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Cite as: [2011] EWHC 1852 (Pat), [2011] FSR 43

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Neutral Citation Number: [2011] EWHC 1852 (Pat)
Case No: HC 08 C0433


Royal Courts of Justice
Strand, London, WC2A 2LL
5th July 2011

B e f o r e :


- and -



Transcript of the Stenographic Notes of Marten Walsh Cherer Ltd.,
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. THOMAS MITCHESON (instructed by Simmons & Simmons LLP) appeared for the Claimant.
MR. ANTONY WATSON QC (instructed by Arnold Porter (UK) LLP) appeared for the Defendants.



Crown Copyright ©


  1. Eli Lilly & Co. Limited ("Lilly") bring this action against Neopharma Limited and Gumos Limited (formerly Neolab) for infringement of European Patent UK 0454436. The patent relates to olanzapine and has already been the subject of scrutiny as to its validity in an earlier action between Lilly and Dr. Reddy's Laboratories (the DRL action). I gave judgment in that action in October 2008, rejecting the attacks made on the patent of obviousness, inter alia over items of prior art known as 235 and Chakrabarti 1980. I granted a certificate of contested validity under section 65 of the Patents Act 1977, one consequence of which is that Lilly would normally be protected by an order for indemnity costs in the event of a second unsuccessful attack on the patent in this jurisdiction.
  2. The defendant seeks to meet the allegation of infringement in the present action by alleging invalidity again over those two items of prior art and also over an article by Sullivan & Franklin (S&F). There are three applications before me, all made by Lilly.
  3. The first is an application for summary judgment on the grounds that the defendant has no realistic prospect of defending the action. The second and third applications are, in effect, applications for security for costs: one based on granting security as a condition of dismissing the application for summary judgment under CPR Part 24; the other a straightforward application for security against the counterclaiming defendant under CPR Part 25.
  4. The SPC protecting olanzapine, and for which the basic patent is the patent in suit, comes to an end on 26th September 2011. In February 2008, whilst the DRL action was pending, Lilly became aware of sales of olanzapine bearing the name Neopharma. Although the parties had been in what may loosely be described as negotiations up to this point, the defendant has chosen to launch without notice to Lilly. The launch followed a letter from the defendant in which it stated that it was unable even to provide samples of the product. Mr. Roger Wyand QC, acting as deputy judge on the subsequent application for a disclosure order, described the conduct of the defendant as positively misleading as to the state of its readiness to launch. In the result, the defendant did not challenge the grant of an interim injunction, which remains in force today. They claim that they have a substantial claim on the cross-undertaking in damages against Lilly in respect of sales which they would have made but for their agreement to stay off the market pending expiry of the SPC. To establish that claim, they have to establish that the patent is invalid.
  5. Given that the trial of the DRL action was scheduled for July 2008, Lilly and the defendant agreed to put the present action on hold until the result of the DRL action was known. That agreement was extended after judgment to the pending of appeal. The Court of Appeal gave judgment upholding the validity of the patent in December 2009. That meant that the present action had to be restored and is presently fixed to be heard in a trial window from 16th January 2012 for a period of ten days.
  6. Although the defendant denies infringement in paragraph 11 of the defence and counterclaim, it is clear that the defence turns only on the validity of the patent. Lilly say that the attack on validity can now be seen to have no realistic prospect of success, for the following reasons:
  7. The patent has been upheld at first instance and on appeal by the Court of Appeal.
  8. Two of the three items of prior art, 235 and Chakrabarti, were included in DRL's unsuccessful attack in the DRL action.
  9. The same conclusion has been reached in a number of other jurisdictions which apply the European Patent Convention.
  10. 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.
  11. In Austria, the Austrian Patent Office upheld the patent in a revocation action brought by Synthon.
  12. Similar decisions have been arrived at in the Patent Offices in the Czech Republic, Slovakia, Romania and Hungary.
  13. 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.
  14. Accordingly, say Lilly, there is no realistic prospect of the case on 235 and Chakrabarti succeeding.
  15. 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.
  16. 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.
  17. 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.
  18. 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.
  19. The principles on which the court should grant summary judgment on a claim or issue are well-established. In Virgin Atlantic Airways v Delta Airways Limited, [2010] EWHC 3094 (Pat), 30th November 2010, Arnold J said this, at 32 and 33:
  20. "32. There is no dispute about these. They were conveniently summarised by Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]:
    '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 [2001] 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
    [2003] EWCA Civ 472 at [8].
    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 [10].
    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) [2001] 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 [2007] 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 [2007] 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 [2009] EWCA Civ 1098, [2010] Lloyds Rep IR 301 at [24]."

    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 [1991] FSR 354 and Monsanto v Merck [2000] RPC 77. I think it will indeed be a rare case where summary judgment is appropriate.

  21. Mr. Mitcheson, who appeared for Lilly, stressed the need for a realistic, as opposed to a merely arguable, case and the fact that it may be possible to see there is no real substance in an argument even though factual assertions are made.
  22. Mr. Watson QC, for the defendant, relied on the evidence of his instructing solicitor, Mr. Stothers, to the effect that evidence would be adduced on 235 and Chakrabarti which was different from that which was before the court in the DRL action. Mr. Stothers sets out the matters on which such different evidence would be given in paragraph 14 of his witness statement.
  23. So far as S&F is concerned, Mr. Watson stressed the fact that no court in this country had considered the case based on S&F and it was different in material respects from the case based on the other documents. Also, he said it was impossible at this stage of the proceedings to say that it had no realistic prospect of success.
  24. It seems to me that there is really nothing of any substance in the evidence to suggest that a case based on 235 would have any realistic prospect of success. I propose, therefore, to grant judgment on that issue alone. I believe, however, on balance, and by a narrow margin, that it would be wrong to grant summary judgment on either Chakrabarti or S&F. It is impossible to describe the prospects of success on those issues as merely arguable, supported, as they are, by Mr. Stothers' careful statement as to the evidence which the defendant proposes to bring to the trial. Whilst I should be wary of Micawberism and although no expert has been named or even quoted, it is clear that Mr. Stothers is making his statements after discussing the matter with a suitably qualified expert. If such evidence were to be adduced, it is conceivable that a different result could be achieved. Having said that, I believe it is fair to describe the defendant's prospects of successfully revoking the patent as unpromising. In the light of the very close examination the patent has had in this jurisdiction and abroad, the prospects of this defendant achieving an order for revocation where others have failed appear very slim. This is not the typical case where the court has no yardstick against which to measure the prospects of success. There is very little of substance to indicate that the defendant will succeed where so many others have failed. Whilst the defendant has done enough to fight off summary judgment, it has not cleared that hurdle by much.
  25. I bear in mind that S&F is, at least so far as this jurisdiction is concerned, a new citation, but its fate in other jurisdictions does not suggest that it would lead to a different result here. Moreover, it was clear from Mr. Stothers' and Mr. Watson's explanations of the case over S&F that it remains an essential part of the case on that document, as with Chakrabarti, that it would be obvious to pursue a compound in which the halogen atom is replaced with hydrogen. That means that the case based on this document is really no better and, in all likelihood, somewhat worse than that based on Chakrabarti alone.
  26. I turn, therefore, to consider whether it would be right to impose a condition by way of payment into court on any order dismissing the summary judgment application in respect of Chakrabarti and S&F. CPR Part 24.6 by its cross-reference to CPR 3.13, makes it clear that the court when refusing summary judgment may make a conditional order. This is confirmed by practice direction 5.21. In Olatawura v Abiloye [2002] EWCA Civ 998, [2003] 1 WLR 275, the Court of Appeal considered the jurisdiction to make a conditional order under rule 24 and rule 3. Simon Brown LJ, with whom Dyson LJ agreed, explained that there is now a jurisdiction under the CPR to make orders which are tantamount to orders for security for costs outside the provisions of Part 25. He then turned to consider the approach the court should adopt to the exercise of this discretion, in paragraphs 22 to 26:
  27. "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.

  28. In the present case the factors in favour of making an order are really these:
  29. 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.
  30. Against these considerations, I have to balance the risk that the defendants would be denied access to justice by being unable to meet an order for security. There is undoubtedly a risk that this might be the case. After all, the claimants say, as the basis of their Part 25 application for security, that there is reason to believe that the defendant may not be able to pay its costs if unsuccessful in its defence.
  31. The approach to be adopted in considering this issue was explained by the Court of Appeal in the context of security for costs against the claimant in Al-Koronky v. The Time Life Entertainment Group [2006] EWCA Civ 1123, at paragraphs 27 to 31:
  32. "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. [2004] 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 [1995] 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."

  33. What that passage indicates is that the mere existence of a risk that the party will not be able to provide security, as evidenced, for example, by bare denial of ability to pay, will not necessarily be enough to fight off the application. Moreover, the court can, in the exercise of its discretion, by the terms of its order, manage the risk that security will stifle the party's ability to bring its case.
  34. Mr. Stothers says in his witness statement that the defendants cannot currently provide any significant security. On 17th May 2011, the second defendant sold its trade and business assets to Fannin UK Limited, part of the DCC group, although it retained this litigation and some limited assets. The details of that transaction are said to be confidential. All that is said is that Fannin took on certain liabilities or provided funds to the second defendant to clear those liabilities, and that the second defendant expects no funds from the sale to remain after the liabilities are cleared. All this raises the question how the defendant claims it will be able to fund its defence at all. Mr. Stothers explains that as the first defendant has a marketing authorisation for olanzapine, it hopes to fund its defence of this action out of proceeds to be made by selling olanzapine after September 2011, when the SPC expires. There is, however, no explanation how the first defendant, which is a dormant company, will exploit the marketing authorisation or how the funds from this exploitation would be channelled.
  35. Mr. Mitcheson criticised this evidence as lacking the appropriate degree of candour about whether the defendant could hope to obtain support from elsewhere.
  36. I am not satisfied, on the present material, that I have more than a bare denial from the defendant of its ability to provide security. I certainly do not have a full account of its financial position. Indeed, Mr. Stothers points out that the detailed analysis of the filed accounts carried out by Lilly's witnesses is out of date. More importantly, there is no attempt to show what the attitude of the defendant's shareholders and other potential backers might be to providing the security. If there is indeed a very substantial claim on the cross-undertaking which the defendant considers worth pursuing, then I would not regard it as unrealistic for the defendant to seek backing from others to continue with the action. Equally, if there is a prospect of a reasonable income stream from selling olanzapine, then there is some reason to suppose that the defendant could borrow against this or even use it to provide the security. There is no evidence to suggest that any of this has been investigated. Moreover, any difficulty in raising the necessary security immediately (note Mr. Stothers' use of the word "currently") can be dealt with by the period granted by the defendant to raise the security given that they expect an immediate income stream in September 2011.
  37. The authorities do indicate, however, that CPR Part 24 and the power to make a conditional order should not be used to bypass the traditional approach to security under CPR Part 25. I should therefore look briefly at the position under Part 25. In Bryan Huscroft v. P&O Ferries Limited [2010] EWCA Civ 1483, Moore-Bick LJ, with whom Elias LJ and Sedley LJ agreed, pointed out that litigants should not regard rule 3.1 as providing a way of circumventing the requirements of Part 25:
  38. "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."
  39. In the course of a normal patent action where infringement was alleged and validity raised as a defence, security would not normally be ordered on the counterclaim (see, for example, Norprint v SPJ Labels [1979] F.S.R. 126). The issue of validity arose equally on the defence of the claim itself. The additional costs of the counterclaim were nominal. Indeed, the case there, as here, could have been run on the basis of a simple denial of validity, which would be adequate to defeat the claim for damages and an injunction. The addition of a counterclaim for revocation adds nothing. Although Mr. Mitcheson pointed out that the claim for invalidity here went slightly wider than was necessary to defeat the claim for infringement, Mr. Watson indicated that he would trim the invalidity claim accordingly if the point proved decisive.
  40. Mr. Mitcheson's real answer to this is that it is only because of the way in which the defendant chose to launch the product that it is a defendant, rather than a claimant, at all. Had they behaved in a less underhand manner, they would now have no answer to a claim for security for costs. So the principles underlying Part 25 do not in this particular case throw much light on the application for security under Part 24. I accept that submission.
  41. What is more, the matters I have taken into consideration above (namely, the results of litigation elsewhere, the failure to raise the new case in Germany or in the DRL action, the underhand launch of the product, the fact that the defendant has a large claim on the cross-undertaking, the policy of section 65, the lack of candour in relation to the support of the defendant and the likelihood of an income stream in September) all mean that this is a truly exceptional case and that there are a number of strong factors pointing towards the grant of security. It is not, therefore, necessary to consider separately the application under Part 25.
  42. In the circumstances, I propose to make an order that the defendants pay a sum into court by way of security for the claimant's costs. The claimant seeks an order for some 590,000, being 80% of its costs up to and including the trial. I propose to order security only up to and including reply evidence. The claimant's costs estimate up to this date is 290,000, which at 80% is about 230,000. I will reduce that further to 200,000 to take account of the reduced scope of the action with the removal of 235. There is no material before me on which to adjust that figure to bring it into line with what the defendant might be expected to pay immediately. I will, however, grant a stay of the proceedings until that security is given.
  43. Given that the defendant expects an income stream from selling olanzapine after September, I will be sympathetic to a relatively long period for the giving of security. I will hear counsel on the precise form of order.
  44. 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.


  45. So the order will provide a longstop date of December 2011 for the providing of security. If security is not provided by the end of July 2011, then the trial date should be vacated.
  46. So far as the costs are concerned, the claimant has been overall successful with their three applications, but they have not succeeded to the full extent of their summary judgment application. I consider that they ought to receive 80% of their costs of the applications.
  47. So far as the basis of assessment is concerned, the costs should be assessed on the standard basis. There has not yet been a second unsuccessful attack on validity so the provisions of section 65 do not, as I understand them, yet bite.
  48. MR. MITCHESON: My Lord, I am very grateful.

    MR. JUSTICE FLOYD: Thank you both very much.

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