Illumina, Inc & Ors v Premaitha Health PLC

This application, adjourned from a case management conference (“CMC”) heard before Birss J on 18th April 2016, arises in major patent litigation between a number of parties but primarily, if I can put it that way, between an American corporation, Illumina, and an English defendant. The case is due to be heard in the Patents Court, at what one might call an orthodox patent trial, listed in a window commencing 3rd July 2017, i.e. effectively in one year's time. When I say an “orthodox” patent trial, I mean that the claimants, who are the patentees or licensees of the patentees, seek injunctions for infringement, damages or an account of profits, and so forth, whereas the defendants contend that the patents are invalid or alternatively are not infringed.

As I understand it, pleadings are considerably advanced on those technical issues. What has happened and given rise to the issue presented to the court today is an unfortunate procedural development. As I mentioned, the CMC was listed before Birss J in the Patents Court on 18th April. Not very long before that, the defendant had indicated that it wished to raise various competition issues which would arise if the patents were valid and infringed.

It appears, from the incomplete information now before the court, that this was first ventilated in correspondence between the parties themselves and not their English solicitors at some time in March. As regards more formal steps in the English litigation, it was first raised in solicitors' correspondence on 1st April 2016, by reference to the decision of the Court of Justice of the European Union in the Huawei case, with a demand for a licence on FRAND terms. That led to a response from the claimants' solicitors, dated 8th April, saying:

"Should your client intend to pursue a competition defence based on the principles set out by the CJEU in Huawei v ZTE, you should provide us without delay with your client's draft Amended Defence. This should fully particularise your client's case..."

That prompted an application issued by the defendant on the 12th April, to be heard at the CMC shortly afterwards, seeking permission to introduce what has been described as a non-technical defence, i.e. a defence raising various competition issues. There are, in fact, two actions before the court, the first concerning two patents and the second concerning a third patent, but they have been ordered to be heard together. For that reason, two draft non-technical defences were included with the draft order accompanying that application. It follows that the claimants saw those draft pleadings only a few days before the hearing of the CMC.

At the CMC, on 18th April, the defendant nonetheless pressed the court to grant permission to introduce those pleadings, taking the position that the claimants could subsequently, and as it were on full consideration of the pleadings, make any application to strike them out or for summary judgment. That course, understandably, did not commend itself to the judge, but equally he recognised that the claimants could not be expected to address a wholly new case at such very short notice. The non-technical defences raise some complex questions under competition law and, apart from anything else, the claimants were not represented by a specialist competition lawyer at that hearing. The matter was therefore left on the basis that it could come back before the court at a subsequent hearing. The order made provided that the application to introduce the non-technical defences be adjourned to a subsequent hearing; that the claimants shall give notice within a specified period of the parts of the draft defences to which they object and on what basis; and that if that subsequent hearing did not for some reason take place, then the defendant would be given permission to serve the non-technical defences in the form annexed to its application.

It was in the light of those submissions before the judge and the consequent order which he made, that the claimants served their notice of objection. That prompted a flurry of witness statements. There is no doubt that a great deal of work, both legally and in terms of factual evidence, has been deployed in the meantime for what was potentially a substantial hearing as to the arguability of the various competition defences that the defendant sought to introduce, whether the pleadings are sufficiently particularised and precise, and so forth.

However, on considering the papers, it became clear to me that to have such a hearing and then a judgment which potentially might be appealed, as the issues of law are not necessarily straightforward or uncontroversial, was really not appropriate in terms of the efficient conduct of this litigation at this stage.

As I have mentioned, there are three patents at issue. Each of those patents has, in the usual way, a large number of claims. Although the claimants do not contend that all the claims are infringed, they are relying on a significant number, I believe at least ten claims, under each of the three patents. It follows that there are a whole range of possible outcomes of the technical trial. It is of course possible that the defendant will be wholly successful such that there is no infringement of any valid claim. If that is the outcome, then the non-technical defences fall away. But if the outcome is a finding of infringement of only some of the claims, then the shape of the competition arguments, and therefore the non-technical defence, may be significantly altered. As the skeleton arguments placed before me on the competition issues make clear, much depends on the scope of the patents.

The market definition for which the defendant contends is framed in terms of patent technology that is an essential input to the product which the defendant has produced. That is strongly challenged, as unsustainable, by the claimants. All of that, accordingly, may take on a very different complexion when judgment is given in the technical trial. I recognise, of course, that there may be appeals from that judgment. Nonetheless, the judgment regarding the patents that will be given following the technical trial will enable a much more sophisticated and tighter focus to be brought on the competition issues. The pleadings that are before the court in draft raising the competition defences are, quite aside from a deficiency in the defence in the second action which I can accept arises through unfortunate oversight in the way it has been prepared, rather vague and general in certain places, a point which the lawyers for the claimants have indeed emphasised.

For that reason alone, it seems to me that much the more sensible approach is to adjourn this application, to be restored on the handing down of judgment in the technical trial and then to be heard as directed by the trial judge. I put it that way because it may be, and in no way am I suggesting that this is inevitable, that the judge would direct that it be heard by a judge with experience in competition law, as had been suggested for the hearing today; or it could be transferred, if the judge thought that appropriate, to the Competition Appeal Tribunal under the rules for transfer of competition issues. In any event, it will enable the defendant to put in a much more focused pleading. When I raised that prospect with Mr. Beard QC, leading counsel for the defendant, he readily accepted that this made sense.

I mentioned that there are two additional reasons why I think this would be a more sensible approach. The first additional reason was that it seems that the European Commission is conducting a, perhaps preliminary, investigation of potential infringement of competition law by Illumina, which it appears may cover some of the same ground as is raised in the non-technical defence. That investigation appears to be at a relatively early stage, but on the basis that judgment in the technical trial is unlikely to be delivered until the autumn of 2017, and on any view not until late July 2017, by then one will have a much clearer picture of the stage to which the Commission's investigations have progressed. That will very probably shed some light on the competition arguments that the defendant seeks to raise.

The second additional matter is that the defendant, as well as raising a defence of abuse of a dominant position, seeks to advance a defence under Article 101 of the Treaty on the Functioning of the European Union, or alternatively the Chapter 1 prohibition under the Competition Act 1998, based on what is called the "Pooled Patents Agreement". That is a settlement agreement reached between Illumina and Sequenom, the third claimant in one of these two actions, and which, as I understand it, involves licensing or cross-licensing covering all three of the patents in issue. However, to date, the defendant has received only a significantly redacted copy of that agreement, and the draft defences with regard to the issues raised under that agreement, it seems to me, suffer through the inability of the pleader to see the full agreement or sufficient parts of it to formulate a more precise case. Various copies of the Pooled Patents Agreement have been placed before the court with different degrees of redaction and I am not quite clear which version was before the pleader when the draft pleading was produced. In any event, that is a matter which can be addressed by way of further disclosure and resolved before any revised draft has to be produced. That will then assist consideration as to whether the proposed pleading raises an arguable case.

I do not suggest that those two additional reasons, either individually or even together, would have supported an adjournment of this application. What I have indicated is that they are supportive of the firm view I have reached because of the main consideration that I have outlined.

For Illumina and the other claimants, Mr. Harris QC did not strongly resist the course that I proposed. He did urge me to dismiss the application altogether, but I think was constrained to accept in exchanges with the court that, since I had not heard argument on the strength or at least sustainability of the claims set out in the draft defences, that might be inappropriate. He suggested that I should at least refuse permission to adduce the non-technical defence in the second action because of the mistakes in it to which I drew attention at the outset of this hearing, which meant that it was a fundamentally flawed pleading. I think that would be a rather extreme course, because they are self-evidently mistakes. No objection seems to have been taken on that basis, either in correspondence or indeed in Mr. Harris’ and Ms. Kreisberger's skeleton argument. If that were the only objection, it could clearly be corrected.

Accordingly, I am going to take the course which I have set out. That leaves the question of the costs, which have been considerable: not merely the costs of the pleading and preparing the objections, but then of various witness statements and of course the lawyers' preparation and skeleton arguments for today's hearing.

Mr. Harris submitted that his clients should have all the costs thrown away, which could be determined on assessment, since it had been the defendant that had been pressing for a determination admitting its non-technical defences. Mr. Beard strongly resisted that, pointing out that it had been the claimants that had required the pleading of a non-technical defence, and that whilst they had urged on the 18th April that the matter could not be dealt with then and should be adjourned, that was on the basis that they needed to consider the draft pleading. They did not, at any time, suggest that it was premature to determine admissibility: indeed, they were determined fully to contest admissibility.

It seems to me that the reality is that neither side gave much consideration to the sensible way this might be approached. That could not realistically have been done by the claimants before the hearing on 18th April because they had only just received the draft pleadings, and I think they had been fully entitled to ask to see a draft defence so that they could understand the sort of competition issues that the defendant wished to advance and on what basis they are were being advanced. Given the order made by Birss J, who also did not have full argument on this, for the reasons I have explained, the claimants then had to produce their grounds of objection.

There may perhaps be some lessons from all this. If competition defences are now being introduced on this contingent basis in patent litigation, consideration needs to be given as to how the pleading, and any argument about strike out or summary judgment for the respondent to that pleading, should sensibly be managed. I doubt that this is the last case where such non-technical defences will be introduced.

How then should one deal with the significant costs incurred in the present circumstances? Mr. Harris urges that reserving costs is not an attractive outcome, because it puts the judge hearing this matter more than a year away in a difficult position as he or she will know much less about what has happened in the run-up to today than I do. I fully acknowledge that. Nonetheless, I think it is impossible, save in one respect, to reach a fair determination of the significant costs incurred until one knows how the matter is going to proceed after judgment in the technical trial; what shape the non-technical defence, if any, will then take; and how much of what has been involved in preparing for today plays into a hearing of the application to introduce that defence.

Accordingly, it seems to me that the only fair resolution is that the costs should be reserved, save in one respect. This is an application by the defendant. It is the defendant who put forward the draft defences and, having received the detailed objections from the claimant, then pursued the application and drove it forward.

I think an applicant does bear a particular responsibility to consider how its application should sensibly be proceeded with and determined. For that reason, contrary to Mr Beard’s submission, I think that when one considers the costs of today, there is not in fact complete equality between the parties. I will therefore order that there will be no order for the defendant’s costs of this hearing. Save in that respect, as I have stated, the costs will be reserved to the judge hearing this application after judgment in the technical trial. There will be permission for the defendant to serve revised draft non-technical defences after that judgment is handed down.