Smithkline Beecham Plc & Anor v Apotex Europe Ltd & Ors

I have before me today an application to vary certain undertakings regarding confidentiality in an action which was commenced on 22 October 2002. The claimants are SmithKline Beecham Plc and GlaxoSmithKline UK Limited. The defendants are Apotex Europe Limited, Neolab Limited and Waymade Healthcare Plc. The action is one for infringement of patent. The patent-in-suit is UK Patent 2,297,550, which relates to a pharmaceutical known as paroxetine hydrochloride anhydrate. The dispute between the parties relates to the use which can or cannot be made of the results of certain tests performed on some samples provided by the defendants to the claimants as explained below.

Before the proceedings commenced, the claimants asserted that they had a cause of action against the defendants for infringement of one or more of a number of patents which they owned relating to paroxetine. At an early stage a mechanism was agreed with the defendants by which the claimants could discover which, if any, of their patents were infringed in advance of the commencement of proceedings. The mechanism adopted was that they asked for samples to be provided for them to test, and the defendants gave certain very limited undertakings not to come on to the market without giving three weeks’ advance notice to the claimants of their intention to do so. The precise terms on which the samples were to be handed over was the subject of a considerable amount of correspondence between the parties. Samples were supplied by the defendants on the agreed terms.

The defendants notified the claimants that they were intending to enter the UK market. Certain interlocutory proceedings resulted. The parties are currently awaiting the decision of the Court of Appeal on an appeal brought by the defendants against an order made by Jacob J, in which he granted interlocutory relief against them. The trial of the action is due to take place in June of this year. There is also another action in Chicago in the United States of America, which is due to commence in a few weeks time.

As mentioned above, the dispute between the parties which has to be resolved now relates to what use can be made of the results of certain experiments conducted on the samples provided by the defendants to the claimants. When the samples were handed over it was the belief of the claimants (and may in fact have been the case) that the defendants’ paroxetine-containing product was not on the market. The defendants were prepared to make available to the claimants samples of the active pharmaceutical and certain intermediates, but they wanted the terms upon which those samples were handed over to be controlled by certain confidentiality undertakings which they wanted to bind the claimants and those to whom the samples were disclosed. The correspondence referred to above related to the terms of the confidentiality undertakings eventually agreed upon.

Although it was apparent that the parties were not ad idem as to the how the confidentiality undertakings should be implemented in the long term, at a fairly early stage Simmons & Simmons, who act for the claimants, decided to accept the confidentiality undertakings then being proposed by the defendants in the hope and expectation that if any dispute arose on this issue it could be resolved when it arose. In the meantime, accepting the terms offered would allow the samples to be delivered to their clients. It also would allow them to get on with the most important task which was to discover whether or not any of the patents were infringed. Indeed, the confidentiality undertaking which were agreed include an express provision allowing the parties to go to court to resolve any future dispute which might arise between them as to the modification or release of any of the undertakings. In so doing, Simmons & Simmons adopted an entirely reasonable and sensible approach. It allowed the parties to get on with matters of substance in the hope that, if there were any real problems, they could be sorted out later either by agreement between the parties or by the court. This avoided the need to resolve all possible disputes in advance before further pre-trial progress could be made.

I turn to consider the terms under which the materials were handed over. The defendants wanted a confidentiality club to be created which would strictly limit the number of people who would see the samples they handed over. They also wanted to control the use to which those samples could be put. In substance, the defendants wanted to ensure that they could maintain the samples in confidence through the action and they could recover the samples and any related information which they supplied to the claimants. To this end a draft confidentiality agreement was supplied in October of last year. Both Mr. Waugh QC, who appears for the claimants, and Mr. Birss, who appears for the defendants, have taken me through not just the final version of the confidentiality agreement but also the draft of it. Both of them argue that the draft throws light not just upon the terms as eventually agreed but also on other issues which are relevant to the decision I have to make today.

The agreement is between the defendants, referred to as “the Apotex parties”, the claimants, referred to as “the GSK parties”, and certain named individuals. The latter are named individuals who are members of the confidentiality club. The agreement defines what can be done with material received from the Apotex parties. It starts with a definition of the term “information” as follows:

“‘Information’ means any written or printed material, formulations, samples provided by the Apotex parties to [name], test results (including, but not limited to, results from analyses of samples provided by the Apotex parties to [name]) or other disclosure of any kind whatsoever and in any way related to paroxetine hydrochloride, and the information contained therein, provided by the Apotex parties to [name].”

That Information is then the subject of the restrictions imposed in subsequent paragraphs in the confidentiality agreement. Clause 3 contains certain undertakings to be given by the individual named in the confidentiality club who signs the agreement. Clause 3(a) provides that the member of the confidentiality club concerned:

“agrees and undertakes that the Information provided is confidential and held on trust for the Apotex parties to use in their absolute discretion”.

Clause 3(f) contains an obligation to “return” to Apotex’s solicitors the Information or any part of it when so requested by Apotex. Clause 4 contains certain obligations imposed upon the GSK parties. However the final version of this clause in the agreement differs materially from the draft. Clauses 4(d) and (e) in the draft read as follows:

“(d)

that, subject to obligations of confidentiality, the Apotex parties (or entities related to Apotex Europe Limited) may use in any jurisdiction anything (whether written statements, reports, experimental results, transcripts or otherwise) including anything produced by or on behalf of the GSK parties for the purposes of proceedings to which any of the Apotex parties (or entities related to Apotex Europe Limited) are a named party; and

(e)

not, without the express written consent of the Apotex parties, to use directly or indirectly outside of England or Wales anything (whether written statements, reports, experimental results, transcripts or otherwise) including anything produced by or on behalf of the GSK parties for the purpose of proceedings in England and Wales to which any of the Apotex parties are a named party.”

The provisions of clause 4(d) and (e) were clearly designed to allow the defendants to use the results of any tests carried out without fetter, and in that respect were designed to treat Apotex in a way which was very different to that in which the claimants and the members of the confidentiality club were to be treated. Whereas the claimants’ ability to make material public, or to use it outside the proceedings, was to be carefully restricted, the whole purpose of 4(d) and (e) was to release Apotex from any equivalent obligation in respect of, amongst other things, the results of any experiments or tests carried out on the samples they provided.

The claimants objected to draft clauses 4(d) and (e). They made it clear at the very outset that they were not happy to be put under contractual terms which would oblige them to allow Apotex to do what they liked with the results of any tests carried out on the materials supplied but were they would not have equivalent freedom. That would have produced an unbalanced relationship between the parties, and the claimants were not prepared to accept that. In the result the agreement which was eventually entered into did not include clauses 4(d) and (e).

As far as the final version of the agreement is concerned, Mr Birss argues that it indirectly achieves what draft Clauses 4(d) and (e) were intended to do because the definition of “Information” includes “results from analyses” and the rest of the provisions in the agreement oblige the claimants to keep the Information confidential but that Apotex can use it “in their absolute discretion” (Clause 3(a)). He says that that agreement should not be overridden by the court even under the express provision which allows the court to modify the contractual terms.

It is frequently easy to pick holes with drafting when a dispute has arisen. Without in any way criticizing the skill of the draftsman, it is possible to construe the definition of “Information” in the agreement as if it covers both information coming from Apotex to the claimants and also the results supplied by the claimants back to Apotex as Mr Birss argues. However it is also possible to construe it as only covering material coming from Apotex, as Mr Waugh argues.

When all the clauses are read together, what was intended was to impose fetters upon what could be done with material and data supplied by the defendants to the claimants. The definition of Information is governed by the words “provided by the Apotex parties”. It is possible to construe those words in the bracketed part of the definition as governing the word ‘samples’ rather than ‘results’. This is consistent with Clause 2 which starts with the words “In consideration of the Apotex parties disclosing to [name] the Information …”. Similarly, as noted already, Clause 3(f) refers to the Information being “returned” to the defendants. Clause 4(b) also obliges the claimants not to disclose or use “the Information acquired from the Apotex parties …”. Construed as a whole, the agreement does not release the defendants to make use of the test results. Were it otherwise it is difficult to see why draft clauses 4(d) and (e) were thought necessary in the first place. The defendants did not suggest during the course of negotiations that the removal of those clauses was removal of mere surplusage.

In the course of the correspondence during which the terms of the confidentiality agreement were being negotiated, the parties also made reference to CPR 31.22. The position adopted by the claimants throughout was that CPR 31.22 should apply and it appears that they assumed until very late in the day that the defendants adopted the same attitude. However, on 7 October of last year it became apparent that notwithstanding the amendment to remove draft Clauses d(d) and (e), the defendants took the view that they, and they alone, were entitled to use the results of the tests carried out on behalf of the claimants for the purpose of these proceedings in any way they, the defendants, liked. In particular, they could use them, for example, in the American proceedings which are about to come on for trial.

Mr. Birss summarises his clients’ position as follows. If the results of the tests carried out on his clients’ samples had proved unhelpful to his clients, whether here or in proceedings anywhere else in the world or for any other reason, they could restrain the claimants from making any use of either the samples themselves or the results outside these proceedings. On the other hand, his clients are free to use those results where they like. In effect this would reinstate what was to be found in deleted Clauses 4(d) and (e) of the draft confidentiality undertaking. As he puts it, if the results had been unhelpful his clients would have wanted them to be restricted to these proceedings, but if they are helpful to his clients he wants to be able to shout that fact from the rooftops. Unsurprisingly, Mr. Waugh argues that this is somewhat unbalanced. He says that the defendants should not be allowed to use the results in this way.

It seems to me that whether or not the defendants are allowed to use results in this way depends on two things; the effect of the confidentiality agreement and the provisions of CPR 31.22. I can deal with the provisions of the confidentiality agreement quite shortly. These imposes certain restraints upon the claimants and people who have come within the confidentiality club in respect of material obtained from the defendants. It does not impose any relevant restraints on the defendants. On the other hand, absent what was in draft Clauses 4(d) and 4(e), it does not give them any rights to use the results of the tests carried out by the claimants for the purpose of these proceedings.

Mr. Waugh’s application before me today is to modify the terms of the confidentiality agreement so as to impose a contractual restraint on the defendants against making use of the test results elsewhere. As I say, at the moment on the form of agreement as it is at present, the restraints are all on the claimants and members of the confidentiality club but the defendants obtain no rights under it to disclose the test results. Had I not thought that the situation was adequately provided for by CPR 31, I would have acceded to Mr Waugh’s application.

CPR 31.22 provides:

“(1)

A party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where (a) the document has been read to or by the court, or referred to, at a hearing which has been held in public; (b) the court gives permission; or (c) the party who disclosed the document and the person to whom the document belongs agree.”

No doubt the results which are at issue before me have been recorded, and it is those which have been handed over by the claimants to the defendants. The tests were carried out and the results were collected once these proceedings had commenced. CPR 31.22 applies. As I said earlier in this judgment, at an early stage the parties addressed the application of CPR 31.22, and certainly it appears from the correspondence that both parties were anxious that CPR 31.22 should apply. For example, in a letter of 18 September the defendants’ solicitors wrote a letter to the claimants’ solicitors which contained the following:

“Our clients will also require your clients to confirm that they will treat the material as if CPR 31.22 applies”.

On 23 September they wrote another letter which contained the following:

“Our clients wish to be constructive and have offered to provide samples of their bulk active and tablet material for the limited purpose of tests to resolve the issues on European patent (UK) 0 223 403 and UK patent GB 2,297,550 raised in your letters of 29 August. CPR 31.22 would apply if proceedings had been commenced. A confidentiality club would not change that. Our clients expect the same comfort when providing their samples prior to any proceedings.”

Those letters do not expressly say that the protection of CPR 31.22 applies to both sides in a balanced way, but the claimants’ solicitors assumed, reasonably in my view, that it did or that that was the intention. On a careful reading of the correspondence it can be seen that the defendants’ solicitors never expressly accepted or confirmed that 31.22 would apply to them as much as it applied to the claimants. That is a matter which came to a head, as I have said, in early October of last year.

My initial reaction to the current dispute was to say that, the tests having been conducted by an independent scientist, a Dr. Baldwin from the Department of Physics and Astronomy at the University of Leeds, it is in the public interest that the results should be made available if they throw light on the question of whether or not the defendants’ products infringe either the anhydrate patent (which is currently in issue in the UK) or any other patent relating to the same active ingredient, including what is called the claimants’ hemihydrate patent.

Mr. Waugh has persuaded me that this is not a correct way of looking at the matter. As he points out, his clients have had to carry out certain tests on this material at some speed. They are very concerned that if the results are released from the protection afforded by the provisios of CPR 31.22 they will be dropped into the American proceedings at the very last moment. It will then be necessary for his clients to start explaining in those proceedings how the results were obtained. They will have to explain how they do not relate to the issues which are uppermost in the mind of the American courts. This may oblige them to disclose additional material which had been produced in preparation for the English proceedings. He says that if the American courts want additional material they can always order the parties to provide it under their own procedures. He argues that it would be wrong to allow CPR 31.22 to be operated in a way which binds only his clients and not Mr. Birss’s clients, as Mr. Birss wants, and to allow Mr. Birss to make use of the results in a way which could be unhelpful to the claimants and in a way which was not within the contemplation of the claimants when they were conducting the experiments in the first place.

As I say, I am persuaded by Mr. Waugh’s arguments. It seems to me that the results were generated solely for the purpose of these proceedings in an environment where it was reasonable to expect both parties to be equally restrained in the extent to which they could make use of material outside these proceedings. The express attempt by the defendants to install a very different regime which would leave them unfettered but the claimants fettered was rejected, and the parties agreed to a form of confidentiality undertaking without those provisions in. It is open to me to release this material for use elsewhere or, as Mr. Birss accepts, expressly to restrain its use outside the confines of these proceedings.

I am not convinced that it is necessary to redraft the confidentiality undertakings which have already been entered into by a fair number of members of the confidentiality club. It seems to me it is sufficient if I say that it is appropriate in this case that the results obtained by the claimants from their tests of the samples provided to them by the defendants are to be treated as coming under the provisions of CPR 31.22 and that they shall not be disclosed or used outside these proceedings save by agreement of the parties or order of the court. I make it clear that I am not giving such permission on this application. Indeed, as Mr. Birss has said to me, he is not asking for permission. His position has always been that no permission was needed because the confidentiality agreement gave his clients the right to use the results as they like.

In substance, therefore, Mr. Waugh has succeeded on this application although, as I have said, whether that means that a new form of confidentiality agreement has to be entered into I much doubt.