Australia: The agony of anticipation: When will a prior disclosure mean a patent is invalid?
Clayton Utz Insights

Key Points:

The Full Federal Court has clarified when a disclosure in a prior document will make a subsequent patent invalid, and when a licensee will be considered an "exclusive licensee" with standing to sue.

Inevitability is often associated with death and taxes. Something is "inevitable" only when there can be no other outcome. In a recent decision, the Full Federal Court reiterated that it is this restrictive test that must be applied when determining whether a prior published document "anticipates" a patented invention (Bristol-Myers Squibb Company v Apotex Pty Ltd [2015] FCAFC 2).

A patent will be invalidated for lack of novelty based on a disclosure in a previously published document only if the prior document contains directions which, if followed, "inevitably" result in the patented invention. But if more than one outcome is possible from the directions in the prior document, the subsequent patent is not invalid based on lack of novelty.

Novelty, anticipation and "inevitable result"

In order to qualify for patent protection, an invention must be "novel" (Patents Act 1990, section 18(1)(a)). That is, the invention, as claimed in the patent, must not previously have been performed or disclosed in a prior document. Lack of novelty is therefore a ground to challenge the validity, and seek revocation, of a patent.

Commonly, a prior disclosure relied on to challenge the novelty of a patented invention contains direct statements or illustrations which are alleged to correspond to the elements in the claims of the invention. The question of "inevitable result" arises where the prior document does not contain a comprehensive disclosure of the claimed invention. In such a case, the party seeking revocation must argue that the prior document contains clear and unmistakeable directions which, if followed, would result in the claimed invention. This is also referred to as the "reverse infringement" test: would the directions in the prior document result in something that would be an infringement of the patent? If so, the claimed invention lacks novelty, because a prior publication anticipated the invention, even if a skilled person at the time of the earlier disclosure may not have understood all of the implications.

Were Aripiprazole Crystals B inevitable?

The Full Court decision in BMS v Apotex is part of a long-running dispute relating to the anti-psychotic drug Aripiprazole. The subject of the novelty dispute in the appeal was a form of the drug described in BMS's patent as "crystals B" which were described in the patent as having specified chemical properties. Among other points of appeal, Apotex appealed to the Full Court from the primary judge's decision that a prior document relied on by Apotex did not contain a disclosure sufficient to invalidate claim 12 of BMS's patent based on novelty. The prior document, an earlier patent application, contained instructions that resulted in the creation of Aripiprazole crystals. However, there was conflicting expert evidence as to whether following the instructions in the prior document led as a matter of course to crystals B as characterised in the patent.

Both parties commissioned independent experts to create protocols in accordance with the instructions in the prior document. Apotex's experimental evidence was accepted by the trial judge and showed that following the instructions in the prior patent could lead to the creation of crystals B. However, the prior disclosure was "indifferent" about the exact method to use conducting a final step in the process (a drying step to obtain Aripiprazole in its free base form). The evidence showed that a skilled person following the instructions in the prior disclosure would have had a range of options for this step.

While the method used by Apotex's expert resulted in crystals B, the Full Court agreed with the trial judge that it would have been open to a skilled person following the instructions in the prior disclosure to choose a different method, in which case the resulting crystals would not have had all of the attributes of crystals B. Thus, the result was not "inevitable" and the prior disclosure did not make the patent invalid. The Full Court noted that the onus was on Apotex to establish that the claimed invention would be an inevitable result of following the instruction in the prior disclosure, and that in circumstances where its own evidence recognised a number of possible drying options, Apotex had not achieved this.

The decision confirms that the scope for invalidating an Australian patent based on lack of novelty remains narrow where the prior publication relied upon does not contain a complete disclosure of the claimed invention.

Exclusive patent licences

There was also another interesting aspect to the decision in BMS v Apotex. Under the Act, an exclusive licensee is given the right to commence infringement proceedings. But exactly what is meant by the phrase "exclusive licensee" in this context? Does the licence need to be exclusive for all purposes, or is it sufficient that it is exclusive for one product, or one field of use, or one kind of exploitation?

At the time BMS commenced proceedings against Apotex, BMS had an exclusive licence to advertise, promote, market, distribute and sell Aripiprazole in Australia, but the patentee, Otsuka, retained the exclusive right to manufacture Aripiprazole.

"Exclusive licensee" is defined in the Act as a licence "conferring on the licensee, or on the licensee and persons authorised by the licensee, the right to exploit the patented invention throughout the patent area to the exclusion of the patentee and all other persons". The definition of "exploit" includes "where the invention is a product, make, hire, sell or otherwise dispose of the product, offer to make, hire, sell or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things" [emphases added] (Patents Act 1990, Schedule 1).

Relying on the word "or" in the definition of "exploit", BMS argued that a licence to do any of the acts encompassed in the definition of "exploit" to the exclusion of all others should be considered an "exclusive licence". BMS argued that it was not necessary for the licence to encompass all of the acts within the definition of exploit in order to be an exclusive licence.

Rejecting BMS' arguments, the Full Court agreed with the trial judge that "an exclusive licence cannot be one that reserves to the patentee, or any other person, any residual right with respect to the exploitation of the invention, and it followed that there could be only one exclusive licensee". Applying a High Court decision on the definition of "exclusive licence" under the earlier 1952 Act (which refers to a patentee having the right to "make, use exercise and vend" instead of "exploit"), the Full Court held that this difference in wording, and the inclusive wording in the definition of "exploit", should not be regarded as determinative of the meaning of the term "exclusive licensee".

This decision is a salutatory reminder to parties to patent licences to ensure that the prospect of future infringement proceedings is properly considered, and that the licensee is granted all the necessary rights to ensure it has standing to commence proceedings, if appropriate.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.