FEDERAL COURT OF AUSTRALIA Novartis AG v Arrow Pharmaceuticals Pty Ltd [2020] FCA 139 File number: NSD 859 of 2019 Judge: JAGOT J Date of judgment: 14 February 2020 Catchwords: PATENTS – application to amend under s 105(1A) of the Patents Act 1990 (Cth) – method of treating or preventing multiple sclerosis and protecting against neurodegenerative brain inflammation – where amendments narrow the scope of the claims by defining the method and use of claims only – application to amend granted – costs Legislation: Patents Act 1990 (Cth) ss 40(2), 40(3), 102(1), 102(2), 102(2A), 105(3), 105(4),105(1A) Federal Court Rules 2011 (Cth) r 34.41(a) Cases cited: Cytec Industries Inc v Nalco Company [2019] FCA 1800 Eli Lilly and Company v Pfizer Research and Development Company NV/SA [2003] FCA 988; (2003) 59 IPR 234 Meat & Livestock Australia Limited v Cargill, Inc (No 2) [2019] FCA 33 Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 Date of hearing: Heard on the papers Date of last submissions: 20 December 2019 (Applicant) 17 January 2020 (Respondent) Registry: New South Wales Division: General Division National Practice Area: Intellectual Property Sub-area: Patents and associated Statutes Category: Catchwords Number of paragraphs: 20 Counsel for the Applicant: Mr C Dimitriadis SC with Mr C Burgess Solicitor for the Applicant: Clayton Utz Counsel for the Respondent: Mr JS Cooke Solicitor for the Respondent: Maddocks Lawyers ORDERS NSD 859 of 2019 BETWEEN: NOVARTIS AG Applicant AND: ARROW PHARMACEUTICALS PTY LTD ACN 605 909 911 Respondent JUDGE: JAGOT J DATE OF ORDER: 14 February 2020 THE COURT ORDERS THAT: 1. The parties confer and file agreed short minutes of order reflecting these reasons for judgment within 7 days including directions for the future conduct of the matter. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT JAGOT J: The application 1 The appellant has applied to amend the claims of Australian Patent Application No 2013204752 (the 752 application) pursuant to s 105(1A) of the Patents Act 1990 (Cth) by inserting new claims 1 to 20. The respondent does not oppose the amendment application but seeks an order that the appellant pay the respondent's costs of the amendment application and any costs thrown away if the amendment application is successful. 2 The appellant contends that the amendments should be made because: (1) appropriate notice of the amendments has been given; (2) neither the respondent nor the Commissioner of Patents nor any third party opposes the amendments; (3) the amendments comply with the requirements of s 102 of the Patents Act; and (4) it is appropriate in the exercise of the Court's discretion to make the amendments. Background 3 The appellant is the applicant for the 752 application. The 752 application relates to pharmaceutical compositions that comprise an S1P modulator, including methods of treating or preventing multiple sclerosis and methods of protecting against neurodegenerative brain inflammation, that involve administering such compositions. The Commissioner of Patents upheld the respondent's opposition to the 752 application on the ground of lack of inventive step. This proceeding is the appellant's appeal from that decision. The proceeding has not yet been fixed for hearing. Nor has any timetable for the filing of evidence been fixed. 4 The application to amend the 752 application is made under s 105(1A) of the Patents Act. An amendment may only be permitted if allowable under s 102: s 105(4). To be allowable the amendments must not result in the specification claiming matter not disclosed in substance in the specification as filed (s 102(1)) and, after the relevant time, must not result in a claim of the specification that would not in substance fall within the scope of the claims of the specification before amendment (s 102(2)). The "relevant time" means after the specification has been accepted: s 102(2A). 5 The proposed amendments are confined to the claims and either restrict the scope of the claims or remove some of the claims. The respondent withdrew its opposition to the proposed amendments after the appellant abandoned some of the amendments. Notice requirements 6 The notice requirements are satisfied. 7 Notice was given to the Commissioner of Patents on 3 July 2019 as required by s 105(3) of the Patents Act. 8 The Commissioner advertised the amendments on 25 July 2019 by advertisement in the Official Journal stating the matters identified in r 34.41(a) of the Federal Court Rules 2011 (Cth). The advertisement required any third party intending to oppose the amendments to notify the parties and the Commissioner of Patents of its intention by 22 August 2019. No notice was given by a third party. 9 The Commissioner of Patents is prima facie satisfied that the amendments do not contravene s 102 of the Patents Act and does not wish to appear in the proceeding. In Cytec Industries Inc v Nalco Company [2019] FCA 1800 at [43] Burley J said "…the absence of opposition and consent of the Commissioner tends strongly in favour of the grant of the leave sought…". Compliance with s 102 10 Section 102(2)(a): an amendment is not allowable if, as a result, a claim of the specification would not in substance fall within the scope of the claims of the specification before amendment. 11 The appellant submitted that each proposed amended claim clearly falls within the scope of the at least one claim of the specification before amendment. This submission in borne out by comparison of the claims before and after the amendment. 12 Sections 102(1) and 102(2)(b): in Meat & Livestock Australia Limited v Cargill, Inc (No 2) [2019] FCA 33 Beach J explained at [197] that: Section 102(1) provides that, if by reason of the proposed amendments, the specification would claim matter not in substance disclosed in the specification as filed, the amendment is not allowable. The notion of "in substance disclosed" is similar to the test of "fair basis". It can therefore be tested by asking whether there is a "real and reasonably clear disclosure" in the specification as filed of the new proposed amended claims (Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No 1) (2004) 217 CLR 274 at [69]). The same test applies to non-compliance with s 102(2)(b) where there is lack of fair basis. The usual tests for clarity and definition also apply to s 102(2)(b). 13 The appellant submitted: (1) the proposed amendments do not amend the body of the specification and do not claim any new subject-matter and thus do not result in any change capable of contravening s 102(1) or s 102(2)(b); (2) the proposed amended claims are prima facie clear and fairly based having regard to both the specification as filed (refer s 102(1)), and the specification prior to amendment, as required by s 102(2)(b) and (by extension) s 40(3); and (3) there is no basis for finding that the proposed amended claims cause the specification to contravene s 40(2) of the Patents Act, as the proposed amended claims plainly define the invention for the purposes of s 40(2)(b) and the amendments do not change the description in the body of the specification for the purposes of compliance with the requirement under s 40(2)(a) to fully describe the invention, including the best method known to the patentee. The amendments are appropriate 14 As a matter of discretion the appellant submitted that the amendments are appropriate to be allowed. In particular: (1) the amendments merely restrict the subject-matter already claimed in the 752 application to the existing method and use claims (proposed claims 1 to 16) and re-write claim 15 to adopt a corresponding form (proposed claims 17 to 20); (2) the amendments will reduce the scope of the rights that would be conferred upon grant by removing the composition of matter claims, and a claim directed to a process for producing a pharmaceutical composition; (3) the proposed amendments will narrow the scope of the issues in the appeal by confining the dispute to the method and use claims only; (4) there is no opposition to the amendment application; and (5) the appellant has acted expeditiously and without undue delay in bringing its application for amendment. Conclusions 15 In the circumstances set out above, the amendments which the appellant has sought should be permitted. The statutory pre-conditions are satisfied and there is no discretionary consideration which weighs against allowing the amendments. Costs 16 The appellant accepted that it is common in patent amendment applications for the patentee to be ordered to pay the respondent's costs irrespective of the outcome, but this is not a rule as costs are always in the Court's discretion: Eli Lilly and Company v Pfizer Research and Development Company NV/SA [2003] FCA 988; (2003) 59 IPR 234 at [25]. The appellant submitted that having regard to the restrictive and limited nature of the amendments to claims 1 to 20, it was unreasonable for the respondent to incur any costs formulating grounds of opposition against those amendments. As to amended claims 21 to 24 the appellant did not press for those claims and there has been no hearing on the merits so that the appropriate order is for each party to pay its own costs: Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624-625. Alternatively, any order to pay the respondent's costs should be limited to those reasonably and properly incurred in relation to the interlocutory application. 17 The respondent submitted that the appellant should pay the respondent's reasonable costs of and incidental to the amendment application and any costs thrown away if the amendment application is successful. The respondent pointed out that the proceeding was commenced by the filing of a notice of appeal on 30 May 2019 against the decision of the Commissioner of Patents that each of claims 1 to 15 lacked an inventive step. On 21 June 2019 the respondent filed a notice of contention in which it contended that the decision of the Commissioner of Patents was correct for the reasons given and for additional reasons. On 28 June 2019 the appellant filed an interlocutory application to amend the 752 application by proposing new claims 1 to 24. On 5 September 2019 the respondent filed a statement of grounds and particulars of opposition to the proposed amendments. Ground 1 opposed certain of the proposed claims on the basis of non-compliance with s 102(2) of the Patents Act. Ground 2 opposed the amendments for discretionary reasons, including the paucity of disclosure in the accompanying affidavit about the reasons for the proposed amendments. The appellant then filed further affidavit material providing additional reasons for and background to the proposed amendments. This further material also indicated that the appellant would not press for the amendments to introduce claims 21 to 24. On 28 November 2019 the respondent indicated that it did not intend to file any evidence. On 6 December 2019 the respondent indicated it no longer opposed the proposed amendments, but would seek an order that the appellant pay its costs of and incidental to the application. 18 The respondent relied on Cytec at [49] in which Burley J said: Section 105(2) of the Patents Act provides that an order under s 105(1A) may be made subject to such terms (if any) as to costs, advertisements or otherwise as the court thinks fit. That provision is in addition to the general discretion that the Court has to award costs in proceedings before it: see Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 (Nicholas, Beach and Burley JJ) at [5] – [6]. In the present case Nalco chose to file and pursue its amendment application following the commencement of these proceedings. By taking this course it was seeking an indulgence in the form of the exercise of discretion in its favour. Cytec has a very real interest in the amendment application, the outcome of which will affect the scope of the appeal from the opposition. No doubt for good reason, Cytec formed the view that it should not oppose the grant of the leave sought, but that is not to say that its interest in the amendment ceased upon making that decision. During the course of the application evidence may have been lead that was contrary to its interests or the application may have been varied in a manner adverse to its interests. It was entitled to consider the relevant evidence and attend the hearing. 19 According to the respondent, the facts of the present case provide a stronger example in support of a costs order, as the respondent incurred additional costs by initially opposing the application to amend before the appellant indicated it no longer pressed proposed claims 1 to 24 and provided further explanation of the amendments. The respondent also sought an order that the appellant pay its costs thrown away if the amendment application is successful which would include, for example, the issues raised, but which no longer need to be pursued given the amendments. 20 I accept the respondent's submissions. It formulated its opposition to the proposed amendments before the appellant refined those amendments and provided additional material explaining them. It subsequently withdrew its opposition. The appellant's submission that the amendments to claims 1 to 20, were so confined that it was unreasonable for the respondent to incur any costs formulating grounds of opposition against those amendments, overlooks the proper interest which the respondent has in the amendments and the fact that the appellant supplemented the information on which it relied to support the amendments after the respondent had lodged its opposition. The respondent should have the benefit of the costs orders it has sought. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 14 February 2020