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[2016] ZAGPPHC 465
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Merck Sharp Dohme Corporation and Others v Cipla Agrimed (Pty) Ltd (98/101975) [2016] ZAGPPHC 465 (8 April 2016)
IN THE
COURT OF THE COMISSIONER OF PATENTS
FOR
THE REPUBLIC OF SOUTH AFRICA
S.A.
PATENT No. 98/10975
DATE:8/4/2016
[1]
REPORTABLE: YES
[2] OF
INTEREST TO OTHER JUDGES: YES
Iin the matter
between:
MERCK SHARP DOHME
CORPORATION First
Applicant
MERIAL LIMITED
(MERIAL
LLC) Second
Applicant
MERIAL SOUTH AFRICA
(PTY)
LTD Third
Applicant
and
CIPLA AGRIMED (PTY)
LTD Respondent
JUDGMENT
J
W LOUW, J
[1]
The first and second applicants are the co-patentees of South African
patent 98/10975. The third applicant is a registered licensee
under
the patent. On 9 June 2011, the respondent filed an application for
the revocation of the patent on the grounds of lack of
novelty and
inventive step in the light of the disclosure in South African patent
1992/7457 ("the 1992 patent"). On 18
October 2011, the
applicants issued summons against the respondent in which they claim
a final interdict restraining the respondent
from infringing claims 1
to 7, 18 to 23 and 29 of the patent and an inquiry into the damages
which they allegedly suffered as a
result of the respondent's alleged
infringement. In its plea to the applicants' particulars of claim,
the respondent admits infringement
of the said claims but raises the
alleged lack of novelty and inventive step as defences to the action.
[2]
In view thereof that affidavit evidence had already been presented in
the revocation application, the parties agreed to stay
the
infringement action pending the outcome of the revocation
application. The respondent's attorney wrote a letter to the
applicants'
attorney on 2 August 2012 in which the following was
said:
"We
have discussed this matter with Counsel and it is clear that what we
have here is a conditional referral to oral evidence.
Specifically,
if claim 1 is found not to be anticipated as alleged but is found to
be valid, the question of whether or not dependent
claims are invalid
on the ground of obviousness becomes moot. They would stand with
claim 1.
On
the other hand if claim 1 is found to be anticipated and invalid then
the question of whether or not dependent claims 3, 4, 19,
20 and 21
(plus omnibus claim 29) do or do not cover obvious subject matter
must be decided by the court. As is clear in our law,
this it can
only do on the basis of oral evidence.
In
the premises we are advised that the Court will be loath to hear an
application for the referral of the matter to oral evidence
in
circumstances where such a hearing may in fact never become
necessary. Only if we are successful in the first issue will the
referral become necessary.
-------------
We
propose that:-
1.
the application for the referral to oral evidence stand over until
such time as the revocation matter is ripe for hearing;
2.
the two applications (revocation and referral to oral evidence) be
set down for hearing at the same time;
3.
heads of argument be prepared for both matters simultaneously; and
4.
no heads of argument be filed by either party at this time.
We
will proceed with the preparation for the revocation matter and
ensure that we file the main index within the next week.
The
revocation and the conditional application would then be heard at the
same time.
Please
confirm that this procedure is acceptable. …………”
[3]
The applicants' attorney responded the following day as follows:
"Our
clients do not accept that the application for revocation should be
heard on a piecemeal basis as you have proposed or
that a
"conditional application" for referral to oral evidence is
a legitimate procedure or one that is appropriate in
the current
circumstances . ..........
We
do, however, agree that the application for revocation is ripe for
hearing and should be set down. Our client will contend at
the
hearing that it is entitled to the dismissal of the application for
revocation in its entirety. We will deal with the "conditional"
application for referral to oral evidence as and when such
application is made."
[4]
There was therefore no agreement between the parties on the procedure
to be followed in the revocation application. In the respondent's
heads of argument in the revocation application, the following was
stated:
"Should
the above Honourable Court find that the invention was not new, and
the patentees thereafter apply for an amendment
of the claims of the
1998 patent, then and in that event, application will be made for the
matter to be referred for the hearing
of oral evidence on the second
challenge to the patent, namely that the patent be revoked on the
ground of obviousness.
Similarly,
if the above Honourable Court finds that the lack of novelty
objection to the patent is unfounded, the challenge to the
patent
will continue on the basis of obviousness, and oral evidence will
then be required to resolve the issue.
The
present hearing, however, is confined to the issue of anticipation
only and no oral evidence is required to decide this question.
…………
In
the premises, depending on the nature of any future amendment, the
question will either remain one of prior disclosure, or, assuming
that the prior disclosure
objections
are satisfied by the amendment, the question will move to
inventiveness or obviousness and the evidence of expert witnesses
will then be required to resolve the issue. In this event, Cipla will
apply for the matter to be referred to oral evidence and
the right to
supplement of its papers.
The
application for referral to oral evidence is therefore conditional
upon events which are yet to occur and will not be brought
at this
stage."
[5]
The applicants did not accept that the respondent was entitled to
follow the procedure which it suggested. The following was
said in
their heads of argument:
"Although,
as has been pointed out above the present hearing will be confined to
the issue of anticipation only, Cipla does
suggest in its heads of
argument that, depending on the outcome of the hearing, an
application may or may not be made for a reference
of the issue of
obviousness to the hearing of oral evidence.
As
the joint patentees understand Cipla's heads of argument, however,
any application which might be made for the reference of the
issue of
obviousness to the hearing or oral evidence is "conditional upon
events which are yet to occur and will not be brought
at this stage".
There
will thus be no need to have regard, at the present hearing, to an
application which might or might not be brought in future.
We note,
however, that the procedure proposed is incompetent and that Cipla's
failure the (sic) advance any argument in relation
to obviousness in
these proceedings amounts to an abandonment of that attack on the
validity of the patent. Any attempt to resurrect
that attack at some
later undefined time will be opposed, inter alia, on the basis that
the question of validity of the patent
will be res judicata between
the parties and that the attempt to resurrect the attack constitutes
an abuse of process (and one
which runs contrary to the trite
principle that there be finality in litigation)."
[6]
The revocation application was heard by Teffo J, sitting as
Commissioner of Patents. The application for referral to oral
evidence
which was foreshadowed in the letter of the respondent's
attorney was not moved. Instead, as was indicated in the respondent's
heads of argument, the application was not being brought at that
stage but, depending on future events, might be brought at a later
stage. It is common cause that the issue of novelty was the only
issue which was argued before Teffo J and decided by her.
[7]In
a judgment delivered during March 2014, Teffo J granted the
respondent's application for revocation of the patent after finding
that all of the claims of the patent were anticipated by the 1992
patent. She thereafter granted the applicants leave to appeal
to the
Supreme Court of Appeal (SCA). The only issue argued on appeal was
the issue of novelty. The appeal was upheld in a judgment
delivered
on 27 November 2015, replacing the order of Teffo J with an order
dismissing the application for revocation of the patent.
The court
further certified each of the claims of the patent as being valid in
terms of
section 74
of the
Patents Act, 57 of 1978
.
[8]
The applicants' attorney thereafter, on 3 December 2015, wrote to the
respondent's attorney demanding that, in light of the
decision of the
SCA, the respondent consent to the orders sought in the infringement
action. The respondent refused to do so and
proceeded to file a
notice of intention to amend its plea by introducing a further ground
of alleged invalidity based on
s 61(1)(d)
of the
Patents Act
(in-utility
). This resulted in the bringing by the applicants of the
present application. The application was brought on a semi-urgent
basis
on the ground that the decision of the SCA had effected a
significant change in the circumstances relevant to the infringement
action from a position in which the applicants were facing a
challenge to the validity of the patent in order to succeed in the
infringement action to a position where the respondent no longer had
a pleaded defence to the action. The patent will expire in
2018 and
it is common cause that the respondent's application to amend its
plea will delay the finalisation of the infringement
proceedings
until after the expiry of the patent. The respondent contests that
the matter is urgent, submitting there has been
no change in the
circumstances as the decision of the SCA had not rendered the issue
of the validity of the patent
res judicata
between the
parties.
[9]
The respondent's contention that the issue of the validity of the
patent is not
res judicata
as between the parties depends on
whether or not the procedure to be followed in the revocation
application as proposed and adopted
by the respondent is permissible,
i.e. whether the respondent may now proceed to bring an application
for the hearing of oral evidence
on the issue of obviousness and, if
it is permitted to amend its plea, the issue of in-utility.
[10]
It is trite that, generally speaking, piecemeal litigation is to be
avoided.
[1]
In
Clipsal
Australia Pty Ltd and Others v Gap Distributors (Pty) Ltd and
Others
[2]
,
Malan
J referred with approval
[3]
to
the following statement by Roper J in the English decision of
Shoe
Machinery Company v Cutlan
[4]
:
"But
a further point is now taken on behalf of the defendants. It is said
that they are entitled in this action to retry the
question of the
validity of the patent because they have discovered fresh materials
for impeaching it, fresh alleged anticipations,
and are entitled to
have the issue of validity retried on the footing of these further
materials. In my opinion they are not so
entitled. If they were held
to be so entitled, I do not see how there could be any finality of
the questions in an action between
parties such as these. According
to this contention the defendant might try his case piecemeal. He
might raise such objections
as he thought convenient, and when he was
defeated he might then raise other points at his leisure, and might
in that way try the
case piecemeal, and, so far as I can see, extend
it over as long a period as he pleased. In my opinion the defendants
are not entitled
to do that. When the question of the validity of a
patent is brought for trial by reason of the defendant's contesting
that question,
he is bound to put his whole case before the Court;
and if he does not do so, then it is his own fault or his misfortune.
He cannot
be allowed to put part of his case, or to put his case in
an incomplete manner. He is bound, when that question is raised, to
search
and find out all that he intends to rely upon in support of
his contention that the patent is invalid. For these reasons it
appears
to me that the defendants are not entitled to have this
question of validity retried, because, as they say, they have found
further
material that
would
have assisted them if they had known of them at the first trial. The
plaintiffs are therefore right in their contention, as
between these
parties the plaintiffs are entitled to say that this patent has been
held to be and is valid.
”
[5]
[11]
The respondent did not say that it had discovered new material on
which it wished to rely in support of its claim that the
patent is
invalid. What it indicated is that it intended holding over its claim
that the patent was invalid for lack of inventiveness.
It thereafter
further indicated that it intended to apply for the amendment of its
plea to introduce an additional ground of invalidity,
namely
in-utility. To allow a defendant to do this would in my view be no
different in principle than to allow a defendant to have
a matter
re-tried on the basis of new material having been discovered. Both
instances will result in piecemeal litigation. In
Chiron
Corporation and Others v Organon Teknika Limited (No 14
[6]
),
Sir
Thomas Bingham said the following in the Court of Appeal:
"The
basic principles with which we are concerned are, for the purposes of
resolving this application, in my view, straightforward
and they are
based, in essence, on preventing what may fairly be regarded as an
abuse of the court's process. There are, I think,
two fundamental
rules. One is that once a matter has been the subject of a final
judicial decision it cannot ordinarily be re-litigated.
This rule
rests on the principle that it is not in the interests of the
parties, or in the public interest that the same point
should be
re-litigated over and over again. The second relevant rule is, as I
think, that it is the duty of parties to any action,
be they
plaintiffs or defendants, to bring forward their whole case when the
matter is before the court. If a party is reasonably
ignorant of
matters which found a claim or a defence, then that may provide an
exception to the general rule in some circumstances.
If a party is,
for any reason, unable to present its whole case then there are
well-known procedures available. The most obvious
is to ask for an
adjournment, but alternative courses open are to ask the judge in the
first instance to try a preliminary issue
which, if resolved in one
way, may suffice to dispose of the case or to hear such issues as can
be fairly tried and to reserve
the remaining issues for later
decision. What, in my understanding, is not permissible is for a
party with more than one cause
of action or more than one ground of
defence to advance one of them and then keep the others in reserve
for a rainy day."
[12]
It seems to me that is exactly what the respondent is attempting to
do. The alternative course which the respondent could have
followed,
but didn't, was to apply for the separation of the issue of
anticipation from the issue of obviousness and for the issue
of
obviousness then to be postponed. It seems fairly obvious that it
would have been convenient for the parties and the court if
the court
had ordered a separation of the issue of novelty and postponed the
issue of obviousness. It was possible to decide the
issue of novelty
on the affidavit evidence before court, whereas the issue of
obviousness required oral evidence. If the court
had ordered such
separation and then found, as it did, that the patent lacked novelty,
that would, but for a successful appeal
or a subsequent amendment of
the claims of the patent, have made an end to the matter, obviating
the need for deciding the issue
of obviousness. I need to point out
that, had the respondent informed the SCA, which it did not do in its
heads of argument, that
it intended proceeding with its attack on the
validity of the patent on the ground of obviousness in the event of
the SCA upholding
the applicants' appeal on the issue of validity,
the SCA might well have declined to entertain the appeal. The SCA is
strongly
opposed to the hearing of piecemeal appeals.
[7]
[13]
Rule 33(4) of the Uniform Rules of Court provides the following:
"If,
in any pending action, it appears to the court mero motu that there
is a question of law or fact which may conveniently
be decided either
before any evidence is led or separately from any other question, the
court may make an order directing the disposal
of such question in
such manner as it may deem fit and may order that all further
proceedings be stayed until such question has
been disposed of, and
the court shall on the application of any party make such order
unless it appears that the questions cannot
conveniently be decided
separately."
It
was submitted by Adv. Puckrin SC, who appeared with Adv. Seale for
the respondent, that the respondent could not have applied
for a
separation as rule 33(4) only applies to actions and not to
applications. There is, however, no reason why the court could
not,
in terms of its inherent power to regulate its own procedure, have
made such an order. The hybrid nature of revocation applications
in
patent matters would have provided sufficient justification for the
making such an order. Mr. Puckrin correctly pointed out
that courts
are often asked to deal separately with parts of an application, e.g.
on urgency, jurisdiction or
locus standi
despite the
inapplicability of rule 33(4).
[14]
Mr. Puckrin further submitted that the court impliedly made a
separation order. In my respectful view, the submission is incorrect.
The respondent needed to have applied for a separation order which
the applicants would have been entitled to oppose. The court
thereafter, if it was in agreement with the respondent, needed to
make a separation order and to postpone the issue of obviousness
for
the hearing of oral evidence if such hearing later became necessary.
It is common cause that no application for separation
was made by the
respondent and that the respondent simply informed the court that it
would follow a piecemeal procedure which,
as I have found, is
impermissible.
[15]
The requirements for an interim interdict are a clear right or, if
not clear, is
prima
facie
established
though open to some doubt; a well-grounded apprehension of
irreparable harm if the interim relief is not granted and
the
applicant is ultimately successful; that the balance of convenience
favours the granting of interim relief; and that the applicant
has no
other satisfactory remedy. In view of the finding of the SCA that the
claims of the patent are valid and my finding that
the respondent is
not entitled to proceed with the piecemeal procedure which it
proposed to adopt, the applicants have established
that they have a
clear right. If a clear right is established, an applicant need not
establish the requirement of irreparable harm.
[8]
[16]
The balance of convenience in my view favours the applicants. The
respondent admits that its product,Ivermax Platinum LA, competes
directly with the applicants' productIvomec Gold which falls within
the scope of the claims of the patent. The presence of the
respondent's product on the market of necessity reduces the sales of
the applicants' product and deprives the applicants of the
exclusive
right to exploit the invention of the patent. The applicants accept
that having to withdraw Ivermax Platinum LA from
the market will
occasion prejudice to the respondent, but have tendered to pay any
damages which the respondent is able to show
it has suffered as a
result of the grant of an interim interdict. The respondent, however,
claims that it will not be able to quantify
its damages because of
the presence of other competitors on the market. The applicants'
answer to this is that the respondent will
relatively easily prove
its damages as its product has been on the market for five years and
that it will have existing projections
for, and will have budgeted
for, sales of its product over the next approximately two years of
the life of the patent. I agree
that it will be easier for the
respondent to prove its damages than for the applicants. In
Pfizer
Ltd and Another v Cipla Medpro (Pty) Ltd and Others
[9]
the
court said following:
[10]
"The
proof of damages is notoriously difficult. The problem lies more in
the proof of causation. In my view the proof of damages
would be more
difficult for the applicants. It would always be very difficult to
prove what part of any reduced turnover was caused
by the
respondents' entry into the market. In an expanding market it may be
even more difficult to prove what growth the sales
of the applicant
would have achieved but for the inroads of the respondents. It seems
to me that the respondents would have less
of a problem with the
proof of damages. Their launching costs are known. What they will
lose is a delay in the profits that they
would in any event be able
to make as from 2007.
It
was argued that the respondents would never be able to prove what
profits they would have made if an interdict is granted. That
is
true, but if they claim their damages after the expiry of the patent
they would be able to prove actual sales and it would be
difficult
for the applicants to contend that those sales would not have been
achieved if an interdict had not been granted."
[17]
As to the availability of an alternative remedy, it was contended by
the respondent that the applicants do have the alternative
remedy of
claiming a reasonable royalty as provided for in
s 65(6)
of the
Patents Act. A
claim for payment of a reasonable royalty is an
alternative remedy, but it is not necessarily a satisfactory
alternative remedy.
The applicants have pointed out in their founding
affidavit that it will be difficult to establish what a reasonable
royalty will
be in the circumstances and that, even if a royalty can
be established, it is unlikely that it will ever place the applicants
in
the position they would have been absent the respondent's entry
into the market. If a reasonable royalty cannot be agreed between
the
parties, something which cannot be excluded, the applicants will have
to institute proceedings against the respondent to prove
what a
reasonable royalty will
be
in all the circumstances. It will, for example, have to produce
evidence of royalties paid in terms of existing licence agreements
which deal with similar products and circumstances, which evidence
may not be available to them. If a reasonable royalty can be
established, the applicants will have to police the respondent's
sales of its product, something which in itself may produce
substantial
difficulties. In my view, it cannot be said that a claim
for payment of a reasonable royalty is a satisfactory alternative
remedy
for the applicants in all the circumstances.
[18]In
the result, I find that the applicants have satisfied the
requirements for the granting of an interim interdict. I accordingly
make the following order:
[a]
The respondent is interdicted from infringing claims 1 to 7, 18 to 23
and 29 of South African patent 98/10975 pending the final
determination of the action instituted by the applicants against the
respondent on 18 October 2011 under the above case number,
provided
that the interdict will lapse on the expiry date of the patent if the
action has not been finally determined by that date.
[b]
The costs of the application are reserved for determination in the
action.
Counsel for
applicants: Adv.
L Bowman SC; Adv. G D Marriott
Instructed
by: KischIP,
Pretoria
Counsel for
respondent: Adv.
C E Puckrin SC; Adv. M Seale
Instructed
by: Brian
Bacon Inc., CapeTown
[1]
Consolidated
News Agencies (Pty) Ltd (in liquidation) v Mobile Telephone Networks
(Pty) Ltd and Another
2010(3)
SA 382 (SCA) par. [89];
Satawu
v Garvis and Others
2011(6)
SA 382 (SCA) par. [45]
[2]
2009 BIP 261 (GSJ)
[3]
At par. [36]
[4]
(1896) 1 Ch 667
at 672
[5]
See also
Alcatraz
Integrated Intelligence Systems (Pty) Ltd v lntegra-Set (Pty) Ltd
20
I 0 BI P 94 (CP) par. [16]
[6]
[1996] FSR 701
at 707 - 708
[7]
S
v
Malinde
1990
(1) SA 57
(AD) 67F;
Guardian
National Insurance Company Ltd v Searle NO
1999
(3) SA 296
(SCA) 3018-D;
Minister
of Health v New Clicks SA (Pty) Ltd
2006
(2) SA 311
(CC) paras [54] - [58];
Telkom
SA Soc. Ltd and Another v Blue label Telecoms Ltd and Others
[2015]
JOL 33099
(GP) paras [6] - [10]
[8]
L F
Basho.ff Investments (Pty) Ltd v Cape Town Municipality
1969
(2) SA 256
(C) 267.
[9]
2005 BIP I (CP)
[10]
At 11H - 12D