CHINESE PIONEER HOLISTIC APPROACH TO PIRACY; FROM APOPLEXY TO APOTEXY

Chinese pioneer holistic approach to piracy

This piece from The Age is one of the most astonishing pieces that the IPKat has ever read. To keep a long story short, not content with infringing IP rights on an ad-hoc basis, one or more enterprising Chinese thieves have duplicated an entire business, setting up a counterfeit NEC operation that not only ran its own manufacturing operations but even "licensed" its IP to other local enterprises.

Left: Rest in Peace, industry as we used to know it ...

The IPKat cannot believe that, in a repressive regime in which one can scarcely visit a website without attracting the attention of the authorities, an entire operation of this nature can have been unlawfully duplicated without the knowledge, if not the blessing, of the Chinese government. Everyone seems to be so terrified of offending the Chinese, but they're not the slightest worried about offending us because, it appears, while they are happy to take our technology and our money, they respect neither us nor our culture. To save time and trouble, why don't we just hand over all our technology, all of our know-how and all of our money right now, and then go and liquidate ourselves? Merpel agrees and wants to know, are we the victims of our greed, our naivety or our plain stupidity?


From apoplexy to Apotexy

Having let of rather too much steam, the IPKat thinks it's time to calm down now, so what more appropriate for relaxing the mind than a complex patent post-infringement appeal? Somehow, in the excitement of last week, the IPKat missed this gem from BAILII: the decision of the Court of Appeal for England and Wales in the most unusual case of SmithKline Beecham Plc and others v Apotex Europe Ltd and others (heard by the Chancellor Sir Andrew Morritt and Lords Justices Moore-Bick and Jacob). This ruling, blessed with the neutral citation [2006] EWCA Civ 658, was given on Tuesday 23 May and dealt with (i) an appeal by Apotex and others against the decision of Mr Justice Lewison that their claims in restitution and for the recovery of third party loss had no real prospect of success and (ii) a cross-appeal by SKB against the decision that a claim in estoppel was arguable and should go to trial.

The ancient history of this case was that SKB sued Apotex for infringing its paroxetine hydrochloride patent. Apotex denied infringement and attacked the patent's validity. SKB then pressed for, and got, an interim injunction ordering Apotex not to deal in any similar pharmaceutical preparation; in return, SKB gave a cross-undertaking in damages. The patent was later held valid, but to SKB's disappointment Apotex was held not to have infringed it.

Apotex and its Canadian manufacturers, who were not parties to the original action, then sought damages on the cross-undertaking. Lewison J ruled that the Canadians could not recover the losses they sustained and that Apotex could not claim their losses as third party losses under the cross-undertaking.

He also said that he couldn't rule in summary proceedings on Apotex's claim that SKB was estopped from denying that the Canadian companies were entitled to claim their losses under the cross-undertaking, since that would involve a mini-trial. The Canadians argued that they were entitled to recover in restitution that part of SKB's extra profits that they would have enjoyed themselves, if the interim injunction had not been made, and that the court had power to ensure that a litigant who had used its procedures in order to gain an advantage and then lost on appeal would disgorge that benefit to a party adversely affected by the "wrongful order". Apotex argued that a party identified in the cross-undertaking as one whom the injunctor would compensate could claim compensation not only for itself having been prevented from doing the restrained acts but also for others who were adversely affected by the injunction. SKB argued that (i) inter partes estoppel could not operate to expand or contract the effect of a court order, (ii) an estoppel could not be used as a key element of a claim and could not operate to create a legal relationship where there was none, and that (iii) in any event the evidence put before the court was inadequate to justify estoppel.

The Court of Appeal dismissed Apotex’s appeal but allowed SKB’s cross-appeal. In its view

* there was no rational basis for any third party to claim restitution of benefits that accrued to a "wrongful" injunctor and no action lay by a party, except in very limited exceptions involving abuse of process, for recompense for damage caused by litigation itself.

* SKB had undertaken to the court to compensate Apotex, but that did not create any contract between those parties.

* SKB’s cross-undertaking in damages was given to the court, not to Apotex. Whatever passed between the parties could not affect the scope of what was actually undertaken, or the scope of the injunction itself.

* the Canadians sought to use estoppel in order to create a legally binding agreement where there was none and no intention to create one, which estoppel could not do.

Left: the Mounties may get their man, but they don't get their damages on a cross-undertaking given to someone else.

The IPKat agrees with the Court of Appeal's ruling, which was crispy articulated for the court by Lord Justice Jacob. However, he has some sympathy with the trial judge for not wanting to strike out the estoppel argument. While it didn't seem to him to be an argument that would work, the very fact that it took the Court of Appeal 27 paragraphs in order to deal with it does rather suggest that it was fairly arguable-ish.