Indran Shanmuganathan, Michelle Loi Choi Yoke, and Yap Khai Jian of Shearn Delamore & Co provide an in-depth analysis of the Federal Court’s decision in Merck Sharp & Dohme & Anor v Hovid Berhad, a patentee-friendly judgment which overruled a previous precedent on the assessment of dependent and independent claims.
The pronouncement four years ago by the Federal Court in the SKB Shutters Manufacturing Sdn Bhd v. Seng Kong Shutter Industries Sdn Bhd & Anor[1] case (“the SKB Shutters case”) that the validity of a dependent claim will automatically fall upon the substantive finding of invalidity of its independent claim have left patentees grappling with what the judgment in this case would mean to their dependent claims in patent grants and applications. The Federal Court’s ruling in this case attracted criticisms. The ruling was a departure from the known practice where all claims, dependent or independent, are to be assessed substantively if challenged in court.
Neither the Patents Act 1983 (“the Act”) nor the Patent Regulations 1986 (“the Regulations”) provided that independent and dependent claims are different in terms of their strains of validity[2]. The Regulations, if at all, had only sought to define what a dependent claim is. However, with this judgment, dependent claims were no longer viewed as an attractive or viable option. The move to convert all or at least the more important dependent claims within a patent into independent claims seemed inevitable so as to ensure dependent claims are not rendered vulnerable purely on the basis and standing of its independent claim.
Further, the practice of converting a dependent claim into an independent claim format, a practice that few companies have been known to embark upon following the SKB Shutters ruling was seen as inconsistent with the position adopted in most other jurisdictions. Potentially, 100,000 patent grants and patent applications[3] were affected by the ruling.
The ruling was also criticised by few as shifting the well-entrenched practice of legal and evidential burden of proof. With a ruling that called for an automatic invalidation of a dependent claim, a ‘person aggrieved’ would have the upper hand in that it only needed to, as a matter of strategy, concentrate on invalidating an independent claim. This is inconsistent with the various statutory provisions including section 56(2) of the Act[4] which sets out exhaustive grounds of invalidation, none of which provides for the automatic invalidation of a dependent claim once its independent claim was found to be invalid.
Merck convinces court to take a second look
As it is extremely rare for an apex court judgment to be overruled, the thought of a subsequent case overruling the SKB Shutters judgment was unthinkable, with most IP practitioners preferring instead to mull over the possibility of the relevant provisions within the Act being amended so as to counter the effect of the judgment. Whilst some progress in terms of lobbying for a change has been made, it was the case of Merck Sharp & Dohme & Anor v. Hovid Berhad[5] (“the MSD case”) that made the unexpected progress which led to the present decision as it is now.
Being the decision of the apex court, courts pre-MSD era were bound as a matter of stare decisis by the SKB Shutters ruling. The MSD case was not spared either. In 2016, Merck Sharp & Dohme and its local licensee (“MSD”) commenced a patent infringement action against Hovid Berhad (“Hovid”) over the latter’s commercial use of alendronate 70 mg tablets, alleging infringement of several claims of its MY-118194 patent for “pharmaceutical compositions for use in inhibiting bone resorption” (“194 Patent”).
The claims relied upon by MSD in its assertion for patent infringement included both the independent claim 1 and several of its dependent claims. Hovid counterclaimed to invalidate MSD’s 194 Patent on various grounds. The High Court[6] substantively considered MSD’s independent claim 1 and found it to be invalid only on the ground of obviousness. It then went on to hold, following the SKB Shutters ruling, that as the independent claim 1 was found invalid, all dependent claims related to the 194 Patent fell without the need for the High Court to consider separately the validity of each of the dependent claims. On appeal, the Court of Appeal[7] affirmed the decision of the High Court. In its unanimous judgment, the Court of Appeal noted that it too was bound by the SKB Shutters ruling.
The Federal Court departs from SKB Shutters
Undeterred, MSD appealed to the very same court that had decided the SKB Shutters case, fully aware of the treacherous road ahead. For one, a substantive appeal to the Federal Court must first be preceded by the grant of leave by the Federal Court itself. The greater hurdle was the Federal Court’s past treatment of appeals which have sought to revisit the court’s very own decision. In the past four decades or so, the apex court have revisited its own decision in a handful of cases[8]. Yet, these rare cases demonstrated that the Federal Court is open-minded and prepared, in the interest of justice, to revisit any of its decisions and in some cases, overrule the said decision, if it could be shown that the earlier decision was wrong, uncertain, unjust, or outmoded[9].
In 2018, following an application for leave to appeal to the Federal Court by MSD[10], the Federal Court allowed MSD’s question of law which asked the question: “Where an independent claim is adjudged to be invalid, whether claims which are dependent on the said independent claim would be automatically rendered invalid without the need for the court to consider separately the validity of each and every dependent claims”.
The substantive appeal was heard on April 29 2019. On August 21 2019, the Federal Court in a three-to-two majority allowed MSD’s appeal and answered the question of law in the negative. In effect, the majority agreed with the position advanced by MSD on the status of dependent claims, their functions and purpose. The Federal Court expressly announced its departure from the SKB Shutters ruling, and allowed Merck’s request to have the dependent claims 2 - 22 of its 194 Patent remitted to the High Court for substantive hearing for the first time.
Analysis of the Federal Court’s judgment
In departing from the SKB Shutters ruling, the Federal Court rejected the misconceived understanding of the role of a dependent claim vis-à-vis its independent claim as well as the misplaced reliance on the cited Australian case of E.I. Du Pont De Nemours & Co. v. Imperial Chemical Industries Plc & Anor[11].
- Interdependency of independent and dependent claims
The majority in the MSD case accepted the roles of independent and dependent claims, noting that it is inaccurate to merely perceive a dependent claim as a form of extension of an independent claim. The judges acknowledged that an independent claim has the broadest scope of monopoly whereas the dependent claims have narrower scope in terms of monopoly. Because of the broad nature of an independent claim, it is more susceptible to validity challenges. In contrast, the dependent claims being narrower in nature, would be better suited to withstand validity challenges[12].
The Federal Court also noted that the only description of a dependent claim is set out in Regulation 14(1) of the Regulations[13] as including all the features of one or more other claims. This is consistent with MSD’s argument that neither the Act nor the Regulations seeks to treat a dependent claim any differently from the independent claim[14]. The distinction between independent and dependent claims if at all, pertains to the form and structure of the claims. Instead of reproducing in its entirety the features and elements of the independent claim, dependent claims merely make reference to the (independent) claim without reproducing word for word the independent claim. The seeming interdependency between these two types of claims stops there and does not extend to define the validity realm of these two types of claims.
A person skilled in the art (“POSITA”) confronted with independent and its dependent claims would understand that the dependent claims seek to limit or narrow the scope of the claimed monopoly. It is for this reason that a dependent claim is sometimes known as the ‘fall-back’ claim in the event the independent claim is found to be broad.
- Patent claims categorised
In further elucidation of the roles of an independent and dependent claims, the Federal Court categorised patent claims into 2 types: type 1 and type 2 claims. Type 1 claim is defined as consisting of one or more independent claims which are subsets of their dependent claims. The dependent claims under this type 1 dependent claim would thus be a subset of the independent claim, focusing on specific features and having a narrower scope than its independent claim. Type 2 claim on the other hand is defined as consisting of dependent claims which include additional features over and above the independent claims.
The majority specifically mentioned that the identification of the type of patent claim would determine the level of treatment of the claim when it comes to invalidation challenges involving the prior art. Potentially, type 1 dependent claim may still be invalidated upon the finding of invalidity of its independent claim insofar as challenges involving prior art are concerned. However, the invalidation is not an automatic one as certain evidential exercises must first be undertaken by the court with the assistance of a POSITA.
- Post-judgment amendment clarified
The majority further rejected the amendment rationale in the SKB Shutters ruling that a dependent claim would be rendered unintelligible if its independent claim was found to be invalid and thus should be invalidated as it could not be amended during the pendency of litigation. Contrary to the SKB Shutters ruling, the majority in the MSD case felt that a dependent claim could still be amended even with the finding of invalidity of its independent claim. More importantly, the Federal Court held that prohibition of amendment during the course of proceedings under section 79A(3) of the Act[15] does not prevent the Patent Registrar from considering and amendments applications for amendments after the proceedings. The effect of the amendment moreover takes effect only after the Registrar effected these amendments, which would have been after the proceedings[16].
- Wrongful reliance on Australian case law
The majority in the MSD case also found that the court in the SKB Shutters case had wrongly relied on the Australian case of E.I. Du Pont De Nemours & Co. The judges in the MSD case did not regard the Australian case as one that laid down any form of rule for the treatment of dependent claims to the effect that they fell automatically as a consequence of the independent claim being held to be invalid for lack of novelty. The said approach was furthermore inconsistent with a subsequent, more appropriate Australian case law (Austal Ships Pty Ltd v Stena Rederi Aktiebolag[17], a decision not considered in the SKB Shutters case).
Patent practice restored and impact
The MSD decision is significant not only in terms of its rarity but also because it restored the previous patent practice before the SKB Shutters ruling. However, there may be some changes in terms of the practice involving patent litigation moving forward.
One immediate change is the practice of identifying the types of claims in the affected patent as either type 1 or type 2 claims or a patent that consists of both types of claims. As mentioned briefly above, it would appear that a dependent claim that is of a type 1 form may still risk being invalidated on the sole basis of the finding of invalidity of its independent claim, but not before the trial court undertakes the evidential process with the assistance of POSITA.
The Federal Court cautioned that failure to undertake this evidential exercise would risk placing a patentable invention (presumably a dependent claim) invalid. Just how this would translate into actual practice remains to be seen. This may or may not be incorporated into the existing practice directions[18] where counsel would be asked to revert and agree on issues of convergence and divergence prior to the trial. Be that as it may, the identification as to which type of claim is however irrelevant if the basis of the challenge does not relate to prior art. This presumably relates to challenges other than non-novelty and obviousness, for instance sufficiency of disclosure of any given claim.
Despite this anticipated change of practice, the MSD case is a very much welcome decision in that it finally clarifies the standing of a dependent claim vis-à-vis the independent claim. Patentees can at least proceed with confidence insofar as the claims of their patents are concerned. The MSD case effectively has opened the doors which were previously shut by the SKB Shutters case.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, any other of its practitioners, its clients, or any of its or their respective affiliates. This article is for general information purposes only and is not intended to be and should not be taken as legal advice.
Authors
Indran Shanmuganathan (partner)
Michelle Loi Choi Yoke (partner)
Yap Khai Jian (associate)
Footnotes:
[1][2015] 6 MLJ 293
[2]Regulation 14 of the Patents Regulations 1986 for example only provides that “14. Dependent claims. … (1) Any claim which includes all the features of one or more other claims (“dependent claim”) shall contain, if possible at the beginning, a reference to the other claim or claims and shall then state the additional features claimed.”
[3]According to http://www.myipo.gov.my/en/statistic-application-registration/#toggle-id-1, at least 169,770 were applied for as patent and utility innovations between 1986 and 2019
[4]Section 56(2) provides that “The Court shall invalidate the patent if the person requesting the invalidation proves ‐ (a) that what is claimed as an invention in the patent is not an invention within the meaning of section 12 or is excluded from protection under section 13 or subsection 31(1) or is not patentable because it does not comply with the requirements of sections 11, 14, 15 and 16; (b) that the description or the claim does not comply with the requirements of section 23; 48 (c) that any drawings which are necessary for the understanding of the claimed invention have not been furnished; (d) that the right to the patent does not belong to the person to whom the patent was granted; or (e) that incomplete or incorrect information has been deliberately provided or caused to be provided to the Registrar under subsection 29A(4) by the person to whom the patent was granted or by his agent.”
[5]See footnote 6 (High Court citation), footnote 7 (Court of Appeal citation), footnote 10 (Leave Application citation)
[6][2017] 1 LNS 53
[7][2019] 3 CLJ 339
[8]According to LexisNexis and the Current Law Journal search, there were only 6 cases since 1967 where the Federal Court expressly overruled its own decisions, namely, Tan Ying Hong v. Tan Sian San & Ors [2010] 2 MLJ 1 (overruling Adorna Properties Sdn Bhd v. Boonsom Boonyanit @ Sun Yok Eng [2001] 1 MLJ 241); Kathiravelu Ganesan & Anor v. Kojasa Holdings Bhd [1997] 2 MLJ 685 (overruling Inchcape Malaysia Holdings BHd v. RB Gray & Anor [1985] 2 MLJ 297; Dr Shamsul Bahar Abdul Kadir & Anoter Appeal v. RHB Bank BHd [2015] 4 CLJ 561 (overruling Ambank (M) Bhd v. Tan Tem Son & Another Appeal (2013) 3 CLJ 317); Sinnaiyah & Sons Sdn Bhd v. Damai Setia Sdn Bhd [2015] 7 CLJ 584 (overruling 2 cases, Yong Tim v. Hoo Kok Chong & Anor [2005] 3 CLJ 229 and Ang Hiok Seng v. Yim Yut Kiu [1997] 1 CLJ 497); and Majlis Ugama Islam Pulau Pinang dan Seberang Perai v. Shaik Zolkafilly Shaik Natar & Ors [2003] 3 CLJ 289 (overruling Mohd Habibullah Mahmood v. Faridah bt Dato Talib [1993] 1 CLJ 264). None of these cases were IP cases.
[9]Dalip Bhagwan Singh v. PP [1998] 1 MLJ 1
[10]FC Civil Application No. 08-470-10/2017
[11][2007] FC AFC 163
[12]Jeffrey A.Lefstin in his article “The Formal Structure of Patent Law and the Limits of Enablement”[12] that was cited by the Federal Court with approval, wrote: “The practical motivation to construct hierarchies of successively narrower claims is to ensure that some claims remain valid. If broad claims are invalidated because it is later discovered that they read upon the prior art, or are too broad in light of the patentee’s disclosure the patentee may be able to fall back on narrower dependent claims that are still valid. Because narrower claims encompass less subject matter, they are less likely to encompass prior art or subject matter that the patentee did not enable or describe.”
[13] “14. Dependent claims. … (1) Any claim which includes all the features of one or more other claims (“dependent claim”) shall contain, if possible at the beginning, a reference to the other claim or claims and shall then state the additional features claimed.”
[15]“The Registrar shall not make an amendment under this section [79A] if there are pending before any Court proceedings in which the validity of the patent may be put in issue.”
[16]Section 57(2) of the PA 1983 provides “When the decision of the Court becomes final, the Registrar of the Court shall notify the Registrar who shall record the said declaration in the Register and cause it to be published in the Gazette.”
[17] [2005] FCA 805
[18]See also Order 40 of the Rules of Court 2012 (on Court Expert) and Order 41 of the Rules of Court 2012 (on Experts of Parties)