Illegality doctrine does not preclude Apotex from recovering on perindopril undertaking – U.K. Court of Appeal

U.K. Background

In 2008, Servier’s U.K. patent 1 296 947 was declared invalid.  In the course of that proceeding, Servier had sought and obtained an interlocutory injunction preventing Apotex from selling in the U.K. its perindopril products (which Apotex manufactured exclusively in Canada).  In order to obtain the interlocutory injunction, Servier had provided the following cross-undertaking in damages:

If the Court later finds that this Order has caused loss to the Defendants, which shall include Apotex UK Limited, and decides that the Defendants should be compensated for that loss, the Claimants will comply with any Order the Court may make.

In October 2008, Norris J ordered Servier to pay to Apotex £17.6 million on its cross-underatking.

Canadian Background

Apotex and Servier were also involved in patent litigation in Canada in relation to Canadian Patent No. 1,134,196, which claimed perindopril erbumine per se.  In July 2008, the Federal Court of Canada held that the CA ‘196 Patent was valid and had been directly infringed by Apotex.  As a result, Apotex was prevented from manufacturing, selling, offering for sale, or otherwise dealing in products containing perindopril in Canada. This finding was upheld by the Federal Court of Appeal in 2009 and the Supreme Court of Canada refused to hear Apotex’s appeal in March 2010.

Judgment Below

Servier sought to set aside the order on the cross-undertaking for damages on the basis that, as a matter of public policy, Apotex should not be entitled to collect on the cross-undertaking as it would have had to infringe the valid CA patent in order to sell perindopril in the U.K.  This was an illegality defence also known by the latin maxim ex turpi causa non oritur action (no action can arise from an illegal or immoral act). Arnold J concluded that Apotex’s claim on the cross undertaking was barred by the ex turpi causa rule and ordered Apotex to repay to Servier the £17.6 million.

Instant Decision

The Court of Appeal allowed Apotex’ appeal.  The Court noted that the illegality principle was a flexible principle that depended on the particular circumstances.  In allowing the appeal, the Court of Appeal held:

1. The infringement of the Canadian Patent is a statutory wrong irrespective of the infringer’s state of mind.
2. The grant of a monopoly confers enormous economic benefit to the patentee and an invalid patent can confer huge and unwarranted benefits to the great disadvantage of the public. Here, while Apotex’s challenge to the UK 947 patent was ongoing, the National Health Service paid higher monopolist prices to Servier. In  circumstances where the infringer has a reasonable and good faith belief the patent is invalid, a commercial risk by a competitor by marketing a product in breach of the patent is low on the scale of culpability in terms of the illegality defence.
3. Sales made in the United Kingdom from goods manufactured in Canada in breach of the CA ‘196 patent would, but for the injunction, not have been unlawful under either Canadian or United Kingdom law.
4. The Canadian Court was not willing to grant an interim injunction during the period covered by the U.K. injunction.
5. Apotex had conceded before the hearing of the appeal of the invalidity decision that any amount awarded by Norris J on the cross undertaking should be reduced by an amount equal to the amount the Canadian Court ordered Apotex to pay Servier for manufacturing and exporting perindopril products into the U.K. in breach of the CA ‘196 patent. The Court characterized this concession as “important” and noted that it was not raised before Arnold J.

A copy of the Court of Appeal judgment may be found here.