Merck Sharp and Dohme (UK) Limited v Halozyme Inc

Revocation of a patent does not automatically justify summary judgment recording that an infringement counterclaim had no real prospect of success. The court should consider whether the additional order has a practical purpose and whether its wording may invite inappropriate inferences in parallel proceedings.

For indemnity costs, the relevant question is whether the conduct or circumstances take the case out of the norm. A claim which is speculative, weak, opportunistic or thin may justify indemnity costs where pursuing it involves unreasonable conduct to a high degree. A party cannot rely on undisclosed experimental material to support a claimed bona fide belief while withholding the evidential basis said to establish that belief.

Merck challenged the validity of two patents owned by Halozyme and Halozyme counterclaimed for infringement. Halozyme consented to revocation of the UK designation of European patent UK No 2 797 622. Merck sought summary judgment recording not only revocation but also that Halozyme had no real prospect of succeeding on its infringement counterclaim.

The court dismissed that application. The infringement counterclaim would necessarily fail because the patent was revoked, but there was no practical need for the additional declaration. Merck then sought indemnity costs, relying on Halozyme’s failure to disclose experimental evidence said to support its pleaded bona fide belief in infringement. The central issues were whether the counterclaim was speculative, weak or thin and whether the circumstances justified indemnity costs.

1. Summary judgment. The application for summary judgment was dismissed. Revocation of EP 622 necessarily meant that Halozyme could not succeed on infringement, but the only reason for dismissal of the counterclaim was the revocation itself. There was no practical need to record separately that the counterclaim had no real prospect of success. The court was also entitled to avoid wording which might encourage an excessive inference in parallel German or other European proceedings, following Teva UK Limited v Novartis AG [2022] Civ 1617 at [51].
2. Privilege and evidence. The court was not persuaded that Halozyme had waived privilege in the reasons for consenting to revocation or in the results of the English Experiments. Nor could any inference be drawn merely from Halozyme’s reliance on privilege. However, Halozyme could not both withhold the experimentation and invite the court to assume that it established the claimed bona fide belief in infringement.
3. Indemnity costs. Applying the principles discussed in Noorani v Calver (No. 2 Costs) [2009] EWHC 592 (QB), Reid Minty v Taylor [2002] 1 WLR 2800, Kiam v MGN Limited No2 [2002] 1 WLR 2810, Excelsior Commercial and Industrial Holdings Limited v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 879 and Lejonvarn v Burgess [2020] EWCA Civ 114, the court found on the balance of probabilities that, when filed, the counterclaim was no more than speculative, weak or thin. Halozyme had offered no alternative evidential basis for its belief and had not produced evidence from a witness with direct knowledge of the experimentation.
4. An order for indemnity costs was therefore made in relation to Halozyme’s infringement counterclaim concerning EP 622.