A recent judgment from Mr Justice Roth in the Patents Court highlights the importance of parties considering the sensible case management of competition defences in patent litigation and potential cost implications.
The judgment is from a case management conference in proceedings between several parties including Illumina Inc, Sequenom Inc, and Premaitha Health Plc. The case is primarily patent litigation that is due to go to trial in July 2017. In April 2016, the defendant Premaitha Health plc sought to introduce various competition law defences. Pleadings were already advanced on the technical patent issues and the defendant sought permission to amend its defence. This was discussed at a CMC in April. The presiding judge (Mr Justice Birss) adjourned the application to be heard at a later hearing. The defendant had served its amended pleading only two days before the CMC and so he recognised that the claimants could not be expected to address a wholly new case at such very short notice. The proposed non-technical defences addressed complex questions under competition law and the claimants were not represented by specialist competition counsel at that first CMC. Regardless, the defendant pressed the court to grant permission to amend its defences at the first CMC taking the position that the claimants could subsequently on full consideration of the pleadings apply to strike them out or for summary judgment. The judge (unsurprisingly) did not agree this would be appropriate. He adjourned the application to a second CMC once the claimants had had time to consider properly the proposed amendments and had been able to give notice of the aspects of the defence to which they objected or consented. He remarked that if this second hearing did not take place for some reason then the defendant would be given permission to serve the non-technical defences in the form annexed to the defendant’s application.
The second CMC took place on 1 July (the judgment has just been handed down).
Roth J, decided that actually the most appropriate course of action in terms of the efficient conduct of the litigation at this stage would be to further adjourn the non-technical defences application to be restored once the technical judgment had been handed down. The main reason given is that the precise content of the competition law arguments in this case depends on the scope of the patents. The market definition alleged by the defendant is framed in terms of patented technology that is an essential input to the allegedly infringing product produced by the defendant. So any change to the scope of the patent in the technical trial could have a substantial effect on market definition and non-technical arguments that depend on that market definition. Additionally, the Judge notes that the draft non-technical pleadings are vague and general in places and that a technical judgment would enable a much more sophisticated and tighter focus to be brought on the competition issues. He also mentions two additional (but subsidiary) reasons why he thinks this is a more sensible approach: (i) the Commission is conducting a competition law investigation which appears to cover the same ground as in the draft non-technical defences (on which we reported here) and further clarity as to the Commission’s investigations should be reached by when the technical judgment in the current proceedings is handed down, and (ii) one of the non-technical defences relates to a settlement agreement between Illumina Inc and Sequenom Inc which to date the defendant has only seen a heavily redacted version. Roth J suggests that this issue can be dealt with by way of further disclosure in due course which will enable consideration of whether the proposed pleading raises an arguable case.
On costs (which Roth J notes were significant), he ordered that they should be reserved (as a fair assessment requires knowledge of how the matter is going to proceed after judgment in the technical trial) save as to the defendant’s costs which the defendant had to bear. He stated that an applicant (here the defendant) has a responsibility to consider how its application should sensibly be managed and determined. He warned “[t]here may perhaps be some lessons from all this. If competition defences are now being introduced on this contingent basis in patent litigation, consideration needs to be given as to how the pleading, and any argument about strike out or summary judgment for the respondent to that pleading, should sensibly be managed. I doubt that this is the last case where such non-technical defences will be introduced”.
This case acts as a reminder of the importance of parties taking a reasonable position when asserting competition law defences in patent litigation and considering how they should best be case managed in the circumstances (or alternatively being prepared for costs consequences). The facts of this case (notably, the proximity of the raising of the non-technical defences to trial and the defendant’s approach to how strike out or summary judgment should be handled) are not entirely standard and this no doubt had a particular bearing in this case. However, given the propensity of the UK courts to be inclined to order “patents first, non-technical defences second” in the absence of agreement between the parties to the contrary, and also to defer to any parallel competition law investigation particularly where the alleged non-technical defences concern complex issues of competition law, the outcome is not entirely surprising. Something for all defendants (and claimants) to keep in mind.