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Law & practice

VI. INSTITUTIONAL MATTERS

1. Judicial status of the EPO Boards of Appeal

ES Spain

Court of Appeal of Madrid (Section 28) of 4 of March 2013 (17/2013) – Actavis Group et al. v Merck Sharp & Dohme

Keyword: interpretation of the Convention – decisions of the Boards of Appeal of the EPO – second medical use

The Court of Appeal of Madrid upheld the claimants' challenge to patentability on the grounds of a lack of inventive step and so revoked the patent (EP 724 444). A significant point in the decision was, however, whether the claim in question was excluded from patentability pursuant to Art. 52(4) and 54(5) EPC.

The defendant had observed that, in parallel procedures, the English Court (Court of Appeal, Actavis UK Ltd v. Merck & Co) in a decision of 21 May 2008 had held that "Swiss-type" claims were allowable where novelty was conferred by a new dosage regime. Thus it followed the decision adopted by the EPO in T 1020/03. In G 2/08 the Enlarged Board had also held that such patenting was not excluded where a dosage regime was the only feature claimed which was not comprised in the state of the art. The respondents argued that national courts were not obliged to follow the criterion adopted by the EPO, citing the courts of France and Germany on the same legal issue.

The Madrid Court of Appeal saw no obstacle to the patentability of such inventions. It stated that while the decisions of the EPO were not binding, the task of promoting the harmonisation of the patent system and the need to ensure uniform application of the EPC should also be taken into account, and this was especially relevant in interpreting the scope of the exclusions from patentability. The court found that it was necessary to consider the special importance of the decisions of the boards of appeal of the EPO for the interpretation of the EPC. It noted that the Convention establishes a system similar to a jurisdictional one and the necessary independence of the boards of appeal (Art. 23 EPC). The boards of appeal also fulfilled the requirements for being considered a court or tribunal for the purposes of Art. 6 ECHR.

Editor's note: See also the judgment of 7 November 2011 (no. 317/2011) of the Madrid Court of Appeal (Chamber 28) on the status of the boards of appeal, with a similar line of argument.

2. EPO decisions, the Convention and national courts

ES – Spain

Supreme Court (Civil Chamber) of 27 April 2011 – LEK Pharma v Warner Lambert – Atorvastatina (274/2011)

Keyword: selection inventions – relevance of the Guidelines for Examination in the EPO and decisions of the boards of appeal

The case concerned the revocation of European patent 409 281 concerning atorvastatin calcium. The calcium salt of atorvastatin is the active ingredient of a widely used cholesterol-lowering medicament.

The decision of the Barcelona Court of Appeal (Section 15) dated 18 October 2007 (see second edition "Case Law from the Contracting States to the EPC" 2004 – 2011, OJ SE 3/2011, p. 69) had declared the patent valid. In its judgment it was held that the selection patent was novel and did not depart from the general criteria developed by the EPO boards of appeal known as the "two-lists principle". Subsequently, the claimant questioned this decision before the Supreme Court on the ground that, by applying the rules of interpretation developed by the EPC, the Court of Appeal had manifestly infringed the applicable law.

The Supreme Court upheld the decision of the Court of Appeal on the issues of the patentability of selection inventions and the "two-lists principle". It also clarified the concept of implicit disclosure. A few months later, another decision of the Supreme Court dated 11 November 2011 confirmed this decision (Cinfa et al. v Warner-Lambert). Concerning the possible breach of the law, the Supreme Court pointed out that national courts were competent for declarations of nullity, but in assessing the nullity, the EPC fully applied. It noted that the case at issue was not concerned with the effects of the European patent, which were determined according to the respective national patent law of each of the contracting states (Art. 2 EPC), but with a nullity action where the applicable legal regime was that of the EPC. Accordingly, it stated that it was entirely right to consider the Guidelines for Examination in the EPO as a valuable element in assessing novelty. The Court pointed out that these criteria were applicable in interpreting key concepts of the EPC. Accordingly, the Appeal Court could not be reproached for adopting interpretative criteria applied in decisions of the boards of appeal.

ES – Spain

Court of Appeal of Barcelona (Section 15) of 24 July 2014 – Merck & Co. v Laboratorios Alter et al. (Auto 93/2014)

Keyword: revocation of European patent – retroactive effect ("ex tunc")

The case concerned the effect the revocation of a European patent by the EPO could have on parallel national proceedings. In the case at issue, the patentee had sued a number of companies for infringement of the Spanish part of European patent 1 175 904. Revocation actions were also filed by the defendants in the same proceedings. They also started parallel opposition proceedings against the patentee before the EPO. The European patent was eventually revoked by the EPO. Subsequently, the claimant requested that the national court discontinue the proceedings on the basis of Art. 68 EPC, according to which the revocation of a patent has retroactive effect ("ex tunc") and therefore the European patent is deemed to have had no effect from the outset. The decision of the EPO on invalidity had or could have had an effect on both the infringement and the revocation actions in parallel proceedings pending before national courts. The Court of First Instance (Commercial Court No. 6 of Barcelona) ordered the discontinuation of the proceedings in view of the supervening loss of the object of litigation without awarding costs.

The Court of Appeal of Barcelona (Section 15) disagreed with the lower court on the effect the revocation of a European patent could have on national infringement proceedings. It held that the revocation of a European patent by the EPO does not have the same effect on infringement actions as in revocation actions filed before national courts. The court cited another decision taken by the same Court of Appeal dated 5 October 2012 (Rollo 720/2011), in which it was held that the decision on invalidity of a European patent by the EPO affects actions pending before the national court differently: nullity actions in parallel national proceedings are deprived of their litigation object; however, infringement actions need not suffer such an effect.

The patentee/claimant had pointed out that no legitimate interest existed in obtaining effective judicial protection in the case at issue and that a legitimate interest in obtaining a judgment should not be acknowledged solely in order to obtain a decision awarding costs. The court pointed out that an infringement action seeks a declaration that there were acts of infringement of the patent in suit. Clearly, the revocation of the patent by the EPO had an effect on the action for infringement; not, however, by depriving the action of the object of litigation and thus terminating the proceedings, but rather by establishing in the decision that no infringement was possible.

FR – France

Court of Cassation of 3 April 2012 [10-21084] – Mr G v Company R

Keyword: authority of EPO board of appeal decisions

European patent 0 106 997 was for a method for recovering metal from scrap.

Mr G was challenging the Court of Appeal's dismissal of his infringement action, and on its findings as to the scope of protection conferred by the patent, he argued in particular that the EPO board of appeal decision amending the patent was res judicata.

The Court of Cassation however held that the Court of Appeal was not bound by the board's decision or required to follow the parties' detailed pleadings. It had therefore been entitled to decide the way it did.

FR – France

Paris Court of Appeal of 3 July 2013 (10/22679) – Sotira v Compagnie Plastic Omnium (Cpo)

Keyword: authority of EPO board of appeal decisions

Contested claims 1 and 4 of Cpo's French patent 9 901 175 were identical to those of its European patent, granted on 7 September 2005, which had not designated France but had been revoked by an EPO board of appeal (in T 17/09 of 19 October 2011) for lack of inventive step.

The Court acknowledged that the two patents were for the same invention, but said it was not bound by either T 17/09 or the EPO opposition division decision preceding it, and could therefore take its own decision on whether or not the claims were valid.

It then revoked claims 1 and 4 of French patent 9 901 175 for lack of inventive step.

GB – United Kingdom

Patents Court of 27 July 2012 – Virgin Atlantic Airways Ltd v Contour Aerospace Ltd and Ors [2012] EWHC 2153 (Pat)

Keyword: UK designation – non-justiciability before the English courts

An issue had been raised concerning the incorrect designation of the UK, which had not been requested.

The judge pointed out that the member states of the EPC have expressly delegated the grant procedure for European patents to the EPO. Not every decision in the grant procedure which may adversely affect the rights of an individual is capable of challenge. The extent to which the designation of the UK may be challenged in proceedings before the EPO, namely by asking the appropriate division to review its decision, represents the agreement of the contracting states on where the line is to be drawn in that respect. This does not violate the rights of the defendants under Art. 6 of the European Convention on Human Rights (following J.H. Rayner Ltd v Department of Trade and Industry [1990] AC 418 and Lenzing AG's European Patent [1997] RPC 245).

GB – United Kingdom

Court of Appeal of 20 December 2013 – Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd (formerly Contour Aerospace Ltd) and Ors [2013] EWCA Civ 1713

Keyword: designation of states – jurisdiction

Virgin had clearly and unequivocally elected not to designate the UK when it applied for what became the 908 patent, yet, through an error, the granted patent included a UK designation. In proceedings before the EPO, the board had found in T 1259/09 that Premium (a former group company of Zodiac) had no right to seek partial revocation of the patent for non-designation of the UK in the opposition proceedings which it had commenced and had, as a non-party to the examination of the patent application, no locus to object to a grant which included the UK. In the English proceedings the High Court judge had dismissed an appeal from a decision of the UKIPO and rejected the defence to infringement that the grant of the 908 patent in respect of the UK was a nullity. This issue arose again before the Court of Appeal.

Patten LJ stated that the effect of the 908 grant and its publication was that it obtained the legal status under s. 77(1) Patents Act 1977 of a patent granted on an application under the Act. As such, the grounds upon which its validity could be put in issue in English proceedings were limited to those specified in s. 74(3) (cf. Art. 52-57 EPC), which was therefore, on its face, a complete answer to the admissibility of the defences based on non-designation; see Genentech Inc's Patent [1989] RPC 147, which rejected an attempt to challenge the validity of a patent on the ground that the requirements of s.14(5) had not been complied with and that the patent should never therefore have been granted. The Patents Act 1977 had to be construed as one with the EPC.

It was alleged this had changed with the passing of the Human Rights Act 1998. However, the Court of Appeal pointed out that, as a matter of domestic law, it was well established that municipal courts will not regard themselves as competent to enforce or adjudicate upon rights and obligations which arise out of transactions entered into between sovereign states (see e.g. Lenzing AG's European Patent (UK) [1997] RPC 245). How then were the position and functions of the EPO and its relationship with the UK through the medium of the Patents Act 1977 to be characterised in terms of "jurisdiction"?

The Court of Appeal found that, where the actions of an international body could be regarded as independent of the contracting states and were neither participated in nor adopted by the contracting state, then no legal responsibility within Art. 1 ECHR could attach to that state for the consequences of the action in question. It had been argued before the court that in the case of European patents the UK had adopted the acts and procedures of the EPO through the Patents Act 1977, which compelled recognition of patents granted by the EPO in accordance with those procedures. That created the jurisdictional link under Art. 1 ECHR and rendered the grant process in the EPO amenable to scrutiny by the English courts in collateral proceedings.

The Court of Appeal disagreed. This was not a case where the UK as a contracting state had any de facto involvement or responsibility for the examination or grant process of the 908 patent. That was entirely a matter for the EPO, which was both factually and legally independent of the Comptroller and the UKIPO in the exercise of its grant-making powers. Section 77(1) made European patents directly effective in domestic law from the date of publication in the European Patent Bulletin. The Comptroller's function was purely administrative. The fact that the powers of the EPO derived from a surrender of UK sovereign power under the EPC was insufficient to create jurisdiction under Art. 1 (see Behrami v France [2007] 45 EHRR SE10 and Boivin v 34 Member States of the Council of Europe, 9 September 2008, ECHR 2008). The delegation of power and functions to an international organisation was not of itself inconsistent with Art. 1 and the independent legal status of the organisation which the treaty created was recognised for jurisdictional purposes. The Court of Appeal did not accept that the recognition of the validity and effect of European patents under domestic law effected by s. 77 could be sufficient to create a jurisdictional link. Indeed, the court saw it as recognition by the UK of the powers of the EPO as an independently established and functioning authority. To allow the English courts to have a general power to review the validity of grants on grounds not specified in the EPC would be to undermine fatally the whole system for the grant of European patents and would constitute a breach of the UK's treaty obligations under the EPC.

Nor was Art. 6 engaged in this case except insofar as the issue of justiciability itself was required to be tried. It did not extend to creating substantive rights of challenge to the validity of 908 where none existed under existing domestic law.

NL – Netherlands

The Hague District Court of 19 December 2013 – Unilever N.V. v Procter & Gamble

Keyword: board of appeal decisions – national proceedings

Unilever was the owner of the Dutch part of European patent 1 361 172. The patent disclosed a water soluble package containing a laundry detergent for release on dissolution.

P&G US, Henkel AG & Co and Reckitt Benckiser (UK) started opposition proceedings against the patent and subsequently the patent was limited by deleting the words 'or gel' from claim 1 in the section describing the detergent as 'being a liquid or gel'. The process of producing the water soluble package was also deleted from the description, but a section on the shape of the package was added. The opposition division held the patent to be inventive over the prior art.

P&G US filed an appeal against the opposition division's decision.

In 2003 P&G had started introducing products to the market, including Ariel detergent capsules, which appeared to involve thermoforming in its production. This led to accusations of infringement, as in the proceedings at hand.

P&G submitted that the case was too complicated to be dealt with in preliminary injunction proceedings and that the potential harm to P&G's market position was very significant, with a decision from the technical board of appeal for the EPO only six months away at the time. The court decided otherwise, stating that the case was manageable and suitable for preliminary proceedings.

P&G then argued that there was a serious, non-negligible chance that the patent would be revoked by the board of appeal. The court weighed the various grounds for revocation submitted by P&G, but found these arguments unconvincing and in the light of the outcome of the opposition proceedings, decided that there was no serious, non-negligible chance that the patent would be revoked. The court thus found that the Ariel Pods infringed Unilever's patent.

Editor's note: The technical board of appeal handed down its decision in T 1799/12 on 26 March 2014, revoking the patent, because the subject-matter of the claims extended beyond the content of the parent application as originally filed.

3. Stay of national proceedings

GB – United Kingdom

Supreme Court of 3 July 2013 – Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46

Keyword: res judicata – stay of proceedings – concurrent proceedings

Virgin wished to recover damages for the infringement of a European patent which no longer existed in the form said to have been infringed. The board of appeal of the EPO had amended it so as to remove with effect from the date of grant all the relevant claims which it found invalid on account of prior art. Virgin claimed that it was nevertheless entitled to recover damages because before the board had issued its decision, the English courts had held the patent to be valid and rejected the prior art objection – this conclusion and the finding of validity were res judicata notwithstanding the later but retrospective decision of the board. A similar argument had succeeded before the Court of Appeal in Coflexip SA v Stolt Offshore MS Ltd (No 2) [2004] FSR 708 and Unilin Beheer BV v Berry Floor NV [2007] FSR 635 (see second edition "Case Law from the Contracting States to the EPC" 2004 – 2011, OJ SE 3/2011, p. 265). In the case now in dispute the Court of Appeal had reached the same conclusion.

According to Lord Sumption, the Court of Appeal had come to its conclusion by following a line of cases, including Poulton v Adjustable Cover and Boiler Block Co [1908] 2 Ch 430 and Coflexip, culminating in Unilin, which had held that a patentee whose patent has been held to be valid is entitled to claim damages for its infringement without regard to a subsequent revocation of the patent for invalidity which relates back to the date of grant. The real origin of the principle was Coflexip, which in his opinion was wrongly decided. In Unilin, which followed Coflexip, Jacob LJ had said that the conclusion reached was conducive to certainty both because it enabled the parties to get a final decision on validity and because any injunction against future infringements would be discharged if the EPO subsequently revoked or amended the patent. Lord Sumption found this unconvincing – the effect of the decision in Coflexip was not to introduce certainty but to make the outcome dependent on the question which of two concurrently competent jurisdictions completed its procedures first. His conclusion was rather that, where judgment is given in an English court that a patent (whether English or European) is valid and infringed and the patent is subsequently retrospectively revoked or amended (whether in England or at the EPO), the defendant is entitled to rely on the revocation or amendment on the enquiry as to damages.

Lord Sumption also observed that if he had concluded that the defendant was estopped from relying on the revocation or amendment of the patent once the court had adjudged it to be valid, that would have had important implications for the question whether UK proceedings should be stayed pending a decision in concurrent opposition proceedings in the EPO. It would have been essential to stay the English proceedings so that the decision of the EPO would not be rendered nugatory by the operation of the law of res judicata. It would have been difficult to defend the guidance given in Glaxo Group Ltd v Genentech Inc [2008] Bus LR 888 (see second edition "Case Law from the Contracting States to the EPC" 2004 – 2011, OJ SE 3/2011, p. 262) that the English court should normally refuse a stay of its own proceedings if it would be likely to resolve the question of validity significantly earlier.

In his concurring judgment, Lord Neuberger found that previous courts had not had appropriate regard to the statutory provisions relating to patents, which reflect the nature of a patent and the effect of its revocation. They had therefore treated the subsequent decision to revoke the patent as no more than a later determination by another court in other proceedings between different parties. However, the effect of the Patents Act 1977 and the EPC was that the revocation did not just have effect between different parties but retrospectively deprived the patentee of the rights which the patent had bestowed on him as against the world.

The appeal was therefore allowed and the decisions in Poulton and Coflexip overruled. The Supreme Court further considered that the guidance in Glaxo should be re-examined by the Patents Court and the Court of Appeal.

Editor's note: See next summary.

GB – United Kingdom

Court of Appeal of 21 November 2013 – IPCom GmbH v HTC Co Europe Ltd [2013] EWCA Civ 1496

Keyword: stay of proceedings – concurrent proceedings

This appeal concerned the circumstances in which it is appropriate for a court considering combined patent infringement and revocation proceedings to grant a stay of its proceedings pending the outcome of co-pending opposition proceedings in the EPO. In Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46 (see above) the correctness of the guidance on whether to grant a stay of proceedings as set out by the Court of Appeal in Glaxo Group Ltd v Genentech Inc [2008] EWCA Civ 23 (see second edition "Case Law from the Contracting States to the EPC" 2004 – 2011, OJ SE 3/2011, p. 262) was questioned by the Supreme Court in the light both of its finding that the revocation or amendment of the patent in the EPO applied retrospectively and its overturning of the res judicata principle set out in Unilin Beheer BV v Berry Floor NV [2007] EWCA Civ 364 (see second edition "Case Law from the Contracting States to the EPC" 2004 – 2011, OJ SE 3/2011, p. 265).

In the light of Virgin Floyd LJ recast the Glaxo guidance as follows:

1. The discretion, which is very wide indeed, should be exercised to achieve the balance of justice between the parties having regard to all the relevant circumstances of the particular case.

2. The discretion is of the Patents Court, not of the Court of Appeal. The Court of Appeal would not be justified in interfering with a first instance decision that accords with legal principle and has been reached by taking into account all the relevant, and only the relevant, circumstances.

3. Although neither the EPC nor the Patents Act 1977 contains express provisions relating to automatic or discretionary stay of proceedings in national courts, they provide the context and condition the exercise of the discretion.

4. It should thus be remembered that the possibility of concurrent proceedings contesting the validity of a patent granted by the EPO is inherent in the system established by the EPC. It should also be remembered that national courts exercise exclusive jurisdiction on infringement issues.

5. If there are no other factors, a stay of the national proceedings is the default option. There is no purpose in pursuing two sets of proceedings simply because the EPC allows for it.

6. It is for the party resisting the grant of the stay to show why it should not be granted. Ultimately it is a question of where the balance of justice lies.

7. One important factor affecting the exercise of the discretion is the extent to which refusal of a stay will irrevocably deprive a party of any part of the benefit which the concurrent jurisdiction of the EPO and the national court is intended to confer. Thus, if allowing the national court to proceed might allow the patentee to obtain monetary compensation which is not repayable if the patent is subsequently revoked, this would be a weighty factor in favour of the grant of a stay. It may, however, be possible to mitigate the effect of this factor by the offer of suitable undertakings to repay.

8. The Patents Court judge is entitled to refuse a stay of the national proceedings where the evidence is that some commercial certainty would be achieved at a considerably earlier date in the case of the UK proceedings than in the EPO. It is true that it will not be possible to attain certainty everywhere until the EPO proceedings are finally resolved, but some certainty, sooner rather than later, and somewhere, such as in the UK, rather than nowhere, is, in general, preferable to continuing uncertainty everywhere.

9. It is permissible to take account of the fact that resolution of the national proceedings, whilst not finally resolving everything, may, by deciding some important issues, promote settlement.

10. An important factor affecting the discretion will be the length of time that it will take for the respective proceedings in the national court and in the EPO to reach a conclusion. This is not an independent factor, but needs to be considered in conjunction with the prejudice which any party will suffer from the delay, and lack of certainty, and what the national proceedings can achieve in terms of certainty.

11. The public interest in dispelling the uncertainty surrounding the validity of monopoly rights conferred by the grant of a patent is also a factor to be considered.

12. In weighing the balance it is material to take into account the risk of wasted costs, but this factor will normally be outweighed by commercial factors concerned with early resolution.

13. The hearing of an application for a stay is not to become a mini-trial of the various factors affecting its grant or refusal. The parties' assertions need to be examined critically, but at a relatively high level of generality.

GB – United Kingdom

Court of Appeal of 11 March 2014 – Samsung Electronics Co Ltd v Apple Retail UK Ltd [2014] EWCA Civ 250

Keyword: stay of proceedings – request for limitation or revocation before the EPO

In the infringement proceedings concerning complex patents owned by Samsung, the trial judge had found the patents invalid and ordered their revocation, which he suspended pending an appeal. Samsung sought an adjournment of the appeal pending the determination of applications which it had made to the EPO for amendment of the patent claims under Art. 105a EPC ("central amendment application").

Kitchin LJ pointed out that the EPC 2000 had introduced a procedure allowing a patentee to have the claims of his granted patent limited or the whole patent revoked, for all designated states (Art. 105a EPC). This central amendment procedure was intended to be simple and quite quick. A central amendment was deemed to have effect and always to have had effect from the grant of the patent (Art. 64 and 68 EPC). The Patents Act 1977 (as amended) gave effect to these provisions in s. 77(4), which provided that an amendment of the UK designation of a European patent in accordance with the EPC was to have effect for the purposes of the Act as if the specification of the patent had been amended under it. The Patents Act 1977 therefore specifically contemplated the possibility of concurrent proceedings in the UK and in the EPO. Nor was there any prohibition on the filing of a central amendment application while infringement or revocation proceedings were pending, or in the period between a first instance judgment and appeal.

The filing and pursuit by Samsung of its central amendment application could not therefore be characterised as an abuse of process, as alleged by Apple, or indeed, an activity with which the court could properly interfere for any other reason. The recent decision of the Supreme Court in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46 (see above) supported this conclusion; it held that, where judgment is given in an English court that a patent (whether English or European) is valid and infringed, and the patent is subsequently retrospectively revoked or amended (whether in England or at the EPO), the defendant is entitled to rely on the revocation or amendment on the enquiry as to damages.

The cases cited before the court had all involved concurrent English proceedings and EPO opposition proceedings; the court had not yet had to deal with the effect of a central amendment made after trial. However, there was a decision of the Supreme Court of the Netherlands, Case No. C07.085HR, in which precisely this issue did arise. In that case, Scimed argued that the amendment following the central amendment application operated retrospectively. The Supreme Court agreed, holding that it was required to consider the patent in its amended form. It duly remitted the case to the Court of Appeal. Whilst the decision in Scimed was not binding upon the English court, this was a court whose decisions should be accorded considerable respect, following Schutz (UK) Ltd v Werit (UK) Ltd [2013] UKSC 16.

The fact that opposition or central amendment proceedings in the EPO were pending did not prevent a national court from considering the claims of a patent in their existing form and revoking them, even if the EPO proceedings could have saved them (Beloit Technologies Inc v Valmet Paper Machinery Inc [1997] RPC 489). However, in the instant case, the order for revocation had been suspended; and whilst that suspension remained in place the patents continued to subsist and could be amended. The court found that there was nothing in the EPC or the Patents Act 1977 which prohibited Samsung from making and pursuing its applications at this time and they would, if allowed, have retrospective effect in all designated states.

Kitchin LJ pointed out that the recent decision of the Court of Appeal in IPCom GmbH & Co KG v HTC Europe Co Ltd & Ors [2013] EWCA Civ 1496 (see above) was concerned with a different question, namely the circumstances in which it may be appropriate for a court to grant a stay of UK infringement and validity proceedings pending the outcome of concurrent opposition proceedings in the EPO. In the instant case, the court was asked to grant an adjournment on the basis that the outcome of the central amendment applications would be known in a relatively short time and very likely before these proceedings were finally disposed of. The application for adjournment was therefore granted.

GB – United Kingdom

Patents Court of 11 July 2014 and 24 July 2014 – Actavis Group PTC EHF v Pharmacia LLC [2014] EWHC 2265 (Pat) and [2014] EWHC 2611 (Pat) respectively

Keyword: stay of proceedings

In these two judgments the Court of Appeal guidelines for staying proceedings as revised in IPCom GmbH & v HTC Europe Co Ltd [2013] EWCA Civ 1496 (see above) were applied.

The defendant (Pharmacia) applied for a stay of validity proceedings until the final determination of parallel opposition proceedings before the EPO, which raised similar grounds of invalidity. The claimant (Actavis) opposed the application, arguing that a stay should be refused because the English proceedings would be resolved significantly earlier than the EPO proceedings, and that would provide it with reasonable commercial certainty at least in the UK and might assist in promoting settlement. In support of its application for a stay, Pharmacia offered undertakings (a) to seek expedition of the EPO proceedings, (b) not to seek an injunction against Actavis or its customers until the determination of the EPO proceedings and (c) only to seek damages of 1% of Actavis' net sales during the period from launch until the determination of the EPO proceedings if the patent was held valid both by the EPO and by the English courts.

Arnold J referred to the applicable principles as reviewed by the Court of Appeal in IPCom. It was common ground that, as stated in IPCom 5 and 6, the default option was that the proceedings should be stayed and it was for Actavis to show why a stay should not be granted.

In Arnold J's view, the competing considerations were finely balanced. However, he concluded that they favoured the refusal of a stay, the key reason being that the EPO proceedings had only just begun. Although it was likely that the EPO proceedings would be expedited, this could not be guaranteed. Even with expedition, it was likely that they would take at least three years to resolve, and could take significantly longer. By contrast, the English proceedings would be resolved in two years. Thus this was a case where the relative timings of the proceedings meant that some commercial certainty was likely to be achieved in relation to the UK market at an earlier date in the case of English proceedings than in the EPO (IPCom 8 and 10). Pharmacia's undertakings did not go quite far enough. While they did largely eliminate the commercial uncertainty during the period of the stay, and gave Actavis the positive benefit of ensuring that it could get on the market during that period rather than having to rely upon a claim under a cross-undertaking in damages, they 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. That uncertainty would inevitably have a chilling effect on Actavis' investment decisions.

Arnold J also considered that refusal of stay was supported by the possibility that an English decision might promote a settlement (IPCom 9) and by the public interest in determining the validity of the patent (IPCom 11). The risk of wasted costs was a factor that favoured the grant of a stay, but this was outweighed by the commercial uncertainty (IPCom 12).

After the judgment was circulated to the parties in draft, Pharmacia offered two additional undertakings, namely (i) not to seek an injunction in the UK against Actavis or its customers in relation to Actavis' product during the life of the patent and (ii) only to seek damages of 1% of Actavis' net sales in the UK during the life of the patent if the patent was ultimately held valid by the EPO and valid and infringed by the English courts.

After hearing further argument, Arnold J found in the second judgment that the additional undertakings offered substantially eliminated the commercial uncertainty in the UK. However, Actavis wished to launch its generic product throughout Europe and so wished to remove the commercial uncertainty caused by the existence of the patent as soon as possible across Europe. It argued furthermore that an early decision would assist in promoting settlement between the parties on a pan-European basis. Finally, according to Actavis it was clear from Pharmacia's attitude and the undertakings that it offered, that the patent was a weak one, and there was a strong public interest in the validity of weak patents being scrutinised by the courts at the earliest possible date.

Arnold J found that the matters relied upon by Actavis favoured the refusal of a stay, but, having regard to the guidance given in IPCom and taking all the factors set out in that judgment into consideration, he held that the overall balance now came down in favour of the grant of a stay.

4. Reservation to the EPC: scope of the Spanish reservation under Article 167(2)(a) EPC 1973

ES – Spain

Supreme Court (Civil Chamber) Section) of 10 May 2011 (309/2011)Laboratorios Cinfa et al. v Eli Lilly and Company Ltd

Keyword: reservation to the EPC – patentability of pharmaceutical products under Art. 167(2)(a) EPC – scope of the reservation

In its judgment of 17 January 2008 (see also second edition "Case Law from the Contracting States to the EPC" 2004 – 2011, OJ SE 3/2011, p. 199) the Barcelona Court of Appeal had dismissed a claim for a declaration of non-infringement and nullity in respect of claim 5 of European patent 0 454 436 on the pharmaceutical composition olanzapine on the ground that it was a patent filed prior to 7 October 1992 and ineffective because of the reservation made by Spain to the EPC. The court held that the effects of the Spanish reservation to the European Patent Convention on chemical and pharmaceutical products (Art. 167(2)(a) EPC 1973) were rendered void by the application of Art. 27(1) and 70(2) of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

The Supreme Court confirmed the decision of the Court of Appeal. It pointed out that the scope of the reservation to the EPC under Art. 167(2)(a) EPC, under which patents on chemical and pharmaceutical products are ineffective or revocable for the term of the patent, was not exercised to its full extent by Spain. Indeed, the reservation adopted by Spain not only did not include "food" products (only chemicals and pharmaceuticals were included), but it also did not incorporate the provision on revocability. The adopted Spanish reservation only referred to having "no effect in Spain". Accordingly, the requested revocation of claim 5 could not be allowed. The court also found that Art. 167(5), second sentence, EPC, in which it is stated that "the effect of the reservation shall continue for the term of the patent", could no longer be applied to the patents granted and valid prior to October 7, 1992, because the principle of non-discrimination under Art. 27(1) TRIPs had to prevail (patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application).