Case Law

185
APOTEX PTY LTD v SANOFI-AVENTIS AUSTRALIA PTY LTD

and Others (No 2)
5
FEDERAL COURT OF AUSTRALIA
KEANE CJ, BENNETT and YATES JJ
30 April, 1 May, 18 July 2012 — Sydney

10
[2012] FCAFC 102
Patents — Infringement — Threatened infringement — Supply and use of products

— Construction — Whether patent — Invalidity — Novelty — Prior publication —
15 Anticipation — Skilled addressee — Dermatologists — Rheumatologists — Supply
of product — Use of product in accordance with instructions — Staple commercial
product — Whether appellant had reason to believe that product would be used for
infringing purpose — Prior art base — Prior art information — Disclosure —
Whether invention made publicly available in prior art information — Inevitable
result — Manner of manufacture — Whether method of treating human body
20 patentable invention — Appeal — (CTH) Patents Act 1990 ss 7, 13, 18, 40, 105, 117,
138, Sch 1.
Copyright — Infringement — Literary works — Product information statements —

Reproduction of substantial part — Implied licence — Implication by custom —
25 Whether use of product information statements long-standing practice — (CTH)
Copyright Act 1968 ss 36, 44BA, 138 — (CTH) Therapeutic Goods Act 1989 s 25AA.
The second respondent, Sanofi-Aventis Deutschland GmbH, is the registered owner of

a patent relating to the use of a compound, leflunomide, for the treatment of psoriasis.
The first respondent, Sanofi-Aventis Australia Pty Ltd, supplies products containing
30 leflunomide in Australia under the trade names, “Arava” and “Arabloc”. Associated with
these products were product information documents.
The appellant, Apotex Pty Ltd, threatened to supply its own leflunomide products in
Australia for the purpose of treating rheumatoid and psoriatic arthritis. Apotex sought to
register its products on the Australian Register of Therapeutic Goods. As a step in this
35 process, it created a product information document, which it sent to the Therapeutic Goods
Administration. The Sanofi-Aventis respondents claimed that Apotex’s product
information document infringed their copyright in their product information documents
for their own products.
The Sanofi-Aventis respondents commenced proceedings in the Federal Court of
Australia, alleging threatened contravention of the Trade Practices Act 1974 (Cth),
40 threatened patent infringement and copyright infringement. At first instance, Jagot J found
that Apotex threatened to infringe Sanofi-Aventis’ patent and to have infringed copyright
in the works. Her Honour rejected Apotex’s challenge to the validity of the patent, which
was based on novelty and whether the invention was a manner of manufacture.
See Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 3) (2011) 196 FCR 1;
45 281 ALR 705; 92 IPR 320; [2011] FCA 846.
Apotex appealed to the Full Federal Court.
Held, dismissing the appeal:
Per Keane CJ:
(i) It is not appropriate to depart from the settled view that methods of medical
50 treatments of human ailments are patentable. Any such departure could only be effected
by the legislature or by the High Court of Australia: at [26].
186 INTELLECTUAL PROPERTY REPORTS FCAFC
Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1; 122 ALR 141;
28 IPR 383; Bristol-Myers Squibb Company v F H Faulding & Company Ltd
(2000) 97 FCR 524; 170 ALR 439; 46 IPR 553; [2000] FCA 316, applied.
(ii) The trial judge erred in failing to find that the patent was directed to the treatment
of a specific ailment, psoriasis. The method presupposes a deliberate exercise of diagnosis
of psoriasis and prescription of leflunomide by a medial practitioner. The patent, properly
construed, does not extend to the application of leflunomide as a method of treating
psoriatic arthritis merely because that treatment will inevitably have some incidental,
beneficial effect on psoriasis. Therefore, Sanofi-Aventis’ patent would not be infringed by
the application of leflunomide upon prescription of a rheumatologist to prevent or treat
psoriatic arthritis: at [27], [37], [41], [42], [44]–[46].
(iii) Although the claim in the patent was a method for treating psoriasis, Apotex had
reason to believe that its leflunomide product would be used to treat psoriatic arthritis.
Therefore, the supply of Apotex’s generic leflunomide product for the purpose of treating
psoriatic arthritis would infringe Sanofi-Aventis’ patent, pursuant to s 117(2)(c) of the
Patents Act 1990 (Cth): at [55]–[58].
(iv) The patent with the earlier priority date does not disclose any suggestion of the
use of leflunomide to treat skin diseases, such as psoriasis. Therefore, Apotex has not
established that Sanofi-Aventis’ patent lacked novelty: at [64]–[67].
(v) The evidence adduced by Apotex did not establish an industry practice allowing
the use of product information statements without the threat of copyright being enforced.
Therefore, the trial judge was correct to reject Apotex’s claim for an implied licence to the
product information statements: [76], [77], [80], [82].
Per Bennett and Yates JJ:
(vi) Properly construed, the patent protects as an invention a method of deliberately
using leflunomide for the purpose of preventing or treating psoriasis. The governing
characteristic of the patent is the method is directed to the prevention or treatment of
psoriasis. The trial judge erred in construing the patent as extending to the use of
leflunomide, which may have the result of preventing or treating psoriasis, even
accidentally or unintentionally: at [124]–[129].
(vii) It was open to the trial judge to find that the statements of indications for
Apotex’s product contained the instruction to use that product to treat psoriasis. Therefore,
Apotex’s supply of its product was an infringement of Sanofi-Aventis’ patent within the
meaning of s 117(2)(c) of the Patents Act 1990 (Cth): at [143], [145], [146].
(viii) It was open to the trial judge to find that Apotex had reason to believe that a
rheumatologist prescribing Apotex’s product to a patient would in fact put that product to
the use of preventing or treating psoriasis. Therefore, Apotex’s supply of its product was
an infringement of Sanofi-Aventis’ patent within the meaning of s 117(2)(b) of the Patents
Act 1990 (Cth): at [148], [155].
(ix) The trial judge did not err in finding that a skilled addressee would not have
understood another patent with an earlier priority date as disclosing the administration of
leflunomide for the treatment of psoriatic arthritis. Therefore, the invention protected by
Sanofi-Aventis’ patent was not anticipated by the patent with an earlier priority date:
at [178], [180]–[182].
(x) There was no principled reason to depart from the orthodox position that methods
of medical treatment are patentable under Australian law: at [193].
(xi) The trial judge did not err in finding that the evidence as to the practice of using
product information statements was equivocal. Therefore, there was no basis upon which
to interfere with the trial judge’s finding of copyright infringement: at [206].
Appeal
This was an appeal against a decision of a single justice of the Federal Court
of Australia (Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 3)
(2011) 196 FCR 1; 281 ALR 705; 92 IPR 320; [2011] FCA 846) in relation to a
claim for threatened patent infringement and copyright infringement.
96 IPR 185 APOTEX v SANOFI-AVENTIS (No 2) (Keane CJ) 187
D Catterns QC and N Murray instructed by Freehills for the appellant.

R Cobden SC and C Dimitriadis instructed by Jones Day for the respondents.
Keane CJ.
5 Introduction
[1] Sanofi-Aventis Australia Pty Ltd (the first respondent) supplies leflunomide
in Australia under the trade names “Arava” and “Arabloc”. It is also, with
Aventisub II Incorporated (the third respondent), the owner of copyright in
product information documentation (PID) relating to Arava. Sanofi-Aventis
10
Deutschland GmbH (the second respondent) is the registered owner under the
Patents Act 1990 (Cth) (the Act) of Australian Patent No 670,491 entitled
“pharmaceutical for the treatment of skin disorders” (the patent). The priority
date of the patent is 31 March 1993.
15 [2] The patent has a single claim for:
A method of preventing or treating a skin disorder, wherein the skin disorder is
psoriasis, which comprises administering to a recipient an effective amount of
pharmaceutical composition containing as an active ingredient a compound of formula
I or II …
20 [3] The compound of formula I referred to in the patent is leflunomide.
The evidence relevant to the invention of leflunomide and its use in the treatment
of PsA and psoriasis is summarised in the reasons of Bennett and Yates JJ.
[4] In July 2008 Apotex Pty Ltd (the appellant) obtained registration of
Apo-Leflunomide, its generic version of leflunomide, on the Australian Register
25 of Therapeutic Goods (the ARTG) in order to implement its intention to supply
it in Australia for use as a medicament for psoriatic arthritis (PsA) and
rheumatoid arthritis (RA).
[5] In Australia, a patient who presents with psoriasis to a medical practitioner
30 would be referred to a dermatologist for treatment. Leflunomide is not used in
Australia for the treatment of psoriasis alone, and it is not prescribed by
dermatologists for that purpose. It is, however, used in the treatment of RA and
PsA. To that end, its use is prescribed by rheumatologists.
[6] Psoriasis occurs in about 2% of the population. Its occurrence is now known
35 to be associated with the occurrence of RA and PsA. About 25% of cases of
inflammatory arthritis are cases of PsA. Approximately 60–70% of cases of
inflammatory arthritis are cases of RA. A patient diagnosed as suffering from RA
might also have or develop psoriasis; but a person with PsA will almost always
have or develop psoriasis. Accordingly, the existence of psoriasis is a diagnostic
40 indicator of PsA. Importantly, as the primary judge said in her reasons for
judgment (reasons) at [130] “if leflunomide is administered to a patient with PsA,
that administration would be expected to prevent or treat the patient’s psoriasis,
to some extent at least”.
[7] The compound leflunomide was the subject of Australian Patent
45 No 529,341 which became publicly available in 1980 and expired in 2004. In
these proceedings it has been referred to as “the 341 patent”. In the 341 patent
leflunomide was claimed to have, inter alia, antirheumatic and antiphlogistic (that
is anti-inflammatory) effects and to provide a “method for the treatment of
inflammations [and] rheumatic complaints”. The appellant relies upon these
50 disclosures in the 341 patent to challenge the validity of the patent for lack of
novelty.
[8] The respondents brought proceedings in the court claiming that the patent
is valid and that it would be infringed by the appellant’s supply in Australia of its
leflunomide product for the treatment of PsA. The appellant disputed the validity
of the patent on a number of grounds, and, in the alternative, denied that the
patent excluded the appellant from supplying leflunomide for the treatment of
PsA.
[9] The primary judge found in favour of the respondents and ordered, inter
alia, that the appellant be restrained from “supplying or offering to supply [its
generic leflunomide product] … for the treatment of psoriatic arthritis …”
Her Honour proceeded on the footing that use of leflunomide to treat PsA in a
patient would infringe the patent because that use would inevitably treat or
prevent psoriasis in that patient. The patent would be infringed because of the
effect of the drug even though its administration was not prescribed as a method
of treatment of psoriasis.
[10] In this court, the appellant argues that the claim in the patent, on its proper
construction, does not support the order which was made at first instance as a
vindication of the patentee’s rights. That is because it is a method of preventing
or treating only the specified ailment psoriasis. The appellant also argues that the
patent is invalid, principally on the ground of want of novelty.
[11] The respondents also claimed in their proceedings that the appellant had
infringed the first respondent’s copyright in product information documentation
(PID) relating to Arava by making and supplying to the Therapeutic Goods
Administration (the TGA) PID concerning the appellant’s generic leflunomide
product which substantially reproduced the first respondent’s PID relating to
Arava. At trial, the appellant admitted that it had copied the first respondent’s PID
but claimed that it was licensed by it to do so by virtue of widespread industry
practice whereby originators of drugs registered with the TGA licensed the
reproduction of their PID by suppliers who seek subsequently to register generic
equivalents. The primary judge found in favour of the respondents, holding that
the evidence adduced by the appellant was not sufficient to found a claim to a
licence implied by custom and usage.
[12] The primary judge also held that the appellant had contravened the Trade
Practices Act 1974 (Cth) (or its successor the Competition and Consumer Act
2010 (Cth)) by failing to warn medical practitioners, pharmacists or patients that
use of the appellant’s leflunomide product would infringe the patent in suit.
The appellant challenges her Honour’s conclusions in this regard, but accepts that
its challenge will stand or fall with the issues relating to the patent.
[13] The principal issues arising on the appeal from the primary judge are
whether:
(a) methods of medical treatment of human ailments are patentable; and, if
so, whether they are patentable only in so far as the object of the
treatment is an integer of the claimed invention;
(b) the supply of leflunomide for the treatments of PsA infringed the patent
in suit: this issue turns upon the proper construction of the claim in the
patent;
(c) the patent in suit was anticipated by the prior publication of the 341
patent;
(d) the appellant’s reproduction of the first respondent’s PID was authorised
under a licence implied as a matter of fact by trade custom.
[14] It may be noted here that the Generic Medicines Industry Association of
Australia (GMIA) applied for leave to intervene in this appeal to make
submissions that the reproduction by the appellant of the first respondent’s PID
was exempt from infringement pursuant to s 183 of the Copyright Act 1968 (Cth)
5 (Copyright Act) or was pursuant to a licence implied by law. The court dismissed
that application at the outset of the hearing of the appeal for the reasons given on
that occasion: Apotex v Sanofi-Aventis Australia [2012] FCAFC 62.
Patentability
[15] Section 18 of the Act provides relevantly:
10
(1) Subject to subsection (2), an invention is a patentable invention for the purposes
of a standard patent if the invention, so far as claimed in any claim:
(a) is a manner of manufacture within the meaning of s 6 of the Statute of
Monopolies …
…
15 (2) Human beings, and the biological processes for their generation, are not
patentable inventions.
[16] Section 6 of the Statute of Monopolies 1623: 21 Jac 1 c 3 (Statute of
Monopolies) is, in effect, a proviso to the declaration by s 1 of the Statute of
20 Monopolies that:
All Monopolies … heretofore made or graunted, or hereafter to be made or graunted …
of or for the sole buyinge, sellinge, makinge, workinge, or usinge of any thinge within
this Realme … are and shallbe utterlie void and of none effecte.
[17] Section 6 of the Statute of Monopolies provides that no declaration
25 contained in the statute shall extend:
… to any Patents and Graunt of privilege for the tearme of fowerteene yeares or under,
hereafter to be made, of the sole working or makinge of any manner of new
Manufactures within this Realme, to the true and first … Inventors … which others at
the tyme of makinge such … [letters] Patent and Graunt shall not use, soe as alsoe they
30 be not contrary to the Lawe nor mischievous to the State, by raisinge prices of
Commodities at home, or hurt of trade, or generallie inconvenient …
[18] Speaking broadly, then, one may say that a patentable invention is an
invention that is a “manner of new manufacture” so long as it is not “generally
35 inconvenient”.
[19] The patentability of a method or process for the medical treatment of
human ailments had been something of a vexed question in the authorities. These
authorities were canvassed extensively by Gummow J, sitting as a single justice
of the Federal Court in Rescare Ltd v Anaesthetic Supplies Pty Ltd
40 (1992) 111 ALR 205; 25 IPR 119 (Rescare) and in the judgments on appeal in
Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1; 122 ALR 141; 28
IPR 383 (Anaesthetic Supplies). In Rescare and Anaesthetic Supplies, Gummow,
Lockhart, Wilcox JJ were of the view, albeit by way of obiter dicta, that a method
of medical treatment of a human ailment is patentable as a manner of new
45 manufacture which is not generally inconvenienced. Sheppard J in Anaesthetic
Supplies took the contrary view.
[20] In Anaesthetic Supplies Lockhart J, after a comprehensive review of the
authorities in Australia and overseas, concluded at FCR 19; ALR 158–9;
IPR 400:
50 In my opinion, there is no justification in law or in logic to say that simply because on
the one hand substances produce a cosmetic result or a functional result as opposed to
a curative result, one is patentable and the other is not. I see no reason in principle why
a method of treatment of the human body is any less a manner of manufacture than a
method for ridding crops of weeds as in National Research Development Corporation
v Commissioner of Patents (1959) 102 CLR 252; [1960] ALR 114; 1A IPR 63 (NRDC).
Australian courts must now take a realistic view of the matter in the light of current
scientific development and legal process; the law must move with changing needs and
times. I agree with Davison CJ that the test enumerated in the NRDC case is whether
the invention is a proper subject of letters patent according to the principles which have
been developed for the application of s 6 of the Statute of Monopolies.
Although a “mere new use for an old thing” is not patentable, a discovery which itself
involves ingenuity or novelty, that an old substance may be used so as to produce a new
result, may ground a patentable invention. In such a case the old substance is treated as
if it were new, its hitherto unknown or unsuspected potential being revealed by the
discovery which is itself a consequence of scientific ingenuity (Wellcome
Foundation Ltd v Commissioner of Patents [1983] NZLR 385 at 528 (Wellcome)). If a
process which does not produce a new substance but nevertheless results in “a new and
useful effect” so that the new result is “an artificially created state of affairs” providing
economic utility, it may be considered a “manner of new manufacture” within s 6 of the
Statute of Monopolies: NRDC at CLR 265 and 277; ALR 118 and 126; IPR 67 and 75
and Wellcome at 528.
There is no statutory provision in Australia prohibiting the grant of a patent for a
process of medical treatment of a human ailment or disease in a human being. It is
noteworthy that the Parliament had the opportunity to exclude methods of treating the
human body when it enacted the 1990 Act, but the limit of the exclusion was s 18(2),
namely: “human beings, and the biological processes for their generation, are not
patentable inventions”; cf s 4, Patents Act 1977.
I am satisfied that the application of the respondent is a proper subject of letters patent
in accordance with the principles which have been developed for the application of s 6
of the Statute of Monopolies.
[21] In Anaesthetic Supplies, Wilcox J agreed with Lockhart J. Wilcox J went
on to say at 42–3; ALR 181; IPR 423:
The important point, it seems to me, is that the Australian Parliament has not been
persuaded by the policy considerations arguing against patentability. Parliament has
never excluded a method of human medical treatment from patentability or the
definition of “invention”; not even in the recent statute, the Patents Act 1990 (Cth) (the
1990 Act), that revised Australian patent law and made a specific provision (s 18(2))
dealing with the patentability of human beings and the biological processes for their
generation. I appreciate that both this statute and its predecessor, the Patents Act 1952
(Cth) (the 1952 Act), left intact the principles developed by the courts in connection
with the application of s 6 of the Statute of Monopolies 1623 (UK) (21 Jac I c 3): see
the definition of “invention” in both Acts and s 35 of the 1952 Act and s 18(1) of the
1990 Act. However, I believe that, in the face of apparently deliberate decisions by
Parliament not to build this particular exclusion into its legislation, courts should be
hesitant to introduce the exclusion by reference to those very general principles.
[22] The question of patentability of methods of medical treatment of human
ailments was discussed again in Bristol-Myers Squibb Company v F H Faulding
& Company Ltd (2000) 97 FCR 524; 170 ALR 439; 46 IPR 553; [2000] FCA 316
(Bristol-Myers Squibb). The judgments in that case confirmed the view expressed
by Gummow, Lockhart, and Wilcox JJ in Rescare and Anaesthetic Supplies.
[23] Before the primary judge in the present case, the appellant reserved its
right to challenge the correctness of these earlier decisions. In mounting that
challenge in its written submissions in this court, the appellant eschewed reliance
on the ground of “general inconvenience” derived from s 6 of the Statute of
Monopolies. It may be noted that it was on this ground that Black CJ and
Lehane J focused in Bristol-Myers Squibb at [7]–[18] in rejecting the contention
that methods of medical treatment are not patentable. In this court, the appellant
seeks to rely upon the reasoning of Sheppard J in Anaesthetic Supplies at
5 FCR 33–7; ALR 172–6; IPR 413–17 to support the proposition that a method of
treatment of a human illness is not a “manner of new manufacture” within s 6 of
the Statute of Monopolies. The appellant also sought, by a second further
supplementary notice of appeal, leave to argue that methods of medical treatment
for a “second or later medical use” not limited by the purpose of the treatment are
10 not patentable inventions. Because the argument sought to be raised overlaps
with the issue of infringement, I would grant the appellant leave to raise the
argument.
[24] The respondents contend that the appellant’s arguments that the patent
does not claim a manner of new manufacture are not open to the appellant, not
15 only because they were not argued below, but also because they are outside the
appellant’s pleaded case. As to the substance of the arguments, it may also be
noted that in Anaesthetic Supplies, Sheppard J ultimately based his conclusion,
not on the view that a method of treatment of the human body is not a “manner
of new manufacture”, but on the ground of “general inconvenience”: see
20 Anaesthetic Supplies at FCR 40–1; ALR 147; IPR 388.
[25] It is not necessary to reach a concluded view on the respondents’
contentions because of the view I take of the proper construction of the claim in
the patent. Further, in oral argument, the appellant did not seek to press, in this
court, the contention that methods of treatment of human ailments were not
25
patentable. That was, in my respectful opinion, an entirely proper course. Little
purpose would be served by this court’s canvassing again the authorities so
comprehensively reviewed in the judgments in Rescare, Anaesthetic Supplies and
Bristol-Myers Squibb.
30 [26] Having regard to the passage of time since the decision in Bristol-Myers
Squibb, and the ample opportunity afforded to the parliament on the occasions
when it has amended the Act to legislate to deny that methods of medical
treatment of human ailments are patentable, I consider that this court could not
now accede to the appellant’s invitation to depart from that view which prevailed
35 in Anaesthetic Supplies and Bristol-Myers Squibb. There is now even more force
in the views expressed by Lockhart and Wilcox JJ in Anaesthetic Supplies that
one cannot attribute to the parliament the intention that the area of
non-patentability of inventions associated with the preservation of the health of
human beings is wider than the express statement of non-patentability in relation
40 to “human beings, and the biological processes for their generation”, in s 18(2)
of the Act. The competing considerations of policy which bear on the question
whether or not that expansion should occur are very much matters for
determination by the legislature rather than the judiciary below the level of the
High Court of Australia.
45 [27] The appellant did, however, press an argument to the effect that a claim
that is said to encompass the accidental or incidental treatment of a disease, when
the claim does not explicitly claim to be a method of treatment of that disease,
is not a method of manufacture in terms of s 18(1)(a) of the Act. This argument
is associated with the issue as to the proper construction of the claim in the patent
50 in the present case. In my respectful opinion it is not necessary to deal with the
patentability issue because I have come to the conclusion that the claim in the
patent, properly construed, does not extend to the application of leflunomide as

a method of treating PsA merely because that treatment will inevitably have some
incidental beneficial effect on psoriasis.
[28] The primary judge took a different view of the proper construction of the
claim, concluding that the invention claimed in the patent is used where
leflunomide is administered by a medical practitioner with the result that
psoriasis is in fact treated, even though the product is administered as a method
of treating PsA. Her Honour held that the use of leflunomide by a medical
practitioner to treat or prevent PsA would infringe the patent because that use
would necessarily have the effect of also treating or preventing psoriasis.
The primary judge’s conclusion in this regard was relevant to, but not decisive of,
the issue of infringement by the appellant as a would-be supplier of leflunomide.
The arguments which bear on the construction of the claim are conveniently
discussed together with the issue of infringement. To that issue I now turn.
Infringement
[29] At trial the parties advanced a number of possible constructions of the
claim in the patent. The primary judge summarised these at reasons [132]:
[132] The potential constructions of claim 1 included the following:
(1) A method comprising the administration to a recipient of a pharmaceutical
composition [containing leflunomide] by a medical practitioner who intends,
by the administration, to prevent or treat psoriasis in the recipient.
(2) A method comprising the administration by a medical practitioner to a
recipient of a pharmaceutical composition [containing leflunomide] where the
“objective purpose” of the administration is to prevent or treat psoriasis in the
recipient.
recipient of a pharmaceutical composition [containing leflunomide] to
prevent or treat the recipient’s psoriatic arthritis by which, incidentally,
psoriasis will also be prevented or treated in the recipient.
recipient of a pharmaceutical composition [containing leflunomide] where the
effect of the administration in fact is to prevent or treat the recipient’s
psoriasis.
[30] The appellant’s preferred construction of the claim was construction (2).
The respondents’ preferred construction was construction (4).
The primary judge’s conclusions
[31] The primary judge summarised the issue of construction of the patent at
reasons [151]–[152]:
[151] … The essence of the dispute between the parties insofar as it related to the
construction of the patent is ultimately whether the claim for a “method of preventing
or treating a skin disorder, wherein the skin disorder is psoriasis” by administration of
a compound should be construed as involving the purpose, object or aim of the
administration (whether that purpose, object or aim be determined subjectively or
objectively), or the effect in fact of the administration.
[152] … Apotex’s … [preferred construction] … depends on an objective determination
of the treating physician’s purpose, object or aim in administering the compound. It asks
whether the purpose, object or aim of the treating physician’s administration of the
compound can be objectively characterised as preventing or treating psoriasis … The
concept of the “incidental” treatment of psoriasis assumes the existence of another
direct or immediate purpose of treatment. By contrast … Sanofi-Aventis’s construction

asks whether the administration will in fact have the effect of preventing or treating
psoriasis …
[32] In resolving the issue of construction in favour of the respondents, her

5 Honour said at reasons [154]–[155]:
[154] … The difficulty for Apotex’s proffered constructions is that the claim itself says
nothing about the purpose of the administration of the compound. The method claimed
is a method of preventing or treating the skin disorder psoriasis by administering an
10 effective amount of the compound. The method is described and defined by the result:
the prevention or treatment of psoriasis. If there were any ambiguity in the concepts of
preventing or treating psoriasis, the definition of those terms in the specification
confirms that they mean achieving a particular biological result or effect in the recipient
of the administration of the leflunomide. According to the specification, “prevention” is
the prophylactic prevention of psoriasis in a susceptible mammal and “treatment” is
15 arresting the development and retarding the progression of psoriasis in a susceptible
mammal. As Apotex submitted, the particular disease, psoriasis, is an essential integer
of the method claimed. But its essentiality operates in terms of result or effect (the fact
of prevention or treatment of psoriasis) and not, as Apotex said, in terms of the purpose
of the administration.
20 [155] Accordingly, the claimed method is used where the compound (leflunomide) is
administered to a recipient in an effective amount so that the recipient’s psoriasis is in
fact prevented or treated. The validity of the patent and, if valid, its infringement are to
be determined on the basis of this construction.
[33] Earlier, her Honour had said at reasons [130]:
25
[130] Leflunomide is a drug used in the treatment of RA and PsA and, for that purpose,
is prescribed by rheumatologists. Leflunomide is not used in Australia for the treatment
of psoriasis alone and is not prescribed by dermatologists for that purpose. However, if
leflunomide is administered to a patient with PsA, that administration would be
expected also to prevent or treat the patient’s psoriasis, to some extent at least.
30
The arguments of the parties on appeal
[34] The appellant argues that the invention claimed by the patent is the method
or process of using leflunomide to achieve the prevention or treatment of the
ailment psoriasis. In developing this argument, the appellant refers to the purpose
35
of the administration of the drug. The appellant argues that this “purpose” is to
be determined objectively.
[35] The appellant argues that the primary judge’s findings at reasons [130] that
the purpose of a rheumatologist prescribing the use of leflunomide is to treat PsA,
40 and that leflunomide is not prescribed by dermatologists for the purpose of
treating psoriasis, serve to demonstrate that it is reasonable and necessary to
speak of the purpose for which a drug is prescribed for use.
[36] The respondent submits that the manner in which the appellant seeks to
support its construction (by referring to the dermatologist’s diagnosis and
45 prescription) postulates an inquiry into the purpose of the user of an invention
which is alien to patent law. The appellant’s construction is also said to disregard
the definitions of treating and preventing contained in the specification which
confirm that the claim is directed to the achievement of a biological result.
Further, the appellant’s construction is said to import words not present in the
50 claim, in that the claim does not state that the process is dependent upon a
doctor’s diagnosis.
Consideration
[37] In my respectful opinion, the construction of the claim which was
preferred by the primary judge fails to recognise that the claim is for a method
of treating or preventing a specific ailment. The claim in the patent is not for the
use of leflunomide in a manner that treats or prevents psoriasis. The claim is not
for the discovery of whatever happens in the human body after the drug is
administered. Rather, the claim is for a method of preventing or treating psoriasis.
The claim is for a method of treatment of a human ailment. That method
necessarily presupposes a deliberate exercise of diagnosis and prescription by a
medical practitioner. The treatment or prevention of psoriasis by the use of the
claimed method presupposes a diagnosis of psoriasis and the consequent
prescription of the application of leflunomide. That this is so is hardly
controversial: as is apparent from all the potential constructions of the patent
advanced by the parties, the claim in the patent involves the application of
leflunomide by a medical practitioner.
[38] Lord Hoffman observed in Merrell Dow Pharmaceuticals Inc v HN Norton
& Company Ltd (1995) 33 IPR 1 at 14; [1996] RPC 76 at 92 (Merrell Dow) that,
under the “traditional United Kingdom doctrine of infringement … liability for
infringement is … absolute. It depends upon whether the act in question falls
within the claims [in the patent] and pays no attention to the alleged infringer’s
state of mind”. His Lordship went on to note that this traditional doctrine may be
“difficult to apply to a patent for the use of a known substance in a known way
for a new purpose”. His Lordship articulated this difficulty in the question:
“How does one tell whether the person putting the additive into his engine is
legitimately using it to inhibit rust or infringing by using it to reduce friction?”
[39] The first point to be made in relation to Lord Hoffman’s observations is
that the difficulty identified by his Honour arises because it is now accepted that
methods or processes which do not produce a vendible product may nevertheless
be patentable: see National Research Development Corporation v Commissioner
of Patents (1959) 102 CLR 252 at 268–77; [1960] ALR 114 at 120–6; 1A IPR 63
at 69–75; Joos v Commissioner of Patents (1972) 126 CLR 611 at 616–17;
[1972–73] ALR 831 at 833; 1A IPR 172 at 174.
[40] A claim for a method or process used to achieve a specific result is
intelligible only as a teleological proposition. In the case of the patent in question
the identification of the object of the application of the method depends on the
diagnosis of a medical practitioner. In the present case, of course, no need arises
to look into the mind of “the alleged infringer”. All four potential constructions
of the claim identified by the parties acknowledge that the claim is for a method
which comprises the administration of leflunomide prescribed by a medical
practitioner to treat a specific human ailment. Even construction (4), the
construction ultimately adopted by the primary judge, proceeds on the footing
that the administration of leflunomide is a step in a clinical process of diagnosis
and prescription by a medical practitioner. It is natural to construe the claim in
the patent as a claim to a method of treatment the object of which is determined
by the diagnosis and prescription of the medical practitioner whose area of
practice is ailments of the skin. To return to Lord Hoffman’s question, one can
readily tell that the person putting the additive into his engine is using it to inhibit
rust, rather than to reduce friction, if the person controlling the process is a
specialist in rust prevention.
[41] The construction of the claim which I prefer is, I think, more in harmony
with the philosophy of the Act than the construction urged by the respondents.
The Act does not permit the monopolisation of something which is a discovery
but not an invention. An invention which consists of a method or process may
5 attract the exclusive rights conferred by the Act in respect of a method of new
manufacture only if it involves the suggestion of an act which results in a
“new result or a new process”. In Reynolds v Herbert Smith & Co Ltd (1902) 20
RPC 123 at 126, Buckley J said:
Discovery adds to the amount of human knowledge, but it does so only … by disclosing
10 something … Invention also adds to human knowledge, but not merely by disclosing
something. Invention necessarily involves also the suggestion of an act to be done, and
it must be an act which results in a new product, or a new result, or a new process, or
a new combination for producing an old product or an old result.
[42] The respondents’ claim to exclusive use of the process of prevention or
15 treatment of psoriasis by the application of leflunomide necessarily depends on
the proposition that the application of leflunomide produces a “new result”,
namely the treatment or prevention of psoriasis. It is the use of leflunomide as an
agent for the prevention or treatment of psoriasis that is new. If one were to
construe the claim in the patent as covering the effective prevention or treatment
20 of inflammatory diseases of the joints, the element of novelty would be
compromised. Further, the exclusive right to the use of leflunomide granted by
the 341 patent would be resurrected after the expiration of the term of that patent.
[43] Section 13(1) of the Act is a key provision of the Act. It provides that
“a patent gives the patentee the exclusive rights, during the term of the patent, to
25
exploit the invention”. Section 13 embodies the fundamental proposition that the
right conferred by a patent is a right to exclude all others from trade in the
patented product or process. By virtue of the definition of “exploit” in Sch 1 of
the Act, the exploitation of an invention includes, in the case of a patented
method or process, the use of the method or process. The claim in a patent serves
30
to delimit the monopoly claimed by the patentee: British United Shoe Machinery
Co Ltd v A Fussell & Sons Ltd (1908) 25 RPC 631 at 650.
[44] The exclusion of a patentee’s competitor from trade is commensurate with
the right of exploitation of an invention enjoyed by the patentee. The extent of the
35 patentee’s right — and its competitor’s correlative exclusion from the relevant
trade — is marked out by the novelty which gives the invention its potentiality.
The primary judge’s construction of the claim would allow the respondents to
exclude their competitors from an area of trade which does not involve
exploitation of the novelty claimed by the patent.
40 [45] Here the monopoly claimed by the patent to the use of leflunomide is a
process of treatment involving a deliberate process of diagnosis and prescription
directed to the treatment or prevention of psoriasis. Given that the policy of
patent law is to reward invention, not serendipity, one should be slow to construe
a patent to a method or process as excluding competitors of the patentee from an
45 area of trade by reason of consequences which the patent does not claim.
[46] For these reasons, I consider that the patent, on its true construction, would
not be infringed by the application of leflunomide upon the prescription of a
rheumatologist to prevent or treat PsA.
[47] It is necessary now to turn to s 117 of the Act in order to determine
50 whether that section operates to render the appellant liable for infringement,
notwithstanding that construction of the patent.
[48] Section 117 of the Act provides:

(1) If the use of a product by a person would infringe a patent, the supply of that
product by one person to another is an infringement of the patent by the supplier unless
the supplier is the patentee or licensee of the patent.
(2) A reference in subsection (1) to the use of a product by a person is a reference to:
(a) if the product is capable of only one reasonable use, having regard to its
nature or design — that use; or
(b) if the product is not a staple commercial product — any use of the product,
if the supplier had reason to believe that the person would put it to that use;
or
(c) in any case — the use of the product in accordance with any instructions for
the use of the product, or any inducement to use the product, given to the
person by the supplier or contained in an advertisement published by the
supplier or contained in an advertisement published by or with the authority
of the supplier.
[49] Section 117 may be said to have been designed to capture those who
supply a product to persons whose use of a product infringes a patent as
infringers themselves. The operative provision of s 117 is s 117(1). The extent of
the operation of s 117(1) is informed by the terms of s 117(2). In Northern
Territory v Collins (2008) 235 CLR 619; 249 ALR 621; 78 IPR 225;
[2008] HCA 49 (Collins) at [20]–[21] Gummow A-CJ and Kirby J said of s 117
of the Act:
[20] … Subject to the Act, a patent gives the patentee the exclusive rights to exploit the
invention for the term of the patent (s 13). Infringement proceedings may be brought to
enforce those rights (s 120) and relief granted by way of injunction, damages or an
account of profits (s 122). While the Act establishes some exceptions to infringement
(ss 118–119A) and offers protection for innocent infringement (s 123), no definition is
given for what constitutes an “infringement” (14). The statutory scheme instead fixes
attention on the exclusive rights given by the patent, as illuminated by the definition of
“exploit” found in the dictionary to the Act.
[21] Section 117 does not itself speak to the exclusive rights given by the patent. Rather,
the provision identifies conduct and prescribes conditions in which that conduct will be
an infringement of the patent. The conduct is the “supply of [a] product” by one person
to another. The critical condition for the imposition of liability for infringement is that
which is stated first. This is that “the use of [the] product” by the person to whom it is
supplied “would infringe [the] patent” (s 117(1)). As the reasons of Hayne J
demonstrate, this is informed by the application of s 117(2) and consideration of the
exclusive rights given by the patent.
[50] In Collins at [34]–[39] Hayne J explained the operation of s 117 of the Act:
[34] Section 117(1) is engaged where there is “the supply of [a] product by one person
to another”. At the relevant time, the dictionary in Sch 1 to the Act provided that
“supply” includes “supply by way of sale, exchange, lease, hire or hire-purchase”.
The dictionary did not (and does not) contain any definition of “product” but the
dictionary’s treatment of the word “exploit” distinguishes between “where the invention
is a product” and “where the invention is a method or process”. Read as a whole, s 117
can be seen to proceed on the footing that the word “product” has its ordinary meaning
and is not confined to a patented product or a product that is itself the result of applying
a patented method or process.
[35] Although s 117(1) is engaged only where there is “the supply of [a] product by one
person to another”, s 117 is directed to an identified sub-set of such transactions. That
sub-set is identified first by the introductory words of s 117(1) — “[i]f the use of a
product [the product that is supplied] by a person would infringe a patent” — and
second by the amplification in s 117(2) of what is meant by “the use of a product by a

person”. At the risk of undue abbreviation the amplification provided by s 117(2) can
be described as inviting attention, in the particular cases identified in each paragraph of
the sub-section, to “only use” (s 117(2)(a)), “known use” (s 117(2)(b)) and “instructed
5 use” (s 117(2)(c)). In many, perhaps most, cases a convenient point at which to begin
consideration of an issue about the application of s 117(1) will be to examine what is
said to be the use of the product that is alleged to engage the provision. It is that use
which must be identified as the use which would infringe the patent because the hinge
about which s 117 turns is its introductory words: “[i]f the use of a product by a person
would infringe a patent.”
10 [36] When the question is approached in that way, it will be observed that to ask
whether supply of an input for a patented method or process (or resulting product) is
capable of attracting s 117(1) may direct attention away from the relevant statutory
questions. Those questions are: is there a supply of a product; what is the use of the
product (as use is elucidated in s 117(2)); and does that use infringe the patent?
15 [37] The answer that is to be given to the last of the three questions just identified will,
of course, turn upon whether the use in question contravenes the patentee’s exclusive
rights under s 13 of the Act, during the term of the patent, to exploit the invention and
to authorise another person to exploit the invention. And that requires close attention to
what is meant by “exploit”. In particular, it requires close attention to what is said in the
20 dictionary in Sch 1 to the Act about “exploit”, namely that:
“exploit, in relation to an invention, includes:
(a) where the invention is a product — make, hire, sell or otherwise dispose of
the product, offer to make, sell, hire or otherwise dispose of it, use or
import it, or keep it for the purpose of doing any of those things; or
25 (b) where the invention is a method or process — use the method or process
or do any act mentioned in paragraph (a) in respect of a product resulting
from such use.”
[38] The question which the appellant submitted arose in this matter — is the supply of
an input for a patented method or process (or resulting product) capable of attracting the
30 operation of s 117(1) of the Act? — was framed as it was in the expectation that it could
and should be answered in the negative. When the questions presented by s 117 are
identified in the manner set out earlier in these reasons it is apparent that a variety of
quite different cases may arise for consideration under s 117. In particular, the different
kinds of use that are identified in s 117(2) may present radically different issues about
35 the relationship between the relevant use and the patentee’s exclusive rights to exploit
the relevant invention. That is reason enough not to attempt some singular answer to a
general question about when s 117 may be engaged.
[39] It is also reason enough to doubt that differences which may be identified in what
was said by Gummow J in Rescare and Black CJ and Lehane J in Bristol-Myers Squibb
40 are usefully expressed in terms of the kind that the appellant’s first question employed.
Rather, questions about the application of s 117 must be approached with a close focus
upon the relevant statutory language. That will require identification of the relevant use
of the product and the relevant exclusive rights of the patentee. It is not useful, and may
be misleading, to proceed by first seeking to establish a singular and all-embracing
explanation of the operation of s 117 by excluding certain types of patent or certain
45 types of product from any possible operation of the section. [Footnotes omitted.]
[51] The primary judge concluded at reasons [264] that a medical practitioner
who prescribes the appellant’s generic leflunomide product as a treatment for
PsA will directly infringe the patent. That conclusion reflected her Honour’s
50 construction of the claim made by the patent. As has been seen, I do not agree
with her Honour’s construction of the claim in the patent. The primary judge also
made findings of fact in relation to s 117(2) of the Act which do not depend on
the correctness of her Honour’s construction of the claim in the patent. To those
findings I now turn.
[52] In relation to s 117(2)(c) of the Act, the primary judge considered the terms
of the appellant’s PID relating to its generic leflunomide product. Her Honour
referred to evidence of the knowledge of the link between psoriasis and PsA and
their treatment or prevention by leflunomide. Her Honour also referred to the
specific statement in the appellant’s PID that its generic leflunomide product “is
not indicated for the treatment of psoriasis that is not associated with
manifestations of arthritic disease”. Her Honour concluded relevantly at reasons
[262]:
[262] … The evidence establishes that psoriasis is a diagnostic criterion of PsA.
It further establishes that nearly every person with PsA has or will develop psoriasis.
The evidence thus establishes that the administration of leflunomide to a person with
PsA will treat that person’s PsA and psoriasis (if they have a concurrent case of
psoriasis) or treat that person’s PsA and prevent psoriasis (if the person otherwise would
have developed psoriasis). Apotex’s approved PI, on any view, instructs a medical
practitioner (namely, a rheumatologist) to use Apotex’s leflunomide product for the
treatment of PsA. As almost all people with PsA have or will develop psoriasis,
psoriasis being one of the diagnostic criteria of PsA, it is apparent that the approved
Apotex PI instructs rheumatologists to use leflunomide to treat psoriasis irrespective of
the phrase “Apo-Leflunomide is not indicated for the treatment of psoriasis that is not
associated with manifestations of arthritic disease”. It does so by reason of the
indication for PsA against the background of the undisputed evidence about the
relationship between PsA and psoriasis … I am satisfied in any event that the meaning
which Sanofi-Aventis attributes to this phrase is unavoidable. In the context of an
indication for PsA, the statement that “Apo-Leflunomide is not indicated for the
treatment of psoriasis that is not associated with manifestations of arthritic disease” can
mean only that Apo-Leflunomide is indicated for the treatment of psoriasis that is
associated with manifestations of arthritic disease. Apotex’s argument to the contrary is
not persuasive. It contradicts the ordinary meaning of the indication and is inconsistent
with the undisputed medical evidence about the relationship between PsA and psoriasis.
It follows from this analysis that the approved Apotex PI gives instructions for the use
of Apotex’s leflunomide product for the treatment of psoriasis within the meaning of
s 117(2)(c) of the Patents Act.
[53] In relation to s 117(2)(b) of the Act, the primary judge said at reasons
[263]:
[263] It also follows from this analysis that Apotex has reason to believe that the person
to whom the product is supplied (by inference, a rheumatologist prescribing the product
to a patient) will put Apotex’s leflunomide product to use for the treatment of psoriasis,
and so that the condition in s 117(2)(b) of the Patents Act is satisfied (if the product is
not a staple commercial product, an issue in dispute between the parties dealt with
below). In this regard it is apparent from the findings and analysis above that is not the
case that Apotex’s leflunomide product merely might treat psoriasis in a percentage of
patients with PsA. The evidence of Dr Shumack, Professor Smith and Professor Brooks
cannot be so characterised. On their evidence, the administration of an effective amount
of leflunomide to a person with PsA will in fact treat or prevent psoriasis, albeit with
variable degrees of success depending on the individual patient. From this it follows
that Apotex has reason to believe that Apotex’s leflunomide product will be used in a
method of preventing or treating psoriasis as claimed in claim 1 of the patent.
[54] By reason of the primary judge’s findings of fact in relation to s 117(2)(b)

and (c) of the Act, one must conclude that the supply by the appellant of its
generic leflunomide product for the use by rheumatologists in the treatment of
PsA would infringe the patent. The appellant’s PID instructed the use of
5 leflunomide in the treatment of psoriasis which is associated with PsA, as will
commonly be the case. On that basis, s 117(2)(c) is engaged. The appellant’s
instruction also means, for the purposes of s 117(2)(b), that the appellant had
ample reason to believe that medical practitioners would put leflunomide to use
as a method of treating psoriasis which is associated with PsA.
10
[55] The appellant argues that the primary judge misread the following
indication in the appellant’s PID for active psoriatic arthritis: “Apo-Leflunomide
is not indicated for the treatment of arthritis that is not associated with
manifestations of arthritic disease”, in that her Honour read this to mean that
15 “Apo-Leflunomide is indicated for the treatment of psoriasis that is associated
with manifestations of arthritic disease”. But her Honour’s reading of the
appellant’s PID was not the only reason for the findings of fact at reasons [262]
and [263]. And, in any event, it is enough that the appellant’s PID instructed the
use by a rheumatologist of the product to treat psoriasis in combination with PsA
20 for the patent to have been infringed. Use of the product in accordance with that
instruction would mean that the product is being used to prevent or treat
concurrent cases of psoriasis. That would be so even if the sole object of the
rheumatologist’s treatment was PsA. Professor Brooks gave evidence to the
effect that in administering leflunomide in the context of the appellant’s PID, he
25 would be treating both psoriasis and PsA.
[56] It may be noted here that the appellant did not advance, and indeed
expressly disclaimed (apparently in deference to the passage from the reasons of
Hayne J in Collins set out above), an argument that s 117 of the Act has no
relevant operation in the present case because the application of leflunomide by
30 a medical practitioner as a medicament for the treatment of PsA is not “the use
of a product … [that] would infringe a patent”. This argument would be that the
invention the subject of the patent is not the product leflunomide; and the medical
practitioner applying it as a method of treating PsA is not doing any act
mentioned in either limb of the definition of “exploit” in the Act. In particular, the
35 medical practitioner would neither be using a product (as opposed to a method)
or doing any act in respect of a product “resulting from” the use of the patented
method. One attraction of this argument would be that it prevents the effective
renewal of the expired patent for the product leflunomide. Because this argument
was disclaimed by the appellant, it is not necessary or appropriate for this court
40 to address it.
[57] In summary, although the claim in the patent is for a method of treating
psoriasis, the appellant had reason to believe that its leflunomide product would
be used to treat or prevent PsA. Further, the appellant’s PID did instruct that its
Apo-Leflunomide be used in the treatment of psoriasis (at least where it is
45 associated with PsA) as contemplated by s 117(2)(c).
[58] Accordingly, I conclude that the supply of the appellant’s generic
leflunomide product for the purpose of treating PsA would infringe the patent.
Novelty
50
[59] Section 18(1)(b)(i) of the Act provides relevantly:
… [A]n invention is a patentable invention … if the invention, so far as claimed in any

claim … when compared with the prior art base as it existed before the priority date of
that claim is novel …
[60] Section 7 of the Act explains the concept of novelty. It provides relevantly:
(1) For the purpose of this Act, an invention is to be taken to be novel when compared
with the prior art base unless it is not novel in the light of any one of the following kinds
of information, each of which must be considered separately:
(a) prior art information (other than that mentioned in paragraph (c)) made
publicly available in a single document or through doing a single act;
(b) prior art information (other than that mentioned in paragraph (c)) made
publicly available in 2 or more documents, or through doing 2 or more related
acts, if the relationship between the documents or acts is such that a person
skilled in the relevant art would treat them as a single source of that
information;
(c) prior art information contained in a single specification of the kind mentioned
in subpara (b)(ii) of the definition of “prior art base” in Schedule 1.
[61] In the appeal to this court, the only prior art information on which the
appellant relied was that contained in the 341 patent. Claim 4 of the 341 patent
was for a “Method for the treatment of inflammation rheumatic complaints or
multiple sclerosis by administering to the patient an effective amount of the
compound …”.
[62] The question is whether the 341 patent disclosed the invention claimed by
the patent to a skilled addressee: Bristol-Myers Squibb at [71]–[72].
[63] The details of the disclosures made by the 341 patent are set out in the
reasons of Bennett and Yates JJ. The primary judge summarised the evidence of
putative skilled addressees at reasons [209]–[211]:
[209] Dr Shumack’s evidence confirmed that the skilled addressee of the 341 patent
would have been a rheumatologist rather than a dermatologist. Dr Shumack, a
dermatologist, said that the animal models in the 341 patent all concerned immune
processes. On his reading of the 341 patent it related to a compound, leflunomide, which
might be useful in treating arthritic and inflammatory conditions and multiple sclerosis.
As the 341 patent said nothing about proliferative processes, Dr Shumack would not
have considered the 341 patent to be relevant to psoriasis. As noted, in 1993 and for a
number of years thereafter, psoriasis was generally understood to be a proliferative
disease and not an inflammatory or immune-mediated response. It follows that
Dr Shumack’s evidence is not that of the skilled addressee.
[210] Professors Smith and Brooks are both rheumatologists. Contrary to Apotex’s
submissions, Professor Smith did not read the 341 patent as encompassing PsA within
the general terms “rheumatic illnesses” and “rheumatic complaints”. Rather, it is
apparent from his evidence as a whole that Professor Smith considered those terms to
be so broad as to be nearly meaningless if read in isolation. Professor Smith, however,
did not do so. As a skilled addressee he had regard to the animal models in order to give
meaning to the very general references in the 341 patent to “rheumatic illnesses” and
“rheumatic complaints”. Professor Smith was adamant that none of the animal models
was relevant to PsA. The models were relevant to RA and, in the case of the AE model,
multiple sclerosis. On this basis Professor Smith read the 341 patent as dealing with
potential treatments for RA and multiple sclerosis. No material was put to
Professor Smith in cross-examination suggesting that his view about the animal models
was wrong.
[211] Professor Brooks had a different view. As noted, Professor Brooks had used
animal models in his own research. He considered the AA model to be relevant to the
seronegative arthropathies, including PsA, because of his own research using such
models. In his words, however, rheumatologists generally “don’t know too much about
animal models”. In common with Professor Smith, Professor Brooks considered various
references in the 341 patent to be very broad or, as he put it, capable of including “all
of the 150 or so types of arthritic disease”. However, in light of his view of the animal
5 models Professor Brooks concluded that the 341 patent was concerned with
inflammatory rheumatic diseases including RA, PsA and other seronegative
arthropathies. Professor Brooks thus described claim 4 of the 341 patent as involving
a method of treatment of inflammatory rheumatic diseases including RA, PsA and other
seronegative arthropathies. Nevertheless, Professor Brooks acknowledged that animal
models rarely mimic human disease. Accordingly, the ability to extrapolate from them
10 is limited to an indication that the treatment may work in the relevant human disease.
Substantial further work would be required to determine whether leflunomide would be
safe or effective to treat any disease in humans.
[64] The appellant does not accept that her Honour’s understanding of the
15 evidence of Professor Smith is correct. The appellant argues that passages in the
evidence of Professor Smith suggest that he would have read the 341 patent as
disclosing a potential treatment for PsA. In my view, it is not necessary to resolve
this argument. That is because, on what I regard as the proper construction of the
claim in the patent, the appellant’s “reverse infringement” argument, based on the
20 assertion that the 341 patent disclosed the use of leflunomide as a treatment for
PsA, is irrelevant. The issue of novelty is concluded against the appellant because
the 341 patent does not disclose any suggestion of the use of leflunomide to treat
skin diseases such as psoriasis.
[65] The 341 patent did not disclose — indeed, it did not even hint at — a
25
method of treating psoriasis by the application of leflunomide. The specification
in the 341 patent, after referring to experiments involving the application of
leflunomide to non-human animals, asserted that the pattern of action of
leflunomide, was more advantageous in the inhibition of immunopathological
30 processes than other antiphlogistic agents, opened up “the possibility of tackling,
by medication, rheumatic illnesses in man by more nearly treating the cause …”.
[66] If one takes the assertions in the 341 patent at their highest for the
appellant, the 341 patent claimed that leflunomide, by virtue of its antirheumatic
and antiphlogistic effects, provides “a method for the treatment of inflammations
35 [and] rheumatic complaints”. These assertions of the prospective benefit of the
use of leflunomide in “tackling rheumatic illness in man” fall far short of making
a disclosure equal, for the purposes of practical utility, with the disclosure of the
invention by the patent in suit. These assertions simply do not disclose a method
of treatment of psoriasis, an ailment, not of the joints, but of the skin.
40
[67] Accordingly, I conclude that the appellant has failed to show that the
invention claimed by the patent was not novel.
The copyright claim: implied licence

45 [68] Section 36(1) of the Copyright Act 1968 (Cth) provides that the copyright
in a literary work is infringed by a person who “without the licence of the owner
of the copyright” does or authorises the doing of an act comprised in the
copyright.
[69] The appellant adduced evidence of a long-standing and widespread
50 practice among pharmaceutical companies in Australia whereby suppliers
bringing to the market a second or later brand of a medicine registered by the
TGA on the ARTG copied the originator’s PID in respect of the medicine,
without provoking an objection from the originator.
[70] The appellant argues that the uncontradicted evidence established that:
(a) Generic pharmaceutical companies in Australia generally copy
substantial parts of the originator’s PID for the relevant drug and there
is a general understanding in the industry that this occurs.
(b) The TGA has a long standing practice of approving PID submitted by
generic companies that copy substantial portions of the corresponding
PID.
(c) The MIMS Annual contains the full text of the originator’s PID under
the originator brand for a particular drug and, under the generic brands,
invited the reader to “see other brands/presentations” of the drug.
(d) Generic companies generally do not file safety and efficacy data in
support of regulatory approval for a drug already listed on the ARTG.
They file bioequivalence data to demonstrate that the drug for which
approval is sought is relevantly the same as the drug already approved.
There is a general understanding in the industry of this practice.
(e) The TGA may require a generic pharmaceutical company to depart from
the general practice and file safety and/or efficacy data if it submits PID
different in content to that of the already registered brand.
(f) For each of the respondents’ products in Australia for which there is at
least one generic competitor (13 drugs), the generic PID is substantially
identical to the respondents’ PID. There was no evidence of any
assertion by the Respondents that the conduct of these generic
companies was an infringement of copyright.
(g) Of the top 10 drugs (by value) on the PBS sold in Australia for which
there is generic competition, in each case the generic brands have PID
substantially identical to the originator brand.
(h) The first respondent itself carries on a business called Winthrop
Pharmaceuticals, a generic brand. The PID for each Winthrop brand on
the PBS (where the originator is not Sanofi-Aventis) is substantially
identical to the originator’s PID. The respondents did not point to any
express licence from those originators.
(i) The generic brands of each of the seven drugs have substantially
identical PID to the originator brand. Of these drugs, Escitalopram,
Perindopril, Paroxetine, Fexofenadine and Gemcitabine were or are the
subject of patent litigation and none of them involve an assertion that the
generic PID infringed the originator’s copyright. Cimetidine was the
subject of litigation in the court over whether the TGA’s registration of
Alphapharm’s generic brand was lawful. There was no assertion of
copyright infringement.
[71] The appellant complains that this evidence was uncontradicted and further
that if it were truly “equivocal”, as described by the primary judge at reasons
[376], her Honour should have concluded that the respondents’ infringement case
failed because they failed to discharge the onus which they bore of negativing a
licence in favour of the appellant.
[72] It may be said immediately that her Honour was fully alert to the points
that the respondent did not call any employee to say that the respondents had not
granted any licence to the appellant or were unaware of the practice, and that the
evidence adduced by the appellant was uncontradicted. Her Honour noted at
reasons [364]–[365]:
[364] Apotex stressed that Sanofi-Aventis filed no evidence in reply to the affidavit of
Mr McVicar. Further, Sanofi-Aventis did not call any witness who was in a position to
prove that the practice of copying PIs was other than universal. Dr Bruand, according
to Apotex, “could offer only some limited confirmation of the practice and no evidence
at all to contradict it” …
5 [365] Using Apotex’s words, the evidence establishes that Sanofi-Aventis has “been
aware of, participated in, benefited from and never complained about the practice of
generic companies making close copies of originators’ PIs.” As such, Apotex said that:
“In light of the unchallenged evidence on this matter and the Applicants’ failure
even to attempt to discharge their onus (except perfunctorily, at the last minute), their
10 copyright case must fail in limine because an essential element of s 36(1) is not made
out.”
[73] The primary judge proceeded on the footing that while the ultimate onus
of disproving a licence lay with the respondents, there was an onus on the
15 appellant to show “a proper foundation for the existence of the implied licence
…”. See reasons [371]. That approach was orthodox. See Lorenzo & Sons Pty Ltd
v Roland Corporation (1992) 23 IPR 376 at 380 (Lorenzo & Sons); Acohs Pty Ltd
v Ucorp Pty Ltd (2012) 201 FCR 173; 287 ALR 403; 95 IPR 117;
[2012] FCAFC 16 at [172] (Acohs).
20 [74] The primary judge concluded at reasons [372] that the evidence did not
establish a proper foundation for the appellant’s assertion of an implied licence.
The bases for her Honour’s conclusion are set out at reasons [373]–[379].
The passage is lengthy, but deserves to be set out in full:
25 [373] First, insofar as the regulatory regime is concerned, it is apparent that the TGA
does not require PIs for a generic or later version of a drug to be identical to the PI for
the original drug. To the contrary, the Regulatory Guidelines disclose that if the PI is
“different in content” or “not identical” to that of the registered brand then safety and/or
efficacy data may be needed “depending on the case”. There are also in evidence
communications from the TGA articulating its position. According to these
30 communications:
“While the expression ‘requirement’ has been used (as in the brief attached to this
email), it is not, as you know, a legal requirement that the documents be the same.
Relevant to the emergence of that practice may be the fact that any differences in the
wording of a draft PI submitted by a generic may indicate to the TGA differences in
35 substance in the medicine itself from the originator’s medicine (which in turn may
require additional information and evaluation, and possibly additional fees). Generic
companies may well have taken the view that providing a draft PI for a medicine in
very similar terms to the approved PI of the originator’s medicine would reduce that
risk.
40 […]
In summary, in the period 2007–2008 there was a practice in the TGA to approve
PIs for generic medicines that contained similar information to that in PIs for the
originator medicine. Some generic companies have provided to the TGA draft PIs in
very similar terms to the originator’s approved PI. PIs have been approved by the
TGA for generic medicines in very similar terms to the approved PI of the
45 originator’s medicine. There was no articulated ‘policy’ as such.”
[374] It may be accepted that the preparation of safety and efficacy data, if required by
the TGA due to differences between innovator and generic PIs, would be likely to
involve significant time and expense. However, the Regulatory Guidelines disclose that
such data may not be needed even if the PIs are different, it being a matter for the TGA
50 depending on the circumstances of each case. It is also not impossible for such data to
be provided if required, albeit at a cost to the generic supplier.
[375] Second, insofar as public policy is concerned, it also may be accepted that there
is a public interest in PIs for the same or bioequivalent drugs also being the same. These
considerations may be inferred to be the reason for the amendment Act. While this
public policy issue may explain the TGA’s position, it does not establish the existence
of an implied licence for one drug company to copy the PI of another drug company.
There are many circumstances in which it might be said that a particular statutory
monopoly, on reflection, is contrary to the public interest. The legal consequence of that
is not that the statutory monopoly simply ceases to exist on recognition of the
inconsistency with public policy. It becomes a matter for the legislature to determine
whether the monopoly should continue or be modified. In the present case, the
legislature has made its determination and has passed the amendment Act. As the
reasoning in Copyright Agency v State of New South Wales (2008) 233 CLR 279;
248 ALR 590; 78 IPR 1; [2008] HCA 35 discloses, the balance to be struck between
competing policy interests in this context is a matter for the legislature with many
options available including, for example, statutory licence regimes (see, for example,
[48] and [71]).
[376] Third, insofar as the “long-standing practice” of copying PIs is concerned, the
evidence is equivocal. It is true that Apotex has discovered PIs where one may infer that
the generic company has copied from the innovator PI (including PIs which suggest
such copying by Sanofi-Aventis itself). It is also true that, albeit late in the day,
Sanofi-Aventis has located other PIs which appear not to have been copied or, at least,
not to have been copied to the same extent. It may also be accepted that the MIMS
annual takes the approach of cross-referring from a generic drug to the innovator PI for
that drug. But the evidence as a whole is simply insufficient to establish either the
existence of an industry-wide practice of copying, or anything more than apparent
neutrality by participants in the industry as to the copyright implications of such
copying (at least until the present case). As to the issue of custom, the evidence does not
disclose the proportion of PIs in evidence (tendered by either party) compared to all
approved PIs. The PIs in evidence, accordingly, lack any meaningful context. As to
mere neutrality, it cannot be inferred from the lack of evidence of any objection until
that of Sanofi-Aventis in the present case that participants in the industry implicitly
consented to the so-called industry-wide practice of copying. The evidence, at best,
indicates a mere lack of objection to apparent cases of PIs being copied. In the
circumstances outlined above, lack of objection without a duty to object is equivalent
to mere neutrality which, as McHugh J said in Avel v Multicoin (1990) 171 CLR 88
at 123; 97 ALR 19 at 44; 18 IPR 443 at 468, is not sufficient to establish an implied
licence.
[377] Fourth, insofar as the care with which PIs are created is concerned, the
consequences are far from clear-cut. The fact that originator companies take care when
crafting a PI (a proposition which I accept, but which is not readily reconcilable with
Apotex’s submissions on the subsistence of copyright in the Arava works in the present
case) does not seem to make the alleged industry-wide practice more or less likely.
Apotex itself managed to create a draft PI for its leflunomide product (the proposed
Apotex PI) which does not copy any part of the approved Arava PI (or any of the other
Arava works). The fate of the proposed Apotex PI has not yet been determined by the
TGA and, given the commencement of the amendment Act, may never be determined.
The point is that, when it considered it might be necessary to do so, Apotex managed
to create a PI which had not been copied from the innovator PI, presumably with the
same level of care an originator company brings to bear upon that process, and without
any evidence of it having been particularly difficult to do so.
[378] Fifth, insofar as safety updates are concerned, Apotex sought to make a case based
in part on the fact that the originator drug company is the repository of all reports of
adverse reactions and thus is best placed to make any required safety amendment to a
PI. This may be so. But it is presumably a circumstance which has existed for many
years. Generic brands must have PIs. PIs are often amended over the years as more
information becomes available. The evidence does not disclose the details of practices
by which drug companies review and disclose their safety data or by which drug
companies remain apprised of amendments to PIs (including amendments by generic
companies which have become aware of some safety issue). While it might be
presumed (and hoped) that suitable systems are in place for the disclosure and exchange
of safety information, the evidence in this case shows (for example) that some generic
5 PIs contain warnings and safety information, as well as information about adverse
reactions and drug interactions, which are not found in the relevant innovator PI.
In other words, the evidence about the need for the copying of innovator PIs based on
the system for safety notifications is equivocal at best.
[379] Taken together these considerations indicate that, in all of the circumstances, a
10 licence to copy innovator PIs for the purposes of obtaining regulatory approval for
generic drugs cannot be implied. If, consistent with Avel v Multicoin
(1990) 171 CLR 88; 97 ALR 19; 18 IPR 443, the legal onus for disproving the alleged
implied licence lies upon Sanofi-Aventis the evidence, taken as a whole, has enabled
that burden to be discharged …
15 [75] In relation to her Honour’s view expressed at reasons [376] that the
evidence of the “long-standing practice” of copying PID is “equivocal”, it is
apparent from the context in which this observation was made that her Honour
was making the point that the evidence was not sufficient to raise a case of an
implied licence. Her Honour’s view was amply justified.
20
[76] The evidence did not show that, as a matter of fact, a pharmaceutical
company bringing to market in Australia a second or later brand of a medicine
registered by the TGA was either required by the TGA or constrained as a matter
of practical necessity to engage in substantial reproduction of the originator’s
PID in respect of its medicine. The TGA did not require PID for a generic or later
25
version of a drug to be identical to the PID for the original drug. It appears that
the appellant itself, on occasion, managed to create a draft PID for its leflunomide
product which does not copy the Arava PID. The evidence also showed that some
generic PID contains warnings and safety information which is not found in the
relevant innovator PID. This is not evidence of a custom or usage applying
30
categorically throughout an area of trade or commerce.
[77] The evidence of behaviour in the marketplace on which the appellant
relies falls short of showing that all competitors in this market have categorically
agreed to participate on the footing that other participants agreed not to assert
35 copyright in PID whenever a participant seeks to supply in the market a different
brand of a product which was previously sold in the market by another
participant. To say that many competitors have observed a policy of mutual
non-objection in relation to the reproduction of PID is distinctly not to say that
each participant has agreed to participate in the market on the faith of a universal
40 expectation that all participants will always, come what may, consent to the
reproduction of their PID by their competitors.
[78] The appellant does not identify any contract or arrangement between the
respondent and the appellant and other competitors in the market into which the
term is to be implied by custom and usage. The appellant argues that a contract
45 between the parties is not necessary for the implied licence for which it contends;
but it does not identify any other legal framework or relationship into which a
binding licence might be implied. Originator pharmaceutical companies supplied
PID to a statutory body, the TGA, under a statutory registration scheme. That
supply did not occur as an incident of a contractual relationship between
50 participants in the industry. Indeed the only relationship between originators and
copiers is that they were competitors in the therapeutic goods industry.
[79] The decisions in Con-Stan Industries of Australia Pty Ltd v Norwich

Winterthur (Aust) Ltd (1986) 160 CLR 226 at 236–7; 64 ALR 481 at 485
(Con-Stan); Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 422;
131 ALR 422 at 427–8 (Byrne) and Hawkins v Clayton (1988) 164 CLR 539
at 573; 78 ALR 69 at 93 (Hawkins), on which the appellant relies, are concerned
with the circumstances in which trade custom or usage may form the basis for
implication of terms into a contract between counterparties to transactions within
that field of trade. This case is not concerned with custom or usage by reference
to which counterparties to transactions in a given field of commerce, such as
insurers and insured, employers and employees or buyers and sellers in a
particular trade, are said to have contracted. The appellant did not cite any case
where a trade custom has been held to bind competing traders as between
themselves in their dealings with a third party. The absence of any such authority
is an indication of the novelty of the appellant’s contention. It may also reflect the
common law’s disapproval of horizontal arrangements between traders which
might tend to blunt the edge of competition between them.
[80] It is a strong thing to hold that all the competitors in a trade have agreed
to surrender, in any respect, their liberty to compete. An inference to that effect
cannot reasonably be drawn from evidence that many of them have, for some
time, refrained from all-out competition. The short answer to the appellant’s
arguments, including its complaint that the respondents failed to call any witness
to dispute its evidence of industry practice, is that the evidence fell short of
showing an agreement from which the parties would not depart if it suited their
business interests to do so. Evidence of a policy or practice of non-objection
consistent with current perceptions of self-interest does not amount to evidence
of a categorical and permanent renunciation of a right to object where later
circumstances may be thought to justify a change of policy and the assertion of
the right.
[81] The parties also devoted considerable attention in argument to the question
of whether a licence to reproduce copyright material “will only be implied when
there is a necessity to do so”. See Copyright Agency Ltd v New South Wales
(2008) 233 CLR 279; 248 ALR 590; 78 IPR 1; [2008] HCA 35 at [81], [91]–[92].
The appellant argued that this issue is immaterial where the implication is said to
arise as a matter of fact from custom and usage. The appellant’s point may be
accepted for the sake of argument. The difficulty on which the appellant’s
argument founders is simply that the appellant did not prove even the ghost of a
case of a custom and usage having binding force between all participants in the
therapeutic goods industry in Australia.
[82] For these reasons, I conclude that the primary judge rightly rejected the
appellant’s claim to an implied licence.
Conclusion and orders
[83] I would grant the appellant leave to raise the argument raised by its second
further supplementary notice of appeal.
[84] The appellant has failed to make good its challenge to the decision of the
primary judge.
[85] The appeal should be dismissed.
[86] The appellant should pay the respondents’ costs of the appeal to be taxed
if not earlier agreed.
96 IPR 185 APOTEX v SANOFI-AVENTIS (No 2) (Bennett and Yates JJ) 207
[87] Bennett and Yates JJ. This is an appeal from orders made in proceedings
in which the appellant, Apotex Pty Ltd (Apotex), was found to have threatened
to infringe Australian patent No 670491 (the patent) and to have infringed the
copyright in certain works described as “the Arava works”.
5 [88] The patent is for an invention entitled “Pharmaceutical for the treatment of
skin disorders”. It concerns, relevantly, the use of a compound called leflunomide
for the treatment of psoriasis. The second respondent, Sanofi-Aventis
Deutschland GmbH, is the patentee. The first respondent, Sanofi-Aventis
Australia Pty Ltd, supplies in Australia products that contain leflunomide. These
10
products are supplied under the trade names “Arava” and “Arabloc”.
[89] At the commencement of the primary proceeding, Apotex intended to
supply its own leflunomide products in Australia for the treatment of rheumatoid
arthritis (RA) and psoriatic arthritis (PsA). It was this intended supply that was
15 said to constitute the threatened infringement of the patent.
[90] In order to supply those products in Australia it was necessary for Apotex
to obtain their registration on the Australian Register of Therapeutic Goods
(the ARTG). For that purpose, Apotex created and supplied a product information
document to the Therapeutic Goods Administration (the TGA). Apotex’s product
20 information document was said by Sanofi-Aventis to be a reproduction of a
substantial part of each of the Arava works. The Arava works are product
information documents associated with the supply of the Arava products by the
first respondent. The first respondent is the owner of the copyright in some of
those works. The second respondent and the third respondent, Aventisub II
25
Incorporated, are the joint owners of the copyright in the other Arava works.
[91] The primary proceeding also concerned the threatened contravention by
Apotex of certain provisions of the Trade Practices Act 1974 (Cth) (now the
Competition and Consumer Act 2010 (Cth)). The primary judge found that case
30 to have been established. The relevant conduct was found to be Apotex’s failure
to warn medical practitioners, pharmacists and patients that use of Apotex’s
leflunomide products would infringe the patent. The correctness of that finding is
plainly dependent on the correctness of the primary judge’s findings about
threatened patent infringement. Accordingly, for the purposes of this appeal, the
35 consumer law aspects of Apotex’s conduct do not need to be considered
separately from the case of threatened patent infringement.
[92] Before identifying the specific issues that arise on this appeal, it is
convenient to summarise a number of factual matters that are not presently
contentious concerning the nature and treatment of RA, PsA and psoriasis. It is
40
also convenient, in that context, to describe briefly the alleged invention by
reference to the complete specification as presently filed in respect of the patent.
[93] It is not necessary for the purposes of the appeal to distinguish between the
respondents. They are referred to in these reasons as, simply, “Sanofi-Aventis”.
45
Factual matters
[94] The primary judge (at [116]–[130]) made a number of general findings
about the nature and treatment of RA, PsA and psoriasis. Those findings, which
are not challenged on appeal, were based on expert evidence given by
50 Dr Shumack, a dermatologist; Professor Smith, a rheumatologist; and
Professor Brooks, also a rheumatologist.
[95] The following is a summary of those findings in so far as they are relevant
to the disposition of this appeal:
• Psoriasis is a skin disease that occurs in about 2% of the population. It is
characterised by demarcated, red scaly plaques.
• In 1993 the prevailing view of the medical profession was that psoriasis
was a proliferative disease in which a genetic abnormality directly
influenced the turnover rate of epidermal cells. It was thought that the
hyper-proliferation of epidermal cells caused the inflammation observed
in psoriasis.
• Although theories were developing about the role of the immune system
in psoriasis, the proliferative theory remained the orthodoxy for a
number of years.
• It is now known by dermatologists and rheumatologists that the genetic
abnormality associated with psoriasis leads to an abnormal
inflammatory reaction localised predominantly in the dermis and
epidermis of the psoriasis plaques. These localised inflammatory cells
secrete cytokines, which are responsible for increased epidermal cell
turnover. Thus the proliferation of epidermal cells is a response to, not
the cause of, the inflammation.
• Rheumatologists use “arthritis” as a global term to refer to joint disease.
There are about 150 types of joint disease which may be described as
“rheumatic diseases”.
• Rheumatologists distinguish between inflammatory arthritis and
non-inflammatory arthritis. Inflammatory arthritis refers to those forms
of arthritis where inflammation of the joint tissues is the underlying
cause of damage to the joints. About 2–3% of the population suffers
from some form of inflammatory arthritis.
• There are two types of inflammatory arthritis: RA and the seronegative
arthropathies.
• RA is associated with the presence of positive rheumatoid factor (RF) in
the blood. In this connection, 70% of persons with RA are RF positive.
RA occurs in about 1% of the population.
• The seronegative arthropathies are PsA, ankylosing spondylitis, reactive
arthritis and inflammatory bowel disease-associated arthritis. Persons
with these diseases are RF negative.
• About 60–70% of cases of inflammatory arthritis are RA and about 25%
of cases are PsA.
• Although RA and PsA are inflammatory arthropathies, they are distinct
diseases, and were known to be such in 1993. They have different
diagnostic criteria. Psoriasis is a diagnostic element of PsA but not of
RA. A person with PsA will almost always have or develop psoriasis.
The incidence of psoriasis in RA is the same as in the general population
(namely, 2%).
• In 1993 there was a possibility of not being able to diagnose a patient
correctly with RA as opposed to PsA. Since the introduction of a new
test in 2003 that is highly specific for RA (namely, the cyclic
citrullinated peptide (CCP) test), the possibility of an unclear or
misdiagnosis as between RA and PsA has been remote. At the present
time RA and PsA can almost always be distinguished by a
rheumatologist.
• As at 1993, PsA had not been as intensively studied as RA. RA was

known by rheumatologists to be T cell-mediated. In contrast, PsA was
not known by rheumatologists to be T cell-mediated. Although they
knew that T cells were involved in inflammatory responses to PsA, the
5 nature of that involvement was unclear. Consistent with that position, by
1993 certain inhibitors were being developed for the treatment of RA.
It was not until the late 1990s that these inhibitors were explored for the
treatment of the seronegative arthropathies.
• Rheumatologists know how to diagnose and treat psoriasis because
10 psoriasis is an element of PsA.
[96] The primary judge made the following important findings (at [129] and
[130]) concerning the treatment of psoriasis by rheumatologists and the use of
leflunomide in that treatment:
15 [129] … a rheumatologist treating a patient with PsA will know how to treat the
patient’s psoriasis as part of the treatment of PsA, either independently or in
consultation with the patient’s dermatologist if the patient is also under the care of a
dermatologist. However, if a patient has psoriasis alone or psoriasis in combination with
a disease other than arthritis a rheumatologist would not consider it appropriate to treat
20 the patient’s psoriasis. The rheumatologist would refer the patient to a dermatologist.
[130] Leflunomide is a drug used in the treatment of RA and PsA and, for that purpose,
is prescribed by rheumatologists. Leflunomide is not used in Australia for the treatment
of psoriasis alone and is not prescribed by dermatologists for that purpose. However, if
leflunomide is administered to a patient with PsA, that administration would be
25 expected also to prevent or treat the patient’s psoriasis, to some extent at least.
The alleged invention as described and claimed

[97] The patent claims priority from 31 March 1993 based on a United States
patent application filing. The priority date is not in dispute in this appeal.
30
[98] The complete specification of the patent commences by identifying the
compound of European patent 13,376 (the equivalent of Australian patent
No 529341 to which further reference will be made) as being
“anti-inflammatory” and having immunomodulation properties, so that it is
“suitable as [a] pharmaceutical against chronic graft versus host diseases and
35
against autoimmune disorders, in particular systemic lupus erythematosus”.
Relevantly, the compound is leflunomide.
[99] The specification then identifies and describes psoriasis as a special form
of skin disorder characterised by the development of reddish plaques, which tend
40 to be dry and scaly. It lists and describes the common types of psoriasis as
vulgaris; eruptive; erythrodermia and pustular. It describes the lesions as being
caused by abnormally increased epidermal cell proliferation but says that
“the etiology of psoriasis remains elusive, although it appears to have an
inherited component”.
45 [100] After noting that the treatment of psoriasis is not entirely satisfactory, the
specification describes the use of immunosuppressive agents as a “promising
therapeutic approach”. It exemplifies the use, in that regard, of cyclosporine A but
teaches that “(t)herapy with immunosuppressive agents is often associated with
serious side effects such as toxicities, including neurotoxicity, hypertension,
50 hypomagnesemia, anemia, leucopenia, thrombocytopenia, tendency to acquire
infections, renal function impairment and teratogenicity”.
[101] The specification teaches that, in an attempt to develop better agents for
the treatment of psoriasis, it has been found that leflunomide shows “effective
inhibition of keratinocyte proliferation”. Keratinocytes constitute the
predominant cell type in the epidermis. The specification teaches that
leflunomide is well-tolerated and that during therapy “no decreased resistance to
infections, no kidney dysfunction, no relevant changes of laboratory values such
as liver enzymes, blood count or body weight have been observed”. It teaches
that leflunomide shows “a better risk benefit ratio compared with other
immunosuppressive agents, [has] a long lasting effect after withdrawal and
[offers] the possibility of short term therapy and longer remission intervals”.
[102] The specification then says that “the invention relates to a method of
preventing or treating a skin disorder in a patient in need thereof by administering
an effective amount” of leflunomide. The specification also says that the
invention relates to a pharmaceutical which contains an effective amount of
leflunomide and to a process for the preparation of a pharmaceutical for the
treatment of psoriasis. This pharmaceutical can be administered orally, topically,
rectally or parenterally.
[103] The specification goes on to discuss appropriate dosage units and
regimes, including for a patient (70 kg) suffering from psoriasis in the early
phases of the disorder.
[104] It defines the word “preventing” as including “the prophylactic
prevention of psoriasis in a susceptible mammal” and the word “treating” as
including “arresting the development, and retarding the progression of psoriasis
in a susceptible mammal”.
[105] The specification provides five examples. The first two examples concern
the preparation of compounds (including leflunomide). Example 3 is a screen
evaluation of the ability of the compounds of the invention to inhibit in vitro
DNA synthesis using normal human epidermal keratinocytes. Example 4 is an
acute toxicity study of the compounds after intraperitoneal administration using
mice and rats. Example 5 is a randomised double blind study of leflunomide
administered to 400 human patients over a 6-month period.
[106] It should be noted that, although parts of the specification refer more
generally to “a skin disorder”, its focus is plainly psoriasis and the prevention or
treatment of that disorder. It is the prevention or treatment of this skin disorder
by the disclosed compounds that is the new result that provides subject matter for
the claimed invention. This is the only reasonable reading of the specification.
The parties did not seek to suggest otherwise.
[107] The specification ends with a single claim (the claim in suit) which,
relevantly, is in the following terms:
A method of preventing or treating a skin disorder, wherein the skin disorder is
psoriasis, which comprises administering to a recipient an effective amount of
[leflunomide].
[108] The claim in suit takes its present form from an amendment made under
s 105 of the Patents Act 1990 (Cth) (the Patents Act) in 2009, which limited the
method of the invention to the prevention and treatment of psoriasis.
The issues on appeal
[109] Sanofi-Aventis’s case in relation to threatened patent infringement was
based solely on s 117 of the Patents Act. It will be necessary to set out and
consider the detail of that provision later in these reasons. It is sufficient to note
for present purposes that the provision creates a species of infringement based on
the supply of products. Put simply, if the use of a product would infringe a patent
then, under that provision, the supply of that product by one person to another
will, itself, be an infringement of the patent by the supplier, except where the
5 supplier is the patentee or a licensee of the patent.
[110] In the present case, Sanofi-Aventis alleged that the use of Apotex’s
leflunomide products by others would infringe the patent. As Apotex was not a
licensee of the patent, it followed that its supply of those leflunomide products
would constitute an infringement of the patent under s 117 of the Patents Act.
10
[111] Apotex’s first defence was that the use of its leflunomide products by
others would not infringe the patent. This was because those particular products
were only registered on the ARTG for the treatment of RA and PsA, not psoriasis.
In essence its defence was that the use of its leflunomide products for the
15 treatment of RA and PsA would not infringe the patent because the claim in suit
was directed specifically to a method of preventing or treating psoriasis, not RA
or PsA. Thus its supply of leflunomide products for the treatment of RA and PsA
could not infringe the patent.
[112] Sanofi-Aventis’s answer was that, when an effective amount of
20 leflunomide is administered to treat active PsA, it will also prevent or treat
psoriasis. It contended that the claim in suit is directed to a method of treatment
where the effect of the administration of, relevantly, leflunomide is in fact to
prevent or treat the recipient’s psoriasis. Thus its case was that the use of
Apotex’s leflunomide products would infringe the patent even when those
25 products were being used to treat PsA.
[113] The issue between the parties on this aspect was raised by them as a
question of construction of the claim in suit. The primary judge (at [151])
identified that dispute as follows:
[151] … The essence of the dispute between the parties insofar as it related to the
30 construction of the patent is ultimately whether the claim for a “method of preventing
or treating a skin disorder, wherein the skin disorder is psoriasis” by administration of
a compound should be construed as involving the purpose, object or aim of the
administration (whether that purpose, object or aim be determined subjectively or
objectively), or the effect in fact of the administration.
35
[114] Ultimately, the primary judge accepted Sanofi-Aventis’s contention.
Her Honour concluded (at [155]) that the claimed method is used when
leflunomide is administered to a recipient in an effective amount so that the
recipient’s psoriasis is in fact prevented or treated. The essential basis for her
40 Honour’s finding on construction is contained in the following passage at [154]:
[154] What then is the proper construction of claim 1 of the patent? The difficulty for
Apotex’s proffered constructions is that the claim itself says nothing about the purpose
of the administration of the compound. The method claimed is a method of preventing
or treating the skin disorder psoriasis by administering an effective amount of the
45 compound. The method is described and defined by the result: the prevention or
treatment of psoriasis. If there were any ambiguity in the concepts of preventing or
treating psoriasis, the definition of those terms in the specification confirms that they
mean achieving a particular biological result or effect in the recipient of the
administration of the leflunomide. According to the specification, “prevention” is the
prophylactic prevention of psoriasis in a susceptible mammal and “treatment” is
50 arresting the development and retarding the progression of psoriasis in a susceptible
mammal. As Apotex submitted, the particular disease, psoriasis, is an essential integer
of the method claimed. But its essentiality operates in terms of result or effect (the fact
of prevention or treatment of psoriasis) and not, as Apotex said, in terms of the purpose
of the administration.
[115] An important issue that arises on this appeal is the correctness of the
primary judge’s conclusion on the question of construction that was raised by the
parties.
[116] In the primary proceeding Apotex also challenged whether s 117 applied,
in any event, to the circumstances of the case. As argued, this challenge, in part,
related to the issue of construction that divided the parties. It also depended on
whether, in relation to its intended supply, Apotex had given instructions to use
its leflunomide products to treat psoriasis and whether it had reason to believe,
in any event, that those products would be used to treat or prevent that disorder.
These questions concern, once again, the detail of s 117 which, as will be
explained later, only applies in certain factual circumstances. It is sufficient to
note for present purposes that the primary judge was satisfied, on the evidence,
that, in relation to its intended supply, Apotex had given instructions to use its
leflunomide products to treat psoriasis and that, separately, it had reason to
believe that those products would be used to treat psoriasis, in any event.
The primary judge found that either of these circumstances was sufficient to
engage s 117 in the present case. There is no issue between the parties as to how
s 117 is engaged. However, an issue on the appeal is whether the primary judge
erred in making the findings she did with respect to Apotex giving instructions
and the existence of Apotex’s belief that its products would be used to treat
psoriasis.
[117] Apotex also challenged the validity of the claim in suit on a large number
of grounds under s 138(3) of the Patents Act. For the purposes of this appeal the
only issues that remain in that regard are whether the invention as claimed is
novel in light of the prior publication of the complete specification of Australian
patent No 529341 (the 341 specification and the 341 patent, respectively) and
whether it is, in any event, a manner of manufacture within the meaning of s 6
of the Statute of Monopolies: see s 138(3)(b) as informed by ss 18(1)(b)(i) and
7(1)(a) and s 18(1)(a) of the Patents Act, respectively.
[118] The primary judge found that the invention as claimed was both novel,
when compared with the 341 specification, and a manner of manufacture. On this
appeal Apotex challenges both findings. In each case, however, Apotex’s
challenge is inextricably linked to the question of construction of the claim in
suit.
[119] In this connection, Apotex accepts that if it be found on appeal that the
primary judge erred in her construction of the claim, with the consequence that
Apotex’s construction of the claim is to be preferred, the invention will be novel
and not anticipated by the publication of the 341 specification. Apotex accepts
that the 341 specification does not disclose to the person skilled in the art,
expressly or impliedly, the use of leflunomide to prevent or treat psoriasis.
Apotex also accepts that, if its construction of the claim is preferred, one basis on
which it seeks to contend that the invention is not a manner of manufacture will
have been removed. However, it wishes to maintain on appeal a more general
contention that an invention claimed as a method of treating the human body is
not a manner of manufacture and hence not a patentable invention for the
purposes of the Patents Act.
[120] Finally, on the question of copyright infringement, the primary judge

found that the Arava works were original works in which copyright subsisted.
The primary judge found that Apotex had reproduced a substantial part of each
of those works without Sanofi-Aventis’s licence and thereby infringed the
5 copyright in those works. No issue arises on appeal concerning the subsistence
of copyright or the fact that Apotex had reproduced a substantial part of the Arava
works. Apotex contends, however, that the primary judge erred in failing to find
that Sanofi-Aventis was bound by a licence implied by custom that permitted it
to engage in the acts of reproduction about which Sanofi-Aventis complains.
10 [121] In summary, the issues that arise on appeal are whether the primary judge
erred:
• in the construction that her Honour adopted for the purpose of
determining the questions of infringement and validity that arise in the
present appeal;
15 • in finding that s 117 applied to the circumstances of the present case and
whether, by operation of that provision, Apotex threatened to infringe
the patent because of its threatened supply of its leflunomide products;
• in finding that the invention as claimed was novel in light of the
publication of the 341 specification;
20 • in finding that the invention as claimed is a manner of manufacture
within the meaning of s 6 of the Statute of Monopolies; and
• in failing to find that Sanofi-Aventis was bound by an implied licence
that permitted Apotex to reproduce a substantial part of each of the
Arava works.
25
The question of construction
[122] Apotex contends that the primary judge erred in concluding that the
claimed method is used when leflunomide is administered to a recipient in an
effective amount so that the recipient’s psoriasis is in fact prevented or treated,
30 regardless of the purpose for which leflunomide is administered.
[123] In this connection Apotex submitted that the primary judge erred in
reasoning (at [154]) that “the claim itself says nothing about the purpose of the
administration of the compound”. Apotex submitted that the claim is not the use
of leflunomide in a manner that treats or prevents psoriasis, but a method of
35 preventing or treating psoriasis by the administration of leflunomide. It submitted
that, as the method is directed to the prevention or treatment of psoriasis, a
“purposive inquiry” cannot be avoided: the “objective purpose” of the
administration of leflunomide must be to prevent or treat psoriasis in the
recipient. It submitted that, in the present context, the method must be viewed as
40 part of the formal, deliberative, medical exercise that involves making a
diagnosis and devising a way to treat the diagnosed disorder, not simply a matter
of biology or chemistry characterised by whatever happens in the body after
leflunomide is administered.
[124] In our view the construction of the claim in suit for which Sanofi-Aventis
45 contends, which was accepted by the primary judge, gives it a field of operation,
and Sanofi-Aventis a resulting exclusive right under s 13 of the Patents Act, that
exceeds the description of the invention in the body of the specification, on which
the claim purports to be fairly based: see s 40(3) of the Patents Act.
[125] That description shows that the object or end in view of the claimed
50 method is the prevention or treatment of psoriasis by the administration of
leflunomide in an amount that is effective to achieve either of those objectives,
regardless of any other therapeutic or biological effect that leflunomide might

have for the recipient. In this latter regard the specification discloses that
leflunomide was already known to have anti-inflammatory and
immunomodulation properties that made it suitable as a pharmaceutical agent for
the treatment of other disorders. Importantly, however, the new result that is
promised, and which purports to provide a patentable invention, is the use of
leflunomide in an amount that is effective to prevent or treat psoriasis. Thus what
distinguishes the claimed invention from what has gone before is the recognition
that leflunomide can be used in a new method of treatment involving a new and
different therapeutic use, that bears the characteristics of a patentable invention.
Those characteristics include the fact that the invention is useful, novel, involves
an inventive step and has not been secretly used in the patent area before the
priority date: see s 18(1) of the Patents Act. This new method of treatment, as a
patentable invention, can only be realised or expressed through the deliberate
administration of leflunomide to prevent or treat psoriasis. It will not be realised
or expressed by its administration with some other object or end in view that
happens to achieve the result of preventing or treating psoriasis accidentally or as
an unsought consequence. To construe the claim as simply requiring the
administration of leflunomide that achieves a therapeutic or biological result that
includes the prevention or treatment of psoriasis is, in our view, effectively to
ignore the governing characteristic incorporated into the express words of the
claim that the invention is a method directed to preventing or treating psoriasis
— the claimed advance in the art.
[126] This construction of the claim in suit accords, in substance, with the
construction that Apotex proffers. The primary judge referred to it as a
construction involving the purpose, object or aim of the administration, whether
that purpose, object or aim be determined subjectively or objectively. So to
construe the claim does not lead to the result that infringement rests on the
alleged infringer’s state of mind: note in that regard the observations of Lord
Hoffmann in Merrell Dow at IPR 14; RPC 92. What is involved, however, is the
analysis and characterisation of impugned conduct to see whether that conduct
possesses all the essential features of the method as defined by the claim in suit.
[127] In advancing their respective contentions the parties saw the claimed
method as one that would be practised by a medical practitioner. The primary
judge found (at [151]) that the skilled addressee of the patent might include
dermatologists and rheumatologists to the extent that both had to deal with
psoriasis as a routine part of their medical practice in 1993 and thus would have
had a practical interest in the subject matter of the patent: Catnic Components Ltd
v Hill & Smith Ltd [1982] RPC 183 at 242–3.
[128] Seen in that context, the inquiry, in any given case, is to the object or end
in view of the method of treatment involving the administration of leflunomide
by the medical practitioner. If the object or end in view includes the
administration of leflunomide to prevent or treat psoriasis, and that
administration is of an amount of leflunomide that is effective for either of those
purposes, then, regardless of any other object to be achieved by the
administration, the claimed method will be used. Whether the medical
practitioner knows of the patent or knows that his or her conduct involves an
infringement of the claim in suit is irrelevant to this process of characterisation.
[129] Thus, in our view, the primary judge erred to this extent. It does not
follow, however, that the primary judge erred in finding infringement in the
present case or in finding that the claim in suit was valid.
5 The question of infringement

[130] Apotex contends that the primary judge erred in concluding that, based
on s 117 of the Patents Act, it threatened to infringe the patent because of its
intended supply of its leflunomide product called Apo-Leflunomide.
[131] The case on infringement turns on the proper construction and
10 application of s 117 in light of the findings of fact made by the primary judge.
The case for infringement was based on s 117 because Apotex, itself, was not
intending to use Apo-Leflunomide in the claimed method but to be a supplier of
that product in circumstances where, according to Sanofi-Aventis, the use of that
product to treat psoriasis would infringe the claim in suit.
15 [132] Section 117 of the Patents Act provides:
(1) If the use of a product by a person would infringe a patent, the supply of that
product by one person to another is an infringement of the patent by the supplier unless
the supplier is the patentee or licensee of the patent.
(2) A reference in subsection (1) to the use of a product by a person is a reference to:
20
(a) if the product is capable of only one reasonable use, having regard to its
nature or design — that use; or
(b) if the product is not a staple commercial product — any use of the product,
if the supplier had reason to believe that the person would put it to that use;
or
25 (c) in any case — the use of the product in accordance with any instructions for
the use of the product, or any inducement to use the product, given to the
person by the supplier or contained in an advertisement published by or with
the authority of the supplier.
[133] The prefatory condition in s 117(1) — “(i)f the use of a product by a
30
person would infringe a patent” — requires particular attention. The “use” to
which it refers is given meaning and content by s 117(2), which directs attention
to the circumstances posited by each of paras (a)–(c). Each of these paragraphs
is directed to a discrete inquiry that is to be undertaken to determine whether
there is a “use of a product by a person” within the stated requirements. If so, it
35
is that “use” by that “person” which gives content to the prefatory condition in
s 117(1). Section 117(1) then proceeds by asking whether that use by that person
would infringe the patent in suit. If so, s 117(1) is then meaningfully engaged
with the consequence that the supply of the product, by one person to another,
will itself be an infringement of the patent, unless the supplier is the patentee or
40
a licensee of the patent.
[134] The issues that fall for consideration on appeal are whether the primary
judge erred in finding that s 117(1) was engaged by the application of
ss 117(2)(b) and (c). Before turning to deal with those issues it is necessary to
45 refer to another aspect of the way in which Apotex’s appeal was argued.
[135] Apotex put to the forefront of its appeal on this question the contention
that, in the circumstances of this case, the relevant use for the purposes of
s 117(1) was the use of Apo-Leflunomide to treat PsA. It contended that that use
would not infringe the claim. Thus, it argued, the prefatory condition of s 117(1)
50 could not be satisfied, with the result that there could be no infringement by it
under that provision.
[136] This approach misapplies s 117(1) by positing the wrong use and, as a
consequence, asking the wrong question. The question is not whether the use of
Apotex’s leflunomide product to treat PsA would infringe the claim in suit, but
whether the use of Apotex’s product in one of the ways mentioned in ss 117(2)(b)
and (c) would infringe.
[137] Apotex accepted that the use of its leflunomide product to treat psoriasis
or, to put it in the words of the claim, its use as a method of treating psoriasis,
would infringe the claim. Thus if, on the facts of this case, one of the uses in
ss 117(2)(b) or (c) is the use of Apo-Leflunomide to treat psoriasis, Apotex’s
supply of that product will infringe the patent. Attention must be directed,
therefore, to the correctness of the primary judge’s findings of fact regarding the
application of ss 117(2)(b) and (c) in the present case.
[138] In that connection, the primary judge considered, first, the application of
s 117(2)(c) of the Patents Act. Fundamental to that consideration was Apotex’s
product information document that had been provided to the TGA. The document
contained the following statement of indications:
INDICATIONS
Apo-Leflunomide is indicated for the treatment of:
• Active Rheumatoid Arthritis.
• Active Psoriatic Arthritis. Apo-Leflunomide is not indicated for the treatment
of psoriasis that is not associated with manifestations of arthritic disease.
The combined use of Apo-Leflunomide with other Disease Modifying anti-Rheumatic
Drugs (DMARDS) has not been adequately studied (see PRECAUTIONS).
[139] Given that the evidence established that:
(a) psoriasis is a diagnostic criterion of PsA;
(b) nearly every person with PsA has or will develop psoriasis; and
(c) the administration of leflunomide to a person with PsA will treat that
condition and also treat psoriasis (if a person presents with psoriasis) or
prevent psoriasis (if that person would have developed psoriasis),
the primary judge reasoned and found that, because the Apotex product
information instructs rheumatologists to use Apo-Leflunomide for the treatment
of PsA, it necessarily instructs rheumatologists to use the product to treat
psoriasis, independently of the express reference to psoriasis in the document.
[140] However, separately from that reasoning and finding, the primary judge
found that Apotex did give instructions in the product information document to
use Apo-Leflunomide for the treatment of psoriasis, by the statement:
“Apo-Leflunomide is not indicated for the treatment of psoriasis that is not
associated with manifestations of arthritic disease”, where appearing in the
passage quoted above.
[141] In this connection Apotex argued before the primary judge that the use of
the double negative in this statement could not be transformed into a positive
instruction. Apotex advanced the same argument on appeal.
[142] The primary judge rejected that argument. She found that it contradicted
the ordinary meaning to be given to the statement. It was also inconsistent with
the undisputed medical evidence about the relationship between PsA and
psoriasis: see at [262].
[143] We are not persuaded that the primary judge erred in the conclusion to
which she came. We are satisfied that it was open to her Honour to find that the
statement of indications contained the instruction to use Apo-Leflunomide to
treat psoriasis.
[144] In this connection Sanofi-Aventis, on appeal, also drew attention to a part

of the Apotex product information that immediately preceded the statement of
indications we have quoted. That part reported on an analysis of patients treated
with leflunomide who were assessed by reference to the Psoriasis Area and
5 Severity Index (PASI). This index is used as a measurement of the efficacy of
treatment for psoriasis, not PsA. In the reported analysis, patients were assessed
to reflect changes following the administration of leflunomide in the extent and
severity of psoriasis lesions as judged by erythema, desquamation, and
infiltration. The analysis reports that leflunomide resulted in a significant
10 improvement in PASI scores over a 24-week study relative to placebo.
[145] The primary judge did not refer to this part of the Apotex product
information when arriving at her finding as to what the quoted passage instructed
practitioners to do. In our view it was not necessary for her Honour to do so,
although we do note that her Honour specifically referred to the PASI analysis
15 when considering whether Apotex had reason to believe that the persons to whom
it wished to supply its product (relevantly, rheumatologists) would put it to an
infringing use. Be that as it may, we are satisfied that Apotex’s statement of
indications alone provided a sufficient basis for her Honour’s finding under
s 117(2)(c). The reporting in the product information of the PASI analysis
20 provides additional matter that fortifies that finding.
[146] Apotex accepted that if no error was demonstrated in relation to the
primary judge’s findings in relation to the application of s 117(2)(c), then s 117(1)
was correctly engaged against it. It follows, therefore, that Apotex’s appeal, in so
far as it concerns the question of infringement based on s 117(1) of the Patents
25 Act, cannot succeed.
[147] We propose, however, to also consider the second basis on which the
primary judge found s 117(1) to be engaged. At trial there was an issue as to
whether Apo-Leflunomide was a staple commercial product within the meaning
30 of s 117(2)(b). The primary judge found (at [270]) that it was not a staple
commercial product. There is no appeal from that finding. The inquiry under the
specific requirements of s 117(2)(b) was thereby engaged: did Apotex have
reason to believe that Apo-Leflunomide would be used to treat psoriasis?
[148] The primary judge reasoned (at [263]) that, given the instruction in the
35 Apotex product information with respect to the treatment of psoriasis, Apotex
had reason to believe that a rheumatologist prescribing Apo-Leflunomide to a
patient would in fact put it to that use. In our view, no error is disclosed in that
reasoning. Her Honour’s finding was also plainly supported by the evidence.
[149] In that connection, Professor Brooks, who was called by Apotex, was
40 cross-examined on this subject. His evidence was that, as a rheumatologist
treating a patient presenting with concurrent PsA and psoriasis, he would
administer leflunomide with the treatment of both conditions in mind.
The primary judge (at [51]) quoted various passages from the transcript of
Professor Brooks’s oral evidence, including the following:
45 Even now, however long after it is from 1993, perhaps if I take you to the date you
swore your first affidavit, would still describe your knowledge of psoriasis as being a
basic knowledge of psoriasis? Yes, in terms of being able to diagnose it and treat it.
…
And so it was acceptable, in fact, in 1993, for a rheumatologist to have a basic
50 knowledge of psoriasis? Well, it depends what you define as a “basic knowledge”.
I would expect rheumatologists to know more than be able to spell the condition.
Because they are dealing with making a diagnosis of psoriatic arthritis, they need to be
able to diagnose it almost as well as a dermatologist, and they need to be able to treat
it almost as well as a dermatologist.
…
… I think that, as I said, rheumatologists need to know about psoriasis probably more
than most other specialties apart from dermatologists, because they are dealing with a
disease that crosses those two boundaries.
…
Not the way it is written there, really. I mean, as I have just said, rheumatologists
have to be able to diagnose psoriasis and know basically how to manage it, because
otherwise how can they treat psoriatic arthritis?
Sorry, the diagnosis of psoriasis is effectively a key part of the diagnosis of psoriatic
arthritis? Absolutely.
[150] This evidence supports the findings made by the primary judge that have
been quoted above, namely that:
(a) a rheumatologist treating a patient with PsA will know how to treat the
patient’s psoriasis as part of the treatment of PsA, either independently
or in consultation with the patient’s dermatologist if the patient is also
under the care of a dermatologist: see [129]; and
(b) if leflunomide is administered to a patient with PsA by a rheumatologist,
that administration would be expected by the rheumatologist to prevent
or treat the patient’s psoriasis, to some extent at least: see [130].
[151] Professor Smith, who was called by Sanofi-Aventis, was also
cross-examined about the use of leflunomide by rheumatologists in the treatment
of psoriasis. The primary judge (at [43]) quoted various passages from the
transcript of his evidence, namely:
… the question is asking me how effective is leflunomide in psoriasis, and I can’t
answer that because I’m not a dermatologist and I don’t treat psoriasis except when it
is in the situation of psoriatic arthritis, and, even then, I’m treating the psoriatic arthritis;
I’m not treating the psoriasis. So I can’t really honestly answer that question.
When you say, even then, you are not treating the psoriasis, you are treating the
psoriatic arthritis — I think that is what you said? Yes.
You mean you are administering the, let’s say, leflunomide for the purpose of treating
psoriatic arthritis in that case? Correct.
The joint disease? Yes.
And if it has a benefit, as the TOPAS study suggests, in relation to the patient’s
dermatological disease, that’s an incidental benefit? I am certainly pleased with the
result for the patient, but that is not my primary aim of treating the patient.
[152] This evidence reflects differences in opinion and clinical approach
between Professor Brooks and Professor Smith. The fact that these differences
exist does not mean, however, that the primary judge’s findings as to Apotex’s
“reason to believe” were in error.
[153] Apotex also relied upon her Honour’s finding that dermatologists do not
prescribe leflunomide for the treatment of psoriasis alone. That reliance,
however, is really beside the point once it is accepted that rheumatologists (even
if not all rheumatologists) will prescribe leflunomide to treat PsA and psoriasis in
patients presenting with concurrent conditions.
[154] In oral argument Apotex submitted that the primary judge’s finding —
that it had reason to believe that the person to whom its product would be
supplied would put it to use for the treatment of psoriasis — was based on
reasoning limited to the finding that administration of leflunomide to treat PsA
would inevitably treat or prevent psoriasis, and not one more broadly based that
involves the purpose for treatment of psoriasis as such. We do not read her
Honour’s findings as being so limited. Indeed, Apotex’s product information —
effectively stating that its intended leflunomide product was indicated for the
5 treatment of psoriasis associated with manifestations of arthritic disease —
cannot be read as an arid instruction that is unrelated to an acknowledged reality
that rheumatologists, like Professor Brooks, do seek, and will seek, to treat both
conditions when patients present with PsA and psoriasis concurrently.
[155] It follows, in our view, that the primary judge’s findings with respect to
10 the application of s 117(2)(b) provide an independent foundation to engage the
application of s 117(1) in the present case.
[156] Accordingly, this ground of appeal fails.
The question of validity: novelty
15 Introduction
[157] Apotex contends that the primary judge erred in concluding that the
patent was novel in light of the 341 patent.
[158] Section 138 of the Patents Act provides for the revocation of patents.
20 The grounds of revocation are discrete and specific. One of those grounds is that
the invention, as claimed, is not a patentable invention. An invention claimed in
a standard patent is a patentable invention if, among other things, it is novel when
compared with the “prior art base” as it existed before the priority date of the
claim: s 18(1)(b)(i). An invention is taken to be novel when compared with the
25 “prior art base” unless it is not novel in light of certain kinds of information,
including “prior art information … made publicly available in a single document
…”: s 7(1)(a) of the Patents Act.
[159] It is accepted by the parties that the 341 specification is a document that
contains “prior art information” forming part of the “prior art base” as it existed
30 before the priority date of the claim in suit. The only question is whether the 341
specification disclosed, and made publicly available, “a method of preventing or
treating a skin disorder, wherein the skin disorder is psoriasis, which comprises
administering to a recipient an effective amount of” leflunomide. If it did, then
the claim in suit is invalid and liable to be revoked. Concomitantly, Apotex’s
35 intended supply of its leflunomide product could not ground a threatened
infringement of the patent under s 117 of the Patents Act.
[160] As we have noted, Apotex’s appeal in relation to this ground of invalidity
proceeds on it being found, contrary to Apotex’s contention, that the primary
judge was correct in concluding that, as a matter of claim construction, the
40 claimed method is used when leflunomide is administered to a recipient in an
effective amount so that the recipient’s psoriasis is in fact prevented or treated,
regardless of the purpose for which it was administered. It follows from the view
that we have expressed concerning the proper construction of the claim that the
basis for Apotex’s challenge to validity in this regard falls away. Nevertheless we
45 propose to consider the ground on the footing that, contrary to our own view, the
primary judge was correct in her finding on the question of construction.
[161] Proceeding on that basis at trial, Apotex contended that the method as
claimed was not novel, based on the following argument recorded by the primary
judge at [213]:
50 (a) The 341 specification discloses the administration of leflunomide as a
method of treatment of (at least) RA and PsA in humans.
(b) The alleged anticipation is thus the administration of leflunomide as a

method of treatment of (at least) RA and PsA in humans.
(c) Sanofi-Aventis asserts that the claim of the patent will be infringed by
Apotex’s proposed supply of leflunomide for use as a method of
treatment for PsA.
(d) If, as Sanofi-Aventis asserts, the claim of the patent includes the use of
leflunomide as a method of treatment for PsA, the claim is the same as
the alleged anticipation.
(e) It follows that the alleged anticipation, on Sanofi-Aventis’s own case,
infringes the claim of the patent.
(f) The reverse infringement test is satisfied. Accordingly, the claim of the
patent is not novel.
[162] For the purpose of considering that argument the primary judge (at [215])
accepted that if performing the teaching of the 341 specification inevitably
resulted in the use of the method of the claim in suit then it must follow that the
claim was not novel. The primary judge (at [216]) put the position as follows:
[216] … if the teaching of the 341 [specification] is a method of treatment of PsA by
the administration of leflunomide to a person suffering from PsA then the following of
that teaching will inevitably result in the use of the method claimed in the patent
(namely, preventing or treating the skin disease psoriasis by the administration of an
effective amount of leflunomide). The fact that the evidence described the proportion of
persons suffering from PsA who also have or will develop psoriasis as “almost all”
rather than “all” is immaterial. The evidence is sufficient to reach the required certainty
of infringement being the “inevitable result” of or “necessarily entailed” by the assumed
alleged anticipation. Consistent with principle, on this analysis, it does not matter that
no one would have been aware that the administration of leflunomide to a person with
PsA would also prevent or treat psoriasis in that person …
[163] The primary judge’s last statement may seem a surprising outcome.
Leaving aside the special circumstance provided by s 7(1)(c), which deals with
the so-called “whole of contents” ground of objection, s 7(1) requires that an
invention be taken to be novel unless it is not novel in light of prior
art information “made publicly available” in, relevantly, a single document (here,
the 341 specification). The question arises as to how information in a document
(the 341 specification) can be “made publicly available” if, by reading that
document, the person skilled in the art would not have been aware that the
administration of leflunomide to a person would prevent or treat psoriasis in that
person. In this connection, Apotex accepts that, as at the priority date, the 341
specification did not expressly or impliedly disclose to the person skilled in the
art the use of leflunomide in a method of treatment of psoriasis.
[164] The rationale for the approach urged on the primary judge is to be found
in the “inevitable result” cases. For example, in General Tire & Rubber Company
v Firestone Tyre and Rubber Company Ltd (1971) 1A IPR 121; [1972] RPC 457
(General Tire) the Court of Appeal (at IPR 138; at RPC 485–6) said:
If the prior inventor’s publication contains a clear description of, or clear instructions
to do or make, something that would infringe the patentee’s claim if carried out after the
grant of the patentee’s patent, the patentee’s claim will have been shown to lack the
necessary novelty, that is to say, it will have been anticipated. The prior inventor,
however, and the patentee may have approached the same device from different starting
points and may for this reason, or it may be for other reasons, have so described their
devices that it cannot be immediately discerned from a reading of the language which
they respectively used that they have discovered in truth the same device; but if carrying
out the directions contained in the prior inventor’s publication will inevitably result in
something being made or done which, if the patentee’s patent were valid, would
constitute an infringement of the patentee’s claim, this circumstance demonstrates that
the patentee’s claim has in fact been anticipated.
5 [165] There is a question whether the unyielding logic of the “inevitable result”
cases can be applied uncritically in every case of alleged anticipation. If so
applied, inventions claimed as new methods of medical treatment involving the
administration of a known compound for a hitherto unknown and unexpected, but
nevertheless useful, therapeutic use would never stand scrutiny as patentable
10
inventions. This is because, on the logic of the “inevitable result” cases, the
disclosure of a given compound for one therapeutic use must equally and
inevitably disclose all therapeutic uses of the compound in susceptible recipients,
notwithstanding that those uses might not have been discovered at the time of
15 disclosure of the first use, and may never be known. Such an approach may not
give true expression to the statutory test that denies novelty only in light of
information that is made “publicly available”, a requirement as stated in Hill v
Evans (1862) 1A IPR 1 at 7; 4 De GF & J 288 at 301 that “(t)he invention must
be shewn to have been before made known”. See also the decision in H Lundbeck
20 A/S v Alphapharm Pty Ltd (2009) 177 FCR 151; 81 IPR 228; [2009] FCAFC 70
at [174]–[190] (Lundbeck) per Bennett J with whom Middleton J agreed.
[166] This appeal does not provide the occasion to explore that question.
The parties proceeded on the basis that the rationale of the “inevitable result”
cases could apply in the particular way in which Apotex sought to deploy it. In
25 that connection, Apotex assumed the correctness of the construction of the claim
in suit proffered by Sanofi-Aventis. It then argued that if, as Sanofi-Aventis
contended, the claim in suit would be infringed by administering leflunomide to
treat a patient with PsA, the 341 specification anticipated the invention, so
claimed, because it sufficiently disclosed that particular method of treatment.
30 The primary judge did not accept that argument. Before turning to consider the
correctness of her Honour’s conclusion, it is necessary to summarise what is
disclosed in the 341 specification.
The disclosures in the 341 patent
35
[167] The invention the subject of the 341 patent is entitled “An isoxazole
derivative, processes for its preparation, compositions containing it, and its use
for combating rheumatism”. The isoxazole derivative is leflunomide.
[168] The 341 specification discloses that, by virtue of its pharmacological
40 properties, leflunomide “can be used especially as an antirheumatic,
antiphlogistic, antipyretic and analgesic agent, and for the treatment of multiple
sclerosis”, and can be administered in various identified dosages and dosage
forms. The 341 specification discloses that a further use of leflunomide is
“to combine it with other suitable active substances, for example anti-uricopathic
45 agents, thrombocyte aggregation inhibitors, other analgesic and other steroid or
non-steroid antiphlogistic agents”.
[169] The 341 specification gives a number of examples of how leflunomide
can be prepared. It also reports on pharmacological tests in several animal models
using the compound. The models are described as Adjuvant arthritis, preventive
50 experiment; Adjuvant arthritis, Perper modification; Allergic encephalomyelitis;
Acute ulcerogenic action; Sub-acute ulcerogenic action; and Acute toxicity.
[170] In these tests, leflunomide was compared with known, closely related
isoxazole derivatives and with a known antiphlogistic agent for
“their antiphlogistic action, the effect on immunopathological processes, the
ulcerogenic activity [sic] and the acute toxicity [sic]”. The 341 specification
states that, according to these comparisons, leflunomide “is superior to the known
compounds to a surprising degree”. Later, the 341 specification discloses the
following findings:
… [leflunomide] differs advantageously in its pattern of action from the tested
antiphlogistic agents, in particular in respect of the inhibition of immunopathological
processes on animal models which are also relevant to human illness. This is probably
equally true relative to other antiphlogistic agents hitherto employed in therapy. This
fact opens up the possibility of tackling, by medication, rheumatic illnesses in man by
more nearly treating the cause, instead of purely symptomatic treatment as with the
antiphlogistic agents used hitherto.
In addition there is a possibility, in view of the histological and immunological
parallels between allergic encephalomyelitis of test animals and human multiple
sclerosis … of introducing a specific therapy, using the formulation according to the
invention, even for this illness which has hitherto been difficult to tackle therapeutically.
[171] The 341 specification ends with four claims. Claim 4 is:
Method for the treatment of inflammations, rheumatic complaints or multiple sclerosis
by administering to the patient an effective amount of [leflunomide].
The primary judge’s reasons

[172] The primary judge explained her approach to an assessment of
anticipation and recognised at [183] that it involved an evaluation of what the
prior art document communicated or disclosed to the skilled addressee.
Her Honour explained her approach to this analysis in detail by reference to a
number of decisions including Lundbeck at [173], [180]–[182] and [189]–[191].
[173] The primary judge found that the 341 patent did not disclose a method of
treatment of PsA by the administration of leflunomide to a person suffering from
PsA, for the following reasons.
[174] First, the person skilled in the art would not read the 341 patent as
disclosing in the sense of directing, recommending or suggesting the
administration of leflunomide for the treatment of any disease. At best, her
Honour found, the 341 patent discloses only the possibility of treating diseases
in humans by the administration of leflunomide: see at [217]–[219].
[175] Second, in the context of a general disclosure that does not specify PsA
or psoriasis, the 341 patent does not, in any event, direct, recommend or suggest
the administration of leflunomide for the treatment of PsA. In this connection the
choice is to read the reference in the document to “rheumatic complaints” as
meaning either all forms of inflammatory arthritis or RA alone, the most common
form of inflammatory arthritis. For the reasons fully discussed by the primary
judge at [221]–[224], her Honour concluded that the person skilled in the
art reading the 341 patent either at the date of its publication (1980) or at the
priority date of the claim in suit (1993) would have understood it as being
concerned only with the most common form of inflammatory arthritis, RA, and
multiple sclerosis, which was expressly mentioned. The primary judge found that
the person skilled in the art would not have understood the document as being
concerned with the seronegative arthropathies: see at [220]–[225]. The primary
judge (at [224]) concluded:
[224] … Hence, if (contrary to the conclusion above) the 341 patent discloses a method
of treatment of diseases in humans, it does not disclose as a method of treatment of PsA
by the administration of leflunomide. The administration of leflunomide to treat RA or
multiple sclerosis, on the evidence, may or may not also treat psoriasis and thus, for the
reasons given above, is not a disclosure sufficient to anticipate the invention claimed in
5 the patent. Accordingly, on this basis the 341 patent cannot be said to deprive the patent
of novelty.
[176] Third, even if, to the person skilled in the art, the description “rheumatic
complaints” as used in claim 4 of the 341 patent was broad enough to encompass
10 or include PsA, that disclosure was too broad to deprive the claim in suit of
novelty. The primary judge noted that the description “rheumatic complaints”,
read literally, would include all 150 or so types of arthritic disease. Her Honour
concluded that the description “rheumatic complaints” could not be read as
dealing with only RA and the seronegative arthropathies: see at [226].
15
Conclusion
[177] In our view the 341 patent can only be read as disclosing the desirability
of administering leflunomide to human recipients in a method of treatment.
We would, therefore, respectfully disagree with the first step in the primary
20 judge’s reasoning.
[178] However, we can see no error in the primary judge’s finding that the
person skilled in the art would have understood the 341 specification as being
concerned only with the most common form of inflammatory arthritis, RA, and
multiple sclerosis, which was expressly mentioned, and would not have read it as
25 disclosing the administration of leflunomide for the treatment of PsA.
The primary judge’s reasons show that she was presented with conflicting
evidence on that question, including as to what would be conveyed to the person
skilled in the art by the comparative tests undertaken using the animal models
that were described in that specification. Her Honour’s reasons show that she
30 carefully weighed that evidence in coming to her finding.
[179] The primary judge was also fortified in her view by five considerations
which she summarised (at [223]) as follows:
[223] The choice which the evidence presents, accordingly, is between reading the 341
35 patent’s reference to “rheumatic complaints” as meaning either all forms of
inflammatory arthritis or RA alone (the most common form of inflammatory arthritis).
To assist in the task of construction it is relevant to note that the 341 patent was
published in 1980. It is not necessary to decide whether the relevant date for
construction of the 341 patent is 1980 or the priority date of the patent in suit (March
1993) because, on the evidence, there is no material difference between those two dates.
40 The relevant point is that the 341 patent nowhere mentions PsA or the seronegative
arthropathies, but it does refer to “arthritis”, “inflammation”, and “rheumatic” illnesses
and complaints. With this in mind a number of other key facts must be recalled. First,
“arthritis” is a general term applying to numerous types of joint disorders. Second,
rheumatologists distinguish between non-inflammatory and inflammatory arthropathies,
45 with the latter term reserved for those forms of arthritis where inflammation of the joint
tissues is the underlying cause of damage to the joints. Third, there are two types of
inflammatory arthritis, rheumatoid arthritis and the seronegative arthropathies (PsA,
ankylosing spondylitis, reactive arthritis and inflammatory bowel disease-associated
arthritis). Fourth, RA is associated, amongst other things, with the presence of the
positive rheumatoid factor in the blood. The seronegative forms of arthritis, by
50 definition, are associated with a negative RF test. Fifth, and as Professors Smith and
Brooks said, for a number of years after the priority date of the claim in the patent
(March 1993) little was known about PsA. By March 1993 (and for some years
thereafter) most research efforts had focussed on RA as the most common form of
inflammatory (as opposed to non-inflammatory) arthritis. The aetiology of RA and PsA
was thought to be different. RA was known to be T cell-mediated. PsA was not.
The mechanisms underlying RA were known, but those underlying PsA were merely in
the course of being investigated ámmatory arthritis). As Professor Brooks said, research
was largely driven by the pharmaceutical industry and the principal focus was thus RA
and not PsA.
[180] That is, as her Honour said at [224], on the evidence, the skilled
addressee would not have understood the 341 patent to concern PsA. In our view
the reasoning of the primary judge is persuasive. The skilled addressee would not
have understood and applied the prior disclosure necessarily to obtain the
invention. The finding to which her Honour came in this regard was plainly open
to her.
[181] Moreover we can see no error in the primary judge’s further conclusion
that, if more broadly read, the expression “rheumatic complaints” lacks sufficient
clarity to deprive the claim in suit of novelty. In this connection it is to be borne
in mind that, when dealing with so-called paper anticipations, the disclosure must
contain “clear and unmistakable directions to do what the patentee claims to have
invented … A signpost, however clear, upon the road to the patentee’s invention
will not suffice. The prior inventor must be clearly shown to have planted his flag
at the precise destination before the patentee.”: see General Tire IPR 138;
RPC 484; ICI Chemicals & Polymers Ltd v Lubrizol Corporation Inc (2000) 106
FCR 214; 181 ALR 635; 49 IPR 513; [2000] FCA 1349 at [51] and Lundbeck
at [174]–[175]. Here the 341 patent does not “plant the flag” on the use of
leflunomide in a method of treatment of PsA. In Hill v Evans, Lord Westbury LC
said that “(t)here may be a latent truth in the words of a former writer, not known
even to the writer himself; and it would be unreasonable to say that there is no
merit in discovering and unfolding it to the world”. Thus Apotex’s “inevitable
result” argument cannot run.
[182] Finally, it should be emphasised again that Apotex accepted that the 341
specification does not expressly or impliedly disclose the use of leflunomide in
a method of treatment of psoriasis.
[183] For these reasons, this ground of appeal fails.
The question of validity: manner of manufacture

[184] In its further amended particulars of invalidity dated 7 March 2011
Apotex alleged that the invention, as claimed in the claim in suit, was not a
“manner of manufacture” within the meaning of s 6 of the Statute of Monopolies
because:
(a) on the face of the specification, the subject matter of the claim lacked
the necessary quality of inventiveness and/or was not new; and
(b) if the claim in suit claims the prevention or treatment of psoriasis
occurring incidentally in the use of leflunomide to treat arthritis,
including PsA, that use is not a manner of manufacture but no more than
the observation of the result of the use of a known substance
(leflunomide) for a known purpose (the treatment of arthritis, including
PsA).
[185] The primary judge dealt with this question of invalidity essentially on the
basis of whether, on the face of the specification, the claimed invention lacked the
quality of newness and inventiveness that was required: see at [236]–[243].
The primary judge decided that question adversely to Apotex.
5 [186] In its further supplementary notice of appeal, which was filed pursuant to
leave granted on 14 March 2012, Apotex raised a somewhat different ground.
It contended that the primary judge erred on this question because methods of
medical treatment of human beings are not patentable inventions and that the
dicta to the contrary effect in Bristol-Myers Squibb and Anaesthetic Supplies
10 should not be followed. It is apparent, however, that this significant question of
principle was not argued before the primary judge.
[187] During the course of the appeal Apotex sought leave to file a second
further supplementary notice of appeal in which an additional ground of appeal,
in this regard, was sought to be raised, namely that methods of medical treatment
15
for a “second or later medical use” not limited by the purpose of the treatment are
not patentable inventions. The question of leave remains to be determined.
[188] Sanofi-Aventis contends that Apotex should not be entitled to argue either
ground. First, it submitted that Apotex should not be entitled to run a new case
20 on appeal which is not within the scope of its pleading. Second, it submitted that
the further ground set out in the second further supplementary notice of appeal
cannot be made out in any event. In that regard it submitted that, however
expressed, the relevant ground must be confined to an assessment of patentability
on the face of the specification and that, when that is done, the primary judge’s
25 finding remains good. Apotex accepted that confinement. The point it advanced,
however, is that, on the face of the specification in suit, the use of leflunomide to
treat psoriasis is disclosed as a subsequent and different therapeutic use for that
compound, its use in methods of treatment of other disorders also having been
expressly disclosed. Therefore, the only new manner of manufacture disclosed on
30 the face of the specification is the use of leflunomide in a method of treatment of
psoriasis. It is that invention that must be claimed.
[189] In [143] of her reasons, the primary judge said:
[143] In respect of patents for methods of treatment of humans generally, Apotex
reserved its right to challenge the correctness of the decisions in Rescare Ltd v
35 Anaesthetic Supplies Pty Ltd (1992) 111 ALR 205; 25 IPR 119; Anaesthetic Supplies
Pty Ltd v Rescare Ltd (1994) 50 FCR 1; 122 ALR 141; 28 IPR 383 … and Bristol-Myers
Squibb Co v FH Faulding & Co Ltd (2000) 97 FCR 524; 170 ALR 439; 46 IPR 553;
[2000] FCA 316 … (which confirmed the patentability of such methods of treatment).
For the purpose of this hearing Apotex said that, if patentable, such methods of
40 treatment must have as an essential integer use for the treatment of a (or the) particular
disease: in this case, the skin disease psoriasis. In Apotex’s words, if the objective
purpose of treating psoriasis is not an essential integer of the claim then the mere
administration of leflunomide for any purpose potentially infringes the patent (as 2% of
the population has psoriasis) “and the claim is hopelessly invalid”.
45 [190] It is clear from this passage that, regardless of the precise form of its
cross-claim and particulars of invalidity, Apotex did seek to reserve as a matter
of substance, for later argument if necessary, the question of whether methods of
medical treatment of human beings are patentable inventions. The primary judge
appears to have accepted that reservation. As we have noted, leave was also
50 granted, prior to the hearing of the appeal, to permit Apotex to raise that specific
ground.
[191] Apotex’s presentation of argument before us carried with it a recognition

of the apparent strength and persuasiveness, at this level of appeal, of the dicta
in this court in the cases cited by the primary judge at [143], which have accepted
the patentability, under Australian law, of methods of medical treatment. It is not
necessary, for present purposes, to detail the reasoning in those cases. It is
sufficient to direct attention to the following passages: Rescare at ALR 233–9;
IPR 145–51 (Gummow J); Anaesthetic Supplies at FCR 6–19; ALR 146–59; IPR
388–401 (Lockhart J) and at FCR 42–5; ALR 181–4; IPR 423–6 (Wilcox J); and
Bristol-Myers Squibb at [7]–[18] (Black CJ and Lehane J) and [99]–[142] and
[161] (Finkelstein J).
[192] Nevertheless, as we have noted, Apotex submits that these dicta should
not be followed. It submits that the contrary reasoning and conclusion of
Sheppard J in Anaesthetic Supplies (at FCR 33–7; ALR 172–6; IPR 413–17)
should be followed.
[193] We would not depart from the position represented by the dicta in this
court that support the patentability of methods of medical treatment, a position
which we regard as representing orthodoxy in Australian patent law. Experience
shows that it is commonplace for patents to be granted in Australia that include
claims for methods of medical treatment. There is judicial recognition of that
fact: Bristol-Myers Squibb at [16]. Moreover, as Wilcox J observed in
Anaesthetic Supplies (at FCR 42–3; ALR 181; IPR 423), it is significant that the
Australian Parliament has not been persuaded to legislate any change to the
Patents Act to give specific effect to policy considerations that argue against the
patentability of methods of medical treatment. Indeed, in that connection, it is
noteworthy that, when defining what is a patentable invention for a standard
patent, the only specific exclusions in s 18 (beyond the generally expressed
requirements for patentability in s 18(1)) are “human beings, and the biological
processes for their generation”: see s 18(2).
[194] We would also grant leave to Apotex to raise the additional ground of
appeal. Its determination is inextricably bound up with the question of
construction of the claim in suit that was central to the case at trial.
Its determination requires no factual findings and creates no prejudice beyond the
fact that it is a differently articulated challenge to the validity of the claim.
[195] Having said that, we are of the view that, whatever the merits of the
ground as a generally expressed proposition (a matter on which we express no
view), it cannot succeed in the present case. The face of the specification makes
clear that the patentee identifies as its invention a new method for preventing or
treating a skin disorder, specifically psoriasis. There is nothing on the face of the
specification that would suggest that the invention there described is devoid of
the necessary quality of inventiveness to sustain a valid patent. After finding
(at [241]) that the prior art references in the specification in suit could not be
equated to a disclosure on its face that leflunomide treats PsA or psoriasis, the
primary judge (at [242]) found as follows:
[242] The qualities of leflunomide (or its character), on the face of the patent in suit,
also could not be described as “known” in the sense that [that] term is used in this
context. It is true that the patent in suit discloses leflunomide as being
anti-inflammatory, but that general description cannot be said to exhaustively define the
actions and thus the characteristics or qualities of leflunomide. This is consistent with
the position disclosed by the objective evidence available at that time …
[196] There is no reason to interfere with these findings. Moreover, the plain
terms of the claim in suit show that it is limited to a method of treating psoriasis.
[197] It follows that these grounds of appeal fail.
5 The question of implied licence

[198] Sanofi-Aventis’s case of copyright infringement of the Arava works
arises in somewhat unusual circumstances. As noted, the Arava works are
product information documents associated with the supply of the Arava products
by the first respondent. The Therapeutic Goods Legislation Amendment
10 (Copyright) Act 2011 (Cth) amended the Copyright Act 1968 (Cth)
(the Copyright Act) by introducing s 44BA which provides, among other things,
that reproducing, in Australia, some or all of the information contained in product
information approved under s 25AA of the Therapeutic Goods Act 1989 (Cth) in
relation to medicine, is not an infringement of copyright. Section 44BA has effect
15 in relation to acts done on or after 28 May 2011, regardless of when the product
information was approved. The parties proceeded on the basis that the Arava
works fell within the scope of s 44BA.
[199] Apotex does not dispute the fact that it reproduced a substantial part of
the Arava works, directly or indirectly, before 28 May 2011. Although at trial it
20 challenged both the authorship and originality of those works as copyright works,
the question of copyright subsistence is not an issue in this appeal. The only issue
in this appeal is whether the primary judge erred in failing to find that
Sanofi-Aventis was bound by a licence which permitted Apotex to reproduce
them. In this connection Apotex contends that Sanofi-Aventis was bound by a
25 licence that was implied by custom. It relies upon various statements of principle
in Con-Stan; Hawkins and Byrne.
[200] It should be noted at the outset that these authorities concern the role that
trade custom or usage might play in implying terms into a contract. Thus, in
Con-Stan the question was whether particular terms should be implied in a
30 contract between insurer and insured dealing with the payment of premiums; in
Hawkins the question was whether a term should be implied in a contract
between solicitor and (testator) client as to the steps that a solicitor is obliged to
take to locate the executor or beneficiaries under a will of which the solicitor has
custody at the time of the testator’s death; in Byrne the question was whether a
35 term of an industrial award should be implied in a contract between employer and
employee, such as to confer on the employee a right to contractual damages for
breach of that term.
[201] In Con-Stan the High Court (at CLR 236–8; ALR 485–6) identified a
40 number of propositions which can be summarised as follows. First, the existence
of a custom or usage that will justify the implication of a term into a contract is
a question of fact. Second, and importantly for present purposes, there must be
evidence that the custom relied on is so well known and acquiesced in that
everyone making a contract in that situation can reasonably be presumed to have
45 imported that term into that contract. Third, a term will not be implied on the
basis of custom where it is contrary to the express terms of the agreement. Fourth,
a person may be bound by a custom or usage notwithstanding that the person has
no knowledge of that custom or usage. This is because persons are presumed to
know of customs and usages that are so notorious that they can be implied as
50 terms in contracts. In this connection the High Court said (at CLR 238;
ALR 486):
… In this way, the issue of notoriety … came to be co-extensive with the question of
imputed knowledge. The achievement of sufficient notoriety was both a necessary and
sufficient condition for knowledge of a custom to be attributed to a person who was in
fact unaware of it. The result is that in modern times nothing turns on the presence or
absence of actual knowledge of the custom; that matter will stand or fall with the
resolution of the issue of the degree of notoriety which the custom has achieved.
The respondent’s contention that industry practices unknown to the assured are
incapable of forming the basis of an implied term of the contract cannot be sustained.
[202] On appeal Apotex did not seek to explain how the principles discussed in
these cases came to apply to its own circumstances. It could not contend, for
example, that it had a contract for the supply of goods or services with
Sanofi-Aventis or with any of its other competitors into which a term based on
trade custom or usage might be implied.
[203] Moreover, as Sanofi-Aventis argued, Apotex did not seek to demonstrate
how its acts in reproducing the Arava works were “authorised by a licence
binding the owner of the copyright” outside the principles of contractual
consideration and privity (see s 15 of the Copyright Act and the observations of
Gummow A-CJ in Concrete Pty Ltd v Parramatta Design & Developments
Pty Ltd (2006) 229 CLR 577; 231 ALR 663; 70 IPR 468; [2006] HCA 55 at [10]),
beyond saying, in effect, “everyone does it”. It certainly did not seek to advance
any particular relationship between itself and Sanofi-Aventis, or any particular or
discrete event or conduct as between itself and Sanofi-Aventis touching upon the
Arava works, that would warrant the implication of a licence ad hoc.
[204] At trial Apotex sought to rely on what it contended was the
“long-standing practice” of the TGA in approving product information
documents for generic versions of drugs in essentially the same or similar form
to the product information documents approved for the original version of the
drug. The primary judge accepted that there was evidence of such a practice but
concluded that this did not provide a proper foundation for the implication of a
licence. The primary judge found (at [373]) that, so far as the regulatory regime
was concerned, the TGA does not require product information for a generic or
later version of a drug to be identical to the product information for the original.
But perhaps more importantly for present purposes, the primary judge considered
the evidence of the “long-standing practice” to be equivocal. In that regard the
primary judge said (at [376]):
[376] … It is true that Apotex has discovered PIs where one may infer that the generic
company has copied from the innovator PI (including PIs which suggest such copying
by Sanofi-Aventis itself). It is also true that, albeit late in the day, Sanofi-Aventis has
located other PIs which appear not to have been copied or, at least, not to have been
copied to the same extent. It may also be accepted that the MIMS annual takes the
approach of cross-referring from a generic drug to the innovator PI for that drug. But the
evidence as a whole is simply insufficient to establish either the existence of an
industry-wide practice of copying, or anything more than apparent neutrality by
participants in the industry as to the copyright implications of such copying (at least
until the present case). As to the issue of custom, the evidence does not disclose the
proportion of PIs in evidence (tendered by either party) compared to all approved PIs.
The PIs in evidence, accordingly, lack any meaningful context. As to mere neutrality,
it cannot be inferred from the lack of evidence of any objection until that of
Sanofi-Aventis in the present case that participants in the industry implicitly consented
to the so-called industry-wide practice of copying. The evidence, at best, indicates a
mere lack of objection to apparent cases of PIs being copied. In the circumstances
outlined above, lack of objection without a duty to object is equivalent to mere
neutrality which, as McHugh J said in [Avel Proprietary Limited v Multicoin

Amusements Proprietary Limited (1990) 171 CLR 88 at 123; 97 ALR 19 at 44;
18 IPR 443 at 468], is not sufficient to establish an implied licence.
[205] Apotex submitted that the primary judge erred in making this finding.
5 In so submitting, however, it did no more than advance the contrary proposition
that “(t)he evidence showed that there was such a practice and that it was so
widespread as to be an industry custom, giving rise to a licence, implied as a
matter of fact, that pharmaceutical companies in Australia bringing a second or
later brand of a registered medicine to market may copy the originator’s PI”.
10 [206] In our view Apotex has not demonstrated error in the primary judge’s
conclusion that the evidence of the asserted “long-standing practice” was
equivocal, in the way discussed by her Honour. Indeed, the primary judge’s
reasoning is compelling. Thus, apart from the conceptual difficulties that attend
the case it seeks to bring for the implication of a licence based on trade custom
15 or usage, the factual foundation to establish the requisite notoriety of which the
cases speak is lacking.
[207] So to view the matter is not to cast on Apotex the onus of proving the
existence of a licence. Plainly the burden of proving the absence of a licence fell
on Sanofi-Aventis: Avel Pty Ltd v Multicoin Amusements Pty Ltd
20
(1990) 171 CLR 88 at 94; 97 ALR 19 at 22; 18 IPR 443 at 446. However, that
burden was one to be discharged upon the whole of the evidence: Purkess v
Crittenden (1965) 114 CLR 164 at 168; [1966] ALR 98 at 100. It was Apotex that
advanced, by way of positive defence, the existence of a licence implied by trade
custom or usage. It was for it to make good the factual foundation for that
25
defence. Sanofi-Aventis assumed no evidential burden in that regard: see the
discussion in Acohs at [169]–[173]; see also Lorenzo & Sons at 380.
[208] For these reasons, this ground of appeal fails.
Disposition
30 [209] We are of the view that the appeal should be dismissed with costs.
Orders
(1) The appeal be dismissed.
(2) The appellant pay the respondents’ costs of the appeal to be taxed if not
35
earlier agreed.
DR DAVID ROLPH
40
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APOTEX PTY LTD v SANOFI-AVENTIS AUSTRALIA PTY LTD

KEANE CJ, BENNETT and YATES JJ

30 April, 1 May, 18 July 2012 — Sydney

Patents — Infringement — Threatened infringement — Supply and use of products

Copyright — Infringement — Literary works — Product information statements —

The second respondent, Sanofi-Aventis Deutschland GmbH, is the registered owner of

D Catterns QC and N Murray instructed by Freehills for the appellant.

patent, properly construed, does not extend to the application of leflunomide as

direct or immediate purpose of treatment. By contrast … Sanofi-Aventis’s construction

[32] In resolving the issue of construction in favour of the respondents, her

[48] Section 117 of the Act provides:

second by the amplification in s 117(2) of what is meant by “the use of a product by a

[54] By reason of the primary judge’s findings of fact in relation to s 117(2)(b)

… [A]n invention is a patentable invention … if the invention, so far as claimed in any

The copyright claim: implied licence

[79] The decisions in Con-Stan Industries of Australia Pty Ltd v Norwich

• As at 1993, PsA had not been as intensively studied as RA. RA was

The alleged invention as described and claimed

[120] Finally, on the question of copyright infringement, the primary judge

regardless of any other therapeutic or biological effect that leflunomide might

5 The question of infringement

[144] In this connection Sanofi-Aventis, on appeal, also drew attention to a part

(b) The alleged anticipation is thus the administration of leflunomide as a

The primary judge’s reasons

The question of validity: manner of manufacture

[191] Apotex’s presentation of argument before us carried with it a recognition

5 The question of implied licence

neutrality which, as McHugh J said in [Avel Proprietary Limited v Multicoin

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