Patents: tort of causing loss by unlawful means

05 October 2017

Summary

The High Court has struck out a claim for economic loss caused by unlawful means in relation to an allegedly improperly obtained patent.

Background

Liability for causing loss by unlawful means occurs where there is intentional causing of loss by unlawfully interfering in the freedom of a third party to deal with the claimant. 

The tort of unlawful means comprises three elements: the use of unlawful means towards a third party; which is actionable by that third party, or would be if they suffered loss; and intention to injure the claimant (OBG Ltd and others v Allan and others, www.practicallaw.com/6-364-4986). For example, where the defendant has intimidated a third party by threats to prevent that person making a contract with the claimant, the third party may have a cause of action against the defendant but may not wish to sue. The claimant has no cause of action against the defendant except in economic tort for causing loss by unlawful means.

Facts

S's original patents for a pharmaceutical used to treat hypertension had expired, but it had a European patent covering an allegedly new form of the drug. This was opposed, but the opposition was dismissed by the European Patent Office (EPO). 

A generic drugs manufacturer, A, decided to manufacture and sell the drug, having been advised that S's patent was invalid. A obtained marketing authorisation and began to sell the drug. S sued A for patent infringement and was granted an interim injunction. 

The High Court held that the patent was invalid because it lacked novelty, or was obvious over an earlier patent, and the injunction was discharged. S appealed. The Court of Appeal dismissed S's appeal.

Various health authorities and the Health Secretary (together, H) issued separate proceedings against S for breach of competition law and the tort of causing loss by unlawful means, namely deception. 

H argued that S's patent application contained express and implied fraudulent misrepresentations that the claimed form of the drug was novel and not obvious. S had relied on these misrepresentations to contest the opposition proceedings and to obtain interim relief.

S applied to strike out the claim based on the tort of causing loss by unlawful means on the basis that it disclosed  no cause of action. S argued that the requirements for the tort had not been made out, in particular the first element of the tort under OBG v Allen.

Decision

The court struck out the claim. 

Although under the European Patent Convention or in the UK there was no doctrine of fraud on the patent office, as there is in the US, for the purpose of the strike-out application the court assumed that the allegation of deceit was made out. 

"Unlawful means" consists of  acts 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 (OBG v Allen). It does not include acts which may be unlawful against a third party but do not affect his freedom to deal with the claimant. Here, the third parties were the EPO and the High Court, and there was no question of interference with their freedom to deal with H, or with anyone else, so this requirement had not been met.

If H was correct, given the broad interpretation of the element of intention adopted in OBG v Allan, the right to claim against S would cover not only H but also all potential generic competitors, any private medical expenses insurer who paid higher prices for reimbursement of the cost of the drug and all foreign health authorities and insurers in European states designated under the patent. This would not confine the tort within a narrow ambit. 

A patent is created by statute prescribing rights and remedies in accordance with the legislative assessment of public policy. If those who suffer economic loss because a patent has been obtained by dishonest or reckless misrepresentations as to novelty or obviousness could use the unlawful means tort at common law to claim damages, that would circumvent the legislative balance. So, any remedy has to be under competition law.

The unlawful means claim also raised the question whether the second element of the tort was satisfied: action ability by the third party. Even assuming that S made the alleged fraudulent misrepresentations to the EPO and the High Court, it was difficult to see how either could be said to have a cause of action in deceit against S, or that they would have had a cause of action if they suffered damage.

Comment

This interim decision follows the approach of OBG v Allan by limiting the scope of common law economic torts, and leaving the regulation of competition to specific legislation. The case will now proceed only on competition law grounds.

Any other approach would have a chilling effect on patent applicants where there was a question over the patentability of the invention arising, as here, from facts known to the applicant which could not readily have been discovered by the patent examiner. The risk of having a patent invalidated and having to pay damages and costs to a competitor unsuccessfully sued for infringement can be assessed by the patent owner before taking action. However, the risk of being liable for the losses of a wide range of third parties who might suffer some form of economic loss from the existence of the patent would in most cases be unquantifiable.

Case: Secretary for State for Health and another v Servier Laboratories Ltd and others [2017] EWHC 2006 (Ch). 

First published in the October issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.

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