Powell Gilbert’s Alex Wilson and Dennis Waller look at the recent case of Actavis v Pharmacia and the issues that can arise from concurrent proceedings in the European Patent Office and national courts. 

This article was contributed by Powell Gilbert LLP and first published by the International Law Office on September 10th 2014.

Delaying UK patent litigation to allow EPO proceedings to catch up – at high cost 

Introduction 
Background 
Actavis v Pharmacia 
Parallel proceedings – generic company's perspective 
Parallel proceedings – patentee's perspective 

Introduction 

The recent case of Actavis v Pharmacia(1) illustrates the issues that can arise from concurrent proceedings in the European Patent Office (EPO) and national courts. The parallel proceedings will often consider the same issues, but run on different timetables. Typically, the EPO is slower than the national proceedings, but can trump any decision of the national court (eg, if the patent is revoked). In Actavis the High Court was ultimately persuaded to stay or suspend national patent proceedings pending resolution of an EPO opposition. This update considers how this decision can be reconciled with existing Court of Appeal and Supreme Court rulings and its impact on planning a generic pharmaceutical launch in the United Kingdom. 

Background 

The Patents Court has repeatedly emphasised the need for generic pharmaceutical companies to take positive steps to clear the way of any patent rights which potentially stand in the way of product launch.(2) Although preliminary injunctions were previously rare in patent matters, the courts have been persuaded by originators that in many cases the launch of a generic pharmaceutical product into the regulated UK pharmaceutical market should be delayed by means of a preliminary (interim) injunction until the court can resolve the question of patent infringement and any invalidity defence. The courts are more likely to grant an interim injunction to restrain any threatened or future patent infringement where the generic company has failed to clear the way by seeking revocation of the patent or a declaration of non-infringement. 

However, this process can be complicated by the inherent possibility under the patent system established by the European Patent Convention that the validity of a patent may be considered in parallel proceedings before the EPO and the national court of a member state. These parallel proceedings tend to vary in duration, with UK proceedings generally concluding considerably faster than those before the EPO. Despite efforts to ensure harmonisation, there is also no guarantee that the same decision on validity will be reached in each forum. A company intending to launch a generic pharmaceutical may challenge the validity of patents in both the EPO and the English court. A potential defendant's ability to 'have two bites at the cherry' is a necessary consequence of the existing European system; but as the EPO decision can ultimately be determinative and override any national decision, there are cases where a patent holder may wish to avoid the additional expense of national proceedings before the EPO has made its decision. 

Actavis v Pharmacia 

Actavis v Pharmacia provides guidance on the possible options and strategies for parties involved in such proceedings. Actavis had filed an EPO opposition and parallel UK revocation proceedings in relation to Pharmacia's patent protecting sustained-release forms of a pharmaceutical product. Pharmacia sought a stay of the UK proceedings until conclusion of the EPO proceedings, but Actavis resisted this. The two sets of proceedings had been commenced almost concurrently, but the court found that the English proceedings would take around two years for a first-instance judgment and any subsequent appeal, whereas the EPO proceedings would take between three and five years. Pharmacia's application was initially refused, despite the relatively broad undertakings that it had offered, on the basis that the commercial certainty offered by an early UK judgment outweighed the risk of any wasted costs. However, Pharmacia offered to provide further, even broader undertakings designed to provide commercial certainty to Actavis throughout the life of the patent, including: 

not to seek an injunction against Actavis or its customers until expiry of the patent; and 

to cap the damages that would be sought if the patent were ultimately held to be valid and infringed to 1% of Actavis's net sales during the period from launch until expiry of the patent (described by the court as "a modest sum compared to the costs of the English proceedings" and one which "can readily be budgeted for"). 

Given the high level of commercial certainty that these undertakings offered to Actavis in the United Kingdom, the court decided to stay the UK proceedings as requested. This is perhaps unsurprising, given the generous nature of the undertakings ultimately offered. It is unclear why Pharmacia was prepared to offer these limitations on its patent rights, but it is clear that it was keen to avoid an early decision by the English court. 

Parallel proceedings – generic company's perspective 

For a generic company, EPO proceedings offer the opportunity to revoke a patent throughout Europe, but this process can take a considerable amount of time. The effect of national proceedings is generally restricted to that particular jurisdiction, but may offer a degree of legal certainty much sooner and in a forum that the generic company feels is more favourable to its position. A positive judgment from a respected jurisdiction such as the United Kingdom may also be of some assistance in persuading other jurisdictions to follow suit, provides confidence to the generic company and its customers, and may be of considerable assistance in agreeing a wider settlement. Both sets of proceedings therefore offer considerable advantages, so a generic company will generally be keen for both to proceed as quickly and efficiently as possible. 

The Supreme Court in Virgin Atlantic v Zodiac(3) questioned whether the English courts should re-examine their approach to such situations to avoid the parties being left in an "impossible situation". Following that judgment, the Court of Appeal in IPCom v HTC(4) formulated revised guidelines, stating that the grant of a stay is discretionary and the court should endeavour to achieve the balance of justice between the parties in light of all circumstances of the particular case. Where there are no other relevant factors, the court's default position is stated to be to grant a stay, but – as seen in Actavis v Pharmacia – whether one is in fact granted will depend on a number of factors. The nature of these factors means that in effect, stays are rare. A generic company may need to consider the following factors if it wishes to clear the way and avoid any UK proceedings being stayed where parallel EPO proceedings have been commenced: 

One of the most important factors in the court's decision on any stay application will be the time difference between resolution of the English and EPO proceedings. It may therefore be advisable for any party filing an EPO opposition with a view to clearing the way for its own pharmaceutical product to bring UK revocation proceedings as soon as possible to maximise this discrepancy. 

Where there is likely to be a large time difference, the chance of providing any commercial certainty to the party seeking revocation will be important. The generic company should therefore be prepared to show what effect any delay is likely to have on its business. 

Although less important than the factors set out above, providing evidence of the persuasive effect that an English judgment may have in other European jurisdictions and the effect that it could have in promoting a pan-European settlement may be of some assistance. This has been accepted as a relevant consideration.(5)  

Given that the court has stated that there is a public interest in dispelling any uncertainty surrounding the validity of patents, a strong prima facie invalidity case may also favour the refusal of a stay. 

Parallel proceedings – patentee's perspective 

Conversely, a patentee may be keen to prevent an early determination of the English national proceedings in order to avoid additional costs or maintain patent protection for longer, ensuring that generic products are kept off the market for as long as possible. The patentee may therefore choose to seek a stay of UK proceedings. Following Actavis v Pharmacia, a patentee seeking a stay may have to take steps to provide commercial certainty to the generic company, or undertake to do so. These could include:

seeking expedition of the EPO proceedings; 

counterclaiming for any threatened infringement in the United Kingdom in order to facilitate expedition of the EPO proceedings (as above, although this was offered by Pharmacia, expedition may not be an attractive option for the patentee); or

agreeing to other undertakings designed to provide commercial certainty to the generic company (eg, in relation to the relief that would be sought if the patent were held to be valid and infringed). 

The undertakings offered by Pharmacia were highly dependent on the exact factual and commercial circumstances of the case and it seems unlikely that other patentees would often be willing to offer such generous terms to a generic company. It may therefore be advisable for a patentee faced with such a situation to seek some alternative commercial settlement of proceedings or trust that the strength of its arguments on validity and infringement will be confirmed by the English courts. 

For further information on this topic please contact Alex Wilson or Dennis Waller at Powell Gilbert LLP by telephone (+44 20 3040 8000), fax (+44 20 3040 8001) or email (alex.wilson@powellgilbert.com or dennis.waller@powellgilbert.com). The Powell Gilbert LLP website can be accessed at www.powellgilbert.com. 

Endnotes 

(1) [2014] EWHC 2265 (Pat) and [2014] EWHC 2611 (Pat). 

(2) See, for example, SmithKline Beecham v Apotex Europe Ltd [2003] EWCA Civ 137. 

(3) [2013] UKSC 46. 

(4) [2013] EWCA Civ 1496. 

(5) See, for example, HTC v Apple [2011] EWHC 2396 (Pat), RIM v Inpro [2005] EWHC 1292 (Pat) and RIM v Visto [2008] EWHC 3025 (Pat).