Cipla Ltd v Salix Pharmaceuticals, Inc.
| Jurisdiction | England & Wales |
| Judge | Dame Clare Moulder DBE |
| Judgment Date | 21 April 2023 |
| Neutral Citation | [2023] EWHC 910 (Comm) |
| Docket Number | Case No: CL-2022-000278 |
| Court | Queen's Bench Division (Commercial Court) |
Dame Clare Moulder DBE
sitting as a Judge of the High court
Case No: CL-2022-000278
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KINGS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Nicholas Saunders KC and Tom Foxton (instructed by K&L Gates LLP) for the Claimant
Andrew Waugh KC, Siddharth Dhar and Katherine Moggridge (instructed by McDermott Will & Emery LLP) for the Defendant
Hearing dates: 21 March 2023
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Table of Contents
| Introduction | 2 |
| Background | 2 |
| Chronology | 4 |
| The Award | 5 |
| Relevant law | 6 |
| The arbitration claim | 10 |
| Context of the 26 October ruling | 11 |
| The 26 October Ruling | 11 |
| The substantive ruling | 12 |
| Submissions | 14 |
| What did the 26 October ruling decide? | 14 |
| Closings | 16 |
| Discussion | 21 |
| Conclusion | 24 |
| Overlooked evidence | 25 |
| Substantial injustice | 27 |
Introduction
The Claimant in these proceedings (and the Claimant in the arbitral proceedings under appeal), Cipla Limited (“Cipla”), applies under section 68 of the Arbitration Act 1996 (the “1996 Act”) for an Order remitting a Partial Award on Outstanding Issues of Liability dated 3 May 2022 (the “Award”) made by the Rt. Hon. Lord Neuberger of Abbotsbury (the “Tribunal”) in an arbitration conducted under the LCIA Rules 2014 on the ground of a failure by the Tribunal to comply with its duty under section 33 of the 1996 Act, which constitutes a “serious irregularity” affecting the Award under section 68(2)(a) of the 1996 Act.
Background
The dispute between the parties arises out of an Exclusive License Agreement dated 1 October 2009 (the “2009 Agreement”). Under the 2009 Agreement, Cipla licenced the use of certain patent claims to Salix. These patent claims were in respect of a compound known as amorphous rifaximin. In exchange for the grant of the licences under the 2009 Agreement, Salix agreed to pay Cipla royalties on the sale of any Salix products that, absent the licences so granted, would infringe Cipla's amorphous rifaximin patents.
Since 2004, Salix has manufactured a drug product sold under the brand name XIFAXAN®, which is an antibiotic used to treat various conditions including diarrhoea and irritable bowel syndrome. Prior to the Award, Salix has always maintained that XIFAXAN® contains only crystalline rifaximin (and no amorphous rifaximin). Cipla brought the arbitration on the basis that XIFAXAN® tablets in fact contain amorphous rifaximin and that, accordingly, sales of XIFAXAN® tablets fall within the scope of the 2009 Agreement.
The central issue in the arbitration was whether Salix was obliged under the 2009 Agreement to pay Cipla a royalty on sales of its XIFAXAN® tablets. The 2009 Agreement provided that a royalty was due to Salix on sales of any “Licensed Product” which was defined as “ any product […] the manufacture, use, sale […] of which would, absent the license granted to Salix hereunder, infringe any Valid Claim included in the Licensed Patent Rights”. Cipla's case was, in essence, that Cipla had five Valid Claims to amorphous rifaximin. Two of the claims were valid because they were made in granted/issued patents (“Claims (b) and (c)” or the “Issued Claims”). The remaining three claims (“Claims (a), (d) and (e)” or the “Pending Claims”) were Valid Claims because they had been diligently prosecuted.
Salix's case was that only the Issued Claims were Valid Claims (the Pending Claims were not Valid Claims because they had not been diligently prosecuted); XIFAXAN® tablets did not contain amorphous rifaximin (only crystalline rifaximin); even if XIFAXAN® tablets did contain amorphous rifaximin, XIFAXAN® tablets (i) do not infringe any claims, because all claims required the tablets to be essentially free of crystalline rifaximin, and the tablets contain at least some crystalline rifaximin (whether or not they also contain amorphous rifaximin); and (ii) XIFAXAN® tablets do not infringe the Issued Claims because the amorphous rifaximin in XIFAXAN® tablets had not been shown by Cipla to produce the Figure 1 XRPD Pattern; Cipla was estopped by convention from contending that XIFAXAN® tablets contained amorphous rifaximin.
The Tribunal agreed with Salix that the Pending Claims had not been diligently prosecuted and so were not valid (Award, paras 71–99). Cipla does not seek to challenge that conclusion. That meant that Cipla had to show that XIFAXAN® tablets infringed one of the two Issued Claims.
The next question was whether XIFAXAN® tablets would, absent the licence conferred by the 2009 Agreement, infringe the Issued Claims. That in turn raised two issues: (i) the proper construction of the Issued Claims as a matter of US law (i.e. what needed to be shown to prove infringement); and (ii) whether XIFAXAN® tablets contained amorphous rifaximin (as Cipla contended) such that the tablets are covered by the Issued Claims.
Dr Kaduk, Cipla's expert carried out XRPD (x-ray powder diffraction) analysis, a technique that reveals structural information about compounds. XRPD analysis can determine the solid form of a material and can also distinguish among polymorphs of the same material. For example, it can distinguish between crystalline materials and amorphous materials. Unlike crystalline rifaximin the XRPD of amorphous rifaximin does not demonstrate distinct peaks but exhibit a “halo”.
The Tribunal agreed with Salix, holding that the words “ characterized by the XRPD pattern shown in FIG. 1” in the Issued Claims limited the ambit of the claim to amorphous rifaximin which, upon being subject to XRPD, produced a Figure 1 XRPD Pattern (Award, para 139).
The Tribunal held that there was no evidence that the amorphous rifaximin present in XIFAXAN® tablets produced the Figure 1 XRPD Pattern (Award, para 151) with the result that, even though Cipla succeeded in showing that XIFAXAN® tablets contained amorphous rifaximin, it could not show that the XIFAXAN® tablets contained the amorphous rifaximin covered by the Issued Claims.
The Tribunal then went on to consider whether XIFAXAN® tablets contain amorphous rifaximin. The Tribunal concluded that, on the balance of probabilities, XIFAXAN® tablets did contain appreciable amounts of amorphous rifaximin (Award, para 279).
So far as material to the issues before this Court, the chronology of the arbitration proceedings was as follows:
The Tribunal was appointed on 15 April 2020.
Cipla served its Statement of Case on 5 August 2020.
On 27 January 2021, Salix served its Statement of Defence. In its Defence Salix pleaded that:
“ 207. Salix's primary position is that XIFAXAN® tablets are not Licensed Products because the Valid Claims would only be infringed if XIFAXAN® tablets were “essentially free of crystalline rifaximin” and/or were “characterized by the XRPD pattern shown in Figure 1” of the common specification…
…
209. As to the latter, the tablets are not “characterized by the XRPD pattern shown in Figure 1” even on Dr. Kaduk's alleged evidence. Dr. Kaduk's XRPD diffractograms of XIFAXAN® tablets do not have the characteristic pattern of amorphous material shown in Figure 1. XIFAXAN® tablets would have to have the XRPD pattern shown in Figure 1 for Cipla to prove infringement of claims with the “Figure 1” limitation, and they do not.” [emphasis added]
Cipla served its Statement of Reply on 25 August 2021.
Salix served its Rejoinder on 6 October 2021. At paragraph 136 Salix pleaded:
“ Cipla has failed to meet its burden of proving infringement of these claims because it does not have even a single XRPD diffractogram of XIFAXAN® tablets or its API that has the halo pattern of Figure 1. Proof of infringement requires proof that the accused product meets each and every claim element. Proof of “rifaximin in an amorphous form characterized by the XRPD pattern of FIG.1” requires the accuser to provide an XRPD of the accused product that has the pattern of FIG. 1. Cipla has failed to do so.”
The merits hearing was held between 25 October 2021 and 30 October 2021, in advance of which each party submitted an opening skeleton argument.
On 6 January 2022, Cipla and Salix each submitted written closing submissions.
On 31 January 2022 and 1 February 2022, the Tribunal heard oral argument on the written closing submissions.
The Award
On 3 May 2022, the Tribunal signed and dated the Award. The Award dismissed Cipla's claim for a royalty for sales of XIFAXAN® tablets under the 2009 Agreement.
At paragraph 139 of the Award the Tribunal held that:
“ I am of the view that the XRPD Claims only extend to products which contain amorphous rifaximin which produces a FIG 1 XRPD pattern (and, I should add for the avoidance of doubt that, if such a product also contains other rifaximin, whether amorphous or not, it would still infringe the XRPD Claims).”
The Tribunal concluded at paragraph 140 ii that:
“ The Patent Claims, Claims (b) and (c), are each Valid Claims, but they only extend to products which include amorphous rifaximin which produces a FIG 1 XRPD pattern.”
The Tribunal held in this regard:
“ 142. As to the second of the conclusions in paragraph 140 above, it means that Cipla can only succeed in establishing that XIFAXAN® tablets would be Licensed Product by virtue of the Patent Claims if it could establish that they contain amorphous rifaximin which produces a FIG 1 XRPD pattern. In other...
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The English Commercial Court Dismisses An Award Challenge Based On Exclusion Of Evidence In Patent Dispute
...Commercial Court, in Cipla Limited v Salix Pharmaceuticals, Inc. [2023] EWHC 910 (Comm), has dismissed a challenge pursuant to s68(2)(a) of the Arbitration Act. It held that a tribunal, in refusing to admit evidence on an issue at a late stage in the proceedings, had not breached its duty t......