Glaxosmithkline Biologicals SA v Sanofi Pasteur SA

The defendant, Sanofi, is the proprietor of patent EP UK 0 983 087 entitled “Multivalent Vaccine Composition with Mixed Carrier”. In this action the claimant, GSK, applies to revoke the patent on the grounds that it lacks novelty, is obvious and the specification does not disclose the invention clearly enough and completely enough for it to be performed by a person skilled in the art.

I have before me today an application by Sanofi to stay the action pending the final determination by the European Patent Office (EPO) and its Boards of Appeal in opposition proceedings concerning the validity of the patent.

Sanofi is a French company devoted to the development and manufacture of human vaccines. It forms part of the Sanofi Aventis group of companies.

The patent was granted on 20^th October 2004 and is currently in force in 17 EPC Member States, including the UK. The subject matter of the patent concerns Streptococcus pneumoniae (also known as Pneumococcus) vaccines. Pneumococcus is a bacterium that can cause a range of diseases in humans including pneumonia, meningitis and septicaemia. Dealing with this bacterium is a significant issue. Pneumonia is the most common infectious disease responsible for child death in the third world, accounting for over one million deaths annually. Even in the UK, 50 child deaths per year are caused by the disease. Antibiotics are used to treat it but even the child survives complications can occur, including meningitis and septicaemia. A mild form of the disease causes an ear infection known as acute otitis medea which most children in the West develop at some stage in their first five years. Although not usually serious, this infection can cause hearing loss.

GSK is a Belgian company and is part of the GlaxoSmithKline group of companies. It is also committed to the development and manufacture of human vaccines. In 1997 it recognised the need for a more effective worldwide vaccine against pneumococcus and so began a development programme. Since then it has tested various formulations targeted against different serotypes of the disease. Its current formulation entered phase III clinical trials in October 2005 and targets 10 serotypes. In May 2006 GSK received the first interim results from those trials and they suggest that the formulation is effective and suitable for launch. Indeed, GSK says that the clinical data available thus far suggest that the formulation is at least as effective as a very successful product currently available called Prevnar. Prevnar protects against seven serotypes. Accordingly, it seems that the GSK formulation has the advantage of providing protection against three further serotypes and preventing additional cases of otitis medea.

GSK says that vaccine development costs are typically in the region of £300 million or more and that its formulation is proving no exception. Forty per cent of its budgeted development costs have yet to be spent. This, it says, is one of the reasons why it is keen to clarify the present situation before launching its product. [Redacted sentence.] It says that this would be expected to result in European approval in 2008 and that marketing would follow as soon as possible thereafter. [Redacted sentence.] There seems to be no dispute that the market for pneumococcal vaccines in the UK is substantial and is expected to be in the region of £60 million per annum by 2010. GSK hopes to secure a significant share of that market.

GSK says that shortly before the grant of the Sanofi patent in October 2004 it became aware that there might be patent issues which needed to be resolved before it launched a vaccine on to the market. However, at that time the development of the vaccine formulation was thought to be so uncertain that invalidation proceedings were not justified. Nevertheless, in July 2005, at the last possible moment, it did file an EPO opposition to preserve the opportunity of opposing the patent on a pan-European basis. GSK says that upon the commencement of phase III clinical trials in October 2005 it became apparent that it might need to revoke the patent on a national basis to avoid the long delays inherent in the EPO opposition procedure. These proceedings were duly issued on 22^nd May 2006 soon after the favourable interim phase III results were obtained.

GSK has in fact issued revocation proceedings in two jurisdictions, the UK and Belgium. It says that the UK was chosen because it is one of the biggest markets in Europe. Further, in order to achieve commercial certainty, GSK is keen to get a decision on the validity of the patent from a respected European jurisdiction as soon as possible. Belgium was chosen because it is GSK’s home and the country in which its manufacturing facility is based. Like the UK, Belgian courts will not automatically stay proceedings pending the final decision of the EPO and its Boards of Appeal.

There is no dispute between the parties as to the relevant legal principles which I must apply. In Beloit Technologies Inc. v. Valmet Paper Machinery Inc [1997] RPC 489 Aldous LJ said at p.503:

“The fact that there may be proceedings both in the national courts and before the EPO is inevitable as patent rights, both under the Convention and under the Act, are national rights to be enforced by the national courts with revocation and amendment being possible in both the national courts and in certain circumstances before the EPO. That overlap can mean that there are parallel proceedings in this country and the EPO with the potential for conflict. It is desirable for that to be avoided. Therefore the Patents Court will stay the English proceedings pending a final resolution of the European proceedings, if they can be resolved quickly and a stay will not inflict injustice on a party or be against the public interest. Unfortunately that is not always possible as resolution of opposition proceedings in the EPO takes from about 4-8 years.”

Similarly, in Kimberly-Clark Inc. v. Procter & Gamble [2000] FSR 235 Aldous LJ said at p.245:

“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.”

These authorities were reviewed by Mann J in Ivax Pharmaceuticals (UK) Ltd. v. AstraZeneca AB [2004] EWHC 1264 where he concluded at paragraph 4:

“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.”

Laddie J made similar observations in Hunt Technology Limited v. Don & Low Ltd. [2005] EWHC 376 at paragraph 7:

“I have no doubt that Mann J was right. There is a presumption in favour of a stay. However, that does not mean, as at times appear to be suggested on this application, that this is a difficult presumption for a party resisting a stay to overcome. Absent any other consideration, there are obvious advantages in only having one set of proceedings rather than allowing two to be pursued simultaneously. The proceedings in the EPO may result in the patent being held invalid, in which case the English proceedings would become redundant. Therefore, absent any other consideration, a stay is the appropriate course to adopt. But when there are other considerations, it is for the court to weigh up the pros and cons and see where the justice of the situation lies.”

I must now consider the application of these principles in the present case and determine where the interests of justice lie. In my judgment the following factors are relevant. First, clearly a factor in favour of a stay is that it would avoid duplication of proceedings. In the event that the opposition proceedings before the EPO succeed, the patent will be revoked in respect of all territories. A stay of the English proceedings will avoid costs being incurred unnecessarily. However, in assessing the weight to be attached to this factor I think it is fair to note, on the basis of the limited materials before me, the case does not appear to be unduly complicated from a technical perspective, although it is certainly one which concerns extremely valuable subject matter.

Second, a further factor in favour of a stay is that the patent may be allowed by the EPO in an amended form which gives rise to the risk that these proceedings may turn out to have proceeded on a wrong basis because the claims which this court considers are different to those which are ultimately allowed by the EPO. Moreover, patentees are undoubtedly afforded greater flexibility in formulating and proffering amendments in the EPO than they are in this jurisdiction. In assessing the weight to be attached to this factor, it is, however, relevant that Sanofi has already formulated three auxiliary requests in the EPO opposition proceedings and there is no reason why Sanofi cannot advance similar amendments in the context of the UK proceedings.

Third, I must consider the likely period of a stay. Here the parties have provided conflicting estimates. Miss Chiappinelli has given evidence on behalf of GSK. She is a patent counsel and qualified European patent attorney and has worked within the Intellectual Property Department at GSK for almost eight years. She acts for GSK in providing intellectual property support for GSK’s vaccines business and has done so since January 2005. Her role involves drafting and prosecuting patents, conducting litigation and oppositions, providing IP input to licence negotiations and advising internal clients on IP issues. She is currently involved in seven ongoing EPO oppositions. She has significant experience of dealing with oppositions and has also consulted with her colleagues in the GSK Patent Department to confirm that her estimates are accurate.

In her experience the soonest that any opposition against a patent involving the kind of technology in issue will be heard in the EPO is two years from filing and will more likely take around three years or more. There is then, she says, an indeterminate period of time, which is normally a few months but may take up to a year and a half, in which a written decision from the EPO has to be awaited. Following the issuance of that written decision there is a four-month period before the appeal can be commenced. Then follows the appeal period of similar length to the opposition period, that is to say, a minimum of two years and more likely three. Accordingly, she says, for an opposition period which ended in July 2005 the earliest she would expect a final decision from the EPO, if all of the above periods are the shortest that, in her experience, they could be, is mid-2010. That is a best case scenario and, in reality, she would not expect a decision until at least the second half of 2011.

Mr. Duckworth has given evidence on this issue on behalf of Sanofi. He is a partner of the firm of JA Kemp & Co. and is qualified as a European patent attorney. Since 1993 he has been engaged in day-to-day in practice before the EPO specialising in chemical and biotechnology subject matter. He has considerable experience of opposition and appeal practice in the EPO having been involved in more than 20 EPO oppositions or appeals. That experience has included representation of both opponents and proprietors throughout the opposition and appeal procedures up to and including appearances at oral proceedings. In addition, he has had the benefit of many discussions with other members of his firm about their experiences of EPO oppositions and appeal procedure.

He considers that the estimates given by Miss Chiappinelli are unduly pessimistic and would expect a final decision from the EPO Board of Appeal three to four years from now, that is to say, by 2009 or 2010. In this regard he draws particular attention to the fact that there is a procedure for expediting appeals and, moreover, it is emphasised on behalf of Sanofi generally that this is an opposition in which there is only one opponent.

It is very difficult for me to resolve the differences between these two experienced practitioners. What I think it is fair to say is that the opposition proceedings are still in their relative infancy and that although there is a genuine possibility that they will be resolved by 2009 or 2010 there is, nevertheless, a real and substantial risk that they will not be resolved for a further five years. Moreover, if the opposition fails, then GSK will, at that stage, be faced with the possibility of pursuing national revocation proceedings which may well take a further two years to come to a final conclusion. On the other hand, if I allow these proceedings to continue, then there is a real prospect that GSK will have a final reasoned decision on the validity of the patent from the UK courts by the end of 2008.

Fourth, I must consider the impact of this timetable on GSK’s commercial position. As I have already mentioned, and Miss Chiappinelli confirms in her evidence, GSK is currently in phase III clinical trials and the data thus far are very positive. The trials are due to continue for a further two years. [Redacted sentence.] In paragraph 26 of her witness statement she explains that GSK seeks a timetable which will allow the trial in the UK proceedings to be heard and judgment delivered before the planned date for the application for marketing authorisation. This will enable a decision to be made as to whether to proceed with the authorisation process, the costs of which are not insignificant, on the basis of a first instance decision. In addition, she says the filing of a marketing authorisation on any significant product by a company such as GSK is a step which is share price sensitive and one that GSK would not want to take in the absence of commercial certainty. [Redacted sentence.]

The market in the UK is very substantial and, as I have indicated, it is estimated to be in the region of £60 million per annum by 2010. It is apparent from this summary that if GSK does indeed begin to market its vaccine in 2008, then it will run a very real risk of incurring a substantial financial liability by 2011 and, of course, a still greater liability by 2013. Miss Chiappinelli explains that this would cause considerable financial and commercial uncertainty to GSK in its business. She says that such uncertainty is highly undesirable and is why GSK has now sought to clarify the issue of the Sanofi patent before marketing authorisation is applied for, marketing plans are drawn up and negotiations with customers and, in particular, the Department of Health entered into. She recognises that the main uncertainty for GSK is a financial one. Hanging over GSK throughout the launch of the new vaccine and at least its first three years on the market is the prospect of having to pay damages. The alternative, that is to say a trial next year (and an appeal thereafter) would not result in damages being payable to Sanofi because GSK would not launch the vaccine in the UK absent a licence on reasonable terms if a final decision upholding the validity of the patent was handed down.

Sanofi make substantial points in answer to this evidence. First, Sanofi says that GSK is overly optimistic about the time it will take to get marketing authorisation for its product. Mr. Parrish has given evidence on its behalf in this regard. He is the Corporate Vice President of Intellectual Property at Sanofi and has been involved in the pharmaceutical industry since the early 1980s and has worked for Sanofi since February 1996. In summary he says that it is difficult to see how marketing authorisation could be applied for prior to the completion of the phase III trials in mid-2008. Further, before an application for approval could be made GSK would need to analyse and organise the data from those trials and that could take several months to a year. The process of acquiring marketing authorisation for vaccines is lengthy and on average takes between 15 and 16 months, and after approval is granted it generally takes several further months before product launch. He says that each of these factors means that the likely time for the launch of GSK’s product is considerably later than Miss Chiappinelli suggests and a more realistic estimate is a date in 2009 or 2010.

Once again, it is very difficult for me to resolve the difference between the parties on the basis of the witness statements alone. However, I think it is right to attach considerable weight to the views expressed by Miss Chiappinelli. After all, GSK is in the best position to assess the development programme for its own product. I believe I must work on the assumption that there is a very real possibility that GSK will be ready to launch its product in the UK in 2008.

The second substantial point is that Sanofi has offered undertakings which, it says, will remove any prejudice to GSK. A number of these are set out in paragraph 17 of a witness statement made on Sanofi’s behalf by Mr. Rich, who is the solicitor who has the conduct of these proceedings. They are:

“I. Not to sue the Claimant during the period of the stay of the UK action for any act of infringement of the Patent in the UK.

II.

Not to seek any financial relief other than damages on infringing items in respect of any acts of infringement of the Patent committed by the Claimant in the UK.

III.

Not to seek any injunctive relief in the UK or delivery up in the UK against the Claimant in respect of any act of infringement of the Patent in the UK.

IV.

Not to sue or threaten to sue the Claimant’s customers in respect of any acts of infringement of the Patent in the UK in relation to goods acquired from the Claimant in the UK during the period of the stay of the UK action.

V.

Not to seek any financial relief other than damages on infringing items against the Claimant’s customers in respect of any acts of infringement of the Patent in relation to goods acquired from the Claimant in the UK.

VI.

Not to seek injunctive relief in the UK or delivery up in the UK against the Claimant’s customers in respect of any acts of infringement of the Patent in relation to goods acquired from the Claimant in the UK.

VII.

To prosecute the EPO proceedings diligently.”

In addition, Mr. Parrish has offered a further undertaking that Sanofi is prepared only to seek damages assessed on a reasonable royalty basis. Finally, on the eve of the hearing, Mr. Parrish has offered a yet further undertaking, not to seek any royalty rate exceeding 10 per cent of arm’s length sales in the UK.

Clearly these undertakings are very significant. They remove any risk of an injunction or damages claimed on a loss of profits basis. Sanofi says that effectively it is offering a licence on reasonable terms and points to the evidence of Miss Chiappinelli (to which I have referred) that GSK would be prepared to launch a vaccine in the UK under the terms of a licence granted on reasonable terms if a final decision upholding the validity of the patent were to be handed down.

Moreover, Mr. Parrish says that assuming Miss Chiappinelli’s predictions are accurate it will, nevertheless, inevitably take time for GSK to take market share away from the established vaccine Prevnar, which was launched by Wyeth in 2000. He says that assuming GSK makes two years of sales, on a most favourable estimate it would only achieve a 25 per cent market share in the first year and a 50 per cent market share in the second year. If damages are assessed on the basis that they are limited to a maximum of 10 per cent then he calculates that the maximum damages payable could only be some £4.5 million. Sanofi says that the GSK business is of such a size that it cannot be said that damages at such a level – capped, as they would be, at 10 per cent – could impact upon its commercial plans.

GSK disputes the figures advanced by Mr. Parrish and says that the problem with Prevnar is that it only tackles certain serotypes, and American serotypes at that. It believes that its own product is a substantially better one and is therefore likely to achieve sales at a higher level than Mr. Parrish suggests possible.

However, even on Sanofi’s figures, it is evident that a stay of these proceedings would leave GSK in a position of uncertainty. It could only proceed on the basis that it was incurring a real risk of running up a substantial liability in damages in respect of its proposed activities in the UK. Further, it disputes that the undertaking offered amounts to anything like a licence on reasonable terms.

Fifth, it is nevertheless important to recognise that the impact on GSK’s commercial position must not be overstated. As Sanofi fairly points out, GSK has clearly spent very substantial sums developing its vaccine and in undertaking clinical trials with the issue of the patent unresolved. Moreover, Miss Chiappinelli has not identified how a stay of the UK action pending the final resolution of the EPO opposition proceedings would result in any alteration of GSK’s plans. Sanofi again fairly points out that, given GSK has spent some £160 million irrespective of the existence of the patent, this lack of evidence from Miss Chiappinelli is understandable.

It is also right to acknowledge that in the event that the UK action is allowed to proceed it cannot, of itself, achieve certainty of the patent position because even if the UK designation of the patent is revoked, the patent will remain in force in other major European markets and in the country of manufacture.

Sixth, I think it is legitimate to take into account an additional potential benefit to GSK in bringing these proceedings in the UK. This is a matter to which Laddie J referred in Unilever v. Frisa [2000] FSR 708 where he said at 713:

“Furthermore, there is an advantage of proceedings being conducted here in accordance with the fairly tight timetables which are now imposed, namely that judgments obtained from this court, or obtained from this court and then from the Court of Appeal on issues of infringement and validity have in the past, at least on occasions, helped to inform the parties so as to enable them to resolve their disputes of a worldwide basis earlier rather than later.”

Seventh, I must have regard to proportionality. It is certainly true that patent proceedings in this country are frequently very expensive. However, I think that GSK submits with some justification that even if damages are restricted in the light of the undertakings offered by Sanofi, the sums at stake are still significant and, even if they do not dwarf the potential costs of a trial and appeal, nevertheless do justify the bringing of proceedings. Further, both sides are clearly in a position to pay any costs liability which may arise.

Eighth, I must have consideration to the suggestion that GSK has proceeded with a lack of urgency. Sanofi says that GSK knew of the potential patent problem in 2004. Had it commenced proceedings at that time, it would have been well on the way to a final conclusion by now, if indeed such a final conclusion had not already been achieved. Clearly this is a matter which I must take into account. However, I think its significance is diminished by the evidence of Miss Chiappinelli to which I have already referred. She has explained in paragraph 23 of her witness statement that it became apparent to GSK in October 2005 that if the trials gave favourable results it might need to revoke the patent on a national basis. Following the necessary consultation with senior management, solicitors were instructed in February 2006 to investigate the possibility of an action for revocation and proceedings were issued soon after the favourable interim phase III results were obtained. Those results, she explains, if confirmed, justify the launch of a commercial product. Moreover, and in any event, it is not suggested that any delay which has occurred hitherto will prevent the resolution of these UK proceedings by the time the product is ready for launch.

I have to say that I have not found this an easy matter to decide. It seems to me that the factors for and against a stay are finely balanced, particularly in the light of the undertakings offered by Sanofi. However, taking into account all the arguments which have been advanced before me and the evidence, I have come to the conclusion that this is not a case where a stay is appropriate. In reaching this conclusion I have found it particularly telling that the opposition proceedings are still at a relatively early stage and will take a considerable time to resolve, that both parties are substantial companies with significant vaccine development programmes and business interests and that this action concerns a major new vaccine product with the potential to secure a significant share of a very large market. Allowing this action to proceed will assist in removing the uncertainty attaching to the launch of the product in the UK and may also serve to inform the parties so as to enable them more readily to resolve this dispute.

In all these circumstances I do not think justice would be served by denying GSK the opportunity to pursue these proceedings to a conclusion as soon as reasonably possible.

My Lord, the outstanding matter that is in dispute is the trial date. It is very simple, my Lord. I deal with it in my skeleton my Lord at paragraph 10 on page 3. We are looking for a direction saying not before 1^st March and my learned friend is looking for a direction not before June which, we gather, means July next year. My Lord has heard so much already about the nature of this case that, to be blunt with my Lord, I am really not sure I can elaborate. It is a simple case. We can see no justification ----

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So my Lord, it potentially causes us prejudice because as Mr. Rich points out, they have had a four-month head start in their preparation, from the time they were instructed. Essentially, less than this will actually come down to a speedy trial. We understand that there are in fact no dates at the moment in the first quarter of 2007. Whether it is coming down from March or June, my Lord, in the circumstances June would be fair because it would cause no prejudice to GSK but potentially could cause prejudice to our preparation of the case.

So in those circumstances that is why not before June 2007 would be appropriate. I understand the reason it could not be July is because of Mr. Birss’s availability, which is not a problem for us. So that if it has to be July, is not on our behest and we are asking for it to go back.

As far as prejudice is concerned, the reality, your Lordship, is that Mr. Rich and Co. have not actually said that they cannot do anything. This is all on both sides, my Lord, frankly. My Lord has been presented with, “It might be this”, “It might be that”. We actually have not got evidence from either side that says anything other than ----