Further undertakings, a stay -- and an expression of hope

Last week PatLit reported on the refusal of Mr Justice Arnold, in Actavis Group PTC EHF v Pharmacia LLC [2014] EWHC 2265 (Pat), to grant a stay of patent revocation proceedings in England and Wales pending the outcome of parallel opposition proceedings before the European Patent Office. On Thursday of last week, in [2014] EWHC 2611 (Pat), the same judge delivered a further judgment in which he granted a stay, having considered the effect of two further undertakings from Pharmacia. This judgment is not yet on BAILII but, since it is only seven paragraphs long, PatLit is reproducing it below in full:

1. This is a renewed application by Pharmacia for a stay of these proceedings until the final determination of the parallel proceedings before the European Patent Office. The background is set out in full in my judgment of 11 July 2014 ([2014] EWHC 2265 (Pat), and I will not repeat it here. As was set out in the postscript to that judgment at paragraph 33, following the circulation of a draft of the judgment to the parties, Pharmacia offered two additional undertakings in return for a stay of the proceedings. Those additional undertakings are summarised in paragraph 33 of the previous judgment and have subsequently been elaborated, together with the other undertakings offered by Pharmacia, under cover of a letter from Pharmacia's solicitors dated 23 July 2014.

2. Against that background, Pharmacia now seeks a stay of the proceedings on the basis of all of those undertakings. As can be seen from paragraphs 30 and 31 of my previous judgment, I concluded that a stay should not be granted on the basis of the undertakings offered by Pharmacia set out in paragraph 12 of that judgment. As I stated, it seemed to me that the competing considerations were finely balanced, but nevertheless they favoured the refusal of a stay. The key consideration that weighed with me in reaching that conclusion was that, having regard to the likely length of time it would take for the EPO proceedings to be resolved, the undertakings that were offered by Pharmacia, although they largely eliminated the commercial uncertainty to Actavis during the period of stay, did not address the uncertainty caused by the prospect that Actavis might be removed from the market by an injunction in, say, five years' time and might have to pay ordinary damages or account for its profits for the last two of those years.

3. In my view, the additional undertakings now offered by Pharmacia meet that point, and accordingly do substantially eliminate the commercial uncertainty to which Actavis will be exposed in the United Kingdom as a result of a stay.

4. Actavis continues to resist a stay even on the basis of the additional undertakings proffered by Pharmacia. Actavis’ reasons for resisting a stay are set out in paragraphs 9 19 of the third witness statement of Mark Hilton of Actavis’ solicitors. In summary, the key points that Mr. Hilton makes on behalf of Actavis are twofold. First, he makes the point that Actavis wishes to launch its generic sustained release pramipexole product throughout Europe. Accordingly, Actavis wishes to remove the commercial uncertainty caused by the existence of the Patent as soon as possible across Europe. Actavis takes the view that an early decision from this court will be of considerable assistance to it in that regard. It will give Actavis and its customers confidence as to the position across Europe. Furthermore, it is likely to be of persuasive effect in other jurisdictions. The second main point made by Mr. Hilton follows on from the first, namely that an early decision of this court will assist in promoting settlement between the parties on a pan European basis. An additional point Mr Hilton makes, which to my mind is of less weight than the two main points, is to suggest that it is clear from Pharmacia’s attitude and the undertakings that it has offered that the Patent is a weak one, and that there is a strong public interest in the validity of weak patents being scrutinised by a competent court at the earliest possible date.

5. In my judgment, the matters that are relied upon from Actavis are considerations which do favour the refusal of a stay. Nevertheless, I have to consider the overall balance, having regard to the guidance given by the Court of Appeal in IPCom GmbH v HTC Europe Co Ltd [2013] EWCA Civ 1496, [2014] RPC 12, at paragraph 68. Taking all of the factors set out in that judgment into consideration, it seems to me that the overall balance now comes down in favour of the grant of a stay. While I accept that Actavis has a good reason to want to obtain a decision of this court at an early date and that that will be of assistance to Actavis in the ways that Mr. Hilton describes, I nevertheless consider that the additional undertakings offered by Pharmacia go sufficiently far to tip the balance in favour of a stay, having regard to the other factors mentioned in IPCom.

6. For those reasons, I will now grant a stay on the basis of the undertakings set out under cover of Pharmacia's solicitors’ letter dated 23 July 2014 as clarified with counsel for Pharmacia this morning.

7. I should say one thing further, which is this. Counsel for Actavis made the point that, although Pharmacia has offered an undertaking to co operate with Actavis to seek expedition of the opposition proceedings in the EPO, including any appeal to the Board of Appeal, there was room for doubt as to whether the EPO would accede to a request for acceleration, given that Pharmacia has offered an undertaking not to seek an injunction in the UK. I acknowledge the force of that point. However, it seems to me to be clear that expedition of the EPO proceedings is warranted not merely because of the existence of the English proceedings, which will include the counterclaim for infringement that Pharmacia has undertaken to bring. It seems to me to be plain from the current position of the parties that there is a strong likelihood of further proceedings elsewhere in Europe and, furthermore, a strong likelihood that those further proceedings will include infringement proceedings in one or more contracting states of the EPC. Accordingly, I express the hope that the EPO will accede to the joint request of the parties to accelerate the opposition proceedings and any appeal.

That the EPO should expedite proceedings is clear; whether it will take note of the hope of a British trial judge or of the parties themselves is however less certain.   Do readers of this weblog have any evidence, anecdotal or otherwise, of the EPO accelerating proceedings because a national court has expressed the wish that this should happen?

Stays revisited: IPCom v HTC in the Court of Appeal

Earlier today the Court of Appeal for England and Wales gave an important and keenly-awaited ruling in IPCom GmbH & Co Kg v HTC Europe Co Ltd & Others [2013] EWCA Civ 1496, a decision on whether and when to stay national validity proceedings pending the outcome of European Patent Office (EPO) invalidity proceedings.  This decision, which was not available online when news of it first broke, is now accessible on the excellent (and free) BAILII database here.

Taylor Wessing LLP has prepared an unusually helpful news bulletin on this case, which is also available online with hyperlinks to citations.  It says, in relevant part, as follows:

"The Court of Appeal has today given judgment in IPCom v HTC – a case concerning the validity of a European patent due to be heard in December 2013. HTC applied for a stay of the English validity proceedings pending the outcome of proceedings concerning the same European patent at the  ...EPO. Roth J at first instance refused HTC's application .... The Court of Appeal has upheld his decision. This is the first time that the Court of Appeal has ruled on such a stay application since the Supreme Court suggested in Virgin Atlantic v Zodiac that the guidelines set out by the Court of Appeal in Glaxo v Genentech should be considered again.

In the light of this decision, it is to be expected that the considerable duration of EPO proceedings will continue to point in favour of refusing a stay of English proceedings in most cases [this blogger thinks that the trend towards refusing a stay will accelerate anyway since, as patent litigation in England and Wales becomes faster and more efficient, and case management becomes more cogent, the likely duration of any stay will be longer. Meanwhile, in the fast-moving ICT technologies in particular, the commercial life of litigated patents is likely to continue to grow shorter].

Parallel validity proceedings for European patents

The European patent system allows proceedings concerning validity to run concurrently in both national Courts and the EPO. The reasons for requesting a stay in these circumstances are plain: there is the possibility of wasted costs and/or conflicting decisions. All else being equal, it might be said to be sensible for the national Courts to wait and see what happens at the EPO where a decision to revoke a patent trumps a finding of validity in a national Court.

However, ... proceedings in the EPO typically last many years. A decision from a national Court may arrive much quicker and still provide the parties with a helpful measure of commercial certainty, despite the fact that it only applies in that particular jurisdiction.

A number of English cases have addressed what should be done when proceedings are under way on the parallel national and EPO tracks. English proceedings have often been allowed to continue, despite the risk of wasted costs or inconsistent decisions, because a final decision of the EPO is still many years away. The leading case was Glaxo v Genentech, where the Court of Appeal set out a number of guidelines, including:

"If the likelihood is that proceedings in the Patents Court would achieve [some certainty] significantly sooner rather than the proceedings in the EPO, it would normally be a proper exercise of the discretion to decline to stay the Patents Court proceedings."

The HTC stay application

Roth J applied the Glaxo guidelines in dismissing HTC's stay application at first instance. However, he allowed permission to appeal because the Supreme Court had indicated at around the same time in Virgin Atlantic that the Glaxo guidelines should be reconsidered [it's a pity that the parties in a subsequent case should be made to pay for the reconsideration of rules that was identified as being necessary in an earlier case -- but someone has to pay the price of judicial law-making]. Virgin Atlantic concerned the impact of a later revocation of a patent on an earlier award of damages for infringement, .... Their Lordships highlighted that failure to stay national proceedings could lead to injustice to a defendant ordered to pay damages for infringement of a patent later revoked by the EPO. Furthermore, national decisions were only national, whereas a decision of the EPO applied in all designated states and the potential for inconsistency, uncertainty and wasted cost through allowing national proceedings to continue was not desirable.

In upholding Roth J's decision to refuse the stay, the Court of Appeal considered each of these criticisms of the Glaxo guidelines. While recognising that the guidelines required some revision, the Court did not consider that they should be swept away altogether. In recasting the guidelines, the Court paid particular heed to the issue of potential injustice to a defendant ordered to pay damages by a national court, but proposed ways of mitigating this injustice (e.g. by requiring the patentee to undertake to repay the damages if the patent were subsequently revoked). ... [I]nconsistency and wasted cost could only be avoided altogether (or rather potentially avoided) if stays were mandatory, which was not what the Supreme Court had suggested. Rather, these factors were inherent consequences of the European patent system, which the Courts have to take account of and manage as best they can".

No stay where EPO proceedings start over again

Ipcom GMBH & Co KG v HTC Europe Co Ltd and others [2013] EWHC 2880 (Ch) is a Patents Court, England and Wales, decision of Mr Justice Roth, going back to 26 September but not yet on BAILII.  This note is drawn from a short explanation of this decision on the Lawtel subscription-only service. It invites once again the question whether the traditional court system, meshed in with the grant-and-opposition mechanisms of the European Patent Office (EPO), are really suited to the sort of complex litigation that is needed where internationally-granted and often technical standard-oriented patents are concerned.

These proceedings concerned litigation in respect of IPCom's mobile telephony patent for a means of controlling access to the ‘Random Access Channel’ or ‘RACH’ between mobile phones and a network base station.  IPCom sued the three defendants (collectively referred to as HTC) for patent infringement; HTC counterclaimed that the patent was invalid and argued that, even if it was valid, they weren't infringing it because they were using ‘workarounds’ that did not infringe.

The patent, in the form subject to IPCom's existing claim, was held valid by the Patents Court back in 2011 in Nokia Oyj (Nokia Corporation) v IPCom GmbH & Co KG, [2011] EWHC 1470 (Pat) following which HTC applied to adjourn the trial of technical issues of invalidity and infringement pending the final determination of validity proceedings currently pending before the European Patent Office's Technical Board of Appeal (TBA).  In May 2012 the Patents Court heard this application by HTC and granted it, though limiting it to the period up to the decision of the TBA on the appeal against the Opposition Division’s revocation of the European patent.

The TBA subsequently held that the patent was valid with an amended claim and remitted the case to the Opposition Division to consider some other grounds of opposition. At this juncture, IPCom applied for an ‘unless’ order to enforce directions given by a judge on 25 September 2012 for inspection of parts of the source codes which enabled or governed access to the RACH. The chips were supplied to HTC by third parties, including Qualcomm and Intel, who were responsible for the software and the relevant source codes.

HTC sought a further stay and the third parties applied to vary or discharge the relevant provision in that order. In these proceedings Roth J thus had to decide (i) whether there ought to be a further stay of the proceedings until the final resolution of the case in the EPO and (ii) whether the order should be varied to restrict the inspection of the security codes, particularly in the light of concerns expressed by the third parties about the very high degree of commercial confidentiality that attached to the source codes.

Roth J refused to order a further stay, but did vary the order.  In his view:

* a further stay would involve waiting for two levels of decision in the EPO. Accordingly, the potential total delay resulting from the stay sought was very long indeed.

* Justification for the order for inspection remained and the court was not prepared to discharge it on substantive grounds. However, account was taken of concerns expressed by the third parties about the very high degree of commercial confidentiality that attached to the source codes. Having heard argument regarding the scope of the confidentiality club of which the third parties were members, Roth J was minded to restrict the order so as to allow access to just one or two nominated experts who would each provide a written undertaking of confidentiality to the court, as well as to identified individuals in IPCom’s external English team.

Court stays olanzapine infringement/invalidity action pending payment into court

Eli Lilly and Co Ltd v Neopharma Ltd and Gurnos Ltd [2011] EWHC 1852 (Pat) is a Patents Court decision of Mr Justice Floyd which doesn't seem to have found its way on to BAILII yet.

Pharma company Eli Lilly owned a patent for the anti-psychotic drug olanzapine. Neopharma and Gurnos were also pharma companies; Neopharma was dormant, but it did hold the EU marketing authorisation for generic olanzapine. In January 2008, the defendants launched a generic version of the drug, without telling Eli Lilly. A month later, Eli Lilly found out and obtained an interim injunction. Neopharma and Gurnos admitted infringement, but argued that the patent was invalid. In July 2008, in separate proceedings Dr Reddy's unsuccessfully challenged the validity of the same patent and Eli Lilly was granted a certificate of contested validity. Dr Reddy's had maintained that the patent was invalid for lack of novelty, based on an earlier publication ('Chakrabarti'), and for obviousness, based on an earlier UK patent document ('235'). In these proceedings, Neopharma and Gurnos also relied on a third piece of prior art, an article by Sullivan and Franklin. Unimpressed, Eli Lilly applied for summary judgment against them and/or security for costs. The defendants counterclaimed.

Before the court, Eli Lilly pressed for summary judgment on the ground that Neopharma and Gurnos had no real arguable case. Neopharma and Gurnos said in turn that it proposed to adduce different evidence in relation to 235 and Chakrabarti, and that Sullivan and Franklin was not relied on in the Dr Reddy's case.

Floyd J granted Eli Lilly summary judgment regarding the challenge to the patent's validity based on obviousness via the 235 patent. The challenges to validity based on Chakrabati and Sullivan & Franklin would be allowed to proceed: while they were pretty unpromising, they were just about arguable and hadn't been raise

The judge felt it was right for Neopharma and Gurnos to make a payment into court to provide security for Eli Lilly's costs. For one thing, their attempts to revoke the patent in other countries had failed, the patent having  been found valid in Germany, Austria, Slovakia, the Czech Republic and Romania and, beyond the European Patent Convention zones, in the United States, Canada. What's more, they had behaved reprehensibly in launching the generic version of the drug without telling Eli Lilly first. Requiring them to make a payment into court was not disproportionate particularly since, if they didn't have to give security, there was a risk of injustice to Eli Lilly if the invalidity claim failed. Moreover, Parliament had intended patentees to enjoy better protection in the event of a second attack on a patent, which is why section 65 was put into the Patents Act 1977 in the first place. That payment would be reduced to take into account the fact that the challenge based on the 235 patent would no longer have to be tried. However, a stay of the invalidity proceedings would be granted until the money had been paid into court.

PatLit thanks Tom Mitcheson (instructed by Simmons and Simmons on behalf of Eli Lilly) for drawing his attention to this decision.

Bulls and horns, carts and horses -- but still no stay.

On what may be the first occasion on which both bulls and horses have been harnessed by any British judge for the purpose of deciding a patent appeal, the Court of Appeal for England and Wales gave a short and somewhat bucolic-sounding decision in Molnlycke Health Care v BSN Medical Ltd [2010] EWCA Civ 988. Lord Justice Jacob (with whom Lord Justice Patten presumably agreed) explained that this was an appeal against Mr Justice Floyd's refusal to stay an English patent action on the ground that proceedings were already underway in Sweden and that, accordingly, the case fell within Article 27 of the Brussels Regulation which runs like this:

"1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.

2. Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court.".

Dismissing the appeal, Jacob LJ said that, when the matter first came before the Court of Appeal it was not entirely clear from the papers whether the Swedish court was seised with the same issue as that in the English proceedings: did the samples of BSN's products fall within the claims of Molnlycke's patent? Rather than ploughing through the various Swedish judgments [which, PatLit guesses, were delivered in Swedish] the Court would take the bull by the horns and contact the Swedish judge. The latter responded immediately and helpfully in that spirit of cooperation between European judges which could not have existed even 20 years ago [which, PatLit guesses, means that she replied in English]. She confirmed that, as the case stands right now, that question was not in issue. Ergo, no stay.

If, as Jacob LJ pointed out, the question does subsequently arise in Sweden, since it will do so only after the Court of England and Wales was seised with that issue, it is that court and not the Swedish one which will be first seised.

It was argued, relying on Article 28 of the same Regulation, that the Court of Appeal should adjourn this current appeal to await a decision from the Swedish court as to whether it wants to take jurisdiction over this question. That, said Jacob LJ, was putting the cart before the horse: "This court is seised with the issue. There is an infringement, according to Molnlycke, of the British patent. Molnlycke are entitled to proceed to bring that claim before the English court". The learned judge then observed:

"Whether it is sensible for the parties to proceed in two different jurisdictions is a quite different matter. That is a matter for them. If they wish to choose just one of them and have it decided there, they can of course do that. But it is not a matter for the courts to get involved in".

Says PatLit, this judgment is also characterised by a mysterious line which reads:

"There were other points too, none of which matter for present purposes. PRIVATE ".

If the points do not matter for present purposes, one wonders whether it wise to mention them.

Infringement action won't be stayed pending foreign decision in non-patent claim

Stay of proceedings is always an important issue where litigation breaks out between the same parties in different jurisdictions in respect of the same patent -- but it's not so common to find an application for a stay of patent infringement proceedings in the UK pending the outcome of proceedings unrelated to patent infringement abroad. For this reason the extempore decision of Mr Justice Kitchin in Elmotech Ltd and another v Guidance Ltd and another (Patents Court, England and Wales, 13 May 2010) is instructive (this decision was picked up by subscription service Lawtel).

In these proceedings Guidance applied to stay an infringement action brought against them by Elmotech in relation to its patent for tracking devices, pending the outcome of related French proceedings. In those French proceedings, Elmotech had challenged the award of a state tender to a consortium, which included the second applicant in these proceedings, to supply personal monitoring equipment in France. Elmotech, as a member of a consortium that had made an unsuccessful bid, claimed that the award of that tender and the subsequent contract signed by the parties should be set aside because of the procedural violations of EU law and French procurement contract rules. Elmotech, opposing the application for the stay, maintained that it was likely to take around four and a half years to resolve the French proceedings and to receive any relief if it was successful. The French proceedings did not involve any allegations of infringement of patent rights or any issue as to the validity of any patent rights.

Kitchin J refused the application for a stay. In his view, in these circumstances it would not be right to deprive Elmotech of the opportunity to establish the validity of its patent in suit; rather, it was appropriate to allow the patent infringement action to proceed.

Revocation proceedings not an abuse of process even if not commercially justified

In TNS Group Holdings Ltd v Neilsen Media Research Inc. [2009] EWHC 1160 (Pat), a decision of Mr Justice Arnold of 20 May, the Patents Court for England and Wales ruled that the Patents Act 1977, s.72(1), which states that "any person" may apply to revoke a granted patent, means exactly what it says. On this basis, the intention of a claimant in revocation proceedings is irrelevant and it is not therefore an abuse of process to bring a revocation action even if the applicant has no commercial reason to do so. In this case, the patent owner had offered the claimant a licence to use the patent (for television audience management measurement systems) on terms which -- though confidential -- must have been sufficiently attractive for the patentee to be able to argue that the plaintiff would be no better off if the patent were revoked than if it remained in force.

The judge went further: a claimant's declared intention to use validity decision in the United Kingdom as persuasive authority when seeking revocation in other European jurisdictions was legitimate, since consistency of decisions as between European jurisdictions is a desirable end. As he said (at para.26):

"It is commonplace for parties litigating on the same European patent in a number of Contracting States to put before the courts of one Contracting State decisions arrived at in one or more other Contracting States. I do not see that such conduct can possibly be stigmatised as an abuse of process. That is particularly so given that such judgments may come to the attention of courts in other Contracting States in any event. The courts of all the Contracting States are seeking to apply the same substantive law. It would be most unfortunate if anything were to be done which made it more difficult for the courts of the Contracting States to arrive at common answers to common questions".

Having so held, Arnold J in any event refused to stay the revocation action before him, pending the outcome of opposition proceedings in the European Patent Office since the EPO proceedings would take at least two years longer than a final decision in the UK courts.