Les Laboratoires Servier and another v Apotex Inc and others

The illegality defence is a rule of law founded on public policy, rather than a discretion to balance culpability, proportionality or the parties’ merits. Subject to limited exceptions, it applies to criminal and quasi-criminal conduct which engages the public interest. It does not ordinarily apply to torts, breaches of contract or statutory civil wrongs protecting private interests.

Patent infringement creates and vindicates private rights. Profits dependent on manufacturing goods in breach of a foreign patent are therefore not barred by illegality. The patentee’s interest is sufficiently protected by damages for infringement, which may be deducted when assessing recoverable loss.

Servier obtained an interlocutory injunction restraining Apotex from marketing generic perindopril in the United Kingdom, upon the usual undertaking in damages. The United Kingdom patent was subsequently held invalid in [2007] EWHC 1538, and that decision was upheld in [2008] EWCA Civ 445. Apotex was awarded damages for sales lost while the injunction operated.

The active ingredient would have been manufactured in Canada in infringement of a valid Canadian patent. Arnold J held that this illegality barred the claim under the undertaking: [2011] RPC 574. The Court of Appeal allowed Apotex’s appeal, reported at [2013] Bus LR 80, holding that application of the defence would not be a just and proportionate response.

The central issue was whether infringement of a foreign patent constituted turpitude capable of engaging the illegality defence.

1. The appeal was dismissed unanimously. Lord Sumption gave the leading judgment, with which Lord Neuberger and Lord Clarke agreed. Lord Mance agreed that patent infringement did not constitute the necessary turpitude. Lord Toulson reached the same result through a public-policy analysis.

2. Per Lord Sumption, the illegality defence is a rule of law founded on public policy. It is not a discretionary power to achieve a proportionate result by balancing the claimant’s culpability, the seriousness of the wrongdoing and the consequences of denying relief. The public-conscience approach in Euro-Diam was decisively rejected in Tinsley v Milligan. The Court of Appeal’s fact-sensitive proportionality approach was therefore contrary to established principle.

3. Turpitude depends primarily on the legal character of the act. It ordinarily comprises criminal acts and a limited category of quasi-criminal conduct engaging the public interest. The latter includes dishonesty, corruption, certain conduct contrary to public policy, and infringements of public-protection statutes carrying penal civil sanctions. Ordinary torts, contractual breaches and statutory civil wrongs protect essentially private interests and do not justify withholding the court’s remedies.

4. Exceptional criminal or quasi-criminal acts may fall outside the defence. An offence may be too trivial. Conduct attracting strict liability may also lack turpitude where the claimant was unaware of the facts making it unlawful. That inquiry determines whether the conduct has the necessary legal character; it does not authorise a discretionary assessment of degrees of culpability.

5. Infringement of the Canadian patent affected private proprietary rights comparable to contractual or tortious rights. Those rights were adequately vindicated by Canadian infringement damages, which would be deducted from Apotex’s recovery under the English undertaking. No public interest justified the additional forfeiture of Apotex’s claim. The questions concerning reliance on the infringement, the undertaking and attribution therefore did not arise.

6. Lord Toulson added that enforcement of cross-undertakings serves the public interest in effective interlocutory relief. Damages ordinarily place the restrained party in the position it would have occupied without the injunction. Deduction of the Canadian damages achieved that result without conferring an unwarranted advantage on either party.

1. United Kingdom Supreme Court: The appeal was dismissed unanimously. The Court of Appeal’s order remained in force, although its proportionality reasoning was rejected by the majority.
2. Court of Appeal: The appeal from Arnold J was allowed. The decision is reported at [2013] Bus LR 80; the cover sheet identifies the appeal as from [2012] ECWA Civ 593. The court held that patent infringement was not relevant illegality on a just and proportionate assessment.
3. High Court: Arnold J held that Apotex’s claim was barred by illegality and ordered repayment of the damages received: [2011] RPC 574.
4. Earlier proceedings: The Court of Appeal permitted Servier to amend its defence and made the damages award interim: [2010] EWCA Civ 279 . Norris J had awarded Apotex £17.5 million plus interest: [2009] FSR 220.
5. Patent proceedings: Pumfrey J held that the United Kingdom patent was infringed but invalid and discharged the injunction: [2007] EWHC 1538. Servier’s appeal was dismissed in [2008] EWCA Civ 445 .