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The appeal related to the defence of illegality (“ex turpi causa non oritur actio”; from a dishonourable cause an action does not arise) in the context of a patent dispute.alasdhair_mcdonald_ph

Background

The appellants held the following patents in relation to perindopril erbumine, a drug used in the treatment of hypertension and cardiac insufficiency:

  1. a European patent for the perindopril erbumine compound, which expired in June 2003;
  2. a UK patent for a specific crystalline form of perindopril erbumine, which was originally due to expire in 2020; and
  3. a Canadian patent for the perindopril erbumine compound claimed in the European Patent, which was due to expire in 2018.

The respondents comprise a Canadian group of companies which manufactures generic perindopril erbumine tablets in Canada and, in around July 2006, began to import them into the UK.

Servier sought an interim injunction against Apotex to prevent it from importing its perindopril erbumine tablets into the UK, on that basis such activities infringed the UK Patent.  The injunction was granted in the interim, but Servier was forced to give a cross-undertaking in damages, under which it would have to compensate Apotex for its lost sales should the UK Patent eventually be found to be invalid.  The parties also began litigation in Canada as to the validity and infringement of the Canadian Patent, although no interim injunction was granted.

The UK Patent was ultimately found to be invalid and the injunction was discharged, whereas the Canadian Patent was found to be valid and infringed. Apotex was then injuncted by the Canadian Court from manufacturing perindopril erbumine tablets in Canada.

The Appeal

The Supreme Court appeal related to whether or not Apotex should be entitled to receive damages in respect of the interim injunction which was wrongly granted in the UK, even though its manufacture of perindopril erbumine tablets was found to be an infringement of the Canadian Patent.

At first instance, Servier pleaded a defence of “illegality”, citing that it would be contrary to public policy to allow Apotex to recover damages for being prevented from selling a product that it had unlawfully manufactured in Canada. At first instance, Arnold J. held that:

  1. the infringement of the Canadian Patent by manufacturing perindopril erbumine tablets in Canada was a relevant illegality;
  2. that relevant illegality was sufficiently serious in the circumstances of the case (having reference in particular to whether the manufacturing was done with knowledge of the patent or deliberately) for the defence of illegality to apply.

Accordingly, Arnold J. held that Apotex was barred from claiming under the cross-undertaking in damages which Servier had given.  Apotex appealed the decision to the Court of Appeal.

The Court of Appeal unanimously allowed the appeal and held that the infringement of the Canadian Patent by Apotex’s manufacture of perindopril erbumine tablets in Canada was not a relevant illegality, on the basis that:

  1. Apotex honestly and reasonably believed the Canadian Patent to be invalid;
  2. Servier had enjoyed a monopoly to which it was not entitled (under the UK Patent which was later found to be invalid) and should have to account for that;
  3. the sale of the tablets in the United Kingdom was not an infringement of the Canadian Patent;
  4. the manufacture in Canada had not contravened any interim injunction as the Canadian Court had declined to issue one; and
  5. any issue of public policy arising from the illegality of the manufacture in Canada was sufficiently addressed via damages as a matter or private law.

Etherton LJ (giving the leading judgment), also held that that court was entitled “to take into account a wide range of considerations in order to ensure that the defence only applies where it is a just and proportionate response to the illegality involved in the light of the policy considerations underlying it.” (Les Laboratoires Servier v Apotex Inc [2012] EWCA Civ 593, at paragraph 73)

Servier accordingly brought a further appeal to the Supreme Court, which was heard on 10 June 2014, with judgment being handed down on 29 October 2014.

The Supreme Court Ruling

Servier’s appeal was unanimously dismissed by the Supreme Court, which held that the defence of illegality did not apply.  The leading judgment was given by Lord Sumption (with which Lord Neuberger and Lord Clarke agreed), with supporting judgments given separately by Lord Mance and Lord Toulson. The court held that the infringement of the Canadian Patent did not constitute “turpitude” (an illegal act which engages the interest of the public) and so did not engage the defence of illegality.

Lord Sumption stated that the defence of illegality applies either in instances of criminal acts (to which almost all academic commentary exclusively relates) or “quasi-criminal” acts, which include: (i) dishonest or corrupt acts; (ii) acts which, whilst not criminal, are contrary to public policy or involve criminal liability on the part of other (the example given being prostitution); and (iii) the breach of statutes enacted for the protection of the public interest.

Lord Sumption also rejected the approaches taken at first instance and by the Court of Appeal in holding that the defence of illegality was a rule of law and that previous attempts to introduce a discretionary element into the doctrine had been expressly rejected by the House of Lords in Tinsley v Milligan [1994] 1 AC 340. Therefore, the Court of Appeal should not have had any regard to the culpability of the illegality, the proportionality of applying the illegality defence or the general merits of the case.

Lord Toulson’s judgment

Lord Toulson reached the same ultimate conclusion as the other Lords but agreed with the approach taken by the Court of Appeal that, given the defence itself is based on public policy, it is right that other public policy considerations should be taken into account (Hounga v Allen [2014] UKSC 47). Moreover, the ability for parties to place reliance upon the enforceability of cross-undertakings in damages is a matter of public interest.

Comments

 The case clarifies the lack of availability of the illegality defence in matters which do not engage the public interest and are essentially matters for resolution under private law.  However, Lord Toulson’s observations regarding the enforcement of undertakings given before a court of law are an interesting point for discussion.

The case also demonstrates an added layer of complexity in multi-jurisdictional litigation, particularly when conflicting judgments are obtained in different parts of the world.  Such results are more frequently becoming considerations when negotiating settlements in UK litigation.  Moreover, the case highlights the ongoing anomalies and difficulties that can be encountered by international or global companies as a result of distinctly territorial patent and intellectual property rights not being completely harmonised.