Neutral Citation Number: [2013] EWHC 739 (Pat)
Case No: HC12C04455
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
Rolls Building
Fetter Lane, London, EC4A 1NL
Date: 12 April 2013
Before :
THE HON MR JUSTICE ARNOLD
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Between :
RESOLUTION CHEMICALS LIMITED / Claimant- and -
H. LUNDBECK A/S / Defendant
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Michael Tappin QC and Mark Chacksfield (instructed by Olswang LLP) for the Claimant
Andrew Waugh QC and Miles Copeland (instructed by Wragge & Co LLP) for the Defendant
Hearing dates: 13-15 March 2013
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Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
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THE HON MR JUSTICE ARNOLD
THE HON MR JUSTICE ARNOLDApproved Judgment / Resolution v Lundbeck
MR JUSTICE ARNOLD :
THE HON MR JUSTICE ARNOLDApproved Judgment / Resolution v Lundbeck
Contents
Topic Paragraphs
Introduction 1-7
The witnesses 8
Factual background 9-80
Resolution 10-17
Resolution’s relationship with the Arrow Group in 2001-2009 18-22
Resolution’s interest in citalopram 19-26
The 2002 citalopram litigation 27-34
Arrow Generics’ citalopram product 35
Resolution’s interest in escitalopram 36-46
The previous escitalopram litigation 47-50
Arrow Generics’ escitalopram MAs 51
The Dutch citalopram MAs 52
The lactulose MA 53
The tibolone experiments 54
The genesis of the present proceedings 55-80
Lundbeck’s primary application 81-122
The law as to privity of interest 81-100
The law as to joint tortfeasance 101-103
Is Resolution bound by privity of interest with Arrow Generics? 104-111
Is Resolution bound by privity of interest with Teva UK and/or Teva
PI? 112-122
Lundbeck’s secondary application and Resolution’s cross-application 123-154
Principles applicable to summary judgment cases 123-126
The technical background etc 127
Obviousness over 884: the diol route 128-140
Obviousness over Bigler: the desmethyl route 141-154
Lundbeck’s tertiary application 155-163
Summary of conclusions 164
Introduction
1. In these proceedings the Claimant (“Resolution”) seeks revocation of SPC/GB02/049 ("the SPC") for escitalopram in the name of the Defendant (“Lundbeck”). The claim is based on the alleged invalidity of the basic patent European Patent (UK) No. 0 347 066 (“the Patent”). Escitalopram is the S or (+) enantiomer of citalopram. Citalopram is an anti-depressant drug of the selective serotonin re-uptake inhibitor (SSRI) type which was first synthesised by Lundbeck in 1972 and launched in 1989. Some time after it developed citalopram, Lundbeck devised the method for synthesising escitalopram described and claimed in the Patent and discovered that escitalopram was the active enantiomer of the racemate. This led to it launching escitalopram in 2002. Escitalopram has been hugely successful. Lundbeck was also the proprietor of a number of patents for citalopram and methods of making it which have now expired, including United States Patent No. 4,650,884 (“884”).
2. On 3 January 2013 Lundbeck issued an application seeking:
i) summary judgment on the ground that Resolution is precluded from bringing its claim and/or relying on allegations in its claim by reason of cause of action estoppel or issue estoppel or abuse of process;
ii) alternatively, summary judgment on the ground that Resolution’s claim has no real prospect of success; and
iii) in the further alternative, a conditional order that Resolution provide security for Lundbeck’s costs of these proceedings.
3. The foundation for Lundbeck’s primary application is that the validity of the Patent was previously challenged unsuccessfully by inter alia Arrow Generics Ltd (“Arrow Generics”), Teva UK Ltd (“Teva UK”) and Teva Pharmaceutical Industries Ltd (“Teva PI”). It is common ground that Arrow Generics, Teva UK and Teva PI would be precluded by issue estoppel and the doctrine of abuse of process from challenging the validity of the SPC on the ground that the Patent is invalid. Lundbeck contends that Resolution is also precluded from doing so by virtue of privity of interest with Arrow Generics alternatively Teva UK/Teva PI.
4. The foundation for Lundbeck’s secondary application is that not only has the validity of the Patent been upheld in the previous proceedings in this country, but also equivalents to the Patent have been held to be valid in proceedings in a number of other countries. Accordingly Lundbeck says that, even if Resolution is not bound by the result in the earlier proceedings, there is no real prospect that it will be able to demonstrate that the Patent, and hence the SPC, is invalid.
5. Resolution responded with an application of its own, in which it sought summary judgment in its favour on the estoppel/abuse of process point, alternatively its determination as a preliminary issue. It also sought permission to amend its Particulars of Claim and Grounds of Invalidity to add an additional item of prior art and directions for the trial of the proceedings with a degree of expedition.
6. These applications came before Roth J on 24 January 2013. On that occasion he made an order:
i) directing that there should be a trial of the following preliminary issue, namely whether Resolution is precluded from bringing this action by reason of cause of action estoppel, issue estoppel and/or abuse of process;
ii) directing that the applications (i) by Lundbeck for summary judgment on the ground that the claim has no reasonable prospect of success alternatively for a conditional order for security for costs and (ii) by Resolution for permission to amend its Grounds of Invalidity be stood over to be heard at the hearing of the preliminary issue; and
iii) giving directions leading to a trial of the claim in November 2013.
7. In addition, Resolution gave an undertaking not to make, import, keep or dispose of escitalopram or any pharmaceutical composition containing escitalopram prior to final judgment and Lundbeck gave the usual cross-undertaking in damages.
The witnesses
8. The principal witness on the preliminary issue was Alan Greenwood, who has been the Managing Director of Resolution since 1986. In addition Resolution called Dr Derek McHattie, who was employed by Resolution from February 1993 to March 1996 and has been employed by Resolution in various capacities since January 1998. I also received statements from a number of witnesses who were not required to attend for cross-examination.
Factual background
9. I shall set out the factual background topic by topic and approximately chronologically in relation to each topic.
Resolution
10. Resolution was established in 1986 as a manufacturer of active pharmaceutical ingredients (“APIs”). At that time it was part of the Amerpharm Group.
11. In 1994 the Amerpharm Group was acquired by Merck KGaA and became part of the Merck Generics Group. Whilst part of Merck Generics, Resolution continued to supply the APIs it had previously developed to Merck Generics and to third parties. It also worked on the development of three further products, namely citalopram, tetrahydrocannabinol (“THC”) and tibolone. It did not market any newly developed APIs during this period. It either manufactured the APIs which it supplied or sub-contracted other manufacturers.
12. In December 1999 Merck sold Resolution to Carlgrove SA. At this time Resolution’s business consisted of servicing four API supply agreements with Merck Generics, a joint venture for the manufacture and sale of lactulose with another company and the continuation of the three development projects mentioned above. In 2000 Resolution engaged another company to develop latanoprost.
13. On 21 December 2001 Carlgrove sold Resolution to Arrow Group ApS. Arrow Group ApS was a holding company for a new group of companies founded by Anthony Tabatznik, who had previously founded and sold Generics (UK) Ltd. Between 2001 and 2009 the Arrow Group grew rapidly. Arrow Generics was another English company in the Arrow Group throughout this period. Resolution and Arrow Generics were sister companies within the Arrow Group.
14. The initial business model for most companies in the group other than Resolution was to buy in manufacturing authorisations (“MAs”) for products. For such products, the MA would stipulate the manufacturer of the API and details of the manufacturing method. It would not have been possible for Resolution to take over the manufacture of such APIs.
15. After becoming part of the Arrow Group, Resolution continued to sell four APIs to Merck Generics, to be involved in the lactulose joint venture and to work on the development of citalopram, THC and tibolone. In 2002-2004 it developed cabergoline. Resolution sold latanoprost and cabergoline to companies in the Arrow Group, but those amounted to only about 4% of its sales during the period it was part of the Arrow Group. Conversely, while Resolution was part of the Arrow Group, companies in that group launched over 400 products, but only two contained APIs sourced from Resolution.
16. In 2009 the Arrow Group was purchased by Watson Pharmaceuticals Inc, which hived off Resolution in order to meet requirements imposed by the United States Federal Trade Commission. Since December 2009 Resolution has been an independent company which is majority owned by a US investment bank. The remaining shareholders are its management and employees. Resolution continues to sell cabergoline and latanoprost to Watson under long term contracts.
17. Since leaving the Arrow Group, Resolution has reviewed its operations and adopted a new business model which is more akin to that of a generic pharmaceutical supplier than that of an API manufacturer.
Resolution’s relationship with the Arrow Group in 2001-2009
18. The ultimate beneficial owner of the Arrow Group, and hence of both Resolution and Arrow Generics, during this period was Mr Tabatznik. Mr Tabatznik was the Chief Executive Officer of the Arrow Group. He was also one of the directors of Resolution together with Mr Greenwood and Lawrence Stolzenberg. Mr Tabatznik and Mr Stolzenberg were also directors of Arrow Generics.
19. Mr Greenwood was cross-examined at some length over the extent to which Mr Tabatznik exercised control over Resolution during this period. In his first witness statement, Mr Greenwood said that Resolution was independently run, although it depended on Arrow Group to fund its development projects, and that Mr Tabatznik had no executive role and no influence over day to day or strategic decisions of Resolution. In his second witness statement Mr Greenwood qualified this by acknowledging that, if Mr Tabatznik wanted something done, Resolution would accommodate his requests if possible. He maintained that, for long periods of time, Resolution’s management were left to get on with things on their own.
20. Counsel for Lundbeck submitted that this evidence was inconsistent with various statements made by Resolution to the European Commission in connection with an inquiry by the Commission into the agreement between Lundbeck, Arrow Generics and Resolution dated 24 January 2002 (as to which, see below) and another agreement relating to Denmark. Counsel particularly relied on the following statements:
“[Resolution’s response dated 2 April 2012 to a questionnaire dated 8 March 2012]
4.3 As the Arrow Group became more established, Resolution received increasing requests for R&D work from Arrow Group companies, including from outside the UK, and focused its R&D activities on servicing the Arrow Group's API requirements. … However, Resolution continued to supply manufactured APIs that it had already developed to Merck …
4.4 Consequently, during its time with the Arrow Group, in particular from early 2001 until 2009, the principal activity of Resolution was to supply API research, development and manufacturing services to the Arrow group.
5.3 As explained above, during its time in the Arrow Group, Resolution's role was principally to act as an API R&D company to service the Arrow Group companies. Resolution also continued to supply products outside the Arrow Group pursuant to its historical manufacturing functions. These activities were used (in addition to group funding) to fund Resolution’s principal role of developing APIs for the Arrow Group.
[Resolution’s response dated 18 May 2012 to question 14 of a questionnaire dated 9 March 2012]
3.14(d) Resolution continued to seek to produce Citalopram API (at Arrow's instruction) until Arrow directed it to stop in 2005.
6.2 [Resolution’s] activities were directed and controlled by the Arrow Group, which also provided its funding. ...
[Resolution’s response to the Commission’s statement of objections]
1.2(b)(ii) …. Resolution was wholly controlled by Arrow following its instructions in manufacturing APIs at the relevant time.
4.23(a) As explained in para 3.14 of the 18 Response, Resolution did not engage in autonomous conduct in respect of the manufacture and supply of Citalopram API; it merely followed Arrow's instructions in that regard. …;
(b) Resolution reported directly to senior executives within Arrow regarding its business activities including in respect of Citalopram API;
(c) Resolution's funding, as well as the direction of its API activities, were wholly controlled by Arrow;
5.8 In summary, …., any involvement in the allegedly infringing agreements by Resolution arises out of the direct control by, and actions of, Arrow's former CEO and not through any autonomous conduct on the market by Resolution.”
21. Mr Greenwood’s evidence in cross-examination was that the statements quoted above were true. Nevertheless, he maintained that the evidence he had given in his witness statements was also true. In my view there is some tension between those two positions, although I do not think they are quite as contradictory as counsel for Lundbeck submitted. Viewing Mr Greenwood’s evidence as a whole, I think the position is reasonably clear. Mr Tabatznik controlled the Arrow Group, including Resolution. Accordingly he had control of Resolution’s activities in the sense that, if he wanted Resolution to do something, Resolution would do it (or try to do so). That included manufacturing citalopram or escitalopram (as to which, see below). As Mr Greenwood put it, “it was his chemistry set”. Thus Mr Tabatznik set the strategic direction for Resolution. He would also intervene if he was not satisfied with Resolution’s progress (as he did in July 2004, as discussed below). Nevertheless, most of the time, Mr Tabatznik left Mr Greenwood and his colleagues alone. It was Mr Greenwood and his colleagues who decided how to pursue Resolution’s projects, who to employ, what commercial partners to work with, budgets and so on. Mr Greenwood met Mr Tabatznik just three or four times a year to discuss how Resolution’s projects were progressing, particularly the THC project which Mr Tabatznik was most interested in. There were also occasional telephone calls, usually from Mr Greenwood to Mr Tabatznik rather than the other way around. Thus on a day-to-day basis Resolution was essentially independently managed.