TORT CLAIMS
NHS v Servier: unlawful means tort claim fails, but the long-running saga continues
Beatriz San Martin and Shishu Chen of Arnold & Porter Kaye Scholer unpack the latest ruling in the dispute between the NHS and pharmaceutical company Servier.
The latest episode in the long-running dispute between the NHS and French pharmaceutical company Servier has been marked by a UK Supreme Court judgment of July 2, 2021 on Servier’s application to strike out the NHS’s unlawful means tort claim.
In this article, we summarise the Supreme Court’s judgment which upholds the lower courts’ decisions in refusing to allow the NHS to avail itself of the tort of unlawful means against Servier, and we comment on the reasoning of the Supreme Court.
Background
Servier, a pharmaceutical company headquartered in France, develops and manufactures perindopril, which is used in the treatment of cardiovascular diseases. In 2001, Servier applied to the European Patent Office (EPO) for a patent for the alpha crystalline form of perindopril (European Patent UK 1,296,947). The patent was granted by the EPO in 2004 and upheld by the Opposition Division of the European Patent Office (EPO) in 2006.
Servier vigorously defended and enforced the UK designation of the patent in proceedings before the English courts against several generics. Eventually, Canadian pharmaceutical company Apotex contested the validity of the patent in the UK and, in 2005, following a six-day trial, the UK High Court held the patent to be invalid for lack of novelty and inventive step.
This decision was upheld by the Court of Appeal in 2008 and the patent was revoked by the EPO Technical Board of Appeal in 2009.
The current proceedings, commenced in 2011 by the Secretary of State for Health and NHS Business Services Authority (referred to as ‘the NHS’), are an attempt to find a legal recourse for what the NHS perceives as the wrongful acts of Servier. The NHS alleges damages and interest in excess of £220 million for Servier’s breaches of competition law and for the unlawful means tort.
Servier sought to have the freestanding unlawful means claim struck out; a claim in which the NHS alleged that Servier had deceived EPO and the courts in obtaining, defending and enforcing the patent. This included making representations as to the novelty and/or lack of obviousness of the product that Servier either knew to be false, or that Servier made with reckless indifference as to their truth.
As a result of Servier’s conduct, the NHS alleged that generic manufacturers of perindopril did not enter the market as early as they otherwise would have done, and this inevitably led to the NHS having to pay a higher price for perindopril.
Summary of strike-out proceedings
In 2007, Servier was successful at first instance in seeking to have the NHS’s unlawful means claim struck out, a decision affirmed by the Court of Appeal in 2019.
”The Supreme Court’s decision correctly keeps the application of the unlawful means tory within reasonable bounds.”
Beatriz San Martin
Shishu Chen
The High Court and Court of Appeal both considered themselves to be bound by the House of Lords 2007 decision in OBG v Allan, which concluded that a necessary element of the unlawful means tort was that the defendant’s (in this case, Servier’s) unlawful means should have affected the third party’s (the EPO’s and the English courts’ in this case) freedom to deal with the claimant (the NHS). This was referred to as “the dealing requirement”.
As it was common ground that neither the EPO nor the courts had dealt with the NHS, the NHS’s unlawful means tort claim failed.
The NHS appealed to the Supreme Court, contending that the dealing requirement should not be treated as forming part of the ratio of OBG which binds the lower courts; alternatively, the Supreme Court should depart from OBG and dispense with the dealing requirement. The policy issues raised were sufficiently important for the Supreme Court to consider the matter.
Having considered the reasoning in OBG, and the House of Lords’ concern to keep the unlawful means tort within “reasonable bounds”, the Supreme Court agreed with the lower courts that the dealing requirement is a necessary element to the tort of unlawful means.
While the NHS was able to cite some academic criticism of the OBG decision, the NHS did not provide any real-life examples of its causing difficulties, creating uncertainty or impeding the development of the law. Therefore, the NHS has failed to show that this was an appropriate case for the Supreme Court to depart from OBG and the claim had been properly struck out by the lower courts.
Comment
In our view, the Supreme Court’s decision correctly keeps the application of the unlawful means tort within reasonable bounds, something which Lord Hoffman had been at pains to ensure in OBG. Indeed, the application of OBG by the Supreme Court was pivotal to the outcome of the appeal and, in particular, whether statements made by Lord Hoffman in OBG were part of the ratio of the decision, creating binding precedent.
Had the Supreme Court departed from OBG, it might have opened the floodgates to unlawful means claims from anyone who may have allegedly suffered loss as a result of an innovator’s action to obtain, defend and enforce one of its patents when that patent was ultimately invalidated.
In the case at hand, this could have included not just the NHS but other providers of health services (public and private), as well as generics. More generally, any innovator could have been susceptible to third party damages claims as a result of statements made to the EPO or in patent validity proceedings. Instead, the Supreme Court has correctly limited unlawful means claims to circumstances in which a third party’s freedom to deal with the claimant is affected.
The allegations of deceit by the NHS relied upon statements made by Jacob LJ in the Court of Appeal in the validity action, including criticising the patent as: “the sort of patent which can give the patent system a bad name” and that “the only solution to this type of undesirable patent is a rapid and efficient method for obtaining its revocation. Then it can be got rid of before it does too much harm to the public interest”.
”It is important to emphasise that, for the purposes of the unlawful means claim, Servier has not at any point been held to have acted in a deceitful manner.”
Jacob LJ observed in the same judgment that nothing that Servier had done was unlawful and that it was the court’s job to: “see that try-ons such as the present patent get nowhere. The only sanction (apart, perhaps, from competition law which thus far has had nothing or virtually nothing to say about unmeritorious patents) may, under the English litigation system, lie in an award of costs on the higher (indemnity) scale if the patent is defended unreasonably”.
It is important to emphasise that, for the purposes of the unlawful means claim, Servier has not at any point been held to have acted in a deceitful manner. Deceit was assumed for the purposes of the Supreme Court hearing as all that was before the court was the issue of whether the dealing requirement is a necessary element of the tort of unlawful means.
In the US, there is a duty of candour and good faith placed upon each individual associated with the filing and prosecution of a patent application when dealing with the US patent office. This includes a duty to disclose information known to that individual to be material to patentability. In the event of a breach of the duty of candour and good faith, a patent will not be granted.
In contrast, none of the UK IP Office, UK courts or the EPO requires a specific duty of candour. The broad equitable doctrine of unclean hands in English law, which is based on the principle that a plaintiff seeking relief must come to the court with clean hands, might be raised as a defence but not as an affirmative claim for relief.
An unclean hands defence generally requires the plaintiff to have engaged in unconscionable conduct (such as fraud, deceit or bad faith), and that unconscionable conduct has an immediate and necessary relation to the matters at issue.
Although the Supreme Court’s decision will be good news for pharma and patent owners in general, this is not the end of the long-running dispute between the NHS and Servier, as the NHS’s claims of infringement to competition law are ongoing. Servier and the European Commission also have related pending appeals to the Court of Justice of the European Union following the General Court’s decision of 2019 which partially annulled the 2014 European Commission decision.
Beatriz San Martin is a partner at Arnold & Porter. She can be contacted at: beatriz.sanmartin@arnoldporter.com
Shishu Chen is an associate at Arnold & Porter. She can be contacted at: shishu.chen@arnoldporter.com
Images, from top: Shutterstock / MIND AND I, Marbury, GagliardiPhotography, lazyllama
