Unsuccessful strike out of a quia timet infringement counterclaim

Teva UK Ltd v Chiesi Farmaceutici SpA [2020] EWHC 1311 (Pat), 2 June 2020

Summary

After having been pressed by the defendant pharmaceutical company, Chiesi Farmaceutici SpA (“Chiesi”), to disclose a product description in a patent revocation action brought by Teva UK Ltd (“Teva”), Teva applied to strike out Chiesi’s counterclaim for quia timet infringement. Teva argued that the legal test for such a claim had not been met and, in the alternative, that the disclosure of the product description required for the infringement claim would violate competition law. Mr Justice Birss refused to strike out the counterclaim for infringement on the basis that it has a real prospect of success at trial and that the disclosure sought by Chiesi does not amount to collusion contrary to Art 101 TFEU.

Background

In October 2019, Teva brought an action to revoke three of Chiesi’s patents which, along with others, cover one of Chiesi’s products known as FOSTAIR in the UK, used in inhalers to treat asthmatics. The patents are due to expire in 2027/28, but the data exclusivity for FOSTAIR expired in 2012 such that generic companies were free to apply for marketing authorisations for that product. In response to Teva’s revocation action, Chiesi filed a defence and counterclaimed for infringement on a quia timet basis, seeking disclosure of a product description in the usual way. The trial for both the validity and infringement claims is currently listed for October 2020.

Legal test for a strike out claim and quia timet injunction

Birss J reiterated that the legal test for infringement on a quia timet basis is whether “viewed in all the relevant circumstances, there was a sufficiently strong probability that an injunction would be required to prevent the harm to the claimant to justify bringing the proceedings” (MSD v Teva [2013] EWHC 1958 (Pat)). He rejected Teva’s submissions that sought to qualify this test and also the submission that, as a matter of legal principle, it was a prerequisite for quia timet claims in pharmaceutical patent case for there to be a pleaded, relevant marketing authorisation. In rejecting the latter submission, he considered and distinguished his earlier decision in Actavis v ICOS [2016] EWHC 1955 (Pat) on which Teva relied. In Actavis v ICOS, Birss J held when granting a final injunction at trial that the inference supporting quia timet infringement does not derive solely or even predominantly from the fact they have sought to clear the way by applying to revoke patents, but that it derived from the relevant marketing authorisation. Addressing Teva’s submission, Birss J cautioned that this decision and his reliance on the existence of a relevant marketing authorisation must not be taken out of context. In Actavis v ICOS, he was considering the grant of a final injunction at trial whereas in this case he was being asked to strike out a claim for infringement on a quia timet basis at an interim stage.

In considering the correct approach, Birss J held that a lack of evidence at the start of the action to justify a final injunction is not determinative of the relevant question at a strike out hearing, where the relevant legal question is whether there is a real prospect of success of establishing a threat or intention to infringe at trial, i.e. whether such evidence may exist by then. In the absence of other regulatory hurdles that would preclude a marketing authorisation during the remaining life of the patent, it is not a complete answer at an interim stage that the alleged infringer has not obtained a marketing authorisation, although the weight given to this fact will change if the question is assessed again at trial. Birss J took further support for his conclusion from Arnold J (as he then was) allowing a quia timet infringement claim by amendment in Generics v Sandoz [2017] EWHC 2276 (Pat).

Birss J also held that the approach of the English Courts to patent litigation was a relevant consideration. Here, he highlighted the well established principle that an alleged infringer ought to “clear the way” by revoking the relevant patent and/or seeking a declaration of non-infringement (“DNI”). Actions to clear the way usually result in the alleged infringer seeking to both revoke the patent and obtain a DNI, such that issues of both infringement and validity are determined together. In such actions, the fundamental question can be answered: are the alleged infringer’s proposed acts lawful or not in view of the patentee’s rights. If the alleged infringer chooses not to seek a DNI, then the patentee may wish to counterclaim for infringement so that this fundamental question can be answered.

In light of these considerations, a simple, rebuttable inference can be drawn from the fact that the party seeking the revocation of the patent intends to infringe by launching a product before expiry of the patent.  As Teva had commenced revocation proceedings, Birss J drew this inference, which, as set out above, is not displaced simply by the absence of a pleaded, relevant marketing authorisation. Birss J drew further support for this inference from the fact that, as pleaded by Chiesi, Teva had failed in correspondence to state that it did not have an intention to launch, despite having been given an opportunity to do so. Teva’s offer of two weeks’ notice of launch was also insufficient to rebut this inference, as it would not allow infringement to be decided in advance of such a launch. In light of this, Birss J was satisfied that Chiesi’s pleaded claim for quia timet infringement had a real prospect at trial and therefore refused to strike out this claim.

Abuse of process

Teva pleaded an alternative free standing “abuse of process” argument to strike out the claim, contending that the Chiesi’s true motive in pleading the infringement counterclaim was a collateral one, namely to obtain Teva’s launch plans through disclosure. Having summarised the earlier law, Birss J relied on JSC BTA Bank v Ablyazov (No. 6) [2011] 1 W.L.R. 2996 as establishing that even if a claimant has two purposes for commencing proceedings, one legitimate and the other sufficiently collateral as to be illegitimate, the commencement of proceedings will not be an abuse. Birss J starkly noted that even assuming disclosure was one of Chiesi’s motives, it is obvious that there is another purpose in bringing the infringement claim, namely to sue Teva for infringement and obtain appropriate remedies such as an injunction if the claim is made out. Furthermore, he noted the claim was being brought by Teva in the first place, and thus held that the infringement claim is not an abuse of process.

Competition law

Teva put forward another alternative argument, submitting that the parties are “competitors” and that there is a very real risk that the provision of the information requested by Chiesi mentioned above would be found to infringe Art 101(1) TFEU. Birss J agreed that the parties were competitors and summarised infringement of Art. 101(1) as requiring a collusion between undertakings.

Birss J highlighted that the point of the patent system is to stimulate innovation, which itself is pro-competitive. Resolving disputes between rivals about patent validity and infringement are part of that system and therefore this sort of litigation, conducted properly and not as part of a sham, is inherently pro-competitive, irrespective of the result. A court determination that a patent is valid and infringed should not be seen as a “negative” result even if it means that consumers will pay higher prices for the patented goods, because such determinations are a necessary means of ensuring that patent-holders receive the proper rewards for their innovations.

Although Birss J agreed that the provision of information between undertakings can itself amount to the requisite form of collusion required, Art. 101 will only be engaged if this provision amounts to practical cooperation between the parties being substituted for the risks of competition. Balancing the factors above, the judge concluded that exchange pursuant to disclosure obligations and case management orders which are made in properly constituted patent litigation does not meet the minimum threshold to amount to a form of collusion prohibited by Art. 101 TFEU, and, accordingly, he dismissed the competition law argument.

Stay of proceedings

Finally, Teva argued that, if the claim was not struck out, it should be stayed because it was prepared to offer 14 days’ notice of launch. Birss J was not convinced by the argument and stated that it offered no substitute for resolving issues of infringement on their merits at trial, remarking that Chiesi asking Teva for two months’ notice seemed to have been a fair attempt at a compromise.