There’s a drug for that: Generics manufacturer Sandoz ‘rolled the dice and lost’

Lundbeck (a Danish pharmaceutical giant) was all smiles when Justice Jagot, of the Federal Court of Australia (FCA), held in H Lundbeck A/S & Anor v Sandoz Pty Ltd¹ that Sandoz (a German-based generics manufacturer) infringed upon Lundbeck’s pharmaceutical patent for popular antidepressant drug, Lexapro.

Sandoz released a generic version of Lexapro soon after the expiry date of the original patent term. However, while at that time Lundbeck had no patent rights, Sandoz was aware that Lundbeck had sought an extension of the term of the patent and that if granted, it would be infringing the Lundbeck patent (as Lundbeck’s rights would be extended to the period during which Sandoz was selling it’s generic equivalent).

Lundbeck was successful in securing an extension of the term of the patent, which according to s 79 of the Patents Act 1990 (Cth) (‘the Patents Act’) took effect retrospectively, meaning that Lundbeck’s rights to the patent never ceased during the period that a decision regarding the patent expiry was forthcoming.

Sandoz (as well as Apotex Pty Ltd and Sigma Pharmaceuticals, who both reached a settlement with Lundbeck prior to judgement) released their generic brand escitalopram oxalate products to the market just two days after the original 13 June 2009 expiry of Lundbeck’s patent.

On 25 June 2014, the Commissioner of Patents handed down her decision approving an extension of the patent term to 9 December 2012. Accordingly, on 26 June 2014, Lundbeck filed patent infringement proceedings in the Federal Court of Australia.

In a separate action, CNS Pharma Pty Ltd (an Australian subsidiary of Lundbeck) subsequently filed proceedings in the FCA against the same generics manufacturers claiming that the release of their generic brand escitalopram oxalate products to the market amounted to misleading and deceptive conduct under the Australian Consumer Law.²

The Sandoz patent infringement judgement

Justice Jagot handed down her judgement on 21 November 2018, finding that the generics manufacturer had infringed upon Lundbeck’s patent and in doing so rejected Sandoz’s challenges to the construction and validity of the patent.

The patent at hand, Australian Patent No. 623144, for which Lundbeck is the patentee, is titled ‘(+)-enantiomer of citalopram and process for the preparation thereof’. The standard term for pharmaceutical patents, per s 67 of the Patents Act, is 20 years. However, pursuant to the Patents Act, pharmaceutical patents can obtain an extension of the term of the patent of up to five years. It was on this basis that the patent, which was filed on 13 June 1989, didn’t expire on 13 June 2009 but was granted an extension to 9 December 2012.

Justice Jagot ruled:

Essentially, Justice Jagot held that a decision regarding the extension of the term of a patent could be delivered following the standing expiry, and the effect of that delivery will retrospectively provide the patentee with their patent rights from the standing expiry date up until the end of the extended term. The effect of this is that the patent never ‘ceased’ nor needed to be ‘restored’ because the extension meant that it never really expired.

Justice Jagot noted:

Sandoz ultimately failed in its attempts to claim that Lundbeck’s patent had ‘ceased’ when the patent infringement occurred because the term had not yet been extended and the patent had not yet been ‘restored’ under what was held to be an incorrect interpretation of s 223(10) of the Patents Act.

Justice Jagot concluded that Lundbeck should succeed in its claims for damages for patent infringement, subject to an overall discount of 30% to take account for the fact that some sales of Sandoz’s generic brand escitalopram oxalate product would not represent lost sales for Lundbeck, but of other generic brand escitalopram oxalate products. The court is yet to make orders relating to damages and costs.

Justice Jagot also concluded that CNS Pharma Pty Ltd, a Lundbeck subsidiary with a licence to use the patent to produce an authorised generic brand escitalopram oxalate product, was entitled to succeed in its misleading and deceptive conduct claim, noting that Sandoz wrongly represented itself to pharmacists that it was authorised to produce a generic brand escitalopram oxalate product.

Key takeaways

1. Generics manufacturers need to take pending requests for extensions of term seriously, or risk finding themselves in Sandoz’s position;
2. Extensions of patent terms have retrospective effect if made after the standing expiry date; and
3. Generics manufacturers cannot get away with claiming that the infringement didn’t occur even if the patent was technically expired at the time of the infringement.

Macpherson Kelley first published a version of this article, and to the extent that elements of this article are the same as or similar to another version, they are published here with permission.

• 1.[2018] FCA 1797.
• 2.Competition and Consumer Act 2010 (Cth) sch 2 (‘Australian Consumer Law’).
• 3.H Lundbeck A/S & Anor v Sandoz Pty Ltd [2018] FCA 1797, [151].
• 4.Ibid, [346].