In a potentially significant decision in Arrow v Merck1 the High Court has held that a generic drugs company could request a declaration that its product was obvious at the priority date of a patent application. If so, were the patent granted from that application to cover the product it would be invalid. The decision therefore opens up the possibility of generic companies (and any other would-be infringer) being able to clear a product's path to market without having to wait for a patent to grant in order to bring invalidity or non-infringement proceedings.
As the judge noted, Arrow v Merck was an exceptional case. Arrow had cleared the path for its generic version of Merck's Fosamax2 by successfully applying to the court for revocation of Merck's relevant European patent (UK) in 2003. The European Patent Office (EPO) also revoked the patent in opposition proceedings. Arrow then proceeded to build up substantial sales in the EU for its drug only for Merck to be granted a second European patent earlier this year, based on the same application as the revoked one, with several more patents that might follow and all of which Arrow potentially infringed as they contained similar claims to the revoked patent3. Further Merck clearly intended to enforce its rights and refused to give undertakings not to sue Arrow and to withdraw the UK designations of the applications.
The court evidently sympathised with Arrow's position. While it could not give the declarations that Arrow actually sought – as they involved the validity of non-UK designations of Merck's patent and applications over which the High Court had no jurisdiction4 – the judge decided that the court could rule on whether Arrow's alendronate (formulated as a sodium salt in a weekly dosage form) was obvious as at the priority date of the patent and applications. If obvious, then any patent that covered the product would be obvious too and so invalid. This approach neatly avoided the limited circumstances in which declarations of invalidity of patents can by brought under the Patents Act 1977 and which Merck argued formed a complete bar to the relief sought by Arrow. But more significant is the court's view that businesses need commercial certainty in patent matters, as in any other, and that the court should assist in providing it where it properly could. In particular Merck's applications could take a further year or more to be granted as patents during which time Arrow would be accumulating substantial potential liability if it infringed them5. Merck could have avoided this effect on Arrow by giving the undertakings but it did not so there was a valid and valuable commercial purpose to the declaration for Arrow.
This decision gives a potentially attractive additional tool to declarations of invalidity and non-infringement of patents for those wanting to establish whether or not they infringe a patent and, if not, to clear the path for bringing their product to market. Particularly useful is that, as the declaration on a product can be sought as soon as a patent application is published rather than having to wait for grant, a favourable declaration allows considerably earlier entry on to the market. The decision will therefore be of obvious interest to generics drugs companies though, as it is not being appealed, it needs to be seen whether judges in other cases will follow it, or decide it is restricted to its facts or to exceptional circumstances only, before its full potential can be assessed.
CONFIDENTIALITY AT A PRICE
In May the House of Lord's long awaited decision in Douglas v Hello!6 was finally delivered after a 7 year legal battle and months of deliberations by the Lords. By a majority, the Lords found that the exclusive right to publish photographs of the Douglas's wedding given to OK was protectable through the laws of confidence - OK's payment of £1 million for the exclusive both indicated confidentiality and gave an expectation that the law would protect it. In their decision the Lords also clarified the economic torts of causing another loss by intentional acts against third parties.
The background to the case was that, in November 2000, OK beat Hello for the exclusive right to publish photographs of the wedding of Catherine Zeta Jones and Michael Douglas. OK paid the Douglases £1 million for that exclusivity. However, Hello, to meet its readers' expectations, bought unofficial photographs taken surreptitiously by an uninvited photographer and published them only a few hours after OK's exclusive. OK sued alleging breach of confidence and unlawful interference with its business.
While successful at first instance, the Court of Appeal found against OK on breach of confidence holding that rights of privacy were personal to the Douglases and could not be relied on by OK and that once OK's photographs had been published confidentiality was lost leaving Hello free to publish its unauthorised ones. The unlawful interference claim failed at both levels.
Lord Hoffmann gave the leading majority judgment in the Lords. In his view there was no need to involve privacy, "image rights" or any other unorthodox form of intellectual property. "The information in this case was capable of being protected [under the laws of confidentiality] simply because it was information of commercial value over which the Douglases had sufficient control to enable them to impose an obligation of confidence". "OK! had paid £1m for the benefit of the obligation of confidence imposed upon all those present at the wedding in respect of any photographs of the wedding". The "any photographs" was key as it meant that the obligation survived the publication of the particular photos used in OK's exclusive and so caught those published later by Hello.
Turning to the economic torts, these have long been a confused area and seen as arguments of last resort. The Lords, wary of allowing them to broaden in scope, instead cut them back to give 2 well-defined and separate rights of action:-
- inducing a breach of contract - where the inducer intentionally procures the breach he is liable to the claimant in addition to the person who actually commits the breach; and
- causing loss by unlawful means - wrongful interference with the actions of a third party with an intention thereby to cause loss to the claimant.
Both torts thus involve damaging the claimant through a third party. A second common thread is that the breach and the loss respectively must be intended - being a foreseeable consequence is not enough. In the Douglas case, Hello had the necessary intention to cause loss to OK (this being the flip side of wanting to keep its own circulation figures up) but it had not unlawfully interfered with the Douglas's arrangement with OK by preventing or breaking it - only made it less valuable.
Of more direct relevance to the IP field, the Lords ruled out the unlawful means tort from applying to the infringement of IP rights thus preventing, for example, a non-exclusive licensee from suing another for losses caused by that other's infringement of the licensed patent. The rationale is that Parliament has set out in the relevant statutes those entitled to bring infringement actions and it is not for the courts to extend those rights.
While the decision is overall a fair one for OK, it is not without criticism. As Lord Gestingthorpe queried, with some force, in his dissenting judgment: how could Hello's photographs be confidential? None were even faintly embarrassing for the Douglases nor offensive in any way. The standard test is that information has to be confidential by its nature not as a result of its market value. Nonetheless, other publications will now have to be careful before deciding to publish a spoiler of another's exclusive.
OTHER DEVELOPMENTS SINCE OUR WINTER UPDATE 2007
Obviousness test for patents reformulated - for 20 years or so the test applied by the courts in England and Wales to determine whether or not the invention claimed in a patent is obvious has been that laid down in the Windsurfing case7. This test had become so familiar that a judge merely mentioning the word "Windsurfing" in his judgment could be enough to defeat an argument on appeal that he had applied the wrong test. Despite this, the Court of Appeal recently decided8 that the test needed reformulation to ensure that, before trying to identify the inventive concept, which was the first step of the Windsurfing test, the court identifies the person skilled in the art. This legal fiction is the person to whom the invention is directed or who would be interested in putting it into effect. The restated test is then:-
- identify the notional person skilled in the art and then identify the relevant common general knowledge of that person.
- identify the inventive concept of the claim in question or, if that could not readily be done, construe it.
- identify what, if any, differences existed between the matter cited as forming part of the state of the art and the inventive concept of the claim or the claim as construed.
- viewed without any knowledge of the alleged invention as claimed, did those differences constitute steps that would have been obvious to the person skilled in the art or did they require any degree of invention?
The changes introduced in steps 2 to 4 of the test are to clarify that the claim should be construed, if the inventive concept is not readily apparent, and that hindsight should be avoided in the comparison between the invention and the prior art. In practice, as with the initial identification of the skilled person, the courts had these points well in mind when applying the Windsurfing test. Hence the changes formalise normal practice rather than constituting a new departure or development in the law on obviousness. In particular, there is no change in the obviousness standard being applied.
Whether the UK courts set too high an obviousness hurdle for patentees was the subject of consultation last year. The outcome was that they did not. The overall result is thus business as usual and here the Court of Appeal upheld the lower court's decision that the patent, for a multiple CD case in which the discs overlapped to make the case slim enough to fit standard CD storage units, was obvious. There was no technical prejudice in the art against overlapping CDs that would have presented an obstacle to a skilled person making the claimed 'invention'.
No relief from damages for infringing an invalid patent – the validity of a granted European patent can be attacked either centrally through opposition proceedings before the EPO or in national courts or patent offices of the states for which it is designated. If found invalid, it is deemed never to have existed.
Despite this, the Court of Appeal in Unilin v Berry Floor9 has held that a patentee can recover damages from a defendant following a final decision of infringement of a European patent even if there are ongoing parallel proceedings in the EPO which might result in the patent being invalidated. The main reason for the Court of Appeal's decision was that the defendant was estopped from re-opening the issue of validity. In this the judgment is consistent with the Court of Appeal's earlier decision in Coflexip v Stolt10 (in which, rather than there just being a risk of invalidity, the patent had actually been found invalid in subsequent proceedings against a different defendant).
The justifications for cause of action estoppel include the strong public interest in finality in actions and preventing an unsuccessful defendant from re-litigating validity itself or through a token third party. In Unilin, the Court of Appeal also specifically commented on the need for businesses to have certainty as to their positions. Both decisions have though been criticised by commentators as unduly pro-patentee - however much businesses may like certainty, at least an infringer would surely rather avoid having to pay potentially significant damages (about £80 million in Stolt's case). Maintaining the patentee's right to damages is also inconsistent with earlier authority that an injunction against the infringer would be discharged where the patent it relates to is subsequently found invalid. However, this will remain the position for the foreseeable future as the Unilin case settled before judgment so there will be no appeal to the House of Lords to consider the issue.
Pan-European patent litigation – although efforts to progress both the Community patent and the European Patent Litigation Agreement ("EPLA") routes towards a pan-European court system for litigating patents continue, it remains difficult to see either initiative coming to fruition in the near future. The EPLA, having started as a protocol to the European Patent Convention independent of the European Union, now looks as though it will be incorporated into the Community patent as the basis for its court rules. This was the general agreement at meetings held by the German presidency of the European Union in June 2007. Since then the now Portuguese presidency has initiated a number of working parties to look at the Community patent and court system but it appears that none will address the main issue that has hampered progress to date - namely limiting the number of languages to be used to make the proposed regime cost-effective for users.
Some encouragement on languages comes from the announcement in August that France will (finally) ratify the London Agreement thereby bringing it into force, potentially in early 2008. The London Agreement reduces the translation burden on European patent owners in signatory states as its practical effect is that they will only need to submit applications in one of the three official EPO languages - English, French, or German. On grant of the patent only its claims, rather than the entire specification, will then need to be translated into the national language for each country for which the patent is designated.
The Commission and the EPO have seen the London Agreement as an important first step towards the Community patent. This seems optimistic. While it does suggest that the language issues that have dogged the Community patent may not be insoluble, the London Agreement raises the hurdle on cost-effectiveness that the Community patent will have to meet. Very few European patents are ever litigated and, outside the pharmaceutical and electronics fields, relatively few are designated for more than a handful of countries. If the Community patent is going to compete successfully with the existing European patent system it will therefore have to offer Community coverage at no greater cost than the average European patent. With the London Agreement in place, that seems difficult to achieve unless the Community patent operates in a single language only. Heated debate between Member States can also be expected over the language regime that should apply in the proposed supra-national Community patents court.
Disclosure in patent actions - an attempt by a former patents judge, now in the Court of Appeal, has failed to curb the disclosure obligations in patent actions. By a majority the Court of Appeal held in Nichia v Argos11 that the same standard of disclosure should apply in patent actions as in any other commercial dispute (notwithstanding that date limitations on obviousness disclosure already exist in patent actions as well as infringement disclosure generally being replaced by a product or process description written by the alleged infringer).
The Nichia case concerned patents for LEDs allegedly infringed by Argos's Christmas lights. Argos countered that the patents were invalid as obvious and requested disclosure of the inventor's records as well documents relating to experiments on infringement conducted by Nichia. The first instance judge refused. On appeal, Lord Justice Jacob, who has frequently criticised the extent and cost of disclosure in patent actions, agreed in part saying that inventors' documents were irrelevant to the obviousness test (see above) as that was an objective test based on the notional skilled person. Further such disclosure was often to no purpose as the documents produced were not referred to at trial and so ordering it would be disproportionate. As mentioned the other 2 appeal judges could not agree as practically to do so would end disclosure in all patent cases other than where exceptionally large sums were at stake. Whether disclosure is required and its extent should instead by seen case by case as to what is needed and proportionate.
As regards the disclosure of Nichia's experiments, the parties reached agreement. Nonetheless, Lord Judge Jacob observed that material indicating whether or not the experiments formally relied on by Nichia in the action were reliable was disclosable and not privileged - Nichia could not disclose the part of its privileged experimental material it liked and not the part it did not. In this the decision follows a recent trend in patent decisions that "work-up" experiments should be disclosed as well as the final experiments12.
ECJ declines jurisdiction over duration of patents – somewhat surprisingly given the Commission's prolonged efforts to bring in a Community patent, the ECJ has decided that the Community has not yet exercised its powers in the sphere of patents, at least not in a way of sufficient importance, for the issue of the duration of patents to fall within its sphere.
The question arose in a dispute between Merck Genericos and Merck & Co.13 concerning the formers release of a generic version of Renitec (enalapril, an antihypertensive) in Portugal. The relevant national patent was granted pre-TRIPS14 and so under applicable Portuguese law expired 15 years after grant. Merck & Co. sued arguing that TRIPS had direct effect so that its 20 year patent term should apply instead meaning that the patent was still in force when the generic was launched. The Portuguese Supreme Court referred the matter to the ECJ which, as indicated, considered that member states remained principally competent to decide whether to apply the TRIPS term or not. The decision weakens the ability of patentees to argue against patent terms of less than 20 year where they still exist within the Europe Union.
New examination rules for UK trade marks15 - from 1 October 2007 the UK Intellectual Property Office (UKIPO)16 will no longer automatically refuse to register a new mark where it conflicts with an already registered mark. Instead it will notify both the applicant and the owner of any earlier conflicting mark of the application. The onus is then on either the applicant to amend or withdraw its application or the owner of an earlier mark to oppose the application if it considers that the use of the new mark would infringe its rights.
While owners of UK and International marks designating the UK will be notified automatically, owners of Community trade marks and International marks designating the European Union will only be notified if they have "opted-in", i.e. filed the appropriate form and paid the official fee of £50 for each mark in respect of which they wish to receive notifications. The 'opt-in' procedure starts from 1 October as well.
The change brings UKIPO practice on examination into line with the Community registry17 and will benefit applicants by simplifying the examination procedure. On the other hand, it will increase the number of oppositions and so the costs of some applications as well as the costs for trade mark owners of policing their portfolios as they will no longer be able to rely on the UKIPO for an initial weeding out of conflicting applications. Trade mark owners should therefore review their portfolios for Community marks and International marks designating the EU for those that are used in the UK so that they can opt-in to the notification system. Whether the system offers value for money compared to routine searches for new applications by trade mark attorneys, or can replace the need for such checks, given that an examiner's view of what constitutes a conflict may differ from a trade mark owner's, are moot points but it would be prudent for trade mark owners to opt-in to help ensure that conflicting applications are caught an early stage.
Copyright & Designs
The inter-relationship between copyright and design rights – section 51 of the Copyright, Designs and Patents Act 1988 provides that any copyright in a design document is not infringed by an unauthorised person making an article to that design unless the copyright concerned is to an artistic work or a typeface. The primary intention behind the provision when enacted was to allow spare parts earlier entry on to the market by excluding copyright protection and only allowing the shorter, 10-15 year term for unregistered design rights. However, section 51 has caused headaches in a number of designs cases since and particularly in Lambretta Clothing v Teddy Smith18in which the Court of Appeal held that, despite the colour patterns in Lambretta's tracksuit design being surface decoration, so excluded from design rights, there was no independent artistic copyright in them either (as the patterns were defined by the shapes of the different parts of the tracksuits). Section 51 therefore applied, excluding the patterns from copyright protection as well, leaving Lambretta with no redress against the defendant for allegedly copying them.
This gap in protection between the design right and copyright regimes has now been revisited by the High Court in The Flashing Badge Company v Groves19 with a more favourable outcome for the rights owner. The case involved badges bearing messages such as "Happy Birthday" with flashing, coloured LEDs. The badges were designed for The Flashing Badge Company but virtually identical copies were imported by Groves from China. In defence of copyright infringement Groves relied only on the section 51 exclusion. The defence failed. Distinguishing the position in Lambretta, the judge found that in this case the designs on the badge faces could exist separately from the overall badge designs. As the face designs also constituted artistic works, section 51 did not apply and the copyright in them could be asserted against Groves.
By his decision the judge has removed some of the uncertainty on how copyrights and design rights inter-relate introduced by the Lambretta decision and shown that at least some surface decorations can be protected from copying through copyright. Also, since Lambretta was decided, European unregistered design rights have been introduced which again close the gap in protection exposed in Lambretta as, unlike UK design rights, European design rights specifically include surface decoration.
Copyright enforcement - in May 2007, Parliament's Select Committee on Culture, Media and Sport issued a report recommending a number of measures to toughen copyright enforcement. This included the extension of copyright on sound recordings from 50 years to 70 years, despite the Gower Report on intellectual property in the UK being against the extension. Not surprisingly therefore, this recommendation was rejected by the Government in a July statement. Other recommendations made by the Report were for:-
- an investigation into reported difficulties for rights owners in obtaining additional damages (for flagrant copyright infringement) noting that the deterrent effect of additional damages was near zero whereas it ought to be substantial.
- unauthorised copying and commercial distribution of illicit recordings made in cinemas to be made a criminal offence; and
- the introduction of an exemption to copyright infringement for domestic copying (including for use in e.g. MP3 and car players) but not onward transmission of copied material.
On the last point, the Report noted that digital rights management techniques should not be unduly restrictive as that was counter-productive by discouraging the legitimate market. The Government has said that a consultation on format-shifting for private use is to be launched later this year.
The Report also welcomed, as long overdue, the bringing into force of section 107A of the Copyright, Designs and Patents Act 1988 and the provision of £5 million to local government to fund enforcement. Section 107A places a duty on trading standards officers to enforce the statutory offence of copyright infringement. Section 198A, which places an equivalent duty in respect of illicit recordings, was brought into force at the same time - from 6 April 2007. Bringing these sections into force redresses the balance with trade mark infringement, for which trading standards already had enforcement duties.
More anti-counterfeiting initiatives - various statistics have been released in recent months showing how significantly and quickly the international trade in counterfeit and pirate goods is increasing. For example:-
- the European Commission's Taxation and Customs Directorate General reported that over 250 million fake and pirated goods were seized in 2006, compared to 75 million in 2005, with over 80% originating in China;
- within this figure, 497 cases of counterfeit medicines were seized, an increase of 384% over 2005 figures, with India being the primary source followed by the United Arab Emirates then China; and
- a report from the OECD in June put the value of fake goods traded internationally as high as $200 billion.
In addition, within the UK counterfeits of a number of major drugs companies' products have been found in the supply chain leading to recalls including: Sanofi-Aventis's Plavix (anti-thrombosis), Lilly's Zyprexa (schizophrenia treatment), AstraZeneca's Casodex (anti-cancer). Counterfeits of Pfizer's Viagra (erectile dysfunction) were also been uncovered during August.
Recent international initiatives aimed at countering the rising tide of counterfeit products include:-
- proposals by the Council of Europe for a European convention on the suppression of counterfeiting and trafficking in counterfeit goods, covering civil and criminal law aspects of the problem, as well as a convention on counterfeit medicines and other forms of pharmaceutical crime;
- continued progress on the draft EU Directive on criminal sanctions for IP infringement – which, following amendment by the European Parliament, is limited to counterfeiting and piracy (allaying concerns that it would catch and so criminalise IP disputes between legitimate enterprises that should remain under civil law only). Under the draft infringers would, in serious cases, face a fine of at least Euros 300,000 and/or up to 4 years in jail. The text is now to be discussed between Member States. It is expected to meet strong opposition including challenge to the Commission's jurisdiction to legislate on criminal matters.
- The opening in April of Interpol's Database on International Intellectual Property Crime for a pilot period during which private-sector participants can submit what information they have on crimes or suspected crimes for inclusion in the database. Interpol will analyse the data to identify links with organised crime as well as to help collaboration between law enforcement agencies.
- The launch of a "supply chain integrity pact" in September by the European bodies representing generics firms, pharmacists and pharmaceutical wholesalers20 aimed at securing the supply chain for pharmaceuticals and so reducing the risk of counterfeit medicines entering it.
No data protection or privacy - a recent High Court case shows that the courts are willing to take a pragmatic approach to the application of the Data Protection Act 1988, which imposes various duties on persons that process or deal with personal data (i.e. data relating to a living individual who can be identified from it).
The case, Murray v Express21, mainly concerned an alleged breach of privacy by a photograph of JK Rowling's child taken covertly while the family walked down the street and then published in the Sunday Express newspaper. On that part of the claim the High Court found that effectively the Rowling family sought a right to personal privacy when engaged in ordinary activities wherever conducted. Despite the judge's sympathy for shielding children from intrusive media attention, this was going too far and the claim was struck out as hopeless.
The allegation that the photograph agency failed to comply with its data protection duties fared little better. It was agreed by the parties that the photograph was personal data and that the agency was a data controller in respect of it such that duties applied to the way the agency processed it, in particular it had to do so lawfully and fairly. Given there was no breach of privacy, the photograph was processed lawfully. Even though the photograph was taken covertly, there was no deception involved and so it was not taken unfairly. The last ditch argument tried by the Rowlings was that, because the photograph showed the child's skin colour and him to be a normal child it constituted sensitive personal data on his ethnic origin and physical and mental health. The judge rejected the argument and anyway found that by appearing in public the claimant had deliberately made the data public leaving no ground for complaint.
The only breach the agency had committed was that it was not registered with the Information Commissioner as a data controller at the relevant time and so was prohibited from processing personal data. While accepting this breach, the judge found that it was not causative of any damage to the claimant and gave no other basis for compensation. As a result the entire data protection claim was struck out as having no realistic prospect of success.
The Murray case shows how the data protection rules can apply to unexpected areas of business, and the need to be registered, but more importantly imposes common sense limits on what can constitute unfair processing and sensitive data.
1 Arrow Generics Ltd v Merck & Co, Inc (unreported;  EWHC 1900)
2Alendronate - used in the treatment of bone wasting diseases including osteoporosis
3 The new patent and applications were divisionals of the original patent and all concerned a weekly as opposed to daily dosage formulation
4 Merck had also withdrawn the UK designation of its second patent just before its grant
5 Patent applications as published by a patent office can be infringed but no action can be brought until the patent itself is granted (and the patent has to be infringed as well)
6 Douglas and Others v Hello! Limited and Others  2 WLR 920
7 Windsurfing International Inc v Tabur Marine (Great Britain) Ltd  RPC 59
8 Pozzoli SpA v (1) BDMO SA (2) Moulage Industriel de Perseigne SA (unreported;  EWCA Civ 588)
9 Unilin Beheer BV v Berry Floor NV & Ors  FSR 25
10 Coflexip SA v Stolt Offshore MS Ltd (No.2)  FSR 34
11 Nichia Corp v Argos Ltd (unreported;  EWCA 741)
12 Mayne Pharma v Debiopharm  FSR 37, though interestingly the judge in this case was the same one as refused experimental disclosure at first instance in Nichia v Argos
13 Merck Genericos - Produtos Farmaceuticos Lda v Merck & Co. Inc. & Anr (unreported; Case C-431/05 judgment of 11 September 2007)
14 Agreement on Trade-Related Aspects of Intellectual Property Rights (Annex 1C to the Agreement establishing the World Trade Organisation)
15 For more detail on the new rules see our bulletin "Opt-In Or Lose Out!" available on our website www.fasken.com
16 Formerly the Patent Office (it changed its name on 1 April 2007)
17 OHIM (Office for Harmonization in the Internal Market, Trade Marks & Designs)
18 Lambretta Clothing Co Ltd v Teddy Smith (UK) Ltd  RPC 6
19 The Flashing Badge Company Ltd v Brian David Groves (t/a Flashing Badges by Virgo and Virgo Distribution) (unreported;  EWHC 1372 (Ch))
20 The European association of pharmaceutical full-line wholesalers (GIRP), the European Generic Medicines Association (EGA) and the organisation representing European Community Pharmacists (PGEU)
21 David Murray v Express Newspapers PLC & Another (unreported;  EWHC 1908 (Ch))
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.