From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Thursday, 9 April 2015

Freeze-dried bacterial food for thought, as pharma company is offered a second bite at the cherry

Readers may be merry-making over the holiday period or dedicating their time to the pursuit of truth at this year's Fordham IP Conference.  Either way, here's something for them to chew on. Actial Farmaceutica Lda v Claudio de Simone, Mendes srl and Florence Pryen [2015] EWHC 836 (Ch) is a High Court, England and Wales, decision of Andrew Hochhauser QC sitting as a Deputy Judge of the Chancery Division on 31 March. This decision is not on the BAILII database, though the note below is based on a Lawtel summary. Subscribers to the subscription-only Lawtel service can also access the text of the 61-page judgment in full.

Professor de Simone, an Italian national domiciled in Switzerland, invented bacterial compositions used in human nutrition and hygiene. He had been the sole director and shareholder of Mendes, an Italian company, and had worked closely with Florence Pryen, who lived in Italy. Having created a probiotic food product containing a high concentration of beneficial, live bacteria [somewhat unappetisingly described as "live, freeze-dried, pure lactic acid bacteria"], the professor entered into a joint venture agreement with two brothers, who were majority shareholders in the Sigma Tau group of Italian pharmaceutical companies, to exploit that product commercially worldwide.

It was alleged that Professor de Simone had transferred the IP rights in his product to companies within the joint venture and that the brothers had accepted responsibility for funding, distributing and selling the product. The product itself was made in the US, then exported in bulk to companies in Italy and the Netherlands for packaging before onward distribution.

Asked if he liked eating probiotic bacteria,
the answer given by Beavis was more 
eloquent than any words
Actial, the claimant in these proceedings, a Portuguese company, was part of the joint venture group which held the VSL#3 Community trade mark (CTM) for the product and, allegedly, the right to make and sell it in other countries -- including the UK. In these proceedings Actial claimed damages and injunctive relief for unlawful means conspiracy and unlawful interference with its business, and indicated its intention to add further causes of action based on infringement of the CTM and passing off. Said Actial, the defendants had embarked on a dishonest scheme to wrest control of the product's manufacture and distribution unlawfully from the joint venture with the intention of creating a rival business. Actial added that the professor had sought to cut off supplies of the product to it, thus preventing it from fulfilling its UK distribution obligations.

In these proceedings Actial contended that, if no interim relief was granted before trial, enabling it to obtain supplies of the product and fulfil orders to UK companies, it would go out of business. The defendants argued that the court lacked jurisdiction to entertain the action under Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

Andrew Hochhauser QC refused Actial's application for interim relief. In his view:
* The defendants were domiciled in Italy or Switzerland. Accordingly, under Article 5(3) of the Regulation, proceedings could only be brought in the UK if that was where the harmful event complained of had occurred or might occur -- and it was for Actial to satisfy the court that it had an arguable case that this was so. 
* In claims relating to economic loss such as this one, we have to locate the place where the harmful event directly had its effect on the immediate victim and where the original damage was manifested. In this context, damage occurred where direct harmful consequences were suffered, not at the place where indirect or remote damage occurred or consequential financial loss was felt which had arisen out of the event that had already caused initial and actual damage elsewhere.  
* Ideally the court should identify a single place for the occurrence of damage, and one which had the closest proximity to the harmful event. 
* Here the original damage caused by the alleged conspiracy and wrongful interference with contractual relations was the non-delivery, on the professor's instructions, of bulk supplies of the product to the Italian and Netherlands packing agents for onward distribution. If the alleged tort had not been committed, the packing agents would have received the product in the usual way. The resultant indirect damage was Actial's inability to supply its UK distributor -- but that was one stage removed. The initial damage did not therefore occur in the UK but when supplies of the product in Italy or the Netherlands ceased. Actial could not therefore bring its claims as currently pleaded within Article 5(3) and the UK court lacked jurisdiction to hear them.
The judge did however have some better news for Actial when it came to trade marks.  Actial did have a good arguable case that there had been trade mark infringement and passing off in the UK. The court would have jurisdiction to hear such claims under the Community Trade Mark Regulation and was willing to hear an application to amend the claim form and consider an application for interim relief.

Merpel is puzzled by this dispute.  Here is a High Court action involving a product that is presumably so commercially valuable that it's worth litigating over, but which features a cast of players drawn entirely from outside the IP community. The Deputy Judge, the barristers and the solicitors on both sides, without prejudice to their undoubted excellence and competence, are all effectively unknown to her. Is this a sign that IP law is fast evolving from a niche specialism to an area of general commercial law, or is there some more interesting reason?

This Kat is a bit puzzled too. While it's encouraging for Actial to learn that it has an arguable case of trade mark infringement and passing off, he wonders what form any interim relief might take, following the amendment of Actial's application for it.  He understands that a court may apply American Cyanamid principles and order an infringer to stop infringing -- but can they be stretched far enough to cover what Actial really wants, which is a resumption of the supply of the trade mark-protected product?

More on VSL#3 here


Aslancat said...

The "Portuguese" status of the company is via Madeira. So, probably it's an offshore company. It would be very interesting to discuss the level and types of IP troubles created by all this off-shoring for tax purposes.

Anonymous said...

Your last two paragraphs are pretty poor. As you note, no IP claims were brought -- the matter was a commercial dispute (conspiracy and unlawful interference with a contract are not exactly the same as patent invalidity proceedings) and therefore it's plainly appropriate that commercial counsel were used and that the matter was heard by a general commercial judge.

As for your last paragraph... specific performance...?

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