Resolution Chemicals Ltd v H Lundbeck A/S

Privity of interest is a narrow exception to the rule that a judgment binds only parties to the litigation. Common ownership or control within a corporate group, and a shared general interest in patent revocation, do not by themselves make a later claimant a privy. The court must assess the later party’s interest in the subject matter, whether it was in reality the original party because of its relationship with the original litigant, and whether it is just to bind it. A concrete business interest or a relationship under which the earlier proceedings were conducted for the later party’s benefit may justify preclusion. A person who knowingly stands by while another fights its battle may also be bound, but that narrow exception did not apply.

Lundbeck’s Patent and supplementary protection certificate concerned escitalopram. Arrow, a sister company of Resolution, had joined earlier revocation proceedings in which the Patent was upheld. Resolution later brought its own validity challenge, relying on better evidence and new prior art, after becoming independent of the Arrow Group.

On a preliminary issue, Arnold J held that Resolution was not precluded by privity of interest from challenging the Patent or SPC: [2013] EWHC 739 (Pat). Lundbeck appealed. The central issue was whether Resolution’s corporate relationship with Arrow, its knowledge of the earlier proceedings, and its historical work on escitalopram made it a privy or otherwise bound by the earlier result.

Appeal dismissed. The Court of Appeal held that Arnold J had applied the correct principles and was entitled, on his factual findings, to conclude that Resolution was not in privity of interest with Arrow.

1. General rule. Privity of interest is a narrow exception to the principle that estoppel binds only the parties to the earlier litigation. In patent revocation proceedings, a judgment that a patent is valid determines issues only between the parties, whereas final revocation is a judgment in rem. Third parties may bring subsequent attacks. The Patents Act 1977, section 72, vests the revocation cause of action in any person, while section 65 provides the patentee with protection against successive unsuccessful attacks principally through costs.
2. Privity inquiry. The court must examine the extent of the later party’s interest in the subject matter, the extent to which it was in reality the original party because of its relationship with the original litigant, and whether it is just to bind it by the earlier result. A shared legal interest in revocation, which exists across the world, is insufficient without a more concrete business consequence.
3. Standing by. A person who knows that proceedings are testing an interest and stands back while another person with the same interest fights the battle may be bound. This is a narrow exception rooted in representative or class litigation and does not remove the ordinary requirement of fair participation. Resolution had no battle to fight in 2006: it could not make escitalopram, its earlier investigations had ended, and the suggested possibility of using Neuland was speculative.
4. Corporate relationship. Common control and group membership did not establish the necessary identity. There was no subsisting relationship under which Arrow was conducting the 2005 proceedings for Resolution’s benefit. Special Effects Ltd v L’Oréal SA was distinguishable because the operating company had a concrete interest in the trade-mark opposition and in the legality of its past and future sales: [2007] EWCA Civ 1.
5. Alternative approach. If the relevant estoppel were abuse of process rather than issue estoppel, the broad merits-based approach described in Johnson v Gore Wood and Aldi Stores Limited v WSP Group plc and others would apply. Applying that approach would lead to the same result, particularly because Resolution was independent when it brought its proceedings.

• Court of Appeal (Civil Division): Dismissed Lundbeck’s appeal.
• High Court of Justice, Chancery Division, Patents Court: Arnold J held that Resolution was not precluded from challenging the validity of the Patent or SPC: [2013] EWHC 739 (Pat).