Functional ingredients: the past may come back to bite you!

A recent decision by the Full Bench of the Federal Court (Novozymes A/S v Danisco A/S [2013] FCAFC 6) may have a far-reaching impact on the food technology sector in Australia. The case raises concerns for developers of food products with ingredients which impart beneficial functions other than supporting good nutrition. 

Functional ingredients in baked foodstuffs
The case involved a dispute between Danish biotech-based companies Novozymes and Danisco – two significant global players in food technology. Core to the dispute was the manufacture of baked foodstuffs containing "functional ingredients". 

The term "functional ingredient" has different meanings depending on the context in which it is used. Danisco’s patent, which was the focus of the dispute, broadly defined "functional ingredient" as a constituent which performs a specific function in a foodstuff. 

The process of Danisco’s patent relied on an enzyme being able to produce two functional ingredients from constituents present in the starting food material before inactivation during the baking process. Common enzymes used in industry are proteins derived from microorganisms which are used as catalysts in biochemical reactions. Enzymes used as a processing aid during the production of foodstuffs, but which are ultimately inactivated during production, are not considered to be additives. Thus, there is a benefit for using enzymes in foodstuff production from both the industry and consumer perspectives.

In the lower court (Danisco A/S v Novozymes A/S (No 2) [2011] FCA 282 (29th March 2011), Danisco asserted infringement of the patent by virtue of the promotion and supply by Novozymes of Lipopan® Xtra for producing baked goods. Lipopan Xtra is the trademark given to a lipase enzyme which acts on fats found in animal and vegetable oils to produce lipids with emulsifying properties. These lipids can, for example, be used in dough to increase the softness of baked bread. Thus, in the context of Danisco’s patent, the lipids produced by Lipopan Xtra are considered to be functional ingredients. 

In defence, Novozymes challenged the validity of Danisco’s patent on several grounds. Of particular interest was the assertion that Danisco’s invention lacked novelty over an earlier Novozymes patent. An example in that patent described the use of an enzyme (a phospholipase also having lipase activity) as a "bread-improving agent". While the specification disclosed phospholipases as having dual activity, the invention was directed to improving bread by reducing phosphorous-containing components. The potential of the phospholipase to produce functional ingredients in the same manner that a lipase might was not known at the priority date of Novozymes’s patent. Nevertheless, Novozymes submitted that use of the phospholipase according to the example would inevitably result in the process of Danisco’s patent. This argument was rejected, in part because there was no disclosure or recognition of the production of functional ingredients in Novozymes’s patent. The case was ultimately decided in Danisco’s favour.

Invalidation of Danisco’s patent: anticipation by inevitable outcome
The principle (The General Tire and Rubber Co v The Firestone Tyre and Rubber Co Ltd [1972] RPC 457) concerning anticipation by inevitable outcome can be summarised as follows: "If carrying out directions contained in a prior publication will inevitably result in something being made or done which would constitute an infringement of a claim, the claim has in fact been anticipated."

The Full Federal Court, in reconsidering Novozymes’s earlier patent, rejected the primary judge’s findings in relation to anticipation by inevitable outcome. It was considered that the primary judge had erred in interpreting the above principle, and in not fully appreciating expert testimony and evidence supporting the view that Novozymes’ phospholipase, if used according to the method of Novozymes’s patent, would have inevitably produced functional ingredients. It was therefore unnecessary that there be an explicit or implicit disclosure of the production of functional ingredients by phospholipase in Novozymes’s patent to render Danisco’s patent invalid.

Impact on food sector
The food sector is highly competitive. Coupled with the increasing demand from consumers for "additive-free" food products and increasingly restrictive food labelling requirements, manufacturers will be motivated to develop new cost-effective processes for creating food products containing functional ingredients, irrespective of whether these ingredients perform "functions" in foodstuffs and/or provide health benefits in addition to supporting nutrition. 

The present case highlights the importance of conducting detailed market and competitor analyses before driving innovation, particularly in existing market sectors.