Baxter Healthcare SA & Ors v Bayer Corp & Ors

This is an application by the defendants who are patentees and to whom I shall refer as "Bayer" to stay the claimants' (collectively “Baxter’s”) proceedings for a declaration of non-infringement and to revoke European patent UK number 0764 447. The subject matter of the patent is intravenously injectable immunoglobulin, conveniently abbreviated to "IVIG".

The patent claims a priority date of the 22nd September 1995. The application was filed on 10th September 1996 and the patent granted on 2nd January 2004.

On 1st October 2004 Baxter entered opposition to the grant in the EPO, which was rejected by the Opposition Board on 14th March 2006. The Opposition Board has not given its reasons and the decision is to be appealed. The appeal may, in accordance with EPO practice, be expedited but the date of its final resolution is uncertain. Mr. Thorley QC, who appeared on behalf of Bayer, put it at late 2007 to early 2008, with a degree of confidence which was not shared by Mr. Floyd QC, for Baxter, who said it could be considerably later.

Shortly after the decision of the Opposition Board, Baxter began proceedings against Bayer in Belgium in the first instance court at Mons seeking a declaration of non-infringement. Validity is not presently in issue in those proceedings. Baxter's IVIG, which is called KIOVIG, is manufactured at a factory near Mons.

On the same day, an acknowledgment of non-infringement was sought on Baxter's behalf in respect of the UK designation of the patent, and a few days later these proceedings were commenced. A defence and counterclaim alleging infringement has been served.

The parties' respective commercial positions are as follows - first Bayer. Bayer does not sell IVIG generally here but has a handful of named patient prescriptions. Baxter has recently obtained an EMEA authorisation for the whole of the EU. Its sales in the IVIG sector in the United Kingdom were have been, on average, about £1 million per annum. These sales have hitherto been of a lyophilised, that is to say powder, formulation requiring reconstitution; but KIOVIG is an injectable liquid and Baxter expects its sales to increase next year to £1.83 million or so. In the pharmaceutical field, nobody could describe these sales as being very large.

Bayer wish to stay the non-infringement and invalidity proceedings in this jurisdiction to await (1) the Belgian decision on infringement and (2) the EPO determination of the opposition. Their reasons are primarily financial. There is no doubt that the opposition is cheap, costing about €25,000 to €50,000. The Belgian infringement proceedings are, at €250,000 to €500,000 -- the estimates advanced by the parties vary -- rather more expensive. One may be confident that the United Kingdom's costs will be higher than this, perhaps ranging from £500,000, that is €700,000, to £1 million or
€1.4 million.

A potential trial date for these proceedings has been obtained for March 2007. Bayer, as patentees, say they should not be subjected to the expenditure on these proceedings, which will be resolved first, if that expenditure may be wasted if subsequently either the EPO decides the patent is invalid or the Belgian court decides there is no infringement.

Recognising that a finding of non-infringement in Belgium in respect of the process carried on at the Belgian factory would not be binding on anybody in this country, they offer an undertaking to accept a finding of non-infringement by the Belgian court. That undertaking is in these terms and is to be found in paragraph 16 of the first witness statement of Rowan Charles Bayfield Freeland, who is the solicitor acting on Bayer's behalf:

"If, however, the Belgium court decided that the European Patent (Belgium) was not infringed (either because the KIOVIG manufacturing process falls outside the scope of the relevant claims, or because the European Patent (Belgium) is invalid), then, in return for a stay of the present action, the Defendants would agree to be bound by that decision in respect also of the Patent in the UK."

Bayer goes further. If successful in Belgium, they will seek from the Belgian court only a reasonable royalty in respect of material exported to the United Kingdom in respect of the United Kingdom sales emanating from the Belgian factory fixed by reference to the difference in transfer price and selling price in the United Kingdom and will not seek delivery up or an injunction in respect of such trade. In paragraph 12 of Mr. Thorley's skeleton argument, he says this:

"As a condition of the granting of a stay therefore Bayer is prepared (a) to be bound by any adverse decision in the Belgium proceedings on infringement (b) to abandon any claim for an injunction or for delivery up (c) to limit any claim in respect of damages or an account to a claim for damages to be assessed on a reasonable royalty basis."

This offer was made on the footing that production takes place in Belgium. But it is clear from Miss Macdonald's first witness statement on behalf of Baxter that if Baxter are successful in the United Kingdom action, they would contemplate moving at least the relevant part of the process for IVIG production from Belgium to this jurisdiction, even though they have thus far sought no acknowledgment of non-infringement in respect of local manufacture. The scope of the various undertakings offered by Bayer on the other hand is limited to production in Belgium for the United Kingdom market.

With that introduction to the basic facts of the case, I can turn to the law. There is now a number of cases on the stay of patent proceedings in the face of opposition proceedings in respect of the patent in suit pending in the European Patent Office. The majority of such cases have concerned only revocation proceedings, though some have not. Among the earliest cases, two, Beloit Technologies Inc. and Another v. Valmet Paper Machinery Inc. and Another [1997] RPC 489 and Kimberly-ClarkWorldwide Inc. v. Procter & Gamble Limited and Another [2000] FSR 235, are concerned with the effect upon the patentee of, among other things, different régimes for amendment of the patent in this jurisdiction and in the European Patent Office during the course of opposition proceedings. In Beloit, Aldous LJ identified a potential for conflict even though the jurisdictions are concurrent and the right of the national court to revoke even if an opposition has failed is familiar. See Buhler v. Chronos Richardson [1998] RPC 609 and the review of cases set out in that case.

It is instructive to enquire what the conflict identified by Aldous LJ is. In my judgment, it is normally in cases where there is no potential for conflict that the exercise of the power to stay needs to be considered. Such cases are concerned with the potential waste of money involved in reaching the same conclusions in two jurisdictions, not the possibility that different conclusions will be reached in two different jurisdictions.

I leave on one side for the moment the theoretical possibility of a patent being upheld here, yet an opposition succeeding. Such cases are very rare. In Kimberly-Clark Aldous LJ said this: 

"It is not sensible for a court in this country to allow proceedings to be heard in this country which duplicate those in the EPO unless justice requires that to happen. At the time that the 1977 Act was enacted, it was envisaged that proceedings before the EPO would be concluded with reasonable expedition. The consequence would be that any overlap between EPO proceedings and national actions could be prevented by staying the proceedings in this country for a short period. In some cases the Patents Court has refused to stay proceedings in this country, despite the obvious desirability of taking that action, because of the injustice that a stay would cause. In the present case it is hoped that the EPO appeal decision would be available by 2001. These proceedings are due to be heard in May 2000. The judge did not consider whether a stay was appropriate as he decided the issue before him as a matter of principle as that was the way the matter was put before him."

I would respectfully suggest that the duplication involved is normally unnecessary only when the EPO allows the opposition. If the EPO maintains the patent, there is no relevant duplication since the revocation proceedings must go ahead unless the opponent accepts the EPO's view and abandons his application to revoke here.

In General Hospital Corporation's European Patent UK [2000] FSR 633, Neuberger J appears to have regarded the exercise of the discretion to stay as a general one on all the available material. He does not identify any particular starting point. This decision was prior to that of the Court of Appeal in Kimberly-Clark, and since then the authorities have developed, to a certain extent at least, in the way summarised by Mann J on the basis of Kimberly-Clark and Beloit in IvaxPharmaceuticals (UK) v. AstraZeneca AB [2004] EWHC 1264 (Ch) where, at paragraph 4, he said:

"What I take from these decisions is that there is an emphasis or presumption in favour of a stay but not where to do so would cause injustice."

In General Electric Company v. Ennercon GmbH and Others [2003] EWHC 1248 (Ch), Laddie J appears to have been concerned principally by two factors, the expense of the proceedings here and the comparative slowness of the proceedings in the European Patent Office. The delay caused by the stay in that case would seriously undermine the value of the claimant's rights if the patent was both valid and infringed. This is another case where the possibility of interlocutory relief was not considered.

In 3Mv. Rennicks [2000] FSR 727, Laddie J was concerned principally by delay and opposition proceedings and proposed a solution to the problem caused by the possibility that the EPO might refuse to maintain a patent which survived revocation in this country in the form of relief in interlocutory form at trial, as in 3Mv. Johnson & Johnson [1976] RPC 671. This possibility, which I have indicated I consider remote, is not one which should, in my judgment, influence a decision to stay. Laddie J proposes a simple and cost-effective solution to an problem unlikely to arise at all often.

In Hunt Technology v. Don and Low Limited [2005] EWHC 376 (Ch), Laddie J endorsed Mann J's formulation of the starting position in assessing the desirability of a stay. Laddie J describes the problem of inconsistency between this jurisdiction and the European Patent Office as trivial, a view with which I entirely agree.

In Rambusv. Hyundai (Unreported, 19th December 2000), Laddie J emphasized that all relevant factors should be taken into account and followed Aldous LJ in Kimberly-Clark.

Finally, I should mention AffymetrixIncorporated v. Multilyte Limited [2004] EWHC 291 (Pat), [2005] FSR 1, a decision of Patten J, the learned judge in that case refers to the doubtful employment of the jurisdiction to stay infringement proceedings to await the outcome of proceedings not in the European Patent Office but in Germany. This case is relevant only in so far as the Belgian proceedings are concerned. I share Patten J's doubts about using general case management powers for the purpose of staying proceedings to await the outcome of other parallel proceedings having no direct legal impact in this country.

I shall approach this application by trying to eliminate irrelevant considerations and seeing where the balance of justice lies when what remains is assessed. I think that the question of starting point reflected in the passage which I have quoted from Mann J's judgment in
Ivaxv. AstraZeneca is more difficult. I prefer to ask the question in the form which it has been asked in a number of cases by Laddie J, whether, on balance, a stay is in the interests of justice. I suspect that, as a matter of reality, there is little or no difference between the two tests.

I consider that the Belgian proceedings are substantially irrelevant, or at most relevant only to a very limited extent, to the question which I have to decide. If those proceedings had determined Baxter's ability to manufacture in Europe, it might have been otherwise; but Baxter say that they can move the relevant process to this jurisdiction. The Belgian proceedings determine whether Baxter need to move, but Baxter wish to know by then if the process may be moved to this jurisdiction. If anything, they point to the desirability of an early determination here.

I turn to the opposition. Baxter have lost at first instance. The patent has been maintained unamended. Baxter must appeal to the Technical Board of Appeals. The result will not be known until at the earliest, as I have indicated, the turn of 2007, given a fair wind. If there is a stay in the meantime and Baxter lose, the action will proceed. All that will have been wasted are Baxter’s costs in the EPO. If the action is not stayed in the meantime and Baxter win in the EPO, the costs of the action, both infringement and validity, will have been wasted. But Baxter will at least have been told at an earlier date, regardless of the outcome in the EPO, whether or not they are free to manufacture in the United Kingdom.

It turns out, as one would have expected, that the ultimate balance is between an earlier certainty in March or April 2007 against a potential waste of a substantial sum of costs in respect of a comparatively modest trade. The patentee Bayer, who seeks to stay the proceedings, is no doubt apprehensive to some extent of what may happen in the Technical Board of Appeals.

There is no doubt about the ultimate form of the patent because of the EPO proceedings. There is no risk of a relevant inconsistency that cannot be allowed for in the relief granted at trial. The issue is essentially one of costs. Where both sides are able to pay, I do not believe that a mere question of the waste of costs can justify a stay unless the potential waste is so disproportionate to the interest to be protected that the refusal of a stay amounts to an injustice. I am not satisfied that the potential waste of costs is disproportionate to the desirability of certainty for Baxter in the face of an opposition which has failed and which may fail again on appeal.

It will be observed that I have said nothing about the undertakings offered by Bayer. I have not taken them into account because however appropriate to a small trade in the United Kingdom for material exported from Belgium, the position is quite different if Baxter contemplate moving the entire production in respect of Europe to the United Kingdom. Indeed, it might be positively unfair to Bayer to try and force them into the straitjacket of those undertakings in a different factual circumstance.

Accordingly, I do not think those undertakings help me in the inevitably difficult question which I have to decide in this case.

The matters which I have set out above are incommensurable. How one should trade the desire for confidence or certainty on the one hand against a potential waste of costs on the other is far from clear to me. None the less, I have formed the view that this is not a case in which it is appropriate to stay properly constituted proceedings in this jurisdiction; and so I decline to do so. I dismiss the application for a stay.