On July 2, an extended panel of seven Justices of the UK Supreme Court handed down a unanimous judgment upholding Servier’s strike out of the Secretary of State for Health’s claim of “causing loss by unlawful means” in Secretary of State for Health and another [the “Appellants”] v. Servier Laboratories Ltd and others [the “Respondents”]  UKSC 24. Crucially, the Supreme Court rejected an attempt to expand the scope of this tort to encompass allegations of deceit practiced on the patent office – a concept that does not exist in UK and EU law, although it may be found in other jurisdictions as the doctrine of “inequitable conduct.”
Causing loss by unlawful means is an “economic tort” that was crystallized by the House of Lords in OBG Ltd v. Allan  UKHL 21. In his leading speech, Lord Hoffmann held that the tort “consists of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant” and he concluded that “[i]t does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant.” This is now known as the “dealing requirement.”
In the present case, Appellants claimed that the “Respondents” misled the European Patent Office (the EPO) in obtaining and defending a patent application, and then misled the High Court by enforcing the patent when, it was claimed, they knew or should have known that the patent was invalid. The validity of the patent was initially upheld before the EPO, but it was ultimately invalidated. Since it was common ground that there were no dealings between the Appellants and the EPO or the English court, a key issue in the appeal was whether the dealing requirement was part of the ratio of OBG and therefore an essential ingredient of this tort.
In its judgment, the Supreme Court came to the “firm conclusion” that the appeal should be dismissed, enumerating eight reasons why the dealing requirement was a part of the ratio of OBG, and holding that no good or sufficient reason had been shown why OBG should be departed from. Indeed, the dealing requirement performs an essential function as a control mechanism which ensures that there is a sufficient nexus between the parties to keep the tort within reasonable bounds. As the Supreme Court explained, it minimizes the danger of there being indeterminate liability to a wide range of claimants for pure economic loss.
Without the dealing requirement, claims of causing loss by unlawful means brought against pharmaceutical patentees could be available to all the various UK health authorities, generic competitors, private medical insurers, foreign health authorities and even individuals, leading to potentially unquantifiable damages. In the authors’ view, had the necessity for a dealing requirement been removed from the tort, this could have inhibited future innovation, as prospective patentees would be deterred from filing patent applications in light of the risk of claims of indeterminate liability if their patent were ultimately found to be invalid. The patent system has been carefully designed and balanced by the legislator, and as noted by the Court of Appeals, it was open to the Appellants in the present case to apply for an undertaking for damages when an interim injunction was granted. In addition to its other reasons for rejecting the appeal, the Supreme Court was right not to substitute itself for the legislator in this area and not to destabilize the patent system.
This judgment rightly leaves the patent system undisturbed, which will come as a relief to patentees and stakeholders in the UK and beyond.
Servier Laboratories Ltd are represented by Marie Manley and Chris Boyle from Sidley with counsel Marie Demetriou QC and Daniel Piccinin from Brick Court Chambers.
Sidley Austin LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000.