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Applications for preliminary discovery are not dress rehearsals or “mini trials”

7 minute read

Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd [2017] FCAFC 193

On 29 November 2017, the Full Court of the Federal Court of Australia upheld an appeal from the primary judge in respect of orders made refusing an application for preliminary discovery pursuant to r 7.23 of the Federal Court Rules 2011 (Cth) (FCRs). The three separate judgments of Chief Justice Allsop and Justices Perram and Nicholas contain a comprehensive analysis of FCR 7.23 and the prior case law, thereby providing a detailed and practical guide for prospective litigants seeking to determine whether they may have the right to obtain preliminary discovery.

Setting the scene

Pfizer manufactures etanercept which is the active ingredient in ENBREL, a biological medicine used in the treatment of autoimmune diseases such as rheumatoid arthritis, juvenile rheumatoid arthritis and psoriatic arthritis. Since 2003, Pfizer has been the sponsor of ENBREL on the Australian Register of Therapeutic Goods (ARTG). Until July 2016, ENBREL was the only product containing etanercept registered on the ARTG. Samsung Bioepis AU (SBA) is the sponsor of two pharmaceuticals products containing etanercept as the active ingredient registered on the ARTG under the name BRENZYS from July 2016.

Pfizer’s preliminary discovery application

Pfizer made an application for preliminary discovery in order to obtain certain confidential documents SBA had lodged with the Therapeutic Goods Administration, which Pfizer believed would assist it in determining whether or not to commence proceedings against SBA for patent infringement.

Decision at first instance

In Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd [2017] FCA 285, the central issue at first instance was whether Pfizer had satisfied FCR 7.23(1)(a) which required Pfizer to demonstrate that it held a reasonable belief that it may have the right to obtain relief from SBA for infringement of three of its process patents.

That belief was expressed by a representative of Pfizer, and was based on the expert evidence of Pfizer’s expert, Dr Ibarra. Dr Ibarra’s evidence was to the effect that, in her opinion and based on her expertise, the close similarity of the glycosylation profiles of the two products was a basis to believe the upstream process to make BRENZYS was similar to that of Pfizer’s process patents.

It was accepted by the primary judge that based on Dr Ibarra’s evidence Pfizer subjectively believed that it may have a right to relief. However, his Honour held that irrespective of Pfizer’s subjective belief, the evidence of Dr Ibarra, when considered against the evidence of SBA’s experts, objectively supported no more than a “mere suspicion” that SBA infringed its process patents. In the result, his Honour held that Pfizer had failed to demonstrate a reasonable belief that it may have the right to obtain relief for patent infringement from SBA.

Furthermore, the primary judge held that even if Pfizer had established it held a reasonable belief, he would have exercised his discretion against granting the preliminary discovery order sought. His Honour held that whilst asking the Court to exercise its coercive powers to require SBA to expose its confidential process documents for the purpose of commencing proceedings, Pfizer failed to provide the Court with the basis upon which it may be discerned including whether the Pfizer process itself falls within any of the claims. This proposition was foundational to the chain of inferences which Pfizer propounded the Court ought to draw. His Honour held that whilst Pfizer’s expert evidence was admissible, its utility in assessing the strength of the inferences Pfizer asked to have drawn in its favour was weakened considerably by the absence of detail from which the inferences may be drawn.

The correct approach to determining “reasonable belief” became the central issue on appeal.

On appeal

The Full Court held that the relevant test under the rule is that preliminary discovery will be granted where a prospective applicant subjectively believes it may have a right to obtain relief and that belief is reasonably open on the evidence (i.e. not unreasonable, untenable, irrational or baseless).

To succeed, SBA would have had to demonstrate that no reasonable person apprised of Dr Ibarra’s evidence would think that a right to obtain relief may exist. The Full Court found that Dr Ibarra’s views were capable of providing a reasonable basis for Pfizer’s subjective belief even though those views were contested by SBA. The correct question was not which witness was more persuasive or to be preferred, but whether Dr Ibarra’s views so lacked foundation that it was not open to Pfizer to rely upon them.

The Full Court held that confusion had arisen out of previous authorities where the Court had occasionally applied a standard of the existence of a right to relief rather than the possible existence of a right to relief. This, the Court held, had led to a tendency of such applications to become “mini-trials” because of a misapprehension that a prospective applicant must show the reasonableness of a right to relief existing rather than possibly existing.

In this regard, the Full Court found that whilst Dr Ibarra may be wrong, her views could not be put to one side as unreasonable or untenable in the kind of hearing anticipated for the operation of the rule and her views were not ones that were unreasonably held. Accordingly, Pfizer’s belief based upon Dr Ibarra’s evidence was reasonable and satisfied FCR 7.23(1)(a). In making their observations, the Court reiterated that proceedings of an interlocutory nature are not generally the appropriate forum for final findings of fact to be made, especially in light of contested scientific evidence and absent cross examination.

What does this mean for prospective applicants?

The forming of a reasonable belief by a prospective applicant will necessarily involve some degree of speculation; the relevant inquiry is whether the belief arising from the speculation is a reasonable one. The Full Court’s decision makes it easier to meet that standard and reiterates the importance of giving the FCRs the meaning that the words intend.

The Full Court’s decision means that applications for preliminary discovery should be less complex and cheaper to obtain and there will be a movement away from the tendency toward the extensive “mini trials” that have occurred in recent years.

Expert evidence can be relied upon by the relevant decision maker to establish belief in circumstances where the expert opinion discloses familiarity with the relevant material (in this case the patents and Pfizer’s manufacturing processes) and necessary qualifications, technical knowledge and experience.

In practice, to defeat a claim for preliminary discovery it will be necessary either to show that the subjectively held belief does not exist or, if it does, that there is no reasonable basis for the belief. Showing that some aspect of the material on which the belief is based is contestable, or even arguably wrong, will rarely make good such a contention.

Take away points

  • The plain words of the rule must be firmly kept in mind and not be supplanted for other less precise words or phrases – all that is required is that the prospective applicant reasonably believes he or she may have a right to obtain relief.
  • The current iteration of the rule was not intended to disturb the settled principles governing the application of the former rule, O 15A, r 6.
  • Interlocutory applications are not the appropriate place for the making of final determinations on contested evidence, especially in circumstances where there is no cross examination and the evidence cannot be tested.
  • An applicant’s reasonable belief need only be founded on considerations or views that are reasonably open or arguable.
  • To defeat a claim for preliminary discovery it will be necessary to demonstrate that the subjectively held belief either does not exist or that there is no reasonable basis for the belief.

This decision is still subject to an appeal period and therefore there may be more acts to follow.