Like diamonds, trade marks last
forever (provided that you manage them correctly). Thus, trade marks are a vital aspect of
building and extending an IP monopoly in many fields, not least of which
being pharmaceuticals.

Taste trade marks have been of
particular interest in the past few years as another avenue of product
lifecycle management. However, taste trade
marks are quite susceptible to attacks based on functionality and lack of
distinctiveness.

The recent US Appeal Board
decision in In re N.V. Organon highlights just how damaging an
applicant’s own marketing materials can be to assertions that the mark
is non-functional. The case is also a
good reminder that taste trade marks are extremely unlikely to be held
inherently distinctive in any jurisdiction, so that it will be necessary to
prove acquired distinctiveness.

Comment

The Organon
case

On 14 June
2006 the USPTO Trademark Trial and Appeal Board handed down its
decision in In re N. V. Organon concerning trademark
application 76467774 for ‘an orange flavor’ for
‘pharmaceuticals for human use, namely antidepressants in
quick-dissolving tablets and pills.’
(The product is Mirtazapine, marketed as RemeronSolTab®)

The mark was held not capable of
trade mark protection because:

(a) Organon’s own
advertising material touted functional advantages (factor 2 of the 4 part
test for functionality — see below), and

(b) in this case at least, the
flavor would not in fact act as a trade mark in any event.

(There are many oral
pharmaceuticals with an orange taste, and by their nature, taste marks are
not inherently distinctive.)

The US
law on functionality

The
relevant section of the US Trade Marks legislation which prohibits
functionality is 15 USC 1052(e)(5).

In the
landmark Qualitex
case, the US Supreme Court provided further guidance by stating that in
general terms, a product feature is functional if it is essential to the use
or purpose of the article or if it affects the cost or quality of the
article.

Back in
1982, the Federal Circuit, in In re
Morton-Norwich Products, Inc.
671
F.2d 1332 referred to the following four factors to be considered when
assessing functionality:

1 —
the existence of a utility patent disclosing the utilitarian advantages of
the design

2 —
advertising materials in which the originator of the design touts the
design’s utilitarian advantages

3 —
the availability to competitors of functionally equivalent designs

4 —
facts indicating that the design results in a comparatively simple or cheap
method of manufacture

(For a more
recent case, see Valu Engineering Inc., v Rexnord Corp 278 F.3d 1268.)

Organon had
advertised the advantages of the Orange
flavour (such as increased patient compliance) on its website and other
marketing materials. This was a key
factor in the Appeal Board’s decision to refuse registration of the
mark.

Lack of
distinctiveness

It was also held that the
applicant’s taste would not function as a trademark since there are
many flavored medicines and numerous orange flavored medicines. Consequently, an orange flavor for
antidepressants would not be distinct of N.V. Organon’s product.

The Appeals Board also noted
that flavor is a characteristic of the goods and not their origin. Hence, in the same way as for color or
scent, flavor can never be inherently distinctive. Thus, in the words of the Appeals Board,
registration of a flavor mark will require a substantial showing of acquired
distinctiveness.

Can a taste act as a trade mark?

As the Appeals Board pointed
out, it is not clear how a taste would function as a trade mark since a
consumer has no access to the product’s flavor prior to purchase.

This is clearly a major problem
for taste marks for medicinal goods where taste testing of the product is
extremely unlikely to occur.

(Although one might imagine
placebo taste samples being offered by an enterprising pharmaceutical company
keen to tackle this issue.)

Background

No luck elsewhere either

Organon’s parallel BENELUX
application 1 018 650 and CTM application 3 065 539 were finally rejected in
2004 for lack of distinctiveness.

The
Qualitex case

The Appeals
Board relied heavily on the landmark Supreme Court decision in Qualitex
Co. v. Jacobson Products Co., 514 U. S. 159 (1995)
, in which a
green-gold colour used on dry cleaning press pads was found to be registrable
as a trademark where the colour had acquired distinctiveness.

Some
notable quotes from Qualitex;

‘[s]ince
human beings might use as a ‘symbol’ or ‘device’
almost anything at all that is capable of carrying meaning, this language,
read literally, is not restrictive.’

‘[i]t
is the source-distinguishing ability of a mark — not its ontological
status as colour, shape, fragrance, word, or sign that permits it to serve
[as a trademark]’

Lilly’s
strawberry failure

In 2003, the OHIM Boards of Appeal rejected Eli Lilly’s
application for a strawberry flavour as applied to pharmaceuticals —
see Case R 120/2001-2.
The refusal was predictably based in part on lack of
distinctiveness. In the words of the
Board:

‘…, it is in any event clear that such a taste
cannot distinguish the pharmaceutical preparations of one undertaking from
those of another.’

‘Moreover, the taste is unlikely to be perceived by
consumers as a trade mark; they are far more likely to assume that it is
intended to disguise the unpleasant taste of the product:..’

To be
patentable in Australia:

A business method must produce a
‘useful product’ – a
physical phenomenon or effect resulting from the working of the method. It must be more than mere
‘intellectual information’.

An alleged invention need not be an
application of science or technology.
However schemes relating to the operation of the law are not suitable
subject matter for patent protection.

Grant v Commissioner of Patents
[2006] FCAFC 120
(18 July 2006).

Comment

Patent
drafting practice

Due to
international jurisprudence, it has always been good practice to ensure that business
method patent specifications include at least some physical manifestation or
technical element. The simplest way to
effect this is of course to include embodiments which utilize a computer or
computerized network in order to work the invention. This practice has now been fully validated
in Australia.

While Mr
Grant may choose to appeal to the High Court, it is unlikely that leave would
be granted. Consequently, this is
likely to be the last word on patentability of business methods from the Australian
appellate courts for some time to come.

What is a
‘physical effect’?

The
definition of a ‘physical effect’ is obviously critical as it
defines the boundary of patentability.
The Full Court
did not provide a detailed definition of this term, perhaps leaving this to
the interpretation of future judges in the context of each case as it arises
— and rightly so.

However,
the Full Court
provided guidance by stating amongst other things that:

  • the required physical effect
    must be a concrete effect or phenomenon or manifestation or
    transformation;
  • in NRDC, an artificial effect was physically
    created on the land;
  • in Catuity and
    CCOM as in State Street
    and AT&T, there was a
    component that was physically affected or a change in state or
    information in a part of a machine

In relation
to Mr Grant’s asset protection method, the Full Court stated:

‘By
contrast, the alleged invention is a mere scheme, an abstract idea, mere
intellectual information, which has never been held to be patentable, despite
the existence of such schemes over many years of the development of the
principles that apply to manner of manufacture. There is no physical
consequence at all.’

Background

History of
the proceedings

The
decision is the second appeal from a decision of the Deputy Commissioner of
Patents: Stephen John Grant [2004] APO 11 (26 May 2004).

In the
original decision, the Deputy Commissioner revoked Innovation Patent No. 2003100074 entitled ‘Asset Protection Method’
on the basis that the invention claimed did not involve a manner of
manufacture. The second instance
appeal (to the Federal Court) affirmed revocation of the patent: Grant v Commissioner
of Patents [2005] FCA 1100
(12 August 2005)

(The patent
in issue was an Innovation Patent, but this has no bearing on the question of
patentability as the same test for patentability applies.)

The claimed
invention

Claim 1 of
AU 2003100074 read:

‘1.
An asset protection method for protecting an asset owned by an owner, the
method comprising the steps of:

(a)
establishing a trust having a trustee,

(b) the owner
making a gift of a sum of money to the trust,

(c) the
trustee making a loan of said sum of money from the trust to the owner, and

(d) the
trustee securing the loan by taking a charge for said sum of money over the
asset.’

Other
non-patentable methods

The Full Court gave
the following examples of non-patentable methods:

systems for arrangement of known
things, such as a plan relating to the layout of houses in a row or terrace
so as to prevent overlooking (Re
ESP’s Application
(1944) 62 RPC 87);

an arrangement of buoys for
navigational purposes (Re W’s
Application
(1914) 31 RPC 141);

a system of business even though
its implementation involved the use of a printed envelope with a particular
arrangement of words (Re
Johnson’s Application for a Patent
(1901) 19 RPC 56 at 56); and

a method of preventing the
fraudulent re-use of sales book dockets and books used in that connection (Re Brown (1899) 5 ALR 81).

Interestingly,
the Full Court
referred to similar cases in the UK
and USA
to support its view:

Burroughs
Corp (Perkins’) Application
[1974] RPC
147

International
Business Machines Corporation’s Application
[1980] FSR
564

State
Street Bank & Trust Co v Signature Financial Group Inc

149 F 3d 1368; 47 USPQ 2d 1596 (Fed Cir 1998)

Can you sue a group of related
companies for patent infringement across Europe
in one consolidated proceedings in a single jurisdiction?

No.
A patentee must sue each infringer in their country of domicile
pursuant to the patent(s) and law in force there.
It does not matter that the alleged infringers are companies in the same
group acting in an identical manner according to a common policy: C-539/03 Roche Nederland and Others.

In which jurisdiction can you claim
or counter-claim for invalidity of an intellectual property right?

To invalidate a French patent, you must seek revocation in France
(and so on).
The Courts of the Contracting
State in which a patent
was applied for have exclusive jurisdiction in questions of patent validity
irrespective of how those questions arise: C-4/03 GAT and Art 16(4) Brussels Convention.

Implications

It is now clearer than ever that
cross-border injunctions in patent disputes do not comply with the Brussels
Regime. In the past, such injunctions
were commonly granted by the Courts in the Netherlands
(and sometimes in Germany).

In the past, Dutch Courts have
allowed infringement proceedings to be brought against a group of companies
in different Contract States if the central policy had been determined by the
Dutch defendant (the “spider in the web”). It is now clear that this practice does not
comply with the Brussels Regime.

Comment

On Thursday 13 July 2006, the First
Chamber of the European Court of Justice handed down two judgments which
clarify the game of intellectual property cat-and-mouse that is played across
the European Contracting States.

1
– C-539/03 Roche Nederland and Others.

The
patent in suit was EP 131 627. The
patentees, Drs Primus and Goldenberg had argued that Article 6(1) of the Brussels Convention applies in the present case to allow
all of the infringement proceedings to be heard together.

(Article
6(1) basically states that where there is more than one defendant, then suit
can be brought in the Contracting
State of one of the
defendants. Article 6(1) is an
exception to Article 2 which states that a defendant domiciled in a Contracting State must be sued there in that
State.)

Amongst
other things, the Court stated:

For Article 6(1) to apply there
must be a sufficiently close connection so that it is expedient to determine
the actions together in order to avoid the risk of irreconcilable judgments
resulting from separate proceedings: Case 189/87 Kalfelis [1988] ECR 5565,
paragraph 12 (repeating the words of Article 22).

For decisions to be contradictory
it is not sufficient that there is a divergence in outcomes. The divergence must also arise in the
context of the same situation of law and fact.

The facts will not be the same in
patent infringement proceedings where different companies are being sued,
even if the impugned activity is the same.

The legal situation will not be the
same as the law to be applied varies in each state.

To agree with the patentees would
multiply the potential heads of jurisdiction, undermine the predictability of
the rules of jurisdiction, and consequently undermine the principle of legal
certainty, which is the basis of the Convention.

The negative effects of such a decision damage would be even more serious if it
provided the defendant a wide choice, thereby encouraging forum shopping
which the Convention seeks to avoid and which the Court, in its judgment in Kalfelis, specifically sought
to prevent.

Even if a court seised
by the defendant were able to accept jurisdiction, the consolidation of the
patent infringement actions before that court could not prevent fragmentation
of the patent proceedings as soon as validity is brought into question (which
is commonly the case).

2
– C-4/03 GAT

This
judgment applies to any proceedings relating to the validity, existence or
lapse of a patent or an alleged right of priority by reason of an earlier
deposit (see Case 288/82 Duijnstee [1983] ECR
3663, paragraph 19
).

Given
the wording of Article 16(4) of the Brussels Convention, it is quite likely that C-4/03 GAT
will also apply to disputes relating to trade marks and designs.

Amongst
other things, the Court stated:

Article 16 seeks to ensure that
jurisdiction rests with courts closely linked to the proceedings in fact and
law.

The Courts of the jurisdiction in
which a patent was applied for are best placed to adjudicate a dispute concerning
validity of the patent or the existence of a deposit or registration.

The concern for sound
administration of justice is all the more important in the field of patents
since, given the specialised nature of this area

The issuance of patents necessitates
the involvement of the national administrative authorities.

To allow a court seised of an action for infringement or for a declaration
that there has been no infringement to establish, indirectly, the invalidity
of the patent at issue would undermine the binding nature of the rule of
jurisdiction laid down in Article 16(4) of the Convention.

To hold otherwise would enliven the
possibility of circumventing Article 16(4) of the Convention and would have
the effect of multiplying the heads of jurisdiction, undermine the
predictability of the rules of jurisdiction, and consequently to undermine
the principle of legal certainty, which is the basis of the Convention

To hold otherwise would multiply
the risk of conflicting decisions which the Convention seeks specifically to
avoid (see, to that effect, Case C-406/92 Tatry [1994] ECR
I-5439
, paragraph 52).

A judgment which falls foul of the
provisions of Article 16 will not benefit from the system of recognition and
enforcement under the Brussels Convention:
See Article 19, first paragraph of Article 28 and second paragraph of
Article 34.

Background

The
Brussels Regime consists of the Brussels Convention, the Lugano Convention and the Brussels Regulation (Council Regulation (EC) No 44/2001 of 22
December 2000)
.

Article
6 of the Brussels Convention, which appears in Section 2 of Title II,
entitled ‘Special jurisdiction’, states:

“[A
defendant domiciled in a Contracting
State] may also be
sued:

(1) where he is one of a number of
defendants, in the courts for the place where any one of them is domiciled;

…”

Article
16(4) of the Brussels Convention states:

“The
following courts shall have exclusive jurisdiction, regardless of domicile:

…

4. in proceedings concerned with the registration
or validity of patents, trade marks, designs, or other similar rights
required to be deposited or registered, the courts of the Contracting State
in which the deposit or registration has been applied for, has taken place or
is under the terms of an international convention deemed to have taken
place;..”

Article
18 of the Brussels Convention states:

“Apart
from jurisdiction derived from other provisions of this Convention, a court
of a Contracting
State before whom a
defendant enters an appearance shall have jurisdiction. This rule shall not
apply … where another court has exclusive jurisdiction by virtue of
Article 16.”

Articles
64(1) and (3) of the Munich Convention provides:

“(1) A European patent shall … confer
on its proprietor from the date of publication of the mention of its grant,
in each Contracting State in respect of which it is granted, the same rights
as would be conferred by a national patent granted in that State.

…

(3) Any infringement of a European patent
shall be dealt with by national law.”

The
question to be determined by the ECJ in C-4/03 GAT was:

‘Should
Article 16(4) of the Convention … be interpreted as meaning that the
exclusive jurisdiction conferred by that provision on the courts of the
Contracting State in which the deposit or registration of a patent has been
applied for, has taken place or is deemed to have taken place under the terms
of an international convention only applies if proceedings (with erga omnes effect) are brought
to declare the patent invalid or are proceedings concerned with the validity
of patents within the meaning of the aforementioned provision where the
defendant in a patent infringement action or the claimant in a declaratory
action to establish that a patent is not infringed pleads that the patent is
invalid or void and that there is also no patent infringement for that
reason, irrespective of whether the court seised of
the proceedings considers the plea in objection to be substantiated or
unsubstantiated and of when the plea in objection is raised in the course of
proceedings?’

The
questions to be determined in C-539/03 Roche Nederland and Others were:

“(1) ‘Is there a connection, as
required for the application of Article 6(1) of the Brussels Convention,
between a patent infringement action brought by a holder of a European patent
against a defendant having its registered office in the State of the court in
which the proceedings are brought, on the one hand, and against various
defendants having their registered offices in Contracting States other than
that of the State of the court in which the proceedings are brought, on the
other hand, who, according to the patent holder, are infringing that patent
in one or more other Contracting States?

(2) If the answer to Question 1 is not or
not unreservedly in the affirmative, in what circumstances is such a
connection deemed to exist, and is it relevant in this context whether, for
example,

— the
defendants form part of one and the same group of companies?

— the
defendants are acting together on the basis of a common policy, and if so is
the place from which that policy originates relevant?

— the alleged infringing acts of the
various defendants are the same or virtually the same?”

Thanks
again to the IPKat for news of these cases.

See the IPKat’s commentary.

For the foreseeable future at least
some confusion will remain about the scope of product by process claims in
the US.

On 22 June 2006 the US Court of
Appeals for the Federal Circuit refused to hear an en banc appeal in SmithKline v Apotex.
Click here for
a copy of the dissenting decisions.

Comment

My article of 24 February 2006
discussed the initial Court of Appeal decision – CAFC creates another invalidity risk for US process patents. In essence, Smithkline v Apotex provides an
avenue to argue that product by process claims are to be construed
broadly. However, this particular
decision is readily distinguishable on the facts.

In my humble opinion, I would agree
with the dissenting Judges — greater clarity around this issue would
have been very useful.

Despite litigation in at least ten
jurisdictions across the world, Ranbaxy has so far been unable to obtain launch before
patent expiry (~2011). (Further
analysis below.)

On 28 June 2006, the United Kingdom
Court of Appeal handed down its decision in Ranbaxy (UK) Ltd. v Warner-Lambert Company Rev 1 [2006] EWCA Civ 876.

In essence, the UK Court of Appeal
held that the basic patent was infringed by the R, R enantiomer,
but the enantiomer patent was not novel and invalid. Thus, (barring a successful appeal to the
House of Lords), Ranbaxy will be unable to launch generic Atorvastatin (Lipitor) in the United Kingdom until 2011.

Comment

Two key
patent families have been in issue in the various proceedings around the
world (other, process patents have also been litigated in some
countries). The first key family
derives priority from US19860868867
andclaims a racemic mixture of enantiomers of
Atorvastatin (‘the basic patent’). The second key family derives priority from
US19890384187 and
claims the calcium salt of the R, R enantiomer of Atorvastatin (‘the enantiomer patent’).

The pattern of litigation does not suggest
a coordinated, strategic attack by Ranbaxy.
Given the overwhelming lack of success to date, it is difficult to see
what Ranbaxy hopes to achieve in continuing the litigation.

The Global IP Scorecard™

A trite answer (which may be all
that is needed), is that given the size of the market for Lipitor, success in
even one moderately-sized jurisdiction will more than pay for all of the
litigation.

Clearly, Lipitor illustrates this
important principle, which should be factored into global litigation strategy
along with other key factors such as cost and time to first judgment (see my article ‘Value for money in global patent litigation: Relative cost
and time to first judgment in eight key countries
’).

What happened in the UK?

In
relation to the basic patent, the UK Court of Appeal held that the R, R
enantiomer infringed claims which depicted the racemic mixture. This finding was based substantially on the
common general knowledge of the skilled addressee of the patent, which
included knowledge that the molecule would have two chiral centres,
that other molecules in the class (Statins) had
at least one chiral centre and that the R, R enantiomers would be more active
and readily separable.

The UK
Court of Appeal held that the enantiomer patent was not novel in light of
earlier filed WO 89/07598.
This was essentially because the R, R enantiomer had been prior
disclosed in the following terms “The preferred isomer in this invention
is the 4R,6R-isomer of the compounds of Formulas I, Ia and XII above”
and the patent clearly taught that (amongst others), the Calcium salt could
be made. To quote Pumfrey J from the
first instance decision:

“It
is no answer to an allegation of anticipation that the specification gives
clear and unmistakable directions to use the common general knowledge to
produce a specific material.”

The
Court of Appeal saw no need to also determine obviousness of the enantiomer
patent which it held invalid. (As the Court
of Appeal mentioned, it is extremely unlikely that leave to appeal to the
House of Lords would be granted, and that this Appeal would be
overturned. (See — Synthon BV v SmithKline Beecham Plc [2005] UKHL 59.) If that happened, then the case would be
remitted to the Court of Appeal to determine obviousness as well.)

Background

The
UK appeal was from the judgment of Punfrey J in Ranbaxy (UK) Ltd. v Warner-Lambert Company Rev [2005] EWHC
2142 (Pat), [2006] FSR 14
.

In
that case, Pumfrey J refused Ranbaxy’s application for a declaration of
non-infringement of Warner-Lambert’s EP (UK) 0 247 633 (basic patent) but held Warner-Lambert’s
EP (UK) 0 409 281 (enantiomer patent)
invalid for lack of novelty and obviousness.

Relative
cost and time to first instance judgment are important components of global
litigation strategy. A fast decision
in a key jurisdiction will create an early strategic advantage. However, expensive litigation in a market
with lower returns may not be warranted without a series of wins in more
‘litigation efficient’ countries.

So,
where will you get the fastest decisions?

On
average, patent litigants will obtain a first instance judgment first in
China (3-6 months for an Administrative Action, 6-12 months in Court), then
the UK, Netherlands or Germany (9-15 months), followed in decreasing order by
Japan, France, USA, and finally Australia (the slowest with 33 months on
average).

Which
countries provide the biggest markets per dollar spent on litigation?

Due
to its relatively large market and inexpensive litigation, France ranks first then in decreasing order; Germany, USA,
the Netherlands, the UK and finally Australia.

Clearly
these are only two of the many factors to be taken into account when putting
together a global patent litigation strategy.
However, the analysis rewards careful scrutiny.

First instance decisions

Getting
a fast result in a key jurisdiction can be of enormous strategic assistance
in global litigation. Table 1
summarises the average time to first instance judgment and compares each
jurisdiction to the fastest — China (in an administrative
action — as little as three months).

The
UK, Netherlands and Germany take approximately three times longer, while
Japan, France and the USA range from 4 to 8.7 times slower than in
China. While it is possible to
complete a trial relatively quickly in Australia, the judiciary regularly
take much longer to hand down their decisions, so that the average time taken
until a first instance judgment is handed down is nearly three years —
eleven times slower than using the administrative procedure in China.

Average time to

1st Instance Judgment

CN Multiple

(best case)

China

3-6 months
(administrative)

6-12 months (court)

1.0

UK

9-15 months

3.0

Netherlands

10 months

3.3

Germany

10-15 months

3.3

Japan

12 months

4.0

France

20 months

6.7

USA

26 months

8.7

Australia

33 months

11

Table 1: comparison of time to first
instance judgment

Market size per litigation dollar
spent – ‘litigation efficiency’

To
compare the relative effectiveness (in market share) of money spent in each
jurisdiction, I came up with the concept of ‘litigation
efficiency’. Table 1 compares
the LE Index (Litigation Efficiency Index) for the eight countries
reviewed. The index is obtained by
dividing market size by average litigation spend and standardising so that
the least efficient country (Australia)
has an index of 1.0.

Readers
should carefully note that the LE index is only useful as a means of
comparing jurisdictions — it says nothing about a particular
jurisdiction and has no unit of measurement.
It says nothing about the merits of litigating in a given country in any
given set of circumstances.

Of
the countries reviewed, France
is the most litigation efficient, with an index of up to 117.2. In other words, each Euro spent on
litigation in France will
return up to 117.2 times more in market size than would be returned for the
same litigation in Australia.

(The
market size data is based on the retail pharmaceutical market which is a
reasonable approximation of relative market sizes across industries and
countries.)

Retail Market Size (Pharma.)

[US $‘000,000,000]

Av. Litn spend

(1st inst)

[US $ ‘000,000]

Market size per Litigatn $

LE Index

France

25.6b

0.08 — 0.46

56,000-337,000

19.4 — 117.2

Japan

58.7

0.26

225,769

78.5

Germany

27.0

0.13

211,000

73.4

USA

186.0

2.70

69,074

24.0

Netherlands

5.0

0.2 — 0.30

15,600-26,000

5.4 – 9.0

UK

15.0

1.90

7,890

2.7

Australia

4.6a

1.60

2,875

1.0

China

?

0.04 (admin)

0.07 (court)

?

?

Table 2: comparison of litigation efficiency
to first instance judgment

Comment

While
you may not agree with all of the assumptions (and please let me know if you
don’t), I think you will agree that the figures are a fair
representation of the relative costs and times.

Assumptions:

An
important assumption is that the market for a particular product will have
the same relative sizes when comparing jurisdiction ‘A’ and
jurisdiction ‘B’ as the overall pharmaceutical retail market size
in each of those jurisdictions.

I
have made slight adjustments to market sizes and litigation costs based on
the relative age of the source data.

References:

IMS Health, IMS Retail Drug Monitor, 12 months to March 2006

Bodoni, S; Where to find value in Europe:
Managing Intellectual Property, Sept 2004

Generic Drug Entry Prior to Patent Expiration: An FTC Study. US Federal
Trade Commission, July 2002

Weatherall K, & Jensen, P; An Empirical Investigation into Patent
Enforcement in Australian Courts (2005); Federal Law Review (2005), Vol 32;
IPRIA Working Paper No. 07/05.

In preparation for expiry of the key blocking patent
covering Zocor (Simvastatin),
Merck has made two
strategic but controversial moves in the USA to neutralize any advantage that
generic first filers Ivax (Teva)
and Ranbaxy would
obtain from the generic 180 day exclusivity under the Hatch-Waxman
legislation:

1. In 2003, Merck
requested that the Orange Book patents listed in relation Zocor be
delisted. This controversial tactic
effectively removed the chance of generic exclusivity and is currently the
subject of litigation before the US Court of Appeals for the Federal
Circuit (see my article about this from 29 May)

2. It was widely
reported on Wednesday 21 June (for example by Reuters), that Merck intends to sell Zocor at a price
lower than the generic entry price.
(Merck secured the cheapest co-payment level for its Zocor branded
drug on the coverage list of U.S.
health insurer UnitedHealth Group Inc.)

Comment

Patent expiry

The molecule patent for Merck’s Zocor product (US 4,444,784)
expired on 23 June 2006. (To be
strictly correct, the 6 month pediatric
exclusivity expired on that day.)

Controversy

Needless to say both moves by
Merck are controversial and this latest one has prompted at least one request
for a U.S. Federal
Trade Commission investigation (from Senator Charles Schumer of New York).

Increasingly complex game of chess

The advent
of strategies such as these and others (eg. the various forms of authorised
generics) underscore that the chess game played out in the global (and
particularly the US)
pharmaceutical market is becoming a lot more complicated (and interesting).

Other
jurisdictions

Of course,
such strategies may also be adopted in other jurisdictions. However, they are less critical because
without the Hatch-Waxman legislation to encourage earlier generic entry,
there is less need. In other
countries, Brand pharmaceutical companies have traditionally been able to
maintain a sufficient brand premium and market share so as not to bother with
such strategies.

Generic
activity in the US
under the Hatch-Waxman regime has reached a level at which the brand premium
alone is insufficient — clearly Merck is more interested in market
share in this latest move.

No doubt
the ongoing CAFC litigation and the outcome of any Federal Trade Commission
investigation will be closely monitored by other players in the
industry.Depending on the result,
generic players may need to brace themselves for more of the same from other
brand companies.(There are, of course
strategic responses available, but that’s a topic for another day.)

On 15 June
2006, the Full Federal Court of Australia handed down its judgment in Merck & Co Inc v Arrow Pharmaceuticals Limited [2006]
FCAFC 91
.

Under
Australian law, a patent specification which incorporates by reference the
entire disclosure of one or more prior art documents is more likely to be
invalidated for lacking a manner of new manufacture.

The classic
test for the required degree of disclosure in a prior art reference was
reiterated by the Full Court — would a skilled addressee have been able
to at once perceive, understand, and be able practically to apply the
discovery without the necessity of making further experiments?

Comment

The two grounds argued on
appeal were whether the patent claimed a manner of new manufacture (s 18(1)(a)) and novelty (s 18(1)(b)(i)).

Manner of
new manufacture

To
invalidate a patent on this ground, it is necessary to demonstrate that there
is no invention disclosed on the face of the specification.

Arrow
argued that the patent was invalid on this ground since:

on comparing the description of the
prior art in the patent to the claims, it merely claimed a known drug (alendronate) administered in a known way (oral
alendronate) for a known indication (osteoporosis). The only difference being 70 mg once a week
rather than 10 mg once a day.

on comparing the disclosure in the
prior art documents which were incorporated by reference (Strein and
Goodship), the claims of the patent merely added rest periods (Strein) and
use of alendronate for the treatment of osteoporosis (Goodship). (Although Goodship assumed this in any
event.)

In the
words of the Judges of the Full
Court:

“We see no invention in
asserting that a patient is more likely to comply with a continuous weekly
regime than with an intermittent regime involving periods of weekly
administration and rest periods.”

“The Patent specification
discloses no new substance, no new characteristic of a known substance, no
new use and no new method. There is,
therefore, no manner of new manufacture.”

Novelty

The two key
issues argued in relation to novelty were whether the prior art ‘Lunar
News’ articles had been adequately published and whether there was an
anticipatory degree of disclosure in them.

The Full Court
swiftly dealt with the first argument by the simple expedient of reminding
Counsel of the wording of the Patents Act.

In relation
to the degree of disclosure, Merck argued that the Lunar News articles merely
disclosed a need for further testing rather than a full disclosure of the
claimed invention. However, the Full
Court reiterated the classic test, namely that all that is required is that a
person of ordinary knowledge of the subject would at once perceive,
understand, and be able practically to apply the discovery without the
necessity of making further experiments.

Background

The patent
in suit was AU 741818 for an invention entitled ‘Method for
inhibiting bone resorption’. It
basically claims a method of treating osteoporosis in a human comprising oral
administration of alendronate (Fosamax) at a dosage interval of once per week.

Arrow had originally commenced revocation proceedings under s 138 of the Patents
Act.Merck did not defend the claims of the Patent as granted
but proposed and secured amendments to the claims so that only ten claims
were finally pursued.Arrow asserted
invalidity of seven of those claims, all of which were held invalid at first
instance: Arrow Pharmaceuticals Limited v Merck & Co Inc [2004] FCA
1282
.

I recently came up with the ‘6T’s’™
framework to provide a simple structure for executives to analyze
intellectual property. Here it is
— please let me know what you think.

Intellectual property is all about monopolies. To get a handle on the extent of the
monopoly, and its ramifications, think about:

  1. Type of IP
  2. Time (until expiry)
  3. Territories (in which IP is held/registered)
  4. Terminated (ie the status of
    the IP — is it in force)
  5. Technical Scope of the monopoly
  6. True monopoly? (validity)

You should be able to assess items 1 and 2 yourself. Items 3 and 4 you can (generally) get from
a searching company. Items 5 and 6
will require expert advice from a qualified attorney, and (depending on the
issue at hand) in each jurisdiction of interest to you.

Explanation

This is obviously a simple tool
and there are many, many jurisdiction-specific complexities. It is meant to trigger a useful line of
questions and is not the ‘last word’ in any jurisdiction on the
applicable law.

Type of IP

Although they overlap,
different types of IP cover different things.
In (very) brief form:

Patents cover the practical
implementation of a useful idea.

Trade Marks cover a sign used to
indicate a connection between the originator and their goods or services.

Registered Designs cover the
‘visual look and feel’ as applied to a particular article.

Copyright covers pretty much anything
as soon as it is reduced to (recorded in) material form. (Yes, this is over-simplified.)

Confidential Information covers things
that you can (and do) keep secret.

Don’t forget that they
overlap — so for example the shape of a simple mechanical device could theoretically be protected by all of
the above forms of IP.

Time until
expiry

All of the other aspects of the
monopoly are irrelevant if it has expired.
So, this is an easy first item to check.

Patents — generally 20 years
from filing a ‘full’ application (eg. a
PCT application). (Extensions / SPCs are possible depending on the technology and
context.)

Trade marks — for as long as you
pay maintenance fees

Registered Designs ~ 10 years

Copyright ~ Life of the author plus
‘x’ years (‘x’ depends on the jurisdiction: eg. 50 or 70)

Confidential Information — for
as long as you can keep it secret.

Territories

With a simple search, you can
find out whether registered intellectual property protection has been sought
in countries of interest to you. This
obviously applies to Patents, Trade Marks and Registered Designs, but not
Copyright or Confidential Information.
(In the US
you can check copyright registration at www.copyright.gov — but something may still be
protected by copyright, even if not registered.)

Termination
(status of the IP)

With the
help of a searching company you can obtain a reasonable indication of whether
payment of maintenance fees is up to date in countries of interest to
you. Here are a couple of provisos
(amongst others):

to be sure of status information,
you will need to get local attorneys in each country to confirm (and even
then sometimes they won’t be able to tell); and

some
IP rights can be revived, even after they have lapsed — so you may need
expert advice about this.

Technical
Scope

You will
definitely need an IP expert to assist you with this. To give you a flavour of the analysis, it
is (mostly determined by):

for patents – the words of the
claims;

for trade marks – the degree of
similarity to the registered mark and the classes of goods and services for
which the mark is registered compared to those in which the alleged
infringement has occurred;

for Registered Designs – the
similarity to the Design

for Copyright – whether there has
been copying and the extent of any copying;

for Confidential Information –
whether there was a prior obligation of confidence and whether it was
breached

True
monopoly (validity of the IP Right)

Again, this
is an area where you will need specialist assistance.It is possible to challenge the validity of
most intellectual property rights.This may be via type-specific attacks (such as obviousness for patents
or descriptiveness for trade marks), or based on ownership, or rights to the
IP by the other party.

On the same day as the ‘Barbie’
Decision
(2 June 2006), the Supreme Court of Canada handed down its
decision Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23.

Comment

The Veuve Clicquot decision also deals with famous marks and has similar facts and the same result as the Barbie decision (see my article). This
time, the dispute was in relation to the well known ‘Veuve
Clicquot’
for luxury champagne and ‘Cliquot’ for
mid-priced women’s clothing.

In the Veuve Clicquot case, the Supreme Court also
dismissed an allegation made by Veuve Clicquot Ponsardin (pursuant to section
22 of the Canadian Trade Marks Act
) that the fame of the Veuve Clicquot
mark for up-market luxury goods is such that associating the name Clicquot
with a mid-range women’s clothing store depreciates the value of
the mark.

In essence, the Court held that the Appellant had failed to
establish that the respondents had made use of marks which were sufficiently
similar to evoke in a relevant universe of consumers a mental association of
the two marks that is likely to depreciate the value of the goodwill
attaching to the appellant’s mark.

This was essentially because the respondents never used the
appellant’s registered trade-mark as such and if the casual
consumer does not associate the marks displayed in the respondents’
store with the mark of the venerable champagne maker, there can be no impact
on the goodwill attached to the mark.

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