Recent decisions of the UK Patents Court (Actavis v Pharmacia (2014)) develop the approach of the UK courts to the question of whether, and in what circumstances, the court will grant a stay of UK patent litigation pending the outcome of EPO opposition proceedings. This is of interest to patent owners seeking to enforce their patents while EPO opposition proceedings are pending. It is also of interest to parties seeking to “clear the way” of troublesome patents, by relatively fast national revocation proceedings in addition to EPO opposition proceedings, in order to launch a competing product.
Background - Virgin v Zodiac
In patent litigation between Virgin and Contour (which became Zodiac), relating to flat-bed seats for airliners, the Court of Appeal reached a final determination of patent infringement based on the scope of the patent as granted. However, subsequently, the Board of Appeal in EPO opposition proceedings maintained the patent in an amended form. In this amended form, the patent was not infringed by Zodiac. The effect of amendment of the patent in EPO opposition proceedings is that the scope of the patent is considered to have been the amended scope as from the date of grant. Therefore the question arose: was Virgin still entitled to damages from Zodiac, in view of the final decision of the UK courts on the question of infringement, or was Zodiac now able to rely on the retrospective amendment of the patent as a defence to the requirement to pay damages? There was previous case law from the Court of Appeal (Unilin v Berry (2007)) that had decided that in these circumstances the alleged infringer must still pay damages.
The case reached the UK Supreme Court. In Virgin v Zodiac (2013) [Virgin Atlantic Airways v Zodiac Seats  UKSC 46], the Supreme Court decided that the decision of the Court of Appeal in Unilin v Berry (2007) was wrong. The outcome was that Zodiac was allowed to rely on the retrospective amendment of the patent at the EPO in order to avoid paying damages. It should be noted that if Zodiac had already paid damages to Virgin and the damages proceedings had been terminated, the decision in Virgin v Zodiac would not have made is possible for Zodiac to claw back the money paid.
To stay, or not?
Since the introduction of the European Patent Convention, the reality of parallel jurisdiction over the validity of European patents has caused difficulties and conflicting decisions. EPO opposition proceedings, including appeal, can take around six years to reach a conclusion. In the meantime, the patent owner is entitled to start patent infringement proceedings in national courts. Validity may also be put at issue for European patents in national courts, and in the UK courts this is often done by a defendant in a patent infringement action. Patent litigation in the UK is relatively speedy, with a first instance judgement within 12-18 months of the start of the action, and with any appeal being determined within around 12 months. The rather messy result can be seen in the Virgin v Zodiac saga. Therefore the question often arises in practice of whether UK patent litigation proceedings should be stayed pending the final outcome of any parallel EPO opposition proceedings.
The Supreme Court commented on the question of stays of UK proceedings in these circumstances in their judgment in Virgin v Zodiac (2013). The previous authoritative guidance was provided by the Court of Appeal in Glaxo v Genentech (2008). In that case, the dominant principle was the length of time likely to be taken before completion of EPO opposition proceedings. Therefore, following the guidance established in Glaxo v Genentech, where there is likely to be a considerable delay before the completion of EPO opposition proceedings, a stay of the UK proceedings would not normally be granted. The Court of Appeal justified this in terms of the need for commercial certainty for the parties, as early as possible.
The Supreme Court criticized this approach, in Virgin v Zodiac, and indicated that the guidance on stays should be reconsidered. This was duly done by the Court of Appeal in IPCom v HTC (2013) [IPcom v HTC Europe  EWCA Civ 1496]. The guidance was re-cast to indicate that if there are no other factors, a stay of UK patent litigation proceedings pending the outcome of EPO opposition proceedings should be the default. However, of course there will usually be “other factors” which can be relied on by the party resisting the stay of proceedings. In IPCom v HTC, the claimant undertook that if damages were awarded as a result of the UK court finding the patent valid and infringed, the damages would be repaid if the EPO subsequently decided that the valid scope of the claims was narrower to the extent that they were not infringed. In that case, the Court of Appeal decided that a stay of UK proceedings should not be granted.
Application of the principles of IPCom v HTC
The Patents Court, in Actavis v Pharmacia (2014) [Actavis v Pharmacia  EWHC 2265 (Pat) and  EWHC 2611 (Pat)] considered this issue further. At issue in Actavis v Pharmacia is the validity of the UK designation of a European patent owned by Pharmacia relating to a dosage form of the drug pramipexole, with Actavis seeking to have the patent revoked in order to clear the way for marketing in the UK of a generic dosage form. Pharmacia requested a stay of the UK proceedings, and this was resisted by Actavis. The principles guiding whether or not to grant a stay of UK proceedings, as explained by the Court of Appeal in IPCom v HTC are:
- The discretion, which is very wide indeed, should be exercised to achieve the balance of justice between the parties having regard to all the relevant circumstances of the particular case.
- The discretion is of the Patents Court, not of the Court of Appeal. The Court of Appeal would not be justified in interfering with a first instance decision that accords with legal principle and has been reached by taking into account all the relevant, and only the relevant, circumstances.
- Although neither the EPC nor the 1977 Act contains express provisions relating to automatic or discretionary stay of proceedings in national courts, they provide the context and condition the exercise of the discretion.
- It should thus be remembered that the possibility of concurrent proceedings contesting the validity of a patent granted by the EPO is inherent in the system established by the EPC. It should also be remembered that national courts exercise exclusive jurisdiction on infringement issues.
- If there are no other factors, a stay of the national proceedings is the default option. There is no purpose in pursuing two sets of proceedings simply because the Convention allows for it.
- It is for the party resisting the grant of the stay to show why it should not be granted. Ultimately it is a question of where the balance of justice lies.
- One important factor affecting the exercise of the discretion is the extent to which refusal of a stay will irrevocably deprive a party of any part of the benefit which the concurrent jurisdiction of the EPO and the national court is intended to confer. Thus, if allowing the national court to proceed might allow the patentee to obtain monetary compensation which is not repayable if the patent is subsequently revoked, this would be a weighty factor in favour of the grant of a stay. It may, however, be possible to mitigate the effect of this factor by the offer of suitable undertakings to repay.
- The Patents Court judge is entitled to refuse a stay of the national proceedings where the evidence is that some commercial certainty would be achieved at a considerably earlier date in the case of the UK proceedings than in the EPO. It is true that it will not be possible to attain certainty everywhere until the EPO proceedings are finally resolved, but some certainty, sooner rather than later, and somewhere, such as in the UK, rather than nowhere, is, in general, preferable to continuing uncertainty everywhere.
- It is permissible to take account of the fact that resolution of the national proceedings, whilst not finally resolving everything, may, by deciding some important issues, promote settlement.
- An important factor affecting the discretion will be the length of time that it will take for the respective proceedings in the national court and in the EPO to reach a conclusion. This is not an independent factor, but needs to be considered in conjunction with the prejudice which any party will suffer from the delay, and lack of certainty, and what the national proceedings can achieve in terms of certainty.
- The public interest in dispelling the uncertainty surrounding the validity of monopoly rights conferred by the grant of a patent is also a factor to be considered.
- In weighing the balance it is material to take into account the risk of wasted costs, but this factor will normally be outweighed by commercial factors concerned with early resolution.
- The hearing of an application for a stay is not to become a mini-trial of the various factors affecting its grant or refusal. The parties' assertions need to be examined critically, but at a relatively high level of generality.
At first, the judge in the Patents Court refused a stay of the UK proceedings. He noted that there was a fine balance between the parties’ competing considerations. Pharmacia had offered undertakings (a) to seek expedition of the EPO proceedings, (b) not to seek an injunction against Actavis or its customers until the determination of the EPO proceedings and (c) only to seek damages of 1% of Actavis' net sales during the period from launch until the determination of the EPO proceedings if the patent is held valid both by the EPO and by the English courts. This was not enough for the judge to agree to a stay.
However, shortly afterwards, Pharmacia offered two additional undertakings in return for a stay of the proceedings. These were (d) not to seek an injunction based on the patent in the UK against Actavis or its customers during the life of the patent and (e) only to seek damages of 1% of Actavis' net sales in the UK during the life of the patent if the patent is ultimately held valid by the EPO and valid and infringed by the English courts. The judge decided that these additional undertakings tipped the balance in favour of granting a stay of the UK proceedings, by addressing the concerns of Actavis that the granting of a stay would cause commercial uncertainty in view of the availability of injunctive relief and of damages at a normal level after conclusion of the EPO proceedings.
The direction of the decisions of the UK courts in relation to granting of stays is interesting. It shows that relatively complex sets of undertakings can be arranged in order to protect each side from adverse interim decisions and even to protect against conflicting decisions on validity as between the UK courts and the EPO. However, there must be a limit on what the patent owner or alleged infringer are prepared to offer as undertakings, in order for patents to retain their value and deterrent effect.