Teva Pharma - Produtos Farmaceuticos Lda & Anor v Astrazeneca-Produtos Farmaceuticos Lad & Anr

A settlement agreement must be construed according to its clear natural language, read in the context known at the time of contracting. Commercial common sense cannot retrospectively subvert that language or relieve a party from an imprudent bargain. Where an agreement defines the relevant patent to include a supplementary protection certificate, a later paediatric extension remains within the defined right. A general release concerning disputes about that certificate can therefore cover claims arising during the extended term, even if the precise extension was uncertain when the agreement was made. The court should assess the whole commercial bargain, including benefits obtained by the releasing party. It need not determine the merits of the settled underlying dispute or rely on subjective intention evidence to construe the agreement.

Teva, Portuguese pharmaceutical companies, had settled patent and arbitration disputes with AstraZeneca. The Settlement Agreement required Teva to stop marketing its generic product until the earlier of specified dates, including 3 July 2017, and contained a general release of claims arising from use, sale and marketing of the product.

A paediatric extension later prolonged AstraZeneca’s supplementary protection certificate until 29 December 2017. AstraZeneca sought to enforce that extended right. Leggatt J dismissed Teva’s summary-judgment application on 30 June 2017, construing the defined patent as limited to the certificate without the extension. The appeal concerned whether the release and covenant applied to the extended certificate and whether Teva’s post-3 July sales would breach the agreement.

Appeal allowed. Lord Justice Flaux delivered the judgment, with Lord Justice Sales and Lord Justice Rupert Jackson agreeing. Teva were entitled to the declaration sought.

1. Construction of the Settlement Agreement. The Paediatric Extension prolonged SPC 156. It did not confer a different kind of right. The definition of “Patent” therefore encompassed SPC 156 whether in its original form or as extended. Clause 2.6 released AstraZeneca from claims arising under SPC 156 as extended. Clause 2.7’s prohibition on sales ended on 3 July 2017, so sales after that date were not in breach of the Agreement.
2. Natural meaning and commercial common sense. The judge had wrongly allowed commercial considerations to displace the clear and natural meaning of the definition. The principle in Arnold v Britton [2015] UKSC 36 required the court to identify what the parties agreed, rather than rewrite an imprudent bargain. Even if commercial common sense were relevant, the judge had considered only the alleged benefit to Teva and omitted AstraZeneca’s substantial benefits, including the withdrawal of validity challenges, reduced litigation risks and over four years of preserved exclusivity.
3. Scope of the release. The principles in BCCI v Ali [2002] 1 AC 251 and Stretchline Intellectual Properties Ltd v H & M Hennes & Mauritz UK Ltd [2015] EWCA Civ 516 showed that the scope of a general release depends on the particular subject matter under consideration. A precise lack of knowledge about the extension did not take the claim outside the release. The claim concerned the same SPC and disputes addressed by the Agreement.
4. No need for a trial. The court did not need to decide the merits of the settled Portuguese validity dispute. Evidence of AstraZeneca’s subjective reasons for settlement was irrelevant and inadmissible. On contractual construction, the appellate court could adopt a less restrained approach than on discretionary matters: AmTrust Europe Ltd v Trust Risk Group SpA [2015] EWCA Civ 437. The matter was not remitted.

1. Court of Appeal (Civil Division) — In [2017] EWCA Civ 2135, the court allowed the appeal and held that Teva were entitled to the declaration.
2. Queen’s Bench Division, Commercial Court — Leggatt J’s order dated 30 June 2017 dismissed Teva’s summary-judgment application and ordered Teva to pay AstraZeneca’s costs.