Open Sesame – the Federal Court Opens the Door to Preliminary Discovery in the Xadago® Dispute

Introduction

Newron Pharmaceuticals S.p.A. (Newron) and Zambon S.p.A (Zambon) have succeeded in their preliminary discovery application against Arrotex Pharmaceuticals Pty Ltd (Arrotex) in the Federal Court of Australia.  Newron and Zambon sought production of documents from Arrotex, for the purpose of deciding whether to commence court proceedings for actual or threatened infringement of two patents relating to the product and the process of producing high purity safinamide (which contains two particular impurities at a level less than 0.03% by weight).  Safinamide is the active ingredient in Xadago®, which is used in the treatment for moderate-to-late-stage Parkinson’s disease.

Justice Needham’s decision illustrates the ease with which patentees are able to obtain preliminary discovery in the Federal Court of Australia given the low bar set by rule 7.23 of the Federal Court Rules 2011 (Cth).

Background

In their preliminary discovery application, Newron and Zambon sought production of documents from Arrotex, for the purpose of deciding whether to commence court proceedings for actual or threatened infringement of two patents relating to the product and the process of producing high purity safinamide.  Arrotex had four Australian Register of Therapeutic Goods (ARTG) registrations for safinamide products which had been approved as generic versions of Xadago®.  Arrotex expected to start supply in the near future, following the listing of its products on the PBS.

Rule 7.23 provides that a party may apply to the Court for a preliminary discovery order if that party:

a) reasonably believes that it may have the right to obtain relief in the Court from another person or entity whose description has been ascertained;

b) after making reasonable inquiries, does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and

c) reasonably believes that:

i. the other person or entity has or is likely to have or has had or is likely to have had in their control documents directly relevant to the question whether the first party has a right to obtain the relief; and

ii. inspection of the documents by the first party would assist in making the decision.

In interpreting rule 7.23, the Full Court (Allsop CJ, Perram and Nicholas JJ) in Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (2017) 257 FCR 62 (Pfizer) stated that:

• rule 7.23 is a beneficial provision, which enables a person who believes they may have a right to seek relief to obtain information to make a responsible decision as to whether to start court proceedings;
• the party seeking preliminary discovery must prove that it has a belief that it may (not does) have a right to relief, and must demonstrate that the belief is reasonable, either by reference to material known to the person holding the belief or by other material subsequently placed before the Court;
• the question of whether the belief is reasonable requires one to ask whether a person, in light of all of the material before the person holding the belief (or subsequently the Court), could reasonably believe that they may have a right to obtain relief; and
• to defeat a claim for preliminary discovery, the party from who discovery is sought will need to show, either that the subjectively held belief does not exist, or, if it does, that there is no reasonable basis for thinking that there may be (not is) such a case. That may be done by demonstrating that no reasonable person, faced with the evidence relied on by the prospective applicant, would think that a right to relief might exist.

Newron and Zambon relied on the evidence of Zambon’s General Counsel, Ms De Dominicis, who was the person “primarily responsible for making legal decisions on Zambon’s behalf relating to its concerns” about the possible infringement of the patents.  Ms De Dominicis stated in her evidence that she inferred that the Arrotex products must have been approved on the basis of bioequivalence with Xadago®, and that there was nothing in the material available to her which would lead her to believe that the Arrotex products differed from Xadago® in terms of efficacy and safety.  Accordingly, she believed, but did not know, that the Arrotex products might contain high purity safinamide, and/or might be made using the patented processes.

Arrotex principally relied on the expert evidence of Professor Michael Roberts, an Emeritus Professor of Clinical Pharmacology and Therapeutics at the University of Queensland, and Emeritus Professor of Therapeutics and Pharmaceutical Science at UniSA Clinical and Health Science.  Professor Roberts stated, in his evidence (amongst other things), that determination of bioequivalence did not require determination of whether two drug products have the same or similar levels of impurities, and that there was no reason to believe the percentage of the impurity in the Arrotex products might be below the claimed threshold, because even amounts of the impurity far above that threshold would still result in blood plasma concentrations so low as to be therapeutically meaningless.

Key Issues

The key issue for Justice Needham’s determination was whether Newron’s and Zambon’s belief that they may have a right to relief against Arrotex was reasonable.

In short, her Honour found that Newron’s and Zambon’s belief was reasonable, or, in other words, was not a belief based on “unreasonable, untenable, irrational or baseless” considerations or views.  In reaching this view, Justice Needham noted that rule 7.23 must be applied in a way which gives full weight to its purpose, which is to allow a person to make up their mind whether to commence proceedings.  Her Honour further noted that Newron and Zambon did not need to establish a prima facie case of patent infringement, and that the relevant question was not whether one scientific view was more or less persuasive than another.

Her Honour considered that, giving the views of Professor Roberts the appropriate weight, in the context of the preliminary discovery application, Newron’s and Zambon’s evidence did not demonstrate affirmatively that the safety level of impurities in safinamide was lower than 0.03%, nor did it demonstrate affirmatively that the bioequivalence of the Arrotex products meant that they were the same high purity formulation as Xadago®.  However, her Honour did not consider that she needed to be persuaded to that level.  Instead, her Honour considered that, given the range of scientific views expressed in the patents and Newron’s and Zambon’s evidence, and that given that the Arrotex products did contain safinamide, there was a reasonable basis for the belief that Newron and Zambon might have a right to relief.

Justice Needham did not find persuasive Arrotex’s argument that, as the Therapeutic Goods Administration did not recognise the 0.03% impurity level as a safety threshold, Ms De Dominicis’ belief was unreasonable.  Nor did her Honour accept Arrotex’s submission that bioequivalence of the prospective parties’ products, and reliance on the same testing for each products’ Product Information, did not give rise to a belief that the impurity factor may be present.  Neither ruled out the possibility that the claimed impurity level might be present.

Her Honour also considered Professor Roberts’ reasoning to be circular when he stated that, as his calculations were that safinamide with higher impurity levels were not toxic, then there was no reason to believe that the Arrotex products were high purity products.  To the contrary, her Honour considered that it was equally open to believe that they might be high purity products.  Her Honour also noted that Professor Roberts’ analysis was based on his calculations of toxicity by reason of blood plasma concentrations in vivo, and that in the context of the preliminary discovery application, her Honour had not been able to accept that the calculations on the various assumptions were unassailable.

Accordingly, her Honour held that, when all of the evidence was considered, including the expert evidence of Professor Roberts, a belief that Newron and Zambon might be entitled to relief appeared to be reasonable; that is, it is not a view that could not be held by any reasonable person.

Outcome and Implications

Her Honour ordered Arrotex to provide preliminary discovery, with her Honour then ruling on the access regime for the production of documents by Arrotex and on the issue of costs in a short subsequent judgment.  On the issue of costs, her Honour ordered that the costs of the preliminary discovery application be costs in the cause of any infringement proceedings, but should no infringement proceedings be commenced, then there be no order for the costs of the preliminary discovery application, with the intent that each party bear their own costs.

Justice Needham’s decision applies the principles set out by the Full Court in the Pfizer decision as to the factors relevant to a preliminary discovery application.  Her Honour’s decision illustrates the ease with which patentees are able to obtain preliminary discovery in the Federal Court of Australia given the low bar set by rule 7.23 of the Federal Court Rules 2011 (Cth).

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