In a welcome boost for Australian innovators in biotech and medical technologies, the Australian government has announced the introduction of a new patent box scheme which will come into effect on 1 July 2022.
Patent box schemes of different forms are currently available to innovators in over twenty countries including many European countries. The general concept of a patent box scheme is to encourage innovation by applying a lower rate of corporate tax to any profits made from patented inventions.
The Australian government is introducing a patent box to encourage businesses to undertake R&D and keep patents in Australia. The patent box will tax income derived from Australian medical and biotech patents at a 17 per cent effective concessional corporate tax rate. Normally corporate income is taxed at 30 per cent or 25 per cent for SMEs.
Only granted Australian patents with a filing date after 11 May 2021 will be eligible for the patent box. It seems likely that the patent box will also only apply to granted Australian standard patents and not innovation patents.
The government has said it will consult closely with industry on the design of the patent box before implementation on 1 July 2022.
In addition to the new patent box scheme which incentivises businesses at the ‘back end’ of the commercialisation pathway, Australia also has an R&D tax incentive, which provides incentives to carry out earlier stage research and development in Australia.
At this stage, the patent box scheme will only apply to biotech and medical technologies, although the government has also suggested it could be extended to the clean technology sector. In an effort to incentivise innovation in a wide range of sectors in Australia it would be good to see the patent box scheme eventually extended to other technology areas as well.
Madderns will monitor the implementation of the patent box scheme closely and update our clients and associates when we have further information.
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A patent term extension (PTE) provides a valuable mechanism for an Australian patent holder to extend the term of a pharmaceutical patent beyond the standard 20-year term. The PTE provisions are designed to compensate a patentee for the relatively long time required to develop, test and obtain regulatory approval to commercialise a new drug.
An application for a PTE can be made when (i) the patent relates to a pharmaceutical substance or a pharmaceutical substance when produced by recombinant DNA technology, (ii) the substance is included on the Australian Register of Therapeutic Goods (ARTG) before the 20-year term of the patent expires, and (iii) at least five years have elapsed between the effective filing date of the patent application and the first inclusion of the pharmaceutical on the ARTG.
An application for a PTE must be lodged within six months from the later of (i) the date on which the patent was granted or (ii) the date of first regulatory approval of a product containing or consisting of a pharmaceutical substance covered by a claim of the patent.
In the recent case of Ono Pharmaceutical Co Ltd et al.  APO 43, the Australian Patent Office had to determine the date of first regulatory approval of a product containing or consisting of a pharmaceutical substance covered by the claims of the patent.
Ono Pharmaceutical Co., Ltd. and E. R. Squibb & Sons, L.L.C. are the owners of Australian Patent No. 2011203119 (the Ono patent) which covers monoclonal antibodies that bind to PD-1. Important cancer immunotherapy drugs Pembrolizumab (KEYTRUDA – a Merck Sharpe and Dohme product) and the Nivolumab (OPDIVO – an Ono Pharmaceutical product) are covered by the Ono patent.
ARTG approvals for KEYTRUDA and OPDIVO were obtained in Australia on 16 April 2015 and 11 January 2016, respectively. The patentee filed two separate applications for PTE, the first based on the KEYTRUDA regulatory approval date and the second based on the OPDIVO regulatory approval date. The latter PTE would provide a slightly longer extension term, and therefore the Patentee asked for this PTE request to be considered first. The KEYTRUDA-based PTE request would also require the granting of an extension of time, as the PTE request was filed more than six months after the KEYTRUDA regulatory approval date.
The OPDIVO-based PTE request was considered by a Delegate of the Commissioner who held that the KEYTRUDA pharmaceutical substance fell within the scope of the claims of the Ono patent, and the PTE request should have been filed within six months from the date of first inclusion of KEYTRUDA on the ARTG. The Patentee requested a hearing in relation to this decision and submitted at the hearing that the purpose of the extension of term provisions was to restore the time lost to patentees prior to gaining marketing approval and that a construction of the PTE provisions that would render the OPDIVO-based PTE request invalid would be manifestly absurd or unreasonable. The Delegate disagreed with the Patentee and held that the pharmaceutical substance to be considered with a PTE request does not have to belong to the patentee and that a PTE request must be based on the earliest of the approval dates that apply to the patent, irrespective of who obtained the approval. Therefore, the Delegate decided that the KEYTRUDA regulatory approval date was the earliest first regulatory approval date and the OPDIVO-based PTE request was refused.
It is important for patentees to be aware of all pharmaceutical substances that fall within the scope of the claims of their patent and their respective regulatory approval dates because a PTE request will need to be filed within six months of the earliest regulatory approval date, irrespective of whether that regulatory approval was obtained by the patentee themselves or by a third party.
It is also important for patentees to carefully consider the scope of their granted patent claims because broad claims are more likely to include pharmaceutical substances that may have regulatory approval obtained by a third party.
In summary: A patent term extension (PTE) must be requested within six months of the earliest regulatory approval date of a pharmaceutical substance covered by the claims of the patent, even when the earliest regulatory approval was not obtained by the patentee. Patentees will need to be aware of all pharmaceutical substances that fall within the scope of the claims of their patent and their respective regulatory approval dates. They should carefully consider the scope of their granted patent claims to ensure they do not cover pharmaceutical substances that may have regulatory approval obtained by a third party.
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