Clarifying the law relating to double jeopardy in patent litigation

Author: Eddy D. Ventose (Faculty of Law, Cave Hill Campus, University of the West Indies, Barbados)

Resolution Chemicals Ltd v H. Lundbeck A-S [2013] EWCA Civ 924, Court of Appeal, England and Wales

Journal of Intellectual Property Law & Practice (2013) doi: 10.1093/jiplp/jpt194, first published online: November 12, 2013

The Court of Appeal of England and Wales has simplified the test relating to privity of interest, enabling litigants to know the circumstances in which a party will be prevented from re-litigating a matter.

Legal context and facts

Lundbeck, a Danish pharmaceutical company, owned a European patent which was subsequently the subject of a supplementary protection certificate (SPC). The SPC related to escitalopram, a single enantiomer of the compound citalopram, a drug used for the treatment of depression. The UK equivalent of the patent was ultimately declared invalid in revocation proceedings in 2005. Before and during the litigation, the claimant, Resolution, was part of the Arrow Group, the holding company of Arrow Genetics—one of the generic pharmaceutical companies that had brought the 2005 proceedings against Lundbeck. Resolution, now an independent company, wished to bring invalidity proceedings against the SPC, relying on the invalidity of the patent. Lundbeck argued that Resolution was precluded from bringing the action because of the privity of its interest with Arrow Generics, which was in turn estopped from bringing a similar action as a result of the judgment in the 2005 proceedings. Was Resolution thus precluded from bringing its proceedings? In the High Court, the judge held that Arrow Generics would be precluded by issue estoppel and the doctrine of abuse of process from challenging the validity of the SPC on the ground that the patent was invalid.

Analysis

Floyd LJ, speaking for a unanimous Court of Appeal, stated that privity of interest provided an exception to the general principle of the law of estoppel in that the estoppel binds only the parties to the previous litigation. He stated that the rules of law compendiously described as estoppels were very broadly based on the principle that nobody should be vexed twice in the same cause. So, for example, in cause of action estoppel, party A would not be allowed to litigate the question of whether a cause of action existed with a counterparty B more than once. Floyd LJ explained that the successful litigant and the public had an interest in this being the law: first, the litigant has an interest in not being vexed twice in the same cause; secondly, the public also has an interest in ensuring that the scarce resources available for resolving disputes are used efficiently. There was, however, no reason in principle why a different party, C, who had the same complaint against B, should not be free to litigate the same question. Floyd LJ noted that, notwithstanding the fact that A might have lost a first action, fairness normally demands that C should not be precluded by the manner in which A conducted the first action from bringing his own action, calling his own evidence and challenging the evidence called by B.

In the court's view, these principles applied to actions for revocation of patents as they do to any other type of action: while the final revocation of a patent was a judgment in rem and therefore could be relied on by the world at large, a judgment that a patent is valid determines issues only between the parties to the revocation action. Floyd LJ explained that third parties might launch second and subsequent attacks on the patent and that it was not necessary for any such party attacking a patent to show any particular interest: the cause of action is vested in ‘any person’. The patentee does, however, receive some protection from successive, unsuccessful attacks in terms of the costs order the court may make, but that is all. Floyd LJ claimed that the law recognizes that there are some classes of case where fairness demands that party C should be precluded from re-litigating a matter even though it was not a party to the previous proceedings between A and B. An example of these is where party C was in ‘privity of interest’ with A and that the privity of interest has been said to be a ‘somewhat narrow’ doctrine: one type of case where privity was recognized was where C knew of proceedings between A and B in which his rights were being tested but stood back and did nothing.

After considering the leading authorities, including the judgment of Sir Robert Megarry in Gleeson v J Wippell & Co [1977] 1 WLR 510, Floyd LJ summarized the state of the law relating to privity of interest as follows: a court, which has the task of assessing whether there is privity of interest between a new party and a party to previous proceedings, needs to examine (a) the extent to which the new party had an interest in the subject matter of the previous action; (b) the extent to which the new party can be said to be, in reality, the party to the original proceedings by reason of his relationship with that party; and, against this background, (c) to ask whether it is just that the new party should be bound by the outcome of the previous litigation.

Floyd LJ found that Lundbeck had not established that the judge made any error of law. He noted the extent of the identity between Arrow Generics and Resolution was that they were part of a group of companies under the common control of Mr Tabatznik, the Chief Executive Officer of the Arrow Group and a director of Resolution. Floyd LJ held there was no subsisting relationship between them in 2006 pursuant to which Arrow Generics was conducting the 2005 proceedings for Resolution's benefit. He was of the opinion that: (1) Resolution was Mr Tabatznik's chemistry set, but he was not playing with it to make escitalopram; (2) Resolution had no concrete interest in the 2005 proceedings. As a result, it would be quite unjust to hold Resolution bound by the outcome, and the judge was entitled to come to that conclusion. Floyd LJ added that he would not come to any different conclusion applying a broad merits-based approach; and, if anything, the case for Resolution was stronger as it would be proper to take into account the fact that Resolution was now independent of the Arrow Generics and operating under a different business model.

Practical significance

This decision has provided some useful clarity in relation to the byzantine area of law that is privity of interest. Moreover, it re-affirms the narrow scope of the doctrine; and the simplicity with which the test has now be cast will enable litigants to know in what circumstances a party will be prevented from litigating the same matter. In such cases, litigants should be advised of the following: (1) a litigant who had a legal interest in the outcome of earlier proceedings, but did not participate but was content to stand by and see his battle fought by someone else, would be precluded from re-litigating the matter even though he was not a party to the previous proceedings; (2) it is a question of fact whether a company within a group of companies has sufficient interest to be precluded from re-litigating the matter; (3) a commercial interest in the success of the previous proceedings it not of itself sufficient to bring a litigant within the narrow scope of the privity of interest doctrine. Of critical importance will be the degree of identification that would be necessary for the doctrine of privity of interest to stop applicants from re-litigating matters. In this case, the fact that Resolution was part of the Arrow Group was not sufficient to satisfy the necessary degree of identification and neither was its current commercial interest in marketing the generic version of escitalopram. What was critical was that, at the time of the earlier litigation, Resolution did not have necessary interest, which meant that, consequently, it did not have ‘privity of interest’ with Arrow Generics to prevent it (Resolution) from re-litigating the escitalopram patent.