SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271

FEDERAL COURT OF AUSTRALIA

SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271 PRACTICE AND PROCEDURE – preliminary discovery – offer by respondents to make discovery of documents – whether sufficient information provided – information contains trade secrets – extent to which information should be kept confidential Federal Court Rules O 15A, rr 6, 12 Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd (unreported, Federal Court of Australia, Lindgren J, 24 May 1996) cited CCA Beverages (Adelaide) Ltd v Hansford (unreported, Federal Court of Australia, O'Loughlin J, 15 November 1991) applied Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354 applied Cappuccio v Australia & New Zealand Banking Group Ltd [1999] FCA 1188 applied Harvey v Phillips (1956) 95 CLR 235 cited Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 cited SMITHKLINE BEECHAM PLC, BEECHAM GROUP PLC, and SMITHKLINE BEECHAM (AUSTRALIA) PTY LIMITED v ALPHAPHARM PTY LTD and UNIVERSITY OF QUEENSLAND V 935 of 2000 FINKELSTEIN J 19 MARCH 2001 MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V 935 of 2000

BETWEEN: SMITHKLINE BEECHAM PLC, BEECHAM GROUP PLC, and SMITHKLINE BEECHAM (AUSTRALIA) PTY LIMITED

Applicants

AND: ALPHAPHARM PTY LTD and UNIVERSITY OF QUEENSLAND

Respondents

JUDGE: FINKELSTEIN J

DATE OF ORDER: 19 MARCH 2001

WHERE MADE: MELBOURNE

REASONS FOR JUDGMENT 1 The applicants are part of a worldwide pharmaceutical group, known as the GlaxoSmithKline group. GlaxoSmithKline was established in January 2001 upon the merger of the SmithKline Beecham group and the Glaxo Wellcome group. Among the principal activities of GlaxoSmithKline are the conduct of research into, and the development and marketing of, drug therapies for use in humans. 2 The first applicant manufactures an antidepressant drug, the active compound of which is paroxetine hydrochloride in hemihydrate form. The drug is sold in many countries and its sales account for a significant proportion of the revenue of GlaxoSmithKline. 3 The second applicant is the proprietor of an Australian patent in which the invention claimed (in claim 1) is the compound crystalline paroxetine hydrochloride hemihydrate. The 'hemihydrate' form of the compound refers to crystalline material containing molecules of water and paroxetine hydrochloride in a fixed ratio. There are other claims, including a method of treatment for depression and processes for the preparation of the compound. It is not necessary to detail them. 4 The first applicant is the proprietor of an Australian patent in which the invention claimed (in claim 1) is the compound paroxetine hydrochloride anhydrate substantially free of bound propan-2-ol (an alcohol which is an organic solvent, also known as isopropanol, or isopropyl alcohol). The 'anhydrate' form of the compound refers to crystalline material containing paroxetine hydrochloride with negligible amounts of bound water. The compound has certain characteristics which it is not necessary to mention. Nor is it necessary to refer to the other claims, which include process and method claims, some of which are dependent on claim 1. 5 The first applicant is also the proprietor of an Australian patent in which the inventions claimed are various processes for preparing tablets containing paroxetine hydrochloride and the tablets produced by any of those processes. 6 The compounds claimed in the hydrate and the anhydrate patents are defined by reference to certain physical and chemical properties. The existence of the properties of the anhydrate form of paroxetine hydrochloride can be identified by a number of tests, including: (a) infra-red (IR) spectral analysis (a means of measurement of absorption of radiation caused by the excitation of molecular rotations or vibrations); (b) X-Ray powder diffractogram (XRD) spectral analysis (a technique for the study of crystal structures, whereby the wavelengths of X-Rays are comparable in size to the distances between the atoms in a crystal lattice); (c) differential scanning calorimetry (DSC) analysis (an analytical technique in which a sample and thermally inert reference material are subjected to a programmed temperature that is linearly ramped with time, enabling the measurement of energy as a function of temperature); and (d) nuclear magnetic resonance (NMR) analysis (the splitting of nuclear energy levels of elements having nuclear spin by a magnetic field, enabling the measurement of the intensity of absorption as a function of radiofrequency or of magnetic field). The existence of the properties of the hemihydrate form of paroxetine hydrochloride can be identified by reference to IR, DSC and XRD analyses. 7 The third applicant is the exclusive licensee in Australia of the right to exploit the inventions the subject of the three patents. It distributes in Australia, under the name AROPAX, antidepressant tablets that are manufactured by the first applicant. 8 The first respondent, Alphapharm Pty Ltd, is a generic pharmaceutical manufacturer with manufacturing facilities in Australia. Alphapharm proposes to manufacture an antidepressant drug in tablet form to be called PAXTINE. Alphapharm intends to export the manufactured tablets to a related company, Pacific Pharmaceuticals Ltd, which will market the drug in New Zealand. Pacific Pharmaceuticals has made application under the Medicines Act 1981 (NZ) to the New Zealand pharmaceutical authority for approval to market PAXTINE in New Zealand. 9 Requests made under the Official Information Act 1982 (NZ) have disclosed some information about the drug PAXTINE. One revelation is that the active ingredient of the drug is paroxetine hydrochloride anhydrate, manufactured by Sumika Fine Chemicals Co Ltd, a Japanese company. The precise form of the compound is not known. The information suggests that the indications for PAXTINE (eg major depression, panic disorders, social anxiety disorder) are the same as for AROPAX. 10 Through their searches, the applicants have also become aware that a bio-equivalence study was conducted on Alphapharm's paroxetine hydrochloride by the second respondent. A bio-equivalence study involves tests to determine whether the dosage form of a particular drug releases the active ingredient in a tablet in equivalent potency to comparative products. Bio-equivalence studies are typically required by pharmaceutical licensing authorities from a person seeking registration of a generic pharmaceutical product, to demonstrate that the generic product is bio-equivalent to an already registered product, and the study provides a standard for the authority to use in later comparisons of the potency of the generic product. 11 The applicants believe that if Alphapharm makes PAXTINE in Australia, it may infringe one or more of the patents. But they say they do not have sufficient information to enable a decision to be made whether to commence infringement proceedings. 12 Accordingly, the applicants ask for what is commonly referred to as preliminary or pre-trial discovery under O 15A of the Federal Court Rules. Relevantly, O 15A provides: "Rule 6. Where – (a) there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained; (b) after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and (c) there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision – the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c). … Rule 12. On an application under this Order the Court may also make an order providing for any one or more of the following matters: (a) the inspection, measurement, photocopying, preservation, custody and detention of property: (i) which relates to the subject matter of the proceedings; or (ii) as to which any question arises in the proceedings; (b) (i) taking of samples; (ii) observation; (iii) carrying out of any experiment; (iv) making, playing or screening of tape recordings and films and other means of recording sight or sound; (v) making and reproducing or displaying other instrumental recordings and tracings; with respect to any such property mentioned in paragraph (a)." 13 By their application, the applicants seek discovery under O 15A, r 6, of the following categories of documents: specifications for materials used in the manufacture of PAXTINE tablets (including the active ingredient), specifications for the finished dosage form of PAXTINE, testing methods, laboratory notebooks relating to each batch of PAXTINE tablets manufactured, other test methods and results for analysis on the characteristics of PAXTINE tablets and stability data. The applicants also seek an order under O 15A, r 12 that they be provided with samples of PAXTINE tablets, and paroxetine hydrochloride used by Alphapharm in manufacturing the tablets, for the purpose of carrying out experiments. They seek 50 grams of each lot of Alphapharm's raw material (paroxetine hydrochloride), 30 tablets of each batch of PAXTINE which Alphapharm has formulated, and 50 grams of each excipient used by Alphapharm in formulating PAXTINE tablets. 14 The applicants say that, in order to determine whether the patents have been infringed, they need information which shows, in relation to Alphapharm's paroxetine hydrochloride, whether it is crystalline, whether it contains bound propan-2-ol, its melting point, its purity, its XRD results, its IR spectrum, its DSC profile, its NMR spectrum, and in relation to Alphapharm's PAXTINE tablets, their process of preparation, their active ingredient, their excipient and their chemical and physical properties. 15 Alphapharm has offered to provide to the applicants a number of documents that fall within the class of documents that the applicants seek, subject to an appropriate order to maintain the confidentiality of the information contained in those documents. The documents that Alphapharm is willing to provide record results of tests which have been performed by each of Sumika and Alphapharm on specified lot numbers of the paroxetine hydrochloride supplied to Alphapharm. Alphapharm says that the tests, which include IR spectral analysis and XRD spectral analysis, were conducted on all lots supplied in order to determine the chemical and physical properties of the compound. It appears that some of the properties of the hemihydrate and the anhydrate forms of the paroxetine hydrochloride supplied to Alphapharm by Sumika are disclosed by these tests, for example, the presence or absence in them of propan-2-ol. 16 In view of the discovery of these documents, the applicants do not press for further discovery of the documents identified in their application. They are content to consider the documents proffered by Alphapharm to determine whether they may have a claim. However, and this is accepted by the respondents, the applicants may wish to renew their claim for further documents and their failure to press for them now will not be raised as a bar to any future claim. 17 It is common ground that the documents which the respondents offer to provide contain confidential information. The parties are in dispute as to how that confidential information should be appropriately protected. I will resolve this issue later. 18 Apart from documents, the applicants still ask for an order that Alphapharm make available samples of raw material (paroxetine hydrochloride), PAXTINE tablets, and excipients, so that they can be subjected to experiments to determine the precise form of the compound. The applicants argue that it would be unsafe to rely upon the tests performed by Alphapharm or Sumika to determine the precise nature of the compound and they prefer to conduct their own tests. For example, the applicants say that it is not clear under what conditions the tests by Alphapharm and Sumika were performed. They highlight that the tests were not performed for the purpose of determining whether the active compound contained the features of the applicants' inventions but were performed for other purposes. They say, for example, that the isopropyl alcohol content of the active compound is not revealed by the tests. According to the anhydrate patent, one characteristic of the compound is its percentage content of molecularly-bound isopropyl alcohol. 19 Order 15A is designed to enable a person to determine whether he has a good cause of action against a prospective defendant. It is not designed to secure for a prospective plaintiff all the documents and other information that would be discoverable if a proceeding were commenced against the defendant. Nevertheless, some "fishing" must be permitted, for otherwise there will be little scope for the operation of the rule. Speaking generally, however, once a person is in a position to make a decision whether he has a good (or perhaps arguable) cause of action, the criteria to be satisfied before an order can be made under O 15A, r 6 will not be satisfied. I leave out of account those cases where it may be desirable to permit discovery to determine whether there may be a good defence to a proceeding, as to which, see Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd (unreported, Federal Court of Australia, Lindgren J, 24 May 1996). 20 Alphapharm filed an affidavit by Prof Hibbert, a professor of analytical chemistry at the University of New South Wales. Prof Hibbert was provided with the applicants' patents and the documents that Alphapharm is willing to discover. He says he was asked to give his opinion on whether the documents and samples, presumably of the raw material paroxetine hydrochloride, which he was told that the respondents proposed to provide are sufficient to enable the applicants to determine whether the raw material used by Alphapharm (paroxetine hydrochloride anhydrate) and the PAXTINE tablet infringe the patents. 21 There is one comment that should be made immediately. There is no evidence to suggest that Alphapharm has offered to provide any samples to the applicants. To the contrary, the correspondence between solicitors that is in evidence suggests that no such offer was made. This is an important point to which I will return later. 22 Prof Hibbert said that, based on the documents that he has seen, there are no other documents which would assist the applicants in determining whether any of their patents have been infringed. He said that documents to which he referred as the batch manufacturing documents, which comprise some of the documents which Alphapharm proposes to hand over, indicate the ingredients and the process for preparing the PAXTINE tablets. He said that, in his opinion, these documents provide sufficient information to determine whether Alphapharm's process of manufacturing the tablets is within the claims of the tablet patent. Prof Hibbert then referred to the raw material assay reports, which appear to describe the properties, by reference to test results, of the paroxetine hydrochloride which is used as the active ingredient of the PAXTINE tablet. He said that these documents contain the following information in relation to the hemihydrate patent and the anhydrate patent, namely the IR spectra, the XRD spectra, the chromatographic purity and the amount of isopropanol. It will be remembered that the applicants assert that the amount of bound isopropanol in the active ingredient is not disclosed by these tests. According to Prof Hibbert, the tests reveal whether the active compound for PAXTINE is that described in the patents, and whether the crystalline structure is the same. 23 I now come to a critical part of Prof Hibbert's affidavit. Claim 1 of the anhydrate patent claims a substance, the properties of which can be identified by reference to particular IR bands, DSC results, and XRD and NMR spectra, each with characteristic peaks. Alphapharm does not have NMR, DSC or melting point data for its paroxetine hydrochloride. According to Prof Hibbert, Alphapharm relies on the other tests that have been made, including those contained in the assay reports, to satisfy itself as to the identity of its paroxetine hydrochloride. He acknowledges that NMR, DCS and melting point data for the compound "would also be helpful (in addition to IR and XRD) in determining whether the [compound] is similar to any of the polymorphs described in the anhydrate patent." 24 Prof Hibbert then goes on to deal with the quantity of samples that the applicants would need to conduct the following tests: NMR (solid state and solution), melting point and DSC, IR and XRD analyses. He says that a sample of between 20 and 50 grams would be sufficient for these purposes and that there is no need to provide any tablets. 25 I draw two conclusions from this evidence. First, Prof Hibbert was mistaken that an offer to provide samples had been made. Second, Prof Hibbert is of opinion that in the absence of NMR, DSC and melting point data, for the applicants to be better able to form a view on whether any of their patents have been infringed, it is either necessary or at least desirable that they conduct NMR, DSC and melting point analyses. 26 There is a limit to the discovery to which an applicant is entitled under O 15A. As I have indicated, O 15A is not a substitute for general discovery. The object is to disclose what is sufficient to permit the applicants to establish whether the elements of a cause of action are made out and to plead sufficient particulars to support a claim. 27 Having regard to the evidence of Prof Hibbert, I am satisfied that it is appropriate for the applicants to be provided with 50 grams of Alphapharm's raw material (paroxetine hydrochloride). 28 Returning to the question of the confidentiality of the information that is to be disclosed by Alphapharm, I should keep in mind the following observation of O'Loughlin J in CCA Beverages (Adelaide) Ltd v Hansford (unreported, Federal Court of Australia, 15 November 1991) at [24]: "If the Court were disposed to make [an order for preliminary discovery], every effort would be made to afford commercial protection and security of processes to the respondent company. After all, if the applicant's fears are groundless, it is essential that the respondent company's right to secrecy is preserved. But it must be acknowledged that with any disclosure - no matter the security - there may well be a risk that some person may gain information that should not have been made available to him. Such a risk must be taken into the balance when deciding whether an applicant, whose application is wholly genuine, should be entitled to 'fish' for further information." 29 Reference might also be made to Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354. The issue was whether the plaintiffs, in a patent infringement action, were entitled to disseminate documents discovered by the defendants, which revealed their process of manufacture of a drug, to persons other than the plaintiffs' counsel, solicitor, patent agent and an expert. In particular, the plaintiffs sought to disclose the contents of the documents to their chief executive, their general counsel in the USA, their patent counsel in the USA, and a scientist whom they employed in Italy. Buckley LJ said (at 360): "Where a matter in question in an action, being that matter upon which inspection or disclosure will throw light, is of a technical nature, the party seeking discovery may well require inspection by, or disclosure to, technical and professional advisers. If the matter be of a kind on which the party will be likely to be able with the aid of those advisers to form some kind of view of his own, it seems to me that he should normally be allowed to know as much about the facts as his advisers. If, however, the case were one of so esoterically technical a character that even with the help of his expert advisers the party himself could really form no view of his own upon the matter in question but would be bound to act merely upon advice on the technical aspects, disclosure to him of facts underlying the advice might serve little or no useful purpose. In such a case a court might well be justified in directing disclosure of allegedly secret material only to expert or professional agents of the party seeking discovery on terms that they should not, without further order, pass on any information so obtained to the party himself or anyone else, but should merely advise him in the light of the information so obtained." Although the case was concerned with discovery after the commencement of proceedings, the comments of Buckley LJ are instructive in the present application. 30 The applicants have retained a number of experts to carry out tests in the event that an order was made that samples be provided. I assume that the applicants propose to show one or more of these experts the discovered documents to obtain their opinion on whether any of the patents have been infringed. The application was conducted on the basis that at least one independent expert would be used in that way. 31 I think it appropriate, at this stage, that, subject to an appropriate form of undertaking, disclosure of the information contained in the discovered documents or the results of any test performed on the sample should be made only to the applicants' solicitors, to their counsel, to any patent attorney whom the applicants have retained, to any independent expert who is retained to perform tests or to advise on the possibility of patent infringement, and to one director of one applicant who can decide whether to commence infringement proceedings. If the director who will become privy to the information finds it necessary to discuss the initiation of proceedings with other directors, he may do so, as long as he refrains from also discussing the content of the confidential documents and the results of the tests. 32 As to the costs, I propose to order that, if an action for infringement is brought by the applicants (or any of them) against the respondents (or any of them) by 1 August 2001, the costs of this application be at the discretion of the court which hears that proceeding. If, on the other hand, no such action is brought within that period, then the applicants should pay the costs of the application for preliminary discovery. This approach is similar to that adopted by Burchett J in Cappuccio v Australia & New Zealand Banking Group Ltd [1999] FCA 1188. 33 The applicants should, within 14 days, bring in short minutes of orders to give effect to these reasons and also to deal with whatever orders may be necessary for maintaining the confidentiality of the exhibits, a matter which has been the subject of discussion between the parties. 34 There is one final matter that I must address. This application first came for hearing on 18 December 2000. At the time, for good reason, the respondents were unable to proceed. The applicants agreed to an adjournment on condition that an undertaking be given that the first respondent should not, before the earlier of the dismissal of the application or 1 August 2001, sell, offer for sale, market or promote its product, or export its product from Australia. The undertaking was given. The first respondent now wishes to be relieved of this undertaking. It says that it is apparent on the face of the undertaking that it was intended to continue only until the hearing and determination of the application. I have much sympathy with this contention. The undertaking does appear to be unnaturally broad in the circumstances. Yet it seems to be common ground that the undertaking was given pursuant to an agreement between the parties. I doubt that, absent the consent of the applicants, I can release the first respondent from its undertaking without being satisfied that the underlying agreement can itself be annulled: Harvey v Phillips (1956) 95 CLR 235. Even if the undertaking was not given pursuant to an agreement, a court can release a party from an undertaking only in limited circumstances, for example, if new facts come into existence or are discovered which render unjust the enforcement of the undertaking: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 178. Accordingly, I would decline to make the order sought.