Evergreen or deciduous? Australian trends in relation to the 'evergreening' of patents.

• Jurisdiction: Australia
• Author: Chalmers, Robert
• Date: 01 April 2006

[The so-called 'evergreening' of pharmaceutical patents has become an issue of major public concern in the wake of the Australia--United States Free Trade Agreement and the amendments it requires to the Therapeutics Goods Act 1989 (Cth). The effect of these amendments was to place additional obligations on manufacturers of generic (unpatented) pharmaceuticals. Some additional provisions were also included in an attempt to safeguard against potentially 'illegitimate' patent infringement action taken by patentees against such manufacturers. This article examines these provisions and their likely effect on the patent protection strategies adopted by the pharmaceutical industry. It also considers recent responses to these strategies by the patents administration system and the courts--in particular, the decision of Arrow Pharmaceuticals Ltd v Merck & Co Inc.]

CONTENTS I Introduction II Patent Strategies--Evergreening in Action? III Pre-Existing Law A Australia B United States IV The AUSFTA and its Implementation A AUSFTA 1 Time Extensions 2 Use of Patents for Marketing Approval 3 Grace Periods B US Free Trade Agreement Implementation Act 2004 (Cth) 1 The Certification Regime C US Views D Australian Views 1 Senate Committee 2 Parliamentary Researchers 3 Practitioners and Academics 4 Industry Groups V Recent Australian Evergreening Cases VI Conclusion I INTRODUCTION

'Evergreening' refers to the strategy adopted by patentees who seek to extend their period of patent protection by applying for secondary patents over related or derivative technologies. At first blush, the idea of evergreening seems an anathema to central tenets of the patent system, which provide protection for a limited term to 'novel' inventions. Accordingly, the practice of evergreening has been criticised as effectively enabling protection beyond the initial term despite only trivial changes to the invention itself. Multinational pharmaceutical companies are most frequently accused of abusing the patent system in this way, and it was this concern that prompted such debate and interest in the lead-up to Australia's implementation of the Australia--United States Free Trade Agreement (1) and during the 2004 federal election campaign.

The AUSFTA made much more extensive alterations to copyright law than to the patent system. The duration of many copyrights was extended by a further 20 years (2)--the full term of a patent--a change much more amenable to the charge of evergreening than corresponding changes to patent law. Nevertheless, the changes to copyright did not capture the public's imagination in the same way, even though their consequences would be felt far more profoundly in the future. Rather, it was the changes to patents and therapeutic goods regulation that received widespread public and media attention. The availability and cost of pharmaceuticals are issues that have much greater visceral impact upon the public than access to and use of copyright works.

This recent attention in the Australian media reflects global concern about the manner in which the patent system is to strike a balance between the interests of inventors and the general public. On the one hand, incentives must exist for 'pioneering' or 'originator' drug companies to innovate. On the other hand, regard must be had for competing manufacturers of generic products ('generics companies') in order to facilitate their simultaneous creation of new therapies and efficient production of older drugs. This is, of course, not a concern isolated to Australia. Such issues, and concerns over potential abuses of evergreening, are widespread throughout the global community, including in the United States. (3) However, the balance is struck differently in each jurisdiction. (4) Unsurprisingly, some countries--notably those with a significant pioneering drug sector--are more favourably inclined to protect originator interests, whereas others--especially countries with poorer health and financial positions, and those with a significant generics industry--are less inclined. Additionally, world trade agreements are layered on top of all those interests and related debates have been playing out inside the Doha round of negotiations of the World Trade Organization ('WTO') in recent years.

This article reviews evergreening practices and related laws from an Australian perspective. First, it analyses the strategy and practice of evergreening in Australia, before outlining the backdrop provided by pre-existing patent and Therapeutic Goods Administration ('TGA') systems. It then examines the changes introduced by the A USFTA, identifying both 'pro-' and 'anti-' evergreening elements, and considers the effect of several recent cases.

The 'pro-evergreening' elements of the A USFTA extend protection by creating peripheral mechanisms rather than making fundamental changes to patent laws. Specifically, the mechanisms introduce regulatory 'data exclusivity' and impose tightened controls over advertising by generics companies. The core obligation imposed by these changes is to require those seeking to market pharmaceuticals to certify their products as 'patent-friendly', under threat of significant penalty. As will be seen, the original provisions of the US Free Trade Agreement Implementation Act 2004 (Cth) have already had to be amended to ameliorate unintended side effects for the 'over-the-counter' and complementary medicine sectors, where compliance costs were raised without any real benefit for consumers. (5) The 'anti-evergreening' provisions are also unlikely to have any significant effect. To the extent that they do prove to have teeth, they are likely to be 'pulled' at the insistence of the US, which indicated its grave reservations about their inclusion in the amending legislation.

There is clearly a large financial incentive for drug companies to push the boundary of protection systems, so it seems likely that evergreening in one form or another will continue. In light of Australia's obligations under the AUSFTA, legislative intervention appears unlikely. Consequently, the primary checks and balances on subversive evergreening practices in Australia remain those provided by IP Australia and the courts. Case law is, of course, very fact specific (as it must be). It is therefore difficult to draw any coherent principles from the decisions. Some courts continue to exhibit serious reservations about patenting methods of medical treatment--sometimes on philosophical grounds and especially where they perceive no real technical innovation but rather legal artifice. Other decisions, particularly those by appellate courts, appear quite 'patent-friendly' and seem less inclined to refuse protection unless a product or process clearly lacks novelty (attacks on 'obviousness' proving more problematic). Overall, the proprietarian trend in intellectual property seems set to continue, with evergreening of pharmaceutical patents providing merely one more example.

II PATENT STRATEGIES--EVERGREENING IN ACTION?

Clearly, it is fundamental to the patent system that applications relate to new inventions. However, in the context of pharmaceutical patents, the practice of evergreening does not simply refer to extending the original patent, but also includes strategies and practices used to protect a cluster of related, but arguably unoriginal, technologies through the filing of secondary applications. For example, a patentee may seek protection for novel uses of a drug, or new methods of administering or producing it, prior to the expiry of the original substance patent. The effect is to 'reset the clock' on the patentee's protection period, excluding potential competitors from the marketplace for another full term. Generic drug companies, for example, are forced to decide whether to delay entry of their own products, challenge the secondary patent, or design around it.

With a number of 'blockbuster' substance patents due for expiry within the next few years, this practice has received a considerable amount of attention, both within and outside the pharmaceutical industry. As it is phrased in an article by Michael Burdon and Kristie Sloper:

In an environment where there is ever increasing pressure on innovator pharmaceutical companies to maximise return on investment and where share values may be substantially affected by court decisions in patent litigation between pharmaceutical innovators and generic companies, a key element of pharmaceutical life cycle management strategies is to extend patent protection for as long as possible by filing secondary patents to keep generics off the market. (6) Burdon and Sloper's article reviews the United Kingdom case law and attempts to extrapolate several lessons for 'the development of a credible life cycle management strategy.' (7) The article concludes that:

secondary patents can be useful in extending patent protection in certain cases. Although it has often proved difficult to maintain the validity of such patents before the UK courts it is by no means impossible and there have been some significant victories for patentees in the UK courts in cases involving secondary patents in recent years.... Even where the final outcome of proceedings is that the patent is held invalid, the effect of the litigation will have been to delay the generics' entry to the market. Fighting the litigation may also have 'warned off' other generic competition. In any event, for a successful product, the benefit of even a short time of additional proprietary sales may easily outweigh the costs of patent litigation. (8) Similarly, it is instructive to consider various comments included in presentations by Andrew Teuten of Sagittarius Intellectual Property Consultants Ltd: 'These days 20 years of patent life is not enough; there is a need to make protection "longer and stronger"'. (9) Such protection is further defined to include measures such as making best use of the Paris Convention...