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Tuesday, April 16, 2013

The importance of playing by the rules

By Lawyer Joel Barrett

There's no guarantee that the Federal Court will admit evidence that fails to comply with the Federal Court Rules, no matter how material it is to your case or how much prejudice its exclusion will cause. Generic Health Pty Ltd, a generic pharmaceutical supplier, found that out the hard way in Justice Jagot's recent decision in Bayer Pharma Aktiengesellschaft v Generic Health Pty Ltd.

The case involved a patent covering a pharmaceutical contraceptive. The patentee, Bayer Pharma Aktiengesellschaft, markets the product as YASMIN, and Generic Health started selling its own version – ISABELLE – in February 2012, 11 years before the patent was due to expire. Bayer sued for patent infringement and Generic Health naturally cross-claimed for patent invalidity.

The decision is relatively straightforward. On the facts, Justice Jagot found that Generic Health failed to establish any of its pleaded grounds of invalidity: lack of inventive step, lack of a manner of manufacture and lack of fair basis. Essentially, ISABELLE infringes a valid patent. The interesting part is that Generic Health might have succeeded on lack of novelty, but we will never know because Justice Jagot ruled Generic Health's only evidence on that point inadmissible in an earlier interlocutory skirmish, and Generic Health had no option but to abandon the argument at trial.

In early March 2013, Generic Health had sought leave to rely on the affidavit of Mr Burgess, who had observed an experiment in Pune, India in September 2012 involving the manufacture of tablets in accordance with information in a piece of prior art, which Generic Health claimed anticipated the patent and thus destroyed its novelty. Bayer argued that Generic Health hadn't complied with rule 34.50 of the Federal Court Rules, which basically requires a party who proposes to tender 'experimental proof of fact' as evidence to first apply for certain orders, including orders about the time and place of the experiment, who must be permitted to observe it, and so on. The party must then comply with the orders or obtain leave of the court, otherwise evidence regarding the experiment's conduct and results will likely be inadmissible.

Generic Health argued that rule 34.50 was not enlivened because Mr Burgess' evidence only related to the experiment involving manufacture of tablets, and so didn't constitute 'experimental proof of fact'. The relevant fact, Generic Health contended, concerned the dissolution rates of those tablets, and the dissolution tests were conducted after, and separately from, the experiment. Justice Jagot disagreed with that characterisation, finding that the tablets were manufactured for the purpose of carrying out the subsequent dissolution tests, so the experiment was plainly part of the 'experimental proof of fact'.

So rule 34.50 applied, and Generic Health obviously hadn't complied with it. After much correspondence between the parties leading up to the Pune experiment, during which Bayer repeatedly argued that rule 34.50 was engaged, complained that an experiment outside Australia wouldn't be cost-effective and emphasised that it would be inappropriate for Generic Health's parent company to conduct the experiment, Generic Health proceeded with the experiment anyway. Although Generic Health advised Bayer of the impending experiment in a letter, it failed to disclose that it would be taking place the very next day, which Justice Jagot noted 'effectively [denied Bayer] any opportunity to be present during the manufacturing process and to observe what Mr Burgess had the opportunity of observing'.

Despite its failure to comply with rule 34.50, Generic Health argued that it would be heavily prejudiced if Mr Burgess' affidavit was not admitted, which would far outweigh any prejudice suffered by Bayer if the affidavit was allowed. While Justice Jagot accepted that excluding the evidence would prejudice Generic Health, her Honour refused to admit the evidence for several reasons, including that Bayer was prevented from observing the experiment 'when it would always have been in the power of [Generic Health] to give [Bayer] that opportunity', Bayer would be considerably prejudiced by admission of the affidavit due to the importance of the novelty issue to Bayer's defence of the invalidity claim, the affidavit was inscrutable (in that Mr Burgess simply observed an experiment conducted by other people, and couldn't be meaningfully cross-examined on the experiment's conduct), and the evidence might be unfairly prejudicial to Bayer under section 135 of the Evidence Act 1995 (Cth).

Her Honour stated that as early as August 2012, when Justice Yates foreshadowed in a directions hearing that the potential evidence probably wouldn't be accepted at trial if it didn't comply with rule 34.50 and that 'the risk is with [Generic Health] on that', Generic Health should have either taken steps to comply with the rule or sought an interlocutory determination on the 'experimental proof of fact' issue.

So remember: eat your greens, never run with scissors and always comply with the Federal Court Rules.

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