Monday, July 5, 2021

Thoughts on the U.K. Supreme Court's Decision in Servier

Last Friday I noted that the U.K. Supreme Court had issued its decision in Secretary of State for Health v. Servier Laboratories Ltd., [2021] UKSC 24, and I said that I might have more to say about it in the next few days.  Lord Hamblen's opinion strikes me as very well-reasoned, so I don't have a lot to say, but here goes.

The case involves an action for "unlawful means" brought by the U.K. Secretary of State of Health, as successor in interest to various National Health Service bodies.  The defendants are drug companies that obtained a European Patent on an "alpha crystalline form of the tert-butylamine salt of perindopril," a drug used for treating high blood pressure that is marketed under the brand name "Coversyl."  The patent survived an opposition proceeding before the EPO, and the defendants used the patent to delay the introduction of a generic form of the drug into the U.K. market.  The Patents Court for England and Wales thereafter found the patent to be invalid on both novelty and nonobviousness grounds.  The Court of Appeal upheld this decision, and the EPO Technical Board of Appeal revoked the patent in 2009.  On the basis of this procedural history, the Secretary of Health alleged that "the respondent practised deceit on the EPO and/or the courts, with the intention of profiting at the expense of the appellants," in that "the patent was obtained, defended and enforced on the basis of representations  . .  . that the third respondent knew to be false, or that were made with reckless indifference as to their truth" (para.12).  Plaintiffs claimed damages of more than £200 million.

The lower courts dismissed the action, however, and now the U.K. Supreme Court affirms.  To cut to the chase, the court concludes that the matter is governed by an earlier decision of the House of Lords, OBG Ltd v. Allan [2007] UKHL 21, which it reaffirms.  In that earlier decision, Lord Hoffmann had stated that:

Unlawful means therefore consists of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant. It does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant (para. 16).
The court here agrees with the lower courts that the defendants did not interfere with third parties (the EPO and the English courts in the earlier enforcement actions) in their "freedom to deal" with the plaintiff, and that the claim therefore must be dismissed.  In particular, the court concludes that the "dealing requirement" is indeed an element of an "unlawful means" action; that to do away with that element would create an expansive theory of liability with no clear stopping point; and that whether such an expansion would be desirable is a question better left up to Parliament.

As I said, the decision seems correct to me, for the reasons Lord Reed states:  there has to be some limit on liability for the remote consequences of a wrongful act, and in the present context that limit is imposed by requiring evidence that the defendant interfered with the third party's ability to deal with the plaintiff.  I believe the result would be the same in the United States, where the analogous cause of action would be one for tortious interference with prospective economic advantage.  There is some variation from one jurisdiction to another, both in terms of precisely what the tort is called and how its elements should be interpreted, but according to one fairly recent decision "a plaintiff must prove the following five elements: 1) The existence of a reasonable expectation of economic advantage; 2) Defendant’s knowledge of that expectation of economic advantage; 3) That defendant intentionally interfered with plaintiff’s reasonable expectation of economic advantage, and the intentional interference is either independently tortious or in violation of a state or federal statute or regulation; 4) That in the absence of the wrongful act of defendant, it is reasonably probable that plaintiff would have realized his economic advantage or benefit; and 5) That plaintiff sustained damages.” Gieseke v. IDCA, Inc., 844 N.W.2d 210 (Minn. 2014).  Under this formulation, the U.S. counterpart to the "dealing requirement" is element (1), namely that the plaintiff had a reasonable expectation of deriving some economic advantage from doing business with a third party (which the defendant has interfered with).  Thus, if a proceeding similar to Servier were to be brought in the U.S. under this theory, it too would fail because the defendants' alleged deceit would not have caused the USPTO or the courts in which any earlier enforcement actions would have been brought to cease dealing with the plaintiff.

One other thought that occurred to me in reading the U.K. decision is that in the U.S. a plaintiff would consider filing a Walker Process antitrust claim.  Basically, if a plaintiff can prove that the defendant obtained a patent by making knowing and willful misrepresentations to the USPTO, it may be able to succeed in holding the defendant liable for monopolization or attempted monopolization--though only if all of the other elements of such a claim (monopoly power, etc.) are also proven.  See Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172 (1965).  I hope to immerse myself in the relevant non-U.S. case law relating to this type of issue in the coming months.  My present understanding, however, is that under E.U. law these types of claims, though perhaps available an abuse of dominant position rationale, are difficult to prove (as they are in the U.S., for that matter) under governing CJEU precedent, e.g., ITT Promedia v. Commission and AstraZeneca v. Commission.

No comments:

Post a Comment