Les Laboratoires Servier v Apotex Inc.

JurisdictionEngland & Wales
CourtSupreme Court
JudgeLord Sumption,Lord Neuberger,Lord Mance,Lord Clarke
Judgment Date29 October 2014
Neutral Citation[2014] UKSC 55
Date29 October 2014

[2014] UKSC 55

THE SUPREME COURT

Michaelmas Term

On appeal from: [2012] ECWA Civ 593

before

Lord Neuberger, President

Lord Mance

Lord Clarke

Lord Sumption

Lord Toulson

Les Laboratoires Servier and another
(Appellants)
and
Apotex Inc and others
(Respondents)

Appellants

Iain Purvis QC Andrew Lykiardopoulos QC (Instructed by Bristows LLP)

Respondents

Daniel Toledano QC Thomas Mitcheson QC Harris Bor (Instructed by Taylor Wessing LLP)

Heard on 10 June 2014

Lord Sumption (with whom Lord Neuberger and Lord Clarke agree)

Introduction
1

This appeal is about the defence of illegality: ex turpi causa non oritur actio.

2

The first claimant Les Laboratoires Servier is a French pharmaceutical company which originated the perindopril erbumine compound, an ACE inhibitor used for treating hypertension and cardiac insufficiency. The respondents are companies of the Apotex Group, a Canadian pharmaceuticals group specialising in the manufacture and marketing of generic pharmaceutical products. The parties have agreed that for the purpose of resolving the issues on this appeal, both groups can be treated as one entity without regard to the distinct corporate personality of the companies comprising them.

3

A number of patents for the perindopril erbumine compound have been granted to Servier and its associated companies. In Europe, patent protection for the compound itself expired in June 2003. However, the corresponding Canadian patent for the compound will not expire until 2018. The present dispute relates to a United Kingdom patent not for the compound but for a specific crystalline form of the compound, which was granted to Servier. Its UK subsidiary Servier Laboratories Ltd was the exclusive licensee.

4

In March 2006 Apotex wrote to Servier to notify them that they intended to market generic perindopril in the UK, and at the end of July 2006, upon obtaining marketing authorisation, they began to do so. On 1 August 2006, Servier began proceedings against Apotex for infringement of the UK patent. On 7 August, Mann J granted an interlocutory injunction restraining the importation and sale by the Apotex companies of generic perindopril erbumine in the United Kingdom. The injunction was obtained upon Servier giving the ordinary undertaking to comply with any order that the court might make if it should later find that the order had caused loss to Apotex for which it should be compensated. Pumfrey J gave judgment on the claim on 11 July 2007 [2007] EWHC 1538. He held that the patent had been infringed but that it was invalid, and discharged the injunction. Servier's appeal was dismissed by the Court of Appeal on 28 April 2008 [2008] EWCA Civ 445.

5

Meanwhile, separate proceedings were in progress in Canada for infringement of the Canadian patent for the compound itself. An interlocutory injunction had been refused in those proceedings. But on 2 July 2008, Snider J held that the Canadian patent was valid and infringed, and granted a final injunction. The Canadian Federal Court of Appeal dismissed Apotex's appeal on 30 June 2009, and leave to appeal to the Supreme Court of Canada was refused on 25 March 2010. A separate trial of damages is expected in November 2014.

6

It is agreed that damages under the undertaking in the English proceedings fall to be assessed on the basis that but for the injunction Apotex would have sold in the United Kingdom an additional 3.6 million packs of perindopril erbumine tablets. The active ingredient would have been manufactured by Apotex Pharmachem Inc in Canada and sold at a 30% mark-up to Apotex Inc. Apotex Inc would have formulated it into tablets, also in Canada, and sold the tablets to Apotex UK Ltd which would then have sold them on the UK market. Under the terms of the sale to Apotex UK Ltd, Apotex Inc would have received 90% of the profits arising from UK sales. The assessment was heard before Norris J in June 2008, and judgment was reserved.

7

In July 2008, after Snider J had given judgment in Canada but before Norris J had given judgment on the assessment in England, Servier applied to Norris J to re-amend their defence to plead two points arising out of Snider J's judgment. The first, which I shall call the "illegality point" was that it was contrary to public policy for Apotex to recover damages for being prevented from selling a product whose manufacture in Canada would have been illegal there as an infringement of Servier's Canadian patent. The second, which I shall call the "cost of manufacture point" was that in assessing Apotex's loss of profit the damages for infringement to which they would be entitled in the Canadian proceedings should be treated as an additional cost of manufacture, thereby reducing or eliminating the profit. On 9 October 2008, Norris J gave judgment on the assessment: [2009] FSR 220. He refused permission to amend, on the ground that the application came too late and would cause undue prejudice to Apotex. He then awarded Apotex £17.5 million damages plus interest of approximately £2.1 million, to be split 90/10 between Apotex Inc and Apotex UK. However, on 12 February 2010, the Court of Appeal allowed an appeal from the refusal of the amendment, and directed that Norris J's award of damages should be treated as an interim order pending determination of the new issues: [2010] EWCA Civ 279.

8

Subsequently, Lewison J made an order staying the second of the new issues (the cost of manufacture issue) until damages had been assessed in Canada.

The judgments below
9

The illegality point turns in this case on three issues:

  • (1) Does the infringement of a foreign patent rights constitute a relevant illegality ("turpitude") for the purpose of the defence?

  • (2) If so, is Apotex seeking to found its claim on it?

  • (3) Is Servier entitled to take the public policy point having given an undertaking in damages?

10

Arnold J gave judgment on these questions on 29 March 2011: [2011] RPC 574. He decided all three points in favour of Servier. On the first point, he held that a relevant illegality was one which was sufficiently serious in all the circumstances of the case, including in particular whether the illegal act was done with knowledge or deliberately. On the second point, he held that the claim was barred because Apotex could not make good its claim for damages without affirming that it would have manufactured the product in Canada, where it was illegal to do so. On the third point, he held that it was not inconsistent with the undertaking as to damages for Servier to raise the illegality defence. In the result, Arnold J held that the whole of Apotex's claim on the undertaking was barred, and ordered the repayment of the amount which they had received in satisfaction of Norris J's judgment.

11

Apotex appealed to the Court of Appeal. Shortly before the hearing of the appeal they conceded that any damages awarded in the Canadian proceedings should be deducted from Norris J's award irrespective of the fate of the public policy point. The Court of Appeal gave judgment on 3 May 2012 allowing the appeal: [2013] Bus LR 80. The leading judgment was given by Etherton LJ, with whom Laws LJ and Kitchin LJ agreed. The essential point on which he differed from the judge was issue (1). In his view, the infringement of Servier's Canadian patent was not a relevant illegality for the purposes of the defence. This was because (para. 73) in dealing with the illegality defence, the court was entitled,

"to take into account a wide range of considerations in order to ensure that the defence only applies where it is a just and proportionate response to the illegality involved in the light of the policy considerations underlying it."

Etherton LJ considered that this test was not satisfied because (i) Apotex honestly and reasonably believed the Canadian patent to be invalid; (ii) it was important as a matter of principle that Servier, having enjoyed a monopoly by virtue of the injunction, should have to pay when it was found not to be entitled to it; (iii) the sale of the tablets in the United Kingdom was not an infringement of the Canadian patent, whose effect was limited to Canada; (iv) the Canadian court had refused to grant an interlocutory injunction restraining the manufacture of the active ingredient or its formulation into tablets in Canada; and (v) any public policy arising from the illegality of the manufacture and formulation of the product in Canada was sufficiently addressed by Apotex's concession that credit had to be given for the damages payable in the Canadian proceedings for the infringements committed there. If Etherton LJ had been satisfied that the infringement of the Canadian patent was a relevant illegality, he would have upheld the illegality defence. This was because like the judge he considered that there was a sufficiently close causal relationship between the patent infringement and the loss suffered by virtue of the injunction; and because, like the judge again, he was not impressed by the suggestion that the taking of the illegality defence was inconsistent with the undertaking in damages.

12

The Court of Appeal approved the concession made by Apotex about the credit to be given for the damages for infringement payable in Canada. It followed that the financial consequences of its decision must depend on what happens on the assessment of damages in Canada.

The illegality defence: a rule of law
13

English law has a long-standing repugnance for claims which are founded on the claimant's own illegal or immoral acts. The law on this point was already well established when Lord Mansfield CJ articulated it in his celebrated statement of principle in Holman v. Johnson (1775) 1 Cowp. 34l, 343:

"No court will lend its aid to a man who founds his cause of action on an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause...

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10 firm's commentaries
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    ...and could such conduct include fines imposed by the ICO? Lord Sumption, in his majority judgment in Les Laboratoires Servier v Apotex [2015] A.C. 430, said that an act of moral turpitude could include "the infringement of statutory rules enacted for the protection of the public interest and......
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    ...than a matter of discretion and pragmatism, a view that was reaffirmed by the Supreme Court in Les Laboratoires Servier v Apotex Inc [2014] UKSC 55 which determined (in Lord Sumption's words) that "the illegality defence is based on a rule of law on which the court is required to act…It is ......
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    ...than a matter of discretion and pragmatism, a view that was reaffirmed by the Supreme Court in Les Laboratoires Servier v Apotex Inc [2014] UKSC 55 which determined (in Lord Sumption's words) that "the illegality defence is based on a rule of law on which the court is required to act…It is ......
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8 books & journal articles
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    • The Modern Law Review Nbr. 79-3, May 2016
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    • The Modern Law Review Nbr. 79-3, May 2016
    • 1 May 2016
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    • Singapore Academy of Law Journal Nbr. 2016, December 2016
    • 1 December 2016
    ...23. 167[2010] EWCA Civ 1472; [2011] 2 All ER 841. 168Jetivia SA vBilta (UK) Ltd[2015] UKSC 23 at [11]–[31]. 169[2014] 1 WLR 2889. 170[2014] 3 WLR 1257. 171Jetivia SA v Bilta (UK) Ltd[2015] UKSC 23 at [65]....
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