NAPP Pharmaceutical Holdings Ltd v Dr Reddy's Laboratories (UK) Ltd & Anor

This is an application by, first, Sandoz Ltd and, secondly, Dr Reddy’s Laboratories (UK) Ltd for retrospective permission to give short notice of applications that they have made for a preliminary issue to be directed in these patent infringement proceedings.

I do not propose, for the purposes of this judgment, to set out the background to the matter in full. For present purposes, the key aspects of the chronology are as follows. On 15 January 2016 Dr. Reddy’s solicitors wrote to the then proprietor of the patents in suit, Euro-Clinique SA, seeking an acknowledgement of non-infringement of proposed seven-day buprenorphine transdermal patches. Shortly thereafter, the patents in suit were transferred to the present claimant, Napp Pharmaceutical Holdings Ltd.

Shortly before 9 February 2016, it came to Napp’s attention that Sandoz was also proposing to launch a seven-day buprenorphine transdermal patch product. Napp therefore wrote a letter before action to Sandoz on that date. On the next day, 10 February, Sandoz agreed not to launch the product before a certain date. Thereafter, it came to Napp’s attention that Sandoz was undertaking pre-launch activities in respect of its product. Accordingly, on 19 February Napp applied for an interim injunction against Sandoz. At around the same time, Nappy also commenced proceedings seeking an interim injunction against Dr Reddy’s, although Dr Reddy’s was less close to launching its product.

The application against Sandoz came before the court on an urgent basis on 22 February, when undertakings were given by Sandoz. As a result of directions given on that occasion, the application is due to be heard in a window of 14-16 March, that is to say, next week.

Subsequently, there was a directions hearing in respect of Napp’s application against Dr Reddy’s on 1 March. On that occasion, shortly before the hearing, Sandoz raised the suggestion that there should be a trial of a preliminary issue on infringement. Since the suggestion had only been raised about half-an-hour before the hearing, understandably nobody was in a position to address it on that occasion. The upshot of the hearing on 1 March was that it was directed that Napp’s application for an interim injunction against Dr Reddy’s was also to be heard in the window on 14-16 March.

On 2 March Sandoz issued and served an application notice seeking an order for the trial of a preliminary issue which was made returnable today, 7 March. It is to be noted that it is Sandoz’s proposal that the preliminary issue be tried in late April. Sandoz is willing, upon that basis, to continue its existing undertaking in the meantime. The witness statement in support of the application was not served until around 6.00 p.m. on 3 March and it was not until about 6.00 p.m. on 4 March that Sandoz served a product and process description in respect of its product.

Also on 4 March, Dr Reddy’s issued and served its application notice. Although Dr Reddy’s application notice also seeks the trial of a preliminary issue, it differs from the Sandoz application in two respects. First, it was Dr Reddy’s proposal that the preliminary issue be tried in June 2016, although counsel for Dr Reddy’s has made it clear to me that Dr Reddy’s would be content with an earlier hearing than that. Secondly, and perhaps more importantly, the preliminary issue which is sought by Dr Reddy’s is effectively a preliminary issue on a proposed counterclaim for a declaration of non-infringement (albeit that no such counterclaim has yet been served, since Dr Reddy’s has not yet reached the position where it has even had to serve a defence).

The nature of the proposed preliminary issue proposed by Dr Reddy’s is effectively to say that, on the true construction of the claim in specified respects, a series of alternatives will fall outside the claim. In that way, Dr Reddy’s hopes to secure a decision by way of preliminary issue which will enable Dr Reddy’s to know what it has to do to avoid infringement of the claim as so construed. Dr Reddy’s is likewise prepared to offer an undertaking pending the determination of the preliminary issue (albeit formulated in a way that, at present, I do not regard as wholly satisfactory). Dr Reddy’s application again was made returnable today.

It is accepted on behalf of both Sandoz and Dr Reddy’s that they have failed to give the three days’ notice which is ordinarily required for an application by CPR rule 23.7(1)(b). Both parties request the court to exercise its power to hear the application notwithstanding the giving of short notice pursuant to CPR 23.7(4).

I do not propose to address in this judgment all of the points that have been canvassed in the course of argument. I think it is sufficient for present purposes to focus on the way in which the matter was put by counsel for Dr Reddy’s. He submitted that there were really two questions which the court had to decide and that they could be decided separately. The first question was whether, as a matter of principle, it was appropriate in the particular circumstances of the present case to direct the trial of a preliminary issue on infringement and, in particular, the trial of a preliminary issue as formulated by Dr Reddy’s in its application. Secondly, if, in principle, there should be a trial of a preliminary issue, there was the question as to the directions that should be made in order to enable that preliminary issue to be determined as quickly and efficiently as possible.

Counsel for Dr Reddy’s submitted that it was abundantly clear that, as a matter of principle, this was a case in which it was appropriate to direct the trial of a preliminary issue, and therefore the court should proceed to decide that here and now, even if it was not possible to decide what directions should be given today. In that way, the parties would be saved the additional burden and cost of continuing to prepare for the interim injunction next week. That is a particularly relevant submission from his client’s perspective given that his client has yet to serve their evidence on the interim injunction application. By contrast, although the same submission was made by counsel for Sandoz, Sandoz has already served its evidence on the application. Nevertheless, even from the perspective of Sandoz, I accept that there may be the prospect of saving of some effort and costs if a decision is made today.

As I see it, the fundamental problem with the approach taken by both Dr Reddy’s and Sandoz is that it would not be fair to require Napp to deal today with the question of whether there should be a trial of a preliminary issue with the short notice that it has been given and divorced from the question of what directions there should be for the trial of that preliminary issue.

As will be apparent from the chronology that I have set out, the first occasion on which a preliminary issue was mooted was shortly before the hearing on 1 March. It was only the following day that the application was made by Sandoz and not until Friday that Dr Reddy’s made its application. Moreover, it was not until Friday that Sandoz served its PPD. It seems to me that, as a matter of fairness, Napp is entitled to have the ordinary period of notice specified under the rules to consider its position in the light of the evidence (including the PPD served by Napp) and in the light of the position taken by Dr Sandoz on its application which, as I have described, is slightly different to that taken by Sandoz. I see no sufficient justification for railroading Napp into an early hearing. There was nothing to prevent Sandoz and Dr Reddy’s from giving the ordinary three days’ notice, which would have led to a hearing later this week.

The matter does not stop there, however. In the first place, I do not accept the beguiling argument of counsel for Dr Reddy’s that one can divorce the issue of principle from the question of directions. The whole objective that is sought to be achieved by both Sandoz and Dr Reddy’s by their respective applications is to have a rapid determination of the issue of infringement, and more specifically the issue of the scope of the claims of the two patents in suit on their proper construction. Accordingly, in exercising its discretion, the court will have to have regard not merely to the question of principle as to whether this is a suitable case in which to order a preliminary issue, but also the timing of that preliminary issue.

I have already noted that, to begin with, there was a divergence in the proposed timing between Sandoz and Dr Reddy’s, but even if one operates on the basis that both Sandoz and Dr Reddy’s would be content with a hearing in late April, at present it seems likely that Napp will oppose a hearing which is that quick even on the assumption that, in principle, there is to be a preliminary issue ordered. The analysis as to the convenient way forward may well be changed if the court comes to the conclusion, for example, that it would not be fair or practical to hold a hearing prior to, say, October or November.

More generally, it seems to me that, as has been discussed in the course of argument, there are a number of questions as to which the parties need to consider their respective positions with the benefit of the opportunity of further reflection and which may feed into the overall decision. By way of example, Dr Reddy’s needs to consider its position with regard to expert evidence. Sandoz has served a fairly full report from an expert, Professor Williams. As yet, Dr Reddy’s has not yet had the opportunity to decide whether it wants to have its own expert or not. That factors into at least the question of timing, but as I have already indicated the question of timing may affect the question of principle as well.

Then there is the question of Napp’s expert. Presently, Napp has been benefiting from assistance from Professor Hansen. Professor Hansen is currently in Thailand, and therefore communications with him have been difficult. In order to decide its way forward, it is understandable that Napp wishes to have the benefit of Professor Hansen’s input. Moreover, Napp needs to ascertain whether Professor Hansen is (a) willing and (b) available to appear as an expert witness at the trial of any preliminary issue. Again, that may depend on how quickly the preliminary issue is ordered to be tried.

Then there is the question of what the parties’ stances are on validity. Counsel for Dr Reddy’s suggested in the course of his submissions that, once the issue of infringement had been determined, the question of validity of the patents in suit would become academic. That may be correct, at least from his client’s perspective. Whether it is necessarily correct from Sandoz’s perspective is less clear to me, and that is a matter on which it seems to me only fair to give Sandoz a proper opportunity to consider its position.

Moreover, all of this has to be viewed against the background where the court is going to be deciding the question of whether or not to grant a preliminary injunction at a hearing next week. While I understand and applaud the desire of Sandoz and Dr Reddy’s to avoid unnecessary costs being incurred, it seems to me that it is unrealistic to try to divorce the question of the trial of a preliminary issue from the question of the grant of an interim injunction. The grant of an interim injunction is, of itself, an exercise in case management. As is common ground, the court is attempting to take the course that will lead to the least ultimate risk of injustice in circumstances where the court does not know who is going to be ultimately successful at trial, or indeed on appeal.

I recognise, of course, that part of the objective of Sandoz and Dr Reddy’s is to try and short-circuit that exercise by enabling a final decision, at least at this level, to be arrived at on the question of infringement on a speedy basis. Nevertheless, it seems to me that all of these various questions are necessarily interconnected because, even if one accepts the argument of Sandoz and Dr Reddy’s that there is a strong case here for the trial of a preliminary issue on infringement, in order to decide what directions should be given for the trial of that issue, one has to have regard to such questions as how quickly that can fairly be tried. If it cannot be tried quite as quickly as Dr Reddy’s and Sandoz propose, when can it be tried? What are the consequences of that for the balance of the risk of injustice in terms of undertakings or an interim injunction? Also, what is going to be done with regard to the question of the validity of the patents and on what timing?

In short, for the reasons that I have attempted to outline, it seems to me that no sufficient case has been made out for forcing Napp to argue the question of principle at this stage. On the contrary, it seems to me that the question of principle cannot properly be divorced from the question of the directions that would be made for the hearing of any preliminary issue. Furthermore, it seems to me that the better course is not to try and divorce the question of whether there should be a preliminary issue or not from the question of whether there should be an interim injunction. On the contrary, I take the view that the better and fairer course to all parties is for all these applications to be considered together. Then the court will be fully seized of all aspects of the matter, and will be best placed to decide what course is likely to lead to the least ultimate risk of injustice.