(UK Supreme Court decision of 29 October 2014 – Les Laboratoires Servier v Apotex Inc [2014] UKSC 55)

All five Justices of the Supreme Court agreed, in the opinion handed down today, to uphold the decision of the Court of Appeal reinstating Apotex’s award for damages under a cross-undertaking, although the majority judgment diverged from the Court of Appeal’s reasons for that decision.

Facts

In 2006 Servier obtained an interim injunction preventing Apotex from selling the medicine perindopril in the UK and gave a cross-undertaking for damages in the process. The injunction was discharged in 2007 and the patent held invalid. Apotex claimed damages (under the cross-undertaking) for lost UK sales.

Servier sought to rely on the defence of illegality (or ex turpi causa non oritur actio) against the whole claim for damages because it emerged that Apotex would have manufactured perindopril in Canada where a patent was still in force (and was held valid). Servier argued that Apotex’s damages claim was therefore founded on an illegal act.  At first instance Arnold J found for Servier, but the Court of Appeal held that as Apotex had acted honestly and reasonably in manufacturing in Canada (believing the Canadian patent to be invalid) the defence of illegality could not defeat their claim for damages, although the damages should be reduced by the amount of damages Apotex would have had to pay to Servier for the infringing manufacture in Canada.

The Supreme Court Decision

The three issues which arose before the Supreme Court were:

  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?

Lord Sumption (with whom Lord Neuberger and Lord Clarke agreed) in the majority judgment reviewed the English law on illegality and concluded that the infringing manufacture relied upon by Apotex did not amount to the “turpitude” required for the defence to bite.  The legal character of patent infringement, whilst a civil wrong, was not sufficiently grave to engage the public interest on which the defence is founded.  What was required was a criminal (or quasi-criminal) act.  The use of a discretionary approach to determine the “severity” of the illegality, which was applied (with contradictory results) by both the Court of Appeal and Arnold J at first instance, was expressly disapproved of.  Having answered the first question in the negative, the Supreme Court did not need to rule on questions 2 and 3.

The decision leaves unanswered the question of whether the illegality defence would apply where a patent infringement amounts to a criminal act in the country in which it occurs (for example Brazil) or whether the Supreme Court’s decision excludes all patent infringement from being turpitudinous by its very nature.

Judgment appealed

[2012] EWCA Civ 593