England and Wales Patents County Court

IN THE PATENTS COUNTY COURT

		Rolls Building 7 Rolls Buildings London EC4A 1NL
		03/05/2012

His Honour Judge Birss QC :

1. In my judgment [2012] EWPCC 18 I decided that the defendant (Sigma) had infringed the patent (European Patent (UK) No. 0 480 717) held by the claimants (Merck). The case concerns the parallel import of a drug called SINGULAIR (montelukast sodium) from Poland. This judgment deals with the form of order made as a consequence.
2. At the hearing Tom Hinchliffe instructed by Hogan Lovells represented Merck while Martin Howe QC instructed by Maitland Walker represented Sigma.
3. The order includes an injunction preventing infringement as well as a cross-undertaking in damages from the claimants pending appeal. In the end there was no dispute about that. In fact the injunction relates to Merck's SPC (SPC/GB98/025) because the patent has now expired. The SPC will expire in about 11 months time.
4. The order also includes provision for costs. Costs in the Patents County Court are governed by scale costs provisions in CPR Part 45, section VII and are the subject of a summary assessment. The appropriate scale in this case is Table A in Section 25C of the Costs Practice Direction (Part 45). Merck's solicitors produced a statement of costs with the information broken down by reference to the stages in Table A. The parties were agreed that, applying the approach to the assessment of Patents County Court scale costs set out in Westwood v Knight [2011] EWPCC 11, the sum to be awarded by way of summary assessment was £45,875. I accepted that submission and made the costs order in those terms.
5. Sigma sought leave to appeal on all issues. I gave permission to appeal on the points of European Union law but refused permission on the estoppel.
6. In addition to some minor drafting points which were resolved at the hearing, there were two points of substance. On those two points I told the parties what I had decided to do so that the drafting of the order could be completed then and there but indicated that I would give my reasons in writing. This judgment deals with those reasons.

Delivery up or destruction

7. Sigma is holding a substantial quantity of stock of Polish SINGULAIR which they imported before the letter before action and agreed not to sell pending trial. Some of it has been reboxed/relabelled and could not be re-exported and sold in Poland. Some of the stock will expire before the SPC expires but some has a shelf life expiring later than the SPC.
8. Merck sought an order for delivery up or destruction of the infringing product in Sigma's possession. Sigma sought an order that the delivery up or destruction be stayed pending appeal. Merck did not oppose the stay pending appeal per se provided any appeal was prosecuted by Sigma with due diligence but Merck did submit that the stay should be subject to a further proviso. The proviso is that while they did not object to re-export of the product to Poland if it was still in its original Polish packaging, Sigma should not otherwise part with possession of its stock which was imported into the UK in infringement of the patent and should preserve it so that it will be delivered up or destroyed in the event the appeal is unsuccessful.
9. The issue is the proviso. Merck submit that the proviso is appropriate. They contend that the purpose of an order for delivery up is two fold. It is that the court should protect the patentee from any use after expiry of his patent of infringing articles made during its currency and also that destruction or delivery up would render still more effective the injunction ordinarily granted by the court. For this Mr Hinchliffe cited Terrell 17^th Ed paragraphs 19-74 and 19-76. He contended that if the delivery up order was made now then the products should be ordered to be delivered up. The only reason that is not happening now is because the order is to be stayed pending appeal but the court should seek to arrange matters so that if the appeal is dismissed the winning party will be in the same position as if there had been no appeal.
10. Mr Howe explained that his clients have in their possession stock which could be lawfully sold in the UK in 11 months time once the SPC has expired. He submitted that the court should not make an order which prevented his clients from keeping that stock pending expiry of the SPC and then selling it at that stage. It is perfectly good product and his clients should be permitted to sell it. In support of his argument Mr Howe pointed out that Sigma had imported the stock in good faith albeit that I had held that it was not reasonable for Sigma to believe that Merck did not object to its sale in the UK. He also submitted that on the wording of the Specific Mechanism (see paragraph 16 of my main judgment), all it prevented was importing and marketing of product and so keeping product was not an act of infringement of the Specific Mechanism albeit keeping would be an act of infringement under national law in s60 of the 1977 Act.
11. Mr Howe's submission was not based on a suggestion that his clients should benefit somehow from the stay pending appeal. His case was focussed on the proper scope of the delivery up order itself. In that respect I believe Mr Howe's approach is right. Although the problem has arisen in the context of drafting concerned with staying the delivery up order pending appeal, it is in fact an issue about the delivery up/destruction order itself. I accept Mr Hinchliffe's submission as regards the position pending appeal that the court should seek to arrange matters so that if the appeal is dismissed the winning party will be in the same position as if there had been no appeal, with the qualification that it applies equally to the losing party. The matters should also be arranged so that the losing party should be in the same position as if they had succeeded at first instance (see Neuberger J as he then was in Kirin-Amgen v TKT [2005] FSR 41 at p881).
12. The question is whether the delivery up/destruction order itself should permit Sigma to retain stock which is dated such that it could be sold after the expiry of the SPC in 11 months time.
13. The first question is whether I need to decide upon Mr Howe's submission that "keeping" was not an infringing act under the Specific Mechanism on the footing that the only infringing acts there provided for are importing and marketing. That depends on whether it matters from the point of view of an order for delivery up/destruction.
14. The availability of an order for delivery up / destruction is provided for by s61(1)(b) of the Patents Act 1977 (see also Art 10 (1) of Enforcement Directive 2004/48 EC). The court may order delivery up or destruction of any patented product in relation to which the patent has been infringed or any article in which that product is inextricably comprised.
15. It is clear that all the stock held by Sigma can be described as patented product in relation to which the patent has been infringed because the product concerned has been imported into the UK and that act of importation was an infringement of the patent (s60(1)(a) 1977 Act). Thus the stock falls within the terms of s61(1)(b).
16. The purpose of orders for delivery up or destruction is (at least) to be in aid of the injunction to make sure it is obeyed (see Jacob LJ in Mayne v Pharmacia [2005] EWCA (Civ) 294, citing the judgment of Einfeld J in the Federal Court of Australia in Roussel Uclaf v Pan Laboratories). Orders for delivery up are not a punishment of the infringer or compensation to the patentee, they are to protect the patentee's rights.
17. Thus it seems to me that orders for destruction or delivery up are not made because the act of keeping itself is an act of infringement as defined by s60(1)(a). After all in such a case, the continued keeping would be caught by the injunction anyway. Mr Howe's argument about the scope of infringement under the Specific Mechanism is a point with potentially wide ramifications. I do not need to decide it on this application.
18. What of Mr Howe's submission on the merits? He argues that the stock concerned is perfectly good product (we are concerned with the batches with a shelf life expiring after the SPC). It was imported in good faith. For the packs which have been re-boxed they cannot now be sold in Poland. Considering the order regardless of any stay pending appeal, the expiry of the SPC is only 11 months away. Sale of the goods after expiry of the SPC will be perfectly lawful. There will be no springboard of any significance since his clients would have been entitled to arrange for a PL/PI before expiry anyway. The order would be in effect the wanton destruction of perfectly good stock without a purpose.
19. I remind myself that an order for delivery up or destruction is made in the exercise of the court's discretion. The Enforcement Directive (Art 10(3)) indicates that in considering a request for such an order the need for proportionality between the seriousness of the infringement and the remedies ordered as well as the interests of third parties shall be taken into account.
20. A key element in the exercise of the discretion must be to have regard to the purpose of such orders. As Mr Hinchliffe pointed out the authors of Terrell state that delivery up/destruction orders have two purposes, to protect the patentee from any use after expiry of his patent of infringing articles made during its currency and to act in aid of the injunction. However Terrell does not cite an authority in support of the first purpose. The point was probably derived from some very old cases including Crossley v Beverley (1892) 1 WPC 112 and Crossley v Derby Gas Light (1834) 4 L.T. Ch. 25 in which stocks had been built up before a patent had expired and the question was whether delivery up could be ordered after expiry. The first purpose was considered by the Supreme Court of South Africa in Monsanto v Stauffer [1988] FSR 57. There the court (Mr. Justice Harms, Mr. Justice Goldstone and Mr. Justice Stegmann) held that there was no such principle. Harms J also considered the then current edition of Terrell (13th Ed.) in which the point was made and said (at p62):

I have read the cases referred to by Terrell and I find nothing in them justifying the conclusion of the learned authors in respect of the existence of such a principle.

21. In my judgment orders for delivery up / destruction are ancillary to the injunction and their purpose is to act as an aid to the injunction (Jacob LJ in Mayne above). Such an order, when made, will obviously have the effect of protecting the patentee from any use after expiry of articles made during the currency of the patent but I do not believe it is accurate to say that that in itself is a or the purpose of orders for delivery up /destruction. That is not to say that questions of springboards and the like do not have a role to play in the exercise of the discretion, I am sure they do and springboard relief generally is a different point. However I am not satisfied that the passages in Terrell on this first point are correct.
22. Turning to the facts of this case, I have decided that the order for delivery up / destruction should be made in its normal form, i.e. without a provision permitting the defendant to retain in its possession stock imported in infringement of the patent in order to sell it in the UK at the end of the term of the patent/SPC. My reasons are these.
23. First as an order in aid of the injunction, the purpose is to ensure that the defendant does not retain stock which it could sell in breach of the injunction. Sigma has been found to have committed acts of infringement already. These goods are goods falling within s61(1)(b). Although I did not reject Sigma's argument that the goods had been imported in good faith, I rejected the estoppel argument. Sigma's belief that Merck did not object was not a reasonable one. The best way to ensure compliance with the injunction is to order delivery up.
24. Second I am not satisfied there is no substantial springboard in this case. Sigma are not entitled to import Polish SINGULAIR until after the patent/SPC has expired. They will only be holding stock on the very day the SPC expires because they imported it before expiry and in infringement of the patentee's rights. It is notorious that markets for products like these move very fast at the point at which a patent or SPC expires. It seems to me that, prima facie, Sigma's retention of unlawfully imported stock would give it an unwarranted advantage when the SPC expires. Sigma may well be able to sell into the market more quickly than would otherwise have been possible. If Sigma had wanted to prove there really was no springboard they could and should be put in some evidence on the point. There was none.
25. Third the fact the stock is "perfectly good product" is neither here nor there. Goods ordered to be delivered up are often perfectly good. Their relevant characteristic is that they have been imported in infringement of the patentee's legal rights and their sale now would be an infringement and a breach of the injunction.
26. Fourth as regards proportionality, the goods to be caught by the order ought never to have been imported in the first place. Their importation was an infringing act. The remedy is proportionate to the infringement.
27. Fifth, there are no relevant third parties whose interests need to be catered for.
28. I will make the order in the terms sought by Merck.
29. In terms of drafting, the parties were agreed that the order only need refer to destruction since Merck indicated they would destroy the goods themselves if they were delivered up.

Stay of the inquiry as to damages pending appeal

30. Merck are entitled to an inquiry as to damages or (at their election) an account of profits. They are also entitled to Island Records disclosure in advance of the election (Island Records v Tring [1995] FSR 560).
31. Mr Howe submitted that the inquiry should be stayed pending appeal. Mr Hinchliffe resisted that and reminded me of the observations of Jacob LJ in Virgin Atlantic v Premium Aircraft [2010] FSR 15 at paragraphs 4-5 that the general rule is that a successful claimant is entitled to pursue an inquiry as to damages even if there is a possibility of an appeal. He does so at his own risk as to costs if the decision on liability is reversed on appeal. Mr Howe replied that he could not resist giving Island Records disclosure but as regards conducting the inquiry itself a significant factor was that this case is in the Patents County Court, where costs are capped. With capped costs, a party will not necessarily be fully compensated for costs they have incurred even if they win.
32. I accept Mr Howe's submission. The costs capping regime has an important impact on the exercise of the discretion to stay or not to stay. What I will do is order the Island Records disclosure to be given since that seems to me to be a step which can be taken a relatively low cost. Merck can then decide whether to elect for an inquiry as to damages or account of profits. The next step Merck proposed was to come back for further directions before any pleadings were prepared. That will be a suitable occasion on which to decide whether to stay the inquiry or account pending appeal since all parties will have an idea of the sums at stake. This directions step may well be something which could be dealt with on paper.