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Tuesday, 29 March 2011

Servier v Apotex [2011] EWHC 730 (Pat) - Cross-Undertakings and Ex Turpi Causa

It has been rumoured that Mr Justice Arnold has produced some judgments which contain fewer than 100 paragraphs. Some have even heard tell of one mythical judgment in which the paragraph count struggled majestically but was finally laid to rest within a hair’s breadth of single digits. Naysayers dismiss this fable as nothing but stuff and nonsense: quality, they say, takes time. And space. And words. Lots of words. But still the rumours persist: whispers around the hearthside, hushed conversations in ale-houses, and meek utterances made through the froth of lattes and macchiatos consumed on the Strand. Sometimes a quiet murmur of the word “probate” can be heard to accompany the tale. No one knows why.


The decision in Servier v Apotex [2011] EWHC 730 (Pat) handed down this morning is not one of these fabled decisions, close though it is to nudging under the triple-digit paragraph line. Statisticians amongst you will be delighted to hear that the page count is 34 and the paragraph count a little under 120. At only 17,000 words, however, it falls to be classified as a 4.0 on the Arnold scale.

The issue before the court on this particular occasion is not really IP-centric as such, although it does arise in the context of an IP dispute. It therefore enters this blog through a back door replete with false moustache (whether that is the door, or the decision, is unimportant for present purposes).

First, however, the background:
Servier is (and has been) the proprietor of a number of patents (some expired) on various formulations of perindopril erbumine and its derivatives and processes for its manufacture. Perindopril erbumine is a long-acting ACE (Angiotensin-Converting Enzyme) inhibitor used for treating hypertension and cardiac insufficiency. In July 2000, Servier filed priority applications for three patents each of which covered one of the three crystalline forms of perindopril erbumine (α, β and γ) which had been discovered. The patent for the α form (European Patent No. 1 296 947 – “the Patent”) serves as the basis for the current dispute.

The Patent was granted on 4 February 2004, and was the subject of opposition by 10 opponents, not including Apotex. Initially, the Opposition division of the European Patent Office decided to maintain the patent, but by a decision of the Technical Board of Appeal dated 6 May 2009 (T_1753/06) it was eventually revoked. The eagle-eyed amongst you will have noted that this left a 5-year window within which the patent was apparently valid when, in fact, it was not. Needless to say, things happened within this window that led to the dispute in hand.

In March 2006, Apotex informed Servier that it intended to start marketing generic perindopril erbumine in the UK – the relevant material having been manufactured by Apotex in Canada. It received marketing authorisations in July 2006, and between 28 July (for the curious: a Friday) and 3 August (a Thursday) that year it made sales worth over £4.1 million. On 1 August 2006, Servier commenced proceedings against Apotex and on 2 August they applied, without notice, for an interim injunction to restrain Apotex from marketing the product. This was denied by Mann J so a renewed application on notice was made the following day, which was successful. A short-term injunction was granted until a hearing on 7 August 2006, following which Mann J granted an interim injunction until trial – reasons for which were contained in his judgment ([2006] EWHC 2137 (Pat)), dated 8 August 2006.

Both the original (3 August) and later (8 August) orders contained a cross-undertaking in damages by Servier in the following form:
“If the Court later finds that this Order has caused loss to the Defendants, which shall include Apotex UK Limited, and decides that the Defendants should be compensated for that loss, the Claimants will comply with any Order the Court may make.”

Thereafter, Pumfrey J held ([2007] EWHC 1538 (Pat)) that Apotex had infringed the Patent, but that it was invalid. The Court of Appeal ([2008] EWCA Civ 445) upheld this finding of invalidity, describing it (at [9]) as “the sort of patent which can give the patent system a bad name”. The cross-undertaking was therefore thrust into play.

To complicate matters, Servier had also been pursuing Apotex in Canada (where the perindopril erbumine sold in the UK before the injunction had been manufactured). The Canadian Federal Court of Appeal (CFCA) had affirmed that the Canadian patent was valid and infringed ([2009] FCA 222), leave to appeal to the Supreme Court of Canada was denied at the end of March 2010.

Ex Turpi Causa Non Oritur Actio
Cutting out some of the wrangles that occurred between the CFCA’s decision and the present episode in this dispute, the question before Arnold J was whether Apotex should, as a matter of public policy, be allowed to recover damages for being prevented from selling a material whose manufacture would have been unlawful because it infringed a valid foreign patent. As the Judge explains (at [41]), this “is an application of the rule of law identified by the Latin maxim ex turpi causa non oritur actio (no action can arise from an illegal or immoral act), also known as the illegality defence.”

Apotex claimed that it should be able to recover these damages as: (1) the ex turpi causa rule only applies where the act in question is either a criminal offence or involves moral turpitude amounting to dishonesty, and that patent infringement is neither of these; (2) that the rule only applies where the claimant’s claim relies to a substantial extent on the illegal or immoral act, which Apotex did not do; and (3) that the rule cannot be invoked where an unqualified cross-undertaking in damages has been given (as here) because that amounts to approbating and reprobating.

Apotex’s First Claim
Taking these points in turn, Arnold J embarked upon a characteristically comprehensive, thorough and moreover engaging tour of the cases, noting in relation to Apotex’s first point that:
[92] “The main conclusion which I draw from this survey of the cases cited to me is that they confirm that the application of the ex turpi causa rule depends on the circumstances of the case. Significant factors include the knowledge of the claimant at the relevant time, whether the illegality involved intentional or negligent conduct on the part of the claimant and whether the commission of the illegal act was induced by the defendant. It appears from dicta in a number of these cases that it may not be sufficient that the act was criminal if the offence was one of strict liability and the claimant was unaware of the relevant facts. Equally, mere negligence is unlikely to be enough in the circumstances of a claim for contribution or indemnity against another tortfeasor.”
However, none of the authorities cited assisted Apotex in substantiating its first point. Mr Justice Arnold noted that it was important to bear in mind that the real issue in this case was the exercise of the court’s “equitable jurisdiction to enforce a cross-undertaking in damages”. Therefore, the fact that the court has “discretion to refuse to order an inquiry casts lights on the nature of the jurisdiction. The court is concerned to do what is just having regard not only to the fact that the injunction was wrongly granted, but also to wider considerations.”

The Judge accordingly referred to his own judgment in Lilly Icos LLC v 8PM Chemists Ltd [2009] EWHC 1905 (Ch), where he had noted (at [287] thereof) that:
“…the court will not award compensation under a cross-undertaking for the loss sustained by an unlawful business or where the beneficiary of the cross-undertaking has to rely to a substantial extent upon his own illegality in order to establish the loss. As a matter of international comity, it does not matter for this purpose whether the acts in question are unlawful under English law or under foreign law.”
He added that the unlawfulness in question must be “sufficiently serious to engage the ex turpi causa rule”, and that “the unlawfulness must be personal to the claimant, not vicarious.” Whether unlawfulness is “sufficiently serious” would depend on the “circumstances of the case, and in particular the state of knowledge of the claimant under the cross-undertaking at the relevant time”.

On the facts before him, Arnold J was of the opinion that Apotex’s claim involved sufficiently serious unlawfulness to engage the rule. Apotex, he said, was not misled by Servier in any way, neither was its unlawful act induced by Servier. Apotex was also aware of all the material facts – indeed the Canadian first instance decision had found as a matter of fact that Apotex knew that making perindopril erbumine would infringe the Canadian patent if valid. Moreover, Apotex committed the infringing acts intentionally. The final nail in this particular argument was however provided by the fact that there was “precise symmetry between Apotex’s claim for compensation under the cross-undertakings and the illegality upon which Servier relies”, adding rhetorically:
[100] “…Why should Apotex be permitted to claim compensation for being wrongly prevented from infringing one patent on the basis that, but for the injunctions, it would have infringed another patent belonging to the group of companies?”
Apotex’s Second Claim
In his earlier judgment in Lilly v 8PM, Arnold J had held that the ex turpi causa rule applied where the beneficiary of the cross-undertaking has to rely to a substantial extent upon his own illegality in order to establish the loss claimed. According to the judge:
[104] “Apotex’s claim is predicated upon manufacture of perindopril erbumine in Canada at low cost, export of the tablets to the United Kingdom and sale of those tablets in the United Kingdom at a profit. It is true that the importation and sale of the tablets in the United Kingdom was perfectly lawful, but those acts were not sufficient to produce the profits which Apotex claims to have lost. The profits depend on Apotex manufacturing the product in, and exporting it from, Canada, which would have [been] unlawful. It follows that Apotex does have to rely upon its own illegality to a substantial extent to establish the loss claimed. To use the language used in a number of the cases, Apotex’s claim is founded upon its own unlawful acts.”
This put paid to Apotex’s second point.

Apotex’s Third Claim
In relation to the third point concerning approbation and reprobation, the Judge was similarly unimpressed. To begin, Arnold J did not accept that Servier’s cross-undertakings were unqualified. Second, even if they had been qualified in the manner that had been suggested by Apotex as appropriate (i.e. if they were subject to a qualification or proviso that the undertakings would not apply to losses sustained by Apotex as a result of acts which were subsequently held by the Canadian courts to infringe the Canadian Patent), then this have had “no effect on the exercise of … discretion to grant the injunctions.” “The same policy considerations which underlie the ex turpi causa rule would lead to the conclusion that such losses should not weigh in the balance when deciding whether or not to grant an interim injunction.” [115]

Accordingly, Apotex’s claim was held to be barred by the ex turpi causa rule.

It’s been a long day. But I've learned things. I’m off for a macchiato…

5 comments:

Anonymous said...

The rumour is true: see Court v Despallieres [2009] EWHC 3340 (Ch), [2010] 2 All ER 451

Mancunian said...

My Email client has suddenly replaced all apostrophes with beta symbols?? And Matt's post on Servier was the first i read this morning, i just had to check the main blog. Thankfully there were no Betas in sight. For a moment, was beginning to think Matt the Cat had been on Advocaat all night!

Mancunian said...

The last line reads:


" Itβ s been a long day. But I've learned things. Iβ m off for a macchiatoβ "

Jürgen said...

It's worth noting that the Canadian patent was the basic compound patent which due to Canadian peculiarities will only expire in 2018, not the crystal form patent revoked at the EPO and in the UK.

Tim said...

Darn - was hoping that Court v Despallieres would in fact be single digits. Alas, it's just over ...

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