Full Federal Court abolishes patent term extensions for pharmaceutical formulations

In a dramatic change to Australian patent law, Australia's Full Federal Court has just held that patents for pharmaceutical formulations are not eligible for patent term extensions (PTE): Otsuka Pharmaceutical Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161.

The decision overturns years of case law and Patent Office practice, and means that many granted patents are likely now vulnerable to having their patent terms slashed. This article discusses how the law has changed, and what this means for developers and users of patented pharmaceutical technology in Australia.

Australia's PTE regime

In Australia, eligible pharmaceutical patents have long enjoyed the privilege of obtaining an extension of term, of up to five years. The regime is limited to pharmaceutical patents, in recognition of the fact there are typically many years lost between filing a patent application (when the technology is new and inventive) and the bringing of a pharmaceutical product to market – which typically follows many years of clinical trials, regulatory approvals, and market access procedures.

Three main conditions must be met for PTE:

1. the patent must disclose a "pharmaceutical substance per se" that, in substance, falls within the scope of one or more claims of the patent (section 70(2)(a));

2. there must be goods registered on the Australian Register of Therapeutic Goods (ARTG) that contain or consist of that pharmaceutical substance (section 70(3)(a)); and

3. the first regulatory approval date for the substance must be at least five years later than the date of the patent (section 70(3)(b)).

The Act defines "pharmaceutical substance" as meaning:

"a substance (including a mixture or compound of substances) for therapeutic use whose application (or one of whose applications) involves:

(a) a chemical interaction, or physico‑chemical interaction, with a human physiological system; or

(b) action on an infectious agent, or on a toxin or other poison, in a human body;

but does not include a substance that is solely for use in in vitro diagnosis or in vitro testing."

We recently discussed the Australian PTE regime in more detail, including its eligibility criteria and its object.

Otsuka's aripiprazole formulations

Otsuka Pharmaceutical Co Ltd owns Australian patent no. 2004285448, which in summary discloses new and inventive controlled release formulations of aripiprazole – a drug used for treating schizophrenia and bipolar I disorder. In addition to aripiprazole, each of the patent claims included other integers, such as excipients (ie., non-active components) – aripiprazole itself having been well known when the patent application was filed.

The standard 20-year term of the patent expired in October 2024. However, ten years earlier, Otsuka had successfully obtained a PTE from the Australian Patent Office, based on the ARTG registration of its product, ABILIFY MAINTENA. The extended term was due to expire in July 2029.

Sun Pharma's clear-the-way litigation

In 2023, Sun Pharma ANZ Pty Ltd commenced Federal Court proceedings challenging the validity of the PTE. Otsuka and related parties cross-claimed for threatened infringement and misleading or deceptive conduct in contravention of the Australian Consumer Law.

Otsuka defended the validity of the PTE, alleging various alternative "pharmaceutical substances", all of which included excipients as part of the formulation.

In February 2024, the trial judge agreed with Otsuka that a patent for a pharmaceutical formulation could be eligible for a PTE. Her Honour identified the relevant question as being whether the formulation (as a whole) was a substance whose application involved a chemical interaction, or physico‑chemical interaction, etc. as required by the definition of "pharmaceutical substance" quoted above. The judgment aligned with many years of case law and Patent Office practice, including the detailed reasons of Justice Perram in another recent decision upholding the availability of PTEs for formulation patents: Cipla Australia Pty Ltd v Novo Nordisk A/S [2024] FCA 1414.

However, her Honour also considered that Otsuka's patent claims were invalid for lack of clarity and lack of definition, and so ultimately ordered that the patent be revoked. Otsuka appealed, and Sun Pharma responded by filing a Notice of Contention asserting that the judgment could be upheld for different reasons: most significantly, that a PTE should never have been granted for a formulation patent.

Active pharmaceutical ingredients only, says the Full Court

The Full Court upheld Sun Pharma’s Notice of Contention, finding that the PTE was invalid, because pharmaceutical formulations did not meet the definition of "pharmaceutical substance" in the Act. As a consequence, the Court dismissed Otsuka's appeal (although it would have allowed Otsuka's appeal in relation to the primary judge's findings of lack of clarity and lack of definition).

The Full Court examined the legislative history and purpose of the PTE regime, and concluded that Parliament had always intended the definition of "pharmaceutical substance" to be limited to active pharmaceutical ingredients (API), and excluded formulations. In reaching that conclusion, in addition to overturning the primary judge's reasons, the Full Court confirmed that at least three earlier single-judge decisions (which had found in the patentee's favour) had also been wrongly decided: Cipla; Pharmacia Italia SpA v Mayne Pharma Pty Ltd [2006] FCA 305; and Spirit Pharmaceuticals Pty Ltd v Mundipharma Pty Ltd [2013] FCA 658.

The crux of the Full Court's reasoning was simple: it said that only the "active" ingredient(s) could have the requisite interaction with a human physiological system etc. It evidently was not attracted to the primary judge's analysis that a formulation, taken as a whole, could itself be a "mixture or compound of substances" that meets the statutory definition, even if only one or more components of that substance has the requisite chemical interaction etc.