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Actavis v Eli Lilly: when the High Court of Justice rules across multiple jurisdictions… Isn’t the need for a Unified Patent Court becoming even more flagrant?

Background of the case and Nature of the claim:

On 15 May 2014, the High Court of Justice in the Patents Court division handed down a significant judgment in Actavis v Eli Lilly, granting a declaration of non-infringement across multiple European jurisdictions in respect of the UK, French, Italian and Spanish designations of a European Patent. Actavis in fact sought a declaration that their proposed launch of a generic pemetrexed product to compete with Lilly’s cancer treatment product Alimta, would not infringe Lilly’s EP1313508 covering pemetrexed disodium. Actavis had indicated to Lilly that they would seek marketing approval for their competing product by reference to Alimta and were seeking to clear the path of any obstacles that would prevent this. Lilly counterclaimed for threatened infringement in relation to the UK designation of the patent.

Before going more in-depth into this decision it is important to look at the decisions for the same claim rendered on 27 November 2012 and 21 May 2013 by respectively the Patent Court and the Court of Appeal which laid the legal basis of the 2014 decision.

In 2012 Arnold J passed a judgment on three procedural issues relating to the service of the claim (§ 35) and the question of the exercise of the Court’s jurisdiction on the ground of forum conveniens. The question before the court was thus whether the UK Court could determine all five claims together, or whether they should be tried separately in their respective national courts.

It is important to highlight three essential points of that judgment.

• First Lilly is not domiciled in an EU Member state. It followed that in accordance with article 4(1) of the Brussels I Regulation which states “If the defendant is not domiciled in a Member State, the jurisdiction of the courts of each Member State shall, subject to Articles 22 and 23, be determined by the law of that Member State” the jurisdiction of the court was a matter for English law.

• Second, Actavis did not challenge the validity of the Patent (§ 29). This point is essential as in these circumstances “this Court was not required to decline jurisdiction by virtue of article 22(4) of the Brussels I Regulation, which confers exclusive jurisdiction over challenges to the validity of registered intellectual property rights on the Courts of the States where they are registered.” Arnold J considered that as the validity or registration of the patents at stake was not part of the litigation, national courts did not have exclusive jurisdiction over any litigation deriving from them in their respective registration State. A court in the United Kingdom applying English Law can therefore determine any issue of infringement of a foreign patent as long as its validity is not at stake.

• Third, Arnold J points out that, in the light of Lucasfilm Ltd v Ainsworth, Lilly did not dispute the justiciability before the English Court of the claims raised with regard to the non-UK designations. The Supreme Court in Lucasfilm Ltd v Ainsworth in fact established that the infringement of foreign copyrights were justiciable before the English Courts. For Lord Walker and Lord Collins, the modern trend is in favour of the enforcement of foreign intellectual property rights: “First, article 22(4) of the Brussels I Regulation only assigns exclusive jurisdiction to the country where the right originates in cases which are concerned with registration or validity of rights which are “required to be deposited or registered” and does not apply to infringement actions in which there is no issue as to validity. This can rarely, if ever, apply to copyright. Second, the Rome II Regulation also plainly envisages the litigation of foreign intellectual property rights and, third, the professional and academic bodies which have considered the issue, the American Law Institute and the Max Planck Institute, clearly favour them, at any rate where issues of validity are not engaged”(see §109).

Whence, Arnold J states at paragraph 89 that “If (…) one considers the reasons given in Lucasfilm v Ainsworth at [104]-[110] by Lord Walker of Gestingthorpe JSC and Lord Collins of Mapesbury (…)  for holding that there is no subject matter limitation on jurisdiction, in my opinion they are equally relevant to the operation of the forum non conveniens doctrine.” Arnold J in fact considers that if patents are no different to copyrights for the purpose of justiciability, they should then be treated no differently for the purposes of forum non conveniens –when validity is not an issue.

The forum non conveniens doctrine allows a court to dismiss a civil action where an appropriate and more convenient alternative forum exists in which to try the action. The appropriate forum is the one in which the case may most suitably be tried in the interests of all the parties and the ends of justice. Permission to serve the proceedings outside the jurisdiction will then only be granted if the court is satisfied that the other jurisdiction is the proper place (or forum conveniens) in which to bring the claim.

Actavis argued of course that England was the appropriate place for a trial as “first, it would mean that the case would be conducted by one team of lawyers on each side using one set of factual and expert witnesses (although in the present case it appears unlikely that there will be any need for factual witnesses), thereby saving costs for both sides. Secondly, it would enable the case to be determined by reference to one law, namely English law, if Lilly chose not to raise any issue as to foreign law, thereby saving even more costs. Thirdly, even if different laws were applied, it would mean that one court (and one court on appeal) would determine all five claims, thereby eliminating the prospect of inconsistent decisions unless they really were mandated by the different national laws’ approaches to Article 69 EPC and the Protocol.” Arnold J found these arguments compelling, rejected Lilly’s position as to the cost of the defense (see §98) and declared that England was the proper forum to hear the five claims.

Following this decision Lilly lodged an appeal (which can be read here), dismissed by the Court of Appeal on 21 May 2013. It is nonetheless important to note that the Court only considered the issues of procedure and service of the claim. The substantial issue -whether “the judge ought to have granted a stay on the grounds of forum non conveniens”- was not looked into by the Court. Kitchin LJ in fact after upholding the first issue (whether the judge was right to hold that Lilly’s solicitors, Hogan Lovells, agreed to accept service of proceedings in the first action), formed the view that this conclusion was dispositive of the whole appeal.

The Judgment passed in May 2014 is  the last chapter -to date- of the Actavis v Lilly saga, and seems to bring a definite if unsatisfactory answer to the question of the justiciability of the infringement of the foreign counterparts of a European Patent.

The substantive issue and the claim for declaration of non-infringement:

Concerning the substantive issue, Arnold J found that “neither pemetrexed diacid nor pemetrexed dipotassium nor pemetrexed ditromethamine falls within the scope of the claims 1 to 12 of the UK, French, Italian, or Spanish designations of the patent”. These claims can be read here. Hence, the dealings in permetrexed diacid, dipotassium and ditromethamine by Actavis do not constitute direct or indirect infringement of the UK, French, Italian or Spanish designations of the Patent.

Arnold J then proceeded to the analysis of the law applicable to the declaration of non-infringement (“DNI”) claims. The Judge made an important difference between the law applicable to the question of whether Actavis’ proposed acts infringed each non-UK designation of the Patent and the law applicable to the DNI claim made by Actavis. Concerning the first question, or whether Actavis’ proposed acts infringed each non-UK designation of the Patent, Arnold J considered that lex loci protectionis, the substantive patent law of the relevant country, applied. As for the second question, i.e. which law should be applied to the DNI claim, the Judge had to decide between Actavis’ contention that lex fori -i.e. the law of the jurisdiction in which relief is pursued- should apply, and Lilly’s contention that on the contrary lex loci protectionis was relevant. Two interpretations of the nature of the rules governing the declaration of non-infringement were opposing each other. Actavis in fact contended that these rules should be considered as part of evidence and procedure and should thus be governed by article 1(3), which excludes these areas from the scope of the Rome II Regulations at the benefit of national jurisdictions. Article 1(3) hence states: “

“This Regulation shall not apply to evidence and procedure (…)”

Lilly on the contrary argued that a declaration of non-infringement is a remedy in the sense of article 15 (c) and as such should be within the scope of the Regulation. Article 15 (c) in fact states:

“The Law applicable to non-contractual obligations under this Regulation shall govern in particular:

(…)

(c) the existence, the nature and the assessment of damage or the remedy claimed”

After considering the interpretation of the Rome II Regulation Arnold J found that the law that applied to the DNI claim should follow lex fori. In fact he did not accept that a DNI is a remedy in the sense of article 15(c) and “even if a DNI is a remedy, and even if it is a remedy within Article 15(c), it seems to me that Article 15(c) should be interpreted as only having the effect that the question of principle as to whether a DNI is available at all is a matter for the law applicable to the non-contractual obligation.” The judge then concluded “the rules presently in issue (the rules for obtaining negative declaratory relief) are matters of procedure within article 1(3) and are not governed by the law applicable to non-contractual obligation in accordance with Article 15”. As a result the rules determining the obtaining of a DNI fall outside of the scope of the Rome II Regulation. Thus, as explained by Arnold J in paragraph 210 “it is common ground that if Actavis are right (…) the question of the applicable law is to be determined by English private international law and that under English private international law, the applicable law is the lex fori, because English law regards the rules for obtaining declaratory relief as being procedural”.  The rules governing the claim for a declaration of non-infringement thus follow English Law.

This in consequence explains why Arnold J considers that Actavis are entitled to a DNI in respect of the UK, and foreign designations of the European Patent.  The declaration of non-infringement irrelevantly of the Patent designation being in fact governed by the lex fori, or English Law.

Declaration of non-infringement in respect of the UK designation applying English Law:

Once the appropriate law applying to the DNI identified, Arnold J pursued by deciding if the grant of a DNI to Actavis would meet the necessary criteria identified by English Law.

Following Messier – Dowty, a DNI can only be granted if it serves a useful purpose. This criterion will be met if the “claimant has a real commercial interest in the negative declaratory relief sought or a real commercial reason for it to be granted”. Arnold J found that Actavis should be granted a DNI in respect of the UK Patent designation as “Lilly does not seriously dispute that, if Actavis establish that dealings in their products would not amount to an infringement of the UK designation of the Patent, then Actavis should be granted a DNI in respect of that designation pursuant to the inherent jurisdiction of the Court”.

DNI in respect of the French, Italian, and Spanish designations applying English Law:

After establishing that the law applicable to the question of whether Actavis were entitled to a DNI in respect of the French, Italian, and Spanish designations of the patent was English law, Arnold J found that Actavis should be granted declarations of non-infringement in respect of those designations pursuant to the jurisdiction of the High Court of Justice of England and Wales, Actavis having demonstrated that they have a real commercial interest in obtaining DNIs and that these declarations would serve a useful purpose .

DNI in respect of the French, Italian and Spanish designations applying respectively French, Italian, and Spanish laws:

Arnold J pursued his judgment by looking at the declarations of non-infringement in respect of the French, Italian, and Spanish designations applying French, Italian and Spanish law “in case (I am) is wrong about the applicable law” on “the assumption that the relevant law is the law applicable to the non-contractual obligation”.

Finally, Arnold J helped in his appreciation of foreign laws by experts’ opinions on the granting of DNI under these jurisdictions, decided that “even if French, Italian, and Spanish law is the applicable law respectively, Actavis are entitled to a DNI in respect of the French, Italian, and Spanish designations of the Patent”.

In Conclusion:

This decision is remarkable in many respects. First, it is a superb example of legal craftsmanship. Second , Arnold J  innovative reasoning could inspire litigants in the UK and in other EU countries, pending the entry into force of the Unitary Patent system.  We believe that although the reasoning applied to a situation where a party was seeking a declaration of non-infringement prior to marketing potentially infringing products, thus not risking a patent infringement counterclaim, it could nevertheless be extended to infringement claims in cases where nullity counterclaims are not available, such as in cases litigated before the German patent district courts (Landgericht).  Third, this decision is a good illustration of the inefficiency of the existing system. Of course the solution is elegant and sophisticated but in the end, this is merely a “patch” aimed at fixing, albeit imperfectly, an inherent error in the European Patent system.  It is time to move from error correction and bug fixes to a brand new release of the European patent system.  No doubt that the patent lawyers will find many new opportunities to demonstrate their creativity in this new system, for a better result.