South Africa’s highest court, the Constitutional Court, handed down judgment in the matter of Ascendis Animal Health (Pty) Limited v Merck Sharpe Dohme Corporation and Others (CCT 212/18)  ZACC 41 on 24 October 2019. This was the first ever patent matter heard by the Constitutional Court. The patent, held by Merck and Merial, dates back to 1998 and relates to an anti-parasitic formulation.
The matter has a long history. It started in 2011, when Ascendis launched patent revocation proceedings. Ascendis sought to have the patent revoked on the grounds that the invention claimed in the patent lacked novelty and inventiveness (in other words, the invention was not new and it was obvious). While the revocation proceedings were ongoing, Merck and Merial launched patent infringement proceedings, claiming damages against Ascendis on the basis that it had infringed and was continuing to infringe the patent.
The infringement action was put on hold pending the finalisation of the revocation proceedings. At the revocation proceedings (heard by the Commissioner of Patents), Ascendis requested to deal with the lack of novelty claim first and only to deal with the lack of inventiveness claim if the lack of novelty claim did not succeed. Ascendis did not bring a formal application for the allowance of this approach.
The Commissioner found in favour of Ascendis and revoked the patent on the basis of a lack of novelty. Merck and Merial appealed this finding and the Supreme Court of Appeal (“SCA”) overturned the original decision. The SCA held that the patent was not invalid on the ground of a lack of novelty.
In response to the SCA overturning the Commissioner’s ruling, Ascendis sought to amend its plea in the infringement action. Specifically, Ascendis sought to remove the defence of lack of novelty and to add an additional defence, namely that the patent was invalid because of inutility. The Commissioner, in hearing the infringement action, held (1) that Ascendis had abandoned lack of inventiveness as a ground of invalidity and (2) that it had not reserved the right to rely upon a separate ground of alleged invalidity. It was therefore found that the validity of the patent was res judicata. This term essentially means that a matter has been adjudicated by a competent court and therefore may not be pursued further by the same parties. Ascendis then approached the Constitutional Court to appeal the finding of the Commissioner.
Ascendis argued that the Commissioner extended the rule of res judicata beyond its reasonable boundaries. It contended that the different subsections in the South African Patents Act dealing with invalidity of patents each require different facts to be proved and that they therefore constitute separate causes of action. Ascendis also contended that the Commissioner erred in finding that a procedural error could preclude it from raising a different basis for invalidity than what had already been ruled upon, as a defence in separate proceedings.
On the other hand, Merck and Merial argued that the Commissioner correctly applied the res judicata principle and the “once and for all” rule. According to Merck and Merial, as the patent was already found (by the SCA) not to be invalid, Ascendis could not rely on that same “cause of action” again. Furthermore, Merck and Merial contended that the “piecemeal” litigation strategy employed by Ascendis constitutes an abuse of process.
The Constitutional Court handed down an evenly split decision (two judgments, referred to separately below). Five of the ten judges would have granted leave to appeal and upheld the appeal, while the other five judges would have granted leave to appeal but dismissed the appeal.
The first judgment by the Constitutional Court held that each one of the grounds of revocation of a patent constitutes a “separate, distinct and independent” cause of action that can be raised even after another one has been dismissed. In other words, Ascendis’ claim of inutility was not a cause of action that could be said to be res judicata as it was not specifically dealt with by the SCA. Similarly, the claim based on lack of inventiveness could also not be said to have been decided and Ascendis should have been allowed to raise it.
The following part of the first judgment, written by Judge Khampepe, is particularly noteworthy:
“We must not lose sight of the fact that testing the validity of patents is in the public interest because patents create artificial monopolies. Currently, South Africa completely relies on private parties to regulate this artificial monopoly system because the government does not examine a patent’s validity upon registration. Instead of deterring litigants, who are working both in a private capacity and for the public interest, there should be an inclination to encourage them to bring more revocation challenges, not to create extensions in common law that increase the costs and risks of doing so.”
The second judgment by the Constitutional Court concurred with the decision of the Commissioner. The second judgment held that the Commissioner was correct in finding that the SCA conclusively rebuffed Ascendis’ attempt to revoke the patent. It also held that the first judgment would result in incoherence and would go against the long-held judicial caution against “piecemeal litigation”. According to the second judgment, written by Judge Cameron, the default position should be that a previously unsuccessful revocation applicant is generally (but not invariably) precluded from raising the validity of the patent as a defence in a future infringement action. It was held that this should only be allowed under exceptional circumstances.
As a result of the evenly split decision of the Constitutional Court, there was no majority decision and the judgment and order of the Commissioner stands.
This case reaffirms the importance of patent rights in South Africa and it is heartening that the country’s patent laws are continuously being developed and strengthened. Furthermore, as pointed out by the Constitutional Court, not only did the dispute between the parties raise a constitutional issue in relation to access to courts, but various arguable points of law, extending beyond the interpretation of the patent laws to more general aspects of public importance.
Reviewed by Rowan Forster, an executive in ENSafrica's IP Department
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