Glaxosmithkline Biologicals SA v Novartis AG

This is a patent action in which the claimant seeks revocation of the defendant's European Patent (UK) No. 1 401 489 entitled “Capsular Polysaccharide Solublisation” (“the Patent”). I now have before me an application for a stay of the action for a period of 12 months.

The Patent relates to a process for purifying polysaccharides from bacteria which is used in the context of preparing vaccines against the bacteria from which the polysaccharides are derived. The Patent was granted on 5 April 2006 and its earliest claimed priority date is 20 June 2001. The claimant began this action on 24 December 2008.

The validity of the Patent is attacked on the grounds of lack of novelty and lack of inventive step. The claimant relies upon two of its own patent publications, one being European Patent No. 0 072 513 ("SKB 1"), for lack of novelty, and upon those publications and an article entitled "Polyosides (encapsulated bacteria)", by A.A. Lindberg, for obviousness.

The CMC in the action was held on 27 February 2009, at which this court gave directions, with the result that the trial of the action will float from 11 January 2010, with an estimate of four to five days for the trial, one to two days pre-reading and a technical difficulty rating of a high 3.

On 5th January 2009 the defendant invited the claimant to agree to a stay of the action. This was refused by the claimant and so the defendant issued this application on the day of the CMC.

There are two other sets of proceedings on foot, namely opposition proceedings in the EPO and infringement proceedings in Belgium and it is the existence of those proceedings which gives rise to this application. But before dealing with them, I must first explain a little more of the technical background because it provides the context in which the parties' conduct must be considered.

That technical background is elaborated in the second witness statement of Caroline Johnston, a qualified UK and European Patent Attorney, who provides support for the European biopharmaceuticals business of the group of companies of which the claimant forms part. In this judgment, I will refer to all the companies in that group and their predecessors, collectively, as "GSK".

The claimant maintains that since the 1960s it has been known that polysaccharides can be purified by first precipitating them using a cationic detergent and then dissolving the precipitate in some organic solvent such as ethanol. Certain pathogenic bacteria have an outer coating, or capsule, which is made of polysaccharide and for many years that polysaccharide material has been used by those in the field to make vaccines.

In 1982 GSK applied for a patent relating to a development of that basic method in which an inert porous support is used at the precipitation stage. In due course that application became the patent SKB 1. It was granted in 1989 and expired in 2002. Ms. Johnston says that since that time GSK has always used a particular inert support, known as Celite, or an equivalent. The patent SKB 1 is reference D1 in the EPO Opposition proceedings.

Some vaccines have been made using polysaccharides alone but, Ms. Johnston says, such vaccines did not work well in young children, for the reason that their immune systems do not give rise to long-term immunity when faced with a polysaccharide antigen. It was thought that a vaccine in which the polysaccharide was presented conjugated to a protein carrier would work better and the first commercial scale conjugate vaccines directed to H. influenzae type b (“Hib”) became available in the 1980s. Different companies used different carrier proteins, so she says, at that time, Pasteur Merieux and GSK used tetanus toxin as a carrier protein, Connaught used diphtheria toxin and Praxis Biologics used a mutant form of diphtheria toxin. By 1992 these Hib conjugate vaccines were well-known to anyone working in the field as being highly effective in infants.

The Patent has, as I say, a claimed priority date in 2001 and granted claim 1 certainly seems rather broad, in that it claims a method of purifying bacterial polysaccharides which involves precipitating the polysaccharide using a cationic detergent and then solubilising it using ethanol. It expressly cross-refers to patent SKB 1 and states that the invention differs from it because it does not require an inert porous support. However, despite that statement, the claimant understands the defendant's position to be that the claim also covers the case in which an inert support is used and that is its own position too.

Thus, the claimant asserts that claim 1 as granted is clearly invalid and the Opposition Division of the EPO apparently came to the same conclusion. Accordingly, as I shall elaborate, at the hearing before the Opposition Division, the defendant offered to limit the scope of the invention to processes in which the polysaccharides were to be used to make conjugate vaccines with particular carrier proteins and to polysaccharides from particular bacteria.

The claimant says that, much to its surprise, the limitation so offered was accepted by the Opposition Division. The reason for that surprise was that, on the claimant’s case, the there is no suggestion in the Patent that the polysaccharide purification process itself has any special relevance to conjugation. In other words, the two steps are totally distinct. Once a polysaccharide has been purified, it might be used to make a conjugate or it might not. Also, the claimant says that conjugate vaccines using the same carriers and the same bacterial polysaccharides were well-known by 2001 and are referred to, for example, in the Lindberg publication. It therefore believes it has a strong case that the claim accepted by the Opposition Division is invalid and particularly so if it covers the use of an inert support.

As I have mentioned, the Patent was granted on 5th April 2006 and the claimant filed an opposition to it at the EPO in January 2007, at the very end of the opposition period, and was the only opponent. This does not itself demonstrate a lack of urgency on behalf of the claimant because, as is well-known, the EPO does not take any action before the end of an opposition period, but waits until all possible oppositions have been filed. Moreover, the Opposition Division is reluctant to expedite an opposition unless proceedings are in foot, or at least threatened, in a designated state.

In its opposition, the claimant contended that the Patent was invalid in the light of SKB 1 and the other patent application relied upon in these proceedings, namely international patent application WO 00/56360. Lindberg was not cited, although the claimant does intend to rely upon it as prior art in the EPO appeal.

The opposition was heard by the Opposition Division on 24 October 2008 and at that hearing the Opposition Division upheld the patent in the amended form to which I have referred.

On 22 December 2008 the claimant filed an appeal against the Opposition Division's decision and, on the following day, wrote requesting that the appeal be accelerated. At essentially the same time, it began this action. Its position is that it has a substantial and important vaccine business but was confident that the Opposition Division would revoke the Patent. Indeed, it observed that the defendant did not attempt to defend the novelty or inventive step of the granted claims substantively in the written procedure. Hence, it perceived the commercial risk posed by allowing the opposition proceedings to run their course without also issuing national revocation proceedings to be low.

Ms. Johnston has also provided further details as to the oral proceedings. She explains that the defendant had previously filed five auxiliary requests but these were not pursued on the day. Instead, at the hearing, the Opposition Division allowed the defendant to file two further auxiliary requests and it was on the basis of one of these that the Opposition Division upheld the Patent.

The result was unexpected and surprising to the claimant and, at that point, it perceived the commercial risk posed by reliance solely upon the opposition proceedings to be much higher. Its position has always been that it has a legitimate commercial interest in invalidating the Patent as soon as possible but it hoped that that could be done quickly by the Opposition Division. In the event, that approach has not proved to be successful and the issuing of revocation proceedings in the UK is the claimant's second attempt at achieving the same objective, but now driven by a higher commercial risk.

The defendant also intends to appeal the decision of the Opposition Division and filed its Notice of Appeal on 16 March 2009. The legal effect of these appeals is that the Opposition Division's decision is suspended until the appeals are determined. In the meantime, the claims as granted are those which exist in the UK and other designated territories.

The claimant filed its grounds of appeal in the EPO on 17 April 2009 and the defendant's grounds of appeal are due on or before 18 May 2009. The defendant has not, as yet, joined in the claimant's request for acceleration.

It follows from the foregoing that the claims currently pending before the EPO are different to the claims of the UK designation of the Patent. Moreover, the defendant reserves the right, which it has, to file auxiliary requests for claim amendments in the course of the appeal. It points out these may arise during the course of the EPO appeal proceedings at any point up to and including the oral hearing before the Board of Appeal. As such, it is possible (and the defendant says entirely likely) that the claims as finally allowed by the EPO, if indeed any are allowed, will differ from those presently granted or allowed.

In addition to the disputes in the UK and in the EPO, an equivalent of the Patent is currently in dispute in Belgium, another designated territory. On the day on which it commenced proceedings in the UK, the claimant issued a summons in the Brussels Commercial Court seeking revocation of that Belgian patent. It has requested the Belgian court to declare the Belgian patent invalid on the basis of the same art relied upon in the UK proceedings and it also seeks a declaration that it has a right of prior use. In particular, it asserts it has used the process claimed in the patent since at least 1993 and that certain of its current and future products are made by essentially the same process as that claimed in the patent. It identifies five products as being potentially of relevance but does not indicate the specific process by which any of them is made.

The defendant fairly observes that the fact that the Belgian proceedings have been launched and include the declaration sought is perhaps not surprising because Belgium is the centre for all GSK's activities in the vaccine field, both in the area of research and development, as well as production. The proceedings in Belgium are scheduled to be heard in January 2010, that is to say, about the same time as the UK trial.

In the context of the Belgian proceedings, the defendant has recently applied for and obtained an order for saisie contrefacon to allow their appointed expert to gather information on the claimant's products and processes in Belgium. That saisie procedure began in the week of 2 March 2009 and it appears that the defendant's appointed expert in Belgium is preparing his report on its results. During the saisie, the defendant's appointed expert was provided with various documents and information from the claimant. However, the defendant has not itself yet been provided with that information. I understand from counsel this morning that a hearing is currently taking place in Belgium which will decide the issues of whether or not the saisie was properly ordered and, if it was, to whom the relevant documents and information should be provided.

In any event, the report of the defendant's appointed expert is due on 4 May 2009, but the defendant says that in all these circumstances the saisie has not yet had the effect of dispelling any of the mystery surrounding the claimant's alleged commercial concerns and whether or not it is in fact making or selling products in infringement of the Patent or its Belgian equivalent.

For its part, the claimant says its concerns are exacerbated by this development because it appears from the documents in the saisie procedure that the defendant wishes to use the information to which it gains access to in order to examine whether or not there is infringement not just in Belgium, but also in Germany, France and the UK. More specifically, on the last page of the saisie request, there is apparently an indication of the defendant's intention to use the material and information obtained in order to sue the claimant for infringement in the UK and, by implication, to seek interim relief. The claimant therefore believes that the use by the defendant of the saisie procedure and the documents which it has deployed disclose a clear and present threat of UK infringement proceedings against the claimant under the Patent and it expresses the view that it seems unfair that the defendant is able to collect material supporting a UK infringement action and reserve its right to sue in the UK while, at the same time, seeking to delay the claimant from proactively invalidating the Patent and so clearing the path in the UK.

Against that background, the defendant seeks a stay of this action so as to allow the Belgian and EPO proceedings to advance and potentially determine the matter, at least from a commercial point of view. This, it says, will provide a substantial saving of the parties' time and money and of court resources, which are estimated at £1 million on each side to trial. After the stay of 12 months, the Belgian and EPO proceedings will be further advanced, or even concluded, and the parties will then be able to reassess the need for this litigation. If the claim cannot be simply settled completely, it is possible, or even likely, that a further stay will be warranted.

The claimant resists the application on the basis that it has a real and substantial commercial interest in securing certainty as soon as possible and says that is particularly so in the light of the recent steps taken by the defendant in Belgium.

In Glaxo Group Ltd v. Genentech Inc [2008] FSR 18 the Court of Appeal provided general guidance on the Patents Court's discretion to stay legal proceedings on the ground that there are parallel proceedings pending in the EPO contesting the validity of a patent in suit, at paragraphs 80-88:

"80.

First, the discretion, which is very wide indeed, should be exercised to achieve the balance of justice between the parties having regard to all the relevant circumstances of the particular case.

81.

Secondly, it is the discretion of the Patents Court, not of the Court of Appeal. The Court of Appeal would not be justified in interfering with a first instance decision that accords with legal principle and has been reached by taking into account all the relevant, and only the relevant, circumstances.

82.

Thirdly, although neither the EPC nor the 1977 Act contains express provisions relating to automatic or discretionary stay of proceedings in national courts, they provide the context and condition the exercise of the discretion.

83.

Fourthly, the possibility of the duplication of proceedings contesting the validity of a patent granted by the EPO is inherent in the system established by the EPC. In practice national courts exercise jurisdiction on infringement issues and they have concurrent jurisdiction with the EPO on validity issues. As Mr. Daniel Alexander QC, appearing for GSK said, the Contracting States and the UK Parliament contemplated that the national Patents Courts should be able to determine the same issues of patentability as the EPO. The resultant legislation allowed the determination by the national court and the EPO to proceed at the same time. Indeed, there is nothing in the EPC or the 1977 Act to prevent the commencement of revocation proceedings in the Patents Court on the very date of the grant of the patent by the EPO.

84.

Fifthly, this setting indicates that, in present conditions, one factor affecting the discretion will usually carry more weight than any other. That is the length of time that it will take for the respective proceedings in the national court and in the EPO to achieve some certainty on the issue of the validity of the patent in suit so that business knows where it stands. The length of the stay of proceedings, if granted, is, in general, the most significant factor in the discretion. Both the parties' legitimate interests and the public interest are in dispelling the uncertainty surrounding the validity of the monopoly rights conferred by the grant of a patent and the existence or non-existence of exclusive proprietary rights on a public register. A decision in the revocation action in the Patents Court will dispel some of the uncertainty. If the likelihood is that proceedings in the Patents Court would achieve this resolution significantly sooner than the proceedings in the EPO, it would normally be a proper exercise of discretion to decline to stay the Patents Court proceedings. They should be allowed to proceed to a decision that would supply some certainty in the public interest and the parties' legitimate interests.

85.

Sixthly, there are no grounds justifying the application by the Patents Court of a presumption that the duplication of legal proceedings in it and in the EPO is, without more, a ground for a stay of the proceedings in the Patents Court, as the EPC system allows for parallel proceedings contesting the validity of the patent in both the international court (which is what the EPO in substance is) and in the national court.

86.

Seventhly, the Patents Court is entitled to refuse a stay of the national proceedings where, as here, the evidence is that some commercial certainty would be achieved at a considerably earlier date in the case of the UK proceedings than in the EPO. It is true that it will not be possible to attain certainty everywhere until the EPO proceedings are finally resolved, but some certainty, sooner rather than later, and somewhere, such as in the UK, rather than nowhere, is, in general, preferable to continuing uncertainty everywhere. Thus, in this case some degree of commercial certainty could be achieved at the trial of the UK revocation action in February without unfairly prejudicing Genentech's legitimate interests in the protection of its patent.

87.

Eighthly, much weight should be given to an assertion by a commercial party that it has a good reason for resisting a stay. Normally a party is the best judge of its interests. Contentions of a competitor that there is no commercial need for early resolution of validity should be viewed with suspicion. Detailed arguments of the sort advanced here are unlikely to carry weight and a judge would be justified in dealing with them shortly.

88.

Finally, other considerations in the particular case may affect the balance of justice, such as additional costs in the duplication of proceedings, the order in which the proceedings were commenced and so on, but, in general, the other factors, though relevant, are of lesser importance than achieving some commercial certainty somewhere sooner. The judge will receive evidence and submissions on other relevant factors, but should be wary of over-elaboration of the issues by the parties in their evidence and legal submissions. Although due consideration must, of course, be given to the evidence and the arguments, the actual exercise of the discretion does not require the judge to deliver a judgment dealing in detail with all the points taken by the parties. A global assessment of the relevant material, supported by valid reasons, is normally sufficient to justify the decision to refuse or to grant a stay."

In my judgment, the following matters are particularly relevant to the exercise of my discretion in the context of the present case.

First, the UK is one of the most important markets for GSK's vaccine business, as well as being the location of GSK's headquarters. As Ms. Johnston explains in her second witness statement, GSK has been selling valuable vaccines in the UK for some time and has other vaccines in the pipeline, which, as I shall elaborate, potentially infringe the Patent.

Second, in all the circumstances which I have related, the claimant is justifiably concerned that the defendant may shortly commence proceedings against it in the UK for infringement. Plainly, one of the purposes of the saisie proceedings was to examine whether or not there has been infringement in the UK. Moreover, I accept the concern elaborated by Ms. Johnston that there is an element of unfairness in the defendant seeking to collect material to support a UK infringement action while, at the same time, seeking to delay the claimant from invalidating the patent and so clearing the path in the UK.

Third, the extent of GSK's vaccine business is very substantial. Its turnover from vaccine sales in 2008 was around £2.5 billion. Around £1.2 billion of this was attributable to Europe, of which the UK is considered by the claimant to be a key market. Specifically in relation to bacterial polysaccharide vaccines, UK annual sales since 2006 have exceeded tens of millions of pounds and they include conjugate vaccines. Specifically in relation to conjugate vaccines, INFANRIX HEXA and MENITORIX each have annual sales in the UK of over £10 million.

Further, GSK is preparing to launch one new bacterial polysaccharide conjugate vaccine in the UK over the course of the next 12 months. The costs of preparing such a launch have been estimated by third parties to be in the region of $80 million worldwide. Ms. Johnston says that if it were not possible to achieve certainty with respect to the patent position in the UK by means of this action by the end of January 2010, GSK will have to take that into account and it may lead to changes in GSK's strategy in the UK or to delay. Both the direct and indirect costs of doing so would be substantial and as a result, it would be commercially damaging to the claimant for there to be any delay, or risk of delay, to the UK launch as a result of any uncertainty over freedom to sell.

Fourth, in view of the significance of the UK market to GSK, it is, as Ms. Johnston explains, one of the most important jurisdictions in which to obtain early revocation of the Patent. Further, the speed and thoroughness of UK proceedings make it an attractive forum for the claimant to achieve a measure of commercial certainty. She explains that the claimant perceives it to be sensible to achieve commercial certainty somewhere quickly than to have uncertainty everywhere. It would hope to have a first instance judgment from this court by early 2010 and a decision from the Court of Appeal, should there be an appeal, by early 2011.

Fifth, conversely, I accept that to allow these proceedings to continue will involve an element of duplication and it may prove to be the case that the UK proceedings are entirely unnecessary if, in due course, the EPO decides to reverse the decision of the Opposition Division and to revoke the Patent. Against this, however, I must weigh in the balance that both parties to the present proceedings are substantial and the products in issue constitute an important part of the claimant's business. Moreover, the costs of the UK proceedings will only prove to have been wasted if the Board of Appeal does indeed revoke the Patent. If, on the other hand, it upholds the Patent, then the commencement and pursuit of the proceedings here will prove to have been both necessary and justified.

Sixth, I recognise that there is always a possibility that allowing these proceedings to continue will result in inconsistent decisions, or a decision in the UK based on claims other than those finally allowed by the EPO. However, as the Court of Appeal made clear in the Glaxo case at paragraph 83, the possibility of the duplication of proceedings contesting the validity of a patent granted by the EPO is inherent in the system established by the EPC. Moreover, the issue of possible amendments of the patent before the EPO was discussed at the CMC of this action and the claimant made clear it does not intend to rely on any new prior art in the EPO proceedings. Directions were given so as to permit the defendant a period of three weeks after the lodging by the claimant of its grounds of appeal in the EPO to file any application for amendment of the claims of the Patent in these proceedings. The defendant therefore has the opportunity to ensure the UK trial determines the validity of any amended claims it wishes to advance and it is a matter for the defendant whether it wishes to propose yet further amendments thereafter in the context of the EPO proceedings.

Seventh, the defendant suggests that if these proceedings are pushed ahead of the appeal proceedings in the EPO, it would, in effect, deny the defendant the opportunity to use the undoubtedly greater flexibility with regard to amending claims that is allowed in the EPO. I accept that that is so and it is a matter to which I must give due regard but, once again, it seems to me to be a factor which is minimised in the context of this case because the claimant has made it clear that invalidity is asserted only over the art to which I have referred and the defendant has ample time in which to consider and to formulate consistent amendments in both sets of proceedings.

Eighth, the defendant also relies upon the fact that the period of the stay is short and initially only 12 months, by which time, it says, the EPO proceedings will be well advanced and may well have terminated and the Belgian first instance trial will have occurred. As for the EPO, I am far from persuaded that it is likely that within 12 months the appeal proceedings will be well advanced. Without acceleration, which the defendant has not yet requested, the appeal may not be heard until 2011. In the meantime, the claimant is faced with what I believe to be a significant threat to its UK business, which a first instance decision of this court would do much to diminish, assuming, of course, it decides to revoke the Patent. As for the Belgian proceedings, these do not concern the UK designation of the Patent but only its Belgian equivalent. It is true to say that GSK is currently manufacturing its vaccines in Belgium but Ms. Johnston has said in her witness statement that GSK has other manufacturing options, including specifically the possibility of using a new facility which is in the course of construction in Singapore. In a press release dated August 2006 GSK confirmed that it would be investing more than US $188 million over the course of the next four years in the plant's first phase of development, dedicated for primary production of paediatric vaccines for global consumption and that the facility was expected to be operational by 2010 and would serve as “the nerve centre of GSK's bulk of polysaccharide and conjugate production worldwide”. Most recently, the claimant's solicitor has said, by letter dated 27 April 2009, that it cannot give precise dates for the start of manufacture of vaccines in Singapore and its plans may change. Nevertheless, I do not understand this statement substantively to qualify the evidence provided by Ms. Johnston that GSK does have other manufacturing options.

Finally, I must take into account the assertion that the claimant has delayed in bringing these proceedings for over 30 months since the grant of the Patent and that had the UK proceedings been brought shortly after the grant, then they would have proceeded to both a first instance and a Court of Appeal decision by now. Again, this is a point to which I must attach appropriate weight but in the particular circumstances of this case which I have detailed, I am satisfied that the claimant had reasonable grounds for hoping and anticipating that its commercial concerns would be resolved by proceedings before the Opposition Division of the EPO.

Taking all these matters into consideration, I have reached the conclusion that the balance of justice between the parties demands the refusal of this application.