Resolution Chemicals Ltd v H Lundbeck A/S

Privity of interest requires consideration of the new litigant’s interest in the earlier dispute, its identification with the original litigant, and whether justice requires it to be bound. Common ownership or control of companies does not, by itself, establish privity. In successive patent revocation proceedings, the shared right to seek revocation requires some concrete consequence for the new litigant’s business before it can justify preclusion. Knowledge of earlier proceedings and an opportunity to join them are insufficient where the new litigant had no battle of its own being fought. A judgment upholding patent validity ordinarily binds only the parties and their privies. Where abuse of process is alleged, a broad merits-based assessment considers the circumstances when the new proceedings were brought, including subsequent corporate independence and changes in business activity.

H Lundbeck A/S owned a patent relating to escitalopram and the associated supplementary protection certificate. Earlier revocation proceedings brought by generic pharmaceutical companies, including Arrow Generics Limited, ended with the patent being upheld. Resolution Chemicals Limited, an active pharmaceutical ingredient manufacturer, had been Arrow’s sister company under common ownership and control during those proceedings. Resolution had subsequently become independent and adopted a different business model.

Resolution brought proceedings challenging the certificate through alleged invalidity of the patent, relying on better evidence and new prior art. Lundbeck contended that Resolution was bound by the earlier outcome as Arrow’s privy. Arnold J determined a preliminary issue against Lundbeck in [2013] EWHC 739 (Pat). He also dismissed Lundbeck’s summary judgment application, against which no appeal was brought. Lundbeck appealed the preliminary determination. The central issue was whether Resolution’s former relationship with Arrow, its knowledge of the earlier litigation and its earlier investigations into escitalopram made it just to bind Resolution to that litigation’s outcome.

The appeal was dismissed unanimously. Floyd LJ gave the substantive judgment, with which Moore-Bick and Longmore LJJ agreed.

1. Privity of interest was a narrow exception to the principle that a judgment bound the parties to the proceedings. Fairness ordinarily entitled an independent litigant to advance its own case and evidence. A judgment revoking a patent operated in rem, whereas a judgment upholding validity determined issues between the parties. Section 72 of the Patents Act 1977 permitted any person to seek revocation. Section 65 provided costs protection against successive unsuccessful challenges (paras [22]–[24]; [38]).

2. Drawing on Gleeson v J Wippell & Co, the court had to examine the new party’s interest in the earlier dispute, the extent to which its relationship with the original party made it effectively that party, and whether it was just to bind it. The court left open the precise interest generally required and found a distinction between legal and commercial interests unhelpful here. The legal right to seek revocation was shared with everyone. Some concrete consequence for Resolution’s business was needed to justify binding it (paras [29]–[32]).

3. Common group membership and control did not establish the necessary identification. Central management of major patent matters did not mean that every proceeding was conducted for every group company. Resolution’s escitalopram investigations had ended before Arrow joined the earlier proceedings. Its inability to manufacture the drug and its speculative possibility of arranging manufacture gave it no concrete interest in their outcome. Its knowledge through a common director did not establish that it had stood back while Arrow fought its battle (paras [44]; [49]–[50]).

4. The observations on corporate privity in Special Effects Ltd v L’Oréal SA were distinguishable. The operating company there used the disputed mark and had a concrete interest in proceedings conducted for its benefit. A former litigant would normally be prevented from employing another party to relitigate on its behalf, but no such arrangement or subsisting relationship was alleged here (paras [42]; [45]–[47]).

5. A broad merits-based assessment of abuse of process produced the same result. That inquiry concerned the circumstances when the new proceedings were brought. Resolution’s subsequent independence and different business model strengthened its position. Particular care was required when alleging abuse against a privy. Arnold J had made no established error of law and was entitled to conclude that Resolution was free to pursue its challenge (paras [41]; [50]–[53]).

• Court of Appeal (Civil Division): In [2013] EWCA Civ 924 , unanimously dismissed Lundbeck’s appeal and upheld the preliminary determination that Resolution was not precluded from challenging the patent or supplementary protection certificate.
• High Court, Chancery Division, Patents Court: Arnold J, in [2013] EWHC 739 (Pat) , determined the preliminary issue in Resolution’s favour. His order was dated 12 April 2013. He also dismissed Lundbeck’s summary judgment application; that dismissal was not appealed.