Secretary of State v Servier: Supremes decline to broaden scope of unlawful means tort

When a patent is held to be invalid for want of novelty or inventiveness, a party which has suffered loss by being denied access to cheaper products cannot get damages on the basis that their loss was caused by unlawful means. In Secretary of State for Health v Servier Laboratories Ltd, where the loss arose because there were no generic equivalents of the invalidly-patented drug, the Supreme Court held that the "dealing requirement" laid down in OBG Ltd v Allan [2008] 1 AC 1, which states that the unlawful means should have affected the third party’s freedom to deal with the claimant, is a necessary element of the tort. So it's not exactly a patent case, but it deals with interesting questions about what an applicant or patentee can and can't do to protect their invention when novelty or inventiveness is in doubt.

The issue of the validity of the UK designation of the patent in suit was held to be invalid as long ago as July 2007 by the late Pumfrey J held ([2007] EWHC 1538 (Pat)). It lacked novelty, or alternatively was obvious over another existing patent. The Court of Appeal upheld that decision in May 2008 ([2008] EWCA Civ 445), the leading judgment being given by Jacob LJ, and in 2009 the EPO Technical Board of Appeal revoked the patent.

Causing loss by unlawful means is an economic tort, consisting of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful and which is intended to cause loss to the claimant. In this case, the claimant was of course the Secretary of State (not the recently departed one - it would have been Jeremy Hunt at the relevant time) and the third parties whose freedom was interfered with were the European Patent Office and the courts of England and Wales. As neither of the third parties had dealt with the Secretary of State, the claim could only succeed if the court said that the dealing requirement did not form part of the ratio of OBG or departed from that case (which, incidentally, was one of three cases dealt with together by the House of Lords, one of the others being better-known to IP lawyers: Douglas v Hello!).

To cut a fairly long story (30 pages) short, the Supremes could see no reason to do either of these things. In reviewing Lord Hoffmann's reasons in OBG for imposing the requirement, they listed seven good reasons for it, which should be enough for anyone. The claim was struck out by the judge at first instance, the Court of Appeal upheld him, and now the Supremes have too.

Whether the patentee deceived the EPO or the courts is another matter: for the purposes of the strike-out, it was assumed that they had, but the important matter is that there was no sufficient connection between the alleged deception and the loss that the Secretary of State claimed to have suffered. Under the 1966 Practice Statement which remains effective in the Supreme Court (see Practice Direction 3, para 3.1.3), there was no reason for the Supreme Court to depart from OBG, no injustice that called for the invocation of that Statement.

But this is an intellectual property law blog, so we should leave the tort law to others - if the Secretary of State cannot claim on the basis of unlawful means, what can he (or, though not then and not now, she) do about what would (if proven) be reprehensible conduct? Jacob LJ dealt with this back in 2008, saying that there might be a sanction under competition law but noting that the application of that body of law to unmeritorious patents was not something that had been explored. There is, it seems, a claim that Servier's conduct amounts to an abuse of a dominant position, and we (and the Secretary of State) must now wait to see how that goes. It certainly looks more promising, and more closely related to patent law than the tort under consideration in today's judgment.

Abuse of dominant position by SEP owner not a matter for summary treatment

Standards Essential Patents and FRAND licences are in fashion, it seems - and so perhaps they should be. In Optis and Unwired Planet v Apple [2014] EWHC 3538 (Pat) (17 December 2019 ) the Patents Court (Nugee J) considered Apple's application to strike out, and rejected it .

The claimants had brought the action to compel Apple to take a FRAND licence from Optis. Apple answered that with an allegation that Optis had abused its dominant position, contrary to Article 102 TFEU.

Ownership of a Standards Essential Patent puts the patentee in a dominant position as a licensor of that patent, that much is clear, but whether that is the same as a dominant position in the relevant market depends on an analysis of substitute technologies. Life is rarely simple where competition rules are involved .

There has been a lot of judicial consideration of FRAND licensing and Article 102 recently. The Court of Justice looked at the matter in Huawei v ZTE  (Case C170/13) ECLI:EU:C:2015:477, [2016] RPC 4, and the English courts in Unwired Planet Unwired Planet International Ltd v Huawei Technologies Co Ltd) (Birss J) [2017] EWHC 2988 (Pat) and a lengthy decision of the Court of Appeal given by Lord Kitchin at [2018] EWCA 2344 (not yet on Bailii, and if not yet will it ever be?); and Conversant Wireless Licensing SARL v Huawei Technologies Co Ltd  (Henry Carr J) [2018] EWHC 808 (Pat), and [2019] EWCA Civ 38 (judgment given by Floyd LJ). Unwired Planet v Huawei is currently awaiting a ruling from the Supremes.

The EU case law sets out two requirements for an SEP owner to avoid committing an abuse: they must alert alleged infringers and, if the alleged infringer is willing to conclude a FRAND licence, the patentee must offer one, in writing.

According to the Patents Court, UK case law tells ut that these two requirements are not both mandatory. (When is a requirement not mandatory? Isn't it an inherent part of the definition?) The first one is, but the second is more of a safe harbour, not itself determinative of an abuse. Making the offer means you aren't behaving abusively, but not making it doesn't mean you are abusing a dominant position. Beware the logical fallacy of the undisthtuted muddle, as Lord Diplock warned us in Catnic.

Apple contended that negotiatious had been going on for a long time, indicating presumably that the allegedly requered offer had . nor really been made . But to strike the claim out summarily was not on: the court was not in a position to say that the claimants had no reasonable prospect of avoiding a finding of abuse (excuse the plethora of negatives).

The court also explained that English practice is to establish whether there has been an infringement, them to assess whether ang terms put forward qualified as FRAND. Until the court reached that stage, it would not be granting injunctions.

Does an agreement to settle a dispute between a patentee and a generic drug maker breach competition law? AG's opinion

An agreement settling a patent dispute may constitute a restriction of competition by object or by effect and that entering into such an agreement may be an abuse of a dominant position, according to Advocate General Kokott's 276-paragraph, 223-footnote opinion of 22 January in Generics (UK) Ltd e.a. v Competition and Markets Authority (Case C-307/18) ECLI:EU:C:2020:28.

The reference to the Court of Justice came from the Competition Appeal Tribunal, which was hearing an appeal against the Competition and Markets Authority's finding that GlaxoSmithKline, Alpharma Limited and Generics (UK) Limited had breached EU and UK competition law by entering into a series of agreements that had the effect of delaying generic entry of the drug paroxetine. The generic manufacturers concerned undertook, inter alia, not to enter the market with their products for an agreed period: the CMA found the agreements to be akin to market exclusion agreements, prohibited under Chapter 1 of the Competition Act 1998 and by Article 101 TFEU, and an abuse of GSK's dominant position prohibited by Chapter 2. The CAT referred ten questions for a preliminary ruling.


The fact that the validity of the patents, and whether the generic products infringe them, remained uncertain did not mean that the patent holder and generic manufacturers were not potential competitors, according to the Advocate General. The correct question to ask is whether there are real, concrete possibilities to enter the market despite the patents, and this (the Advocate General went on) is a matter for the competition authority to decide taking into account all the relevant factors. She also considered that conduct that can constitute an abuse of a dominant position can only be justified by consumer benefits when it can be shown that those benefits offset an agreement's adverse effects on competition on the relevant market. Where the agreements provide limited benefits, while eliminating competition by removing all sources of potential competition, this condition is unlikely to be satisfied.

Google in record fine for abuse of dominant position

Google has been fined a record €2.42 billion (more than twice as much as expected, and indeed twice as much as the "bung" given by the UK government to persuade the DUP to maintain it in office) for abusing its dominant position, contrary to Article 102 of the Treaty on the Functioning of the European Union. The Commission found that the search engine gave illegal prominence to Google's comparison shopping service. Unless it terminates the abuse within 90 days, the company will become liable to daily penalty payments up to 5% of the global turnover Google's parent, Alphabet.

The competition Commissioner Margrethe Vestager said:

Google has come up with many innovative products and services that have made a difference to our lives. That's a good thing. But Google's strategy for its comparison shopping service wasn't just about attracting customers by making its product better than those of its rivals. Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.
What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.

The Commission keeps imposing record fines on technology companies. In 2009 it fined a record Intel €1.06 billion for paying manufacturers and a retailer to favour its products over those of AMD, surpassing the €497 million penalty imposed on Microsoft in 2004. There's a brief survey of the eight biggest fines imposed on technology companies for breaches of EU competition rules on the Computer Business review website here. And there is, I think, an outstanding investigation into another abuse by Google involving Google Play and the Google search engine being installed on smartphones. There's also the Commission's state aid case involving the Irish tax authorities and Apple. So many that commentators write about the EU being at war with Silicon Valley - which just happens to be where many of the dominant firms come from (and incidentally a long way from Redmond, WA). The fact remains, however, that there is an interesting phenomenon here as the law on abuse of dominant position (and the penalties for breaches) develops. The fact is, the technology sector offers huge scope for abuses of one sort or another.

There's too much to do to write more about the Google decision right now but I will get back to the story later. If you want to know more here is the Commission's press release. There's also an interesting Fact Sheet. And, with a hat-tip to Warwick Rothnie's IPwars.com blog, Ben Thomposon's comments on Stratechery.com are also well worth reading. I found them very eye-opening.

Remedies for infringements of Standards-Essential Patents

In a nicely-balanced judgment in Case C‑170/13, Huawei Technologies Co. Ltd v ZTE Corp. and ZTE Deutschland GmbH (judgment here) (16 July) the Court of Justice held that the holder of a Standards-Essential Patent (or SEP, a term of art that is gaining currency very rapidly in this SEP-reliant age) can only have an injunction against an infringer if it has previously offered a licence on FRAND (a better-established term of art) terms. If the patentee has given an irrevocable undertaking to grant such a licence, it is not an abuse of a dominant position to seek an injunction and that would be prohibited by Article 102 TFEU, but the patentee has to get over a few hurdles before it is in the clear, to make sure that the right balance is struck between the interests of the patent owner and the would-be user.

First, the patentee has to alert the alleged infringer to the alleged infringement, and then it has to present a FRAND licensing proposal. If the alleged infringer carries on regardless, it will not be regarded (in the court's phrase) as having responded diligently to the proposal. It can only claim that there is an abuse of the patentee's dominant position if it has responded with a counter-proposal, offering FRAND terms (or, you might say, terms which are more FRAND, or FRANDER - there's a nice neoligism) of its own - because, of course, the only matter that can be in dispute is whether the purported FRAND terms qualify as such. Although that makes it sound far easier than it is: FRAND is not a binary, yes-or-no, matter - a wide range of terms might fall within the scope of what is fair, reasonable and non-discriminatory.

The court's approach, within its limits, nevertheless makes perfect sense: if your patent becomes the basis for a standard that everyone has to use, you have to accept that it is no longer a right to stop others from using it, merely a right to remuneration (which may be substantial). Everywhere in the IP field you can observe this shift from exclusive rights to a right to be paid for use: it happened in copyright even before the 1988 Act, when collective licensing suddenly took off with the creation of the CLA, and it was built into design right under Part III of the 1988 Act right from the start.

However, like all references to the Court of Justice, it leaves questions unanswered (usually because the questions weren't posed in the first place, which in turn is usually because they didn't arise in the case concerned so the referring national court had no reason to ask them). Can (as Laëtitia Bénard of Allen and Overy in Paris said to WIPR, that astonishingly inaccurate publication mis-spelling her surname) an injunction be blocked merely because the alleged infringer challenges the FRAND-ness (my word, not Ms Bénard's) of the offer? Will holding an SEP always place the patentee in a dominant position (a point made to WIPR by Axel Walz of King and Wood Mallesons, Munich)? How detailed does that "irrevocable undertaking" have to be (my own thought)? Given the growing frequency with which patents are already becoming standard-essential, which is likely to accelerate rapidly in the future, these are probably questions that we will see coming up before very long.

'via Blog this'

Abuse of dominant position: AstraZeneca

In Case T-321/05 AstraZeneca v Commission the General Court upheld the Commission's finding that the drug company had abused its dominant position (contrary to Article 82 as it was, Article 86 as I remember it, now Article 102 TFEU - and also Article 54 of the EEA Agreement), but reduced from 60 million to 52.5 million Euros the penalty imposed for it. The Commission found that it had done so to keep a generic competitor for Omeprazole, which it  sold under the names  Prilosec and Losec heartburn medicine, off the market.

AstraZeneca challenged the European Commission's decision to fine it for abuse of its dominant position including misleading patent offices in several countries (including the UK) and a number of courts.This finding stands, but the Court reversed the Commission's finding that AstraZeneca breached competition rules by withdrawing market approvals for older versions of the medicine in Denmark and Norway, preventing generic producers and parallel importers entering the market.