Ramifications for Pharmaceutical and Biotech Patent Owners of the US-Australia Free Trade Agreement

The legislation implementing the Australia/US Free Trade Agreement ("FTA") came into force on 1 January 2005. The implementing legislation makes certain consequential amendments to Australia's Therapeutic Goods Act 1989 which establishes a regime designed to dissuade owners of suspect pharmaceutical patents from commencing patent infringement proceedings against alleged infringers. This has been referred to as "patent evergreening" and is intended to cover the practice whereby the term of pharmaceutical patents is, effectively, extended by obtaining the grant of dubious patents in respect of new indications, new formulations or new types of presentations relating to an originally patented pharmaceutical substance. These provisions have been highly controversial and have drawn adverse comment from the US trade negotiator. The US position is that it will monitor how this new regime operates in practice. No doubt, if it is perceived to be adverse to US pharmaceutical companies interests further steps may be taken by the US to have these provisions removed from the Therapeutic Goods Act. Until that time, however, the following provisions apply in relation to the enforcement of pharmaceutical patents in Australia;

Generic Certification

The registration or listing of therapeutic goods (but not devices) is now contingent upon the applicant giving one of two alternative forms of certificate:

1. a s26B(1)(a) certificate
   
   
   that the applicant, acting in good faith, believes on reasonable grounds, that it is not, and will not, market a therapeutic good in a manner, or in circumstances, that would infringe a valid claim of a registered patent
   
   
   or
   
   
   
2. a s26B(1)(b) certificate

that;

• a patent has been granted that covers the applicant's therapeutic good;
• the applicant will market its product during the term of that patent; and
• the applicant has given the patentee notice of its application for listing or registration of a therapeutic good.

This new form of mandatory certification is likely to require a generic applicant for the listing or registration of a therapeutic good to have patent searches conducted and to obtain legal advice in relation to whether or not the good infringes or is likely to infringe any patent which has been identified as being of potential relevance. If the applicant provides a certificate that is false or misleading in any material particular that applicant will be guilty of a criminal offence (currently A$110,000 for an individual and A$550,000 for a corporation).

Patentee Certification

A patentee of a pharmaceutical patent is now required, before issuing any proceedings for patent infringement, to certify that the proceedings;

1. are to be commenced in good faith;
2. have reasonable prospects of success; and
3. that the proceedings will be conducted without unreasonable delay.

The maximum penalty for a patentee providing a certificate which is false or misleading in any material particular is A$10million

Interlocutory Injunctions

If the applicant for registration or listing of a therapeutic good gives certification under s26B(1)(b) and the patentee provides its own certification as set out above and then initiates infringement proceedings and obtains an interlocutory (pre-trial) injunction then, if the proceedings are subsequently discontinued by the patentee without the consent of the applicant or the proceedings are subsequently dismissed, the patentee may be ordered to pay compensation for any loss incurred by the Commonwealth, State or Territory Government as a result of the grant of the injunction. In addition, the patentee may be ordered to pay compensation to the alleged infringer on the basis of an account of the gross profits of the patentee during the period of the interlocutory injunction, without requiring the alleged infringer to establish or quantify any loss.