Patents Court finds EPO oppositions can change the “winner” in the UK

Mr Justice Marcus Smith's recent decision is the latest instalment in the dispute between Neurim (the owner of EP(UK) 1 441 702 ("Patent")) and Flynn (its licensee) regarding the threatened launch of Mylan's generic melatonin product.

We previously reported on Neurim/Flynn's appeal of Marcus Smith J's decision to refuse to grant an interim injunction restraining the launch of Mylan's product, which was dismissed by the Court of Appeal in June 2020.

What happened?

Following the Court of Appeal's decision in June 2020, Mylan were free to launch at risk in the UK ahead of the expedited UK trial (and there is a suggestion that infringing acts commenced in around September 2020).

The expedited trial followed in October-November 2020 and the judgment (delivered on 4 December 2020) held the Patent valid and infringed. 

It was only by the first consequentials hearing on 16 December 2020, that the Judge had been updated about the expedition of parallel revocation proceedings at the European Patent Office ("EPO"), which Neurim and Mylan had jointly sought, to the Technical Boards of Appeal ("TBA") following the Opposition Division's earlier decision to revoke the Patent centrally.

This meant that when the orders following the UK trial were made (on 16 December), it was apparent that the TBA would deliver its decision only 2 days later. In these circumstances, Smith J did not second guess the outcome at the TBA and awarded Neurim/Flynn their costs as they were the "winner" in the UK. However, the pending TBA decision and potential for an inconsistent outcome was taken into account on some provisions, for example as to the onset and mechanics of the final injunction. 

As it turned out, Neurim/Flynn's win in the UK was short lived, because the TBA expressed their opinion that the Patent was insufficient (conflicting with Smith J's decision) and accordingly Neurim formally withdrew its appeal, resulting in the Patent's revocation ab initio (as if the Patent never was). 

Following the revocation of the Patent in the EPO, Mylan applied to the Court requesting a variation of the first consequentials orders, including that Neurim/Flynn be held liable for the costs of the proceedings (despite having won at trial) as a result of a material change of circumstances.  There was also an interim dispute on the drawing up of the 16 December orders which led the Judge to give an interim order on 30 December, revoking his 16 December orders and ordering the parties back for a second hearing.

Smith J heard the parties at a second consequentials hearing on 22 February 2021, and held that the Court had jurisdiction to vary the orders and awarded Mylan its costs of the proceedings, effectively reversing his earlier orders.

In coming to his conclusion that the Court had jurisdiction to vary the orders, Smith J highlighted a number of reasons, including the following:

• the proximity of time between the imminent outcome of the TBA appeal and the orders (drawing principles from the caselaw (IPCom) relating to stays of UK proceedings pending the EPO);

• the fact that (while made) the 16 December orders had not yet been formally drawn up by the parties;

• it would be grossly unfair to Mylan for it to be unable to contend, in light of the TBA appeal, that the orders should not be varied;

• it was implicit that the first consequentials hearing was conducted on the basis that any orders could and would (if appropriate) be revisited, particularly because of some exchanges which Smith J cited, and also as some of the orders did not have a sunset clause and so had to be revisited (e.g. in respect of delivery up and destruction of Mylan's infringing product).

Smith J went on to consider variation of the orders in respect of costs.  Given the interaction between the UK proceedings and the EPO proceedings, the "result in real life" was to compare the remedies and relief sought by the parties in the UK proceedings with what they had actually obtained.  In Smith J's view, there was only one "winner" - Mylan, who contended that the Patent should be revoked and succeeded in doing so (albeit via the EPO and not UK proceedings (in which Smith J had also refused them permission to appeal)).

The Judge also considered the parties' conduct during the UK proceedings.  Whilst he did not criticise either party (and acknowledged the parties' reasons for wanting the EPO and UK proceedings to proceed in parallel), he suggested several times in his judgment that the Court should have been notified about the imminent hearing before the TBA, which had been known months before the scheduled trial date:

"Without in any way wishing to criticise or be prescriptive, whilst the parties may very well have had their own reasons for wanting the EPO and the UK Proceedings to proceed in parallel, their conduct (in not referring the matter to the court) deprived the court of considering whether a stay of the UK Proceedings was or was not appropriate. In effect, the parties prevented the court from re-visiting, or considering re-visiting, Nugee J's order expediting the trial. Nugee J's order would have been premised on an appeal in the EPO Proceedings in the first quarter of 2022: an appeal in the EPO actually listed for hearing and determination on 17 and 18 December 2020 is a very different matter."

Smith J ultimately found that the costs of the UK proceedings were costs thrown away because the decision of the TBA rendered the trial unnecessary, and since it was open to Neurim/Flynn to bring this issue before the Court, they would have to pay Mylan's costs.  Smith J did point out that had the situation been reversed and the interaction between the EPO proceedings and the UK proceedings favoured Neurim/Flynn, then he would have considered Mylan's failure to raise the matter of an adjournment in exactly the same way as he considered Neurim/Flynn's failure.

An "interesting question"

One open question following Smith J's decision is how long a period following a "win" in the UK is required for it to be considered "final" (at least in respect of costs) where there are parallel EPO proceedings on foot.  The Judge posed the hypothetical "interesting question" of what might have happened had the trial of the UK proceedings gone ahead but the hearing before the TBA not taken place until the first quarter of 2022 (as had been originally estimated when the expedited trial was ordered).  In those circumstances, the Judge's orders would have been formalised and Mylan would have been prevented from marketing its product in the UK for around 14 months and would have paid substantially all the costs of those proceedings. 

Whilst the Judge "fortunately" did not need to consider this question, Smith J did remark that he would be "very hesitant" to invoke this jurisdiction in such circumstances (i.e. the bigger gap) and suggested that the most appropriate course might be for the orders to be appealed to the Court of Appeal and for the Court of Appeal to give appropriate directions as to recovery of Mylan's losses (including its costs), that were, taking into account the EPO proceedings, wrongly made and causative of loss.  Therefore, while hesitant, Smith J does not rule out that a period of even 14 months would be enough for a Court's order to be considered "final".

Interestingly, Smith J did not refer to the UK Supreme Court's decision in Virgin Atlantic Airways Limited v Zodiac Seats UK Limited [2013] UKSC 46, where the Supreme Court held that where a patent is found in the UK to be valid and infringed, and the EPO subsequently amends or revokes that patent (meaning it is not infringed), the alleged infringer is entitled to rely on the patent's retrospective amendment or revocation as a defence to avoid paying damages. However, while there are parallels in terms of the outcome, this is not strictly relevant to the main issue in this case which more predominantly concerns the Court's power to vary orders, which was not considered in Virgin.

What's next?

It remains to be seen if Neurim/Flynn appeal Smith J's decision and indeed what impact this case has on cross-border parallel patent litigation strategy. But this judgment raises the profile of the potential for order variation and costs reversal alongside matters such as potential stays (following IPCom) and the avoidance of damages (following Virgin), that require careful consideration in strategizing parallel UK and EPO patent proceedings.