Quo Vadis Patent Litigation: Ascendis Animal Health (Pty) Limited v Merck Sharpe Dohme Corporation 2020 1 SA 327 (CC) - In Search of the Bigger Picture on Patent Validity

In October 2019 the Constitutional Court (CC) handed down judgment in the matter of Ascendis Animal Health (Pty) Limited v Merck Sharpe Dohme Corporation 2020 1 SA 327 (CC). This is its first judgment dealing with the validity of a patent and, as it concerns issues that go the heart of patent law, the judgment potentially has far-reaching implications for patent litigation in South Africa. At issue was the question of whether a court's finding of patent validity on one ground in a revocation hearing ought to have a bearing on a subsequent infringement hearing on the same patent, to the extent that the alleged infringer is barred from raising a different ground to attack the validity of a patent. In essence, did the attempt to do so offend the principle of res judicata? This was a direct appeal to the Constitutional Court after the High Court ruled that it did so offend, and the Supreme Court of Appeal refused leave to appeal. The Constitutional Court was deadlocked on this issue, with the result that the decision of the High Court refusing Ascendis' application to amend to introduce a new ground of attack stands, and the res judicata objection was upheld. The decision raises important questions about the application of the principle of res judicata in such cases where the Patents Act allows dual proceedings for revocation and infringement actions, the meaning of provisions of the Act as they relate to the certification of patent claims, and the broader public interest considerations implicated in patent law adjudication. This note observes that while the outcome sends a strong signal about the courts' displeasure at attempts to prosecute "repeat litigation", an unsatisfactory outcome is that patents can apparently be validated on the basis of merely one of the mandatory requirements for patent validity as required by the Act. It argues that such an outcome is undesirable and does not serve the public interest. This is because it closes the door to further challenges while potentially thousands of patents, which would not have passed the validity test had they been subjected to substantive examination, remain on the patent register.

Does the Injunction Gap Violate Implementers’ Fair Trial Rights Under the ECHR?

Germany is one of few jurisdictions with a bifurcated patent system, under which infringement and validity of a patent are established in separate proceedings. Because validity proceedings normally take longer to conclude, it can occur that remedies for infringement are imposed before a decision on the patent’s validity is available. This phenomenon is colloquially known as the ‘injunction gap’ and has been the subject of increasing criticism over the past years. In this article, I examine the injunction gap from the perspective of the right to a fair trial enshrined in Art. 6 of the European Convention on Human Rights. I find that the case law of the European Court of Human Rights interpreting this provision supports criticism of the injunction gap, because imposing infringement remedies with potentially far-reaching consequences before the validity of a patent has been established by a court of law arguably violates defendants’ right to be heard. Such reliance on the patent office’s grant decision is no longer warranted in the light of contemporary invalidation rates. I conclude that the proliferation of the injunction gap should be curbed by an approach to a stay of proceedings which is in line with the test for stays as formulated by Germany’s Federal Supreme Court. Under this test, courts should stay infringement proceedings until the Federal Patent Court or the EPO’s Board of Appeal have ruled on the validity of a patent whenever it is more likely than not that it will be invalidated.

Rule 226 Contents of the Statement of grounds of appeal

Rule 226 is intended to structure and limit the subject matter of an appeal in a reasonable manner. As a defendant, as appellant, can also challenge the validity of a patent in the appeal proceedings he is especially required to have already presented all his arguments at the start of the appeal proceedings. On that basis, the Court can prevent him from stating additional grounds for appeal at a later time—with the exception of objections based on public documents (→ Rule 222 UPCARoP).

Decision on the validity of a patent

The Court shall decide on the validity of a patent on the basis of an action for revocation or a counterclaim for revocation.

Action to be directed against the patent proprietor

Rule 42 UPCARoP relates to standing to be sued in revocation actions. According to Rule 42, a revocation action must be directed against the patent proprietor. In terms of its meaning, Rule 42 corresponds to Art 47(5) UPCA which stipulates for an action brought by the licensee that the validity of a patent cannot be contested where the patent proprietor does not take part in the proceedings (first clause) and which for the Counterclaim for revocation requires as a mandatory provision the involvement of the patent proprietor. Art 47(6) UPCA merely defines the group of persons entitled to bring an action for an isolated revocation action and makes general reference to the Rules of Procedure without expressly naming the patent proprietor as a necessary defendant.