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To run the risk of needless costs, or to risk delaying a trial - a perennial balancing exercise?

David Knight
14/03/2017
In the recent case of Chugai Pharmaceutical Co Limited v UCB Pharma S.A and Celltech R&D Limited [2017] EWHC 444 (Pat), the Patents Court held that an application for listing of a trial window should succeed, even where this could lead to dual proceedings taking place, and could cause costs to be incurred by the parties in preparing for a trial that might never happen.

In the recent case of Chugai Pharmaceutical Co Limited v UCB Pharma S.A and Celltech R&D Limited [2017] EWHC 444 (Pat), the Patents Court held that an application for listing of a trial window should succeed, even where this could lead to dual proceedings taking place, and could cause costs to be incurred by the parties in preparing for a trial that might never happen.

Background

Chugai Pharmaceutical Co Limited (Chugai) and UCB Pharma S.A (UCB) are parties to a patent licence agreement under which Chugai is permitted to sell, manufacture, and market pharmaceutical products containing the active ingredient known as tocilizumab. Chugai uses tocilizumab in one of its products, known as "Actemra", and pays UCB royalties on all products sold under the licence.

All but one of the patents under licence expired in January 2016; the remaining live patent is a US patent which does not expire until 2026.

Chugai is seeking a declaration from the court that its product "Actemra" does not infringe the remaining US patent, and that therefore, it should no longer have to pay royalties to UCB.

In response to Chugai's application, UCB issued an application for the action to be stayed, and for a declaration that the English court has no jurisdiction, or should not exercise its jurisdiction. This is based on the argument that Chugai is questioning the validity of the remaining patent, and that any case on validity of a US patent can only properly be heard before a US court. The application for the stay of proceedings is set to be heard in April 2017.

The issue before the Patents Court was whether in the meantime it should set a trial window for the declaration claim to be heard. Chugai argued that if fixing the trial date were delayed until after the hearing for the application for stay of proceedings, then the trial would be delayed, and it would be subject to further royalty fees which it might not be able to reclaim if it succeeds in its application for the declaration. In response, UCB argued that setting a trial window before the stay of proceedings hearing would compel UCB to start preparing for trial, and lead to UCB incurring legal costs in the interim of up to £500,000, which would be wasted if it is successful in its application to stay the proceedings.

Decision of the Patents Court

Rose J ordered that a trial window be set to commence at the beginning of January 2018, and for the parties to prepare accordingly, including an order that UCB serve its defence within 28 days.

The judge considered that UCB's wasted costs argument had "some merit" and added that there would always be some costs which are irrecoverable. However, Rose J also said that the potential payment of UCB's costs by Chugai if the jurisdiction challenge succeeded did "go some way to mitigating the damage to UCB".

Finally, Rose J said that "there appears to be a real risk that a substantial delay in the hearing of the case … will lead to serious prejudice to Chugai because they will be forced to pay royalties that are not due with no assurance that they will be able to recover them".

Comment

In this case, the court had to balance the risk of the parties incurring costs to prepare for a trial that might never happen, and the risk to Chugai of having to keep paying royalties that may not be due, in a situation where UCB had not appeared "able or willing" to give any assurance to repay those royalties if Chugai's declaration claim succeeds. By her judgment, Rose J found that the risk to Chugai was higher than any risk of wasted costs by UCB, because, in contrast, Chugai had indicated that it was willing to pay the wasted costs if UCB's application for stay of proceedings is successful.

A further factor Rose J took into account was the 2015 Practice Direction stipulation that a trial should take place within 12 months, and stated that "There must be a good reason why the Practice Direction should not be applied."

What remains unclear, however, is, had Chugai not faced the prospect of paying irrecoverable royalties, whether the balancing exercise between complying with the Practice Direction and the risk of wasted costs would have come down in favour of delaying the trial. In the writers' opinion, based on Rose J's decision in this case, it may be that in future, as long as a party is willing to pay the other party's costs in such circumstances, the court will give little weight to an argument that wasted costs are a reason to halt proceedings until the interim application is heard.

With thanks to Sam Woodley for writing this blog

 

 

 

 

 

 

 

 

 

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