Supreme Court gives certainty to patentees in unlawful means economic tort claims

The Supreme Court's decision in Secretary of State for Health and another v Servier Laboratories Ltd and others is welcome news for patentees seeking to enforce their patents. The Supreme Court unanimously ruled that by defending and enforcing a patent that was later determined to be invalid, a patentee did not commit the tort of causing loss by unlawful means. This decision sees an attempt to bring allegations of fraud on the patent office within the tort of unlawful means rejected. The patentee therefore avoided liability for the economic loss suffered, in this case by the NHS, because generics were only able to enter the market later than if the patent had not been in force.

Background

This case concerned an appeal brought by the Secretary of State for Health and the NHS Business Services Authority (the appellants) against Servier. The appellants fund the cost of medicines dispensed by the NHS in England. Servier developed and manufactured a drug, perindopril, used for the treatment of cardiovascular disease including high blood pressure, and also marketed it as "Coversyl".

In 2001, Servier applied to the European Patent Office (EPO) for a patent claiming the alpha crystalline form of the tert-butylamine salt of perindopril. In 2004, the patent was granted by the EPO, including a UK designation. Opposition proceedings were brought against the patent, which was upheld by the EPO's Opposition Division in 2006.

Servier sought to enforce the UK designation of the patent in the English courts and obtained preliminary injunctions against competitors who wanted to launch generic versions of perindopril. However, the generic companies counterclaimed that the patent in suit was invalid and they were successful at the trial in 2007. That decision of invalidity was upheld by the English Court of Appeal in 2008, and in 2009 the EPO's Technical Board of Appeal revoked the patent. The appellants had not been involved with the proceedings at the EPO nor in the English courts.

The issues

The appellants contended that in obtaining, defending and enforcing the UK patent Servier had practised deceit on the EPO and/or the English courts (the third parties) with the intention of profiting at the appellants' expense. In particular, the appellants alleged that Servier had made representations to the EPO and/or the English courts as to the novelty and/or lack of obviousness of the patent which it knew to be false or were made with reckless indifference as to the truth.

The appellants asserted that as a consequence of this alleged deceit, generic versions of perindopril did not enter the market as early as they otherwise would have, which caused drug prices to be higher. The appellants claimed that this deceit formed the basis of a claim for an unlawful means tort and sought damages and interest in excess of £200m.

In August 2017 the High Court struck out the appellants' claim. The appellants appealed the decision and in July 2019 the Court of Appeal dismissed their appeal. The High Court and the Court of Appeal held that the House of Lords, in its decision of OBG Ltd v Allan, had concluded that an essential element of the tort of causing loss by unlawful means was that the unlawful act intended to cause loss to the claimant by interfering with the freedom of a third party in a way that was unlawful and that affected the third party's freedom to deal with the claimant.

Therefore the High Court and the Court of Appeal decided that OBG determined that a "dealing requirement" was a necessary component of the tort, and they were bound to follow that precedent. As it was common ground that there was no dealing between the appellants and the EPO or the English courts, the claim failed.

The Supreme Court appeal

The appellants contended that the dealing requirement should not be a necessary element of the unlawful means tort as it did not form part of the ratio (rationale for the decision, that becomes binding precedent) of OBG and the lower courts were therefore wrong to consider themselves bound by it. Alternatively, they argued that the Supreme Court should depart from OBG and remove the dealing requirement as it was arbitrary and had the effect of excluding public authorities as potential claimants to this tort.

The Supreme Court (Lord Hamblen giving the leading judgment with whom all the other Lords agreed, although Lord Sales also provided a further short supporting judgment) unanimously agreed with the lower courts that the dealing requirement did form part of the ratio of OBG. Lord Hamblen noted the policy issues considered by Lord Hoffmann in OBG, including the rationale of the tort being to preserve a person's liberty to deal with others and the concern that the tort should not be too expansive.

On the appellants' alternative argument, the Supreme Court held that the appellants' needed to show an appropriate authority to allow it to depart from OBG, which they had failed to do. It also held that the appellants were not able to point to any real-life injustice caused by the dealing requirement that called for remedy by the Supreme Court. The appeal was therefore dismissed.

Osborne Clarke comment

This is a welcome decision for patentees. These proceedings were an attempt by the appellants to bring allegations of fraud on the patent office within the tort of unlawful means. Claims relating to fraud on the patent office exist in other jurisdictions (such as the US) but do not exist in UK or EU law.

In upholding the dealing requirement as an essential component of the unlawful means tort, the Supreme Court has left intact the current system for litigating patents in the UK. A patentee remains able to prosecute, defend and enforce its patents without the risk that it will incur liability to potentially wide and unknown claimants if the patent in question is later determined to be invalid and revoked. This decision closes off the opportunity to seek redress by parties tangentially related to patent validity proceedings but who are financially impacted by a finding that a patent is invalid.

The Supreme Court affirmed that a critical part of the rationale of the unlawful means tort is the protection of a person's liberty to deal with others. Given that the appellants' claim was in excess of £200m, patentees can breathe a sigh of relief that such potential liabilities do not need to be factored into a decision whether to enforce their patents. In contrast, those with the potential to be financially adversely affected by a decision to invalidate a patent should ensure that the court list of patent proceedings is monitored closely and actively take steps to ensure their position is protected.