England and Wales High Court (Patents Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

		Rolls Building Fetter Lane, London, EC4A 1NL
		11 July 2014

MR JUSTICE ARNOLD :

Introduction

1. This is my judgment on an application by the Defendant ("Pharmacia") for a stay of these proceedings until the final determination of parallel proceedings concerning the validity of European Patent No 1 536 792 ("the Patent") before the European Patent Office. The Claimant ("Actavis") opposes the application.

Background

2. The Patent is owned by Pharmacia, which is a subsidiary of Pfizer Inc, and exclusively licensed to Boehringer Ingelheim International GmbH ("Boehringer"). The Patent relates to sustained release dosage forms of pramipexole suitable for once-daily administration for the treatment of Parkinson's disease and restless leg syndrome. Its object is to provide a once-daily dosage form of pramipexole with side effects no greater than with a three times daily regimen of pramipexole immediate release tablets. Patent protection for pramipexole itself has expired.
3. The Patent claims priority from two applications dated 25 July 2002 and one application dated 18 June 2003. It was filed on 25 July 2003 and granted on 18 September 2013.
4. On 3 April 2014 Actavis commenced the present proceedings, in which it seeks an order for revocation of (the UK designation of) the Patent. Actavis challenges the validity of the Patent on the grounds that it is not entitled to any of the priority dates claimed, lacks novelty over two intervening publications, alternatively is obvious over one intervening publication and one prior publication, alternatively is insufficient. On 21 May 2014 Actavis applied for directions for trial. On 6 June 2014 Pharmacia applied for a stay. Both applications came before me on 7 July 2014. I reserved my decision on the stay application and made provisional directions for trial of the claim in a window between 1 June and 31 July 2015.
5. The deadline for opposing the Patent in the EPO expired on 18 June 2014. On 14 October 2013 Actavis filed an opposition. On 16 June 2014 a firm of European patent attorneys called Maiwald filed an opposition, no doubt acting for an undisclosed client. The oppositions raise similar, but not identical, grounds of invalidity as are raised in the English proceedings.
6. Actavis applied for a marketing authorisation for a generic sustained release formulation of pramipexole on 9 September 2013. Actavis has stated in evidence that it expects to be granted a marketing authorisation prior to the trial window, that it intends to launch its product as soon as possible thereafter and that it will give Pharmacia sufficient notice of the launch to enable Pharmacia to apply for an interim injunction to prevent it if Pharmacia so wishes. Actavis has not provided any further details of its preparations or plans, but I do not consider that it was necessary for it to do so.
7. Actavis has not suggested that its product will not infringe the Patent if the Patent is valid. Thus there is a clear threat by Actavis to infringe the Patent. Despite this, Pharmacia has not yet counterclaimed for threatened infringement of the Patent. Pharmacia has offered to do so, however, if required in order to facilitate expedition of the EPO proceedings (as to which, see below).
8. The UK market for sustained release pramipexole is worth about £14 million per annum. (According to Pharmacia, 47% of the market is represented by parallel imports, but I do not consider that this affects the present issue.) This makes it the second largest market in Europe, although significantly smaller than the German market. It is common ground that Actavis cannot effectively bring proceedings to revoke the German designation of the Patent while the EPO proceedings are ongoing, because such proceedings would automatically be stayed.
9. Although Pharmacia has given some rather vague evidence that third parties are selling non-infringing generic sustained release pramipexole elsewhere in Europe, there is no evidence that any third party has applied for a marketing authorisation in respect of an infringing generic product.

The applicable principles

10. The principles applicable to an application of this nature were recently reviewed by the Court of Appeal in IPCom GmbH & Co KG v HTC Europe Co Ltd [2013] EWCA Civ 1496, [2014] RPC 12 and re-stated by Floyd LJ at [68] 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 1977 Act 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 Convention 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"

11. I shall refer to the relevant paragraphs in this guidance as "IPCom 5" etc.

Application to the present case

12. It is common ground that, as stated in IPCom 5 and 6, the default option is that these proceedings should be stayed and it is for Actavis to show why a stay should not be granted. Actavis contends that a stay should be refused because the English proceedings will be resolved significantly earlier than the EPO proceedings, and that will provide it with reasonable commercial certainty at least in the UK and may assist in promoting settlement. In support of its application for a stay, Pharmacia has 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 is held valid both by the EPO and by the English courts. Undertakings (b) and (c) are also offered by Boehringer.
13. Timing of the English proceedings. There is no real dispute about this. As stated above, I have provisionally fixed the trial during June and July 2015. It follows that a first instance judgment may be available by the end of July 2015 and will almost certainly be available by the beginning of October 2015. On that basis, any appeal to the Court of Appeal should be heard by June or July 2016 and a judgment is likely to be available by the end of July 2016 and almost certainly by the beginning of October 2016. In other words, resolution of the English proceedings is likely to take two years (and that is without expedition).
14. Pharmacia points out that Actavis could have commenced these proceedings six months earlier than it did. That is correct, but in my view this is not a significant factor in the assessment because it does not affect the relative timings of the two proceedings considered as matters stand.
15. Timing of the EPO proceedings. There is a considerable dispute as to how quickly the EPO proceedings are likely to be resolved both without and with expedition. Actavis relies upon hearsay evidence from Richard Cooke of Elkington & Fife, while Pharmacia relies upon hearsay evidence from Dr Peter Klusmann of Hoffmann Eitle. Mr Cooke and Dr Klusmann are the European patent attorneys with conduct of the EPO proceedings on behalf of the parties.
16. Dr Klusmann's evidence is that, without expedition, the normal anticipated timings are as follows: 24-27 months from the opposition deadline to the written decision of the Opposition Division and 18-24 months from the notice of appeal to the written decision of the Technical Board of Appeal. By contrast, Mr Cooke's evidence is that the first instance decision may be expected between February and August 2016 and an appeal decision in the autumn of 2019. There is little between the attorneys as to the first instance timing, but a considerable difference as to the appeal timing. I find Mr Cooke's evidence on this more persuasive. It is common ground between the attorneys that an appeal is likely to be assigned to either Board 3.3.07 or Board 3.3.02. Mr Cooke's evidence is that only four of the last 20 cases which went to Board 3.3.02 and only one case of the last 20 which went to Board 3.3.07, were completed within 51 months. Mr Cooke also says that each Board remitted five of its last 20 cases back to the Opposition Division, resulting in considerable further delay before a final resolution. Furthermore, Mr Cooke points out that Dr Klusmann's timings do not include the four months allowed for filing the notice of appeal. In short, without expedition, the EPO proceedings are likely to take over five years to be resolved, and could easily take more.
17. As noted above, Pharmacia has offered an undertaking to seek expedition of (both instances of) the EPO proceedings. Although Actavis has not committed itself, I presume that Actavis would support such a request if these proceedings were stayed. Actavis points out that there is also the position of Maiwald to consider. Neither party has asked Maiwald what their views would be. I would be surprised if Maiwald's unknown client would be opposed to expedition, however. In any event, Dr Klusmann says that, if the EPO accepts that expedition is warranted, Maiwald would not be able successfully to oppose it. I accept that evidence.
18. The question then is whether the Opposition Division and the Board of Appeal would accept that expedition was warranted and what effect expedition would have. As I understand it, it is common ground that the Opposition Division and the Board of Appeal are likely to accept that expedition is warranted where one of the parties requests it because national infringement proceedings are pending, particularly if they have been stayed. It is for this reason that Pharmacia has offered to bring a counterclaim. Accordingly, I shall proceed on the basis that Pharmacia will counterclaim for threatened infringement before any stay takes effect.
19. Counsel for Pharmacia suggested that this Court should support its request for expedition, since expedition was more likely to be granted if requested by the Court, while counsel for Actavis queried whether that would be appropriate in circumstances such as these. Given that neither side's evidence suggested that this would make a significant difference to the outcome, I shall refrain from expressing a view on this point.
20. Dr Klusmann's evidence is that, with expedition, both first instance and appeal proceedings could be completed within two to two and a half years. He does not give a single example of a case in which this has been achieved, however. Mr Cooke's evidence is that, because expedited EPO proceedings are unusual, it is not possible to provide estimates of how long they will take, but he gives an example of a case where Board 3.3.02 remitted the case to the Opposition Division despite a request for accelerated proceedings because an intervener filed a large number of new documents. He also points out that certain periods in the procedure cannot be abridged. I would add that, although I have had personal experience of the Boards of Appeal responding very positively to requests from this Court for proceedings to be expedited, such experience has been gained in cases where the English proceedings were started rather closer to the final resolution of the EPO proceedings. Furthermore, I have no personal experience of a request to the Opposition Division to expedite its proceedings and I am less confident of the Opposition Division's ability significantly to expedite proceedings before it.
21. The conclusion I reach is that, while both the Opposition Division and the Board of Appeal are likely to expedite the proceedings, this cannot be guaranteed. Nor can the effect of expedition be guaranteed. Furthermore, it seems to me that, even with expedition, the EPO proceedings are likely to take at least three years to resolve, and possibly considerably more if the Board of Appeal remits the case back to the Opposition Division.
22. It follows that, if the English proceedings are stayed, the oppositions are unsuccessful and the English proceedings are then resumed, the English proceedings will not be resolved until at least five years from now.
23. Commercial certainty. In considering the question of commercial certainty, the starting point is to consider what Actavis' position would be if there was no stay. In that event, Actavis would be exposed to commercial uncertainty with regard to its position in the UK during the two years it took to resolve the English proceedings. For some of that period Actavis would not be in a position to market its product anyway, however. For the remainder of the period, the likelihood is that Pharmacia would obtain an interim injunction with Actavis being protected by a cross-undertaking in damages. If the Patent was revoked by the English courts, Actavis would be free to market its product once the Court of Appeal gave judgment, and would have a claim for lost profits under the cross-undertaking. If the Patent was upheld by the English courts, the injunction would be continued. Actavis would then have a second chance at attacking the Patent in the EPO (by then, at the Board of Appeal). If the Patent was revoked by the EPO, Actavis would be free to market its product once the Board of Appeal gave its decision, and would have a claim for lost profits under the cross-undertaking (assuming that, as I consider it should be, the cross-undertaking was extended to cover that eventuality). If the Patent was upheld by the EPO, Actavis would be prevented from marketing its product until the expiry of the Patent in July 2023.
24. If there was a stay, then the effect of Pharmacia's undertakings is that Actavis would be free to launch as soon it is able to. It would thus obtain the advantage of being the first generic supplier of sustained release pramipexole in the UK. If the Patent was revoked by the EPO, no injunction would be granted, no damages (or profits) would be payable by Actavis and there would be no need for the English proceedings to be resumed. If the Patent was upheld by the EPO, Actavis would have a second chance at attacking it in this country. If the Patent was revoked by the English courts, no injunction would be granted and no damages (or profits) would be payable. If the Patent was upheld by the English courts, however, Actavis would be prevented by an injunction from continuing to market its product, would have to pay 1% of net sales value by way of damages on sales prior to the EPO Board of Appeal decision and would have to pay normal damages or account for its profits on sales after that.
25. Pharmacia contends that damages assessed at 1% of Actavis' net sales would be relatively modest. I accept this. If one assumes that Actavis will sell its product at 90% of Pharmacia's average price and obtain a market share of 50%, then the damages for one year at that rate would be about £63,000. If Actavis has to reduce its price (e.g. because of the parallel imports), then the damages will be even lower.
26. Pharmacia also contends that the effect of its undertaking would be to eliminate the additional commercial uncertainty which a stay otherwise expose Actavis to. Thus, if one compares the scenario in which the Patent is revoked by the English courts two years from now with the scenario in which the Patent is revoked by the English courts five years from now after rejection of the oppositions by the EPO, Pharmacia argues that the only difference would be that Actavis would have pay damages at the rate of 1% of net sales for the three years of the stay. On the assumptions set out above, this would amount to about £189,000. Not only is this a modest sum compared to the costs of the English proceedings (as to which, see below), but also it can readily be budgeted for.
27. Actavis disputes this, for three main reasons. First, Actavis says that the difference between the two scenarios does not just lie in the fact that, in the second scenario, the two years required for determination of the English proceedings would not start to run until after the determination of the EPO proceedings and the expiry of the stay. In addition, in both scenarios Actavis would not be able to market its product for the immediate future anyway. In one scenario this is time while the English proceedings are pending, while in the other it is time while the EPO proceedings are pending. Secondly, Actavis says that the second scenario exposes it to the risk that, some time after having started to market its product, it will be restrained from continuing to do so, with consequential damaging effects to its commercial position. Thirdly, Actavis says that it is harder to predict what the state of the market will be in five years than in two years. For example, it is more likely, although not certain, that there will be other generic competitors seeking to enter the market. In my view all these points have force.
28. Wasted costs. Both parties have prepared costs budgets for the English proceedings even though the mandatory costs budgeting rules do not apply to this case. Actavis' estimate is £1,367,699 with contingencies of up to £501,381, giving a potential total of £1,859,080. Pharmacia's estimate is £799,035 with contingencies of up to £194,458, giving a potential total of £973,494. I regret to say that, comparing the two budgets, I suspect that Pharmacia's estimate is on the low side. It should be emphasised that these costs are purely for the first instance proceedings. Additional costs would be incurred by both parties in the event of an appeal, although the sums involved would be significantly lower.
29. It is common ground that the proceedings in the EPO will cost the parties a fraction of these amounts. Accordingly, Pharmacia contends that there is risk of substantial wasted costs if a stay is refused. Actavis does not dispute this, but argues that this case is no exception to the guidance in IPCom 12 that this factor will normally be outweighed by commercial factors concerned with early resolution.
30. Assessment. In my view, the competing considerations are finely balanced. In the end, however, I have concluded that they favour the refusal of a stay. The key reason for this is that the EPO proceedings have only just begun. As explained above, although it is likely that the EPO proceedings will be expedited, this cannot be guaranteed. Even with expedition, it is likely that the EPO proceedings will take at least three years to resolve, and there is a risk that this will take significantly longer. By contrast, the English proceedings will be resolved in two years. Thus this is a case where the relative timings of the proceedings means that some commercial certainty is 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 go a considerable way to reducing the commercial uncertainty to Actavis in the UK if the English proceedings are stayed, but in my judgment not quite far enough. While they do largely eliminate the commercial uncertainty during the period of the stay, and indeed give Actavis the positive benefit of ensuring that it can get on the market during that period rather than having to rely upon a claim under a cross-undertaking in damages, the problem is that they do not address the uncertainty caused by the prospect that Actavis may be removed from the market by an injunction in, say, five years' time and may have to pay ordinary damages or account for its profits for the last two of those years. That uncertainty will inevitably have a chilling effect on Actavis' investment decisions.
31. I also consider that refusal of stay is also supported by the possibility that an English decision may promote a settlement (IPCom 9) and by the public interest in determining the validity of the Patent (IPCom 11). The risk of wasted costs is a factor that favours the grant of a stay, particularly given the disparity between those costs and the damages that would potentially be payable by Actavis during the period of the stay in accordance with Pharmacia's undertakings, but I agree with Actavis that this is outweighed by the commercial uncertainty (IPCom 12).

Conclusion

32. I decline to stay these proceedings on the undertakings offered by Pharmacia set out in paragraph 12 above.

Postscript

33. After this judgment was circulated to the parties in draft, Pharmacia offered two additional undertakings in return for a stay of the proceedings, namely (i) not to seek an injunction in the UK against Actavis or its customers in relation to Actavis' sustained release pramipexole 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 is ultimately held valid by the EPO and valid and infringed by the English courts. I shall hear further argument on this proposal as well as costs.