Patent infringement in Canada not an illegality in the UK

Les Laboratoires Servier v Apotex Inc et al

This is a judgment from the Supreme Court and looked at the defence of illegality, and specifically in this case whether infringement of a patent in Canada was a relevant illegality under English law.

The judgment related to an appeal from the decision of the Court of Appeal ([2012] EWCA Civ 593), relating to the earlier decision of Arnold J ([2011] EWHC 730 (Pat)).

Servier had obtained an interlocutory injunction which, for 11 months, prevented Apotex selling perindopril in the United Kingdom. Then, at trial, Servier’s European Patent (UK) No. 1296947 was held invalid. At a damages inquiry, Apotex was awarded £17.5 million under the cross undertaking in damages.

Servier applied to amend its defence to plead that, as a matter of public policy, Apotex could not claim damages for being prevented from selling a material whose manufacture would have been unlawful for patent infringement under the law of Canada (the “illegality point”) and that in assessing Apotex’s loss of profit, the damages for infringement to which Servier would be entitled in the Canadian proceedings should be treated as an additional cost of manufacture (the “cost of manufacture point”). The “cost of manufacture point” was stayed until the outcome of the assessment of damages in Canada.

English law has ruled against claims which are founded on the claimant’s own illegal or immoral acts, dating back to before the noted statement of Lord Mansfield CJ in Holman v Johnson [1775] 1 Cowp. The main issues to be decided in this case were whether infringement of a foreign patent constituted a relevant illegality (“turpitude”) for the purposes of the defence, whether Apotex was seeking to found its claim on the illegality, and whether Servier was entitled to base a defence on a public policy point having given an undertaking in damages.  At first instance, Arnold J had decided in favour of Servier on all three points.

Prior to the hearing of the appeal, Apotex conceded the “cost of manufacture point”. Etherton LJ, giving the lead judgment, had overturned the decision at first instance, concluding that the infringement of Servier’s Canadian patent was not a relevant illegality for the purposes of the defence.

Lord Sumption provided the lead judgment of the Supreme Court. In the judgment, he noted that there was a large body of inconsistent authority as to what constituted “founding a cause on an immoral or illegal act”, as stated by Lord Mansfield CJ. However, he did note that the illegality defence was:

a rule of law, and not a mere discretionary power. Secondly, it is based on public policy, and not on the perceived balance of merits between the parties to any dispute.

Lord Sumption considered that the decisions at first instance and appeal erred in deciding whether there was a turpitude using a test where:

The answer depended not on the character of the illegality but on largely subjective judgments about how badly Apotex had behaved and how much it mattered. This was a process, discretionary in all but name, whose outcome would have been exceptionally difficult for either party’s advisers to predict in advance. In my opinion, it was contrary to established legal principle.

Lord Sumption considered that the relevant issue here was to identify the meaning of turpitude. He stated:

In my opinion the question what constitutes “turpitude” for the purpose of the defence depends on the legal character of the acts relied on. It means criminal acts, and what I have called quasi-criminal acts. This is because only acts in these categories engage the public interest which is the foundation of the illegality defence. Torts (other than those of which dishonesty is an essential element), breaches of contract, statutory and other civil wrongs, offend against interests which are essentially private, not public. There is no reason in such a case for the law to withhold its ordinary remedies. The public interest is sufficiently served by the availability of a system of corrective justice to regulate their consequences as between the parties affected.

He therefore concluded that the illegality defence was not engaged in this case and that the availability of damages for infringements in Canada was sufficient to provide for the patentee’s interests. There was no public policy reason which justified the forfeiture of Apotex’s rights.

Case No. [2014] UKSC 55