Resolution Chemicals Ltd v H. Lundbeck A/S

In these proceedings the Claimant (“Resolution”) seeks revocation of SPC/GB02/049 ("the SPC") for escitalopram in the name of the Defendant (“Lundbeck”). The claim is based on the alleged invalidity of the basic patent European Patent (UK) No. 0 347 066 (“the Patent”). Escitalopram is the S or (+) enantiomer of citalopram. Citalopram is an anti-depressant drug of the selective serotonin re-uptake inhibitor (SSRI) type which was first synthesised by Lundbeck in 1972 and launched in 1989. Some time after it developed citalopram, Lundbeck devised the method for synthesising escitalopram described and claimed in the Patent and discovered that escitalopram was the active enantiomer of the racemate. This led to it launching escitalopram in 2002. Escitalopram has been hugely successful. Lundbeck was also the proprietor of a number of patents for citalopram and methods of making it which have now expired, including United States Patent No. 4,650,884 (“884”).

On 3 January 2013 Lundbeck issued an application seeking:

The foundation for Lundbeck’s primary application is that the validity of the Patent was previously challenged unsuccessfully by inter alia Arrow Generics Ltd (“Arrow Generics”), Teva UK Ltd (“Teva UK”) and Teva Pharmaceutical Industries Ltd (“Teva PI”). It is common ground that Arrow Generics, Teva UK and Teva PI would be precluded by issue estoppel and the doctrine of abuse of process from challenging the validity of the SPC on the ground that the Patent is invalid. Lundbeck contends that Resolution is also precluded from doing so by virtue of privity of interest with Arrow Generics alternatively Teva UK/Teva PI.

The foundation for Lundbeck’s secondary application is that not only has the validity of the Patent been upheld in the previous proceedings in this country, but also equivalents to the Patent have been held to be valid in proceedings in a number of other countries. Accordingly Lundbeck says that, even if Resolution is not bound by the result in the earlier proceedings, there is no real prospect that it will be able to demonstrate that the Patent, and hence the SPC, is invalid.

Resolution responded with an application of its own, in which it sought summary judgment in its favour on the estoppel/abuse of process point, alternatively its determination as a preliminary issue. It also sought permission to amend its Particulars of Claim and Grounds of Invalidity to add an additional item of prior art and directions for the trial of the proceedings with a degree of expedition.

These applications came before Roth J on 24 January 2013. On that occasion he made an order:

In addition, Resolution gave an undertaking not to make, import, keep or dispose of escitalopram or any pharmaceutical composition containing escitalopram prior to final judgment and Lundbeck gave the usual cross-undertaking in damages.

The principal witness on the preliminary issue was Alan Greenwood, who has been the Managing Director of Resolution since 1986. In addition Resolution called Dr Derek McHattie, who was employed by Resolution from February 1993 to March 1996 and has been employed by Resolution in various capacities since January 1998. I also received statements from a number of witnesses who were not required to attend for cross-examination.

I shall set out the factual background topic by topic and approximately chronologically in relation to each topic.

Resolution was established in 1986 as a manufacturer of active pharmaceutical ingredients (“APIs”). At that time it was part of the Amerpharm Group.

In 1994 the Amerpharm Group was acquired by Merck KGaA and became part of the Merck Generics Group. Whilst part of Merck Generics, Resolution continued to supply the APIs it had previously developed to Merck Generics and to third parties. It also worked on the development of three further products, namely citalopram, tetrahydrocannabinol (“THC”) and tibolone. It did not market any newly developed APIs during this period. It either manufactured the APIs which it supplied or sub-contracted other manufacturers.

In December 1999 Merck sold Resolution to Carlgrove SA. At this time Resolution’s business consisted of servicing four API supply agreements with Merck Generics, a joint venture for the manufacture and sale of lactulose with another company and the continuation of the three development projects mentioned above. In 2000 Resolution engaged another company to develop latanoprost.

On 21 December 2001 Carlgrove sold Resolution to Arrow Group ApS. Arrow Group ApS was a holding company for a new group of companies founded by Anthony Tabatznik, who had previously founded and sold Generics (UK) Ltd. Between 2001 and 2009 the Arrow Group grew rapidly. Arrow Generics was another English company in the Arrow Group throughout this period. Resolution and Arrow Generics were sister companies within the Arrow Group.

The initial business model for most companies in the group other than Resolution was to buy in manufacturing authorisations (“MAs”) for products. For such products, the MA would stipulate the manufacturer of the API and details of the manufacturing method. It would not have been possible for Resolution to take over the manufacture of such APIs.

After becoming part of the Arrow Group, Resolution continued to sell four APIs to Merck Generics, to be involved in the lactulose joint venture and to work on the development of citalopram, THC and tibolone. In 2002-2004 it developed cabergoline. Resolution sold latanoprost and cabergoline to companies in the Arrow Group, but those amounted to only about 4% of its sales during the period it was part of the Arrow Group. Conversely, while Resolution was part of the Arrow Group, companies in that group launched over 400 products, but only two contained APIs sourced from Resolution.

In 2009 the Arrow Group was purchased by Watson Pharmaceuticals Inc, which hived off Resolution in order to meet requirements imposed by the United States Federal Trade Commission. Since December 2009 Resolution has been an independent company which is majority owned by a US investment bank. The remaining shareholders are its management and employees. Resolution continues to sell cabergoline and latanoprost to Watson under long term contracts.

Since leaving the Arrow Group, Resolution has reviewed its operations and adopted a new business model which is more akin to that of a generic pharmaceutical supplier than that of an API manufacturer.

The ultimate beneficial owner of the Arrow Group, and hence of both Resolution and Arrow Generics, during this period was Mr Tabatznik. Mr Tabatznik was the Chief Executive Officer of the Arrow Group. He was also one of the directors of Resolution together with Mr Greenwood and Lawrence Stolzenberg. Mr Tabatznik and Mr Stolzenberg were also directors of Arrow Generics.

Mr Greenwood was cross-examined at some length over the extent to which Mr Tabatznik exercised control over Resolution during this period. In his first witness statement, Mr Greenwood said that Resolution was independently run, although it depended on Arrow Group to fund its development projects, and that Mr Tabatznik had no executive role and no influence over day to day or strategic decisions of Resolution. In his second witness statement Mr Greenwood qualified this by acknowledging that, if Mr Tabatznik wanted something done, Resolution would accommodate his requests if possible. He maintained that, for long periods of time, Resolution’s management were left to get on with things on their own.

Counsel for Lundbeck submitted that this evidence was inconsistent with various statements made by Resolution to the European Commission in connection with an inquiry by the Commission into the agreement between Lundbeck, Arrow Generics and Resolution dated 24 January 2002 (as to which, see below) and another agreement relating to Denmark. Counsel particularly relied on the following statements:

“[Resolution’s response dated 2 April 2012 to a questionnaire dated 8 March 2012]

4.3

As the Arrow Group became more established, Resolution received increasing requests for R&D work from Arrow Group companies, including from outside the UK, and focused its R&D activities on servicing the Arrow Group's API requirements. … However, Resolution continued to supply manufactured APIs that it had already developed to Merck …

4.4

Consequently, during its time with the Arrow Group, in particular from early 2001 until 2009, the principal activity of Resolution was to supply API research, development and manufacturing services to the Arrow group.

5.3

As explained above, during its time in the Arrow Group, Resolution's role was principally to act as an API R&D company to service the Arrow Group companies. Resolution also continued to supply products outside the Arrow Group pursuant to its historical manufacturing functions. These activities were used (in addition to group funding) to fund Resolution’s principal role of developing APIs for the Arrow Group.

[Resolution’s response dated 18 May 2012 to question 14 of a questionnaire dated 9 March 2012]

3.14(d) Resolution continued to seek to produce Citalopram API (at Arrow's instruction) until Arrow directed it to stop in 2005.

6.2

[Resolution’s] activities were directed and controlled by the Arrow Group, which also provided its funding. ...

[Resolution’s response to the Commission’s statement of objections]

1.2(b)(ii) …. Resolution was wholly controlled by Arrow following its instructions in manufacturing APIs at the relevant time.

4.23(a) As explained in para 3.14 of the 18 Response, Resolution did not engage in autonomous conduct in respect of the manufacture and supply of Citalopram API; it merely followed Arrow's instructions in that regard. …;

(b)

Resolution reported directly to senior executives within Arrow regarding its business activities including in respect of Citalopram API;

(c)

Resolution's funding, as well as the direction of its API activities, were wholly controlled by Arrow;

5.8

In summary, …., any involvement in the allegedly infringing agreements by Resolution arises out of the direct control by, and actions of, Arrow's former CEO and not through any autonomous conduct on the market by Resolution.”

Mr Greenwood’s evidence in cross-examination was that the statements quoted above were true. Nevertheless, he maintained that the evidence he had given in his witness statements was also true. In my view there is some tension between those two positions, although I do not think they are quite as contradictory as counsel for Lundbeck submitted. Viewing Mr Greenwood’s evidence as a whole, I think the position is reasonably clear. Mr Tabatznik controlled the Arrow Group, including Resolution. Accordingly he had control of Resolution’s activities in the sense that, if he wanted Resolution to do something, Resolution would do it (or try to do so). That included manufacturing citalopram or escitalopram (as to which, see below). As Mr Greenwood put it, “it was his chemistry set”. Thus Mr Tabatznik set the strategic direction for Resolution. He would also intervene if he was not satisfied with Resolution’s progress (as he did in July 2004, as discussed below). Nevertheless, most of the time, Mr Tabatznik left Mr Greenwood and his colleagues alone. It was Mr Greenwood and his colleagues who decided how to pursue Resolution’s projects, who to employ, what commercial partners to work with, budgets and so on. Mr Greenwood met Mr Tabatznik just three or four times a year to discuss how Resolution’s projects were progressing, particularly the THC project which Mr Tabatznik was most interested in. There were also occasional telephone calls, usually from Mr Greenwood to Mr Tabatznik rather than the other way around. Thus on a day-to-day basis Resolution was essentially independently managed.

More specifically, Mr Greenwood accepted that Mr Tabatznik took charge of major patent matters affecting companies within the Arrow Group with the assistance of Dr Andrew Lowrie, who was the Group’s Head of European Patent Litigation.

In 1998 Resolution (which was then part of the Merck Generics Group) started research into the manufacture of citalopram. Over the next year it devised a process for its manufacture which it believed would not infringe Lundbeck’s patents. In March 2000 Resolution filed a United Kingdom patent application in respect of its process. This was followed by US and European applications in March 2001.

Scale-up work was initially undertaken by another company in the Merck Generics Group. In 2001 Resolution purchased the rights to the development from Merck Generics and transferred the scale-up work to Neuland, an API manufacturer in India. There were problems with the development, however, and more general problems with Neuland. Neuland delivered 10 large laboratory-scale batches of citalopram totalling 50kg to Resolution in the period October 2002 – February 2003. There were problems with the purity of the material, and concerns about whether scale-up to commercial scale would be possible. Furthermore, it became clear that, even if Neuland was able to make the process work on a commercial scale and to the necessary purity, it would not be able to do so at a competitive price. Accordingly, Resolution decided to terminate the project.

In February 2004 Resolution paid Neuland the final fee for its work on citalopram. No further development work was done by Resolution on citalopram after this. In October 2004 the citalopram which had been delivered by Neuland was destroyed. Resolution was never able to produce citalopram on a commercial scale. It never submitted a Drug Master File (a confidential detailed file of information about the manufacture of an API submitted to the US Food and Drug Administration and other regulatory authorities, “DMF”) for citalopram.

In November 2005 Anna Power, Arrow Group’s Global Operations Director, instructed Mr Greenwood to abandon Resolution’s patent applications for its citalopram process. By that point the UK and European patents were close to grant, and so they were allowed to proceed to grant, but no renewal fees were paid and the patents in due course lapsed.

On 14 January 2002 there was a meeting between Mr Tabatznik, and possibly other representatives of the Arrow Group, and John Meidahl Petersen and Morten Bryde Hansen of Lundbeck to discuss the Arrow Group’s interest in citalopram. Mr Tabatznik informed Mr Meidahl that he would offer citalopram for sale in the UK in the very near future. Mr Meidahl said that Lundbeck believed that this would infringe Lundbeck’s UK Patents Nos 2 356 199 and 2 357 762.

On 21 January 2002 Mr Meidahl wrote to Mr Tabatznik to confirm these discussions and to demand the provision of immediate undertakings not to infringe the patents, failing which Lundbeck would commence proceedings and seek an interim injunction. This letter was addressed to “ARROW Resolution” at Resolution’s premises. Mr Meidahl’s unchallenged evidence is that the letter was addressed in that way because either Mr Tabatznik or S.J. Berwin & Co (a firm of solicitors) had indicated that Arrow and Resolution were the relevant parties and had provided that address.

On 22 January 2002 Mr Tabatznik replied on Resolution notepaper (which also bore an Arrow logo) suggesting that they meet to discuss Lundbeck’s allegations in more detail. It appears that there was at least one more meeting.

On 24 January 2002 Lundbeck on the one hand and Arrow Generics and Resolution on the other hand entered into a settlement agreement. The agreement was signed by Mr Tabatznik on behalf of both Arrow Generics and Resolution.

On 25 January 2002 Lundbeck commenced proceedings against Arrow Generics and Resolution for infringement of UK Patent 2 356 199. On the same day Lundbeck’s solicitors served the Claim and a draft application and draft consent order on S.J. Berwin saying that they understood that S.J. Berwin were instructed to accept service on behalf of both defendants.

On 6 February 2002 an order was made by consent in which Arrow Generics and Resolution gave undertakings to the Court until 31 December 2002 or any earlier final determination of the proceedings not without Lundbeck’s consent to make, keep or deal in (i) citalopram not manufactured by or with the consent of Lundbeck or (ii) any other citalopram which Lundbeck alleged to infringe its proprietary rights.

On 21 February 2002 S.J. Berwin wrote to Lundbeck’s solicitors stating that their clients intended to counterclaim for revocation of the patent in suit. The proceedings did not go any further, however.

It is unclear why Mr Tabatznik involved Resolution in this litigation, since it was unable to manufacture citalopram at the time. Mr Greenwood gave unchallenged evidence that he was unaware of the litigation until long afterwards.

Arrow Generics launched a citalopram product some time in 2004. The API was not supplied by Resolution. Mr Greenwood’s belief was that the product was supplied by Cipla, a well-known generic pharmaceutical manufacturer based in India.

In early November 2001 (prior to the acquisition of Resolution by the Arrow Group) escitalopram was amongst a list of drugs which Resolution identified as representing generic opportunities. Although it remained on the list in early December 2001, nothing was done at that stage.

Mr Meidahl gave unchallenged evidence that, during one of the meetings in January 2002 to discuss the citalopram litigation, Mr Tabatznik asked him whether Lundbeck would give a licence under Lundbeck’s escitalopram patents. The strength of the escitalopram patents was also discussed. It is therefore possible that Mr Tabatznik was considering asking Resolution to make escitalopram at that time.

In early September 2002 Mr Tabatznik met Mr Greenwood and asked Resolution to review routes for the synthesis of escitalopram. Mr Greenwood asked Dr McHattie to review the relevant patents. On 9 September 2002 Dr McHattie recorded in a memo that he had found and reviewed the Patent and noted a couple of ideas for synthesis. Dr McHattie reported these ideas together with some others in an email to Mr Greenwood dated 25 September 2002.

On 27 October 2002 Mr Greenwood sent Mr Tabatznik an email asking the latter whether he still wanted Mr Greenwood to look at escitalopram. In this email Mr Greenwood said “I can make some after the 50 kg citalopram”. Mr Greenwood’s evidence, which I accept, was that, by this, he meant that Resolution could try to make some escitalopram once it had finished working on the 50 kg of citalopram which was then being manufactured for it by Neuland. In the event, no more was done for over 10 months.

On 2 September 2003 Dr McHattie sent Dr Lowrie an email asking him to look for patents and patent applications for escitalopram. On 24 September 2003 Dr Lowrie replied attaching copies of four patents and applications, including the Patent. On 9 October 2003 Chris Woolley, who was assisting Dr McHattie, asked Dr Lowrie for copies of four more patents, which Dr Lowrie sent him on 16 October 2003. On 10 November 2003 Mr Woolley asked for two more patent applications which Dr Lowrie sent later the same day.

In about October 2003 Dr McHattie and his colleagues produced a document entitled “Routes for the Preparation or Resolution of Escitalopram”. This set out a number of routes covered by Lundbeck patents and applications and some possible routes not covered by existing patents. As Mr Greenwood accepted, the purpose of this was to enable Resolution or a subcontractor to manufacture escitalopram. As both he and Dr McHattie confirmed, however, nothing further was done to that end. In particular, no laboratory work was done whatsoever. As Mr Greenwood explained, there was no prospect of Resolution being able to make escitalopram at commercial scale, purity and cost when it had been unable to achieve that with citalopram.

The cost of this work was very modest, namely £1,155.20 in internal costs in 2003, reflecting how little had been done.

On about 14 July 2004 Mr Tabatznik called a meeting of Arrow Group and Resolution personnel, including Mr Greenwood, on 20 July 2004. Mr Greenwood’s evidence was that the main focus of this meeting was cutting Resolution’s costs as a result of the failure of the citalopram project and problems encountered with the THC project. In addition, there was a review of a number of other projects, including escitalopram.

So far as escitalopram is concerned, following the meeting Mr Greenwood sent Mr Tabatznik an email dated 22 July 2004 in which he identified four generic suppliers of escitalopram and continued:

“Dick [Binnington, API sourcing manager for the Arrow Group] to look and see if we can get a supply. Failing that, I will look to Neuland.”

Mr Greenwood’s evidence, which I accept, was that he was trying to be helpful to other companies in the Arrow Group by identifying suppliers of escitalopram and by offering to try to get it manufactured by Neuland if Mr Binnington was unable to source it, but that he did not expect Mr Binnington to be unsuccessful. He maintained that Resolution was unable to make citalopram, let alone escitalopram, at that time and that he would have had no confidence in Neuland’s ability to do so. In the event, he believed that Mr Binnington was successful in sourcing escitalopram for Arrow Generics (see below).

This marks the end of Resolution’s involvement with escitalopram while it was a member of the Arrow Group. Resolution’s costs incurred in connection with this project in 2004 amounted to just £64.95.

On 2 December 2005 Generics (UK) commenced proceedings in this Court seeking revocation of the Patent. On 5 February 2006 Arrow Generics followed suit. On 16 July 2006 Teva UK and Teva PI also commenced proceedings. All three claims were tried together. On 1 March 2007, shortly before the trial, all three sets of claimants commenced separate proceedings to revoke the SPC on grounds specific to the SPC. Resolution was not a party to any of these claims.

On 4 May 2007 Kitchin J (as he then was) gave judgment on the claims for revocation of the Patent, holding that claims 1 and 3 of the Patent were invalid for insufficiency, but claim 6 was valid: see Generics (UK) Ltd v H. Lundbeck A/S [2007] EWHC 1040 (Pat), [2007] RPC 32. I shall consider some of his reasoning for reaching these conclusions below. On 12 April 2008 the Court of Appeal allowed Lundbeck’s appeal in relation to claims 1 and 3 and dismissed the claimants’ appeals in relation to claim 6: [2008] EWCA Civ 311, [2008] RPC 19. On 25 February 2009 the House of Lords dismissed the claimants’ appeals against the decision of the Court of Appeal: [2009] UKHL 12, [2009] RPC 13.

In May 2009 Arrow Generics and the Teva companies discontinued their claims for revocation of the SPC. In November 2009 Generics (UK) did likewise.

Mr Greenwood gave unchallenged evidence that Resolution was not asked whether it could or would supply Arrow Generics (or any other company in the Arrow Group) with escitalopram at the time of the escitalopram litigation. Nor was it asked to assist in the manufacture or supply of escitalopram at that time. Indeed, he said that he was unaware of the litigation then.

In August 2008 three MAs for escitalopram oxalate were granted to Arrow Generics. At that time a typical application would have taken about 15-18 months. In order to apply for the MAs Arrow Generics would have needed to have a source of the API (and the finished dosage form) in place. The supplier was not Resolution. Arrow Generics would have had no difficulty in sourcing escitalopram oxalate from elsewhere: by 6 February 2006 there were already seven different manufacturers of escitalopram oxalate who had submitted DMFs to the US Food and Drug Administration. It would not have been possible for Resolution to supply escitalopram to Arrow Generics under those MAs even if Resolution was able to manufacture escitalopram at that time, which it was not. In order for Resolution to have been able to supply Arrow Generics with escitalopram, Resolution would have had to develop a viable and competitive process and to compile and submit a DMF and Arrow Generics would have had to obtain a variation to the MAs. There was no prospect of this happening within the relatively short period before the price of generic escitalopram collapsed if the Patent was revoked.

As at February 2013 Resolution was named on the website www.hma.eu as the c/o address on three Dutch MAs for citalopram belonging to Arrow Pharma BV. Mr Greenwood explained that Resolution agreed to act as the c/o address in 2001 when Arrow Pharma BV had no physical office of its own. In 2006 the MAs were transferred by Arrow Pharma BV to Arrow Generics and Resolution sought to remove its name from the MAs, but it appears that an administrative error led to its retention on certain websites. This has now been corrected. Resolution was not the supplier of the API under the MAs in question.

Resolution holds an MA for a product called “lactulose Arrow”. Mr Greenwood explained that an unconnected third party uses this MA to supply this product to Arrow Scandinavia. Resolution’s only role is to maintain the MA and provide regulatory services for the third party, services for which it is paid by the third party.

In 2003 Arrow Generics was involved in proceedings in Scotland for the revocation of two patents relating to tibolone. In February 2003 Arrow Generics asked Resolution to carry out some experiments for the purposes of those proceedings, and Resolution did so. At that time Resolution was undertaking research into the manufacture of tibolone and it had an exclusive agreement to supply tibolone to Generics (UK).

Between leaving the Arrow Group in December 2009 and November 2011, Resolution explored a number of different business models apart from being a pure API manufacturer. Over this period attention was mainly focussed on the idea of buying-in MAs to enable Resolution to sell off-patent generic medicines in the UK. Towards the end of this period, Resolution started considering projects which involved challenging the validity of patents. In September 2011 Resolution employed Mike Sparrow (previously Managing Director of Arrow Generics until July 2010) as its New Business Development Manager. In October 2011 Resolution engaged Dr Lowrie as a consultant. At some point during that year Resolution also engaged Susan de Stasio (previously the Arrow Group’s Head of European Regulatory Affairs from 2002 to 2010) as a consultant.

In early November 2011 Dr Lowrie told Mr Greenwood about two recent decisions of the Dutch and Belgian courts concerning counterparts of the Patent (as to which, see below), and suggested the possibility of Resolution launching a claim for revocation in the UK. Resolution’s board decided to take this idea forward in mid November 2011.

In order to pursue this project, Resolution needed a source of supply of escitalopram and regulatory approval to sell it in the UK. Mr Sparrow identified six granted escitalopram MAs. One of these was in the name of Ratiopharm GmbH which Resolution knew was a company in the Teva Group. Resolution also knew that the Teva Group had escitalopram on the market elsewhere in Europe. Furthermore, Dr Lowrie discovered that there appeared to be an issue regarding data exclusivity with some of the other MAs. Yet further, Mr Sparrow was well acquainted with Richard Daniell, the Managing Director of Teva UK. For all these reasons, Resolution decided to approach Teva. Mr Sparrow first contacted Mr Daniell in February 2012, but to begin with little happened.

At a monthly development meeting in March 2012 Resolution decided to pursue the escitalopram project in earnest and to prioritise it over other projects.

On 27 April 2012 Mr Greenwood and Mr Sparrow attended a meeting with Mr Daniell and Dr Galit Gonen (who I understand to be Head of European Patent Litigation for Teva Europe BV, “Teva Europe”) at Teva UK’s premises. Mr Greenwood’s evidence was that the Teva representatives were very concerned about taking any action in the UK in relation to escitalopram because of the previous litigation. Nevertheless, since the Teva Group had product available in other EU member states where there was no patent in force, they said that Teva would be happy to sell the product to Resolution provided that this was done in such a way that it did not involve Teva taking any steps which might infringe the Patent.

In light of this discussion Resolution decided to pursue the possibility of a transfer or licence of Teva’s UK MA and a supply agreement. On 17 July 2012 Mr Greenwood sent Mr Daniell and Dr Gonen an email setting out the major actions as Resolution saw them:

“1.

Negotiate and sign a supply agreement.

2.

Put a relevant paper trail in place to evidence our ability and willingness to launch. We will notify Lundbeck and expect to be injuncted well before any supply actually takes place.

3.

Case Preparation.

4.

Resolution to put Lundbeck on notice of our intention to launch (see above).”

As Mr Greenwood confirmed, Resolution’s plan was to recover damages under Lundbeck’s cross-undertaking if the claim for revocation was successful.

At a meeting between Mr Greenwood and Mr Sparrow with Mr Daniell on 31 July 2012, Mr Daniell said that Teva was not willing to sell or licence its UK MA to Resolution, but was still willing to discuss selling escitalopram to Resolution outside the UK, in particular in Spain or the Czech Republic. Mr Daniell suggested that Resolution could apply to the Medicines and Healthcare Products Regulatory Agency (“MHRA”) for a Product Licence (Parallel Import) (“PL(PI)”) to enable Resolution to import and repackage the product for the UK. This led to discussions between the parties as to the terms of an arrangement. These terms included the sharing of information about litigation as well as commercial terms.

On 22 August 2012 Mr Greenwood sent Mr Daniell an email, which was copied to Dr Gonen among others, attaching draft Heads of Terms of an agreement between Resolution and “Teva [precise entities to be identified]” for the supply of escitalopram. The Heads of Terms proposed that delivery would be “EX WORKS Teva’s premises at [TBC]” and that Resolution would be responsible for obtaining the necessary PL(PI). Although no country is identified in the Heads of Terms, by this time the parties were discussing supply from Spain.

At around the same time, Resolution approached Lexon UK Ltd to undertake the importation and repackaging of the product. Since it was contemplated that the product would be imported from Spain, the blister packs would need to be removed from the Spanish cartons, over-stickered with English labels and repackaged in new cartons with an English-language Patient Information Leaflet.

On 19 September 2012 Simon Nicklin, New Products Manager for Teva UK, sent Mr Sparrow the shipping address for Teva Pharma SLU in Spain.

On 25 September 2012 Mr Sparrow was contacted by Kim Innes, Teva UK’s Commercial Director, who said that the draft Heads of Terms were fine in principle, but that the product would be delivered direct from the factory in Poland. This would be beneficial both for Resolution (because it would speed up the process) and Teva (for tax reasons).

On 4 October 2012 Ms De Stasio sent Mr Sparrow an email, which was copied to Mr Greenwood, saying that she needed to state in Resolution’s application for a PL(PI) that Resolution had formally notified Teva Spain of its intention to parallel import the product into the UK and she assumed that that had been done. Mr Greenwood replied saying that this was correct, the Heads of Terms had been sent on 22 August.

On 10 October 2012 Resolution filed two applications for PL(PI)s. These applications gave the following information about the product to be imported:

“2.1

EEA Member Sates from which it is to be imported: SPAIN

…

2.3

If the marketing authorisation was issued by a competent authority in Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovenia or Slovak Republic please put a tick in the box (a) or (b) below:

√ In accordance with the provisions of the Specific Mechanism the relevant rights holder has been notified of the intention to import the product into the UK.

Date of notification (at least one month before this application) 22-08-2012.

…

2.4

Marketing Authorisation(s) granted in accordance with Article 6 of Directive 2001/83/ EEC (as amended) for the product in the above Member States:

…

List of Marketing Authorisations and Holders:

1: 664246.7 [Teva Spain]”.

The applications also identified the supplier from whom the product was to be obtained as Teva Operations Sp, Zo.o. (“Teva Poland”) (answer 2.5) and stated that the product would be shipped directly from Teva Poland to the repackaging site (answer 3.5).

The Specific Mechanism was explained by His Honour Judge Birss QC in Merck Canada Inc v Sigma Pharmaceuticals plc [2012] EWPCC 18 as follows:

“16.

The Specific Mechanism is to be found in Chapter 2 to Annex IV of the Act of Accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia or Slovakia to the European Union. The Accession was signed in Athens on 16^th April 2003. It provides:

2.

COMPANY LAW

Treaty establishing the European Community:

Part Three, Title I

Free Movement Of Goods

SPECIFIC MECHANISM

With regard to the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovenia or Slovakia, the holder, or his beneficiary, of a patent or supplementary protection certificate for a pharmaceutical product filed in a Member State at a time when such protection could not be obtained in one of the abovementioned new Member States for that product, may rely on the rights granted by that patent or supplementary protection certificate in order to prevent the import and marketing of that product in the Member State or States where the product in question enjoys patent protection or supplementary protection, even if the product was put on the market in that new Member State for the first time by him or with his consent.

Any person intending to import or market a pharmaceutical product covered by the above paragraph in a Member State where the product enjoys patent or supplementary protection shall demonstrate to the competent authorities in the application regarding that import that one month's prior notification has been given to the holder or beneficiary of such protection.

17.

Although it is part of an international treaty, the Specific Mechanism has effect in the United Kingdom as a result of s2(1) of the European Communities Act 1972 which provides that:

(1)

All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly; and the expression ‘enforceable EU right’ and similar expressions shall be read as referring to one to which this subsection applies.

18.

The expression ‘the Treaties’ is defined in section 1 of the 1972 Act so as to include the 2003 Act of Accession and thus the Specific Mechanism, as part of the treaty, is effective in law without further enactment.

19.

Essentially the Specific Mechanism means that certain UK patents (essentially product claims) can be used to prevent parallel imports from (in this case) Poland if the patent was filed at a time when Polish law did not permit that sort of protection. In that respect it acts to override the usual consequences of a patentee putting product onto the market in a Member State.”

It will be appreciated that the Specific Mechanism is not applicable in the circumstances of this case, since Teva’s escitalopram product is a generic one. Although there is no evidence directly on the point, I believe that the explanation for this is that Ms De Stasio confused notification under the Specific Mechanism with the notification required by the jurisprudence of the Court of Justice of the European Union to be given to the owner of registered trade marks affixed to a product when a parallel importer intends to repackage the product (see e.g. Case C-143/00 Boehringer Ingelheim KG v Swingward Ltd [2002] ECR I-3759). I shall return to this below.

Finally, the applications identified Lundbeck as the holder of an MA for a product which Resolution believed to be identical to, or not therapeutically different from, that imported, namely Lundbeck’s Cipralex product (answers 3.1 and 3.2).

Resolution commenced the present proceedings on 7 November 2012. At that date, Resolution had not concluded a supply agreement with Teva, but Mr Greenwood gave evidence that it was confident that an agreement would be concluded shortly.

On 5 December 2012 Mr Nicklin sent Mr Greenwood an email saying “I confirm on behalf of Teva UK Limited that we are unable to proceed with the project”.

On 17 December 2012 Philippe Drechsle, Head of Generics Support & Pharmaceuticals at Teva Europe, sent Mr Greenwood an email with the subject line “Accepted: on-going discussions” making a provisional appointment for a meeting at the premises of Teva UK on 2 January 2013. On 21 December 2012 Mr Greenwood asked Mr Drechsle if he had any comments on the Heads of Terms and Mr Drechsle replied that Teva’s legal department was drafting a contract. On 30 December 2012 Mr Drechsle emailed Mr Greenwood saying that the contract had not been drafted and hence it would not be possible to meet on 2 January 2013. As a result, Mr Greenwood offered to get a draft prepared. Mr Greenwood duly sent Mr Drechsle a draft on 3 January 2013.

On 10 January 2013 Marta Stroka-Maleta of Teva Poland sent Mr Drechsle an email querying the regulatory status of the product and asking for a copy of Resolution’s wholesale licence. In response Dr Rowland Burgess, Resolution’s Head of Regulatory Affairs, sent Mr Drechsle a copy of Lexon’s Manufacturer’s/Importer’s Licence from the MHRA. As Mr Greenwood explained in an email later the same day:

“So it works like this. We have a supply agreement with Teva. Teva delivers to Lexon. Lexon repackage. Lexon delivers to Resolution (Lexon don’t wish to distribute for obvious reasons – we will have our licence by that time.) Resolution distributes.”

Between 7 and 15 January 2013 Mr Greenwood pressed Mr Drechsle repeatedly to finalise and sign the supply agreement, getting increasingly frustrated as time wore on. During this period he sent Mr Drechsle an email on 13 or 14 January 2013 in which he said (among other things):

“How long can it take for your own lawyers to complete the argument between themselves? You’ve had since March 2012 to think about this, which is when I first contacted Teva.”

On 15 January 2013 Resolution and Teva Poland entered into a supply agreement. The agreement provides that:

The supply agreement formerly included a retention of title clause (clause 5.4), but the parties have subsequently agreed to remove that clause from the agreement.

On 23 January 2013 the MHRA informed Resolution that, since the escitalopram which Resolution intended to parallel import into the UK was a generic product, it had to be cross-referenced to a generic product in the UK with the same MA holder rather than Lundbeck’s product. The MHRA therefore suggested that Resolution’s application for a PL(PI) should refer to Teva UK’s MA. Resolution adopted this suggestion. Resolution did not need, or obtain, Teva UK’s consent to this.

It is well established that estoppel per rem judicatam applies to bar re-litigation of the same claim or issue not merely by parties to the earlier proceedings, but also those who are privy to them. There are three classes of privity: privity of blood, title and interest. It is only the last of these that is in play in the present case.

The question of when a person has privity of interest with a party to previous litigation was considered by Sir Robert Megarry V-C in Gleeson v J Wippell & Co [1977] 1 WLR 510. In that case, Denne had, at Wippell’s request, manufactured shirts designed by Wippell. Miss Gleeson contended that Wippell had, in designing its shirt, copied her shirt (and hence the drawings for her shirt). She first sued Denne and lost, it being held that the Wippell shirt designer had not copied her shirt. Later, she sued Wippell. Wippell applied to strike the claim out on the grounds of cause of action estoppel, issue estoppel or abuse of process. Megarry V-C refused to do so, holding that Wippell and Denne were not privies.

In his judgment, Megarry V-C pointed out at 514D the protean nature of the word “interest”, the dearth of authorities on the point and the fact that it was by no means easy to distil any principle from them. Having referred to certain authorities, he said at 515A that:

“Privity for this purpose is not established by having ‘some interest in the outcome of litigation.’ So far as they go, I think these authorities go some way towards supporting the contention of Mr Jacob that the doctrine of privity for these purposes is somewhat narrow, and has to be considered in relation to the fundamental principle nemo debet bis vexari pro eadem causa.”

He went on at 515C-516C:

“This is difficult territory: but I have to do the best I can in the absence of any clear statement of principle. First, I do not think that in the phrase ‘privity of interest’ the word ‘interest’ can be used in the sense of mere curiosity or concern. Many matters that are litigated are of concern to many other persons than the parties to the litigation, in that the result of a case will at least suggest that the position of others in like case is as good or as bad as, or better or worse than, they believed it to be. Furthermore, it is a commonplace for litigation to require decisions to be made about the propriety or otherwise of acts done by those who are not litigants. Many a witness feels aggrieved by a decision in a case to which he is not party without it being suggested that the decision is binding upon him.

Second, it seems to me that the substratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is in the interest both of the successful party and of the public. But I cannot see that this provides any basis for a successful defendant to say that the successful defence is a bar to the plaintiff suing some third party, or for that third party to say that the successful defence prevents the plaintiff from suing him, unless there is a sufficient degree of identity between the successful defendant and the third party. I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. It is in that sense that I would regard the phrase ‘privity of interest’. Thus in relation to trust property I think there will normally be a sufficient privity between the trustees and their beneficiaries to make a decision that is binding on the trustees also binding on the beneficiaries, and vice versa.

Third, in the present case, I think that the matter may be tested by a question that I put to Mr. Skone James in opening. Suppose that in the Denne action the plaintiff, Miss Gleeson, had succeeded, instead of failing. Would the decision in that action that Wippell had indirectly copied the Gleeson drawings be binding on Wippell, so that if sued by Miss Gleeson, Wippell would be estopped by the Denne decision from denying liability? Mr. Skone James felt constrained to answer Yes to that question. I say “constrained” because it appears that for privity with a party to the proceedings to take effect, it must take effect whether that party wins or loses. … In such a case, Wippell would be unable to deny liability to Miss Gleeson by reason of a decision reached in a case to which Wippell was not a party, and in which Wippell had no voice. Such a result would clearly be most unjust. Any contention which leads to the conclusion that a person is liable to be condemned unheard is plainly open to the gravest of suspicions. A defendant ought to be able to put his own defence in his own way, and to call his own evidence. He ought not to be concluded by the failure of the defence and evidence adduced by another defendant in other proceedings unless his standing in those other proceedings justifies the conclusion that a decision against the defendant in them ought fairly and truly to be said to be in substance a decision against him.”

In House of Spring Gardens Ltd v Waite [1991] QB 241 the claimants had successfully brought a claim in Ireland against the Waites and Mr McLeod. They had been held to be joint tortfeasors and the judgment by Costello J against them was joint and several. The Waites then applied to have the judgment set aside on the ground that it had been obtained by fraud. Egan J rejected that application. The claimants brought proceedings in England against all three defendants to enforce the judgment of Costello J. All three defendants pleaded that judgment of Costello J had been obtained by fraud, relying on the Waites’ then pending case on that point in Ireland. Once the Irish case on fraud had been determined, it was held in the UK proceedings that the Waites were estopped by the judgment of Egan J from contending that the judgment of Costello J had been obtained by fraud, and that Mr McLeod was also estopped as their privy. Mr McLeod’s appeal to the Court of Appeal was dismissed.

Stuart-Smith LJ (with whom Fox LJ agreed and McCowan LJ concurred) adopted Megarry V-C’s approach in Gleeson. He also referred to Nona Ofori Atta II v Nana Abu Bonsra II [1958] AC 95 at 102-103 where Lord Denning delivering the opinion of the Privy Council cited with approval the following passage from the judgment of Lord Penzance in Wytcherley v Andrews (1871) LR 2 P&M 327 at 328:

“There is a practice in this court, by which any person having an interest may make himself a party to the suit by intervening, and it was because of the existence of this practice that the judges of the Prerogative Court held, that if a person, knowing what was passing, was content to stand by and see his battle fought by someone else in the same interest, he should be bound by the result, and not be allowed to re-open the case. That principle is founded on justice and common sense, and is acted upon in courts of equity where, if the persons interested are too numerous to be all made parties to the suit, one or two of the class are allowed to represent them; and if it appears to the court that everything has been done bona fide in the interests of the parties seeking to disturb the arrangement, it will not allow the matter to be re-opened.”

Stuart-Smith LJ held that Mr McLeod was estopped for the following reasons (at 253F – 254B):

“All three defendants were joint tortfeasors, having acted in breach of the duty of confidence in relation to the confidential information imparted to them and in breach of the plaintiffs' copyright in the cutting patterns for the vest. The judgment against them was joint and several. If the Waites' action to set aside Costello J's judgment had succeeded, that judgment would have been set aside in toto, not just against the Waites; it obviously could not stand. Even if (which I do not accept) the judgment against Mr McLeod did not automatically fall in the event of the Waites' succeeding, it is plain that in the English proceedings the plea of estoppel or abuse of process would have prevented the plaintiffs pursuing the claim on Costello J's judgment against Mr McLeod.

Mr McLeod was well aware of those proceedings. He could have applied to be joined in them, and no one could have opposed his application. He chose not to do so and he has vouchsafed no explanation as to why he did not. Mr Swift says he was not obliged to do so; he was not obliged to go to a foreign jurisdiction; he could wait till he was sued here. He speaks as if Mr McLeod was required to go half-way round the world to some primitive system of justice. That is not so. He had to go to Dublin, whose courts, as the judge said, are perfectly competent to deal with this matter. Moreover, it was a process that was good enough for the Waites. Instead, he was content to sit back and leave others to fight his battle, at no expense to himself. In my judgment that is sufficient to make him privy to the estoppel; it is just to hold that he is bound by the decision of Egan J.”

Thus Mr McLeod had the same interest as the Waites in having the judgment of Costello J set aside since that judgment had held him to be jointly and severally liable with them. The Waites were indeed fighting Mr McLeod’s battle before Egan J: if they had won, the judgment against him would have been set aside.

In Kirin-Amgen Inc v Boehringer Mannheim GmbH [1997] FSR 289 there had been proceedings in the USA between Amgen on the one hand and Genetics Institute (“GI”) and Chugai on the other hand involving an Amgen US patent (008) and a GI patent (195). In the UK, there were proceedings on the counterpart patent to 008 between Kirin-Amgen and Ortho on the one hand and Boehringer Mannheim GmbH (“BMG”) and Boehringer Mannheim UK (“BMUK”) on the other hand. There were also proceedings on the counterpart to 195 between GI/BMG on the one hand and Janssen-Cilag on the other hand. Kirin-Amgen/Ortho/Janssen contended that GI/BMG/BMUK were estopped from challenging certain matters determined by the US courts. David Young QC sitting as a Deputy High Court Judge rejected that contention. The Court of Appeal dismissed Kirin-Amgen/Ortho/Janssen’s appeal.

Aldous LJ (with whom Hobhouse and Nourse LJJ agreed) cited various passages from the judgment of Megarry V-C in Gleeson. He then referred to the Court of Appeal’s acceptance of the statement of the law in House of Spring Gardens and Stuart-Smith LJ’s citation of the statement that “if a person, knowing what was passing, was content to stand by and see his battle fought by someone else in the same interest, he should be bound by the result, and not be allowed to re-open the case”. He continued at 307:

“If that be the only test, then there can be no privity between the relevant parties in this case as no party except GI had any legal interest in the U.S. patents.

It is not possible to have in mind all the circumstances where privity of interest may arise and therefore it would not be right to try to formulate a definition. Each case has to be decided in light of its particular facts. However, it will only be where the person sought to be estopped has the same interest or an interest which has a sufficient degree of identification with that interest, so as to require that the decision should bind the other party in the second action, that the court will hold that there is privity of interest.”

Aldous LJ went on to consider the application of those principles to the facts. In relation to the proceedings between Kirin-Amgen/Ortho and BMG/BMUK he said at 307-309:

“(1)

Was Kirin-Amgen a privy of Amgen for the purpose of the US 008 action?

…

Kirin-Amgen was a joint venture company formed by Amgen and Kirin-Amgen. It was set up to exploit Amgen's EPO technology. On October 27, 1987, US 008 was assigned to Amgen to enable it to take proceedings in its own name. Thereafter Kirin-Amgen had no interest in the U.S. patent, nor did it have any direct interest in the outcome of the litigation. It had an indirect interest because the assignment did not affect Amgen's obligation to pay royalties. Thus failure in the action would most likely have affected Amgen's ability to exploit its rights in the USA and therefore would have resulted in a reduction of royalties paid to Kirin-Amgen.

Mr Watson submitted that the close relationship between Amgen and Kirin-Amgen and the fact that Kirin-Amgen still had to pay royalties provided a sufficient interest. Mr Thorley,Q.C. who appeared for the respondents submitted that was not a sufficient interest to amount to privity of interest. I think he is right. Kirin-Amgen had an interest in the outcome of the U.S. litigation in that failure would cause damage, but it had no legal interest in the outcome of the patient litigation. Its sole concern was a commercial one. That does not provide a sufficient degree of identification between it and Amgen, particularly when it is appreciated that the cause of action and the proprietary right relied on in the two actions are different. Failure by Amgen on certain issues in the U.S. proceedings could damage Kirin-Amgen, but it would not be just to hold it to those failures when litigating its patent in Europe.

(2)

Was Ortho a privy of Amgen for the purpose of US 008?

Ortho, by an agreement of September 30, 1985, became exclusive licensees in the USA in respect of certain indications for rEPO and therefore had an interest in the outcome of the U.S. litigation. Mr Watson submitted that that interest made them a privy of Amgen. He drew attention to litigation in California in which GI had sued Ortho for infringement of US 195. He submitted that that demonstrated that Ortho were in the same ‘camp’. No doubt Ortho are in the same ‘camp’, but that does not provide privity of interest with Amgen. Something more is needed.

…

The relationship between Ortho and Amgen, as contained in the agreement between them, does not mean that Ortho had privity of interest with Amgen in the litigation relating to US 008. Their interest was commercial. There was not sufficient identification between them to make a decision against Amgen in the U.S. proceedings binding against Ortho in the English proceedings.”

It can be seen that Aldous LJ was looking for a common legal interest in the subject matter of the previous litigation. A commercial interest in the outcome of the proceedings was not sufficient to establish privity with the parties to the US litigation.

In Johnson v Gore Wood & Co [2002] 2 AC 1 the issue was whether a claim for professional negligence brought by Mr Johnson against a firm of solicitors was an abuse of process in accordance with the rule in Henderson v Henderson (1843) 3 Hare 100 by virtue of the settlement of a previous claim brought by a company which Mr Johnson owned and controlled against the same solicitors in respect of the same transaction. The House of Lords held that Mr Johnson’s claim was not an abuse of process. In reaching this conclusion, however, Lord Bingham of Cornhill (with whom the other members of the House of Lords agreed on this issue) rejected a subsidiary argument that the rule in Henderson v Henderson did not apply because Mr Johnson was not a party to the earlier claim. In this context he said at 32D-G that the correct test was that formulated by Megarry V-C in Gleeson v Wippell at 515 and that on the facts of the instant case that test was clearly satisfied since the company was the corporate embodiment of Mr Johnson and he made decisions and gave instructions on its behalf, including with respect to the previous litigation.

The facts in Skyparks Group plc v Marks [2001] EWCA Civ 319, [2001] BPIR 683 were somewhat complicated, but in essence there were successive proceedings involving first Mr Marks before Master Murray and Sullivan J in the Queen’s Bench Division and then both Mr and Mrs Marks and her son from a previous marriage before Her Honour Judge Elizabeth Steel sitting in the Chancery Division. In both proceedings there was an issue as to whether the matrimonial home was owned by Mr Marks or by the Chanick Trust, a trust of which Mrs Marks and her son were the trustees. In the Queen’s Bench proceedings it was held that Mr Marks had some beneficial interest in that property. Judge Steel held that Mrs Marks was estopped from advancing a case which was contrary to that finding, applying House of Spring Gardens. The Court of Appeal allowed Mrs Marks’ appeal. Robert Walker LJ (as he then was), with whom Keene LJ and Colman J agreed, distinguished House of Spring Gardens on the following grounds:

“41.

Mr Griffiths was however on much firmer ground, in my view, in submitting that there was neither sufficient identity of interest between Mr and Mrs Marks nor sufficiently informed consent on the part of Mrs Marks to stand back and let her battle be fought by her husband. There was obviously a degree of common interest in persuading the master that the house belonged to the Chanick Trust, because that outcome held out the best prospect of the house being preserved as a family home …. And a husband who is facing insolvency may wish to prefer his wife's proprietary claims to his own. Nevertheless Mr Marks, Mrs Marks and the trustees all had competing financial interests, as would have become immediately apparent if Skyparks had proceeded (as it might have done) to make Mr Marks bankrupt at the same time as pursuing the charging order.

42.

The judge described the circumstances of this case as similar to those of House of Spring Gardens v Waite. But to my mind there are significant differences. In that case WW, SW and McL were joint tortfeasors (and probably also conspirators). Their interests were identical and they were jointly and severally liable for enormous damages. McL not only knew about the Irish proceedings alleging fraud but actually pleaded them as a defence in the English action. His decision not to join in the Irish proceedings was deliberate and he offered no explanation of it (see the observations made by Stuart-Smith LJ at pp.253-4).

43.

The evidence of Mrs Marks (which the judge seems to have accepted on this point) was that she knew of the master's decision at about the time when it was made and that she was told not to worry because there was to be an appeal. She (unlike McL) had had no previous involvement in the litigation and there is no suggestion that she took (or was at any time before August 1999 advised to take) independent advice. Had she (or the trustees) applied to be joined as parties at the stage of the appeal to Sullivan J, they might well have been met by the objection that Master Murray envisaged that they (or at any rate the trustees) would have a chance of being heard in the Chancery Division.”

In Powell v Wiltshire [2004] EWCA Civ 534, [2005] QB 117 there was a dispute as to the ownership of a light aircraft. Mr Ebbs brought an action against Mr Wiltshire for its return, but during the course of the proceedings Mr Ebbs purported to sell it to Messrs Etherington, Heapy and Storey who sold it on to Mr Powell. At the trial of the first action, Mr Wiltshire obtained a declaration that he was the owner. In a second action brought by Mr Powell against Messrs Wiltshire, Etherington, Heapy and Storey, the judge held that Mr Powell was the owner of the aircraft. Mr Wiltshire appealed on the ground that title to the aircraft had been determined by the judgment in the first action which bound Messrs Etherington, Heapy and Storey and Mr Powell. The Court of Appeal dismissed the appeal. The case is mainly concerned with the effect of a judgment as to title to real property in circumstances where the property has been transferred during the pending of the proceedings. The Court of Appeal held that the judgment only bound transferees if it was given before the transfer and not after.

Having reached that conclusion, Latham LJ went on at [26] as follows:

“It follows that Mr Powell is not precluded by these principles from claiming good title to the Rallye, which he purchased before the date of the judgment in question. He can only be precluded from asserting good title by reason of the wider principles suggested in the judgment of Sir Robert Megarry V-C in Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510 and the approval by Stuart Smith LJ in House of Spring Gardens v Waite [1991] 1 QB 241 of the citation from Lord Denning in Nana Ofori Atta II v Nana Abu Bonsra II [1958] AC 95. Whatever may be said about the position of Mr Etherington, Mr Heapy who gave evidence in the earlier proceedings, and Mr Storey it has never been suggested that Mr Powell stood by in the knowledge of the proceedings, let alone took any part in them. On the other hand, it is clear from the judgment of Judge O'Rorke, that Mr Wiltshire knew full well that by the time his claim came to trial, the Rallye was in the possession of Mr Powell. He took no steps to join Mr Powell in the proceedings nor did he take any steps in relation to Mr Powell to protect his claimed ownership in the aircraft. It is a pity that Judge O'Rorke did not indicate to Mr Wiltshire that it would be necessary to join Mr Powell in the proceedings in order to ensure that the issues could be fully and properly litigated in those proceedings. I can see no reason why, in those circumstances, justice requires the court to consider Mr Powell to be bound by that earlier judgment on any of the principles to which we have been referred…. ”

In Special Effects Ltd v L’Oréal SA [2007] EWCA Civ 1, [2007] RPC 15 the claimant was the proprietor of the registered trade mark SPECIAL EFFECTS. L’Oréal SA had unsuccessfully opposed the claimant’s application relying inter alia upon use of the mark SPECIAL FX by L’Oréal UK. The claimant subsequently brought a claim for trade mark infringement against both L’Oréal SA and L’Oréal UK in respect of use of the mark SPECIAL FX. The defendants counterclaimed for a declaration that the claimant’s trade mark was invalidly registered on the same grounds as those which had previously been relied on in the opposition proceedings. Sir Andrew Morritt C held that L’Oréal SA was precluded by cause of action estoppel from challenging the validity of the trade mark on the same grounds as before and that L’Oréal UK was bound by the estoppel as L’Oréal SA’s privy. The Court of Appeal allowed the defendants’ appeal, holding that L’Oréal SA was not barred by cause of action estoppel, issue estoppel or abuse of process from raising the same challenges again.

This made it unnecessary for the Court of Appeal to decide the issue as to privity. Nevertheless Lloyd LJ delivering the judgment of the Court said this:

“81.

The Chancellor's decision on the point was expressed as follows, in paragraph 55:

‘The principle to be applied is that formulated by Sir Robert Megarry in Gleeson v Wippell and approved by the House of Lords in Johnson v Gore Wood … . What must be ascertained is whether there is a sufficient degree of identity between the First Defendant and the Second Defendant to make it just that the decision in the opposition proceedings should be binding on the Second Defendant in these proceedings. In my judgment the answer to that question is in the affirmative. The Second Defendant could have been joined as a party to the opposition proceedings. In his evidence in the opposition proceedings M. Monteiro evidently regarded the First and the Second Defendants as one person; hence his references to 'my company' in contexts which can now be seen to refer to the Second Defendant alone. Both are concerned with marks which are owned by the First Defendant and used by the Second Defendant in its business in the UK, the former as owner the latter as licensee. The dispute with the claimant concerns the validity and use of their rival marks. Both defendants are members of the same group. Even accepting that the First Defendant is not entitled to give directions to the Second Defendant there is no reason to think that the ultimate holding company cannot give directions to both of them. In my view, prima facie, each company in a group is to be regarded as the privy of every other company in the group unless it demonstrates the contrary. Otherwise the principles of estoppel will become largely inoperable in a corporate structure.’

82.

It seems to us that in the last two sentences of that paragraph the Chancellor went further than was necessary for his decision. With respect, we could not agree with so general a principle. However, it seems to us that the decision may have been justifiable on a more limited and specific basis, which forms part of the Chancellor's reasoning in his paragraph 55. The First Defendant holds such registered trade marks as there are in the L'Oreal group. It was accordingly appropriate that it should have been the party which opposed the application for registration by Mr and Mrs Jones. The Second Defendant is the operating company in the UK for the L'Oreal group; in the course of its business it uses registered marks under licence from the First Defendant. It was, therefore, the company which did such acts as the Claimant complains of. If a corporate group such as L'Oreal chooses to arrange its affairs, no doubt for good reason, in such a way that matters such as trade mark oppositions, as well as applications and the holding of registered trade marks, are conducted by one company, for the benefit of others in the group, and others then use marks of which the first is the registered holder, or other marks, not yet registered, of which the first would be the holder if a registration was obtained, then it seems to us that it might well be consistent with what Sir Robert Megarry V-C said in Gleeson v J Wippell & Co Ltd [1977] 1 W.L.R. 510 at 515 (approved by Lord Bingham in Johnson v Gore Wood [2002] 2 AC 1 at 32) to regard any constraint on the first, whether by way of cause of action estoppel, issue estoppel or abuse of process, as applying also to the second as its privy. The proposition enunciated by Sir Robert Megarry was that, ‘having due regard to the subject matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was a party should be binding in proceedings to which the other is a party’. It would be relevant to consider the corporate structure adopted by L'Oreal, and the arrangements of which Mr Monteiro gave evidence within the group. The Claimant could reasonably rely on the fact that information was provided by the Second Defendant and used in the course of the opposition proceedings. In Gleeson Sir Robert Megarry said that for employees of one company, not associated with the litigant, to give evidence on behalf of the litigant in the earlier litigation, did not constitute the first a privy of the litigant, but this seems to us a very different relationship, such that the assistance given with the evidence would be relevant. This is also emphasised by the way in which Mr Monteiro spoke of ‘my Company’ in relation to both the First Defendant and the Second Defendant without distinction. We do not decide the point, but it seems to us that the Claimant's contentions as regards privity might have a substantial basis, even though on less general grounds than those expressed by the Chancellor.”

Finally in this survey of the authorities I will mention the recent judgment of Sales J in Seven Arts Entertainment Ltd v Content Media Corp plc [2013] EWHC 588 (Ch). The facts were complicated, and I do not think it is profitable to try and summarise them. Sales J considered most of the authorities referred to above in the course of his judgment. For present purposes it suffices to note what he said at [73]:

“As stated above, the basic rule is that, before a person is to be bound by a judgment of a court, fairness requires that he should be joined as a party in the proceedings, and so have the procedural protections that carries with it. This includes the opportunity to call any evidence he can to defend himself, to challenge any evidence called by the claimant and to make any submissions of law he thinks may assist his case. Although there are examples of cases in which a person may be found to be bound by the judgment of a court in litigation in relation to which he stood by without intervening, in my judgment those cases are illustrations of a very narrow exception to the general rule. The importance of the general rule and fundamental importance of the principle of fair treatment to which it gives expression indicate the narrowness of the exception to that rule.”

The conclusions which I draw from this survey of the authorities are as follows:

I reviewed the law as to joint tortfeasance (i.e. accessory liability) in L’Oréal SA v eBay International AG [2009] EWHC 1094 (Ch), [2009] RPC 21 at [346]-[382]. As can be seen from that exposition, A will be jointly liable for patent infringements committed by B in either of two (closely-related) situations: (i) where A procures B to commit the infringing act by inducement, incitement or persuasion and (ii) where A and B act in concert with one another pursuant to a common design. Since then, there have been two further decisions on this topic in the Court of Appeal.

In Fabio Perini SpA v LPC Group plc [2010] EWCA Civ 525 the Court of Appeal upheld the trial judge’s decisions that PCMC Italia, but not PCMC UK, was jointly liable for infringements committed by LPC. The infringed claims were method claims, and the judge had held PCMC Italia and LPC had acted in concert pursuant to a common design because it was clear from the contract between PCMC Italia and LPC that the machine supplied by PCMC Italia to LPC was to operate in accordance with the patented method and PCMC Italia had constructed the machine on LPC’s premises and caused it work in that way. Lord Neuberger of Abbotsbury MR, with whom Hughes and Jackson LJJ agreed, said:

“104

So far as joint liability is concerned, both Perini and PCMC refer to a decision of this court (which went to the House of Lords, but not on the point at issue here), Sabaf v Meneghetti and MFI [2003] RPC 14, where, at paragraphs 58-59, the Court of Appeal rejected the contention that the supply of infringing goods from abroad into this country was sufficient to fix the supplier with liability even where the supplier ‘knew that [the goods] were going to be imported into the UK’. The supplier in that case had ‘merely been acting as a supplier of goods to a purchaser, which was free to do what it wanted with the goods’. Peter Gibson LJ said that, in order to be liable, the alleged joint tortfeasor must have ‘been so involved in the commission of the tort as to make himself liable for the tort’, and that he must have ‘made the infringing act his own’. While I agree with the decision, I must confess to finding the reasoning rather circular, which is not surprising as the circumstances in which joint liability arises are difficult, probably impossible, to define fully satisfactorily in abstract.

105.

At least to my mind, the test propounded by Mustill LJ in an earlier patent case, Unilever v Gillette [1989] RPC 583 , 608–609, is rather more helpful in the present case. At the end of a brief analysis of the principles (quoted by the Judge at [2009] EWHC 1929 (Pat), paragraph 177), Mustill LJ said that it was ‘enough if the parties combined to secure the doing of acts which in the event prove to be infringements’. Merely exporting a machine from another country to a third party in the UK, even helping to instal the machine in the third party's premises in the UK, would not, at least in ordinary circumstances, amount to such an act, as it is the use of the machine (which, in that case at least, was a matter entirely for the third party) which constitutes the tort.”

More recently, in Football Dataco Ltd v Sportradar GmbH [2013] EWCA Civ 27 Sir Robin Jacob, with whom Lewison and Lloyd LJJ agreed, said at [91]:

“The earlier cases are concerned with the liability of a seller of physical goods for infringements carried out by his purchaser with those goods. They establish that the seller is not a joint-tortfeasor in two circumstances:

(a)

where the goods he sells are not themselves infringing but can be used by the ultimate consumer to make infringing goods. This is so even if the seller knows that many ultimate consumers will do just that. Even in such a case the choice as whether or not he will infringe is made by the consumer alone and there is no common design to infringe – see the passage from the speech of Lord Templeman in CBS v Amstrad cited by Arnold J at [348]; and

(b)

where the seller of infringing goods is abroad and is not himself responsible for the importation of the goods, as where under a c.i.f. contract the property passes abroad and the carrier is the buyer's agent not the seller. That remains so even if the overseas seller acts as the buyer's agent in concluding the contracts of freight and insurance. Only the buyer infringes in the jurisdiction, see Meneghetti. As Mr Mellor put it ‘control ends at the factory gate’.”

Lundbeck contends that Resolution is precluded from challenging the validity of the Patent, and hence the SPC, by virtue of the decisions of the courts in the previous escitalopram litigation on two bases. The first is that Resolution is bound by those decisions by virtue of privity of interest with Arrow Generics. In short, Lundbeck contends that (i) there was at the time of those proceedings a sufficient degree of identification between Resolution and Arrow Generics to make it just to hold that the decisions to which Arrow Generics were party should be binding upon Resolution and (ii) it is immaterial that Resolution is now in separate ownership since it remains the same legal person.

In considering this contention I think it is helpful to begin with some basic principles. The starting point is that a company has a separate legal existence to its shareholders and its own rights and liabilities: see Salomon v A. Salomon & Co Ltd [1897] AC 22. Furthermore, as Roskill LJ put it in The Albazero [1977] AC 774 at 807, “… each company in a group of companies … is a separate legal entity possessed of separate legal rights and liabilities … ”. Accordingly, I respectfully agree with the Court of Appeal in Special Effects that the mere fact that company A is a member of the same group of companies as company B and thus under the same ultimate control is not enough to make A the privy of B. Rather, what is required is that company A had a sufficient interest in the subject matter of the earlier proceedings to make it just to hold that it is bound by the outcome of those proceedings even though it was not a party to those proceedings.

Where a company is precluded by cause of action estoppel, issue estoppel or abuse of process from re-litigating a matter, it will not cease to be bound merely because of a subsequent change of ownership. Likewise, if company A has a sufficient interest in the subject matter of the earlier proceedings involving company B to make it just to hold that it is bound by the outcome of those proceedings, then a subsequent change of ownership of company B will not change that.

Nevertheless, I consider that the change in Resolution’s ownership in December 2009 emphasises the importance of focusing upon Resolution’s interest in the subject matter of the earlier escitalopram litigation and not merely upon the fact that it was under the same ultimate control as Arrow Generics at that time. At times in his submissions, counsel for Lundbeck appeared to be arguing that Resolution had privity of interest with Arrow Generics simply because both Resolution and Arrow Generics were under the control of Mr Tabatznik in 2001-2009. For the reasons given above, I do not accept that. Alternatively, if the mere fact of Mr Tabatznik’s control was enough to make Resolution a privy of Arrow Generics until December 2009, that does not provide a sufficient basis for concluding that Resolution is still a privy now that it is independently owned.

In my judgment it is clear that Resolution had no actual interest in the previous escitalopram litigation. By the time Arrow Generics commenced its claim in February 2006, Resolution’s short-lived and superficial investigation of routes of synthesis to escitalopram was over. Resolution was simply not in a position to manufacture (or subcontract the manufacture of) escitalopram. Nor did Arrow Generics need Resolution to do so, since it was able to source escitalopram from one of seven other suppliers. If Arrow Generics was successful in the litigation, it would have sold escitalopram obtained from one of those suppliers and not from Resolution. Indeed, for the reasons explained above, Arrow Generics’ MAs would not have permitted it to source escitalopram from Resolution.

Counsel for Lundbeck also relied upon Resolution’s earlier interest in citalopram. In my view that does not assist Lundbeck. Citalopram and escitalopram are different APIs covered by different patents and requiring separate MAs to market them. What matters for present purposes is Resolution’s interest in escitalopram, not its interest in citalopram. In any event, Resolution’s interest in citalopram had ceased by October 2004 when it destroyed its stock (or at the very latest in November 2005 when it decided to abandon its patent applications). Furthermore, by that time Arrow Generics was selling citalopram obtained from a different source. Thus Resolution had no interest in citalopram at the time of the previous escitalopram litigation either.

Still less do Resolution’s involvement in the Dutch citaloprom MAs, the lactulose MA and the Scottish tibolone experiments assist Lundbeck. None of these comes anywhere near demonstrating any interest on the part of Resolution in the earlier escitalopram litigation.

Given that Resolution had no interest in escitalopram at the time of the previous proceedings, I conclude that there was no privity of interest between Resolution and Arrow Generics with regard to those proceedings.

The second basis upon which Lundbeck contends that Resolution is bound by the earlier decisions is by virtue of privity of interest with Teva UK and/or Teva PI. As I understand it, Lundbeck argues that (i) Resolution would be a joint tortfeasor with one or more Teva companies if Resolution were to import and sell escitalopram and accordingly (ii) Resolution is a privy of Teva UK and/or Teva PI.

So far as the allegation of joint tortfeasance is concerned, Lundbeck’s main case is that Resolution and Teva Poland would be joint tortfeasors. Resolution admits that it intends, if the Patent is held invalid, to import and sell escitalopram supplied by Teva Poland under the terms of the supply agreement. Resolution disputes, however, that anything in the supply agreement or the surrounding circumstances amounts to Teva Poland combining with Resolution to secure the commission of any acts which would amount to infringements of the Patent.

Under the supply agreement title to the escitalopram passes to Resolution in Poland. It is up to Resolution where in the Territory the product is sold. Resolution is solely responsible for importing the product into the UK, repackaging it and distributing it here. Furthermore, Resolution is solely responsible for obtaining the necessary PL(PI)s. Applying the principles set out in paragraphs 101-103 above, it would therefore seem clear that Teva Poland is not a joint tortfeasor with Resolution.

Lundbeck nevertheless relies on three main matters as showing that Teva Poland and Resolution have participated in a common design to commit infringing acts. First, it relies upon the way in which the price payable under the supply agreement was negotiated between Resolution and Teva. In essence, this was by an apportionment of the assumed profits available. Teva Poland does not in fact get a share of profits made by Resolution, however. It gets a fixed price per pack supplied. If Resolution cannot sell the product it purchases, or can only sell it at a lower price than it predicted, then it is Resolution, not Teva Poland, which takes the loss. If Resolution is able to sell the product at a higher price than it predicted, it is Resolution that keeps the extra profit. Of course, if Resolution is able to sell large quantities of product, that will benefit Teva Poland, but that would be true of any arm’s length supplier.

Secondly, Lundbeck relies on the acknowledgement by Resolution that the products are intended for sale in Spain (clause 9.1). The purpose of this clause is clear: what it is saying is that the products are designed for the Spanish market and it is for Resolution to get any necessary approvals needed to sell them in other countries and to undertake any necessary repackaging. This emphasises that it is Resolution which is responsible for importation into, and keeping and disposal of the products in, the UK.

Thirdly, Lundbeck relies upon the obligation on Resolution to try to obtain for Teva the benefit of any cross-undertaking (clause 9.6). Again, the purpose of this is clear. An injunction against Resolution would be likely to cause loss to Teva Poland. Following the decision of the Court of Appeal in SmithKline Beecham plc v Apotex Europe Ltd [2006] EWCA Civ, [2007] Ch 71, without such a provision Teva Poland might well not be able to obtain compensation for that loss from Lundbeck in the event that the Patent was held invalid and thus the injunction wrongly granted. This is an entirely sensible provision for any supplier of pharmaceutical products to want to include in a supply agreement when it knows that a third party patentee is likely to seek an interim injunction to restrain distribution of those products in the UK.

In my judgment none of these points, either individually or cumulatively, amounts to a case of joint tortfeasance on the part of Teva Poland. None of them establish that Teva Poland procured the commission of infringing acts by Resolution or has combined with Resolution to secure the commission of infringing acts. The fact that Teva Poland may benefit commercially under the supply agreement, whether by selling escitalopram or by recovering damages under Lundbeck’s cross-undertaking, is not enough.

Still less does Lundbeck have any case of joint tortfeasance on the part of any other Teva company. In this regard counsel for Lundbeck again relied upon three main points. First, he relied upon the fact that all the initial negotiations took place between Resolution and Teva UK and that Teva Poland only stepped into the picture towards the end. As counsel for Resolution pointed out, however, it is clear from the evidence that Teva UK was concerned to ensure that it did not act in a manner that could expose itself to a claim for joint tortfeasance. It therefore passed the enquiry on to its sister company in Poland. While there had been negotiations over a supply agreement between Resolution and Teva UK, no agreement had been concluded at that point. If Teva Poland is not liable as a joint tortfeasor, there is no basis for holding that Teva UK is liable.

Secondly, counsel relied upon the involvement of Dr Gonen of Teva Europe in the negotiations both before and after the switch from Teva UK to Teva Poland. But it appears that Dr Gonen’s role was to provide internal legal advice to companies in the Teva group, including Teva UK and Teva Poland. This cannot make either Teva UK or Teva Europe a joint tortfeasor with Resolution.

Finally, counsel relied upon the statement in Resolution’s PL(PI) applications that notice had been given to the relevant rights holder on 22 August 2012 (see paragraphs 67-68 above). He submitted that this showed that notice to Teva UK had been treated as notice to Teva Spain. I do not accept this submission. For the reasons given in paragraph 70-71 above, I think that Resolution was confused about the Specific Mechanism. If I am right about that, there is no evidence that Teva Spain owned any relevant trade marks in respect of which notice needed to be given. Even if I am wrong about that, there is no evidence that Teva Spain owned any relevant patents either (let alone patents in Poland). Either way, it does not appear that Resolution was required to give Teva Spain any notice. In any event, the fact that Resolution thought that sending draft heads of terms to Teva UK was sufficient for the purposes of giving notice to Teva Spain does not begin to establish that either Teva UK or Teva Spain are joint tortfeasors with Resolution.

Given that I have concluded that Lundbeck has failed to establish that any Teva company would be a joint tortfeasor with Resolution, it is not necessary for me to consider the second limb of Lundbeck’s argument. All I will say is that it is not clear to me why, even if Teva Poland was a joint tortfeasor with Resolution, that would lead to the conclusion that Resolution is a privy of Teva UK and/or Teva PI so as to be bound by the earlier decisions. In that regard, I note that Lundbeck made no real attempt to show that there was privity of interest between Teva Poland and either Teva UK or Teva PI with regard to the previous escitalopram litigation. Thus there is no evidence as to when Teva Poland started manufacturing escitalopram.

There is no dispute about these.They were conveniently summarised by Lewison J (as he then was) in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]:

“As Ms Anderson QC rightly reminded me, the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:

i)

The court must consider whether the claimant has a ‘realistic’ as opposed to a ‘fanciful’ prospect of success: Swain v Hillman [2001] 2 All ER 91;

ii)

A ‘realistic’ claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8].

iii)

In reaching its conclusion the court must not conduct a ‘mini-trial’: Swain v Hillman.

iv)

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10].

v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550.

vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63.

vii)

On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.”

This summary was cited with approval by Etherton LJ (with whom Wilson and Sullivan LJJ agreed) in AC Ward & Son v Catlin (Five) Ltd [2009] EWCA Civ 1098, [2010] Lloyds Rep IR 301at [24].

Summary judgment is rarely appropriate in patent cases even on issues as to claim construction and infringement for the reasons explained by Dillon LJ in Strix Ltd v Otter Controls Ltd [1991] FSR 354at 357-358 and Aldous LJ in Monsanto & Co v Merck & Co [2000] RPC 77 at 92.

In Eli Lilly & Co Ltd v Neopharma Ltd [2011] EWHC 1852 (Pat), [2011] FSR 43 Floyd J granted summary judgment dismissing an obviousness attack on a patent for olanzapine based on prior art referred to as 235 in circumstances where the same attack had failed in earlier proceedings (see Dr Reddy’s Laboratories (UK) Ltd v Eli Lilly & Co Ltd [2008] EWHC 2345 (Pat), [2009] FSR 5 at [150]-[159]) and there was nothing to suggest that a different result could realistically be achieved by Neopharma. He refused to grant summary judgment on another attack based on prior art referred to as Chakrabarti which had also failed in the previous case, holding that on the evidence Neopharma had a real prospect of success in relation to that attack.

The technical background, the Patent, the skilled person and the common general knowledge are all set out in full in the judgment of Kitchin J in the earlier proceedings and I shall not repeat them here. It is important to bear in mind, however, that claim 1 of the Patent is to escitalopram, claim 3 is to a pharmaceutical composition containing escitalopram and claim 6 is to a method of making escitalopram by stereospecific conversion from an enantiomer of the precursor diol.

Resolution contends that the method of claim 6 (and hence the products of claims 1 and 3) was obvious in the light of 884. There are four steps in Resolution’s argument:

In the previous proceedings, Kitchin J accepted steps (i)-(iii), but not (iv). He held at [109] that investigation of the enantiomers of citalopram was an obvious goal. He held at [153]-[154] that an obvious route was the resolution of a chiral intermediate, such as the diol disclosed in 884. He held at [157] that it would have been a routine step to separate the enantiomers of the diol. Thus he said at [158] that the crucial question was “whether it would have been obvious to the skilled person that the ring of the resolved diol could be closed without risking loss of stereochemistry”.

Kitchin J considered the evidence relating to that issue from Dr Newton for the claimants and Prof Davies for Lundbeck at [159]-[177]. In particular, he considered the evidence relating to Baldwin’s Rules for ring closure reactions, which say that a 5-Exo-Tet reaction is favoured. Dr Newton said that the S_N2 reaction in question was an example of such a reaction and so would be expected to work. Prof Davies’ evidence was that Baldwin’s Rules did not apply to unsaturated systems, which he said involved significantly different geometries. Kitchin J accepted Prof Davies’ evidence, and concluded that the skilled person would not have been satisfied that there was a real prospect of the reaction working – he would not have thought that Baldwin’s Rules applied to unsaturated systems, nor would he have thought that the necessary geometry could be achieved (see [171]-[172]). Kitchin J thought there was also force in two other points made by Prof Davies relating to the relatively poor nucleophilicity of tertiary alcohols and promotion of a rival mechanism by adjacent benzene rings (see [175]-[176]).

Thus Kitchin J rejected the case of the claimants based on 884 because he was persuaded by the evidence of Prof Davies that the skilled person would not have regarded the ring closure reaction as likely to work. The claimants’ appeal to the Court of Appeal on this issue was rejected because the judge had made no error of principle (see the judgment of Jacob LJ at [25]).

Despite the claimants’ failure in the previous litigation, Resolution contends that it has a real prospect of success because there is a substantial and weighty body of expert opinion (in addition to Dr Newton) which is contrary to the view of Prof Davies that was accepted by Kitchin J. In particular, Resolution relies upon the fact that in proceedings in the Netherlands brought by Teifenbacher, Centrafarm and Ratiopharm, reports strongly disagreeing with Prof Davies’ analysis were submitted from the following experts:

Resolution also relies on the fact that the District Court of The Hague (Judges van Peursem, Kalden and Beijen) preferred the opinion of Prof Baldwin and his supporters to that of Prof Davies, and concluded that the skilled person would expect the ring closure reaction to work (see [6.37]-[6.54]). It explicitly differed from Kitchin J on this point (see [6.39]). Accordingly, it held that the method of claim 6 was obvious. On appeal, the Court of Appeal of The Hague (Judges Fasseur-van Santen, Bonneur and Grootonk) held that claim 6 was not obvious. The reasoning of the Court of Appeal is not very easy to follow, but it appears that it regarded the decision to use the diol as an intermediate as inventive (see [12]), contrary to the conclusion of Kitchin J on that point. Importantly, the Court of Appeal did not disagree with the District Court with regard to the ring closure (see [11.3]-[11.4]). Furthermore, the Court of Appeal nevertheless held that the product claims were obvious. Both sides have appealed to the Dutch Supreme Court, whose judgment is presently awaited.

Against this, Lundbeck relies on the fact that it has successfully upheld the validity of the Patent and its counterparts not only in the UK, but also in every other country where it has been litigated bar the Netherlands. Specifically, Lundbeck relies upon the decisions of the courts or patent offices in the following countries: Australia, Belgium, Canada, France, Germany, Hungary and the USA. It also relies upon the fact that court-appointed experts in several countries (including Austria, Belgium and Germany) have supported its case.

In these circumstances, counsel for Lundbeck submitted that the decisions of the Dutch courts were outliers. While it is true that the Dutch courts appear to be out of step with the other courts that have considered this question, I do not accept the suggestion that their judgments can therefore be ignored. The District Court of The Hague is one of the most experienced and respected patent courts in Europe. The panel who heard this case was presided over by the then President (subsequently promoted to the Court of Appeal) and included his successor. Its judgment is clearly reasoned, and consistent with that of Kitchin J on steps (i)-(iii). It did not agree with him as to step (iv) for reasons it explained by reference to the evidence before it. There is no reason to think that it suffered from some kind of intellectual aberration. In my view the decision of the Dutch Court of Appeal does not suggest otherwise.

Of the other decisions, counsel for Lundbeck relied particularly strongly on the recent judgment of Harrington J in the Federal Court of Canada in Apotex Inc v H. Lundbeck A/S [2013] FC 192. Both Prof Baldwin and Prof Davies (as well as other expert witnesses on both sides) gave evidence. Harrington J concluded that the diol route was not obvious because it was not more-or-less self-evident that it would work (see [213]-[214], [216]-[217]). In this regard he explicitly adopted the opinion of Prof Davies (see [218]).

Counsel for Resolution submitted that, in so concluding, Harrington J had applied the test for obviousness to try stated by Jacob LJ in Saint-Gobain PAM SA v Fusion Provida Ltd [2005] EWCA Civ 177 at [35], which had been adopted by the Supreme Court of Canada in Apotex Inc v Sanofi-Synthelabo Canada Inc [2008] SCC 61, [2008] 3 SCR 265 at [65], and that the law in this country had subsequently moved on: see e.g. MedImmune Ltd v Novartis Pharmaceuticals Ltd [2012] EWCA Civ 1234 at [90]-[93] (Kitchin LJ). This submission appears to me to have force.

More importantly, it is clear from Harrington J’s judgment that he did not simply rely upon the judgment of Kitchin J, still less the judgments of the other courts mentioned above. It is also clear from his judgment that Apotex’s case was supported by the opinions of Prof Baldwin and other experts, and that it required a six week trial to enable Harrington J to decide whose opinions he preferred. In my view, the fact that Harrington J ultimately came to the conclusion that he accepted Prof Davies’ opinion does not demonstrate that the issue is one to which there is only one answer. On the contrary, it confirms that it is one which requires a full trial for its proper resolution.

Counsel for Lundbeck sought to make something of the fact that Resolution has not committed itself to calling any of Profs Baldwin, Bickelhaupt or Barrett at trial. I am unimpressed by this point. As counsel for Resolution pointed out, we have not yet arrived at the procedural stage where Resolution will be obliged to identify the expert witness(es) it intends to call at trial. What matters at this stage is that it is clear that there are at least three expert witnesses who can give evidence supportive of Resolution’s case at trial. It does not matter which of them Resolution decides to call (or, indeed, if it decides to call an expert who has not yet been identified).

For these reasons I conclude that Resolution does have a real prospect of successfully contending that the method of claim 6 of the Patent, and hence claims 1 and 3, are obvious over 884. Statistically speaking, it is unlikely that Resolution will succeed. That does not mean that its prospects of success can be described as fanciful or unreal.

By its application to amend its Grounds of Invalidity, Resolution seeks to introduce a further item of prior art in addition to 884, namely an article entitled “Quantitative structure-activity in a series of selective 5-HT uptake inhibitors” by Allan J. Bigler et al published in the May/June 1977 edition of the European Journal of Medicinal Chemistry (“Bigler”). Resolution contends that claims 1-5 of the Patent, but not claim 6, are obvious over Bigler. Lundbeck resists the application to amend on the basis that this contention has no real prospect of success.

Again, there are four steps in Resolution’s argument:

Again, Resolution relies upon the judgment of Kitchin J in the previous proceedings as supporting its case on steps (i) and (ii). Kitchin J did not consider steps (iii) and (iv) since the claimants in those proceedings did not advance this case. As I understand it, there is little dispute that conversion of the enantiomers of desmethylcitalopram stereospecifically to escitalopram and its enantiomer (step (iv)) would be relatively easy. The principal area of dispute concerns step (iii), and in particular whether the skilled person would (a) choose desmethylcitalopram and (b) be able to resolve desmethylcitalopram into its enantiomers.

This case was run in the Dutch proceedings. It was considered by the District Court in its judgment at [6.17]-[6.25]. In summary, the District Court held that the choice of desmethylcitalopram as the target of resolution was obvious (indeed, it appears that Lundbeck did not argue to the contrary) and that the skilled person would succeed in resolving desmethylcitalopram using common chiral acids and solvents. In reaching this conclusion, the District Court relied on a report of some experiments performed by Matrix Laboratories which was submitted at a late stage of the proceedings. The Court of Appeal held claims 1-5 obvious for other reasons and did not need to consider the Matrix experiments (see [12]).

The German Federal Court of Justice rejected this case, saying that the court expert had identified (unspecified) errors in the Matrix report and holding that it was not obvious that resolution of desmethylcitalopram would be successful (see [60] – [63]).

The desmethyl case does not appear to have been considered in any detail by any other court (although it was also briefly considered and dismissed by the Hungarian Intellectual Property Office).

Lundbeck has alleged that the Matrix report is a work of fiction. This allegation is based on (a) comments made in an expert report by Prof Christopher Frampton prepared for the Dutch appeal proceedings (which has never been the subject of cross-examination) and (b) evidence that attempts to reproduce the Matrix experiments by Lundbeck (in-house and at the laboratory of Prof Frampton’s company Pharmorphix) did not succeed.

Against this, Resolution relies upon (a) two sets of experiments undertaken by Prof Bernd Clement and Dr Ulrich Girreser who resolved desmethylcitalopram using the same standard resolving agent (namely (+)-ditoluoyltartaric acid) and (b) an expert report of Prof Richard Kellogg prepared for the Dutch appeal proceedings which comments on the experiments by Matrix and Pharmorphix and the first set of experiments conducted by Prof Clement and Dr Girreser. Prof Kellogg concluded that the latter experiments were entirely convincing and had succeeded in resolving desmethylcitalopram.

Furthermore, Resolution has served a witness statement from its Head of Technical Operations Dr Parveen Bhatarah in which she describes experiments carried out by three members of her department under her supervision. Those experiments succeeded in resolving desmethylcitalopram using the same standard resolving agent. The resolved (+) desmethylcitalopram was then methylated to produce escitalopram at an enantiomeric purity of 91% (or 94% when repeated on a larger scale).

Counsel for Lundbeck made a series of criticisms of both the experiments carried out by Prof Clement and Dr Girreser and the Resolution experiments, describing them as “litigation chemistry of the worst kind”, but he did not go so far as to suggest these were also fictitious. I do not propose to go into the detail of these criticisms. In my view it is manifest that these are matters that require a witnessed repetition of the experiments, expert evidence and cross-examination at trial to resolve.

Counsel for Lundbeck also relied on the fact that the inventor of the patented method of synthesising escitalopram, Klaus Bøgesø, gave evidence before Kitchin J, which the judge accepted, that he had tried to resolve desmethylcitalopram and failed. No doubt that is evidence which supports Lundbeck’s case, but in my judgment it does not begin to show that it is unanswerable. Thus the District Court of The Hague concluded that Mr Bøgesø had not taken all the steps that the skilled person would take.

The same goes for counsel for Lundbeck’s argument that it would not be obvious to choose desmethylcitalopram as a target for resolution given that Bigler discloses a large number of compounds of which desmethylcitalopram is just one. Not only did Lundbeck not contend that the choice of desmethylcitalopram was inventive in the Dutch proceedings, but also it appears to have been one of Mr Bøgesø’s first choices.

Counsel for Lundbeck also sought to rely on the fact that Resolution had not initially pleaded this attack and had only sought to introduce it in response to Lundbeck’s application as showing that the desmethyl case was only being relied on in a desperate attempt to avoid summary judgment. As counsel for Resolution pointed out, however, Resolution has given a perfectly cogent reason as to why it did not plead the desmethyl case at the outset, namely it did not have a copy of Bigler at that time.

In my judgment it is impossible to say that the desmethyl case has no real prospect of success. Whether the case ultimately succeeds will depend on the experimental and expert evidence, but it requires a trial for its proper determination. At this stage Resolution should have permission to amend its Ground of Invalidity to include it.

The Court’s powers to make an order under CPR rr. 24.6 and/or 3.1 that a party provide security for the other party’s costs as a condition of bringing his claim or defence were considered by Kitchin J in Allen v Bloomsbury Publishing plc [2011] EHWC 770 (Ch),[2011] FSR 22. Having considered the decisions of the Court of Appeal in Olatawura v Abiloye [2003] 1 WLR 275, Ali v Hudson [2003] EWCA Civ 1793 and Bryan Huscroft v P&O Ferries Ltd [2010] EWCA Civ 1483, he said at [32] (a passage that was not criticised on appeal: see [2011] EWCA Civ 943 at [7]):

“I derive from these authorities the following propositions which have a bearing on the application before me:

(i)

the court has jurisdiction under rule 24.6 to make an order which is tantamount to an order for security for costs;

(ii)

that jurisdiction extends to requiring someone advancing an unpromising claim to secure the defendant’s costs;

(iii)

before ordering security for costs in any case, the court should be alert and sensitive to the risk that by making such an order it may be denying the party concerned a right of access to the court; whether or not the person concerned has raised or can raise the money will always be a prime consideration;

(iv)

the court has a wide discretion to ensure that justice is done in any particular case;

(v)

relevant considerations, beside the ability of the person to pay, include his conduct of the proceedings and the apparent strength of his case;

(vi)

a party only becomes amenable to an adverse order for security under rule 3 once he can be seen either regularly to be flouting proper court procedures or orders or otherwise has demonstrated a want of good faith, that is to say a will to litigate a genuine claim or defence as economically as reasonably possible in accordance with the overriding objective;

(vii)

likewise, an order for security for costs would not be appropriate in every case where a party appears to have a somewhat weak claim or defence;

(viii)

exorbitant applications for summary judgment in misguided attempts to obtain conditional orders providing security for costs are not to be encouraged;

(ix)

the occasions when security for costs is ordered solely because the case appears weak may be expected to be few and far between;

(x)

it would be wrong to encourage litigants to regard rule 3.1 as providing a convenient means of circumventing the requirements of Part 25 and thereby providing a less demanding route to obtaining security for costs. When the court is asked to consider making an order under rule 3.1(3) or 3.1(5) which is or amounts to an order for security for costs or when it considers doing so of its own motion it should bear in mind the principles underlying rules 25.12 and 25.13. In my judgment, the court should also bear this principle in mind when considering whether to make a conditional order under rule 24.6.”

On the facts of the case Kitchin J went on to make an order for security. So too did Floyd J in Lilly v Neopharma.

In the present case the starting point is that Lundbeck has the benefit of a certificate of contested validity of the Patent. Accordingly, if it is successful in defending the validity of the Patent again, it will get an order for Resolution to pay its costs to be assessed on the indemnity basis. Furthermore, there is no reason to believe that Resolution will be unable to pay Lundbeck’s costs. Accordingly, Lundbeck does not suggest that an order for security for costs should be made on conventional grounds. Lundbeck nevertheless contends that there are significant similarities between the facts of the present case and those in Lilly v Neopharma, and that an order for security under rr. 24.6 and 3.1 is equally justified here. I will consider the matters which Lundbeck relies on in turn.

First, Resolution could have been party to the previous litigation. I do not regard this as a factor in favour of an order for security in this case. Resolution had no interest in escitalopram at the time of the previous litigation. Accordingly, it had no reason to become a party to it.

Secondly, the prior art is the same. This is true so far as 884 is concerned, but not Bigler.

Thirdly, Resolution has a very weak case. In my judgment Resolution’s case is not so weak as to justify a conditional order for security. This is particularly true in relation to the desmethyl case.

Fourthly, Resolution has conducted itself in a manner that is open to criticism. The only point of any substance at all that was made under this heading was that Resolution had misled Roth J at the hearing on 24 January 2013. At that time Resolution was relying upon the first witness statement of Mr Greenwood, in which he said that Resolution has started work on its current escitalopram project in March 2012. In his second statement, having been reminded by Resolution’s disclosure documents, Mr Greenwood accepted that the process had started in November 2011. Lundbeck claims that this was relevant to Roth J’s decision to make an order for expedition for the trial. It was not put to Mr Greenwood in cross-examination that the account he gave in his first witness statement was deliberately untrue, however. Furthermore, very little was done by Resolution between November 2011 and March 2012. I do not think that Roth J’s decision would have been any different if he had had Mr Greenwood’s second statement before him, since it was mainly driven by the date of expiry of the SPC. In any event, this is not comparable to the behaviour of Neopharma in the Lilly v Neopharma case.

Finally, Lundbeck says that there is a risk of injustice to Lundbeck if an order for security is not imposed. I am unable to understand why this is so given the matters considered above.

Accordingly, I decline to make any order that Resolution provide security for Lundbeck’s costs.

For the reasons given above, I conclude as follows: