Les Laboratoires Servier et al. v Apotex Inc. et al, High Court of Justice, Chancery Division, UK
Nature of Case:
Illegality Defence against Claim for damages pursuant to a cross-undertaking
Les Laboratoires Servier et.al.
Date of Decision:
March 29, 2011
On March 29, 2011, Justice Arnold of the U.K. High Court of Justice, Chancery Division, Patents Court granted the Claimants' ("Servier") request for an Order requiring Apotex Inc., Apotex Pharmachem Inc., Apotex Europe Limited and Apotex UK Limited ("Apotex") to repay monies paid to Apotex by Servier pursuant to an undertaking in damages.
In 2008, Servier's European patent for crystalline forms of perindopril was held to be invalid. Servier was ordered to compensate Apotex and paid to Apotex an amount of £17.5 million for losses suffered as a result of Apotex being prevented by injunction from selling its perindopril product in the U.K. pending the determination of the patent case at trial.
Justice Norris had declined to grant Servier permission to amend its Defence to include a defence based on public policy, namely that Apotex could not claim damages for being prevented from selling a material whose manufacture would have been unlawful under the law of the country where manufacture occurred. In this case, Apotex's perindopril product was manufactured in Canada. On appeal, the Court of Appeal granted Servier permission to amend its defence to include the public policy argument which was the subject of Justice Arnold's decision.
Servier relied on a decision rendered by the Federal Court of Canada in which Judge Snider held that Servier's Canadian Patent covering perindopril was valid and that Apotex had directly infringed the patent by manufacturing and selling perindopril in Canada and possessing perindopril for export to affiliated companies abroad (upheld on appeal). Ogilvy Renault LLP represented Servier in Canada.
In light of the Canadian decisions, Servier argued that, as a matter of public policy, Apotex should not be allowed to recover damages for being denied the right to sell a product in the UK that would have infringed a valid Canadian patent. This is an application of the illegality defence also known by the Latin maxim ex turpi causa non oritur actio ( "ex turpi causa rule").
Apotex disputed Servier's contention on three grounds. First, Apotex argued that the ex turpi causa rule only applies where the impugned act is either a criminal offence or involves moral turpitude amounting to dishonesty, and that infringement of the Canadian patent is neither. Secondly, Apotex argued that the ex turpi causa rule is only engaged where the claimant's claim relies to a substantial extent on the illegal or immoral act, and that Apotex did not do so on the inquiry. Thirdly, Apotex contended that Servier was barred from invoking the ex turpi causa rule as it had given an unqualified cross-undertaking in damages which, in Apotex's view, amounted to approbating and reprobating.
Following an exhaustive review of the jurisprudence on ex turpi causa, including reference to the Supreme Court of Canada's decision in Hall v Hebert, the Court was not convinced that the jurisprudence on the ex turpi causa rule went so far as to suggest that dishonesty on the part of the claimant was required in order for the rule to be engaged. The Court determined that application of the rule will be fact dependent. However, it identified some factors that may be considered including the claimant's state of knowledge at the time of committing the act in question and whether the unlawfulness is sufficiently serious. If the claimant knew the material facts, and particularly if he committed the act in question intentionally, then the rule is likely to apply.
The Court evaluated the facts in the present case in light of the abovementioned criteria and held that the ex turpi causa rule applied. The Court concluded that Apotex was aware of all the material facts, including the existence of the Canadian Patent and the nature of its infringing acts. These acts were sufficiently serious and were committed intentionally. Lastly and most importantly according to the Court, there was a "precise symmetry" between Apotex's claim for compensation under the cross-undertakings and the illegality upon which Servier relied. In other words, Apotex should not be permitted to claim compensation for being wrongly prevented from infringing one patent owned by Servier on the basis that, were it not for the injunctions, it would have infringed a foreign patent also belonging to Servier (its Canadian patent).
In respect of Apotex's second argument, the Court decided that Apotex did in fact have to rely to a substantial extent upon its own illegality to establish the loss claimed. The Court reasoned as follows: Apotex's claim, which was essentially one for lost profits, was predicated on the manufacture of perindopril erbumine in Canada at low cost, export of the tablets to the United Kingdom and the sale of those tablets in the United Kingdom at a profit. The profits depended on Apotex manufacturing the product in, and exporting it from, Canada, which would have been unlawful. Apotex's claim was thus founded upon its own unlawful acts.
The Court rejected Apotex's final contention that Servier was barred from invoking the illegality defence on the principle that Servier was approbating and reprobating. The Court did not accept Apotex's contention that Servier's cross-undertakings were unqualified. On the contrary, the undertakings were to compensate Apotex only if and in so far as the court decided that Apotex should be compensated. Second, had the qualifications been qualified in the manner argued by Apotex, Apotex would only have prevented the cross-undertakings applying to losses sustained as a result of acts by the party sought to be restrained which were held by a court of competent jurisdiction to infringe a valid foreign patent, and thus were unlawful under the applicable law to those acts.
Accordingly, the Court held that Apotex's claim was barred by the ex turpi causa rule and ordered Apotex to repay Servier the money which Justice Norris had awarded to it at first instance.
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