Has the Court of Appeal signalled the end of English judicial influence of Arrow declarations?

With the weather getting colder, the courts are getting hotter as judgments are being feverishly finished before the holidays and applications being filed last minute to try and secure a final hearing before the end of the year. One such judgment that has greeted us this yuletide is the Court of Appeal's decision in Teva v Novartis [2022] EWCA Civ 1617 ending Teva’s Arrow declaration dreams.  Here is the scoop:

Background

The Respondent, Novartis, owns a patent EP 2 959 894 for a specific use of fingolimod. The Appellant, Teva, wanted to sell generic fingolimod. They sought an Arrow declaration that the importation, disposal, use and keeping by them of generic fingolimod in the UK for that specific use would have been obvious at the priority date of the patent in question ([5]). An Arrow declaration is a declaration that a product, process or use was lacking in novelty or obvious as at the priority date of a patent application. The declaration means that the applicant will have a Gillette defence to patent infringement claims about that product, process, or use. In this way the court can decide a patent infringement case even before the patent has been granted ([17]).

The Judge dismissed of the Teva's claim for an Arrow declaration ([2022] EWHC 2779 (Ch)), and this is the appeal against the Judgment. Novartis started infringement proceedings against Teva in several European countries including Germany where the hearing for preliminary injunction was scheduled on the 15 December 2022. Teva wished to rely on the Arrow declaration and the English court’s judgment on obviousness at that hearing ([13]). The recording of the appeal hearing is available here and here.

Applicable legal principles

"Spin-off value" of judgments of the English Patents Court

There are two kinds of spin-off values. First, the high-quality judgments from the English Patents Court may help the parties negotiate a wider settlement. Secondly, the judgments of the Patents Court may be regarded as persuasive by the courts of other European countries ([28]). The spin-off value has been taken into consideration in at least three contexts. One, for parties seeking an expediated trial ([30] – [31]). Two, whether to stay English proceedings while oppositions are going on before the European Patent Office ([32]). Three, to decide whether a claim in the Patents Court is an abuse of process ([33]). It is worthwhile to notice that in each of these three contexts there is a patent or patent application designating the UK ([35]; see also [39]).

Declaratory relief in aid of foreign proceedings

Arnold LJ, with whom Nugee LJ and Sir Christopher Floyd agreed, pointed out that it is quite different to seek a declaration from the Patents Court for the sole purpose of influencing a foreign court applying its own law ([35]). He reviewed the previous four cases where the Patents Court considered if it should make a declaration for use in foreign proceedings. In the first case, Fujifilm v AbbVie [2017] EWHC 395 (Pat), the effect of the declaration on preliminary injunctions abroad was one, but not the only reason for which Henry Carr J concluded that it would serve a useful purpose. Further, Arnold LJ noted that it was not the most important reason in that judgment either, which was rather to dispel the uncertainty in the UK market ([43]).

The second case is Pfizer v Hoffmann-La Roche [2019] EWHC 1520 (Pat). Birss J in that case held that it is wrong to limit the court’s power to grant a declaration even when it will serve a useful purpose; that at least as long as one is not concerned with forum shopping, that the purpose is useful in a foreign dispute may justify granting a declaration; and that the court will identify the real purpose of the declaration considering all the circumstances ([45]). In that judgment Birss J refused to grant a declaration because:

-          - there would be no UK right in the future for that case. An Arrow declaration would only be useful to help Pfizer defend itself in other European countries. There was no outstanding uncertainty about UK rights;

-          - the uncertainty relating to the UK market came from the fact that the goods would be supplied from a foreign jurisdiction where there was the uncertainty on a patent infringement claim. But the issues there were about a Belgian patent and Belgian law;

-          - the purpose of an Arrow declaration in that case would be for use in foreign courts. Birss J was not persuaded that that was enough ([46]).

The third case is TQ Delta v ZyXEL [2019] EWCA Civ 1277. Floyd LJ considered that it would be jurisdictional imperialism to impose the English court’s view on whether ZyXEL were unwilling licensees in an unknown foreign jurisdiction ([48]). The fourth case is Dräxlmaier v Bos [2022] EWHC 2823 (Pat). It was common ground in that case that the infringement or non-infringement claim no longer served a useful purpose. Sir Anthony Mann held that an infringement claim or its counterpart declaration of non-infringement claim brought solely or essentially for the decision to be used to influence a foreign court should be struck out or at the very least stayed ([49]).

Having considered these four previous cases, Arnold LJ reached the conclusion that "[…] as a matter of principle, it is wrong for an English court to make a declaration solely for the purpose of influencing a decision by a foreign court on an issue governed by the law of the foreign court" ([51]).

The first instance Judgment and the appeal

Before the Judge, Teva raised five reasons to support their application for the declaration. First, they pointed to the patent proprietor’s aggressive enforcement of the patent including the fact that they had obtained injunctive relief. The Judge agreed with Teva’s concession that it was not a stand-alone reason for granting a declaration ([54], [56]).

Secondly, Teva argued that a declaration would provide clarity to Teva’s customer in the UK, the NHS. The Judge noted that there was no evidence of uncertainty in the UK market. This conclusion was not challenged on appeal ([57]).

Thirdly, the proprietor’s undertakings in dispelling the uncertainty in the UK market was inadequate. The Judge considered that the revised undertakings were not ambiguous to create uncertainty in the UK market. This conclusion was not challenged on appeal ([58]).

Fourthly, a UK judgment would be useful in Germany on whether to grant a preliminary injunction. The Judge did not accept that submission: the case law established that if the predominant purpose of the declaration was to use the judgment in a foreign court, the declaration was only likely to be granted where there is ‘a very compelling justification for doing so’ ([59]).

Fifthly, Teva’s supply to the UK transited through a confidential Country A, and an injunction against Teva in Country A would threaten the supply chain. The Judge dismissed this submission. The Judge held that it was not enough: an Arrow declaration would be used in foreign courts rather than to obtain or enforce any right in the UK, and granting the injunction sought by Teva required ‘particular unusual circumstances’. But they were not such unusual circumstances ([60]).

On appeal, Teva contended that the Judge erred in principle when considering their fourth and fifth reasons. Alternatively they said that the Judge was wrong to conclude that there was not any very compelling justification. Arnold LJ dismissed those arguments, and held that the only error the Judge had made was in adopting too favourable an approach to Teva.  Once she found that a declaration was not needed to dispel the uncertainty in the UK market, the only purpose of a declaration was to help the courts of Germany and Country A decide issues under their own laws. The Judge followed Birss J’s approach to that question in Pfizer v Hoffmann-La Roche but as Arnold LJ concluded above, helping a foreign court decide an issue under its own law is not a reason to grant declaratory relief ([63] – [64]). The appeal was dismissed.

how a German court may consider an Arrow declaration from the English court 

Comments

Even if an applicant successfully persuaded the English court to grant a declaration following the strict requirements established by this appeal judgment, the persuasive value of the obtained declaration in a foreign court is by itself a question the answer to which is anything but certain. Indeed, [30] – [31] mentioned a case where a German regional court which decided infringement took the judgment of the English Patents Court into consideration but was not ultimately persuaded that the patent was likely to be invalid: the German court thought that it was merely proof that there were conflicting views on the validity between the English court and the European Patent Office.

  

So really, how persuasive is the English court really, wonders Merpel?  Not enough to be sufficient for an Arrow declaration alone without a UK dispute or uncertainty, responds The IPKat, before they both curl up by the fire.