Les Laboratoires Servier v Apotex Inc, [2014] UKSC 55

The United Kingdom Supreme Court dismissed an appeal from the England and Wales Court of Appeal ([2012] EWCA Civ 593), and rejected the argument by Les Laboratoires Servier (“Servier”) that Apotex Inc’s (“Apotex”) infringement of Servier’s Canadian patent could be the basis for a defence of illegality.

Apotex and Servier were in infringement proceedings in both Canada and the UK for Apotex’s sale and manufacture of generic perindropril erbumine. [3] The illegality defence arose after a finding by a lower UK court that an interlocutory injunction that was awarded against Apotex from importing generic perindropril erbumine in the United Kingdom should never have been granted. [4] Apotex had argued that but for the injunction, it would have sold an additional 3.6 million packs of perindropril erbumine tablets in the United Kingdom. [6] Servier had made the undertaking that it would compensate Apotex if it was found that the injunction was improperly ordered. [4] However, Servier argued, in part, that the damages award should not be awarded for illegality since it was contrary to public policy for Apotex to recover damages for being prevented from selling a product whose manufacture in Canada would have infringed Servier’s Canadian patent. [7] The UK Supreme Court rejected the argument, deciding that patent rights do not give rise to the sort of public interest consideration that underpins the defence of illegality. [30]

Two lords concurred with the reasoning of Lord Sumption, while Lord Mance and Lord Touson agreed in the result with separate reasons.

Lord Sumption  (Lord Neuberger and Lord Clarke concurring)

Lord Sumption reviewed the case law relating to the defence of illegality in the UK, making one reference to the Canadian case of Hall v Hebert (1993), 101 DLR (4th) 129, where McLachlin J comments on the defence of illegality. The comments are to the effect that a court allowing recovery for something illegal would introduce an inconsistency in the law which would contradict the integrity of the legal system. [24]

Lord Sumption went on to say that the defence of illegality is concerned with acts that engage the public interest. [25] He explained that this includes criminal acts, but also “quasi-criminal” acts that engage the public interest in some way. He listed examples of these “quasi-criminal” acts: acts involving dishonesty or corruption, misconduct such as prostitution, and the infringement of statutory rules enacted for the protection of the public interest, such as competition law. [25] Lord Sumption distinguished this from tortious conduct, which offends private interests but not public interests. For tortious conduct, the public interest is sufficiently served by a justice system that regulates the consequences between the parties affected. [28]

Lord Sumption ultimately concluded that the illegality defence is not engaged by the consideration that Apotex’s lost profits would have been made by breaching Servier’s Canadian patent by manufacturing the product in Canada. [30] He stated that patent rights are private rights that are akin to contractual or tortious rights, and not the sort of public interest considerations that ground the defence of illegality. Rather, Servier’s private right is vindicated by the availability of damages for infringement in Canada. [30]

Lord Mance

Lord Mance agreed with Lord Sumption that the defense of illegality would not be engaged in this case. [34] He went on to comment on how the case might have differed if Apotex and Servier were parsed out into their subsidiaries and not each treated as singular entities. [35] He speculated that Apotex may not have been able to rely on Apotex Pharmachem Inc’s loss of profit to support its claim, [41] noting that this analysis is “very tentative”. [42]

Lord Toulson

Lord Toulson agreed in the result, framing it a bit differently: “Servier is attempting to extend the doctrine of illegality beyond any previously reported decision in circumstances where I see no good public policy reason to do so.” [46] Lord Toulson further warned that allowing the defence might put Servier in a better position than it had been in had it not obtained the English injunction, depending on how the Canadian court would calculate damages for the Canadian infringement. [53]

Commentary

In this case, the United Kingdom Supreme Court held that patent infringement is not the sort of “illegality” that could ground the defence of illegality. It is interesting to note that during the course of its reasoning, the Court comments on the defence of illegality in two other areas of intellectual property: competition law and copyright law.

First, while the Court characterized patent law as only giving rise to private rights, it considered that acts which offend competition law, with which patent law is closely related, is an example of quasi-criminal behaviour that might engage the defence of illegality. [25]

Secondly, in its review of the law on the defence of illegality, the Supreme Court pointed to a copyright case in which a business was selling pirated videos. [27] In that case, an injunction was similarly awarded against the pirate, and was similarly found to have been improper. The judge refused to award damages to the pirate because the losses had been incurred in a business which was “illicit”. The reasoning of the judge was said to be unclear, but disclosed two separate lines of reasoning, which the Supreme Court considered. First, there was the argument that the pirate’s inventory belonged to the copyright owners, so no loss could result from its inability to sell them. Secondly, the judge would not award the pirate’s business which was “dishonest”. To square this case with its own view of the law, the Supreme Court only endorsed the second line of reasoning, interpreting “dishonesty” to mean misleading customers about the origin of the videos. With respect to the first line of reasoning, the Supreme Court stated that the judge could not have meant that breach of copyright was itself a sufficient basis on which to raise the illegality defence. [27]