Summary
In the recently handed down decision in Otsuka Pharmaceutical Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161[1], the Full Court of the Federal Court of Australia (Full Court) has ruled that patent term extension (PTE) is only available for patents which claim an active pharmaceutical ingredient (API). Unless this decision is overturned by the High Court in due course, patents that claim new pharmaceutical formulations of known APIs are therefore no longer eligible for PTE in Australia. This change aligns Australia’s law with other major jurisdictions (see below).
The knock-on effect of this decision is that existing PTEs for pharmaceutical formulation patents (dubbed “zombie PTEs”) are now vulnerable to challenge. In addition to being challenged directly by third parties, s.191A of the (AU) Patents Act 1990 (“the Act”) gives the Commissioner of Patents the power to revoke invalid PTEs of their own volition (i.e. without requiring a third-party challenge). It remains to be seen whether the Commissioner will enforce this power or whether they will simply wait for challenges to be filed.
Companies with PTEs in Australia should review their portfolios as soon as possible, especially if they have follow-on patents to pharmaceutical formulations of known APIs, to assess if they are affected by this significant law change.
Background
Eligibility for PTE
Under Australian law, patentees may seek a PTE of up to five years to compensate for regulatory delays in marketing approval provided that the patent discloses and claims a “pharmaceutical substance per se” and that corresponding therapeutic goods are registered on the Australian Register of Therapeutic Goods (ARTG). The term of the patent must also not have been previously extended.
“a substance (including a mixture or compound of substances) for therapeutic use whose application (or one of whose applications) involves:
(a) a chemical interaction, or physico-chemical interaction, with a human physiological system; or
(b) action on an infectious agent, or on a toxin or other poison, in a human body;
but does not include a substance that is solely for use in in vitro diagnosis or in vitro testing.”
Prior to the Otsuka v Sun Pharma FCAFC decision, there had been several first-instance Federal Court decisions[2],[3],[4] which had addressed whether the term “pharmaceutical substance” encompassed formulations comprising APIs and excipients or other components (e.g. non-active pharmaceutical ingredients). Each of these earlier decisions affirmed that “pharmaceutical substances per se” included formulations and that these patents were therefore eligible for PTE.
Australia’s prior position on PTE was therefore relatively patentee-friendly when compared to other jurisdictions as discussed below.
Otsuka’s Patent in suit – Australian Patent No. 2004285448
Australian Patent No. 2004285448, owned by Otsuka Pharmaceutical Co., Ltd., is directed to various types of controlled-release formulations of aripiprazole (an atypical antipsychotic). The later-sought PTE claims were summarised by the Full Court in the first instance trial as falling into two main categories: those involving ready-to-use, controlled release liquid injectable formulations and those involving freeze-dried formulations that would need to be reconstituted before injection.
Although the standard 20-year term for AU2004285448 expired on 18 October 2024, Otsuka had applied for and successfully obtained a PTE from IP Australia based on the registration of its pharmaceutical product Abilify Maintena®. This PTE extended the term of the patent to 25 July 2029.
However, aripiprazole was not a new substance at the filing date of AU2004285448 as it was first claimed in US Patent No. 5,006,528 by Otsuka Pharmaceutical Co., Ltd.. There was, however, no Australian equivalent of this patent.
The final hurdle preventing generic companies from launching controlled-release products containing aripiprazole in Australia was therefore the PTE granted for AU2004285448.
First Instance: Sun Pharma seeks to clear the way
Ahead of the planned launch of their generic version of Abilify Maintena® on 1 April 2025, Sun Pharma commenced proceedings against Otsuka’s PTE[5]. Sun Pharma submitted that the PTE had been wrongly granted and argued that a new formulation of a known API should not be considered as a “pharmaceutical substance per se”.
In response, Otsuka argued that the ten alternative “pharmaceutical substances” defined in the PTE claims satisfied the aforementioned requirements of s. 70 of the Act as they included aripiprazole and various excipients.
During the trial, the judge rejected Sun Pharma’s arguments and, following the ruling in Cipla Australia v Novo Nordisk[4], found that formulations fell within the definition of “pharmaceutical substances”. Unfortunately for Otsuka, this was a hollow victory as the judge found that the PTE claims lacked clarity and definition under s. 40(2)(b) and 40(3) of the Act 1990. This resulted in the PTE being found invalid and it was therefore revoked.
As a consequence of this decision, the PTE was deemed never to have existed and thus the patent was deemed to have expired on 18 October 2024.
Naturally, Otsuka appealed this decision. Sun Pharma also lodged an appeal and maintained their arguments that formulations are not “pharmaceutical substances per se”.
On Appeal: The Full Court finds that pharmaceutical formulations are not eligible for PTE
During the appeal, the Full Court[1] decided that the term “pharmaceutical substance” needed to be properly construed in order to reach a decision. Surprisingly, this term had not been construed in any of the earlier first instance decisions that considered this topic. In addition to this, the Full Court reviewed earlier judicial decisions and the legislative history of PTE.
The Full Court concluded that the Australian Parliament had intended for the term “pharmaceutical substances” to be limited to APIs. The Full Court further stated that PTE was intended to be used to compensate for the time and costs associated with the lengthy development and approval processes that new pharmaceuticals face when trying to enter the market in order to allow companies to recoup costs. As such, the Full Court concluded that Otsuka’s aripiprazole formulations were not eligible for PTE and effectively overturned the previous decisions of the Federal Court.
Therefore, the result of the Full Court decision was the same as in the first instance, albeit for different reasons, and AU2004285448 was deemed to have expired on 18 October 2024.
Conclusion
It is generally accepted that new formulations of known APIs typically do not require significant research and development efforts. Moreover, the approval process for such formulations is often quicker as the safety and efficacy of the API is already known. Thus, there has always been a question mark over whether it is equitable to provide PTE for pharmaceutical formulations of known APIs and whether such systems allow a back door for companies to evergreen their pharmaceutical products to prevent generics from entering the market. With this decision, it seems that the Full Court has taken a fairer approach to PTE eligibility and now appears to be more aligned with other jurisdictions such as the EU, the US and China.
However, this may not be the end of the battle for Sun Pharma (and indeed other generics companies) as on 18 December 2025, Otsuka sought special leave to appeal this decision to the High Court of Australia. In order for this special leave to be granted, Otsuka will need to convince the High Court that the case raises a question of public or legal importance that is significant enough to warrant the attention of the High Court (s. 35A of the Judiciary Act 1903). We will certainly be keeping a close eye on this request to see whether the High Court decides to hear the case.
PTE in Other Jurisdictions
As noted above, it seems that this decision has more closely aligned Australian law with the PTE systems (and equivalents) that are in place in other key jurisdictions. A brief summary of the relevant laws in Europe, the US, Japan and China is provided below.
Europe
Although the EPO does not offer PTE, per se, there is a Supplementary Protection Certificate (SPC) system in place in the Europe. SPCs are national rights and, accordingly, individual SPCs must be sought in each European country of interest following the grant of a European patent.
Briefly, an SPC extends patent protection for a medicinal or plant protection product in Europe by up to 5 years. More information of SPCs can be found here.
As confirmed by the CJEU in C-443/17, an SPC cannot be granted for a new formulation of an API in the case where that API has already been the subject of a marketing authorisation.
The US
Amongst other requirements, to be eligible for PTE in the US, the drug must have been approved by the FDA for commercial marketing or use and it must be either a new chemical entity or a drug product that is substantially different from previous versions. The drug must also be covered by a valid, unexpired patent. PTE may be granted for up to 5 years but the total patent term (including the extension) cannot exceed 14 years from the date of FDA approval.
The FDA’s permission for commercial marketing or use must be for the first permitted commercial marketing or use of the drug. As such, formulations of existing APIs are not eligible for PTE if the first permitted commercial marketing of the API itself has already occurred.
The USPTO also provides Patent Term Adjustment (PTA) to extend the term of a patent to compensate for delays caused by the USPTO during examination and this should not be confused with the PTE system. Notably, PTA and PTE run consecutively of one another rather than concurrently.
Japan
In Japan, PTE is available to extend the life of a patent for up to 5 years. Unlike the EU and US, Japan allows for multiple PTEs to be granted for the same patent based on different regulatory approvals.
Following on from the decision in JPO v Genentech, Supreme Court, No. 2014 (Gyo hi) No.356, the JPO broadened its approach to PTE and it now appears that most patented products for which a new marketing authorisation is required are eligible for PTE. This will be handled on a case-by-case basis by the JPO but it would appear to extend to new formulations of known APIs.
China
In China, PTE may be granted for up to 5 years but the total patent term cannot exceed 14 years from the date that the new drug is approved for marketing.
PTE is limited to innovative drugs and certain improved new drugs (including chemical, biological or traditional Chinese medicine) that have not been marketed overseas. Critically, new formulations containing known APIs are not eligible for PTE in China.
References:
[1] Otsuka Pharmaceutical Co Ltd v Sun Pharma ANZ Pty Ltd [2025] FCAFC 161
[2] Pharmacia Italia SpA v Mayne Pharma Pty Ltd [2006] FCA 305; 69 IPR 1
[3] Spirit Pharmaceuticals Pty Ltd v Mundipharma Pty Ltd [2013] FCA 658; 216 FCR 344
[4] Cipla Australia Pty Ltd v Novo Nordisk A/S [2024] FCA 1414; 185 IPR 299
[5] Sun Pharma ANZ Pty Ltd v Otsuka Pharmaceutical Co Ltd [2025] FCA 44