Will you stay or will you go? Mrs Justice Rose is go go go in Lilly v Janssen stay application
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| The AmeriKat covering here eyes, hoping for a stay of proceedings when she wakes up so she can tackle her to-do list in peace |
Background
For five years, Lilly has sought to clear the path for its proposed product, solanezumab, which is intended to be used in the treatment of Alzheimer's disease. Janssen's parent and divisional patents are blocking the way. The procedural history is as follows:
- In 2011, Lilly sought to revoke the parent patent, EP 1 994 937, and to obtain a declaration of non-infringement. Mr Justice Arnold held the parent patent to be invalid on the grounds of insufficiency (see [2013] EWHC 1737) and that Lilly's product would have infringed had the patent been valid. Janssen lodged, but withdrew, an appeal.
- In June 2013, the EPO Opposition Division held that the parent patent was invalid on the basis of sufficiency (it did not consider the other two grounds brought by Lilly - obviousness and lack of novelty). Janssen appealed in October 2013.
- In July 2015, Lilly commenced revocation proceedings in France against the parent and divisional patents. Janssen applied to stay those proceedings. A decision is expected at the end of February.
- In December 2015, Lilly commenced its revocation and DNI action in the English Patents Court with respect to Janssen's divisional patent.
- On 12-13 May 2016, the Technical Board of Appeal will hear Janssen's appeal on the parent patent.
- On 22-23 June 2016, the Opposition Division will hold its oral proceedings on the divisional patent. It's decision is expected to be given immediately.
- In November 2018, the parent and divisional patents will expire.
With the Opposition Division's decision on the divisional patent expected on 22-23 June 2016 and the English proceedings unlikely to be resolved by September 2017, Janssen applied to stay the English proceedings brought by Lilly.
The law
The principles on whether to stay proceedings are set out in IPCom v HTC [2013] EWCA Civ 1496. The earlier case, Galxo v Genentech [2008] EWCA Civ 23, was generally regarded as discouraging of stays, but the dicta was later questioned by the Supreme Court in Virgin Atlantic v Zodiac [2013] UKSC 46. IPCom refreshed all of the guidance by setting out 13 factors to consider when deciding whether to grant or refuse a stay.
These factors were then applied for the first time in Actavis v Pharmacia [2014] EWHC 2265 (the history of which is recorded in Rose J's judgment). In that case, Pharmacia offered undertakings which, after the first decision of Mr Justice Arnold, amounted to not seeking an injunction against Actavis and seeking damages of 1% net sales in the UK during the lifetime of the patent should a stay be granted. These undertakings were held by Arnold J to eliminate the commercial uncertainty that Actavis said they would have been exposed to on the basis of the previous undertakings. The court had held that on the basis of the earlier undertakings, Actavis could be removed from the market by an injunction and have to pay ordinary damages or account for its profits after the EPO opposition. Such a prospect would "inevitably have a chilling effect on Actavis' investment decisions", especially given that the EPO opposition had just begun. However, on the basis of the updated undertakings which lasted for the lifetime of the patent, Mr Justice Arnold granted the stay.
The questions and assessment
1. What are the relative likely timings of the English and EPO Proceedings?
Unlike the situation in Actavis where the EPO proceedings had just started, the advanced stage of the EPO proceedings in this case and the likelihood that any appeal would be accelerated pointed in favor of a stay. Mrs Justice Rose held that it was likely that the EPO decision on validity, even at the appellate level, would be delivered before the decision in the English proceedings (which had only just commenced). In reaching this conclusion, it was relevant that Eli Lilly could have commenced the English action earlier (on or after the divisional patent was granted in June 2013).2. Is Eli Lilly prejudiced by significant commercial uncertainty if the English proceedings are stayed and it has to wait for the EPO proceedings to be finalised?
Lilly argued that because they were seeking a DNI, should they win on that point the matter would be over - irrespective of the fate of Janssen's divisional patent or the future grant of a SPC. Dealing with the DNI now would provide commercial certainty (especially in light of the potential grant of a SPC) and, because national courts exercise exclusive jurisdiction over infringement issues, this should almost be an overriding factor against the grant of a stay (see the fourth IPCom factor). Further, obtaining a decision on infringement is especially important given the timings of Lilly obtaining its marketing authorization (MA). If Lilly has a DNI from the English court, they can lodge their MA application in early 2017 in the knowledge that if it is granted before November 2018 (expiry of the patents), then Janssen could not use Lilly's MA to apply for a SPC. This is because, in these circumstances, Lilly's product would not fall within the scope of Janssen's patent claims so Janssen could not benefit from Lilly's MA for that product in seeking a SPC. If Lilly do not have a DNI by early 2017 (and the EPO upholds the divisional as valid), then they will not know whether they should lodge their MA application in early 2017, If they do lodge their MA application, Janssen could obtain a SPC on the back of their MA and Lilly is then potentially faced with another 5 years of royalty payments. This was considered to be significant commercial uncertainty by the court.3. Are the undertakings offered by Janssen sufficient to reduce the commercial uncertainty faced by Eli Lilly to an acceptable level if a stay is granted?
Janssen proposed undertakings similar to those in the Actavis case, namely that (i) any appeal to the Technical Board be accelerated; (ii) not to seek a preliminary or final injunction in the UK in respect of the patent and any SPC that may be granted for the lifetime of the patent; and (iii), if validity upheld, to seek damages on the basis of a reasonable royalty. Importantly, in contrast with the position in Actavis, Janssen had yet to decide the royalty rate.
Mrs Justice Rose considered that, in line with the eighth and ninth IPCom factors, there was considerable value for Lilly to know as soon as possible whether solanezumab would infringe and whether Janssen would be likely to rely on a solanezumab MA to apply for a SPC. She continued:
"Not knowing those things makes it difficult for Eli Lilly to decide when to start the process of obtaining an authorisation for solanezumab and makes the process of negotiating a cross-Europe settlement of the dispute between the two companies more difficult."
The undertakings were therefore insufficient to reduce Lilly's commercial uncertainty.4. Do the other facts in IPCom as applied to the facts here point in favour or against the grant of a stay?
Mrs Justice Rose considered the exportability of an English judgment to be a neutral point on the question of a stay given that the EPO oppositions, if they hold the patent invalid, may deal with these points earlier than the English court.
On the 11th IPCom factor, that of the public interest in dispelling uncertainty, Mrs Justice Rose accepted that the factor is relevant in view of a therapy that is likely to be a blockbuster for the treatment of an intractable disease, such as Alzheimer's disease. It thus pointed against the grant of a stay. However, the court did not consider it to be a weighty factor as Janssen's undertakings ensured that Lilly's product could still enter the market.
On the 12th IPCom factor, that of avoiding wasted costs, the costs of the English proceedings (likely less than £5 million in total), were not significant sums given the money at stake for a likely blockbuster product. Lilly has already spent over $500 million in developing the product and Janssen's parent group spent about $700 million in developing bapineuzumab (before it was abandoned).The answer
Stay refused. Although there is some risk that the EPO opposition will find the patents invalid and thus costs in the English proceedings potentially wasted between now and June, the EPO opposition will not be determinative of all issues - namely whether Lilly's product is infringing which is a question solely for the English court. Because neither party was attracted by the idea of splitting out the DNI and revocation claims, Janssen's application for a stay was dismissed.
The comment
Although at first blush it may seem like there is still quite a high hurdle to successfully stay English patent proceedings, as ever, it turns on the facts. Here, the fact that Janssen, unusually, did not itself have a MA which they could use to obtain a SPC created enough commercial uncertainty for Lilly and the timing of its MA application to point in favor of the English proceedings continuing. This also made Lilly's DNI that much more important. Indeed, it could be argued, that the inclusion of a DNI in a claim may be an important strategic consideration for parties faced with an application for a stay of proceedings.
