NHS fails in appeal on ‘unlawful means tort’ in claim for damages allegedly caused by Servier’s actions in delaying generic market entry

There seems to be growing trend whereby the NHS is taking proactive steps to seek damages from pharmaceutical originators based on allegations that the originators wrongly prevented generic products from entering the market as early as they otherwise would have done.

In circumstances where it seems the NHS did not obtain an undertaking from Servier to pay damages to the NHS for an interim injunction obtained in 2006, the NHS has taken a case based on the tort of causing loss by unlawful means all the way the UK Supreme Court (SC). In the absence of an undertaking from Servier, the NHS was attempting to claim £220 million damages from Servier for alleged misrepresentations in relation to the validity of its patent for blood-pressure drug Coversyl, which delayed the entry onto the market of generic versions of perindopril. The SC unanimously dismissed the NHS’s appeal.

In Secretary of State for Health v Servier Laboratories Lt & Ors UKSC 2019/0172, the NHS had alleged that Servier’s injunctive relief in the UK against the supply of generic perindopril, which had been granted on a patent later found to be invalid, gave the NHS an action founded in the tort of causing loss by unlawful means. However, the SC unanimously dismissed the NHS’s appeal and upheld a decision to strike out its claim against Servier for causing loss to the NHS by unlawful means. The SC had previously sought to keep the scope of this tort within reasonable bounds. As the SC judgment in Servier states, this was partly to reduce the scope of the tort, “but also to reflect the policy consideration that this is an area of economic activity the regulation of which should largely be left to Parliament”. In the House of Lords case of OBG Ltd v Allan [2008] 1 AC 1, Lord Hoffmann considered that the best way to keep the tort within reasonable bounds was by giving a narrow meaning to “unlawful means”.

The current Patent Courts Guide (issued 2019) draws attention to CPR Practice Direction 25A and states that, when a person seeks an interim injunction which would affect dealings in a pharmaceutical product or medical device purchased by the NHS, the Court will consider whether the applicant should give an undertaking in favour of the NHS. The applicant must also notify the NHS of its application when it is made and any Court order subsequently made.

When Servier obtained its interim injunction in 2006, the practice was only to require the patentee to give notice to the NHS in case it wished to seek such an undertaking. It had been open to the NHS to apply to the Court for Servier to be required to give the NHS an undertaking to pay damages which the NHS might suffer as a result of the interim injunction. However, it seems that the NHS did not take this opportunity at the time.

In the current case it is interesting that the NHS was prepared to invest the money and resources to take the case to the SC, having lost at both the High Court and the Court of Appeal, to try to effect a change in the law. However, with a potential damages claim of over £200 million, there was a considerable upside to taking this course of action. Despite its loss at the SC, the NHS continues to seek these damages from Servier via proceedings in the UK for breaches of competition law.

In separate proceedings involving other parties, the NHS are also seeking damages, via undertakings provided by Warner Lambert, thought to be upwards of £500 million, on the basis that Warner Lambert obtained wrongly granted interim injunctions that kept generic pregabalin off the market in the UK. In addition, following the Competition Appeal Tribunal’s decision that GlaxoSmithKline and some generic suppliers of the anti-depressant paroxetine broke competition law, the path also seems clear for the NHS to seek damages from these parties too.

Pharmaceutical patentees, in particular, need to be aware of this growing trend so they can factor it into their commercial plans surrounding patent enforcement and patent settlement strategies in the UK.

Background

Servier was granted a salt-form patent in 2004 for the alpha crystalline form of the tert-butylamine salt of perindopril. The EPO upheld the patent following opposition proceedings involving 10 opponents in 2006. In the UK, Servier obtained an interim injunction preventing the sale of generic perindopril in 2006 and in the subsequent main action proceedings in 2007, the patent was held to be invalid for lack of novelty and lack of inventive step. That decision was upheld in the Court of Appeal in 2008, and a year later the EPO Technical Board of Appeal revoked the patent.

The appeal

In this case, the NHS had alleged that “in obtaining, defending and enforcing the patent, the third respondent [Servier] practised deceit on the EPO and/or the courts, with the intention of profiting at the expense of the appellants [NHS]. It is alleged that the patent was obtained, defended and enforced on the basis of representations about the novelty and/or lack of obviousness of the alpha form that the third respondent knew to be false, or that were made with reckless indifference as to their truth. These allegations are denied by the respondents but are assumed to be true for the purpose of the strike out application” and that “as a result of the respondents’ deceit, manufacturers of generic perindopril did not enter the market as early as they otherwise would have done. This would have driven down the price of perindopril and so this delayed entry into the market meant that the appellants had to pay higher prices.

This alleged conduct was said to form the basis of an unlawful means tort claim for which damages and interest of over £200 million were claimed.

The lack of direct connection between the allegedly misleading behaviour by Servier and the loss suffered by the NHS and the lack of dealings between the two parties meant that the SC could not allow the appeal – these were requirements for the (strictly interpreted) tort and there risked being a floodgates effect if this was overridden. The dealing requirement also minimised the danger of there being indeterminate liability to a wide range of claimants. In the present case, for example, if the NHS’s case was accepted the potential claimants would include the various UK Health Authorities, generic competitors, private medical insurers, foreign health authorities and even individuals who had to pay more for perindopril.

The risk of the tort resulting in liability to a wide range of claimants arose in part because the House of Lords in OBG rejected a narrow and specific test of intention which requires the defendant to target the claimant. Intention for the purposes of the unlawful means tort includes intending harm to the claimant as a means to an end, such as enriching the defendant. Given that competition involves gain at the expense of others, this means the tort could operate very broadly without the delimiting factor of the dealing requirement.

This was not, however, an appropriate case for the Supreme Court to revisit the OBG test of intention, and it would not assist the NHS’s case if it were to do so as the NHS had not pleaded a more specific intention on the part of Servier to target the NHS in this case. Its case was that harm had been caused to the NHS as a means to an end.

The court therefore rejected the NHS’s submission that the dealing requirement was an undesirable and unnecessary addition to the essential elements of the unlawful means tort.

For more on the detail of this decision see the report on our Litigation Notes blog here.

Key contacts

Sebastian Moore
Sebastian Moore
Partner
+44 207 466 2801

Alex Freelove
Alex Freelove
Senior Associate
+44 20 7466 7452

Rachel Montagnon
Rachel Montagnon
Professional Support Consultant
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Copyright owners “Don’t have to take it”: Universal Music v Palmer

The Australian Federal Court’s recent decision in Universal Music v Palmer, in which Mr Palmer was ordered to pay AU$1.5 million for his unauthorised use of the song We’re Not Gonna Take It, reaffirms that the Court is prepared to award significant financial remedies to intellectual property owners whose rights are infringed.

Key takeaways

  • The $500,000 in compensatory damages and $1 million in additional damages awarded against Mr Palmer reaffirms that the Court will award additional damages in an amount appropriate to punish and deter serious infringements of intellectual property, even where that award dwarfs the actual loss suffered by the rights owner and the amount of compensatory damages awarded.
  • A party’s response to allegations of copyright infringement and their conduct after the original infringement, including the manner in which they conduct their defence to the proceedings, have critical implications for the assessment of additional damages.
  • Damages on the basis of the “user principle”, or hypothetical licence fee, are available for copyright infringement in Australia, even when the parties would not have agreed on an actual licence. This appears to resolve any lingering uncertainty on this issue following the 2007 Full Court decision in Aristocrat.

Click here to read our full analysis of the important aspects of this decision on our website.

Sue Gilchrist
Sue Gilchrist
Head of IP - Australia, Sydney
+61 2 9225 5221
Rebekah Gay
Rebekah Gay
Partner, Joint Global Head of IP, Sydney
+61 2 9225 5242
Aaron Hayward
Aaron Hayward
Senior Associate, Sydney
+61 2 9225 5739

PATENT AND PHARMA UPDATE – November 2017

Key recent developments in the United Kingdom and Europe relating to the patents and pharmaceutical sector. One of the most significant developments in the patent law arena in recent years has been the decision of the Supreme Court in Actavis v Eli Lilly, which has changed the approach to patent infringement in the UK. The update starts by commenting on the new rules of infringement and looks at how subsequent decisions may apply this new test. The case will impact most pharmaceutical sector players, whether they are originators or generics, and may impact the strategy that patentees adopt when litigating in the UK. The update further reports on other significant developments in UK and European law, including a recent TBA decision which elevates the threshold for plausibility and recent references to the CJEU on the SPC Regulation.

1. A new UK approach to infringement: equivalents infringe a patent, but do not anticipate it?

The UK Supreme Court has redefined the UK approach to patent infringement, holding that the scope of protection of a patent extends to “equivalents” of the claimed invention. However, the Patents Court has since held that such equivalents, even if they pre-date the patent, do not anticipate it Read more


2. Plausibility before the EPO and reliance on post-published evidence

BMS has filed a petition for review to the Enlarged Board of Appeal regarding the TBA’s decision to revoke BMS’s patent for the anti-cancer drug dasatinib. The Board’s decision to revoke the patent suggests that the threshold for plausibility has been elevated, at least in the context of an inventive step Read more


3. Further References to the CJEU on Supplementary Protection Certificates (“SPCs”)

The German Federal Patent Court has referred two further issues to the CJEU regarding the interpretation of Article 2 and 3(a) of the SPC Regulation. In relation to Article 2 the Court has asked whether an SPC can be obtained for drug device combination products and, if so, in what circumstances. With regards to Article 3(a) the Court has added further detail to the questions asked by Arnold J in Teva v Gilead Read more


4. New Unjustified Threats Regime in force from 1 October 2017 – encompassing unitary patents and European patents under UPC jurisdiction

The new Unjustified Threats Regime has recently come into force. This Regime is an attempt to encourage more pre-action communication by providing greater clarity on what amounts to an actionable threat Read more


5. Further information ordered to be provided in an enquiry as to damages under a cross-undertaking

Birss J has provided guidance on pleadings for damages under a cross-undertaking. The High Court found the Points of Claim were fundamentally lacking critical information and Sandoz was ordered to provide further information on their substantial £100 million claim for damages, including profit margins on each type of product and profit flows between the relevant Sandoz group companies (under agreed confidentiality terms) Read more


6. UK court strikes out a claim for loss suffered as a result of the tort of unlawful deceit

The High Court has struck out the NHS’s claim for damages based on the tort of causing loss by unlawful means regarding misrepresentations on novelty/obviousness. Roth J’s interim decision represents the latest instalment in the fall-out from Servier’s actions concerning delayed entry of perindopril, and suggests that this tort should be confined within a narrow ambit Read more


7. Judicial consideration of a collaboration agreement in Astex Therapeutics Limited v AstraZeneca AB [2017] EWHC 1442 (Ch), (“Astex”)

Arnold J’s judgment in Astex provides insight into how the Courts will approach the interpretation of a research and collaboration agreement. Arnold J also commented on the amount of witness evidence that was put before him concerning events that had occurred between 10 to 15 years ago Read more


8. Developments in Europe

A brief overview of the developments in the European arena in the past months, including an EU Commission consultation on SPCs, the new approach adopted by EPO to patentability of products obtained by essentially biological processes and how HSF can help you to successfully navigate the new data protection laws Read more


9. UPC Update

This article provides an update on the progress of ratification of the UPCA in the UK and Germany Read more

 

See our previous Patent and Pharma Updates on our IP Blog here:

Patent and Pharma Update – June 2017

Patent and Pharma Update – January 2017

Patent and Pharma Update – May 2016

 

Authors

Sophie Rich
Sophie Rich
Partner
+44 20 7466 2294
Jonathan Turnbull
Jonathan Turnbull
Senior Associate
+44 20 7466 2174
Monika Klajn
Monika Klajn
Associate
+44 20 7466 7604
Rachel Montagnon
Rachel Montagnon
Professional Support Consultant
+44 20 7466 2217