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Tuesday, 27 November 2012

Brief from the AdvoKat: Di-potassium Another Day - English High Court to hear foreign patent claims

The AdvoKat
This AdvoKat likes firsts. As a kitten, it was first in the National Cat Show (Best CopyKat). It got a first class degree in Abyssinian studies. It was the first Siamese to be called to the Bar. And now, here is a legal first, straight from the pen (well, keyboard) of our Mr Justice Arnold in joined cases Actavis Group hf v Eli Lilly & Company (USA)/Medis ehf v Eli Lilly & Company (USA) [2012] EWHC 3316 (Pat) on whether the English Courts have jurisdiction over issues of infringement of foreign-designated patents. For those of you who do not wish to read further, the answer is a resounding “Yes”.

The patent in suit, EP1313508, has a swiss-form claim to the use of pemetrexed disodium in the manufacture of a medicament for treatment of cancer. Actavis have not proposed to launch pemetrexed disodium, but pemetrexed dipotassium – a different salt. Actavis brought a claim against Lilly USA for a declaration of non-infringement with respect not only to the UK designation of the 508 patent but also (here is the twist) with respect to the French, German, Italian and Spanish designations. Lilly USA challenged the English Court’s jurisdiction over the foreign designations.

The challenge resolved itself into two major issues: did the English Court have personal jurisdiction over Lilly USA, and were the English Courts the appropriate forum to hear the claims (taking into account their subject matter)?

Personal jurisdiction over Lilly USA

Trying to ensure that the claim had been properly served, Actavis had in fact started two separate but otherwise identical claims by different entities in the Actavis group, and served both claims twice: first, on Lilly’s solicitors, and secondly, directly on Lilly’s European representative before the EPO, employed by Lilly UK.

To complicate matters further, the first claimant was the Actavis parent company, whereas Actavis’s lawyers had initially written to Lilly’s solicitors stating that they represented a subsidiary, Actavis Group PTC ehf, and its “relevant national subsidiaries”. It was accepted that “relevant national subsidiaries” meant the national subsidiaries relevant to the designations of the '508 patent at issue however they were, as far as was publicly known, not the subsidiaries of Actavis Group PTC ehf, but of the parent.

The Judge found that the acceptance of service by Lilly’s solicitors need not be construed strictly. It did not really matter for the purposes of this claim which company in the Actavis group was claimant. There was unlikely to be disclosure in the case, nor did Lilly seek security for costs, and the precise identity of the person proposing to do the acts was irrelevant for a claim for a declaration of non-infringement. Therefore the first claim was correctly served and Lilly USA had submitted to the jurisdiction of the English Courts.

As Mr Justice Arnold held that Lilly USA had submitted to the jurisdiction, it was not open to Lilly to challenge jurisdiction on the ground of forum non conveniens (about which, see below).

Place of business / carries on activities

Even so, in case he was wrong about the service of the claim and submission to the jurisdiction by Lilly USA, Mr Justice Arnold went onto consider whether Lilly USA had a place of business or carried on activities in England & Wales. If so, it would be possible to found jurisdiction on this ground.

On the facts, it was not disputed that Lilly UK has a patent department running European patent operations, which acted on behalf of Lilly USA and other companies in the Lilly group. In particular, the head of that department, Dr Burnside, was Lilly USA’s representative before the EPO and had been granted authority to carry out certain patent prosecution matters (in particular, the surrender of patents and bringing of appeals) without being required to obtain the authorisation of his seniors back in the USA.

The Judge referred to the Court of Appeal decision in Adams v Cape Industries [1990] 1 Ch 433, which set out the major factors to be considered, and also pointed out the “principal test” as to whether a company carried on activities in England & Wales was whether that company’s representative located in England & Wales had authority to contract on behalf of the company. The Judge found that Dr Burnside did have authority to enter into contracts on Lilly’s behalf. The Judge rejected the contention that Dr Burnside’s role was, in effect, no different to that of an external firm of patent attorneys, particularly as Dr Burnside had authority to surrender patents, which would not be within the scope of the authority given to an external firm. Further, the Judge found that patents were among the most important of Lilly’s assets.

The Judge therefore found that, by virtue of Lilly’s European patent department dealing with Lilly USA’s patents from Lilly UK’s site, and particularly the role of Lilly’s representative before the EPO, Lilly USA has a place of business in England for the purposes English jurisdictional rules. Having been properly served under the provisions of this rule, the Judge found that Lilly USA was subject to the personal jurisdiction of the English Court.

Was it appropriate to hear the claims to the foreign designations in England?


Welcome to England - Land of justiciable foreign
patent claims...

To avoid the consternation of the AdvoKat's overseas Katfriends, it is worth saying at the outset that there was no question that claims for declarations of non-infringement of the French, German, Italian and Spanish designations could not be heard in the Courts of their respective jurisdictions. Indeed the English Courts had for a long time expressed some discomfort with exercising jurisdiction over questions of infringement of foreign patents, for example, per Aldous J in Plastus Kreativ v Minnesota Mining and Manufacturing Co. [1995] RPC 438 at 447:

“For myself I would not welcome the task of having to decide whether a person had infringed a foreign patent. Although patent actions appear on their face to be disputes between two parties, in reality they also concern the public. A finding of infringement is a finding that a monopoly granted by the state is to be enforced. The result is invariably that the public have to pay higher prices than if the monopoly did not exist. If that be the proper result, then that result should, I believe, come about from a decision of a court situated in the state where the public have to pay the higher prices. One only has to imagine a decision of this court that the German public should pay to a British company substantial sums of money to realise the difficulties that might arise. I believe that, if the local courts are responsible for enforcing and deciding questions of validity and infringement, the conclusions reached are likely to command the respect of the public. Also a conclusion that a patent is infringed or not infringed involves in this country a decision on validity as in this country no man can infringe an invalid patent. In the present case the plaintiffs admit the validity of the patent and therefore there is no dispute upon the matter. However, it will be implicit in the judgment of this court that there has been infringement, and that, between the parties, the patent is valid. Thus, I believe it is at least convenient that infringement, like validity, is decided in the state in which it arises.”
But times have changed in English Law, not least with the decision of the Supreme Court in Lucasfilm v Ainsworth [2011] UKSC 39, where the Court found that claims for infringement of foreign copyright were justiciable and suggested that this should be equally applicable to other foreign IP rights at §108:

“There is no doubt that the modern trend is in favour of the enforcement of foreign intellectual property rights. First, article 22(4) of the Brussels I Regulation only assigns exclusive jurisdiction to the country where the right originates in cases which are concerned with registration or validity of rights which are ‘required to be deposited or registered’ and does not apply to infringement actions in which there is no issue as to validity. This can rarely, if ever, apply to copyright. Second, the Rome II Regulation also plainly envisages the litigation of foreign intellectual property rights and, third, the professional and academic bodies which have considered the issue, the American Law Institute and the Max Planck Institute, clearly favour them, at any rate where issues of validity are not engaged.”

Often confused for Brussels I, this one
Brussels sprout spends his days sitting
in court rooms adding little value to 
the proceedings...
Mr Justice Arnold noted that, as long as validity of the foreign patents was not put in issue, Lilly accepted that the effect of the Supreme Court decision in Lucasfilm v Ainsworth was that the Moçambique rule did not apply to questions of patent infringement. Further, Actavis undertook not to challenge validity, or contend that the foreign designations were invalid, either by claim or defence to any counterclaim for infringement. Therefore, the claims over the French, German, Italian and Spanish patents were justiciable.

Even so, Lilly argued that the English Court should stay the proceedings on the grounds of forum non conveniens and raised questions of justiciability in that context. As all the fine Private International Law practitioners reading this post will know, forum non conveniens requires the Court’s consideration of the test set out by Lord Goff of Chieveley in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460. The key part of the test is whether there is some other available forum, having competent jurisdiction, which is the appropriate forum of the trial of the action i.e. in which the case may be tried more suitably for the interests of all the parties and the ends of justice.

Mr Justice Arnold found that the case should not be stayed for forum non conveniens for the following reasons:

Forum non conveniens provides a flexible test and is not a blanket subject matter limitation of jurisdiction;

• The considerations on justiciability set out by the Supreme Court in Lucasfilm are equally relevant to forum non conveniens and there are no real differences between patents and copyrights for the purposes of justiciability;

• Even if, as Lilly submitted, the prior art and questions of validity are required to be taken into account when determining the scope of the claims under the doctrine of equivalents in France at the very least, and therefore Article 22(4) of the Brussels Regulation should take effect, there was not the evidential foundation to show that this made a real difference to whether the English Court is the appropriate forum;

• Although the law on infringement is not, strictly-speaking, harmonised across Europe as the Community Patent Convention never came into force, Lilly did not adduce evidence to show differences between the infringement provisions between the Member States material to the claims at issue;

[Merpel wonders whether this means that a defendant should engage in the merits of the claim to prove its point? Would that mean that the defendant had submitted to the jurisdiction of the Court?]

• The issue was whether the English Court should hear the claims over the four foreign designations together with the claim over the UK designation rather than all being heard separately, not whether all five claims should be heard elsewhere, and this militated strongly against a stay;

• There would only need to be one team of lawyers, rather than five teams, although Lilly would not be obliged to consent to English law being the applicable law of the foreign patents for the purposes of the proceedings;

["But what about the teams of foreign advisors opining as to the state of the foreign law?", meows Merpel]
• The speed of proceedings in the various Member States was not relevant unless it was in the interests of justice to go to the fastest Courts;

• This ‘consolidated’ approach would reduce the risk of inconsistent judgments.

[Merpel questions whether this sits comfortably with the decision of the CJEU in Roche v Primus C-539/03 where the Court said that there was no risk of irreconcilable judgments between different designations of the same European Patent because they are fundamentally different rights.]
And there you have it – it is now open season on claims for infringement of foreign IP rights in the English Courts although a little fluffy kitten told us that Lilly have permission to appeal, so watch this space.

If you need a more, shall we say, “English” interpretation of patent claims, without a doctrine of equivalents, perhaps you should head towards London, although in due course Lilly will no doubt be asking the English Court to adopt a more Teutonic approach.

This AdvoKat wonders if Mr Justice Arnold has put the Kat amongst the pigeons with this decision. Is this start of a brave new alternative to the UPC? Is this the start of a new round of forum shopping across Europe?

Mr Justice Arnold
While this might be good news in support of the gradual unification of the approach across Europe, especially of claim construction, will our continental cousins be feeling rather left out, or even snubbed by the English Court? How time-consuming and costly are actions for infringement (or rather declaratory relief in this case) where the Judge sitting in Paris, Dusseldorf, Milan or Madrid knows his own country’s approach to determining the scope of the claims inside out, and no witnesses as to that particular law are required? Why should the English Court cast aside comity considerations, when the Courts of each member state would be perfectly capable at determining what pharmaceuticals can and cannot be released onto their respective national markets?

Clearly the facts of this case are a little unusual, in that there will be no challenge to the validity of the patent (Actavis is a party to the EPO opposition to it), and Actavis merely wants declarations of non-infringement. If the alleged infringer is happy to fight its patent wars without national validity challenges, then it appears now that it should come to London if it wants to consolidate. However, it is far from clear whether, for example, the French Courts would decide the jurisdiction case the same way (see the decision of the Paris First Instance Court in Dijkstra v Saier dated 5 November 2003). Is therefore the most cost-effective route to start an opposition before the EPO, and challenge all the designations in one action in London?

Perhaps, ponders this Kat, we could also start to dampen the effect of Article 22(4) and GAT v LuK by developing bilateral recognition of judgments on validity either between parties or at a national level. Will this be the smoothest path to achieve true harmonisation of patent litigation (and avoid the need to trouble the CJEU) without bypassing our fellow member states?

5 comments:

Suleman said...

I don't have any comment on the cross border aspects of the case, but as a spectator to purposive construction developments it would be wonderful for the Court to decided that 'disodium' covers 'dipotassium' and presumably Actavis have a fear it might do.. As a junior I was always told purposive construction does not apply to chemical cases. However, one never knows what clever arguments might achieve.

Tales from Hoffmann said...

Ask not 'does purposive construction apply to chemical cases?' but 'what would the skilled addressee understand the patentee to have meant by the words he has used?'.

Anonymous said...

Well... maybe the best choice would be for Lilly to close their department in the UK and open up somewhere else, where courts are more open to equivalents.

Anonymous said...

The last comment sounds... "I'm gonna make him an offer he can't refuse"

It's no positive to blend different things. Don't you think?

Anonymous said...

The last comment sounds... "I'm gonna make him an offer he can't refuse"

It's no positive to blend different things. Don't you think?

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