Glaxo Wellcome UK Ltd (t/a Allen & Hanburys) & Anor v Sandoz Ltd & Ors

On Thursday and Friday 28 and 29 June 2018 I heard various applications by the Claimants in these proceedings (together “Glaxo”) raising issues regarding the joinder of proposed additional Defendants and disclosure from the existing Defendants. Pending draft orders from Counsel, these are my main reasons for the decisions which I indicated during that hearing

In these proceedings Glaxo sues companies in the Sandoz group for allegedly passing off their generic inhaler product AirFluSal Forspiro, launched in the UK and elsewhere in 2015, as Glaxo’s (now out-of-patent) Seretide Accuhaler inhaler, which has apparently achieved sales of more than £62 billion globally since launch in 1999.

Both products are prescription-only combination drugs for the treatment of chronic obstructive pulmonary disease (COPD) and severe asthma, marketed and sold in boxed dispensers with the following get ups:

Glaxo has alleged that the Defendants chose AirFluSal’s get-up “with the deliberate aim of deceiving or creating confusion in the mind of the relevant public”; and the Defendants have accepted that the question of whether the public are deceptively confused may take into account the defendants’ intentions and that documents relating the design history of their product (which, it has emerged, may go back as far as 2003/4) must be reviewed and disclosed if relevant.

That exercise by the existing (“Sandoz”) Defendants has, they say, so far involved the review of 406,300 documents largely identified by agreed keyword searches using 50 legally qualified reviewers and the subsequent disclosure of 75,326 documents, including those in the custody of some 40 of its employees or former employees (thus called “custodians”), taking some 6 months and costing more than £2 million.

The proceedings, issued in December 2015, have taken some 2½ years to date, including the dismissal of Glaxo’s trade marks claims and the joinder of the Second to Fourth Defendants sought in May 2016 and (as regards the Third and Fourth Defendants) eventually granted by the Court of Appeal in April 2017.

Initial disclosure was given in March 2018 and the trial was due to begin with a 12-day estimate in a window commencing on 17 October 2018, this hearing having been set as the PTR; but by an application dated 7 June 2018 Glaxo asked to adjourn the trial date, and to extend time for outstanding steps (including exchange of witness statements which had been set for 31 May 2018); to join as defendants another company in the Sandoz group (Sandoz AG) as well as Vectura Group Plc and Vectura Delivery Devices Limited (together “Vectura”); and to obtain further specific disclosure from Sandoz

Given that the costs of this massive litigation were estimated at over £6 million as to December 2017 and will in all likelihood increase, it is fortunate that the parties are well-resourced. Glaxo is represented by Stephenson Harwood, instructing Simon Malynicz QC and Tom Hickman of counsel; Sandoz by White & Case, Martin Howe QC and Iona Berkeley; and Vectura (with a comparatively small turnover of some £150 million per annum) by Bristows, Iain Purvis QC and Anna Edwards-Stuart. I appreciate all their submissions, although I do not need to refer to each and every one below.

Glaxo and Sandoz agreed that the trial should be adjourned to June/July 2019 and I also agreed. Apart from anything else, Sandoz claimed confidentiality for about a third of their disclosed documents and less than a third have so far been reviewed by Glaxo’s legal team.

The joinder of Sandoz AG was also agreed but not the joinder of Vectura or a number of specific disclosure issues concerning Sandoz, upon which I expand further below, including an objection raised by Sandoz concerning documents in the custody of two more former employees in Germany which Chief Master Marsh adjourned (under an application by Glaxo dated 11 May 2018) to the PTR if time allowed, which in the event (happily or unhappily) it did.

The hearing bundles before me included a number of documents which I was told were in part highly confidential and were marked up as such, and the parties and the Court took care not to refer to those parts in open court.

The Court has a discretion to join a new party to proceedings under CPR rule 19.2 “ if – (a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or (b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.”

As stated in In Re Pablo Star Ltd [2017] EWCA Civ 1768 (at [60]): - In considering whether or not it is desirable to add a new party pursuant to CPR 19.2(2) two lodestars are the policy objective of enabling parties to be heard if their rights may be affected by a decision in the case and the Overriding Objective in CPR Part 1.

Glaxo submit that Vectura is liable to it for the passing-off claimed as having designed, developed and licenced AirFluSal Forspiro in its allegedly imitative get up, as marketed and sold by Sandoz. It claims that Vectura was “deeply” involved in this plan for years before launch in 2015 and refers to documents now available which purportedly support that charge.

Vectura does not dispute (for present purposes only) that there is an arguable case of joint tortfeasance against them but submit that it is neither necessary nor desirable and proportionate to add them as defendants at this stage and that Glaxo’s interests and objectives can be properly addressed by separate proceedings including third-party disclosure if later appropriate.

They sought to stress that Glaxo’s joinder application as regards Vectura comes very late in the day particularly when Glaxo must have known of Vectura’s involvement in the inhaler complained of since a so-called “Irish letter” of 2 November 2015, before these proceedings were issued, and that this late joinder is highly prejudicial to them.

I am not able to agree as regards the extent of Glaxo’s knowledge regarding the detail of Vectura’s involvement. The Irish letter and other communications indeed show that Glaxo was aware of some involvement but the full nature and extent of it – and other matters leading to the application - may well have emerged since then and in particular as a result of Sandoz’ disclosure to date. Whilst I do not disregard the procedural delays to date, they do not in the event sufficiently militate against Glaxo’s current joinder application considered in the round.

As for the comparison of joinder as against other “mechanisms” to meet Glaxo’s claims, I accept (a) that the litigation has developed or even “ballooned” in Vectura’s absence, so that its vast shape has not been influenced by their participation, and (b) that it may well be more difficult to investigate relevant matters now than it might have been 2½ years ago.

As to the first point, whilst I accept that the joinder of Vectura may in some ways add to the overall burden and complexity of the issues, in other ways it may ease them and it is certainly not too late for Vectura to influence them. In that regard, the parties will have to look afresh at most effectively defining the dispute (although I did not accede to Sandoz’s application for discussions to narrow issues at this stage in the light of Glaxo’s opposition) and review their costs estimates (although I was told that costs budgeting has to date been excluded).

Of course, Vectura will if joined undergo the burden of defendants in such substantial litigation, but it has the benefit of an indemnity from Sandoz, and whilst it was suggested that this might not be expected to cover management time, Vectura chose not to put in any evidence as to its terms. It might be expected that, in the circumstances, there would be some considerable common interest and cooperation between Sandoz and Vectura, even if they remain separately represented.

As for the investigation of relevant matters so long after they occurred, this has been ongoing as between Glaxo and Sandoz at least for some 3 years and if Vectura are not joined, so Glaxo submit, there will be significant “liability” and “information gaps” in the proceedings, given Vectura’s allegedly deep role in the activities complained of.

By way of context, among other points, Glaxo contend that Vectura were closely involved in designing the Sandoz product and its get up sometimes by reference to the Glaxo product, were present at a meeting in early May 2006 at which the choice of purple colour was discussed and took part in patient studies and other marketing research.

On the other hand, Sandoz has disclosed at least one Vectura design drawing but has claimed that it cannot practicably search for others and has destroyed its DocXChange documents, does not have control over a consultant’s documents, and should not be ordered to identify the individuals in a “non-specific group of persons” referred to as “Sandoz Marketing”: some at least of these difficulties may, it is claimed by Glaxo, be ameliorated by disclosure from Vectura.

On behalf of Vectura, Mr Purvis submitted that Vectura’s joinder would add nothing sufficient as regards liability. It complained that there was no pre-action warning from Glaxo and offered in general terms to be bound by and comply with any finding in its absence that the get-up of the Sandoz product did amount to a passing-off, that a damages award against Sandoz needed no reinforcement as against Vectura, and that a separate account of profits (involving the defendants’ less profitable product) was unrealistic.

Despite the elegant way in which these arguments were marshalled, I was unpersuaded that the joinder of a key party responsible for designing, developing and licencing the product complained of, would be unjustified on these or other case management grounds. True it is that unless the offering and sale in the UK market by Sandoz was actionable, Vectura’s leading role could not attract liability. But logic and common sense, in my judgment, require them to be joined and formally bound, even if they wish to downplay their involvement and for example propose formal undertakings to that end. The desirability of separate and subsequent “follow-on” proceedings against them if necessary and appropriate after conclusion of the current action seem to me far-fetched as a satisfactory alternative.

A parallel line of reasoning applies as regards investigation by way of disclosure and, if Vectura so decide, witness statements in the action. There does indeed appear to be a likelihood or at least a possibility of a significant “information gap” if Vectura are not joined, especially given the difficulties or complications in Sandoz’ disclosure to date. I do not accept that this must be capable of being fully dealt with by some form of third party disclosure process as Vectura would apparently volunteer.

A crucial ingredient in both Vectura’s position and Sandoz’s in relation to its disclosure (to which I will soon turn) depends on its assertion that Glaxo’s allegation as to their intentions with regard to the choice of their products’ get-up has skewed the proceedings away from the “primary” question of whether it does in fact tend to confuse the public (whose inhalers are prescribed by health-care professionals) as to any association with Seretide.

I am not in a position to endorse or act on the basis of such a characterisation and decline to do so. I have no detailed evidence to justify a finding that Vectura have been so prejudiced by delay on Glaxo’s part, in particular as regards the proper investigation of the relevant matters with which they were involved, that the obvious course to ensure the fair and expedient resolution of the issues between these parties should not be followed.

Accordingly I will order that Vectura be added as defendants, because in my judgment that complies with the Overriding Objective and is, in my judgment, the correct balanced management order in this case (as compared with any alternatives proposed). There should be a period of time of some 10 weeks for directions regarding them to be formulated and discussed and that aspect should be determined by the Master, preferably in late September 2018 and by Chief Master Marsh (who I was informed was fully apprised of this case) if available.

As I have mentioned, Chief Master Marsh ordered that there be determined at this PTR (if time permitted) Glaxo’s application (as it was put in paragraph 18 of the updated draft order put before me) that the “… Defendants shall provide specific disclosure by list and inspection of the documents of the Outstanding Custodians, within 7 days of the date of this order”.

The “Outstanding Custodians” are Messrs Krystof Raczinski and Laurent Masaro, former Sandoz employees, who have not replied to its requests for express consent that it be allowed to documents on its system which it says might contain items of their personal information (which it allowed them to do when their employees) giving rise to a risk of penalty for breach of German date protection and/or telecommunications law.

Thus Sandoz’s Disclosure Statement stated pursuant to CPR 31.19, that the there were in its control:

“4.

Documents from the laptops, H: drives and/or email accounts of the following Custodians: Laurent Masaro, Krysztof Raczynski…

I object to you inspecting these documents because …

ii.

In respect of item 4, the reasons for the stated documents being unavailable are as follows:

•

Laurent Masaro: Left in September 2016 and did not provide consent to the processing of his personal data, which would be required under German law.

•

Krysztof Raczynski: Left in March 2017 and did not provide consent to the processing of his personal data, which would be required under German law.”

Glaxo complains that Sandoz did not properly object to disclosure on this ground, raising the issue only in their list regarding inspection and ignoring their previous duties to make a reasonable search for and list relevant documents falling within CPR 31.6 and 31.7, and promptly applying if they had an objection to those prior steps under PD23A.2.7. That is probably right, and Sandoz’ breach of procedure may have led to some confusion and expansion of what might have been a simple issue, but I prefer to deal with the objection now on its merits.

By way of further preliminary, Sandoz sought to argue that searches of Messrs Raczinski and/or Masaro’s documents were or might be unnecessary, disproportionate or unreasonable. They were not volunteered as such by Sandoz and some of their successors or other “Custodians” there have doubted that they had significant roles. However, as I understand it, Mr Raczynski a former Head of Commercial Excellence Europe and Mr Masaro a former member of the Global Development and Licensing Team, were not immediately rejected as relevant “Custodians” by Sandoz; and others whom they did not volunteer have been subjected to searches. Sandoz’s protest, to the effect that have already provided disclosure from 41 Custodians of 75,326 documents does not render any further searches disproportionate.

Turning then to the objection, in general even if there would be a breach of foreign law, our courts are entitled to make disclosure orders and will ordinarily do so, and it is no excuse for non-compliance with a court order that it would put a party in breach of foreign law: see Morris v Banque Arabe et Internationale d’Investissement SA [2000] CPR 65; Masari v Consolidated Contractors International Company SAL, [2011] EWHC 1024 (Comm); Secretary of State for Health v Servier Laboratories Ltd [ [2014] 1 WLR 4383.

However, in making disclosure and other orders, the court might and in some cases should take into account (in the exercise of the flexible discretion) the possibility of conflict with a foreign law, once that possibility is apparent. Sandoz (more particularly the Second and Third Defendants) now seeks to satisfy the court that there would be a breach and serious risk of prosecution under German law by reliance on the expert German law evidence of a Dr Engels, whose witness statements have been answered by a Mr Muhs on behalf of Glaxo.

I note in passing that Dr Engels is not independent of Sandoz and unlike Mr Muhs does not address that question, but regardless of that, I am not satisfied by his arguments in this regard. Sandoz is, as party to these proceedings, jurisdiction over which is properly seised by the English courts and liable to be recognised by the German courts under the recast Brussels Regulation (even if not enforceable there as a judgment or injunction), accordingly under a significant legal obligation to give discovery as imposed by the law of a Member State directly under the terns of the General Data Protection Regulation (GDPR) recently coming into force.

Article 6(1)(c) of the GDPR provides that processing of personal data shall be lawful if “processing is necessary for compliance with a legal obligation to which the controller is subject”. Article 6(3)(b) states that the legal obligation must be “laid down by … Member State law to which the controller is subject.” Arguments as to the previous Directive 95/46/EC as implemented by Germany, or as to the German Constitutional basis for personal privacy, or as to the expectations of Germans against English disclosure processes, take the matter no further

Sandoz is also entitled (under Article 6(1)(c) of GDPR) to process personal data for a legitimate interest if there is no overriding interest in the data-subject’s fundamental right to prevent such processing. Domestic German law is to similar effect (see section 24 of the Federal Data Protection Act 2017) in allowing that “bodies shall be permitted to process personal data for a purpose other than the one for which the data were collected if... 2. processing is necessary for the establishment, exercise or defence of legal claims… unless the data subject has an overriding interest in not having the data processed.

Here Dr Engels and Mr Muhs join battle as to how German courts and data authorities might regard that balancing exercise but they agree that “legitimate interest” includes bringing or defending civil proceedings (see in Europe, Valsts policijas Rigas regiona parvaldes Kartibas policijas parvalde v Rigas pasvaldibas SIA ‘Rigas satiksme’ Case C13/16) and that this is therefore a balancing exercise.

Whatever may be the theoretical position, common sense strongly suggests that any risk of penalty by compliance with Sandoz’s legal obligations in these proceedings must be remote. No example has been cited to suggest otherwise. The contention that the only legal obligations to which a German authority or court would have regard in considering whether to seek or impose a penalty must be domestic German obligations does not seem to me overwhelmingly plausible and in any event, there is no evidence as to the process and likely result of such a charge.

In that regard:

Sandoz also seeks to suggest that Sandoz might breach the German Telecommunications Act, by intercepting telecommunications when they search their own database. Section 88 of that Act refers in terms to telecommunications “service provider” and “commercial provision” of telecommunications services. I would struggle to find that Sandoz, accessing the old files or email account of a former employee, was acting a commercial service provider or intercepting such a telecommunications process.

I am comforted in my conclusion - against the objection that disclosure should be withheld because Sandoz, by complying with a proper order of this court under the lex fori would be exposed to penalty under German law - by Beatson LJ’s observation in Servier Laboratories:

“118.

… as France is a signatory to the European Treaties,, French law must generally give way to the principle of the supremacy of EU law. This makes any attempt to use the French blocking statute to trump the requirements of EU law extremely unlikely… [This means] that, putting it at its lowest, France's obligations under the Treaty mean that a prosecution in respect of any … disclosure made as a result of the order of Roth J, is highly unlikely.”

Paragraph 22 of Glaxo’s updated draft order, sought specific disclosure of the following categories of documents which I can now briefly address in turn by sub-paragraph (and “Annex A” paragraph) number:

These categories of documents sought appear generally narrower than those in the application of 7 June 2018, and Glaxo have not pursued an number of other categories, in the light of Sandoz’s evidence from Mr Collins of its solicitors. I should however stress the need for caution in making orders for specific disclosure, including electronic processes, in a matter of complex as this and my concern as to what is reasonable and proportionate. This particularly goes to the need for search word protocols and realistic timeframes for these exercises to be carried out (including the disclosure relating to the Outstanding Custodians referred to above) so as to avoid any risk of oppression and the diversion of resources.

First dealing with the further searches the subject of paragraph 22(a) and Annex A, Mr Howe emphasised the volume and difficulty of these further searches (using German equivalents) by reference to the hit returns on earlier searches and the strain on reviewer time which might be involved (at an average rate of 400 documents per reviewer date). In the end, as I understood it, he offered that Sandoz would carry out the exercise by 3 December 2018 but that was not accepted by Glaxo. I will order that Sandoz submit a work programme for this exercise and if it is not agreed, it will be determined by the Master.

Sandoz offered to give disclosure as regards (b) and (c) – as to which timing may or may not be in issue, again - and I refuse to order (d) in relation to further design drawings, in the light of what I was told regarding searches to date and the impossibility of manual searches in the absence of some file structure and naming which might enable Sandoz to search manually. This is one aspect where disclosure from Vectura (who are named on a drawing I was shown) may assist.

As for (e), in my judgment the documents of all these custodians should be disclosed except for (i) Mr Heywood who, while present and noting an important meeting, was (I understand) a consultant whose documents were and are not under Sandoz’ control. Each of the others was involved in project management, marketing, or strategy and finance (which appears from one document at least to have included products and not merely, for example, mergers).

Whether senior or junior, their documents may well include some of relevance. Given that Sandoz does not wish to identify individuals involved in at least the “Sandoz Marketing” side, this may well prove necessary. Without going through what is said about each individual (some of whose documents it is said “would have been destroyed”) in my judgment the search exercise is unavoidable, subject to timing in accordance with a proper work programme.

For completeness (although of course counsel should tell me if this judgment erroneously omits any other matter on which clarification or amplification would assist) Glaxo’s updated draft order also sought the following:

In the event I refuse the order sought at paragraph 23, since Sandoz already indicated that data was liable to destroyed in accordance with its data preservation policy and can confirm that or not when it gives the disclosure ordered. Sandoz agreed to make the witness statement referred to in paragraph 24 although timing is again in dispute.

I have endeavoured above in short order to explain the principal grounds for my decisions so far and await counsel’s draft order. Apart from timing and other practical matters, there may well be corrections to this judgment and consequential applications including costs, which I am prepared to deal with on paper if the parties wish.