The UK remains an important jurisdiction for antitrust and IP cases, so it is no surprise that sometimes a case comes along in which the two fields are both highly relevant. NHS v Servier is such a case, with the NHS basing claims for damages not only on breaches of competition law, but also on the ‘unlawful means tort’, under which it sought to recover damages outside of competition law on the basis of Servier’s conduct before the patent office and courts.
The NHS definitively lost this unlawful means claim in the UK Supreme Court (UKSC) this summer. However, reports of its claims’ demise (see e.g. here and here) are greatly exaggerated. Two further claims based on competition law continue, as we discuss further below. One of them may even require the Court to answer whether Servier’s conduct before the patent office and courts formed an abuse of dominance, a tricky question right at the intersection of competition and IP law.
A short history
When Servier’s main patent for Perindopril expired in 2001, it obtained a further patent in 2004 for the alpha crystalline form of Perindopril salt (referred to in the proceedings as the “947 Patent”). The 947 Patent was held to be invalid by an English High Court judge in 2007 in a judgment upheld by the Court of Appeal a year later. In the Court of Appeal judgment, Lord Justice Jacobs (with whom the other judges agreed) said that the 947 Patent was “the sort of patent which can give the patent system a bad name”, recognising however that there was nothing the European Patent Office (EPO) could have done about this. He added:
“10. It is right to observe that nothing Servier did was unlawful. It is the court’s job to see that try-ons such as the present patent get nowhere. The only sanction (apart, perhaps, from competition law which thus far has had nothing or virtually nothing to say about unmeritorious patents) may, under the English litigation system, lie in an award of costs on the higher (indemnity) scale if the patent is defended unreasonably.”
Servier also entered into a number of settlement agreements with potential generic competitors under which those parties agreed not to enter the market with a generic version of perindopril and/or to withdraw their patent challenges. In 2009, the European Commission opened a formal competition investigation into these agreements and Servier’s conduct with respect to its patent.
In 2011, a number of entities forming part of the English National Health Service (NHS) commenced its claim against Servier. Their claims were threefold:
- a claim based on the reverse payment settlements entered into by Servier with a number of generic competitors, alleging these were both infringements of Article 101 and 102 TFEU (and their UK equivalents);
- a stand-alone competition law claim based on abuse of dominance in relation to misleading or dishonest misrepresentations made to the European Patent Office (EPO) by Servier; and
- an action in tort for unlawful means in relation to those misleading or dishonest misrepresentations to the EPO and subsequently in defence of the 947 Patent.
In 2014, the Commission adopted a decision in which it found that the reverse payment settlements were infringements of Article 101 and that, combined with Servier’s “patent acquisition practices”, they constituted an abuse of a dominant position. Servier and the generic suppliers all appealed the decision in the EU’s General Court.
Although substantial parts of the NHS’s case against Servier were stayed while the EU appeal unfolded, the English Courts proceeded with issues in the case that were not dependent on the outcome of that appeal. For example, the NHS’s claim was amended to rely on the Commission’s decision; Servier obtained permission to re-amend its defence to plead that the NHS failed to take reasonable steps to encourage switching to cheaper generic ACE inhibitors; and Servier applied to have the NHS’s unlawful means claim struck out, an application on which Roth J ruled in August 2017 that the claim should indeed be struck out. That decision was appealed to the Court of Appeal.
In January 2018, Roth J also ruled that there should be a trial of a set of preliminary issues in relation to Servier’s re-amended claim, but that this should not take place before the General Court gave its judgment in the appeal against the Commission’s decision. In December 2018, the General Court upheld the European Commission’s decision insofar as it concerned its findings of infringement of Article 101 with respect to four out of five of the reverse payment settlements, but not in relation to a fifth agreement, and it quashed entirely the Commission’s decision in relation to abuse of dominance because the relevant product market was not limited to Perindopril but extended to ACE inhibitors generally, and Servier did not have a dominant position in that wider market.
This led to the parties’ first trip to the UKSC. In the trial on preliminary issues ordered by Roth J, Servier argued that certain findings in the General Court judgment – in particular concerning the extent to which Perindopril can be substituted for other ACE inhibitors – are binding on the domestic courts in the preliminary issues trial. However, both the High Court and the Court of Appeal held that none of the findings relied on by Servier constituted res judicata for these purposes. Servier appealed to the UKSC but the UKSC unanimously dismissed its appeal.
The appeal against Roth J’s decision to strike out the NHS’s unlawful means claim progressed a bit more slowly, but was ultimately dismissed by the UKSC in July 2021, as further discussed below. That means the case will continue with the preliminary issues ordered by Roth J, on the basis of the two NHS claims that are unaffected by the UKSC’s July 2021 judgment.
Summary of the unlawful means case and UKSC judgment
The appeal relates to the only NHS claim that does not rely on competition law but on the ‘unlawful means’ tort. The unlawful means tort involves three actors: the claimant who suffered damage, the defendant and a third party. It consists of acts by the defendant intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant.
Here, the claimant is the NHS, the defendant Servier, and the third party the European Patent Office (EPO) and the English Courts. The ‘unlawful means’ consisted of what the NHS claimed were misleading submissions made by Servier to the EPO and the English Courts in the application for and subsequent defence of the 947 Patent, a patent that was granted but ultimately found to be invalid after a UK trial.
The key issue of the appeal was whether a necessary element of the unlawful means tort is that the unlawful means should have affected the third party’s freedom to deal with the claimant (referred to as the ‘dealing requirement’). Or in this case: is it a necessary element that Servier’s submissions to the EPO and the English Courts should have affected the EPO and the Courts’ dealings with the NHS? It was common ground that the EPO and Courts had no dealings with the NHS and that if the dealing requirement was indeed a necessary element, then Roth J had properly struck out the claim.
Roth J and the Court of Appeal had held that the majority of the House of Lords had found the dealing requirement to be a necessary element in OBG v Allen and that this formed part of the ratio of that decision and was binding upon the lower Courts. The NHS submitted to the UKSC that the dealing requirement should not be treated as part of the ratio of OBG v Allen or, alternatively, that the UKSC should depart from OBG v Allen.
The UKSC upheld Roth J’s decision to strike out the unlawful means claim because it agreed that the dealing requirement was part of the ratio of OBG v Allen and because no good or sufficient reason had been shown why the UKSC should depart from that decision.
In particular, Lord Hamblen, who wrote the judgment with which the other UKSC justices agreed, stressed that the House of Lords had seen OBG v Allen as an opportunity to clarify and give “coherent shape” to the law on economic torts. In addition, a central concern had been to keep the tort within reasonable bounds. As Baroness Hale had recognised in her speech, drawing the line between “fair and unfair trade competition” involved economic, social, and politically sensitive questions “better left to Parliament”. The best way to keep the tort within reasonable bounds was through giving a narrow meaning to unlawful means.
Lord Hamblen confirmed that the dealing requirement was part of the ratio of the OBG v Allen decision. He then considered whether the UKSC should depart from that judgment but decided that the NHS had not demonstrated why OBG v Allen caused difficulties, created uncertainty or impeded the development of the law. Doing so was essential for this to be an appropriate case for the UKSC to depart from OBG v Allen in accordance with the 1966 Practice Statement. It is clear from Lord Hamblen’s dismissal of the NHS’s various arguments at paragraphs 78-99 of the judgment that he was concerned that dispensing with the dealing requirement would mean losing an important control mechanism, opening up the risk that the range of potential claimants in cases like the present one would be wide.
This means that the NHS’s case against Servier proceeds on the basis of two competition law claims: one essentially following the European Commission’s findings that Servier’s reverse payment settlements with generic suppliers were infringements of Articles 101 and 102 (and their UK equivalents), and one stand-alone claim based on Servier’s conduct before the EPO and the English Courts constituting an abuse of a dominant position. The next step would appear to be the trial on preliminary issues that was held up by Servier’s first trip to the UKSC on res judicata. To be concluded, however, this case needs a judgment from the Court of Justice in relation to the European Commission’s case.
It would be all too easy to conclude that following this judgment, competition claims are a claimant’s only hope where damage is suffered as a result of what Lord Justice Jacobs referred to as an “undesirable patent”. Indeed, one only needs to look at the still ongoing Pregabalin case to conclude that other routes exist, primarily involving seeking an undertaking in damages from the patent holder in the context of the initial patent dispute.
However, for the development of the law it is interesting that such an undertaking was not sought in the present case, as this means that it may still be necessary for the High Court to rule on the question whether Servier’s actions before the EPO and the English Courts constituted an abuse of a dominant position.
We may however never get there, as there is first the appeal in the Court of Justice (for which no hearing has yet been scheduled). There are a number of potential scenarios for this appeal, each of which would have its own impact on the NHS’s claims in the High Court.
Whatever the judgment is, there will be scope for some knotty post-Brexit questions for the High Court (and perhaps also food for thought for the parties in settling the case). In particular, the Court of Justice’s judgment in the appeal will not be binding on the High Court as it will be handed down after the end of the Brexit Transition Period. Because the General Court’s judgment was handed down during the Brexit Transition Period, the High Court would be required to act consistently with that judgment. That said, under section 60A(7) of the CA98 it may depart from the judgment in a number of circumstances, one of which includes where the High Court decides that it would be appropriate to do so in light of “a principle laid down or a decision made by the CJEU after the end of the Transition Period”. In other words: if the Court of Justice annuls the General Court’s judgment, the High Court is not stuck with the General Court’s judgment.
Since all of the conduct alleged to have formed infringements of Articles 101 and 102 TFEU and their UK equivalents took place during the time that the word ‘Brexit’ had not even been invented, it would appear extremely unlikely that the High Court would in the present case dismiss the Court of Justice’s judgment. The NHS’s chances of recovery of damages, and Servier’s defence, therefore remain as tightly connected with the fate of the Commission’s infringement decision as ever, particularly now that the striking out of its unlawful means claim has been confirmed.
Only if the Court of Justice reinstates the Commission’s findings on dominance and there is no out-of-Court settlement will the High Court case proceed to answering the question whether Servier’s representations to the EPO and the English Courts constitute an abuse of dominance. Or, in the words of Lord Jacobs, whether there is a sanction in competition law for “unmeritorious patents”. In principle it would appear that there is scope under EU case-law to find that misuse of the regulatory framework can constitute an abuse of dominance (see the AstraZeneca judgment of the Court of Justice).
If the NHS’s claim that Servier’s representations constituted an abuse of dominance is ultimately upheld, then this case is a good example of the heightened standard (sometimes referred to as ‘special responsibility’) to which dominant firms are held. As the AstraZeneca judgment tells us, whether or not such misleading representations are an abuse of dominance will depend on whether they constitute competition on the merits. There are other examples of cases which involved patent strategies, like the Commission’s Boehringer case (which it closed after the parties settled with each other) and the Italian Pfizer case.
The claims involve Servier Laboratories Ltd, Servier Research and Development Ltd, Les Laboratoires Servier SAS and Servier SAS. For ease this post simply refers to ‘Servier’. The unlawful means claim was only brought by the English NHS claimants. The other two claims also involve the health authorities for Scotland, Northern Ireland and Wales.
The author worked at the Competition and Markets Authority until recently and was involved in a number of the CMA’s recent pharma cases, but not in the UK’s intervention in the Servier appeal at the General Court. The views in this post are strictly personal.