In an embodiment, PEG 3350 is utilized. However, the PEG chosen is a matter of choice and the molecular weight may be higher or lower than 3350.”

33    The description refers to dough being formed into a soft chew of the present invention by a knockout (p 17, line 21). The expression “knockout” would appear to refer to a process whereby the soft chew is formed in a mould and then a “knockout” step removes the soft chew from the mould. Reference is made to suitable examples of forming machines. It is stated that a most preferred forming machine is the FORMAX machine manufactured by FORMAX Food Machines Mokena, Illinois (p 18, lines 3-5).

34    The description concludes with two examples (pp 20-28). Example 1a is described as “Equine Soft Chew”. This is a placebo as it does not contain an active ingredient. The ingredients, as set out at p 20, include Sweet Apple & Molasses Flavor (PC-0555) and PEG, NF 3350. The process used for mixing the components is described, including adding the wet granulation mix to a Formax FC machine (p 21, lines 16-17). A palatability study is described, with the conclusion that an embodiment of a soft chew of the present invention is palatable for a horse (p 23, lines 5-6). Example 1b is “Equine Soft Chew with Ivermectin”. Again, the ingredients are set out, the process for mixing the components is described and a palatability study is described, with the conclusion that an embodiment of a soft chew of the present invention, with an additive, is palatable for a horse. Example 2 is “Canine Soft Chew”. The ingredients, as set out at p 25, include fenbendazole granulation, praziquantel and ivermectin. The ingredients also include Artificial Beef Flavor (PC-0125) and PEG NF 3350. It is stated that a control soft chew was chosen for comparison of the palatability, namely the Interceptor 23 mg Flavor Tablet, prepared by Novartis Animal Health Co. This is described as a “direct compression product, 960 mg/tablet” (p 27). A palatability study is described, with the conclusion that the embodiment of the soft chew of the present invention “performed better than the control, was accepted at a greater percentage through free choice” (p 28).

35    The evidence indicates that the two examples are formulations developed by Pharma Chemie on behalf of Intervet Inc in the course of the Horse Project and the Dog Project.

36    The Patent Application contains 17 claims, the broadest of which is claim 1. The claims are in the following terms:

1.    A soft chew formulation for oral administration comprising a pharmaceutical for control of a parasite of Equidae, Canidae, Felidae, Bovidae, Ovidae Capridae, or Suidae organisms in a soft chew formulation, a flavouring component, a starch component, a sugar component, an oil component and an emulsifying agent that acts as a forming agent, wherein the moisture content of the composition is between 5.0 and 7.5 percent wt, the soft chew formulation is formed by knockout and the soft chew formulation is not an extrudate.

2.    The soft chew formulation according to claim 1 characterized in that the emulsifier is a polyethylene glycol.

3.    The soft chew formulation according to claim 2 characterized in that the emulsifier is polyethylene glycol 3350.

4.    The soft chew formulation according to any one of claims 1 to 3, wherein the soft chew formulation comprises between 0.1 to 50 percent wt of a flavouring component, between 5 to 60 percent wt of a starch component, between 5 to 75 percent wt of a sugar component and between 1 and 40 percent wt of an oil component.

5.    The soft chew formulation according to any one of claims 1 to 4, characterized in that the pharmaceutical is selected from ivermectin, selamectin, milbemycin, fenbendazole, pyrantel pamoate, praziquantel, epsiprantel.

6.    The soft chew formulation according to any one of claims 1 to 4, wherein the pharmaceutical is a macrolide anthelmintic.

7.    The soft chew formulation according to claim 6, wherein the macrolide anthelmintic is ivermectin.

8.    The soft chew formulation according to any one of claims 1 to 4, wherein the pharmaceutical is a benzimidazole.

9.    The soft chew formulation according to any one of claims 1 to 8, comprising more than one pharmaceutical to control a parasite of a livestock or pet animal.

10.    The soft chew formulation according to claim 9, comprising ivermectin, praziquantel and fenbendazole.

11.    The soft chew formulation according to claim 9, comprising pyrantel pamoate and praziquantel.

12.    A soft chew formulation for oral administration according to claim 1 and substantially as hereinbefore described with reference to any one of the examples and or figures.

13.    A process for making a soft chew formulation according to any one of claims 1 to 12, said process comprising the steps of:

a.    mixing a flavoring component, a starch component, a sugar component, an oil component, an emulsifier acting as a forming agent, and an additive into a dough;

b.    heating the dough; and,

c.    forming the soft chew with a knockout, such that the soft chew is not an extrudate.

14.    A process for making a soft chew formulation said process according to claim 13, and substantially as hereinbefore described with reference to any one of the examples and or figures.

15.    A soft chew formulation for oral administration made according to the process of claim 13 or 14.

16.    Use of the formulation according to any one of claims 1 to 12 or 15 for the manufacture of a medicament for the control of internal parasites in livestock, pets and farm animals.

17.    Use of the formulation according to any one of claims 1 to 12 or 15 for the manufacture of a medicament for the control of external parasites in livestock, pets and farm animals.

37    Claim 1 defines a soft chew formulation having the various features there set out. The organisms referred to include types of pets, farm animals and livestock. Claim 1 extends to a soft chew formulation comprising any pharmaceutical for the control of any parasite of any of a wide variety of domesticated animals having the identified classes of formulation components and features. The claim is, in effect, for a “delivery system”, to adopt a phrase used by Intervet in opening.

38    Claims 2 to 17 of the Patent Application are dependent on claim 1, in that they refer back to that claim and incorporate its features, for the purpose of defining the invention by reference to those and certain additional features which they set out.

39    In particular, claims 2 to 12 are dependent claims which, like claim 1, relate to soft chew formulations. They add various features relative to claim 1, such as by specifying ranges or options for particular components or ingredients. Claims 2 and 3 refer to PEG as the emulsifier. Claim 7 refers to ivermectin. Claim 10 refers to ivermectin, praziquantel and fenbendazole. Claim 12 is a so-called “omnibus” claim, being a claim defined by reference to any one or more of the examples or figures in the specification.

40    Claim 13 relates to processes of production of soft chew formulations of the kind earlier claimed, including specified steps. Claim 14 refers to the process described in claim 13 and the examples or figures. Claim 15 defines a soft chew formulation made by the use of such processes, and claims 16 and 17 are “Swiss type” claims that relate to the use of such formulations for the manufacture of a medicament for the control of parasites in animals.

Procedural matters

41    Merial’s notice of appeal was amended on a number of occasions. During closing submissions it was further amended to remove a number of grounds which it no longer pressed. The notice of appeal as so amended (titled fourth amended notice of appeal) contains two grounds of opposition, namely lack of entitlement and lack of inventive step. In closing submissions, Merial narrowed its lack of inventive step ground in the following way. In Merial’s outline of closing submissions, the lack of inventive step ground had been articulated as follows: “the alleged invention does not involve an inventive step because it was obvious in the light of the common general knowledge alone or when combined with the prior patent referred to as Christensen” (emphasis added). However, in oral closing submissions, senior counsel narrowed this ground by indicating that the words “alone or” could be treated as deleted.

42    During the course of the proceeding, Intervet was required to, and did, file a document setting out the matters it intended to raise in response to the allegation of lack of entitlement. This document contains five main propositions (set out in bold) and more detailed statements under each of those propositions. The five main propositions are:

(a)    Intervet owns all of the rights in the invention the subject of the Patent Application by virtue of a written agreement between Pharma Chemie and Intervet;

(b)    Intervet owns all of the rights in the invention the subject of the Patent Application by virtue of an implied term in the agreement between Pharma Chemie and Intervet;

(c)    even if Merial proved that Pharma Chemie was entitled to part or the whole of the invention claimed in the Patent Application, the Court may still exercise its discretion to grant the patent;

(d)    even if it were found that there is no discretion, or it was exercised against Intervet, Intervet could apply to amend the claims of the invention the subject of the Patent Application to address Mr Pieloch’s evidence;

(e)    further or alternatively, Intervet could utilise other amendment and/or rectification procedures to obtain a granted patent.

The hearing

43    At the hearing, Merial led evidence from the following witnesses:

(a)    Dr Jean-Luc Pougnas (a pharmaceutical expert);

(b)    Ms Lydia Linfoot (a compounding chemist);

(c)    Mr Mark Pieloch (the principal of Pharma Chemie at all material times, and one of the named inventors);

(d)    Ms Susan Cady (the person at Intervet responsible for engaging Pharma Chemie in 2002/2003, and one of the named inventors);

(e)    Dr Carl Johnson (who held the position of Director of Product Development and Regulatory Affairs – Pharmaceuticals at Intervet from June 2003);

(f)    Mr Shane Walsh (a food science and manufacturing expert);

(g)    Mr Thomas Kowalski (a lawyer acting for Merial in connection with the proceeding who gave expert evidence about US law);

(h)    Mr Rodney Cruise (who gave evidence about intellectual property research);

(i)    Mr Grant Fisher (a solicitor).

44    Neither Mr Cruise nor Mr Fisher was required to attend for cross-examination.

45    Intervet led evidence from the following witnesses:

(a)    Mr John Surawski (a food science and manufacturing expert);

(b)    Mr Matthew Blackburn (an independent expert on US law);

(c)    Dr Karin Stumm (who holds the position, Patent Counsel, Intellectual Property Group Animal Health MSD – Office of General Counsel, at Intervet, based in Boxmeer, the Netherlands).

46    The following witnesses gave evidence by video-link: Mr Pieloch, Ms Cady, Dr Johnson and Mr Blackburn. In relation to the video-link evidence generally, the quality of the picture and the sound was very good, with no transmission issues. In relation to the cross-examination of Mr Pieloch (and the other witnesses examined by video-link), there were no difficulties of the kind referred to by Middleton J in Intervet International B.V. v Merial Inc [2016] FCA 1030 at [57].

47    Joint reports were prepared by the two experts dealing with the development of pet food products (Mr Walsh and Mr Surawski) and the two experts dealing with US law (Mr Kowalski and Mr Blackburn). The evidence of these experts was dealt with concurrently at the hearing, with some additional cross-examination taking place separately.

48    I make the following observations about the witnesses who gave evidence at the hearing:

(a)    Mr Pieloch was, in my view, a very good witness. He was independent of both parties. He expressed himself clearly and demonstrated a mastery of the subject-matter of his evidence. He had a good recollection of the substantive matters about which he gave evidence. Where he could not recall something, he said so. His evidence is supported by a detailed letter he prepared close to the time of the relevant events, and by the contemporaneous documents. In light of these matters, I consider Mr Pieloch to be a reliable witness and accept his evidence. Where there is a difference between the evidence in his affidavits and his oral evidence during the hearing, I prefer the latter, as the affidavits were prepared by lawyers in their language rather than in Mr Pieloch’s own words.

(b)    Ms Cady worked for Intervet Inc at the relevant time but now works for Merial. However, I do not think this affected the answers she gave in evidence. She made concessions during cross-examination which bolstered the credibility of her evidence. I consider her to be a reliable witness and accept her evidence.

(c)    Dr Johnson worked for Intervet Inc at the relevant time but subsequently worked for Merial. However, I do not think this affected the answers that he gave in evidence. I consider him to be a reliable witness. He was not directly involved in the relevant events and therefore his evidence is less important than that of the other witnesses. To the extent that his evidence bears on the issues, I accept his evidence.

(d)    Dr Stumm was not involved in the relevant events. Her evidence was directed to subsequent events; in particular, the searches Intervet has undertaken for relevant documents. I consider Dr Stumm to be a reliable witness and accept her evidence.

(e)    Mr Kowalski, one of the expert witnesses on US law, was not an independent witness in that he has acted for Merial since 1997 and was involved in the preparation of Mr Pieloch’s affidavit evidence in this proceeding. I am concerned that this lack of independence may have affected his evidence; his presentation at times appeared to be an exercise in advocacy. I therefore generally prefer the evidence of Mr Blackburn, the expert retained by Intervet, to that of Mr Kowalski, to the extent that there were differences in their evidence.

(f)    Dr Pougnas, Mr Walsh and Mr Surawski were very good witnesses, demonstrating a command of the material about which they gave evidence. Ms Linfoot’s evidence was of a confined nature and ultimately not of assistance in the resolution of the issues to be determined.

Lack of entitlement

The issue

49    The issue in relation to lack of entitlement may be briefly stated as follows. Merial contends that Intervet is not entitled to the grant of a patent for the alleged invention in the Patent Application on the basis that it does not derive title to the alleged invention from Mr Pieloch, who Intervet admits is an “actual inventor” of the alleged invention. Intervet’s primary contention in response is that there was a written agreement providing for the assignment of rights from Pharma Chemie to Intervet in any invention that resulted from the Horse Project and Dog Project. In the alternative, Intervet submits that a term is to be implied into the agreement or agreements between Intervet and Pharma Chemie providing for Intervet to own all intellectual property rights that arose during the course of the Horse Project and the Dog Project.

50    In considering these issues, I will proceed on the assumption that Pharma Chemie was the employer of Mr Pieloch and that, as a consequence, it was entitled to any relevant rights of Mr Pieloch. Merial did not make any detailed submissions to the contrary. I will also proceed on the assumption that, if there was an assignment of relevant rights from Pharma Chemie to Intervet Inc, then Intervet Inc has assigned or could assign such rights to Intervet. Merial did not make any detailed submissions to the contrary. The parties generally approached the matter on the basis that no distinction needed to be made between Intervet and Intervet Inc.

Applicable principles

51    As is apparent from the text of s 59(a) of the Patents Act, a ground of opposition is made out if the applicant for the patent is either:

(a)    not entitled to a grant of a patent for the invention; or

(b)    entitled to a grant of a patent for the invention but only in conjunction with some other person.

52    In either case, a ground of opposition leading to the refusal of the patent application is made out. This reflects the principle, which is well established by the case law, that where there is more than one inventor of an invention, an applicant’s title must be derived from each of them, because a patent cannot be granted to only one of two or more inventors or the successor in title of such a person: see Stack v Davies Shephard Pty Ltd (2001) 108 FCR 422 at [13], [21] per Whitlam, Sundberg and Dowsett JJ.

53    The concept of entitlement is dealt with in s 15 of the Patents Act, which relevantly provided that a patent for an invention may only be granted to a person who (a) is the inventor; (b) would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person; or (c) derives title to the invention from the inventor or a person mentioned in (b). In University of British Columbia v Conor Medsystems, Inc (2006) 155 FCR 391, Emmett J said (at [37]) that s 15 specifies no formalities as being necessary for an applicant to be effectively the assignee of the invention from the inventor; s 15 specifies no formalities as being necessary for the derivation of title to an invention from an inventor or from a person who, on the grant of a patent, would be entitled to have the patent assigned; and, while an assignment in writing may be preferable, in order to avoid difficulties of proof, an assignment might be effected orally or may even be implied from the conduct of the parties. See also at [54] per Stone J, and at [101] per Bennett J. See also Speedy Gantry Hire Pty Ltd v Preston Erection Pty Ltd (1998) 40 IPR 543 at 550 per Emmett J. In the University of British Columbia case, Emmett J also said (at [39]-[40]):

39    … Patents are the creature of statute, and rights in relation to patents, and inchoate rights in relation to inventions that might be the subject of a patent, must depend upon the statute under which their existence is recognised. If the statute treats an invention, or the right to apply for a patent in respect of the invention, as something that is capable of assignment, alienation or disposition, it is necessary to recognise any juridical act or conduct that might give effect to such an assignment, disposition or alienation.

40    It may not take very much to constitute an act or conduct that constitutes such an assignment, disposition or alienation or that gives rise, by implication, to such an assignment, alienation or disposition …

54    It appears to be common ground that, where the basis for derivation of title is an agreement governed by the law of another country, regard is to be had, at least to some extent, to the proper law of the contract.

Findings of fact

55    In this section of these reasons, I make findings of fact in relation to the lack of entitlement issue, based on the affidavit and oral evidence and documentary evidence.

The period January 2002 to July 2003

56    At all relevant times, the Intervet group (of which Intervet and Intervet Inc were members) was owned by Akzo Nobel NV. During the period 2001 to 2002, the Intervet group business underwent integration with Hoechst Roussel Vet, which Akzo Nobel NV had acquired in 1999. The Intervet group was acquired by Schering Plough in 2007, and the animal heath activities carried out by the Intervet group business were integrated into the existing animal health business of Schering Plough.

57    In 2002-2003, the Intervet group’s research and development activities in the United States (other than those of Ms Cady) were carried out by Intervet Inc at a site in Millsboro, Delaware. Intervet Inc’s legal team and patent department were also located in Millsboro, Delaware.

58    In 2002-2003, Ms Cady worked at an office in Flemington, New Jersey, near the former research and development site of her former employer, Hoechst Roussel Vet. Ms Cady’s role included overseeing the development of formulations for potential commercialisation. Ms Cady did not have a laboratory at the office where she worked. She therefore arranged to have work done by others, outside the company. She had a staff of one or two assisting her with the oversight of external work.

59    At all relevant times, Pharma Chemie was based in Syracuse, Nebraska and Mr Pieloch was the sole owner of the company. Pharma Chemie had about 30 staff and carried on a number of distinct businesses; five of these were related to companion animal health and one was related to human health. By 2002, Pharma Chemie had developed special flavours for animal products, which it considered to be ‘proprietary’ technology; the flavours were protected as trade secrets rather than by way of patents. Pharma Chemie’s major ‘selling point’ was that it could produce products that were highly palatable for animals. Pharma Chemie manufactured private label supplements that were sold under other companies’ names. Pharma Chemie was sometimes engaged by companies to help them develop a formulation. It was also sometimes engaged to manufacture a formulation that another company had already developed.

60    In early 2002, Ms Cady contacted Mr Pieloch in relation to the development of formulations for animals. They had worked together before on other projects. Later in these reasons, I refer to Mr Pieloch’s letter dated 6 October 2003. It is convenient to note at this point that in the 6 October 2003 letter, Mr Pieloch stated:

In early 2002, Susan Cady contacted me to ask if Pharma Chemie had the ability to develop a palatable “Soft Chew” dosage form for companion animals – dogs, cats, or horses. I had told her that Pharma Chemie did possess the palatable “Soft Chew” technology to develop for Intervet a palatable “Soft Chew” product, that would use one or two Pharma Chemie flavor bases as follows:

Artificial Powdered Beef Flavor: PC-0125 for dogs and cats

Sweet Apple and Molasses Flavor: PC-0555 for horses

Susan Cady from Intervet asked that I prepare a development proposal for Intervet … to develop an Ivermectin Soft Chew for Horses, which I did on January 16, 2002. Pharma Chemie received approval for this project from Intervet via fax on January 28, 2002.

During cross-examination, Mr Pieloch adopted the account of matters contained in his letter dated 6 October 2003. He also said in relation to Ms Cady’s request in early 2002:

Her request was just like all previous requests that I had worked with her for all the previous years. We would take our existing technology and incorporate their active ingredient or active ingredients to produce a commercially-viable product and that’s what we did.

61    I accept the evidence of Mr Pieloch set out in the previous paragraph and the description of the initial approach by Ms Cady set out in his letter dated 6 October 2003. This evidence was not contradicted by Ms Cady and is consistent with the contemporaneous documents, including the development proposal for the Horse Project and the product development report dated 29 April 2002 for the Dog Project, referred to below.

62    Ms Cady said during cross-examination that she contacted Mr Pieloch because he had flavours that were very palatable for animals. She also said that Mr Pieloch was willing to work with all of the animal health companies with formulations so that they would use his flavours; once a company used his flavour in its formulation, the company would buy the flavour commercially as long as that product was sold, as there would be no substitute for it. I accept this evidence.

63    On 16 January 2002, Pharma Chemie provided a proposal to Intervet Inc for (what became) the Horse Project. The proposal (a two-page document) is in evidence. The proposal was accepted by Ms Cady on behalf of Intervet Inc on 24 January 2002 and a copy of the accepted proposal was faxed to Mr Pieloch at Pharma Chemie on 28 January 2002. The proposal described the project as: “Development of an Ivermectin Soft Chew for Horses”. The proposed cost was $40,000 to $148,000. The “Development Plan” for the project, as set out in the proposal, was as follows:

This project has as a goal the development of an Ivermectin Soft Chew for Horses, each Soft Chew containing one specific strength of Ivermectin per Soft Chew. This development project will be divided into five different stages as follows.

The first stage included installation, training and qualification of a Formax F6 Forming Machine and a Texture Technologies Texture Analyzer. As set out in the proposal, this stage included the following work:

Preparation of exploratory formulas incorporating the “Chewable Flavor Tablets” technology into Ivermectin Placebo Soft Chews for Horses. This stage will involve the preparation of a minimum of 20 test formulas to “debug” the new equipment to produce acceptable Soft Chews for Horses. Numerous formulas and processing factors will be evaluated during this stage of development.

64    The Horse Project was carried out by Pharma Chemie during 2002-2003. As noted above, the proposal for the Horse Project refers to a Formax machine. Ms Cady said during cross-examination that Intervet bought the Formax machine and installed it in Mr Pieloch’s facility; when the work was finished, the machine was brought back to Intervet. I accept this evidence.

65    Also in 2002, Intervet Inc engaged Pharma Chemie to carry out the Dog Project. The evidence does not include a project proposal of the type described above in relation to the Horse Project, but it does include several product development reports in relation to the Dog Project. Three of these, which were annexed to Dr Stumm’s affidavit dated 24 June 2016, are dated 29 April 2002, 23 September 2002 and 23 July 2003. Some additional reports were tendered during cross-examination. In the product development report dated 29 April 2002, the objective is described as follows:

To determine the commercial feasibility of developing a Ivermectin / Praziquantel / Fenbendazole (I/P/F) Soft Chew for dogs. The I/F/P Soft Chew product should be a highly palatable product in dogs with palatability equal to or greater than Novartis’ Interceptor Flavor Tablets. To accomplish this objective, Pharma Chemie will develop a highly palatable canine chewable tablet incorporating Pharma Chemie’s Artificial Powdered Beef Flavor (Product Code PC-0125). Pharma Chemie’s Artificial Powdered Beef Flavor is a highly aromatic and palatable flavour concentrate for use in dogs.

The section of the document headed “Development Plan” included the following description of stage one of the project:

Preparation of exploratory formulas incorporating the “Chewable Flavor Tablets” technology into I/P/F Placebo Soft Chews for dogs. This stage will involve the preparation of a minimum of twenty (20) different formulations of test products. Once these formulations are produced, the best four formulations will undergo palatability testing in dogs. …

66    Mr Pieloch estimated that Pharma Chemie was paid approximately $300,000 for the Horse Project and the Dog Project. I accept this evidence.

The period August 2003 to October 2003

67    On 13 August 2002, the First US Provisional Application was filed. Mr Huron, Ms Cady and Mr Pieloch were named as the inventors. The document indicates that it was prepared by the Akzo Nobel Patent Department, Intervet Inc, Millsboro, Delaware. The document was signed by William P Ramey III (Mr Ramey), a patent attorney working at Intervet Inc. The title of the invention is “Novel Compositions and Processes for Delivering an Additive”. There were six claims. Claim 1 was: “A Cookie comprising a starch component, a sugar component, an oil component, and an additive”. The section dealing with the background to the invention stated that chewable dosage forms for drug delivery were well known to pharmaceutical technology; chewables had found wide acceptance for delivery of medication to dogs; however, no such product existed for horses. The specification included an example which was a placebo experiment in relation to horses.

68    On 16 December 2002, the Second US Provisional Application was filed. Mr Huron, Ms Cady and Mr Pieloch were named as inventors. The title was the same as the First US Provisional Application. It was prepared by the Akzo Nobel Patent Department, Intervet Inc, and signed by Mr Ramey on behalf of Intervet Inc. There were 12 claims. Claim 1 was: “A soft chew comprising a starch component, a sugar component, an oil component, and an additive”.

69    On 13 August 2003, the PCT Application was filed. The application claimed priority to the First US Provisional Application and the Second US Provisional Application. The applicants (for all designated States except US) were Akzo Nobel and Ms Cady. Mr Huron was named as the inventor/applicant (for US only). Mr Ramey was named as the agent. The title of the invention was: “Compositions and process for delivering an additive”. There were 17 claims. Claim 1 was in the following terms:

A soft chew comprising a flavoring component of between about 0.1 to about 50 percent, a starch component of between about 5.0 to about 60 percent, a sugar component of between about 5.0 to about 75 percent, an oil component of between about 1.0 to about 40 percent, and a first additive wherein the moisture content is less than about 15 percent and wherein the soft chew is formed by knockout, the soft chew is not an extrudate.

70    Ms Cady accepted during cross-examination that she agreed to be named as an inventor on the First and Second US Provisional Applications and the PCT Application and that she signed an inventor’s declaration in relation to those applications. However, neither her affidavit nor oral evidence contained any description of scientific work done by her in relation to the alleged invention.

71    On 22 August 2003, Mr Ramey wrote to Mr Pieloch. A copy of the letter is in evidence (forming part of Ex A38). The letter was in the following terms:

Dear Mark,

As I informed you in our telephone conversations, enclosed is a copy of a declaration attached to the specification and a separate copy of the specification for a patent application covering the soft chew technology. Please review the specification and sign the declaration, express mailing it back to my office at the address below within five days of receiving this letter. Should you have any questions, please feel free to contact me at 302 933 4034.

Sincerely,

[signed]

William P. Ramey III

(Emphasis added.)

72    A question arises as to which specification was enclosed with Mr Ramey’s letter dated 22 August 2003, that is, whether it was the First US Provisional Application, the Second US Provisional Application or the PCT Application. I discuss this issue below.

73    I note that Mr Ramey described the patent application as covering “the soft chew technology”. As discussed below, Mr Pieloch expressed himself (both in his evidence and in the letter dated 6 October 2003, referred to below) in similar terms.

74    On or about 16 September 2003, Wendy Marsh (Ms Marsh), a lawyer at McKee, Voorhees & Sease, PLC, acting for Pharma Chemie, and based in Des Moines, Iowa, sent a letter of that date to Mr Ramey. The letter was headed “Re: Patent Application Entitled: ‘Novel Compositions and Processes for Delivering an Additive’”. The letter was in the following terms:

Dear Mr. Ramey:

Our firm represents Pharma Chemie Inc. (“Pharma Chemie”) with respect to its intellectual property matters. Mark Pieloch recently forwarded us your letter of August 22, 2003 for response.

It is our client’s position that Pharma Chemie invented the soft chew technology as described in the above-referenced patent application in 1992, and continued its work on the technology through the 1990’s and into the new millenium [sic]. All of the work on this technology was completed prior to Pharma Chemie’s entry into the Manufacturing and Supply Agreement with Intervet in 2002. Pharma Chemie also invented the manufacturing procedure described in the patent application cited above, and provided Formax with this information well prior to its entry into the development agreement with Intervet in 2002.

Pharma Chemie is therefore the owner of the technology described in the above-referenced patent application, not Intervet. For this reason, Mr. Pieloch will not agree to sign the Declaration and Power of Attorney for this application. In fact, our client has already taken steps to patentably protect its own improved soft chew invention unrelated to its contract with you.

Our client has provided us with a copy of the Pharma Chemie/Intervet Inc. 2002 Manufacturing and Supply Agreement. This Agreement relates to the joint development of a veterinary pharmaceutical product that includes the Pharma Chemie soft chew and Flavor Base proprietary technology. It does not, however, confer ownership of the soft chew technology to Intervet. Instead, paragraphs 1.4 and 9.3 provide that only veterinary pharmaceutical product “developed and manufactured by Intervet Inc., which incorporates the [Flavor Base] and which Intervet Inc….will market and sell worldwide” shall be assigned to Akzo Nobel NV. Neither Pharma Chemie nor Intervet’s patent applications require the inclusion of the Flavor Base, nor is there evidence that the claimed products will be marketed and sold worldwide by Intervet. For these reasons, Intervet cannot claim ownership of the subject matter of either of these applications.

We trust this resolves the matter and that you will rethink whether you are legally entitled to file on technology not invented by your folks. Please feel free to contact me with any questions.

Very truly yours,

[signed]

WENDY K. MARSH

(Emphasis added.)

75    The Manufacturing and Supply Agreement referred to in the letter is not in evidence. Despite extensive searches by Intervet, it cannot be located. During cross-examination, Mr Pieloch said he could not recall the Manufacturing and Supply Agreement referred to in Ms Marsh’s letter. I note that the letter states in the fourth paragraph that the agreement “relates to the joint development of a veterinary pharmaceutical product that includes the Pharma Chemie soft chew and Flavor Base proprietary technology”. On the basis of this description, I infer that the agreement referred to as the Manufacturing and Supply Agreement related to the development projects referred to in these reasons as the Horse Project and the Dog Project (rather than to some other subject matter such as the manufacture and supply of the flavouring components). I note also that in the last sentence of the second paragraph, the letter refers to “the development agreement”. This would appear to be a shorthand description of the Manufacturing and Supply Agreement referred to earlier in that paragraph (rather than a reference to a different agreement), thus supporting the inference that the agreement related to the development projects referred to in these reasons as the Horse Project and the Dog Project.

76    In the third paragraph of the letter, Ms Marsh stated that her client had already taken steps to patentably protect its own improved soft chew invention. During cross-examination, Mr Pieloch said that, notwithstanding his view that the soft chew technology could be readily produced by people skilled in the art, he did file a patent application after discussing the matter with Ms Marsh. He said that the application was refused by the United States Patents and Trademarks Office (USPTO) on the basis that people skilled in the art would easily be able to produce it. I note that in the penultimate paragraph of the letter, Ms Marsh referred to “either of these applications”. This would appear to be a reference to Intervet Inc’s patent application and the application filed by Pharma Chemie (rather than indicating that Mr Ramey had sent Mr Pieloch copies of two patent applications).

77    On or about 22 September 2003, Mr Ramey filed in the United States a petition under 37 CFR §1.47. The application cited the serial number for the PCT Application, filed on 13 August 2003, and described the invention as “Novel Compositions and Processes for Delivering an Additive”. The document stated that the applicants were filing the petition “for an inventor who refuses to sign”. It was stated that Mr Pieloch, a joint inventor, had refused to execute a declaration for the above application. A statement of relevant facts followed. This referred to the filing of the First US Provisional Application by Mr Ramey in August 2002 and stated: “Through due diligence and a reasonable inquiry, during the drafting of the application, Mr Ramey determined that the inventorship consisted of Sebastien Huron, Susan Cady and Mark Pieloch. Mr Ramey spoke with each inventor about the application being filed …”. It was then stated that: at or about the one year anniversary for claiming priority, the applicants’ attorney (Mr Ramey) filed the PCT Application; the applicants were able to obtain the signatures of all the inventors except Mr Pieloch; Mr Ramey communicated with Mr Pieloch about signing the declaration; Mr Pieloch responded that he would need to check with his attorney; on 22 August 2003, Mr Ramey sent a certified letter to Mr Pieloch, requesting that he review the patent application accompanying the letter, sign the declaration and return the signed declaration within five days of receipt; as at 22 September 2003, a signed copy of the declaration had not been received by the Akzo Nobel Patent Department or Mr Ramey. An accompanying declaration of Mr Ramey, dated 22 September 2003, also stated that, as at that date, neither Mr Pieloch nor his attorney had attempted to communicate. No reference was made to Ms Marsh’s letter dated 16 September 2003. It is not clear on the evidence whether it had been received by 22 September 2003.

78    On or about 20 October 2003, Ms Marsh on behalf of Pharma Chemie sent another letter to Mr Ramey. The letter was headed: “Re: Patent Application Entitled ‘Novel Compositions and Processes for Delivering an Additive’; Copies of Petition Under 37 CFR §1.47 Filed with Patent and Trademark Office” and was in the following terms:

Dear Mr. Ramey:

Our client forwarded us the above-referenced petition for an inventor who refuses to sign. As explained in our letter of September 16, 2003, Mr. Pieloch will not sign the Declaration and Power of Attorney for this application since Pharma Chemie, not Intervet, invented its subject matter.

We note in your petition and sworn statement that was apparently submitted to the PCT that, as of September 22, 2003, neither Mr. Pieloch nor his attorney had attempted to communicate with you. However, this statement is obviously not true in view of our September 16th letter. We trust you will be promptly informing the U.S. receiving office of this communication.

Since Intervet did not invent the subject matter of the above-referenced patent application, any U.S. patent application filed by Intervet on this technology (if one has not been filed already) will be unpatentable under 35 U.S.C. §102(f). Attached please find evidence proving Mark Pieloch as the inventor of the soft chew formulation described in your application. The active ingredients of the formulations have been blacked out, but not their concentrations, so you can readily ascertain the concentrations of inactive ingredients, including the “starch component”, “sugar component”, “oil component”, and a “first additive” whereby the moisture content is less than about 15%. If a U.S. application is (or has already been) filed, under 37 C.F.R. §1.56, you will be obligated to disclose this evidence to the Patent Office as it is all material to the patentability of the Intervet application. Please note that this information must be treated as confidential according to the terms of the confidential disclosure agreement of the parties dated October 16, 2001, except for purposes of meeting your duty of disclosure under Rule 56.

Very truly yours,

[signed]

WENDY K. MARSH

(Emphasis added.)

79    Ms Marsh’s letter attached a four-page letter from Mr Pieloch to her dated 6 October 2003, together with an eight-page summary of the attachments to that letter and 19 attachments. The subject of Mr Pieloch’s letter was: “Collaborated Documentation of Pharma Chemie’s Soft Chew Product Development Activities from 1992-2002”. The first paragraph of the letter stated in part:

This letter with its numerous attachments is just a small sampling of documentation that is being provided to you to document the fact that the “Soft Chew” technology was developed not by Intervet in 2002, but was well developed by Pharma Chemie in numerous forms starting in 1992 and continuing to this day.

Mr Pieloch’s letter contained a chronological summary of certain matters and then stated (at p 3):

Thus, I have attempted to present a chronological history of collaborated “Soft Chew” product development activities, which clearly shows that Pharma Chemie possessed the “Soft Chew” technology prior to any development work being undertaken by Pharma Chemie for Intervet in the spring of 2002.

Mr Pieloch’s letter also referred (on p 3) to “Intervet’s US Patent Application, Serial Number: PCT/US03/25358”, which is the number for the PCT Application, and made some observations about the patent application. Mr Pieloch was cross-examined extensively on the attachments to his letter dated 6 October 2003. I refer to this evidence later in these reasons.

80    The evidence does not include any response from Mr Ramey or Intervet Inc to Ms Marsh’s letters dated 16 September 2003 and 20 October 2003. Based on the evidence as a whole, it is to be inferred that no response was sent. Despite extensive searches by Intervet, no response letter has been produced. Further, as discussed below, in 2005 Intervet Inc filed documents with the USPTO which referred specifically to Ms Marsh’s letter dated 20 October 2003 and the enclosed documents. Those filings did not refer to any letter in response. Had a response been sent, it is likely that it would have been referred to as well.

81    As noted above, there is a question whether the specification enclosed with Mr Ramey’s letter dated 22 August 2003 was the First US Provisional Application, the Second US Provisional Application or the PCT Application. The headings to Ms Marsh’s two letters state that the patent application is entitled “Novel Compositions and Processes for Delivering an Additive”. That is the title of the US Provisional Applications; the title on the PCT Application is slightly different, namely “Compositions and Process for Delivering an Additive”. This may suggest that one or both of the US Provisional Applications was sent to Mr Pieloch (and passed on to Ms Marsh) rather than the PCT Application. However, for the following reasons, I think it is clear that the PCT Application was provided by Mr Ramey to Mr Pieloch (and provided by Mr Pieloch to Ms Marsh). First, on page 3 of Mr Pieloch’s letter dated 6 October 2003, he referred to “Intervet’s US Patent Application, Serial Number: PCT/US03/2538”. Notwithstanding the reference to a US patent application, the reference to the serial number of the PCT Application suggests that a copy of the PCT Application was provided to Mr Pieloch. During cross-examination, Mr Pieloch was taken to the First US Provisional Application, the Second US Provisional Application and the PCT Application. He said he did not recall which of these he looked at in 2003. In re-examination, he was taken to page 3 of the 6 October 2003 letter (which, as noted above, referred to Intervet’s US patent application, serial number PCT/US03/25358). Mr Pieloch said that he believed Mr Ramey sent him the PCT Application and this is where he obtained this number. Secondly, Ms Marsh’s letter dated 20 October 2003 (set out in [78] above) stated in the third paragraph that evidence was attached “proving Mark Pieloch as the inventor of the soft chew formulation described in your application”. In reference to that evidence, Ms Marsh stated: “…so you can readily ascertain the concentrations of inactive ingredients, including the ‘starch component’, ‘sugar component’, ‘oil component’, and a ‘first additive’ whereby the moisture content is less than about 15%”. These are elements of claim 1 of the PCT Application, indicating that she was in possession of that application. Further, I note that the statement of relevant facts in Mr Ramey’s petition dated 22 September 2003 refers to sending the proposed declaration to Mr Pieloch after referring to the filing of the PCT Application, which is consistent with Mr Ramey having sent Mr Pieloch the PCT Application. For these reasons, I think it is clear that the PCT Application was provided by Mr Ramey to Mr Pieloch. The use of the title of the US Provisional Applications in the headings on Ms Marsh’s letters is explicable on the basis that Mr Ramey used that title in the documents he provided, such as the petition dated 22 September 2003 and the declaration and power of attorney for patent application.

82    On 28 October 2003, Mr Ramey on behalf of Intervet Inc or Akzo Nobel NV filed a petition under 37 CFR §1.425 with the US Receiving Office for the Patent Cooperation Treaty in connection with the PCT Application. (It appears from this petition that the earlier petition, dated 22 September 2003, was dismissed as moot because an actual inventor had been left off the original request.) The 28 October 2003 petition was generally in similar terms to the earlier petition. The petition stated that a joint inventor, Mr Pieloch, had “refused to execute a declaration for the above referenced application”. It stated that “As of September 22, 2003, a signed copy of the declaration has not been received by the Akzo Nobel Patent Department or Applicants’ attorney”. The petition did not refer to Ms Marsh’s letters dated 16 September 2003 and 20 October 2003.

Whether Pharma Chemie had already developed the soft chew technology

83    It is convenient to deal now with the scope of the Horse Project and the Dog Project and whether or not Pharma Chemie had already developed the soft chew technology described in the relevant patent applications before it was engaged by Intervet Inc to carry out those projects. The expression “soft chew technology” was not given a precise meaning in the evidence, but the general tenor of the evidence was that it refers to the know-how to produce an oral formulation with a soft and chewy texture. Both Mr Pieloch and Ms Cady were directly involved in the engagement of Pharma Chemie by Intervet Inc to carry out the Horse Project and the Dog Project. I will deal first with Mr Pieloch’s evidence as he had a much more detailed recollection of the relevant events. Unless otherwise indicated, I refer to the evidence Mr Pieloch gave during cross-examination.

(a)    Mr Pieloch said on several occasions during his evidence that his company, Pharma Chemie, had developed “soft chew technology” before being approached by Intervet in 2002. For example, he said, in reference to his letter dated 6 October 2003 and the attachments to that letter:

I thought the documentation I provided was more than sufficient, showing that myself, Mark Pieloch, and my company, Pharma Chemie, developed initial soft chew technology long before Intervet ever contacted us. That was the reason why Susan Cady contacted me to develop a soft chew dosage form for them because we had the technology. We had the know-how. Same thing for developing a chewable tablet dosage form. We had the technology. We had the know-how. We produced hundreds of companion animal health products using that chewable tablet technology. We had other NADA products approved using that chewable tablet technology and so, when Susan Cady contacted me, she was contacting me because she knew I had the expertise.

(b)    Further, Mr Pieloch said:

I was not paid by Intervet to develop the dosage form. I was paid by Intervet to incorporate their active ingredients using our soft-chew technology.

(c)    Mr Pieloch said that Intervet wanted Formax as their equipment of choice and so Pharma Chemie had to experiment with the new Formax machine, as previously he had had experience with other manufacturers’ equipment.

(d)    Mr Pieloch said on several occasions that, because he considered the soft chew technology to be pre-existing technology and readily known to people skilled in the area, he was “shocked” by Intervet’s patent application (being the application sent to him by Mr Ramey in August 2003). For example, he said:

I can tell you I was totally shocked by Intervet saying that they were going to patent the soft chew technology … [W]e started developing it in 1992 and had continuously worked on it for 10 years and actually had it already perfected and then Intervet approached me. We did the work for them as they had requested and then, out of nowhere, they sent us this patent application which, to me, was totally bogus. It’s a perfect example of a large corporation trying to steal the technology of a small business and that can happen in the United States and it can happen anywhere in the world.

(e)    Mr Pieloch said that he called Ms Cady after receiving the patent application from Mr Ramey, and she said she was also shocked but it was beyond her hands as it was another department. (Mr Pieloch was not challenged on this evidence and Ms Cady did not give evidence as to whether or not she said this.)

(f)    Mr Pieloch said that, although he is not a lawyer or patent attorney, in his view the patent application sent to him by Mr Ramey “as it was written showed that they were basically taking my soft [chew] technology and were trying to patent it”.

84    Mr Pieloch was questioned extensively during cross-examination about the 6 October 2003 letter and the attachments to that letter. I note the following in relation to the evidence given during cross-examination and the attachments to the 6 October 2003 letter:

(a)    Mr Pieloch said that the references in the attachments to his 6 October 2003 letter to a “soft, chewable tablet” were actually words for “soft chew”. He drew a distinction between most tablets, which are compressed and will snap and break, and which may be considered a conventional chewable tablet, on the one hand, and a tablet which will “bend or possibly deform its shape without physically breaking”, on the other. Thus, where the attachments referred to a “soft, chewable tablet”, the words “soft chew” could be substituted, he said. He said that, at the time the relevant documents were written, the words “soft chew” had not been coined or were not used, “so the best way to describe a soft chew in 1992 was a ‘soft chewable tablet formulation’”. It was put to Mr Pieloch on several occasions that the documents only reflected work done with chewable tablet technology, not soft chew. Mr Pieloch consistently rejected this.

(b)    Mr Pieloch said that PEG (which is an ingredient referred to in many of the attachments to the 6 October 2003 letter) was one of the ingredients that gave the dosage form softness.

(c)    In relation to attachment 2 to the 6 October 2003 letter (a project with Ciba-Geigy Limited in 1992 and 1993), Mr Pieloch said the “whole goal of the project was to develop a soft chewable tablet, not a conventional compressed hard tablet”. He said that this was “as clear as day” from the documents. He also said:

The addition of PEG 8000 gives the tablet a soft texture to it. It does not act like a conventional crisp, hard, compressed tablet. The goal of the project was to develop a soft, chewable tablet, something that’s mouldable, something that has a little more shape, because often small breeds of dogs do not like an excessively hard tablet, from a palatability point of view. So if you can develop a dosage form that’s slightly softer, it’s more palatable.

(d)    Mr Pieloch accepted that a number of the attachments to the 6 October 2003 letter did not contain specific elements of claim 1 of the Patent Application. For example, he accepted that attachment 5 did not contain oil or starch.

(e)    Mr Pieloch said that attachment 6 to the letter dated 6 October 2003 (an invoice issued by Pharma Chemie to Novartis Animal Health US, Inc in relation to product shipped to Wenger Inc in 2000) related to a project with Novartis “to develop what the food industry or pet food industry would consider a true, soft chewable dosage form as it exists today”. He said that Wenger made product by extrusion rather than compression. He said: “Wenger was one of the companies that makes … hundreds of thousands of pounds of dog food, soft chewable treats, with their equipment on a worldwide basis, so we went to that company to further our ‘soft [chew]’ development work”. He said that the soft, chewable dosage form produced with Novartis (to which attachment 6 related) was “very much the soft-chew technology that you see other companies have and use” and that it was “very similar” to the Patent Application filed by Intervet in Australia.

(f)    Attachment 10 to the letter dated 6 October 2003, as explained in the description of the attachments accompanying the 6 October 2003 letter, related to the development of a moulded “soft chew” formulation for Novartis Animal Health at Extru-Tech Inc. Mr Pieloch explained in that description: “Extru-Tech Inc was one of several equipment companies that were being evaluated by Novartis Animal Health and Pharma Chemie Inc to produce the new Novartis ‘Soft Chew’ product line for dogs.”

(g)    Attachment 11 related to the development of a moulded “soft chew” formulation for Novartis Animal Health at Wenger Inc.

(h)    Attachment 12 to the letter dated 6 October 2003 comprised five pages being extracts from documentation relating to Novartis’s request to Pharma Chemie to be the potential manufacturer of Novartis’s new “soft chew” canine product line. The cover letter is dated 12 June 2001. Mr Pieloch stated during cross-examination: “That would tell you we had finalised a soft chew formula with Novartis Animal Health prior to that June, 12 date.” The ingredients for the formulation included:

(i)    a flavouring component;

(ii)    starch; and

(iii)    sugar.

In the description of the attachments accompanying the 6 October 2003 letter, Mr Pieloch wrote (at CB 469) that “[o]ils and fats are contained within the formula under the ingredients – Powdered Cooked Beef and Stock-aid Bacon Flavor, FG; which comprise 27.6% weight/weight of the ‘Soft Chew’ dosage form”. (Although Mr Pieloch accepted in cross-examination that the formulation at CB 530 did not contain any oil, he was not taken to the description at CB 469.) This was an extruded product.

(i)    Mr Pieloch said that an extrusion machine and a forming machine were in the same broad category, as distinct from a tablet press, which is in a totally different category. He said that extrusion and forming could also be described as “moulding”. He said that “extrusion”, “forming” and “moulding” were each names used by companies to describe their equipment, with each piece of equipment having pluses and minuses.

(j)    Attachment 14 to the 6 October 2003 letter comprises documentation from Neptech Research regarding two new “soft chew” canine products. As explained in the description of the attachments accompanying the 6 October 2003 letter, Pharma Chemie and Neptech Research had formed a verbal partnership to manufacture Novartis’s new “soft chew” canine product line and other non-drug “soft chew” palatable products using forming rather than extrusion technology, to minimise capital equipment costs for both companies. The fax cover sheet for these documents is dated 3 July 2001.

(k)    As explained in the description of the attachments accompanying the 6 October 2003 letter, attachment 15 is documentation showing the selection of the Formax F6 for “soft chew” manufacturing operations. The documentation is dated 10 August 2001.

(l)    During cross-examination Mr Pieloch was taken to the Second US Provisional Application, which claimed a soft chew comprising a starch, sugar, oil and an additive. He was asked if he understood that to be covering his soft chew technology. He answered: “Yes. Because we used that similar technology with Neptech and with Novartis Animal Health”.

(m)    It was put to Mr Pieloch during cross-examination that none of the formulations in attachments 1 to 18 to the 6 October 2003 letter has each of the features of claim 1 of the Patent Application. He responded: “The work that we had done with Wenger as well as Extrutech [-] we had all of those items covered in the work that we did with Wenger.”

85    As noted above, some of the cross-examination of Mr Pieloch was directed to whether each of the elements of claim 1 of the Patent Application was present in the attachments to Mr Pieloch’s 6 October 2003 letter. A number of points may be made about this line of questioning and Intervet’s submissions based on those questions and Mr Pieloch’s answers. First, the attachments should be read together with the description of the attachments which accompanied Mr Pieloch’s letter. Secondly, some of the attachments were merely provided as evidence that certain work had been carried out, without purporting to set out the ingredients of the formulation. Thirdly, the letter and attachments were intended to describe the process of development of the technology over a number of years. Fourthly, the issue for present purposes is whether or not Pharma Chemie had already developed the soft chew technology described in the patent applications. For this issue, it is sufficient for Merial to show that, through a process of development, Mr Pieloch had already conceived of the invention described in the patent applications. Mr Pieloch’s evidence on this was clear: as noted above, in his view the patent application sent to him by Mr Ramey “as it was written showed that they were basically taking my soft [chew] technology and were trying to patent it”.

86    Ms Cady did not have a clear recollection of the agreements in relation to the Horse Project or the Dog Project. She did not give evidence contradicting the proposition that Pharma Chemie had already developed the soft chew technology described in the patent applications before it was engaged by Intervet Inc in 2002. Nor did she give evidence contradicting Mr Pieloch’s description of the scope of the projects.

87    No other witness gave evidence about the scope of the Horse Project and the Dog Project or as to whether or not Pharma Chemie had already developed the soft chew technology described in the patent applications before it was engaged by Intervet Inc in 2002.

88    I accept the evidence of Mr Pieloch set out in [83]-[84] above. Mr Pieloch had a clear recollection of these matters. He maintained his position under cross-examination. Where his account was challenged during cross-examination, he explained his position clearly and credibly. Mr Pieloch’s evidence is supported by his detailed letter dated 6 October 2003. That letter was prepared close to the time of the relevant events, when he is likely to have had an even clearer recollection of the relevant events. His evidence is supported by or consistent with the contemporaneous documents, such as the proposal for the Horse Project and the product development report for the Dog Project dated 29 April 2002, referred to above, as well as the attachments to his letter dated 6 October 2003. It is also supported by the letters dated 16 September 2003 and 20 October 2003 written by Ms Marsh on his behalf, to which there does not appear to have been any response.

89    On the basis of Mr Pieloch’s evidence set out above, I make the following findings:

(a)    Mr Pieloch and his company, Pharma Chemie, developed initial soft chew technology long before Intervet Inc contacted them.

(b)    A distinction can be drawn between a conventional chewable tablet, which is compressed and will snap and break, on the one hand, and a tablet which will bend or possibly deform its shape without physically breaking, on the other. The latter may be described as a “soft chew”. Where some of the attachments to Mr Pieloch’s 6 October 2003 letter refer to a “soft, chewable tablet”, the words “soft chew” could be substituted. That expression had not been coined or entered into usage at the time those documents were prepared.

(c)    PEG (which is an ingredient referred to in many of the attachments to the 6 October 2003 letter) is one of the ingredients that gave the dosage form softness.

(d)    The whole goal of the project with Ciba-Geigy in 1992 and 1993 was to develop a soft, chewable tablet, not a conventional compressed hard tablet.

(e)    In 2000, Pharma Chemie undertook a project with Novartis Animal Health US, Inc to develop what the pet food industry would consider a true, soft chewable dosage form that exists today. The soft, chewable dosage form produced with Novartis was very similar to the Patent Application filed by Intervet in Australia.

(f)    Pharma Chemie was not engaged by Intervet Inc to develop a soft chew dosage form; it was engaged to incorporate Intervet Inc’s active ingredients into a formulation, using Pharma Chemie’s soft chew technology.

(g)    Pharma Chemie had already developed the soft chew technology described in the relevant patent applications before it was engaged by Intervet Inc to carry out the Horse Project and the Dog Project.

The period 2003 to 2008

90    During 2003 and 2004 Intervet Inc and Pharma Chemie entered into a number of consulting agreements, copies of which were in evidence. These agreements did not relate to the Horse Project or the Dog Project and they are not relied on by Intervet as giving rise to an entitlement to the invention described in the Patent Application. However, it was contended on behalf of Intervet during the hearing that these agreements provide examples of the types of standard clauses relating to intellectual property rights which were included in contracts to which Intervet Inc was a party. One example is a consulting agreement with the date 26 April 2004 on the first page. (Although the agreement has this date on the first page, it was not signed on behalf of Intervet Inc until 4 May 2004.) The agreement was signed by Mr Pieloch for Pharma Chemie and Dr Johnson for Intervet Inc. Pharma Chemie was described as the “Consultant” in the agreement. The purpose of the agreement was to “make palatable formulations containing HOE120739 using a previously developed formulation and a novel formulation developed at Intervet Innovation, Schwabenheim, Germany”. The target animal species was canine. Clause 8 of the consulting agreement was in the following terms:

All inventions, improvements, discoveries and innovations (whether or not patentable) conceived or first actually reduced to practice in the performance of services under this Agreement shall be deemed to be, and shall be, the property of Intervet, and Consultant shall disclose promptly to Intervet or to such persons as Intervet may designate, all such inventions, improvements, discoveries and innovations, and any and all patents and patent applications thereon to Intervet or its designee as and when requested, and to cooperate with Intervet in the preparation, prosecution and enforcement of such patents and patent applications, it being understood that none of the costs thereof shall be paid by Consultant.

91    On 10 February 2005, Mr Ramey on behalf of Intervet Inc or Akzo Nobel NV filed a further petition under 37 CFR §1.47 with the US Receiving Office under the Patent Cooperation Treaty in connection with the PCT Application. The petition was in similar terms to the 28 October 2003 petition. It stated that “As of September 22, 2003, a signed copy of the declaration has not been received by the Akzo Nobel Patent Department or Applicants’ attorney”. A declaration of Mr Ramey dated 7 February 2005 accompanied the petition. This stated: “As of September 22, 2003, a signed copy of the declaration has not been received by the Akzo Nobel Patent Department or me nor has Mr Pieloch or his attorney attempted to communicate”. No reference was made to Ms Marsh’s letters dated 16 September 2003 and 20 October 2003 in the petition or declaration. No explanation has been provided in the evidence as to why they were not referred to.

92    On 29 November 2005, David M Gryte (Mr Gryte), a senior patent counsel at Intervet Inc, filed a renewed petition under 37 CFR §1.47(a) with the USPTO. The application related to the US national phase of the PCT Application and followed the dismissal of the 10 February 2005 petition. Intervet Inc requested that the dismissal be withdrawn and the petition granted in view of the supplemental statement of facts and enclosures provided with the renewed petition. The supplemental statement of facts referred to the 22 August 2003 letter from Mr Ramey to Mr Pieloch. It then stated that, following Mr Pieloch’s receipt of that letter, his attorney, Ms Marsh, notified Mr Ramey by letter that Mr Pieloch refused to sign the declaration. The renewed petition enclosed a copy of Ms Marsh’s 20 October 2003 letter. Towards the end of the renewed petition, it was stated that Intervet Inc was not enclosing the documents referenced in Ms Marsh’s 20 October 2003 letter, but intended to submit such documents in the form of a later-filed information disclosure statement to the extent it believed such documents may be material to the patentability of the patent application. It was also stated that Intervet Inc was happy to provide such documents upon request from the USPTO.

93    On 6 August 2008, Mr Gryte on behalf of Intervet Inc filed a supplemental information disclosure statement with the USPTO. It was stated in the document that Intervet Inc submitted the statement in accordance with the duty to disclose information material to patentability under 37 CFR §1.56, but without admitting that the references were relevant or prior art. The list of documents attached to the statement includes the 20 October 2003 letter from Ms Marsh, “as well as a memo and other documents from Mr Pieloch purportedly supporting Mr Pieloch’s decision” to refuse to sign the declaration. This is apparently a reference to Mr Pieloch’s letter dated 6 October 2003 and the attachments to that letter.

94    There was only limited evidence about registration and commercialisation of the formulations developed in the course of the Horse Project and the Dog Project. In relation to the Horse Project, Ms Cady said during cross-examination that an ivermectin soft chew for horses was approved, launched and sold in the United Kingdom by Intervet or a related company. In relation to the Dog Project, Ms Cady said during cross-examination that an ivermectin, fenbendazole and praziquantel canine soft chew was registered at the FDA by Intervet or a related company; and that it has a NADA number. I accept this evidence. Ms Stumm said during cross-examination that the commercial name for the ivermectin soft chew for horses arising from the Horse Project was Vectin. She said that it might have been sold in the UK but did not know; she did not know if it used Pharma Chemie’s proprietary flavour base; and she did not know if the product was marketed and sold worldwide. Dr Stumm also said during cross-examination that the commercial name of the ivermectin, fenbendazole and praziquantel soft chew for dogs arising from the Dog Project was Panacur Plus; the product is not sold worldwide; and it appears from documents she has seen that Pharma Chemie’s proprietary flavour base is included. In relation to both products, Dr Stumm accepted that they were described as “chewable tablets” in regulatory documents, this being the regulatory term for soft chew formulations. I accept the evidence of Dr Stumm set out in this paragraph.

The period 2009 to present

95    On 31 July 2009, Intervet filed the Patent Application in Australia. This claims priority to the First US Provisional Application and the Second US Provisional Application. The Patent Application is a divisional child of Australian patent application no. 2003262643, which is the Australian national phase of the PCT Application.

96    On 26 August 2009, the USPTO sent to the patents group of Schering Plough (then the ultimate owner of Intervet Inc) a notice of abandonment in relation to the US patent application which was the divisional of the PCT Application. No action was taken by Intervet or Intervet Inc to challenge the notice of abandonment. In Dr Stumm’s affidavit dated 24 June 2016 she stated that the national phase of the PCT Application in the US was unintentionally abandoned. During cross-examination she explained that it occurred at a time when there was a gap between the relevant person in the organisation leaving and a new person starting. I accept this evidence.

97    Dr Stumm said during cross-examination that she was not aware of any information to suggest that Intervet took steps to issue proceedings in the United States to seek to compel Mr Pieloch or Pharma Chemie to execute an assignment of the invention claimed in the patent applications to Intervet. In these circumstances, I find that no such proceedings were commenced.

98    Dr Stumm stated in her affidavit dated 24 June 2016 that none of the personnel involved in the development of the invention the subject of the Patent Application remains employed by Intervet; Mr Huron now works for Virbac, a competitor of the Intervet group; Ms Cady now works for Merial; and the Intervet Inc patent attorneys involved in drafting and prosecution of the US Provisional Applications and the PCT Application are no longer employed by Intervet Inc. I accept this evidence.

Whether there was an express assignment

99    I will now address the factual issue of whether or not there was an express assignment from Pharma Chemie to Intervet Inc of rights in any invention that resulted from the Horse Project or Dog Project. I will first refer to some relevant procedural matters, then the evidence, and then set out my findings.

100    On 7 July 2011, Intervet filed the Notice of Entitlement in connection with the Patent Application. The text of the Notice of Entitlement is set out in [7](a) above.

101    On 8 February 2016, a discovery order was made in this proceeding requiring Intervet to give standard discovery of documents falling within the following categories:

a.    All agreements between the Respondent or any of its predecessors in title or related companies, on the one hand, and Mark Pieloch or Pharma Chemie, on the other hand, relating to the alleged invention the subject of Australian Patent Application No. 2009203180 (the Alleged Invention).

b.    Without limiting the preceding category, all documents on which the following claim of entitlement made in the Notice of Entitlement dated 7 July 2011 filed in respect of Australian Patent Application No. 2009203180 was based:

Pharma Chemie by virtue of a contract of employment between actual inventor Pieloch as employee and Pharma Chemie as employer, is the person which would be entitled to have the patent assigned to it if a patent were granted on an application made by actual inventor Pieloch. The Applicant by virtue of a contract with Pharma Chemie has entitlement to the invention of actual inventor Pieloch.

102    On 4 March 2016, Dr Stumm made an affidavit in relation to that order. The affidavit stated that Dr Stumm had caused reasonable enquiries to be made as to the existence and location of the documents specified in the order; and, to the best of her knowledge, information and belief, there were no documents specified in the order that are or have been in the control of Intervet, other than the documents specified in the list of documents. The list of documents referred to two documents:

(a)    Letter from Ms Cady to Mr Pieloch, with attachments, dated 16 January 2002. (This is the proposal for the Horse Project.)

(b)    Contract between Pharma Chemie and Intervet. The date is stated to be “in or about early 2002”. In relation to “what became of the document”, it is stated that, for the reasons set out in another affidavit filed in the proceeding, what had become of the document was unknown.

103    In Intervet’s opening submissions, it relied on the Manufacturing and Supply Agreement referred to in Ms Marsh’s letter dated 16 September 2003 in support of the proposition that there was an express term that Pharma Chemie’s rights in the invention would be owned by Intervet. Intervet submitted that in circumstances where (a) it is clear that there was a written agreement between the parties; (b) Intervet cannot locate a copy of that agreement for the reasons explained by Dr Stumm; (c) the extracts from that agreement contained in the 16 September 2003 letter state that there was some form of assignment of rights to Intervet; and (d) it was inherently likely that Intervet would have made sure that it owned rights in the technology that it was paying Pharma Chemie to develop for it (as distinct from any pre-existing technology), Merial could not meet its onus of satisfying, let alone ‘clearly satisfying’, the Court that there was no express agreement that such rights would be owned by Intervet.

104    Mr Pieloch gave the following evidence in relation to the issue referred to in [99] above:

(a)    Mr Pieloch said during cross-examination that he did not have any difficulty with Intervet patenting the unique combination of the three active ingredients used in the Dog Project (as distinct from the dosage form technology). He said that he believed that, if Intervet was going to patent anything, it was the use of those three active ingredients.

(b)    Mr Pieloch said during cross-examination that he had not signed a document which assigned rights to the soft chew technology to Intervet. Mr Pieloch was taken to clause 8 of the consulting agreement with the date 26 April 2004 on the first page (referred to in [90] above). It was put to him that, in relation to the soft chew project (which I take to mean the Horse Project and the Dog Project), the agreement would have included a similar clause. He responded to the effect that, for there to be an “invention”, there had to be something new; in this case, he had merely provided information to Intervet; that did not become their invention; it was his invention.

(c)    It was put to Mr Pieloch during cross-examination that he did not remember whether or not there was an agreement that conferred ownership of any invention arising out of the soft chew project (which I take to refer to the Horse Project and the Dog Project) to Intervet. He accepted that he did not remember.

(d)    Mr Pieloch was taken in re-examination to claim 1 of the Patent Application. He said that he had not signed an agreement that transferred rights in that invention to Intervet. He said that the claim was very specific and he would have known if he had signed such a document.

105    Ms Cady gave the following evidence during cross-examination in relation to the issue referred to in [99] above:

(a)    Ms Cady said that she did not have a clear recollection of the agreements in relation to the Horse Project and the Dog Project. She said she recalled there was some kind of supply arrangement with Mr Pieloch. She said that it was important for any company working with Mr Pieloch to have some kind of supply agreement in place, so that it could ensure a continuous supply of flavour (which was necessary to manufacture and sell the product).

(b)    Ms Cady said that there was usually a clause in agreements to the effect that whoever paid for the development of the work would own any patent rights arising out of that work; there was something usually written in by the corporate lawyers or IP lawyers. Ms Cady said that both parties to an arrangement usually sought to protect their intellectual property. By way of example, Ms Cady referred to work carried out by Southern Biosystems and Mr Pieloch and said: “everybody involved in that work brought something to the table and each company wanted to make sure that they owned what they brought to the table and if something came to the table and was jointly owned because it was a [mix] of ideas, then the lawyers would work to sort that out”.

(c)    Ms Cady said that in all of the companies she has worked for, the proper agreements needed to be in place before the company could proceed with a purchase order to get the work done. She said that her assumption is that there would have been an agreement between Intervet and Pharma Chemie that granted ownership of rights in any invention arising out of the Horse Project and the Dog Project. She said that was the usual way of working.

106    Dr Johnson joined Intervet in March 2002 as Manager of Livestock Product Development. Dr Johnson was not involved (directly or indirectly) in the engagement of Pharma Chemie in relation to the Horse Project or the Dog Project. In June 2003, he was promoted to the role of Director of Product Development and Regulatory Affairs – Pharmaceuticals for Intervet (which later became Schering-Plough Animal Health). In this role, he signed or co-signed a number of agreements between Intervet and Pharma Chemie in 2003 and 2004. Dr Johnson does not remember dealing directly with Pharma Chemie or Mr Pieloch in relation to any of those agreements. Ms Cady, who reported to him, was responsible for dealing with Pharma Chemie and Mr Pieloch in relation to the arrangements for Pharma Chemie to provide consulting services to Intervet. In light of these matters, Dr Johnson’s evidence is of limited (if any) assistance. Nevertheless, for completeness, I note that he gave evidence to the following effect during cross-examination:

(a)    Dr Johnson said that intellectual property rights were an important part of the product development process and that these rights were the responsibility of Intervet’s legal department.

(b)    Dr Johnson said that Intervet did everything it could to protect as much as it could of the innovation and development efforts that it was undertaking; he would have made sure that, when Intervet engaged outside consultants or parties, there were agreements in place; such agreements dealt with intellectual property rights and confidentiality, as well as other aspects of the consultancy arrangement; he was not directly involved in finalising such agreements.

107    Dr Stumm had no involvement in the engagement of Pharma Chemie or the drafting of the US provisional applications or the PCT Application. Her evidence related primarily to searches undertaken by Intervet to find relevant documents. Dr Stumm is a European patent attorney. She is not a lawyer. In Dr Stumm’s affidavit dated 24 June 2016 she gave evidence to the following effect.

(a)    Dr Stumm detailed the searches undertaken by Intervet in order to comply with the discovery order of 8 February 2016. She stated that Intervet had only been able to locate limited documentation relating to the project the subject of the Patent Application. She stated that the difficulties were due to a number of reasons, including the fact that the documents relating to the relevant project were created more than 10 years ago; the subsequent occurrence of a number of acquisitions involving the Intervet group; and the departure of key personnel.

(b)    Dr Stumm stated that, following the acquisition of the Intervet group by Schering Plough in 2007, both the research and development activities at the Millsboro site and Ms Cady’s office were closed and the pharmaceutical research activities were transferred elsewhere; Intervet does not know what became of the files that were stored at Ms Cady’s office after that office was closed; there is no electronic archive of documents that were stored at her office.

(c)    Dr Stumm’s affidavit annexed certain documents that had been located (such as the consulting agreements referred to above). (I note that in a letter dated 13 July 2016, Intervet’s solicitors confirmed that none of the documents annexed to Dr Stumm’s affidavit dated 24 June 2016 is a document falling within either of the discovery categories in the 8 February 2016 orders.)

108    During cross-examination, Dr Stumm gave evidence to the following effect:

(a)    Dr Stumm said that she was the person at Intervet who initiated and co-ordinated searches of records for relevant Intervet companies to comply with the discovery orders that were made in this case; the process of looking for relevant documents commenced in about August 2015. Dr Stumm agreed that Intervet had, since August 2015, made very considerable efforts to find all relevant documents that might assist its case; and Intervet had done its best to bring forward the best evidence that it could to support its claim of entitlement. Dr Stumm said that, among other inquiries, Dr Stumm sought to locate the Manufacturing and Supply Agreement referred to in Ms Marsh’s letter of 16 September 2003, but the agreement could not be located.

(b)    Dr Stumm said that she was not directly involved in the giving of instructions to file the Notice of Entitlement (dated 7 July 2011).

(c)    On 7 September 2015, Dr Stumm sent an email headed “Urgent request for documents” to certain key people at Intervet and its related companies. The email included a section headed “Background” in which Dr Stumm stated that, in their appeal, Merial had raised as an issue that Intervet had no entitlement to the invention from one of the inventors (Mark Pieloch). The email stated: “… in order for us to make an internal assessment on the entitlement of the soft chew technology we need to analyse our internal R&D, Legal and Business Development documents on this matter.” Dr Stumm accepted during cross-examination that, at that point, Intervet had not been able to make an internal assessment of its entitlement to the soft chew technology that is the subject of the Patent Application. Dr Stumm said that, following the request in the email referred to above, no further agreements or contracts were ascertained that she thought were relevant to Intervet’s claim of entitlement to a patent for the invention; and that remained the case at the time of the hearing in this proceeding.

(d)    In relation to her discovery affidavit dated 4 March 2016 (see [102] above), Dr Stumm said that the letter from Ms Cady to Mr Pieloch (that is, the proposal for the Horse Project) was a document received from Merial in the course of this proceeding; and that the reference to a contract between Pharma Chemie and Intervet was based on an assumption that there had been such a contract because “you could not file a patent application if you didn’t have the rights”.

(e)    Dr Stumm said she had not seen any document suggesting that Intervet sought to record the Manufacturing and Supply Agreement referred to in Ms Marsh’s 16 September 2003 letter with the USPTO as a document supporting Intervet’s claim to be entitled to a patent for the invention in the applications filed in the US.

109    In light of the procedural matters set out in [100]-[103] above and the evidence set out in [104]-[108] above, I make the following findings.

(a)    I am satisfied that there was no express assignment from Pharma Chemie to Intervet Inc of rights in an invention in terms of any of the claims in the Patent Application. No such assignment has been produced. If an assignment in such terms had been entered into, it is likely that it would have been retained by Intervet Inc and that a response would have been sent to Ms Marsh’s letters referring to the assignment. But, as I have found above, no response was sent. Mr Pieloch’s evidence during re-examination was that he did not execute an assignment in terms of claim 1. He said that if he had executed an assignment in such terms he would remember. I accept this evidence. There is no contrary evidence.

(b)    I am satisfied that the Manufacturing and Supply Agreement referred to in Ms Marsh’s letter dated 16 September 2003 did not contain an express assignment of rights from Pharma Chemie to Intervet Inc in any invention that resulted from the Horse Project or the Dog Project. The Manufacturing and Supply Agreement is not in evidence. The only evidence about its contents is the letter dated 16 September 2003. That letter states in clear and strong terms that Pharma Chemie invented the soft chew technology before the agreement was entered into and that Pharma Chemie – not Intervet – is therefore the owner of the technology described in the patent application (being the patent application provided by Mr Ramey to Mr Pieloch). The letter goes on to state that the Manufacturing and Supply Agreement “does not … confer ownership of the soft chew technology to Intervet”. Thus the letter relied on by Intervet to support its contention that the Manufacturing and Supply Agreement contained an assignment in fact states the opposite. The letter then states that paragraphs 1.4 and 9.3 of the agreement provide that “only veterinary pharmaceutical product ‘developed and manufactured by Intervet Inc., which incorporates the [Flavor Base] and which Intervet Inc….will market and sell worldwide’ shall be assigned to Akzo Nobel NV”. To the extent that Intervet seeks to rely on this brief summary and partial quotation of paragraphs 1.4 and 9.3 of the agreement, the conditions referred to in those paragraphs have not been satisfied. There was only limited evidence as to whether or not those conditions have been satisfied. The evidence was that they have not been satisfied.

(c)    Further, I am satisfied that no other agreement contained an express assignment from Pharma Chemie to Intervet Inc of rights in any invention that resulted from the Horse Project or the Dog Project. First, for the reasons given in [75] above, it is likely that the Manufacturing and Supply Agreement referred to in the 16 September 2003 letter related to the development projects referred to in these reasons as the Horse Project and the Dog Project. In these circumstances, it is unlikely that there was another written agreement between the companies in relation to the Horse Project or the Dog Project containing a standard form clause such as clause 8 of the consulting agreement with the date 26 April 2004 on the first page. Secondly, no such written agreement has been produced, notwithstanding extensive searches. Thirdly, if such an agreement did exist, it is likely to have been in the possession of Intervet Inc as at September-October 2003, when it became apparent that Mr Peiloch would not sign the proposed declaration and the correspondence from Ms Marsh was received. Given the issues raised by that correspondence, it is likely that any such agreement would have been retained by Intervet Inc. Further, it is likely that Intervet Inc would have responded to Ms Marsh’s letters pointing out the existence of such an agreement and the relevant clause or clauses. It is true that Mr Pieloch could not remember whether there had been an agreement whereby Pharma Chemie assigned to Intervet Inc rights in any invention that resulted from the Horse Project or the Dog Project, and Ms Cady and Dr Johnston gave evidence to the effect that Intervet Inc did everything it could to protect as much as it could of the innovation and development efforts that it was undertaking, including where outside parties were engaged. However, in relation to the Horse Project and the Dog Project a specific agreement was negotiated and entered into, namely the Manufacturing and Supply Agreement referred to in Ms Marsh’s 16 September 2003 letter. It is unlikely that it contained a standard clause relating to intellectual property rights along the lines of clause 8 of the consulting agreement with the date 26 April 2004 on the first page, given that the agreement contained specific provisions on the same subject-matter as described in the letter.

Relevant principles of US law

110    I now turn to consider the principles of US law that are relevant to Intervet’s contention based on an implied term. Both parties proceeded on the basis that the agreement (or agreements) between Intervet Inc and Pharma Chemie was (or were) governed by the law of a State of the United States and principles of US law were therefore relevant to the implied term contention. The relevant principles of US law are to be determined as a question of fact in this proceeding.

111    The experts on US law called by the parties prepared a joint report in addition to their separate affidavit evidence. The joint report contains some propositions in respect of which the experts were agreed. However, most of the report contains separate answers by each of the experts. Nevertheless, there was in fact a large measure of agreement between the experts.

112    Although the expert evidence dealt with some other issues, the main issue of relevance concerns the applicable principles of US law for the assignment of rights in an invention. Although patents are a matter for federal law, this is primarily a matter for State law as State law applies to contract issues. The evidence does not indicate if the agreement or agreements contained a choice-of-law clause. The agreement or agreements were connected with a number of different US States. As there does not appear to be any difference between the laws of those States as regards the relevant legal principles, it is unnecessary to determine which State’s law applies. In these circumstances, it will be convenient to refer to “US law”, adopting the expression used by the experts in their evidence.

113    The experts agreed in the joint report that 35 USC §261 states, in relevant part, that: “Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing”. They agreed that an express assignment needs to be in writing under US law to transfer legal title: see, eg, Enzo Apa & Son, Inc v Gaepag AG, 134 F 3d 1090, 1094 (Fed Cir 1998) (assignment that would allow the assignee to assert standing to assert patent in infringement action must be in writing); Abraxis Bioscience, Inc v Navinta LLC, 625 F 3d 1359 (Fed Cir 2010) (“appropriate written assignment is necessary to transfer legal title”). I accept this evidence.

114    The experts agreed in the joint report that the general rule under US law is that “the rights in an invention belong to the inventor”: Bd of Trustees of the Leland Stanford Junior University v Roche Molecular Systems, 563 US 776, 785 (2011); see also Banks v Unisys Corp, 228 F 3d 1357, 1359 (Fed Cir 2000) (an individual owns the patent rights to the subject matter of which he is an inventor, even if he conceived it or reduced it to practice in the course of employment). They also agreed that those legal rights may be transferred to another party through a written assignment: SiRF Tech, Inc v Int’l Trade Comm’n, 601 F 3d 1319, 1327 n 5 (Fed Cir 2010). I accept this evidence.

115    Mr Blackburn gave evidence in the joint report and his affidavit that an implied-in-fact contract can give rise to an obligation to assign patent rights; one example is when a person is specifically hired to make the invention, and the “employed to invent” or “hired to invent” doctrine applies (Teets v Chromalloy Gas Turbine Corp, 83 F 3d 403, 407 (Fed Cir 1996); the Court of Appeals for the Federal Circuit explained in Teets that US contract law allows an agreement to be implied in fact if it is “‘founded upon a meeting of the minds, which, although not embodied in an express contract, is inferred, as a fact from conduct of the parties showing, in light of the surrounding circumstances, their tacit understanding’” (Teets, quoting Baltimore & Ohio R Co v United States, 261 US 592, 597 (1923); see also Hercules, Inc v US, 516 US 417, 424 (1996)). I did not understand Mr Kowalski to disagree with these propositions. I accept this evidence.

116    Mr Blackburn gave evidence in the joint report that, consistent with more general principles of contract law in the United States, whether an agreement is to be implied in fact is an objective assessment; under US law, contracts are formed and construed on the basis of the parties’ objective words and acts, rather than their subjective state of mind: see, eg, Mellon Bank, N.A. v Aetna Business Credit, 619 F 2d 1001 (3rd Cir 1980) (“to interpret contracts with some consistency” and “provide[] a measure of predictability, the courts must eschew the ideal of ascertaining the parties’ subjective intent and instead bind parties by the objective manifestations of their intent”); St Paul Fire & Marine Ins Co v Indemnity Ins Co of N Am, 32 NJ 17, 24; 158 A 2d 825 (1960) (existence of implied-in-fact contract “does not turn on the undisclosed intention of the actors” but rather upon the significance of their actions as viewed by reasonable person in the industry); Kaiser v Millard Lumber, Inc, 25 Neb 943, 951; 587 NW 2d 875, 882 (1999) (implied-in-fact contract arises where circumstances show mutual intent to contract; “subjective, secret intentions or understandings” are “not probative evidence”). I did not understand Mr Kowalski to disagree with these propositions. I accept this evidence.

117    Mr Blackburn gave evidence in the joint report and his affidavit that, under US law, a court can imply a term into a contract to require or obligate an inventor to assign an invention resulting from the development of a product that he or she was engaged to perform; US law generally permits a court to imply a contract term in appropriate circumstances to handle developments and contractual gaps; one example is when a person is specifically hired to make the invention and the “employed to invent” or “hired to invent” doctrine applies (Teets v Chromalloy Gas Turbine Corp, 83 F 3d 403, 407 (Fed Cir 1996)); this doctrine is “firmly grounded in the principles of contract law that allow parties to freely structure their transactions and obtain the benefit of any bargains reached” (see Banks v Unisys Corp, 228 F 3d 1357, 1359 (Fed Cir 2000)); it is, in reality, an application of an implied-in-fact contract. I did not understand Mr Kowalski to disagree with these propositions. I accept this evidence.

118    The main area of disagreement between the experts concerned the potential application of the “hired to invent” doctrine to an independent contractor that is a corporate entity (as distinct from an employer-employee situation). The evidence of the respective experts can be summarised as follows:

(a)    Mr Kowalski’s opinion as set out in the joint report was that: the US “hired to invent” doctrine has been held not to apply to independent contractors (see, eg, Bldg Innovation Indus, LLC v Onken, 473 F Supp 2d 978, 984 (D Ariz 2007); Allegheny Steel & Brass Corp v Elting, 141 F 2d 148, 149 (7th Cir 1944); Gilson v Commissioner, Docket No 3801-78, 1984 Tax Ct Memo LEXIS 228 (US TC Aug 21, 1984)); the cases discussed by Mr Blackburn are in the context of the employer-employee relationship; Mr Blackburn’s affidavit fails to take into account the differences that exist between the employer-employee relationship and between an independent contractor and an entity that has retained the independent contractor; factors taken into consideration as to the “hired to invent” doctrine not applying to a particular fact pattern include whether the individual was an “employee” at the time of invention, including whether the corporation paid taxes for which it would have been liable had the individual been regarded as an employee; a US court can never imply a contract term to the effect that a contractor assigns all ownership rights in an invention resulting from the development of a product that it has been engaged to perform.

(b)    Mr Blackburn, in the joint report, discussed Standard Parts Co v Peck, 264 US 52 (1924) and United States v Dubilier Condenser Corp, 289 US 178, 187 (1933) and expressed the opinion that: what controls is the nature of the contractual relationship between the parties and how the invention was made; under both Standard Peeks and Dubilier, the critical fact is whether the contract specifically required the invention to be made; if so, the agreement impliedly includes a provision that the inventor is obliged to assign what he was paid to produce; no binding precedent has ever held that the “employed to invent” or “hired to invent” doctrine or more generally implied-in-fact contract principles cannot apply to non-employees or independent contractors where an invention results from that development work. Mr Blackburn discussed in the joint report the four decisions cited by Mr Kowalski and expressed the view that none actually supports the legal proposition for which they were put forward. Mr Blackburn concluded that, in sum, US law generally permits a court to imply a contract term in appropriate circumstances to handle developments and contractual gaps; one application of this principle is the “employed to invent” or “hired to invent” doctrine, which requires or obligates an inventor to assign an invention resulting from the development of a product that it was engaged to perform where the inventor was hired specifically to make the invention; while there is no binding precedent directly on point holding that a non-employee or independent contractor can be employed to invent or hired to invent, the reasoning of Standard Peeks and Dubilier suggest that the substance of the relationship between the parties and how the invention is made is the controlling factor.

119    Having considered these competing positions, I am not satisfied that the “hired to invent” doctrine could not apply to a situation where the relevant person is an independent contractor rather than an employee. I do not think the decided cases rule out this possibility. Although the factual situations they considered involved an employer-employee relationship, the existence of such a relationship does not appear to have been essential to the reasoning. Further and in any event, the “hired to invent” doctrine is a subset of the implied-in-fact contract. Both experts accepted this during the hearing. In these circumstances, even if the “hired to invent” doctrine is limited to situations where there is an employer-employee relationship, it may nevertheless be possible to find an implied-in-fact contract to similar effect where the person is an independent contractor.

120    I will consider later in the reasons the issue whether, applying these principles to the facts of this case, a term is to be implied requiring or obliging Pharma Chemie to assign an invention to Intervet Inc.

Consideration of the issue of lack of entitlement

121    As noted above, Merial contends that Intervet is not entitled to the grant of a patent for the alleged invention in the Patent Application on the basis that it does not derive title to the alleged invention from Mr Pieloch, who Intervet admits is an “actual inventor” of the alleged invention.

122    There is no issue that Mr Pieloch is one of the inventors of the invention described in the Patent Application. He is named as an inventor in the Patent Application. Intervet accepts that he is one of the inventors. It is unnecessary to decide whether Mr Huron and Ms Cady were also inventors. Given that Mr Pieloch was one of the inventors, Intervet needs to derive title from Mr Pieloch to be entitled to the grant of a patent.

123    In assessing whether Merial has established its lack of entitlement ground, it is relevant to consider the bases put forward by Intervet to contend that it is entitled to the grant of a patent. Intervet’s primary contention is that there was a written agreement providing for the assignment of rights from Pharma Chemie to Intervet in any invention that resulted from the Horse Project and Dog Project. Intervet’s alternative contention is that a term is to be implied into the agreement or agreements between Intervet and Pharma Chemie providing for Intervet to own all intellectual property rights that arose during the course of the Horse Project and the Dog Project.

124    I consider Merial’s lack of entitlement ground to be clearly established. That is to say, I consider it to be clear that Intervet is not entitled to the grant of a patent for the invention described in the Patent Application on the basis that it does not derive title to the alleged invention from Mr Pieloch. My reasons are as follows.

125    First, I have found that Pharma Chemie was not engaged by Intervet Inc to develop a soft chew dosage form – it was engaged to incorporate Intervet Inc’s active ingredients into a formulation, using Pharma Chemie’s soft chew technology; and that Pharma Chemie had already developed the soft chew technology described in the relevant patent applications before it was engaged by Intervet Inc to carry out the Horse Project and the Dog Project (see [89] above).

126    Secondly, I have found that there was no express assignment from Pharma Chemie to Intervet Inc of an invention in terms of any of the claims in the Patent Application; that the Manufacturing and Supply Agreement referred to in Ms Marsh’s letter dated 16 September 2003 did not contain an express assignment of rights from Pharma Chemie to Intervet Inc in any invention that resulted from the Horse Project or the Dog Project; and that no other agreement contained an express assignment from Pharma Chemie to Intervet Inc of rights in any invention that resulted from the Horse Project or the Dog Project (see [109] above). It follows that, even if an invention did result from or arise in the course of the Horse Project or the Dog Project, there was no express assignment of that invention from Pharma Chemie to Intervet Inc (or Intervet).

127    Thirdly, for the reasons that follow, I am satisfied that a term is not to be implied in any agreement between Intervet Inc and Pharma Chemie requiring Pharma Chemie to assign to Intervet Inc an invention as described in the claims in the Patent Application or any other relevant invention. The relevant principles of US law are set out above. I will proceed on the basis that the “hired to invent” doctrine is capable of application notwithstanding that Pharma Chemie is a corporate entity and independent contractor rather than an employee. As set out above, Mr Blackburn emphasised that what “controls” is the nature of the contractual relationship between the parties and how the invention was made; and that the critical fact is whether the contract specifically required the invention to be made. In the present case, I have found that Pharma Chemie was not engaged by Intervet Inc to develop a soft chew dosage form; it was engaged, rather, to incorporate Intervet Inc’s active ingredients into a formulation, using Pharma Chemie’s soft chew technology (see [89] above). Further, I have found that the Manufacturing and Supply Agreement referred to in Ms Marsh’s letter dated 16 September 2003 related to the development projects referred to in these reasons as the Horse Project and the Dog Project (see [75] above). It appears from the 16 September 2003 letter that the agreement contained (in paragraphs 1.4 and 9.3) express provisions relating to the assignment of intellectual property rights to Intervet Inc subject to prescribed conditions. In light of these express provisions, there is no room to imply a term (in this or any other agreement relating to the Horse Project or the Dog Project) requiring Pharma Chemie to assign to Intervet Inc any invention resulting from the projects. I have also found above that there was no response to the 16 September 2003 letter (see [80] above). If Intervet Inc had had a basis to contend that, contrary to the propositions set out in the letter, it acquired rights to an invention under the Manufacturing and Supply Agreement (or any other agreement) it is likely that it would have responded. This provides further support for the proposition that a term is not to be implied in the Manufacturing and Supply Agreement or any other agreement to the effect that Pharma Chemie was required to assign to Intervet Inc any invention resulting from the projects.

128    As noted in [42] above, Intervet Inc filed a document setting out the matters it intended to raise in response to the allegation of lack of entitlement. I have dealt with the first two of these matters above. I now refer to the third, fourth and fifth of these matters. Intervet’s third proposition was that, even if Merial proved that Pharma Chemie was entitled to part or the whole of the invention claimed in the Patent Application, the Court may still exercise its discretion to grant the patent. No detailed submissions were made by Intervet in support of this proposition. I do not see any basis upon which to exercise any discretion that may exist to grant a patent.

129    The fourth proposition put forward by Intervet was that, even if it were found that there is no discretion, or it was exercised against Intervet, Intervet could apply to amend the claims of the invention the subject of the Patent Application to address Mr Pieloch’s evidence. No such application has been made. It is therefore unnecessary for me to deal with this.

130    Intervet’s fifth proposition was that, further or alternatively, Intervet could utilise other amendment and/or rectification procedures to obtain a granted patent. At this stage, Intervet has not sought to utilise any such procedures. It is therefore unnecessary for me to deal with this.

131    For these reasons, Merial’s lack of entitlement ground is made out.

Lack of inventive step

The issue

132    The issue is relation to lack of inventive step may be briefly stated as follows. Merial contends that the alleged invention does not involve an inventive step on the basis that it was obvious in the light of the common general knowledge when combined with the patent referred to as Christensen.

Applicable principles

133    Section 18(1)(b)(ii) of the Patents Act required that the invention, so far as claimed in any claim, involve an inventive step when compared with the prior art base as it stood before the priority date.

134    The concept of inventive step is the subject of provision in s 7(2) and (3) of the Act. There have been three iterations of these provisions: as originally enacted in the 1990 Act; as they stood following the Patents Amendment Act 2001 (Cth); and as they currently stand following the Intellectual Property Laws Amendment (Raising the Bar) Act 2012. The relevant version for present purposes is the second iteration, being the version in force when the Patent Application was filed (in 2009). Section 7(2) and (3) provided as follows:

(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.

135    The expression “prior art base” was relevantly defined in the Dictionary in Sch 1 to the Act as meaning:

(a)    in relation to deciding whether an invention does or does not involve an inventive step or an innovative step:

(i)    information in a document that is publicly available, whether in or out of the patent area; and

(ii)    information made publicly available through doing an act, whether in or out of the patent area.

136    The expression “prior art information” was defined in the Dictionary as meaning, for the purposes of s 7(3), information that is part of the prior art base in relation to deciding whether an invention does or does not involve an inventive step.

137    The person skilled in the relevant art is a person to whom the patent specification is addressed, or a person with a practical interest in the subject-matter of the alleged invention. It is well established that the person skilled in the art is a notional construct, and is a tool of analysis rather than an actual person or an expert witness in the case. It is also well established that it may be a skilled team, or a notional person with skills from multiple fields.

138    Section 7(2) as set out above referred to the common general knowledge in the patent area. In simple terms this referred to the common general knowledge in Australia. The common general knowledge constitutes “the background knowledge and experience which is available to all in the trade in considering the making of new products, or the making of improvements in old”: Minnesota Mining and Manufacturing Co v Beiersdorf (Australia) Ltd (1980) 144 CLR 253 at 292 per Aickin J.

139    The principles relating to inventive step were considered by the High Court in Aktiebolaget Hässle v Alphapharm Pty Ltd (2002) 212 CLR 411 (Alphapharm); Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No 2) (2007) 235 CLR 173 (Lockwood No 2); and AstraZeneca AB v Apotex Pty Ltd (2015) 323 ALR 605 (AstraZeneca).

140    Alphapharm was concerned with the provisions of the Patents Act 1952 (Cth). While that Act contained a provision (s 100(1)(e)) that was comparable to part of s 7(2), it did not contain an equivalent to s 7(3), which was introduced when the Patents Act 1990 was enacted. Subject to that difference in the applicable legislation, the statements of principle regarding inventive step in Alphapharm are relevant to the issues to be determined in the present case.

141    In Alphapharm, Gleeson CJ, Gaudron, Gummow and Hayne JJ introduced the topic of obviousness or lack of inventive step at [19]. At [21], their Honours referred to the warnings in the authorities about the misuse of hindsight and stated that the danger of such misuse will be particularly acute where what is claimed is a new and inventive combination for the interaction of integers, some or all of which are known. Their Honours considered a number of authorities concerning obviousness at [33]-[41] and discussed the divergence between Australian and United Kingdom law at [42]-[49]. Their Honours then dealt with the expression “matter of routine” at [50]-[53]. First, their Honours quoted the following passage from the judgment of Aickin J in Wellcome Foundation Ltd v VR Laboratories (Aust) Pty Ltd (1981) 148 CLR 262 at 286:

The test is whether the hypothetical addressee faced with the same problem would have taken as a matter of routine whatever steps might have led from the prior art to the invention, whether they be the steps of the inventor or not.

(Emphasis added by the majority in Alphapharm.)

142    Gleeson CJ, Gaudron, Gummow and Hayne JJ said at [51] that what Aickin J had in mind as “routine” appears from an earlier passage in his judgment in which he was discussing the question whether evidence of the steps taken by the patentee was relevant and therefore admissible in a revocation action. Aickin J had said (at 280-282):

Evidence of what he did by way of experiment may be another matter. It might show that the experiments devised for the purpose were part of an inventive step. Alternatively it might show that the experiments were of a routine character which the uninventive worker in the field would try as a matter of course. The latter could be relevant though not decisive in every case. It may be that the perception of the true nature of the problem was the inventive step which, once taken, revealed that straightforward experiments will provide the solution. It will always be necessary to distinguish between experiments leading to an invention and subsequent experiments for checking and testing the product or process the subject of the invention. The latter would not be material to obviousness but might be material to the question of utility.

(Emphasis added by the majority in Alphapharm.)

143    Gleeson CJ, Gaudron, Gummow and Hayne JJ discussed the above passage in connection with the issues in Alphapharm, stating that the relevant question in a case such as the one before the Court was that posed in the first part of the passage, namely, were the experiments “part of” the inventive step claimed in the patent or were they “of a routine character” to be tried “as a matter of course”? Their Honours then said (at [53]):

That way of approaching the matter has an affinity with the reformulation of the “Cripps question” by Graham J in Olin Mathieson Chemical Corporation v Biorex Laboratories Ltd. This Court had been referred to Olin in the argument in Wellcome Foundation. Graham J had posed the question:

“Would the notional research group at the relevant date, in all the circumstances, which include a knowledge of all the relevant prior art and of the facts of the nature and success of chlorpromazine, directly be led as a matter of course to try the –CF3 substitution in the ‘2’ position in place of the –C1 atom in chlorpromazine or in any other body which, apart from the –CF3 substitution, has the other characteristics of the formula of claim 1, in the expectation that it might well produce a useful alternative to or better drug than chlorpromazine or a body useful for any other purpose?” (Emphasis added.)

That approach should be accepted.

(Footnotes omitted.)

144    Their Honours then discussed the approach taken at first instance and in the Full Court of the Federal Court. After setting out a particular passage from the judgment at first instance, their Honours said (at [58]):

The tracing of a course of action which was complex and detailed, as well as laborious, with a good deal of trial and error, with dead ends and the retracing of steps is not the taking of routine steps to which the hypothetical formulator was taken as a matter of course.

145    In connection with the reasoning of the Full Court of the Federal Court, the majority in the High Court said at [65] that the focus upon each integer rather than the interaction between them in combination went against the teaching in authorities such as Minnesota Mining and Manufacturing Co v Beiersdorf (Australia) Ltd (1980) 144 CLR 253. The majority in Alphapharm also said (at [72]) that the statute does not ask whether a particular avenue of research was obvious to try so that the result claimed is obvious; the adoption of a criterion of validity expressed in terms of “worth a try” or “obvious to try” begs the question presented by the statute. Their Honours emphasised that s 100(1)(e) of the 1952 Act, as applied to the facts of the case before the Court, asked whether the combination claimed in claim 1 was obvious; the provision did not direct an inquiry respecting each integer of the claimed combination (at [72]).

146    In Lockwood No 2, the applicable version of s 7(2) and (3) of the Patents Act 1990 was the first iteration, set out at [33]-[34] of the reasons of Gummow, Hayne, Callinan, Heydon and Crennan JJ. The critical difference between the relevant provisions of the 1952 Act and those of the Patents Act 1990 was that, under the latter, certain kinds of publicly available information (namely those described in s 7(3)) were also to be taken into account. This was explained by Gummow, Hayne, Callinan, Heydon and Crennan JJ at [49]:

Previously, only common general knowledge was taken into account when assessing an inventive step. Now, additional information which was publicly available as at the priority date must also be taken into account. Broadly speaking, s 7(3) has as its purpose the specification of the additional publicly available information (s 7(3) information) which must be added to common general knowledge for the purposes of deciding whether an alleged invention is obvious when compared with the prior art base.

147    Although these observations were made in the context of the first iteration of s 7(2) and (3), they would appear to apply also to the second iteration (which is applicable in the present case).

148    Gummow, Hayne, Callinan, Heydon and Crennan JJ set out some general principles concerning inventive step at [50]-[58]. Their Honours said at [51]-[52]:

51    In Alphapharm, this Court reiterated that “obvious” means “very plain”, as stated by the English Court of Appeal in General Tire & Rubber Co v Firestone Tyre and Rubber Co Ltd. The majority in Alphapharm also confirmed that the question of whether an invention is obvious is a question of fact, that is, it is what was once a “jury question”. Broadly speaking, the question is not a question of what is obvious to a court. As well as being a question of fact, the question of determining whether a patent involves an inventive step is also “one of degree and often it is by no means easy”, because ingenuity is relative, depending as it does on relevant states of common general knowledge. This difficulty is further complicated now by the need, in some circumstances, to consider s 7(3) information as well as common general knowledge.

52    Further, as recognised in Beecham Group Ltd’s (Amoxycillin) Application, as a basic premise, obviousness and inventiveness are antitheses and the question is always “is the step taken over the prior art an ‘obvious step’ or ‘an inventive step’”? An inventive step is often an issue “borne out by the evidence of the experts”. There is no distinction between obviousness and a lack of inventive step. A “scintilla of invention” remains sufficient in Australian law to support the validity of a patent. In RD Werner Lockhart J stated that there must be “some difficulty overcome, some barrier crossed”. This is consonant with older authorities in the United Kingdom which recognised that some inventiveness was required to distinguish patentable advances over the prior art from advances which “any fool” could devise. It also accords with the requirement in the United States that for an invention to be “non-obvious” it must be “beyond the skill of the calling”.

(Footnotes omitted.)

149    In a section headed “Patentability of ideas”, their Honours referred to developments in a number of English cases and said at [65]:

Such developments were considered and distinguished in Alphapharm. This Court rejected confining the question of obviousness to a “problem and solution” approach, particularly with a combination patent. This should not be misconstrued. The “problem and solution” approach may overcome the difficulties of an ex post facto analysis of an invention, which may be unhelpful in resolving the question of obviousness. However, it is worth repeating that the “problem and solution” approach may be particularly unfair to an inventor of a combination, or to an inventor of a simple solution, especially as a small amount of ingenuity can sustain a patent in Australia. Ingenuity may lie in an idea for overcoming a practical difficulty in circumstances where a difficulty with a product consisting of a known set of integers is common general knowledge. This is a narrow but critical point if, as here, the circumstances are that no skilled person in the art called to give evidence had thought of a general idea or general method of solving a known difficulty with respect to a known product, as at the priority date.

150    In a section dealing with admissions in a specification, Gummow, Hayne, Callinan, Heydon and Crennan JJ noted at [105] that, while not every invention constitutes a solution to a problem, it is commonplace so to describe an invention where it is appropriate to do so.

151    The High Court in Lockwood No 2 also held (at [32]) that “ascertained” in s 7(3) simply means discovered or found out, and “understood” in the subsection means that, having discovered the information, the skilled addressee would have comprehended it or appreciated its meaning or import.

152    In AstraZeneca, the High Court unanimously dismissed an appeal from the Full Court of the Federal Court. The applicable version of s 7(2) and (3) of the Patents Act was the first iteration of those provisions. French CJ (with whom Gageler, Keane and Nettle agreed) set out the legislative history at [10]-[17]. After referring to the purpose of s 7(3), his Honour stated: “While the range of disclosures that would support a finding of obviousness was widened, the content of the ‘inventive step’ requirement was not changed. The test was still that posed under the 1952 Act by Aickin J in Wellcome in terms of the hypothetical addressee taking, as a matter of routine, steps which might lead from the prior art to the invention” (at [17]). French CJ referred at [40] to the approach to the question of inventive step taken by Jessup J in the Full Court, which adopted as the correct approach to “obviousness” that approved in Alphapharm and derived from the judgment of Graham J in Olin Mathieson Chemical Corporation v Biorex Laboratories Ltd [1970] RPC 157 at 187-188 (Olin Mathieson). French CJ (at [42]) approved the approach adopted by Jessup J, stating that no error was involved in his Honour’s reasoning.

153    Kiefel J (as her Honour then was) (with whom Gageler, Keane and Nettle JJ agreed) referred (at [66]) to Alphapharm, noting that that case had stated the question to be answered to determine obviousness under the Patents Act 1952. Her Honour noted that s 100(1)(e) was in relevantly the same terms as s 7(2) of the 1990 Act except for the latter’s addition of the prior art information referred to in s 7(3) to the matters to be considered. Her Honour then set out (at [67]) how the question stated in Alphapharm was to be modified to allow for that further information. The terms of the question reflected the reformulation of the “Cripps question” by Graham J in Olin Mathieson endorsed by the majority in Alphapharm, as set out above.

154    Kiefel J also stated (at [70]) that, in addressing s 7(2), it is to be borne in mind that the skilled person is an artificial construct, intended as an aid to the courts in addressing the hypothetical question of whether a person, with the same knowledge in the field and aware of the problem to which the patent was directed, would be led directly to the claimed invention. Her Honour stated (at [70]):

The statute’s creation of the skilled person construct for this purpose is not to be taken as an invitation to deal with the question posed by s 7(2) entirely in the abstract. Whilst the question remains one for the courts to determine, the courts do so by reference to the available evidence including that of persons who might be representative of the skilled person.

(Footnote omitted.)

155    Although AstraZeneca concerned the first iteration of s 7(2) and (3), the observations and holdings referred to above would appear to apply also to the second iteration of s 7(2) and (3) (which is applicable to the present case).

Consideration of the issue of lack of inventive step

The person skilled in the relevant art

156    Merial submits that, in the present case, the skilled person to whom the Patent Application is directed is a team of persons with experience in the development of oral dosage forms for drug delivery for use in the treatment of animals; the team consists of a pharmaceutical formulator working with a food processing expert with knowledge of nutraceuticals. Intervet’s position is that the primary area of technology relevant to informing the Court of the skills of the hypothetical skilled person for the purposes of developing a palatable soft chew formulation for delivery of a drug is pet food technology. Intervet emphasises the importance of palatability, hence, it submits, the focus should be on pet food technology. Intervet accepts, however, that expertise in pharmaceutical formulation would be required once the formulation was developed.

157    In my view, the person skilled in the relevant art is a person or notional research team combining both expertise in pet food development and pharmaceutical formulation. Given that the invention involves the use of an active pharmaceutical ingredient, the specification may be taken to be addressed to a pharmaceutical formulator as well as a pet food expert; further, both a pharmaceutical formulator and a pet food expert are likely to have a practical interest in the subject-matter of the invention.

Prior art base

158    Christensen forms part of the “prior art base” as it was publicly available (in or out of the patent area) as at 13 August 2002. There was otherwise no detailed evidence regarding the prior art base, as defined.

The common general knowledge and s 7(3) information

159    The five witnesses who gave evidence relevant or potentially relevant to these issues were Dr Pougnas, Ms Linfoot, Mr Walsh, Mr Surawski and Mr Cruise. I will discuss their expertise and experience before addressing what matters formed part of the common general knowledge and the question whether Christensen constitutes information as described in s 7(3)(a) of the Patents Act.

160    Dr Pougnas is the Chief Executive Officer of a speciality drug delivery company based in the Bordeaux area of France. He has qualifications in pharmaceutical science and more than 20 years’ experience in the area of pharmaceutical formulation for animals and humans. In 1992, he joined the Virbac group (Virbac). Virbac was (and remains) an international veterinary pharmaceutical group which develops and markets vaccines and medicines for the prevention and treatment of the main pathologies for companion and food-producing animals. He was employed by Virbac until 2002. From 1994 to 2002, Dr Pougnas was the head of Virbac’s formulation unit. In the course of his work with Virbac, Dr Pougnas acquired and developed considerable experience in relation to veterinary formulations for oral, parenteral and topical applications. In the oral area, these included solid, liquid and semi-solid dosage forms. During Dr Pougnas’s time at Virbac, Virbac had operations in many countries around the world, including Australia. Dr Pougnas interacted with Virbac’s research and development (R&D) teams in other countries, including Australia. There was collaboration on international R&D projects; there was at least one international R&D meeting per year, when the R&D teams from the subsidiaries of Virbac with R&D activities (including the Australian R&D team) visited Virbac’s headquarters in France to share knowledge and discuss projects. Dr Pougnas worked on the development of soft chew medicaments for animals before 13 August 2002, but much of that work remains confidential to Virbac and he was unable to detail it in his evidence.

161    During evidence-in-chief, Dr Pougnas said that he collaborated with the Australian R&D group on a project for oral paste formulation which contained parasiticides; there was at least one meeting of the research teams each year; there was some interaction during the year during which technical aspects, such as ingredients, were discussed. He stated that in the pharmaceutical industry, the driver for development was the regulatory regime, which tended to be harmonised across Europe and the US; as a result, each team followed more or less the same rules and the same procedures for developing drug formulations. He said in cross-examination that the Australian team came to France; he never went to Australia. I accept the evidence that Dr Pougnas gave during the hearing as set out in this paragraph.

162    It may be accepted that the field of pharmaceutical formulation is, and was by 13 August 2002, one in which information was exchanged internationally such that there is (and was) likely to be substantial overlap in the knowledge of those working in the field in developed countries. On this basis, although Dr Pougnas was based in France and had never been to Australia, his evidence may be of assistance in identifying matters that constituted the common general knowledge in Australia. Dr Pougnas stated in his first affidavit that he had been asked to assume that he had been asked to develop a soft chew medicament for animals using only knowledge that he had before 13 August 2002. In the course of describing how he would have gone about this task, Dr Pougnas made a number of statements pertaining to pharmaceutical formulation. In some cases, it may be appropriate to treat these as forming part of the common general knowledge. However, in some cases his evidence did not describe what was, or was not, commonly known by pharmaceutical formulators generally; it cannot be assumed that just because something was within Dr Pougnas’s knowledge, it was part of the common general knowledge.

163    Ms Linfoot has expertise and experience in the compounding of pharmaceuticals. She stated in her affidavit that compounding “allows a pharmacist to customise or tailor make a medication to meet a patient’s specific needs”. In 1999, she attended a Professional Compounding Centre of America (PCCA) course in Houston, United States, which included various courses on how to make troches, capsules, creams and other forms of product. The folder from that course included two chewable troche formulas. One of these included polyglycol 1450 which Ms Linfoot stated was a reference to polyethylene glycol (or PEG) 1450. She stated that PEG is a wax base and its purpose in such a formulation is to bind all of the components together. She stated that, through her use of the PCCA folder in the compounding of pharmaceuticals from 1999 onwards, she was familiar with PEG 1450 as a component that could be used in the preparation of chewable and hard troches as a binder. She said during cross-examination that she recalled making veterinary chewable troches before August 2002, but was unable to produce records of such products as the records did not go back that far. She also said that she made chewable troches with PEG as described in the PCCA course materials from 1996 onwards. (It may be that Ms Linfoot meant from 1999 onwards, as that was the year she attended the course.) I accept Ms Linfoot’s evidence as set out in this paragraph. However, as her knowledge of PEG seemed to be based on the particular PCCA folder, and her evidence did not describe what was known by compounding chemists (or pharmaceutical formulators) generally, I do not think her evidence assists in identifying the common general knowledge.

164    Mr Walsh has qualifications and experience in the field of food science and technology with particular expertise in animal food products. He has more than 30 years’ experience in the field in Australia. In 1987, he moved to Mars, a business which at the time was known as Uncle Ben’s of Australia Pty Ltd. He remained with Mars in different roles and different locations until 2012. When Mr Walsh commenced at Mars in 1987, he worked on the Danny’s meatballs project (reporting to Mr Surawski). That product (which was not ultimately fully released) was a palatable, semi-moist meat-based product formed through a Koppens forming machine. While at Mars, Mr Walsh worked on a product called Schmackos, which is a semi-moist chew product for dogs that was (and still is) made by Mars in Australia. Schmackos was a relatively new product when Mr Walsh joined Mars in 1987. Another product that Mr Walsh worked on at Mars was the Exelpet Arthricare product. This was an edible semi-moist chew product that contained an active ingredient (green lip mussel powder) to maintain the health of joints and help reduce the symptoms of arthritis in animals. The active ingredient in Arthricare was not an anti-parasitic drug. This product was released in around 1997. It was formed in chewy bars.

165    Mr Surawski has qualifications in food technology including a Bachelor of Technology (Food Technology). Following completion of his studies in food technology in 1976, he commenced employment with Uncle Ben’s of Australia, now called Mars Petcare, and was employed in a number of roles there until his retirement in 2005. From 1982 to 1986 he was Research and Development Manager at the Uncle Ben’s facility in Bathurst, New South Wales. He was responsible for developing a number of new products, new varieties of existing products, and recipe variations. From 1987 to 1988, he was Project Manager for the Danny’s meatballs project. From 1989 to 1996, he was Quality Manager for the Bathurst production facility. From 1997 to 2005 he worked in China, Thailand and India to assist with the operation of new pet food production facilities for Effem Foods (part of Mars Petcare). These factories produced dry pet foods. Mr Surawski said during concurrent evidence that from about the mid-1990s he was no longer involved with semi-moist products. Mr Surawski also said during concurrent evidence that his experience as at 13 August 2002 was focused on pet food products; he had not worked on a veterinary health product; nor had he worked on a product containing an active pharmaceutical ingredient (being an ingredient that would require regulatory approval) for delivery to an animal.

166    It is apparent that, because of the way their career paths diverged, Mr Walsh had (as at 13 August 2002) experience in the development of an oral formulation for delivery of an active ingredient to animals, while Mr Surawski did not. In relation to some matters discussed later in these reasons, it may be that greater weight is to be attached to Mr Walsh’s evidence due to the difference in his experience compared with that of Mr Surawski. In relation to the common general knowledge, as I have concluded, above, that the person skilled in the relevant art for present purposes is a person or notional research team combining expertise in pet food development and pharmaceutical formulation, both Mr Walsh’s and Mr Surawski’s evidence is of assistance in identifying the common general knowledge pertaining to pet food development. Mr Walsh’s evidence may additionally shed some light on the common general knowledge pertaining to pharmaceutical formulation.

167    In Mr Walsh’s first affidavit, he stated that he had been asked to explain how he would have gone about developing a soft chew formulation for delivery of an active ingredient to animals before 13 August 2002. In his affidavit, Mr Surawski stated that he had been asked to consider how he would have gone about producing a semi-moist product if it were being used for the purpose of delivering a veterinary active ingredient to an animal, had he been asked to do so before August 2002. (It may be noted that the question asked of Mr Surawski was framed in terms of “semi-moist” rather than “soft chew”. This may have been because, as he explained in his evidence, he was not familiar with the term “soft chew” as at 13 August 2002.) In the course of responding to these hypothetical development tasks, each of Mr Walsh and Mr Surawski made observations about matters that may be considered part of the common general knowledge. (As discussed below, because Mr Surawski had a view as to the water content of a “semi-moist” product, he would have targeted that level of water content had he been undertaking the hypothetical development task. This needs to be borne in mind in considering his evidence.) Further, in their joint report, the first question Mr Walsh and Mr Surawski addressed was: “What considerations would be relevant in developing a soft chew formulation for delivering an antiparasitic drug to an animal (Soft Chew Medicament)?” Their responses to this question, both in the joint report and during the concurrent evidence session, included statements which assist in identifying the common general knowledge.

168    Mr Cruise was not cross-examined and the evidence in his affidavits is therefore to be accepted. He holds the position of Manager in an intellectual property research company; he is also a partner of an intellectual property firm. He has more than 25 years’ experience in conducting intellectual property research in the areas of patents, trade marks and designs. He described in his first affidavit instructions he was given to undertake searches for patents and applications published before 13 August 2002 and the process he undertook following receipt of those instructions (including the narrowing of the search terms and interactions with Mr Walsh in that regard). His evidence is of assistance in relation to s 7(3) information.

169    Before addressing the common general knowledge specifically, I note the following. Mr Walsh stated in his first affidavit that, when he joined Mars in 1987, Mars had for some time been selling worming products for pets, such as tablets and patches, under the Exelpet brand; in about 1996 or 1997, Mr Walsh became aware of an alternative heart worming dosage form called Heartgard, which was a semi-moist chew. He said during cross-examination that his understanding was that Heartgard was a palatable soft chew product for heartworm which delivered active ingredients. It appears that it was produced by Merial. Mr Walsh stated in his first affidavit that Mars then developed a semi-moist chew product for delivering intestinal worming active ingredients; this was released under the Exelpet brand, as Exelpet Ezy-dose intestinal all wormer, in about 1997; this was developed with cooperation from Pfizer, which supplied the active ingredients. On the basis of this evidence, it may be accepted that soft chew formulations for the delivery of an active ingredient to animals were already on the market as at 13 August 2002.

170    Having regard to the evidence of Mr Walsh, Mr Surawski and Dr Pougnas, I make the following findings as to the common general knowledge in Australia as at 13 August 2002.

(a)    Mr Walsh stated in his first affidavit that the word “soft” in the expression “soft chew” could include formulations from something that can be flattened with gentle pressure from a person’s finger, to something which is firmer, like a hard jube (such as a Marella jube); the softness of the chew can affect the acceptance of a product; if the chew is too soft, some pets will find it hard to eat, as it could stick to the roof of their mouth; additionally, it might be more difficult to form the product in the manufacturing equipment if it is too soft and sticky, as very soft products may not reliably form and then release from the forming machine. Mr Surawski said during the hearing that the term “soft chew” was not on his radar at August 2002. But, apart from the terminology used, I did not take Mr Surawski to disagree with the substance of Mr Walsh’s statements. I consider Mr Walsh’s statements, set out in this paragraph, as to the considerations relevant to formulating a soft chew medicament for animals, to have been part of the common general knowledge.

(b)    Mr Walsh and Mr Surawski agreed in their affidavits that “semi-moist” did not have a precise meaning in the field of pet food manufacturing. Mr Surawski stated in his affidavit that he used “semi-moist” to refer to a particular texture of pet food, such that the product has a degree of softness and compressibility, with a moist, rather than dry, mouth feel. Mr Walsh said in his second affidavit that he considered the term to refer principally to the water content. He said in his affidavit and oral evidence that, in his experience in the pet food field, a “semi-moist” product would usually have a water content of between 15% and 30%. Mr Surawski stated in his affidavit that he would not expect a semi-moist product to have a water content much lower than 18%. On the basis of this evidence, I find that there was no precise meaning for the expression “semi-moist” in relation to pet food and such a product would usually have a water content of between 15% and 30%.

(c)    Dr Pougnas said during cross-examination that usually the water content for a product such as this (that is, a soft chew medicament) is below 10 per cent. He said that this was general knowledge. I accept that this formed part of the common general knowledge.

(d)    Mr Walsh said during concurrent evidence that, in developing a soft chew formulation for delivering an anti-parasite drug to an animal, it would be necessary to understand as much as possible about the drug itself – the drug is likely to have some negative taste implications and the sensitivity of the drug to its environment would need to be considered. Mr Walsh also said that, in developing a soft chew formulation for delivering an anti-parasite drug to an animal, the reaction of the drug to moisture was one of the things that the person developing the formulation would need to understand. Mr Surawski did not disagree with this evidence, but emphasised the importance of considering palatability. I accept the evidence of Mr Walsh set out in this paragraph and consider that it formed part of the common general knowledge.

(e)    Dr Pougnas said during cross-examination that when one develops any kind of oral formulation, one has in mind that the product would be palatable; the context of soft chew is “more related to the texture”; nevertheless, “palatability is a general – I would say a preoccupation”. He accepted that the concept of palatability includes the texture, taste and mouth feel. Mr Surawski gave evidence to similar effect. I accept that these matters formed part of the common general knowledge.

(f)    Mr Surawski said during concurrent evidence that, in developing a soft chew formulation for delivering an antiparasitic drug to an animal, the question of palatability could be affected by the properties of the drug; one example is where the antiparasitic drug has negative taste implications; palatability depends on the animal species that the product is targeted at. Mr Walsh agreed with these propositions. I accept the evidence of Mr Surawski set out in this paragraph and consider that it formed part of the common general knowledge.

(g)    Mr Walsh said during concurrent evidence that water activity and water content are two terms that are used quite widely in the pet food industry; water content is the absolute amount of water that is in a product; water activity is a measure of how well the water is bound – there are a lot of ingredients that will bind water and the purpose of binding water is to make it unavailable to microorganisms; water activity is a measure of the bound water. Mr Surawski agreed with this summary. I accept this evidence and find that these matters formed part of the common general knowledge.

(h)    Mr Surawski accepted during concurrent evidence that, if he was dealing with a water-sensitive active ingredient, one way of addressing this was to reduce the water content. Mr Walsh’s evidence generally was to similar effect. Mr Surawski said during concurrent evidence that the risk of microbial growth as a general proposition is something that one wants to avoid in a product of this kind (a soft chew medicament), as it affects the shelf life; for this reason, one tries to target a particular level of water activity. He accepted that, as a general proposition, the lower the amount of unbound water, the lower the risk of microbial growth. Mr Walsh agreed with these statements. I find that these matters formed part of the common general knowledge.

(i)    Mr Surawski said that the use of humectants to reduce water activity was something he was familiar with before August 2002. He said that this can potentially have a negative impact on palatability. I accept this evidence and find that it formed part of the common general knowledge.

(j)    Mr Walsh stated in his first affidavit that, if lower water content is used in a formulation, which would tend to make the product less soft, a higher fat or oil content could be used to provide the desired softness. Mr Walsh stated in his second affidavit that it is possible to produce food products that are soft and compressible without the use of a significant amount of water. Mr Walsh also stated in his second affidavit that a soft formulation does not necessarily need a high water content – other ingredients can achieve a soft texture; such a product would not necessarily be “semi-moist” but would be soft and chewy. Mr Surawski said during concurrent evidence that fat aided the soft texture of the product; this was something he was aware of at August 2002. Mr Surawski said during cross-examination that he did not disagree with the proposition that fats and oils provide softness if they are used. In relation to the role of moisture content in the formulation of a soft chew, Mr Surawski emphasised during the concurrent evidence that it imparts softness to the product and acts as a binding agent. Mr Walsh said he agreed with this if the product was water-based. On the basis of this evidence, I find that the common general knowledge included that fat or oil can be used to provide softness to a formulation; it is possible to produce food products that are soft and compressible without the use of a significant amount of water; in a water-based product, moisture imparts softness to the product and acts as a binding agent.

(k)    Mr Walsh stated in his second affidavit that a soft chew product could be aqueous or non-aqueous based (although he had not worked on projects that involved non-aqueous matrices for chews). Mr Surawski said during concurrent evidence that before August 2002 he was not aware of non-aqueous matrices. Notwithstanding Mr Surawski’s evidence, I find that the common general knowledge included that a soft chew product could be aqueous or non-aqueous based. Although Mr Surawski was not familiar with non-aqueous bases, his experience, unlike Mr Walsh’s, did not extend to the development of an oral formulation for delivery of an active ingredient.

(l)    Mr Walsh stated in his second affidavit that in a non-aqueous system, binders that do not require water could be used; in such instances, meltable binders, such as fats, may be used. Mr Walsh also stated in his second affidavit that the non-aqueous system can achieve a soft texture without the need to add water; this will not only reduce the need for water activity management (such as by using humectants) to prevent microbial activity, but will also reduce the risk of an active ingredient that is water-sensitive reacting or breaking down once mixed with the soft chew base. I accept the evidence of Mr Walsh as set out in this paragraph and find that it formed part of the common general knowledge. (I note that Mr Walsh said during concurrent evidence that he had not worked on projects that involved non-aqueous matrices for chews; nor had he worked on any product that used added oil for soft chews or semi-moist products. Nevertheless, I accept that the matters set out in this paragraph formed part of the common general knowledge.)

(m)    Dr Pougnas identified the following manufacturing processes that could be used to produce soft chew formulations: (a) an extrusion process; (b) a moulding process; and (c) a tabletting process. Mr Walsh and Mr Surawski gave evidence to similar effect. (The terms “moulding” and “forming” were generally used interchangeably.) I accept that these matters formed part of the common general knowledge.

(n)    Mr Walsh stated in his first affidavit that in his field of pet food, “extrusion” typically refers to a process involving heat, pressure and mixing, where the substance is then pushed through a nozzle. Mr Walsh and Mr Surawski agreed in their affidavits that heat in an extrusion process may compromise some active ingredients. I find that these matters formed part of the common general knowledge.

(o)    Dr Pougnas said during cross-examination that a moulding process involved mixing, melting and putting the substance into moulds. Mr Walsh and Mr Surawski gave evidence to similar effect. Mr Surawski stated in his affidavit that a forming process is one where the material or formulation is forced by different means (for example, piston or screw pressure) into a shaped die and then removed by positive or negative pressure; a forming process would generally not include any heat generation or significant pressure. I find that these matters formed part of the common general knowledge.

(p)    Dr Pougnas referred in his first affidavit to the use of PEG in connection with a moulding process. He stated:

The API can be mixed with components such as gelatine, glycerine and water. Alternatively a semi-solid heated mass can be prepared without the addition of water using meltable materials such as: (i) solid polyethylene glycols (PEGs) (macrogols), such hydrophilic polymers having relatively low melting points (from 45 degrees Celsius to 65 degrees Celsius depending upon the number of monomer units), or alternatively (ii) using hydrophobic polymers combined with fats (see AU 693). This moulding process is commonly used in the pharmaceutical industry, for example in the preparation of suppositories or gynaecological ovules. Prior to 13 August 2002, solid PEGs having relatively low melting points were commonly known and used as meltable materials for the preparation of suppository mass combined with other ingredients. Such polymers were also commonly known and used as meltable materials in melt granulation processes.

Dr Pougnas stated in his second affidavit that, based on his experience in pharmaceutical formulation, including veterinary pharmaceutical formulation, PEG is and was before 13 August 2002 commonly used in many different kinds of formulations including oral and injectable medicaments. He did not provide any examples. In cross-examination, it was put to Dr Pougnas that he had referred in his first affidavit to the use of PEGs in the preparation of suppositories and gynaecological ovules, and that this was far removed from oral administration. He responded that these statements were “more in reference with the moulding process”. It was put to him that it was not something that one would ordinarily think to look to for a tablet that would be swallowed. He responded that “we are talking more about the manufacturing process and not about the destination of a final product”. In response to further questioning as to whether he would have selected PEG, he said that he and his team had conducted some experimental works at the time he was at Virbac, but he could not disclose more. He also said:

But PEG are used and commonly used for oral application, for example, for melt granulation, there are plenty of scientific publications. So – but it is not in reference with a pure moulding process. Usually when you use PEG as a melt for a melt granulation purpose, for example, then it is – the microparticle you obtain or the mass you obtain is then put into a tablet.

Mr Walsh did not refer to PEG in his first affidavit. In his second affidavit, Mr Walsh stated that PEG was not commonplace in pet food products before 13 August 2002; however, he had been aware of PEG and its function as an emulsifier for many years before 13 August 2002; for example, in his work at Devro (1984-1987) he was involved in a project which sought to develop a collagen product for use in cosmetics and investigated the use of PEG in that context. Mr Surawski stated in his affidavit that, as at August 2002, he had heard the name of polyethylene glycol (that is, PEG), but it was not an ingredient that he had used, and he had not heard of it being used in any particular food product; he did not know what its properties were, or what it was used for, before August 2002. Mr Walsh accepted during concurrent evidence that: none of the food products that he knew about before August 2002 had PEG in it; and the one example of a product with PEG that he knew of at the time was a collagen product for cosmetics. Mr Surawski said that he knew of the product but had never had any cause to use it or even to look at it as a product in pet foods. Having regard to the evidence of Dr Pougnas, Mr Walsh and Mr Surawski, I find that the common general knowledge (pertaining to pharmaceutical formulation) included knowledge of PEG and its properties, but not knowledge of its use in a moulding process for an oral formulation.

(q)    Mr Surawski said during concurrent evidence that an emulsifier is a material that allows two immiscible materials to be held together in a colloidal form (that is, where the two immiscible materials are held together in a situation where they do not separate); if you do not have a situation where you need to bind these two things, the emulsifying portion of the ingredient is not necessary, and it is just a forming agent. Mr Walsh agreed. I find that these matters formed part of the common general knowledge.

171    I now turn to consider what information, if any, fell within s 7(3) of the Patents Act. It was contended by Merial that Christensen fell within s 7(3)(a) as a “single piece 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, [and] regarded as relevant”. Christensen constituted “prior art information” as it was information that was part of the “prior art base”, being information in a document that was publicly available (in or out of the patent area) as at 13 August 2002. The question, then, is whether it was information that the skilled person could, as at 13 August 2002, be reasonably expected to have ascertained, understood and regarded as relevant. I have concluded, above, that the person skilled in the relevant art is a person or notional research team combining expertise in pet food development and pharmaceutical formulation. Mr Walsh stated in his first affidavit that (if he had been carrying out the development task described in his affidavit) he would have had access to the current pet technology in the field; as a matter of course, he would have had patent searches done for products that were similar to the product he had been asked to create; he would look at the patents and patent applications revealed in those searches and would see what could be used from them, and also see whether there might be any formulations or processes that would need to be avoided; he would have asked a specialist patent searcher to conduct patent searches. Mr Walsh also stated in his first affidavit that he was asked to describe the patent searches that he would have undertaken before 13 August 2002 as part of the development process described in his affidavit. He set out the search terms he would have used for initial searches. These included “semi-moist”. He described his interactions with Mr Cruise (who conducted the searches) and the abstracts he reviewed. Mr Walsh stated that, after he reviewed the abstracts, he identified the results which he thought were relevant to formulating a soft chew product. The annexed list of such abstracts included the patent referred to in these reasons as Christensen (the title of which is “semi-moist oral delivery system”). Mr Walsh stated that he found Christensen to be of particular interest; and that this patent provides a formulation for a soft chew for delivering active ingredients. It is apparent from Christensen that it describes a soft chew formulation for delivery of an active ingredient: see column 1, line 51 (“soft chewable oral delivery system”); column 5, last line (“in a chewable form”) and claims 1 and 23 (“soft and chewy texture”).

172    Mr Surawski said during cross-examination that conducting searches of literature was something that he had done before August 2002; it was something that a scientist would do on a regular basis, in order to seek out information needed. He said that, quite often, he would not actually carry out the search himself but would ask a specialist to do so. He accepted that scientific publications and patents were potentially useful sources of information on matters of the kind discussed in his affidavit. He accepted that he would have used the term “semi-moist” as a search term. In relation to Christensen, Mr Surawski said that he would reasonably expect Christensen to have turned up in a search if he was searching patent literature before August 2002. Mr Surawski stated in his affidavit, in relation to Christensen, that while he may have initially identified this document to be relevant had it been in a list of search results, on reading the document more completely it did not provide anything new or outside of what he already knew, and he would not have considered it further as a result. In particular, he stated that it does not say anything about animal palatability, which in his view would be a major concern. He said during cross-examination: “I guess my reaction to this would have been I know all this and I know how to do it better; that’s the way I would – having read that”.

173    On the basis of the evidence of Mr Walsh and Mr Cruise, I find that Christensen is a document that the skilled person could, before the priority date, be reasonably expected to have ascertained, understood, and regarded as relevant. I accept the evidence of Mr Walsh and Mr Cruise, summarised in [171] above, as regards searches. It is likely that Christensen would have been ascertained had those searches been carried out. I accept Mr Walsh’s evidence, set out in [171] above, that he would have considered Christensen to be of particular interest to the development task described in his affidavit. Notwithstanding Mr Surawski’s evidence that he would not have considered it to be telling him anything he did not already know, I conclude that the skilled person would have regarded Christensen as relevant, as it describes a soft chew formulation for delivery of an active ingredient. I note that the Delegate reached the same conclusion.

Whether the alleged invention was obvious

174    Under s 7(2) of the Patents 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 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 s 7(3). (As explained in [41] above, it is unnecessary in the present case to consider the common general knowledge separately from the s 7(3) information.) I have concluded, above, that the person skilled in the relevant art is a person or notional research team combining expertise in pet food development and pharmaceutical formulation. The common general knowledge has been set out above. I have also concluded, above, that Christensen constitutes information as described in s 7(3).

175    Both parties approached the question whether the invention was obvious on the basis of the reformulated “Cripps question” as discussed in Alphapharm. Merial submitted that this formulation is not the only test for assessing obviousness, but its written closing submissions were largely framed in terms of the reformulated Cripps question.

176    Consistently with the approach of the parties, I will address obviousness on the basis of the reformulated Cripps question as discussed in Alphapharm. As adapted to the facts and issues in the present case, the question may be expressed as: would the skilled person or notional research team, at 13 August 2002 and in all the circumstances, which include the common general knowledge considered together with Christensen, directly be led as a matter of course to try the invention in each claim in the expectation that it might well produce a useful alternative to or better formulation than the prior art?

177    The primary witnesses in relation to obviousness were Dr Pougnas, Mr Walsh and Mr Surawski. Each of them was asked to address how they would have gone about a notional development project. The task was not expressed in the same terms in each case. Dr Pougnas was asked to assume that he had been asked to develop a soft chew medicament for animals using only knowledge that he had before 13 August 2002. To similar effect, Mr Walsh was asked to explain how he would have gone about developing a soft chew formulation for delivery of an active ingredient to animals before 13 August 2002. However, the question posed for Mr Surawski used the words “semi-moist” rather than “soft chew”. He was asked to consider how he would have gone about producing a semi-moist product if it were being used for the purpose of delivering a veterinary active ingredient to an animal, had he been asked to do so before August 2002. Although none of the experts was a proxy for the skilled person or notional research team described in [157] above, the evidence given by each expert in relation to the notional development project is nevertheless of assistance.

178    One of the aspects of the evidence which is worth noting is that the evidence does not make clear whether there was a problem with existing soft chew medicaments and, if so, what the problem was. As noted above, soft chew formulations for the delivery of an active ingredient to animals were already on the market as at 13 August 2002. The products referred to in the evidence were Heartgard, a palatable soft chew product for heartworm which delivered active ingredients, and the Exelpet Ezy-dose intestinal all wormer, a semi-moist chew product for delivering intestinal worming active ingredients. It may be inferred that the Exelpet product was also palatable, this being an essential feature of such a product. The evidence does not make clear whether there was a problem with those products and, if so, what the problem was. It is true that the Patent Application describes a problem (in general terms, achieving palatability and acceptable mouth feel in circumstances where the active ingredient may have an unpalatable taste or unacceptable mouth feel), but the evidence does not establish that this was a problem with existing formulations.

179    Further, as noted above, Christensen describes a soft chew formulation for delivery of an active ingredient. Apart from the substitution of a moulding or forming process for an extrusion process (about which there is evidence that the invention in the Patent Application represents an improvement) it is unclear on the evidence whether the invention in the Patent Application represents an improvement over Christensen. Indeed, this point was made by a line of questioning of Merial’s witnesses. It was put to Dr Pougnas during cross-examination that he would not have been motivated to modify Christensen because the examples in Christensen were shown to work. He questioned this initially. It was put to him (by reference to the statement in the last line of column 5 of Christensen) that the examples in Christensen produced a chewable form. He accepted this. Dr Pougnas was taken to the statement (at column 6, lines 12-15) that an “effective oral delivery system in which the texture and stability of the product and activity of the active ingredient is controllable, is the result”. He accepted that there was no reason to suspect that the examples did not achieve what the patent stated they would achieve. Similarly, it was put to Mr Walsh during cross-examination that Christensen “is telling you basically that that process works to produce a chewable form”. He accepted this. However, I do not think the witnesses’ acceptance of these propositions necessarily entails a negative answer to the reformulated Cripps question.

180    Claim 1 of the Patent Application is as follows:

A soft chew formulation for oral administration comprising a pharmaceutical for control of a parasite of Equidae, Canidae, Felidae, Bovidae, Ovidae Capridae, or Suidae organisms in a soft chew formulation, a flavouring component, a starch component, a sugar component, an oil component and an emulsifying agent that acts as a forming agent, wherein the moisture content of the composition is between 5.0 and 7.5 percent wt, the soft chew formulation is formed by knockout and the soft chew formulation is not an extrudate.

181    The formulation is a combination comprising:

(a)    a flavouring component;

(b)    a starch component;

(c)    a sugar component;

(d)    an oil component;

(e)    an emulsifying agent that acts as a forming agent,

wherein the moisture content of the composition is between 5.0 and 7.5 percent wt, and the soft chew formulation is formed by knockout and the soft chew formulation is not an extrudate.

182    The inclusion of a flavouring component in the combination is unremarkable. All the experts said they would include this if carrying out the notional development task. The second, third and fourth ingredients referred to above are ingredients described in Christensen. The first three components described at the foot of column 1 of Christensen are:

(a)    starch;

(b)    fat or oil;

(c)    sugar.

183    The combination also includes “an emulsifying agent that acts as a forming agent”. It was explained in the affidavit evidence of Dr Pougnas and in the joint report of Mr Walsh and Mr Surawski that, in each of the applications described in the Patent Application, as the formulation does not include water, this ingredient acts only as a forming agent (or binder) and not as an emulsifier. I note that there may be a theoretical possibility that in other applications, not described in the Patent Application, an emulsifier may be needed. But all three experts proceeded in their evidence on the basis that the component “an emulsifying agent that acts as a forming agent” was to be treated simply as a forming agent, and I adopt the same approach. Based on the expert evidence, the inclusion of a forming agent is something that would occur as a matter of course. Thus I am satisfied that the skilled person or notional research team would directly be led as a matter of course to try the combination of ingredients set out in [181] above in the expectation that it might well produce a useful alternative to or better formulation than the prior art.

184    The claim requires the moisture content to be between 5.0 and 7.5 per cent. The evidence of Dr Pougnas and Mr Walsh was to the effect that this is the approximate range they would be aiming for in a soft chew product. Mr Surawski targeted a higher moisture content, but this flowed from the way in which the development task was formulated in his case (in terms of semi-moist rather than soft chew) and his view that a semi-moist formulation would have a moisture content in the order of 18 to 21 per cent. On the basis of Dr Pougnas and Mr Walsh’s evidence, I am satisfied that the skilled person or notional research team would directly be led as a matter of course to target a moisture content in the order of 5.0 to 7.5 per cent.

185    The formulation described in claim 1 is “formed by knockout” and “is not an extrudate”. This represents a difference from, and improvement on, Christensen. The last stage of the process described in Christensen is an extrusion process. There was agreement between the experts that a moulding or forming process would be preferable (and would have been considered preferable as at 13 August 2002) because this process achieves better consistency of dosage of the active ingredient. On the basis of this evidence, I am satisfied that the skilled person or notional research team would directly be led as a matter of course to try a moulding or forming process in the expectation that it might well produce a useful alternative to or better formulation than the prior art.

186    Taking the elements of claim 1 as a whole, I am satisfied that the skilled person or notional research team at 13 August 2002 would directly be led as a matter of course to try the combination and features set out in claim 1 in the expectation that it might well produce a useful alternative to or better formulation than the prior art. Expressed in terms of s 7(2), I am satisfied (and clearly so) that the invention in claim 1 would have been obvious to a person skilled in the relevant art in light of the common general knowledge as it existed in Australia before 13 August 2002, when that knowledge is considered together with Christensen. (I note that the Delegate reached a different conclusion on this issue, but the evidence before the Delegate on lack of inventive step was different.)

187    Turning to claims 2 and 3, these are as follows:

2.    The soft chew formulation according to claim 1 characterized in that the emulsifier is a polyethylene glycol.

3.    The soft chew formulation according to claim 2 characterized in that the emulsifier is polyethylene glycol 3350.

188    I discussed the common general knowledge in relation to PEG in [170](p) above. I found that the common general knowledge (pertaining to pharmaceutical formulation) included knowledge of PEG and its properties, but not knowledge of its use in a moulding process for an oral formulation.

189    Mr Pieloch’s evidence, referred to in [84](b) above, was that PEG was one of the ingredients that gave the dosage form softness. However, it was not suggested by either party that he was a proxy for the skilled person or notional research team (who is to be treated as having available the common general knowledge in Australia). Dr Pougnas’s evidence in his first affidavit was to the effect that, if he were carrying out the notional development task, he would have adopted a moulding process and, in this connection, would have used meltable materials such as PEG, being a hydrophilic polymer with a relatively low melting point: see the extract from his first affidavit set out in [170](p) above.

190    Christensen does not mention PEG. In commenting on Christensen in his second affidavit, Dr Pougnas said:

Further, as decreasing water content is a primary concern in the field of pharmaceutical formulation, it would be a routine approach to identify Christensen and apply methods to reduce water in the composition it describes. Alternatively, hydrophilic polymers, such as PEG, are another type of ingredient which I would have considered to replace the water added in Example 1 of Christensen (which is 10% of the ingredients by weight). I expect this would achieve a better texture for a soft chew than the texture described in Example 1.

191    Dr Pougnas said during cross-examination that based on his knowledge, when an API is water sensitive, the solution is to remove water. Dr Pougnas said that there were a whole range of alternatives that he could have used to replace the water. It was put to Dr Pougnas that there was no reason why he would look at the Christensen patent and think that he would replace some of the water with PEG. He responded (in the context of example 1 in Christensen): “The reason is that there is the [starch], the oil and for controlling the bubbly appearance due to this leakage. A way to manage this would be to introduce a polymer”. It was put to him that the way to manage the oil in example 1 was to follow example 2, 3, 4 or 5. Dr Pougnas responded that he was aware that oil was a main component for obtaining a soft texture and better softness.

192    Mr Walsh did not refer to PEG in his first affidavit; it was not an ingredient that he would have considered if carrying out the notional development task. As noted above, Mr Surawski said that he knew of PEG but had never had any cause to use it or even to look at it as a product in pet foods.

193    On the basis of the evidence presented in this case, I am not satisfied that the skilled person or notional research team at 13 August 2002 would directly be led as a matter of course to try PEG in the expectation that it might well produce a useful alternative to or better formulation than the prior art. Dr Pougnas’s evidence did not contain, to my mind, a satisfactory explanation as to why he would have considered PEG in addressing the notional development task. It would be different if, for example, there had been evidence that the common general knowledge included that PEG imparted softness and evidence that, for that reason, the skilled person or notional research team would have tried PEG in the expectation that it might well produce a useful alternative or better formulation. That would provide a logic for trying PEG. However, in the absence of such a rationale, I am not persuaded that the skilled person or notional research team would be directly led as a matter of course to try PEG in the expectation that it might well produce a useful alternative or better formulation. Further, there are two reasons for hesitation before accepting that the steps Dr Pougnas would have undertaken indicate the steps that the (uninventive) skilled person or notional research team would have undertaken. First, it may be that Dr Pougnas is ‘too inventive’ to be considered a proxy for the (uninventive) skilled person or notional research team. Dr Pougnas is named as the inventor on at least 13 patents and accepted during cross-examination that he could be described as inventive. Secondly, as noted in [170](p) above, in response to questioning during cross-examination as to whether he would have selected PEG, Dr Pougnas said that he and his team had conducted some experimental works at the time he was at Virbac, but he could not disclose more. That particular research project, not forming part of the common general knowledge, may explain why he would have considered PEG.

194    Expressed in terms of s 7(2), I am not satisfied (or at least, not clearly satisfied) that the invention in claims 2 and 3 would have been obvious to a person skilled in the relevant art in light of the common general knowledge as it existed in Australia before 13 August 2002, when that knowledge is considered together with Christensen. The claims are therefore taken to involve an inventive step.

195    I turn now to claim 4, which is dependent on each of claims 1 to 3. Insofar as this claim is dependent on claim 2 or 3, it follows from the above that the claim is taken to involve an inventive step. Insofar as claim 4 is dependent on claim 1, and not on claim 2 or 3, the affidavit evidence of Dr Pougnas establishes that the ranges in claim 4 are very large; if making a formulation that contains a flavouring component, starch component, sugar component and oil component, it would not be difficult to fall within each of the claimed ranges. I note also that the specific ranges provided for the particular components listed in claim 4 correspond to or encompass the ranges given for key components in Christensen.

196    On this basis, insofar as claim 4 is dependent on claim 1, and not on claim 2 or 3, I am satisfied that the skilled person or notional research team at 13 August 2002 would directly be led as a matter of course to try the combination and features set out in claim 4 in the expectation that it might well produce a useful alternative to or better formulation than the prior art. Expressed in terms of s 7(2), I am satisfied (and clearly so) that the invention in claim 4 (insofar as it is dependent on claim 1, and not on claim 2 or 3) would have been obvious to a person skilled in the relevant art in light of the common general knowledge as it existed in Australia before 13 August 2002, when that knowledge is considered together with Christensen.

197    Claims 5 to 8 are dependent claims which include reference to specific pharmaceuticals. Insofar as each of these claims is dependent on claim 2 or 3, it follows from the above that the claim is taken to involve an inventive step. Insofar as each claim is dependent on claim 1 and not on claim 2 or 3, it may be inferred that the pharmaceuticals were available to the skilled person or notional research team and that the inclusion of the particular pharmaceutical in the soft chew formulation would have been a routine matter. On this basis, insofar as claims 5 to 8 are dependent on claim 1 (and not claim 2 or 3), I am satisfied that the skilled person or notional research team at 13 August 2002 would directly be led as a matter of course to try the combination and features set out in the claim in the expectation that it might well produce a useful alternative to or better formulation than the prior art.

198    Claim 9 is a soft chew formulation according to any one of claims 1 to 8, comprising more than one pharmaceutical to control a parasite of a livestock or pet animals. Insofar as claim 9 is dependent on claim 2 or 3, it follows from the above that the claim is taken to involve an inventive step. Insofar as the claim is dependent on claim 1 and not on claim 2 or 3, it may be inferred that the inclusion of more than one such pharmaceutical in the soft chew formulation would have been a routine matter. On this basis, my conclusion in relation to this claim is the same as for claims 5 to 8.

199    Claims 10 and 11 are dependent on claim 9 and specify a particular combination of named pharmaceuticals. Insofar as each of these claims is dependent on claim 2 or 3, it follows from the above that the claim is taken to involve an inventive step. Insofar as each claim is dependent on claim 1 and not on claim 2 or 3, the evidence does not deal with the obviousness or otherwise of these combinations of named pharmaceuticals. In these circumstances, I am not satisfied that the skilled person or notional research team at 13 August 2002 would directly be led as a matter of course to try the combination and features set out in claims 10 and 11 in the expectation that it might well produce a useful alternative to or better formulation than the prior art.

200    Claim 12 is the so-called “omnibus” claim, based on the examples in the specification. Each of the examples contains PEG. I reach the same conclusion in relation to this claim as claims 2 and 3, for the same reasons.

201    Claim 13 is dependent on claims 1 to 12. The manufacturing process claimed in claim 13 involves mixing each of the claimed components, heating them, and forming a soft chew using a knockout. A process including each of those steps was part of the common general knowledge. Indeed, it was the preferred process of Dr Pougnas, Mr Walsh and Mr Surawski.

202    On this basis, insofar as claim 13 is dependent on claim 1 (and not claim 2 or 3), I am satisfied that the skilled person or notional research team at 13 August 2002 would directly be led as a matter of course to try the combination and features set out in the claim in the expectation that it might well produce a useful alternative to or better formulation than the prior art. On the other hand, insofar as claim 13 is dependent on claim 2 or 3, I am not so satisfied.

203    Claim 14 is based on the examples in the specification. Each of the examples contains PEG. I reach the same conclusion in relation to this claim as claims 2 and 3, for the same reasons.

204    Claim 15 is a soft chew formulation for oral administration made according to the process of claim 13 or 14. As claim 14 refers to the process of claim 13, it would seem that claim 15 is in substance, at least for present purposes, to be treated in the same way as claim 13. I refer to my conclusion and reasons in relation to claim 13, above.

205    Claims 16 and 17 are “Swiss type” claims that relate to the use of formulations according to any one of claims 1 to 12 or 15 for the manufacture of a medicament for the control of parasites in animals. The use of the formulations as so described was part of the common general knowledge.

206    On this basis, insofar as claims 16 and 17 are dependent on claim 1 (and not claim 2 or 3), I am satisfied that the skilled person or notional research team at 13 August 2002 would directly be led as a matter of course to try the combination and features set out in the claims in the expectation that it might well produce a useful alternative to or better formulation than the prior art. On the other hand, insofar as claims 16 and 17 are dependent on claim 2 or 3, I am not so satisfied.

207    It follows from the above that the ground of lack of inventive step is made out in relation to claim 1; is not made out in relation to claims 2, 3, 10, 11, 12 and 14; and is partially made out in relation to the balance of the claims.

Conclusion

208    For these reasons, I have concluded that the lack of entitlement ground is made out. In light of that conclusion, it was not necessary to determine the lack of inventive step ground. However, I have done so for the sake of completeness, and have concluded that this ground is partially made out. I will make orders to the effect that the parties file an agreed minute of proposed orders to give effect to these reasons or, if they cannot agree, that each party file and serve a minute of proposed orders to give effect to these reasons together with a short outline of submissions in support of those proposed orders.

Associate:

Dated:    25 January 2017