The Court of Appeal has given welcome guidance as to the circumstances in which UK revocation actions should be stayed pending the outcome of European Patent Office ("EPO") opposition proceedings. There is no presumption in favour of a stay. Glaxo Group Ltd v (1) Genentech and (2) Biogen, Court of Appeal 31 January 2008

Business Impact

In future, the length of the proposed stay will normally be the most significant factor in deciding whether it is appropriate to stay Patents Court proceedings concerning the validity of a European patent which is under opposition in the EPO. Patentees will therefore find it difficult to obtain a stay of UK proceedings as, given the slow pace at which EPO opposition proceedings move, the UK proceedings will almost always be concluded much earlier than the EPO proceedings.

It is also clear that it will be very unusual for the Court of Appeal to interfere with the exercise of the discretion at first instance in stay cases. Parties should therefore think long and hard before appealing unfavourable stay decisions.

Background

As reported in June last year, at first instance Lewison J. said that there was a presumption, although not a strong one, in favour of a stay of UK patent revocation proceedings to allow parallel EPO proceedings to be concluded. Nonetheless, having weighed the factors in the case, Lewison J. found that GSK would suffer actual prejudice if there was a delay in resolving the validity of the patent, and he rejected Genentech’s stay application. Lewison J. observed that the practice in patent cases in relation to stays was to some extent out of line with the practice in other commercial cases, and this stemmed largely from obiter observations of Aldous LJ. He noted therefore that it would be helpful to have guidance from the Court of Appeal.

Facts

GSK had brought EPO opposition proceedings to Genentech’s patent in August 2006. The patent claimed the use of an anti-CD 20 antibody for the treatment of rheumatoid arthritis. Even on Genentech’s analysis, a final outcome at the EPO was unlikely to be reached before the end of 2010. In February 2007 GSK applied to revoke the UK designation of the patent, and the case was set down for trial in February 2008. GSK wanted a ruling on the validity of the patent as soon as possible because it planned to launch a rival rheumatoid arthritis therapy in the UK and elsewhere.

Court of Appeal Decision

Lewison J.’s decision was not faulted. He had correctly applied the legal principles in refusing the stay, and so the appeal was dismissed. However the Court of Appeal did not agree with his view that there is a weak presumption in favour of a stay. The possibility of duplication of proceedings challenging the validity of a European patent is inherent in the system established by the European Patent Convention. Consequently, duplication of proceedings does not justify a presumption in favour of a stay of the Patents Court proceedings.

Section 49(3) of the Supreme Court Act 1981 gives the Patents Court the widest possible discretion when deciding whether or not to stay UK revocation proceedings. The Court of Appeal should not interfere with the exercise of this discretion unless there was an error of legal principle or the first instance decision was plainly wrong.

The correct approach to the exercise of the discretion was said to be clear: weigh all the factors relevant to the balance of justice. A large number of factors may be relevant, and it is not possible to compile an exhaustive list – the factors and their relative weight will vary from case to case. It is vital to gain a perspective of the overall situation facing the parties.

However, one factor will usually carry more weight than any other. That is the length of the stay, which is determined by the time for the proceedings to achieve some certainty in relation to the validity of the patent. If it is likely that the Patents Court proceedings would achieve this resolution significantly sooner than the EPO proceedings, it will normally be a proper exercise of discretion to decline to stay the Patents Court proceedings.

The Patents Court judge is entitled to refuse to stay UK proceedings where there is evidence that some commercial certainty would be achieved at a considerably earlier date in the UK than in the EPO. Genentech’s unchallenged evidence was that GSK’s costs of developing and marketing its product could not be justified by marketing in the UK alone - it needed to sell in at least four other European countries. Revocation of the UK designation of the patent would not clear the path of Genentech’s European patents to the extent required by GSK for its commercial plans. Nonetheless, the Court of Appeal found that “some certainty, sooner rather than later, and somewhere, such as in the UK, rather than nowhere, is, in general, preferable to continuing uncertainly everywhere”. It concluded that this was the situation in the current case.

Much weight should be given to a party’s assertion that it has good reason for resisting a stay. Normally the party is the best judge of its own interests, and a competitor’s contention that there is no commercial need for early resolution of validity should be viewed with suspicion.

Conclusion

This decision confirms that, in patent cases involving parallel proceedings in the UK courts and the EPO, the Patents Court should take a more flexible approach to declining stays than that taken to parallel claims in other commercial litigation. The principle that “business needs to know where it stands” will take centre stage in stay applications. The court is likely to decline a stay if this is the quickest way of achieving some degree of commercial certainty. In practice this means that stays of UK revocation proceedings pending the outcome of EPO opposition proceedings will be unusual.

There were clear messages as to the evidence that will be persuasive in stay applications. The predicted time it will take to conclude the national and EPO proceedings is likely to be key. There may well be other relevant factors, but a global assessment of these was said to normally be sufficient. In particular, detailed arguments from the patentee as to why there is no commercial need for early resolution of validity are likely to be given short shrift.