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Is Infringement of a Foreign Patent akin to Highway Robbery?

Patents: Les Laboratoires Servier and another v Apotex Inc and others

[2014] UKSC 55, [2014] 3 WLR 1257, [2014] WLR(D) 452, [2014] BUS LR
1217, UK Supreme Court

In Everet v. Williams (1893), 9 L.Q. Rev. 197, the highwayman John
Everet sued his partner in crime Joseph Williams “for discovery, an
account, and general relief” for dealing “with several gentlemen for
divers watches, rings, swords, canes, hats, cloaks, horses, bridles,
saddles, and other things” which they acquired “at a very cheap rate”.
The court dismissed the action on the ground that no action arises from a
disgraceful act (“ex turpi causa non oritur actio”), fined the
claimant’s solicitors and ordered them to pay the defendant’s costs.
They got off lightly. Their client and the defendant were arrested,
brought to trial for their “dealings” and hanged. You can find out more
about the case in The Highwayman’s Case.

Fast forward to 2008. In Les Laboratoires Servier and another v
Apotex Inc and others [2008] EWHC 2347 (Ch), [2009] FSR 3 (9 Oct 2008)
Mr Justice Norris awarded the Apotex companies (“Apotex”) £17.5 million
upon the Servier group (“Servier”)’s cross-undertaking in damages
because the Apotex had been prevented from importing perindopril
erbumine tablets from Canada and selling them in the United Kingdom by
an interim injunction that was subsequently discharged (see my case note
Interim Injunctions: Les Laboratoires Servier v Apotex Inc 10 Oct
2008). However, the manufacturer of those tablets in Canada by the
defendants had become unlawful when Madam Justice Snider held in Les
Laboratoires Servier and others v Apotext Inc, and another 67 CPR (4th)
241; [2008] FCJ No 1094 (QL); 332 FTR 193 that such manufacture
infringed a patent for the drug that had been granted to one of the
Servier companies. Servier had asked Mr Justice Norris for permission to
amend their points of defence in the inquiry proceedings to plead Madam
Justice Snider’s decision but the judge refused to allow them to do so
on the grounds that they had applied for permission too late. Servier
appealed to the Court of Appeal which allowed the amendment (Les
Laboratoires Servier and another v Apotex Inc and others [2010] EWCA Civ
279).

By the time the appeal was heard Apotex had already received the
£17.5 million that had been awarded to them by Mr Justice Norris. The
effect of the Court of Appeal’s decision was that those moneys had to be
treated as an interim payment. The question

“whether a patentee who has obtained an interim injunction from this
court to restrain infringement of a European patent (UK) which is
subsequently held invalid should compensate the defendant for losses
sustained as a result of being prevented by the injunction from selling
goods manufactured by the defendant in infringement of a valid foreign
patent owned by the same group of companies”

came before Mr Justice Arnold in Les Laboratoires Servier and another v
Apotex Inc and others [2011] RPC 20, [2011] EWHC 730 (Pat). His Lordship
held that it should not and because such claim was barred by the ex
turpi cause rule and he ordered Apotex to repay the £17.5 million that
they had been awarded by Mr Justice Norris. Apotext appealed to the
Court of Appeal which allowed the appeal (Les Laboratoires Servier and
another v Apotex Inc and others [2012] EWCA Civ 593, [2012] WLR(D) 138,
[2013] RPC 21, [2013] Bus LR 80. One of the reasons why the Court of
Appeal allowed the appeal was that Apotex had agreed to give credit in
the English litigation for any damages that might be awarded against
them in Canada. Servier appealed to the Supreme Court.

The issue before their Lordships was whether the rule that had
prevented one highway robber from claiming an account from another also
prevented the defendants from claiming damages for being prevented from
infringing a patent in Canada. The point was summed up neatly by Lord
Sumption at paragraph [9] of his judgment:

“(1) Does the infringement of a foreign patent rights constitute a
relevant illegality (“turpitude”) for the purpose of the defence?

(2) If so, is Apotex seeking to found its claim on it?

(3) Is Servier entitled to take the public policy point having given an undertaking in damages?”

Another way of putting it might be “is foreign patent infringement akin to highway robbery?”

The Court’s first task was to determine what is meant by turpitude? At paragraph [25] of his judgment Lord Sumption said:

“The ex turpi causa principle is concerned with claims founded on
acts which are contrary to the public law of the state and engage the
public interest. The paradigm case is, as I have said, a criminal act.
In addition, it is concerned with a limited category of acts which,
while not necessarily criminal, can conveniently be described as
“quasi-criminal” because they engage the public interest in the same
way. Leaving aside the rather special case of contracts prohibited by
law, which can give rise to no enforceable rights, this additional
category of non-criminal acts giving rise to the defence includes cases
of dishonesty or corruption, which have always been regarded as engaging
the public interest even in the context of purely civil disputes; some
anomalous categories of misconduct, such as prostitution, which without
itself being criminal are contrary to public policy and involve criminal
liability on the part of secondary parties; and the infringement of
statutory rules enacted for the protection of the public interest and
attracting civil sanctions of a penal character, such as the competition
law considered by Flaux J in Safeway Stores Ltd v Twigger [2010] 3 All
ER 577.”

There were some cases that suggested that the principle might be wider than that but apart from those decisions

“the researches of counsel have uncovered no cases in the long and
much-litigated history of the illegality defence, in which it has been
applied to acts which are neither criminal nor quasi-criminal but merely
tortious or in breach of contract.”

His Lordship reasoned:

“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 added, at paragraph [29] that there may be “exceptional cases where
even criminal and quasi-criminal acts will not constitute turpitude for
the purposes of the illegality defence.” In his Lordship’s opinion

“the illegality defence is not engaged by the consideration that
Apotex’s lost profits would have been made by selling product
manufactured in Canada in breach of Servier’s Canadian patent. A patent
is of course a public grant of the state. But it does not follow that
the public interest is engaged by a breach of the patentee’s rights. The
effect of the grant is simply to give rise to private rights of a
character no different in principle from contractual rights or rights
founded on breaches of statutory duty or other torts. The only relevant
interest affected is that of the patentee, and that is sufficiently
vindicated by the availability of damages for the infringements in
Canada, which will be deducted from any recovery under Servier’s
undertaking in England. There is no public policy which could justify in
addition the forfeiture of Apotex’s rights.”

Having decided that point, the other two issues listed at paragraph [9] of Lord Sumption’s judgment did not arise.

Lord Mance agreed with Lord Sumption that the appeal should fail on
the simple basis that the manufacture and supply of product in breach of
the Canadian patent would not have involved turpitude such as to engage
the maxim ex turpi cause action non oritur.

Lord Toulson thought that Servier was attempting to extend the
doctrine of illegality beyond any previously reported decision in
circumstances where he could see no good public policy reason to do so.

The conclusion of the Supreme Court was that infringing a foreign patent is not like highway robbery.

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