Merck Canada Inc & Anor v Sigma Pharmaceuticals Plc

EU free-movement rules ordinarily prevent a patentee from stopping the marketing of products put on the market in another Member State with its consent. A derogation such as the Specific Mechanism must be interpreted strictly and in light of its purpose. It was strongly arguable that the Mechanism gives the patent holder an option to oppose imports and remains inapplicable until an intention to exercise that option is demonstrated. Whether notification by a related regulatory applicant, or notification to an operating subsidiary, satisfies the Mechanism was unresolved. Estoppel by silence requires a legal duty to correct the misunderstanding. Delivery up is discretionary and ancillary to an injunction, and may be ordered for infringing stock where retention would confer an unwarranted advantage.

Merck Canada owned patent and supplementary protection rights protecting Singulair. Sigma imported and sold Singulair from Poland under parallel-import licences obtained by Pharma XL, an associated company. The products fell within the Act of Accession Specific Mechanism.

At trial, HHJ Birss QC rejected Sigma’s arguments that Merck had to elect to oppose the imports, that Merck was estopped by silence, and that delivery up was inappropriate. He granted an injunction, ordered an inquiry or account, and ordered delivery up: [2012] EWPCC 18.

The appeal concerned the interpretation of the Specific Mechanism, the identity of the notifier and recipient, estoppel, delivery up, and whether questions should be referred to the Court of Justice.

1. Reference and substantive issues. The Court of Appeal did not finally determine the interpretation of the Specific Mechanism. Under article 267 of the Treaty on the Functioning of the European Union, it made a reference concerning three groups of questions: the patent holder’s option and intention to oppose; the identity of the person required to notify; and the identity of the person to whom notice must be given.
2. Specific Mechanism. The free-movement rule is a fundamental principle of the European single market, and derogations must be construed strictly. The Specific Mechanism was modelled on the Iberian derogation and had to be interpreted in the light of Case C-191/90 Generics and Harris v Smith Kline and French. It was strongly arguable that the Mechanism conferred an option to prevent imports and was inapplicable unless the proprietor demonstrated an intention to exercise it. The issue was not clear and required authoritative resolution.
3. Notification. In the United Kingdom regulatory system, Pharma XL could apply for a parallel-import licence while Sigma carried out the importation. Because the companies formed part of the same economic unit and the notice gave Merck an opportunity to object, Sigma’s position was favoured on the facts. Whether that arrangement satisfied the second paragraph of the Specific Mechanism remained unresolved.
4. Estoppel. The alleged representation was Merck’s silence. Sigma’s misunderstanding had already arisen from its belief that Polish Singulair was being sold without objection; Merck’s silence merely allowed it to continue. No contractual or other relationship created a duty to respond. If Merck could rely on the derogation, it was under no duty to reply, either under the Mechanism or general EU law. The estoppel argument therefore failed.
5. Delivery up. Section 61(1)(b) of the Patents Act 1977 confers a discretionary jurisdiction. Delivery up or destruction is ancillary to the injunction, not punitive, and the question must be assessed at the date of the order. The judge was entitled to order delivery up of infringing stock because its retention could give Sigma an unwarranted advantage after expiry of the SPC.
6. The questions were not acte clair, the Specific Mechanism had not previously been considered by the Court of Justice, and it remained relevant until 2019. A preliminary reference was therefore appropriate.

• Court of Appeal (Civil Division) — In [2013] EWCA Civ 326, the court made a preliminary reference concerning the Specific Mechanism. It upheld the reasoning on estoppel and delivery up provisionally, but left the substantive interpretation issues unresolved.
• Patents County Court — HHJ Birss QC rejected Sigma’s defences, granted an injunction, ordered an inquiry or account, and ordered delivery up in [2012] EWPCC 18.