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England and Wales High Court (Patents Court) Decisions
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Cite as:  EWHC 1852 (Pat),  FSR 43
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CHANCERY DIVISION PATENTS COURT
Strand, London, WC2A 2LL
B e f o r e :
| ELI LILLY AND COMPANY LIMITED
|- and -
|(1) NEOPHARMA LIMITED
(2) GURNOS LIMITED (formerly NEOLAB LIMITED)
1st Floor, Quality House, 6-9 Quality Court, Chancery Lane, London, WC2A 1HP
Telephone: 020 7067 2900. Fax: 020 7831 6864. e-mail: info@martenwalshcherer. com)
MR. ANTONY WATSON QC (instructed by Arnold Porter (UK) LLP) appeared for the Defendants.
Crown Copyright ©
MR. JUSTICE FLOYD:
- The patent has been upheld at first instance and on appeal by the Court of Appeal.
- Two of the three items of prior art, 235 and Chakrabarti, were included in DRL's unsuccessful attack in the DRL action.
- The same conclusion has been reached in a number of other jurisdictions which apply the European Patent Convention.
- In Germany, the Bundesgerichthof held the patent to be inventive over 235 and Chakrabarti. Neolab were a party to that action for revocation but did not rely on S&F.
- In Austria, the Austrian Patent Office upheld the patent in a revocation action brought by Synthon.
- Similar decisions have been arrived at in the Patent Offices in the Czech Republic, Slovakia, Romania and Hungary.
- In non-EPC jurisdictions the position in relation to 235 and Chakrabarti has been similar. So in the United States the patent was upheld over 235 and Chakrabarti. In Canadian Notice of Compliance (NOC) proceedings, a similar result was reached. In subsequent infringement proceedings in Canada, Lilly have prevailed on the issues as well, although decisions on utility and insufficiency are still awaited.
- Accordingly, say Lilly, there is no realistic prospect of the case on 235 and Chakrabarti succeeding.
- So far as S&F is concerned, Lilly point out the defendant chose not to rely on it for the purposes of its attack in Germany.
- Lilly also point out that S&F was specifically cited both by the United States court and by the Canadian court in one of the NOC proceedings. It was also cited by the parties seeking revocation in the Czech and Slovak cases. Each court or tribunal dismissed the challenge based on S&F, although not for identical reasons.
- Lilly say that it is a fair inference that other parties made a conscious decision not to rely on S&F. For example, DRL was a party to the US action but chose not to rely on S&F in the UK. Moreover, they suggest that Neolab was aware of S&F in the course of the proceedings in Germany, which led to the decision of the Bundesgerichtshof, but chose not to rely on it there.
- This last fact leads to a suggestion by Lilly, not really answered in the evidence, to the effect that the only reason it is being relied on here is to allow the defendant to say that new issues are raised which have not been previously and repeatedly rejected.
"32. There is no dispute about these. They were conveniently summarised by Lewison J in Easyair Ltd v Opal Telecom Ltd  EWHC 339 (Ch) at :
'As Ms Anderson QC rightly reminded me, the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:
i) The court must consider whether the claimant has a 'realistic' as opposed to a 'fanciful' prospect of success:
Swain v Hillman  2 All ER 91;
ii) A 'realistic' claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel
 EWCA Civ 472 at .
iii) In reaching its conclusion the court must not conduct a 'mini-trial': Swain v Hillman.
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at .
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5)  EWCA Civ 550.
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a
fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd  FSR 63.
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: If the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd  EWCA Civ 725.'
"33. This summary was cited with approval by Etherton LJ (with whom Wilson and Sullivan LJJ agreed) in AC Ward & Son v Catlin (Five) Ltd  EWCA Civ 1098,  Lloyds Rep IR 301 at ."
Arnold J also observed that it was common ground in that case that summary judgment is rarely appropriate in patent cases, referring to Strix Ltd v Otter Controls Ltd  FSR 354 and Monsanto v Merck  RPC 77. I think it will indeed be a rare case where summary judgment is appropriate.
"22. The first point to be made is I think this. Before ordering security for costs in any case (ie whether or not within rule 25) the court should be alert and sensitive to the risk that by making such an order it may be denying the party concerned the right to access to the court. Whether or not the person concerned has (or can raise) the money will always be a prime consideration, not least since article 6 of ECHR became incorporated into domestic law. Paradoxically, of course, the more difficult it appears to be for the person concerned to raise the money, the more obvious becomes the need for an order for security to protect the other party against the risk of incurring irrecoverable costs. The court will have to resolve that conundrum as best it may.
"23. Assume, then, that in a given case the court concludes that an order for security would not unfairly deprive the party concerned of his ability to litigate the dispute. Should such an order then be made? In addressing this question it is right to bear in mind that under the new rules it is not just the claimant against whom an order for security for costs can be made; it can also be made against the defendant. Under the old rules, of course, it was only the defendant who could be ordered to pay money into court, principally in proceedings for summary judgment, as a condition of his being allowed to defend the claim. That payment in was not, of course, in respect of costs, but rather to provide some security for the claim. But if, as a condition of pursuing an unpromising defence, it is appropriate to secure the claim, why not also the claimant's costs of advancing the claim? And if that, why is it not at least as appropriate to require someone advancing an unpromising claim to secure the defendant's costs. He, after all, has chosen to involve the defendant in litigation and the defendant has no option but to concede the claim or incur costs in resisting it. Such no doubt was the thinking underlying the new rule 24.
"24. Now, it is clear, the court has an altogether wider discretion to ensure that justice can be done in any particular case. Obviously relevant considerations, besides the ability of the person concerned to pay, will be
(a) his conduct of the proceedings (including in particular his compliance or otherwise with any applicable rule, practice direction or protocol), and
(b) the apparent strength of his case (be it claim or defence).
And these considerations, of course, are expressly reflected in the new rules governing the court's power to order payment into court: Rule 3.1(5) dealing expressly with compliance, rule 24 with the probabilities or otherwise of success.
"26. Similarly it is not to be thought that an order for security for costs will be appropriate in every case where a party appears to have a somewhat weak claim or defence. The last thing this judgment should be seen as encouraging is the making by either side of exorbitant applications for summary judgment under rule 24.2 in a misguided attempt to obtain conditional orders providing security for costs. On the contrary, the court will be reluctant to be drawn into an assessment of the merits beyond what is necessary to establish whether the person concerned has 'no real prospect of succeeding' and the occasions when security for costs is ordered solely because the case appears weak may be expected to be few and far between."
It is therefore the case that the court has jurisdiction under CPR 3.1 and CPR 24.6 and CPR 24 PD 5.21 to make an order which is tantamount to an order for security for costs against a defendant. The jurisdiction needs to be exercised with great caution, however, and the fact that a defendant has a weak case is on its own unlikely to give rise to a conditional order.
1. The defendant has already tried and failed to revoke the patent in an EPC country. There is no explanation of why it did not rely on the additional reference or the different evidence in the proceedings in Germany.
2. The defendant could have joined in the DRL proceedings if it felt that the best case against the patent was not being put forward but it failed to do so.
3. There is a very strong inference that S&F is being highlighted in order to be able to suggest there is something new about the case being run in this action.
4. The overwhelming impression from the evidence from this and other jurisdictions is that this patent is safe from attacks of the kind which the defendant wishes to put forward.
5. For these reasons whilst there is no doubt that it is right they have a right to have a further attempt at the UK designation of the same patent as they attacked in Germany, it is not obviously disproportionate to impose terms on their right to do so, given the risk of injustice to Lilly.
6. The way the defendant has conducted itself is open to criticism. The patent was obviously an obstacle to a lawful launch of a product containing olanzapine unless declared invalid. There is no argument that the defendant's product falls within the claims. Instead of clearing the patent out of the way before they launched, they launched in an underhand way, thereby choosing to make themselves a defendant rather than a claimant. Moreover, the defendant cannot be said merely to be defending themselves. They are claiming a very large sum under the cross-undertaking in damages.
7. If the action proceeds without security, there is a very clear risk of injustice to Lilly if the attack on validity fails again.
They are unlikely to recover their costs or any damages. In some cases of purely monetary claims, it may be possible to dismiss this type of injustice on the grounds that the claimant has chosen to sue an impecunious defendant; but Lilly could hardly not sue the defendant in the present case, when their market for olanzapine was under attack by the defendant, and they required an immediate injunction. Having sued them, they could hardly abandon the claim, given that the defendant is arguing that they have a large claim on the cross-undertaking.
8. A further special consideration is that Parliament, by enacting section 65 of the Patents Act 1977, has made it clear that a patentee should, in principle, receive a more generous protection in costs where there is a second or subsequent attack on its patent. In the present case, if security is not ordered, it will not be possible to ensure any such protection. The policy behind section 65 argues that the case should be managed in such a way as to protect the patentee's potential entitlement to costs.
"27. This said, it is both clear on authority and requisite in principle that a claimant resident abroad who wants to ensure that any security he is required to put up is within his means must be full and candid in setting out what his means are. True, as Park J noted in Brimko Holdings v Eastman Kodak Co.  EWHC 1343 (Ch), §12:
'... the court should not press too far the proposition that the burden [of showing that an order in more than a certain sum will stifle the claim] rests on the claimant. It should be recalled that when the claimant has to establish that third parties do not exist from whom security can reasonably [be] expected and obtained, that is to place on the claimant the burden of proving a negative.'
But this does not relieve the court of the need to scrutinise as much as it is told with a critical eye and to note unexplained gaps in the information which the claimant volunteers or in the documentary support for it. Unless the court were prepared to draw adverse inferences from such lacunae, a claimant would have only to deny that he can find the sum asked in order to avoid an order.
"28. It follows that the court, once satisfied that the case is one in which the claimant ought to put up security for the defendant's costs before continuing with his action, is going to find itself in one of two situations. Either it will be satisfied that it probably has a full account of the resources available to the claimant, in which case it can calculate with reasonable confidence how much the claimant can afford to put up; or it will not be satisfied that it has a full account, and so cannot make the calculation. Does it follow in the latter situation that the court must go straight to the amount sought by the defendant and, having pruned it of anything which appears excessive or disproportionate, fix that as the security? Or is there a middle way - for example to set an amount which represents the court's best estimate of what the claimant, despite having been insufficiently candid, can afford?
"29. In our judgment there is such a power, but it resides in the court's discretion rather than in legal principle. In the second situation we have postulated, the requirements of the law have been exhausted: What remains is to set a suitable sum. This classically is where discretion fills the space left by judgment: The court has a choice of courses, none of which it can be criticised for taking provided it makes its election on a proper factual basis uninfluenced by extraneous considerations.
"30. We agree with the submission of Mr Shaw for the claimants that article 6 of the European Convention on Human Rights has a bearing on this issue, by virtue of s.3(1) of the Human Rights Act 1998 which requires both primary and subordinate legislation to be read and given effect, so far as possible, compatibly with the Convention rights. In Tolstoy Miloslavsky v United Kingdom, §59, the European Court of Human Rights held, what it has since reiterated, that while the state has power to regulate access to its courts, it must not do so in ways which 'restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired'. The court also insisted on 'a reasonable relationship of proportionality between the means employed and the aim sought to be achieved'. The domestic obligation to read CPR 25.13 conformably with the law of the Convention is met, we believe, by the approach taken in this judgment and, in particular, by the principle that the court may not fix security in what it knows to be an unaffordable amount.
"31. It is in the context of what we have said so far that, in our respectful view, the judgment of Peter Gibson LJ in Keary Developments Ltd v Tarmac Construction Ltd  3 All ER 534, 539-40, and that of Potter LJ in Kufaan Publishing Ltd v Al-Warrak Publishing Ltd (1 March 2002, unreported), should be read. There is a clear difference between incurring a substantial risk, in the overall interests of justice, that a claimant will not be able to raise the sum required as security, and setting a sum in the knowledge that he cannot do so. The latter is tantamount to striking out his claim and requires the same process and justification as any other strike-out. The former is the striking, within the Convention paradigm, of a balance of the kind described in the two judgments we have mentioned."
"It is clear from paragraph 26 of the judgment in Olatawura v Abiloye that the court was viewing the matter though the prism of an unsuccessful application for summary judgment, but the warning against making exorbitant applications in misguided attempts to obtaining a conditional order for security for costs is of more general application. It would be wrong, in my view, to encourage litigants to regard rule 3.1(3) as providing a convenient means of circumventing the requirements of Part 25 and thereby of providing a less demanding route to obtaining security for costs. In my view, when the court is asked to consider making an order under rule 3.1(3) or 3.1(5) which is, or amounts to, an order for security for costs, or when it considers doing so of its own motion, it should bear in mind the principles underlying rules 25.12 and 25.13. These include the principle that a personal claimant who is resident within the jurisdiction or in one of the other member states of the European Union cannot be required to provide security for costs just because he is impecunious, even though his conduct of the proceedings may be open to criticism. Although it might be argued that the defendant in such a case should be entitled to obtain protection against the risk of being unable to enforce a judgment for costs, a policy decision has been taken to the contrary. This suggests that an order of that kind should not be made in the exercise of the power under rule 3.1(3) unless one or more additional factors are present which make it appropriate to impose a burden of that kind on one party and a corresponding benefit on the other."
MR. MITCHESON: My Lord, I am very grateful for your swift and careful judgment. My Lord, the order that was sought is at tab 14 of the core bundle. My Lord, paragraph 1 is the summary judgment declaration and that will obviously be amended to reflect your Lordship's findings in relation to 235 only.
MR. JUSTICE FLOYD: Is it better simply just to strike 235 out of the particulars of objection? Is that the cleanest way of doing it?
MR. MITCHESON: That may be easiest.
MR. JUSTICE FLOYD: I will leave it to you to agree the precise form.
MR. MITCHESON: Then, my Lord, the conditional order, we can make paragraph 2 filling in the numbers that your Lordship has indicated. Then, the only issue I think really is timing and that will be for my learned friend perhaps to address you on.
My Lord, I do not know whether your Lordship has in mind to stay the action entirely or to order in the terms of paragraph (b) on page 3 that unless security be given, that the counterclaim be struck out, albeit that there has to be evidence of default.
MR. JUSTICE FLOYD: What I have in mind is a relatively generous longstop date for the giving of security, I will hear Mr. Watson, but something like the end of this year and that, if it is not given by then, then it should be struck out.
MR. MITCHESON: My Lord, that obviously places the trial in January in jeopardy unless security is provided within the next week or so.
MR. JUSTICE FLOYD: Yes. That will have to go, then.
MR. MITCHESON: I am really in my learned friend's hands. If security is provided, then clearly we can get on and have a trial, but we would have to adjourn the trial if security is not given until later on in the period and then adjust the dates accordingly.
MR. JUSTICE FLOYD: It may be the parties need time to think about that. But obviously if the trial is going to go, then it should go sooner rather than later, to allow room for other litigants to take advantage of it.
MR. MITCHESON: Of course, my Lord.
My Lord, the only other part of the order, I think, which is relevant is costs. My Lord, we say we have been successful on our application. We succeeded in the summary judgment application on 235. It was necessary to take your Lordship through the merits of Chakrabarti and S&F in relation to the Part 24 application and, therefore, overall, my Lord, we say we should have our costs. We are not asking for summary assessment, recognising that that may place the defendants in further difficulties and your Lordship has already made your Lordship's findings on those. We would ask for our costs to be assessed.
MR. JUSTICE FLOYD: On the standard basis?
MR. MITCHESON: My Lord, as there is a section 65, we would say on the indemnity basis.
MR. JUSTICE FLOYD: Mr. Watson?
MR. WATSON: My Lord, on timing, the end of the year would help my clients considerably and I think to ask for more than that would be pushing. My Lord, if we could have to the end of the year. Perhaps, I am thinking on my feet, that the case be vacated unless security is given by the end of this month.
MR. JUSTICE FLOYD: That seems sensible because we have the long vacation coming up. Yes.
MR. WATSON: I think the only other point, my Lord, is costs. My learned friend has had a degree of success but, of course, he still has an action he was seeking to strike out. He was seeking very large security. My Lord, I would suggest that the proper course is no order as to costs today. If, my Lord, you are to make an order for costs, it should be on the standard basis.
MR. JUSTICE FLOYD: The separate challenge to invalidity has not yet failed.
MR. WATSON: Exactly.
MR. MITCHESON: My Lord, as I say, it was all part of the same set of applications. We succeeded in demonstrating to your Lordship that the argument was unpromising/improbable. For those reasons, we have been successful.
MR. JUSTICE FLOYD:
MR. MITCHESON: My Lord, I am very grateful.
MR. JUSTICE FLOYD: Thank you both very much.