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Noel Kim

Noel Kim

Special Counsel

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Intellectual Property

Preliminary Discovery

Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd [2017] FCAFC 193.    Summary:  Prior to filing a patent infringement lawsuit, Pfizer, the patentee, applied for a ‘preliminary discovery’ order against Samsung Bioepis, a suspected infringer of the patent, to submit a specific document.  2016, first trial (Federal Court of Australia): Pfizer’s did not meet the requirements of the preliminary discovery application: Pfizer lost, Bioepis wins.  2017, second trial (Full Federal Court of Australia): Preliminary discovery requirements were not about the objective facts of evidence submitted (expert’s findings) but rather whether Pfizer’s assertion was rational. Pfizer met the requirements; Pfizer wins, Bioepis loses – An order was made for Bioepis to provide documents requested by Pfizer.  March 2018, third trial (High Court): Bioepis’ requested Special leave was denied: Final – Pfizer wins, Bioepis loses.  From the Patentee’s perspective, proactive use of the preliminary discovery order (you can receive information from the other side in advance and decide whether or not to proceed with a lawsuit if you are unsure on whether the other side is violating through the use of the patent).   “Between war and war”. This famous phrase from the book “The Art of War” means that if you know the situation you are in well, you can fight a hundred times and not be at risk. It is a word that can be applied in a situation where there is an opponent should that be at war, a negotiation, sports game or gambling. The same applies for court proceedings where if you know more about the information or evidence the other side has, you can file a lawsuit more confidently and if you believe the situation will not be in your favour, you can find out whether there is another viable solution.  A discovery regime is to offer evidences each party has upon requests by the other party in pre-trials, and it is very useful to determine whether to continue litigations after looking at each other’s evidence and also to prevent  in advance from encountering unpredictable evidences (“surprise”) later on in trials by ascertaining the other party’s strengths and weaknesses prior to hearings and trials. Of course, on special occasions such as in privileged documents due to lawyer-client relationships, a party can reject a request from the other party to offer an evidence; However, the court can generally intervene in if a party does not submit to the other party’s reasonable requests.  Thanks to a discovery regime, many litigation cases are often terminated early upon settlements between parties in the middle of litigations. Interchanging and examining each other’s evidence helps a party to understand the other party’s strengths and weaknesses, and it may be more beneficial to each other in a long run to compromise each other rather than going all the way in litigations while paying a great sum of money.   In Australia, a common law country, this discovery regime takes huge part in civil proceedings. According to the rule 7.23 of the Federal Court Rules 2011, there is a regime called a preliminary discovery, which enables each party to obtain evidences from the other party upon request to the court even prior to submitting complaints.  As this preliminary discovery clause is conservatively and sparingly used, it has been difficult for parties to get such order. Even prior to litigations, it is unlikely for a party to unreluctantly offer any information or document which is sensitive to the other party (confidential sales/operative information). Since such request is oftentimes triggered among competitors in the same industry, respondents actively try to defend themselves. Reversely, for the applicants who urge such requests, they may get themselves into trouble by recklessly initiating a litigation based on a conviction without a material evidence. Even so without a litigation, it may not be satisfying for a party to observe the competitor’s gradual encroachment into a common-share market. Especially in pharmaceutics- related patent litigations like a case below, the other party’s information obtained prior to a trial would be a valuable information in determining whether to proceed to litigations further, since a manufacturing process is often not overtly displayed.   The case to be introduced below is a litigation after a long period of appeals and cross-appeals, between the Pfizer Ireland Pharmaceuticals Ltd and the Samsung Bioepis AU Pty ltd, which ended up being a precedent concerning a preliminary discovery by the Australian Federal Court.     Facts Overview  Specialized in biomedicals, the Samsung Bioepis Ltd, which was co-founded by the Samsung biologics Ltd, a subsidiary of the Samsung Group, and the Biozen Ltd from the United States, is primarily in charge of developing biosimilars. In turn, these biosimilars are produced by its parent company, the Samsung biologics.  In 2016, the Bioepis Ltd was successful in getting an approval of two biologics consisting of Etanercept in the name of BREZNYS by the Australian Register of Therapeutic Goods (TGA). These products are known to be affiliated with one of the Disease Modifying Anti-Rheumatic Drugs (DMARD) commercially sold as ENBREL, whose patent is beheld by the Pfizer Ltd. Approved by the U.S. Food and Drug Administration (FDA), the Pfizer Ltd’s ENBREL is a very first DMARD, leading a global DMARD market up until now.   Although having a doubt as to a possible infringement of its own company’s patent right by the TGA-approved BREZNYS products, the Pfizer Ltd did not have any affirmative evidence to be submitted in a patent litigation. The Pfizer Ltd contemplated that had it obtained a document as to the Bioepis’s manufacturing process submitted to be authorized by the TGA,  it could have determined a prospect of the litigation as to an infringement of its own patent more meticulously.  Thereafter, as the Pfizer Ltd submitted an application for a pre-trial discovery order to a court  pursuant to rule 7.23 of the Federal Court Rules 2011, and the Bioepis Ltd rejected the discovery request, the federal court handed down a judgment as to the trial provided below.    Federal Court of Australia’s decision  According to the rule 7.23 of the Federal Court Rules 2011, a prospective applicant may apply to the court for an order if the prospective applicant reasonably believes that he or she may have the right to obtain relief in the court from a prospective respondent, does not have sufficient information to decide whether to start a proceeding in the court to obtain that relief despite making reasonable inquiries, reasonably believes that the prospective respondent has or is likely to have or has had or is likely to have had in the prospective respondent’s control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief, and inspection of the documents by the prospective applicant would assist in making the decision.   The Pfizer Ltd’s head of manufacturing process technology, Dr Ibarra informed Mr Silvestri, who is a chief in-house council, of the company’s patent information and an expert opinion with respect to the product’s manufacturing process. Following the Dr Ibarra’s opinion, the Pfizer Ltd alleged in the court that it is highly probable that the Bioepis’s product, BREZNYS, infringed its patent right.   Against this, Professor Gary on behalf of the Bioepis submitted an expert opinion denying the Pfizer LTd’s allegation that the counterpart’s evidence is not sufficient for them to form a reasonable belief that its product, BREZNYS, has infringed the Pfizer Ltd’s patent right.   A federal court judge, Burely J stood on the side of the Bioepis, determining that the expert opinion submitted by the Pfizer Ltd alone is not sufficient enough for it to form a reasonable belief that the Bioepis’s product infringed its patent right, and such belief is no more than a mere suspicion. Furthermore, Burely J added that the mere fact that the BREZNYS and the ENBREL are both biosimilar products does not mean that their manufacturing process are alike.    An Appeal in the Full Federal Court of Australia- different opinion as to a “reasonable belief”   Upon an appeal by the Pifzer Ltd, all three judges from the Full Federal Court of Australia upheld the appeal, determining that the federal court made a mistake in its judgment.   The full federal court of Australia emphasized that a determination with respect to the rule 7.23 is not a mini-trial dealing with the infringement issue, and the purpose of a pre-trial discovery is to reduce the costs to be incurred in the court proceeding and by right support the applicant’s determination. That is, judging factual correctness of each party’s expert opinion as to the possibility of patent infringement in an adversarial manner is not a point at issue, rather its more of reasonableness of the Pfizer Ltd’s belief.  In conclusion, the Pfizer Ltd won whereas the Bioepis Ltd lost, and the full federal court ordered the Bioepis Ltd to disclose the documents requested by the Pfizer Ltd.    An Application for special leave to the High Court  In May 2018, the Bioepis Ltd applied for a special leave to the High Court in order to appeal the Full Federal Court’s decision. Hight Court Judges, Nettle J and Gordon J rejected a special leave and affirmed the Full Federal Court’s decision. Overall, the Pifzer Ltd won and the Bioepis Ltd lost.    Implication   This final decision lays out the conversion from the court’s conventional proclivity to requiring subjective determination as to facts in patent infringement cases to objective yet reasonable determination.  That is, there is an unanimous decision in the court that an applicant fulfills the requirements of  the rule 7.23 as long as he or she forms a objective and reasonable belief, which resonates the interpretation of ordinary meaning of the terms in the rule 7.23.   Such decision is a good news to patent holders unlike to latecomers in the market.  It has become highly likely for patent holders to obtain their opponent’s evidence without burdening themselves to initiate litigations if they utilize a “pre-trial discovery” scheme wisely in circumstances where there are doubts as to possible patent infringements. Also, prior to initiating litigations, they would be able to negotiate with their opponents based on evidences that they obtained through a pre-trial discovery.  In a state-of-the-art biomedical technology, telecommunication, and software-related patent arena, it has become more difficult to discern and reason a manufacturing process or structural analysis using advanced technology such as reverse engineering. Therefore, given such circumstances, Australia’s “pre-trial discovery” regime has become a strong weapon.  On the other hand, for prospective respondents against a pre-trial discovery request, they have to allege neither their opponents’ belief are objective nor subjective evidence as to such belief is sufficient. It would be hard for them to ward off the opponent’s spear just by contending a factual correctness based on the evidence provided by the prospective applicants.