UK Supreme Court Holds Patent Infringement Does Not Constitute “Turpitude” for Illegality Defence

On October 29, 2014, the UK Supreme Court (UKSC) ruled that the infringement of a foreign patent did not constitute turpitude for the purpose of the illegality defence (ex turpi causa non oritur actio) in Les Laboratoires Servier v Apotex Inc [2014] UKSC 55. The issue before the UKSC was whether Apotex was barred by the doctrine of ex turpi causa from pursuing its claim on Servier’s undertaking for an interim injunction against Apotex in the United Kingdom (UK); specifically, whether Apotex’s infringement of Servier’s Canadian compound patent for perindopril (COVERSYL®) constituted a relevant illegality (turpitude) for ex turpi causa. This decision may be of interest to Canadian patent litigants in relation to damages recovery and recovery under section 8 of the Patented Medicines (Notice of Compliance) Regulations. In 2006, Servier obtained an interlocutory injunction restraining the importation and sale by Apotex of generic perindopril into the UK, alleging that Apotex infringed its European patent for a crystalline form of perindopril. The injunction was obtained upon Servier giving the usual undertaking to compensate Apotex should the court later find that the injunction had caused loss to Apotex for which it should be compensated. Servier’s infringement action was ultimately dismissed and Apotex subsequently sought damages on Servier’s undertaking. The perindopril which Apotex would have sold in the UK would have been manufactured by Apotex in Canada. Apotex was found to have infringed Servier’s perindopril compound patent in Canada (Les Laboratoires Servier v Apotex, 2008 FC 825, aff’d 2009 FCA 222). Therefore, the manufacture in Canada of the product that Apotex would have sold in the UK but for the interlocutory injunction would have infringed Servier’s Canadian patent. In the UK proceeding on the undertaking, Servier argued that Apotex should be entirely precluded from recovering on the undertaking because Apotex’s Canadian infringement constituted turpitude to engage the doctrine of ex turpi causa. Apotex conceded that any damages awarded in the Canadian proceeding should be deducted from the award on the undertaking. Servier succeeded at first instance before Arnold J ([2011] EWHC 730 (Pat)), while Apotex succeeded in the Court of Appeal ([2012] EWCA Civ 593). Servier appealed to the UKSC. The UKSC held that infringement of foreign patent rights does not constitute a relevant “turpitude” for the purpose of illegality defence. The UKSC recognized that ex turpi causa

... necessarily operates harshly in some cases, for it is relevant only to bar claims which would otherwise have succeeded. For this reason it is in the nature of things bound to confer capricious benefits on defendants some of whom have little to be said for them in the way of merits, legal or otherwise.

The UKSC held that the doctrine of ex turpi causa should be confined to cases which would otherwise “lend the authority of the state the enforcement of an illegal transaction or to the determination of the legal consequences of an illegal act”. Specifically regarding the ex turpi causa principle, the UKSC held that its application should be confined to those cases “founded on acts which are contrary to the public law of the state and engage the public interest”, ie criminal or quasi-criminal (eg dishonesty or corruption) acts and only the most serious of those. Consequently, “[t]orts (other than those of which dishonesty is an essential element), breaches of contract, statutory and other civil wrongs, offend against interests” are essentially private and do not constitute turpitude. Ultimately, the UKSC held that the illegality defence was not engaged by the consideration that Apotex’s lost profits on the undertaking would have been made by selling products manufactured in Canada in breach of Servier’s Canadian patent:

A patent is of course a public grant of the state. But it does not follow that the public interest is engaged by a breach of the patentee's rights. The effect of the grant is simply to give rise to private rights of a character no different in principle from contractual rights or rights founded on breaches of statutory duty or other torts. The only relevant interest affected is that of the patentee, and that is sufficiently vindicated by the availability of damages for the infringements in Canada, which will be deducted from any recovery under Servier's undertaking in England. There is no public policy which could justify in addition the forfeiture of Apotex's rights.

For more commentary, see http://tinyurl.com/p26vmbp Summary by: Junyi Chen