Fighting back using a divisional patent in the UK: Neurim v Mylan

Fighting back using a divisional patent in the UK: Neurim v Mylan round 2

This case is about using a divisional patent to have a second round of patent litigation against the same defendant. The first instalment came this summer and addresses how fast the patentee (Neurim) can return to court and whether it can use an earlier ‘win’ to its advantage. Ultimately, this relates to the central issue, namely one of speed, which is of primary importance to the patentee when patent expiry is more imminent and who now only seeks a final injunction (and damages) rather than any interim remedies (which were exhausted and in any event refused previously).

In this case, the UK Patents Court granted Neurim’s application for expedition and ordered the trial of various preliminary issues, which also covered estoppel, giving it a first win in round 2 of its dispute against Mylan concerning its generic melatonin product.

Background

We previously reported on Marcus Smith J’s decision to reverse an order on costs in light of the EPO’s decision to revoke EP(UK) 1 441 702 (“EP 702”), granting costs to Mylan, notwithstanding that he had held Neurim’s patent valid and infringed in UK proceedings. This decision is understood to be under appeal by Neurim and is expected to be heard by March 2022.

Now Neurim (and its exclusive licensee, Flynn) has commenced patent infringement proceedings against Mylan using another patent in the same family as EP 702, namely divisional patent, EP 3 103 443 (“EP 443”). Neurim’s urgency to recommence battle is evidenced by the fact it issued its claim on the day EP 443 granted (30 June 2021). Similarly, Mylan has filed an EPO opposition against EP 443 far in advance of the 9-month deadline to do so. Mylan has also applied to have the UK EP443 action stayed, pending the outcome of the opposition. That application for stay is due to be heard in October 2021.

Further, Neurim is seeking to unconditionally amend EP 443 so that it corresponds with the claims of EP 702 that were previously considered by the UK Court to be valid and infringed. Mylan has already opposed that application, including on grounds that it is an abuse. In this respect, Mylan refers to Neurim withdrawing its appeal relating to EP 702 at the EPO during the oral proceedings when the TBA indicated an oral view that the patent was insufficient. As a result of the withdrawal, Mylan alleges that Neurim has shielded its patent from an adverse written decision and also therefore acquiesced to the OD’s decision that the patent lacked both novelty and insufficiency. This introduces a significant sub-plot to this case, which rather than enforcing a divisional, ultimately appears to be an enforcement of materially the same claims all over again, notwithstanding an intervening invalidity decision and lack of harmony between the UK Courts and the EPO.

What was the application about?

Neurim sought two things: that estoppel (and other issues) would be heard as preliminary issues and that they would be in an expedited trial.

Neurim argued that given that the UK court found the parent patent (EP 702) to be valid and infringed, Mylan should be estopped from disputing validity and infringement in respect of EP 443. This is not an uncommon strategy in the UK – albeit is more commonly used against a patentee enforcing a divisional rather than by them – and makes sense in principle: with the patentee trying to capitalise on the positive outcome (at least in the UK) on the parent patent to streamline its case on the divisional and constrict Mylan’s defence.

Neurim applied for the trial of estoppel arguments (in addition to the issue of standing of Flynn in the claim as exclusive licensee and its application to amend EP 443) to be heard as preliminary issues, and for that trial to be expedited in order for it to be heard and judgment handed down before patent expiry on 12 August 2022. The trial on preliminary issues will naturally have a fundamental impact on the main proceedings, and it is not clear whether any steps are being taken in the meantime with respect to listing any full trial on invalidity and infringement.

Neurim argued that the scenario was simple and, in a similar way to the case on EP 702, that an expedited trial would achieve commercial certainty as quickly as possible.

Is this scenario that simple?

Mylan contended that the position was much more complicated, including in particular in light of its intended counterclaim against Neurim for abuse of its dominant position (which it has since filed) which would preclude relief even if Neurim succeeded on the preliminary issues. In that respect, Mylan indicated that, in addition to its opposition against Neurim’s application, it intended to argue that Neurim’s actions, including in particular its amendment, amount to an abuse of a dominant position.

What was the outcome?

In relation to Neurim’s application for the trial of preliminary issues, Mellor J set out the correct approach to preliminary issues should be as follows:

• Only issues which are decisive or potentially decisive should be identified.

• The questions should usually be questions of law.

• They should be decided on the basis of a schedule of agreed or assumed facts.

• They should be triable without significant delay, making full allowance for the implications of a possible appeal.

• Any order should be made by the court following a case management conference.

Mellor J also referred to precedent that “it is notorious that preliminary issues often turn out to be misconceived, in that, while they are intended to short-circuit the proceedings, they actually increase the time and cost of resolving the underlying dispute".

In relation to the expedition of trial, Mellor J referred to the well-established guidance in Gore v Geox, which set out four factors to be considered when dealing with expedition:

• whether there is good reason for the expedition;

• whether expedition would interfere with the good administration of justice;

• whether expedition would cause prejudice to the defendant; and

• whether there are any other special factors.

In coming to his decision, Mellor J set out various ‘special factors’ that needed to be taken into account in this case, namely:

• Neurim had a prima facie valid patent.

• It would appear that the product which Mylan had on the market infringed the patent.

• As Neurim had submitted, the final period when a patent is in force can often be particularly valuable commercially for the patentee before its period of monopoly comes to an end, and that Circadin® was a particularly valuable drug for Neurim.

• There are undoubtedly arguments to be had that Mylan are estopped in some relevant respects. Equally, Mellor J’s preliminary view was that the issues were not nearly as straightforward as Neurim suggested. The estoppel arguments raised, in his preliminary view, some interesting and tricky issues, on which Mylan may prevail.

Mellor J further considered that:

• if the estoppel arguments were dealt with at a full trial of infringement and validity of EP443, the judgment would likely be given after the patent had expired, such that the estoppel arguments would serve no purpose; and

• the costs of a trial of preliminary issues are likely to be considerably less than those of a full trial of infringement and validity with estoppel arguments on top.

Considering the above, Mellor J concluded that it made sense for any estoppel or abuse arguments to be heard first, and that there be a degree of expedition. In his judgment, he stated that in the “unusual circumstances” of the case “it is just and right that Neurim should be afforded the opportunity to establish its patent right by way of a trial of preliminary issues – this being the only realistic way in which Neurim can hope to secure injunctive relief before expiry of EP443.”

Consequently, Mellor J ordered a two-day trial of preliminary issues to be listed after 1 October 2021 and before the end of February 2022. This was conditional on the action not being stayed at the hearing in October concerning Mylan’s application to stay the action pending the outcome of its opposition to EP 443 at the EPO.

Mylan has since filed its Defence and Counterclaim, which includes a defence that:

• EP 443 is invalid

• Neurim is estopped from contending that EP 443 is valid as a consequence of accepting that EP 702 was invalid at the EPO

• Mylan is not estopped from contesting validity and infringement

• Flynn is not an exclusive licensee

• Neurim ought to recover no damages (or only recover reduced damages) for the period between the application for EP 443 and its grant because it would not have been reasonable to expect that a patent would be granted that would confer Neurim protection from an act of the same description as that found to infringe.

Further, as noted already, Mylan counterclaims that Neurim has abused its dominant position and that its strategy is to exclude Mylan from the market without it ever having had an opportunity to challenge the validity of EP 443 or to advance the arguments that the OD and TBA accepted, in the Court of Appeal. A further consequence, it argues, is that consumers (including the NHS) will be deprived of the benefits of competition in the market.

Comment

It will be interesting to see how this second round of litigation plays out. Mylan’s application to stay the UK action could disrupt Neurim’s ability to enforce its divisional patent in the UK (assuming the EPO opposition does not hear Mylan’s opposition until well after patent expiry) – however, in the meantime Mylan, which is understood to be on the market in the UK, will presumably increase the stakes and potential damages that could be in play. In that respect, it also remains to be seen how Neurim/Flynn have addressed their exclusive licensing issue (which they lost on at first instance in respect of the parent patent), as this will presumably impact on the scope of their damages claim.

If Mylan is ultimately unsuccessful in either staying or defending this action second time around (including via estoppel), Mylan’s counterclaim of abuse of a dominant position will be of interest to patentees seeking to enforce divisionals in this way, as such an argument has not been previously reached in divisional fights and will determine the critical issue of remedy. However, the utility of this strategy remains to be seen as it does appear to be a reasonably unusual scenario where a generic has already launched, won at the TBA but in the meantime has lost in a significant jurisdiction (here, the UK) leading to a fully reasoned written decision inconsistent with the TBA outcome (where there is no written decision). While the UK appears to be the eye of the storm in terms of resolving the impact of its inconsistent decision versus that of the TBA, Neurim will presumably be considering whether to deploy the same strategy in other European jurisdictions where Mylan (or any other generic) has launched to see if it can leverage its successful UK outcome. With numerous dimensions and overlapping appeals on every issue, this may become a long and complex battle in which there is sufficient damage and significance to Neurim to see it through.