Tuesday, 15 July 2008

Hanger 18

A patent can only be obtained for an invention if it is novel and involves and inventive step, or (looked at another way) is not obvious. I have been mildly surprised that the way the courts approach this second, higher hurdle has been dictated by a thirty-year old Court of Appeal case, Windsurfing International v Tabur Marine, reference to which is obligatory in just about any judgment which turns on section 1(1)(b) of the Patents Act 1977 (or Article 56 of the European Patent Convention) - though it is not cited in the case .

From now on, the courts will be citing the House of Lords judgment in Conor Medsystems vAngiotech Pharmaceuticals Inc. [2008] UKHL 49. There, the respondents owned a European Patent which designated the UK and covered a stent used in coronary angioplasty. It can be inserted into a diseased artery and a balloon inflated to keep the artery open.

The patent claimed a stent coated with a polymer loaded a drug called paclitaxel, sold under the trade mark Taxol (by which name it is identified in the judgment, as it was in the claims of the patent), which would inhibit restenosis, the growth of tissue that would gradually close the artery up again. Conor argued that it was obvious against the prior art. They pursued a similar claim in the Dutch courts.

At first instance the late Pumphrey J agreed with Conor and revoked the patent. He thought that the mere fact that no-one had used such stents before might make them new but did not get over the inventive step. He thought that it would be obvious to anyone using a stent of this type that Taxol would have to be used to prevent restenosis. Angiotech appealed, but the Court of Appeal (the judgment being delivered by Jacob LJ) dismissed the appeal ([2007]EWCA Civ 5). On 9 July, notwithstanding that the parties had settled their dispute in favour of the validity of the patent, the House of Lords allowed the appeal, the only detailed opinion being that of Lord Hoffmann (of course, who else?).

His Lordship remarked that. as in the case of many product claims, there was nothing inventive in discovering how to make the product: the inventive step lay, if it lay anywhere, in the claim that the product would have a particular property. Was it obvious to use a Taxol-coated stent for the purpose of inhibiting restenosis? The invention was as set out in the relevant claim, and it was the non-obvious of that which had to be considered. Whether it was obvious that Taxol would have the desired effect was not the issue: no-one could have exclusive rights "in the notion that something is worth trying or might have some effect".

The judge had therefore, unsurprisingly according to Lord Hoffmann, asked whether it was obvious to try the prospective invention without any expectation of success. His Lordship referred to this as an oxymoronic concept for which he knew of no precedent in the law of patents. The Court of Appeal had upheld the judgment on the grounds that the patent contained no "disclosure", but Lord Hoffmann saw no reason why, "if a specification passes the threshold test of making the invention plausible, the question of obviousness should be subject to a different test according to the amount of evidence which the patentee presents to justify a conclusion that his patent will work ...". Neither the judge nor the appeal court considered what Lord Hoffmann considered the important question, whether it was obvious to use a Taxol-coated stent to prevent restenosis.

Jacob LJ had rejected this approach on the grounds that the patent did not demonstrate that Taxol actually worked to prevent restenosis. Lord Hoffmann preferred the approach of the Dutch court in the litigation in the Netherlands, considering that the law does not require a demonstration of the effectiveness of the claimed invention, and there was no reason not to apply the ordinary principles of obviousness to the claimed invention.

The IPKat
suggests that Lord Hoffmann is trying to claw back the inventive step test "from the jaws of analytical oversophistication", and that the "obvious to try" test is a valuable tool to help gauge the degree of inventiveness involved in an invention, though not the only one.
His Lordship also referred to the products great commercial success. Historically, commercial success was a good indication of non-obviousness, but again it can be nothing more than an indication and the test needs to focus on the invention set out in the claims and as patented.

Saturday, 12 July 2008

Price-fixing penalties

I remember when the Competition Act 1998 was just about to come into force, attending a breakfast briefing with the then Director-General of Fair Trading, John Bridgman, at Le Manoir aux Quat'Saisons - a rare extravagance. He told us that the Act would carry penalties that would make transgressors' eyes water. Originally, the maximum penalty for a breach of one of the prohibitions was ten per cent of UK turnover, for up to three years (if the infringement had been going on so long), but in 2004 with the modernisation reforms of EC and domestic competition laws the measure became ten per cent of global turnover but only over a twelvemonth. (An excellent expression, that, which Alan Clark used extensively in his book, The Tories, which I am in the middle of reading: I first remember hearing it used back in 83 during the general election campaign, by the Readheads shiprepair guys - reminding me of perhaps my greatest, though largely unacknowledged, claim to fame: surely the only Conservative parliamentary candidate ever to hire a meeting room and invite an audience of unemployed shipyard workers along for a discussion.)

Anyway, I digress. Perhaps I should post some of that, and a further digression that has now occurred to me, on www.petergroves.co.uk. My point is that the Office of Fair Trading has settled a price fixing case against Gallaher and five retailers for a payment of £132 million. The papers today - well, the FT - call it a "fine", but in fact the OFT can only impose a civil penalty, not a fine in the strict sense of the word: but newspapers don't seem to worry about the nuances. There is still a case pending against another manufacturer, Imperial, and other retailers are also in the frame. Tesco maintain that they have done no wrong, and Sainsbury have done a deal under the leniency programme that encourages whistle-blowing. The companies that have settled have been given a "discount" of £40 million off the maximum penalty (surely not the whole ten per cent?) reported to be £173 million.

The law seeks to encourage whistle-blowing, without which it is hard to detect cartels - they are by their very nature secret organisations. So the OFT is pleased with the way this has turned out, with a major saving in the costs of carrying on investigating which they think justifies the discount given to the companies involved. The OFT is certainly getting more and more active, and teh FT reports today that: "Senior executives within the retail , construction and banking sectors have complained that John Fingleton, the OFT's chief executive, appears to be on a "personal crusade" to crack own on perceived wrongdoing, whether justified or not". That sounds to me like an extraordinary proposition, as the OFT has to justify its actions by reference to the Competition Act. Are the unnamed senior executives saying that the Competition Act itself is not something to which we should attach too much importance?

I don't think so. Rather, they are probably referring to something that I have noticed in acting for clients in competition matters, and which I advise delegates on my courses on the subject to bear very much in mind: the mere fact that an investigation is taking place is damaging in itself, perhaps not to the tune of £173 milllion but possibly to an extent representing a large part of that. Years ago, actually before the Competition Act came into force, I advised a group of clients who took a price-fixing complaint to the OFT. I imagine that the OFT's investigation of that matter caused consternation in the offices of the company about whose activities we had presented evidence, but I am sure that it paled into insignificance when the OFT published the result of their probe. The story made the front page of the FT and the BBC news to my certain knowledge, and I am sure other parts of the media also picked up on it. The damage to the reputation and the business of the company concerned must have been significant. It certainly gave my clients satisfaction. And the beauty of it was that, a few weeks later, the Competition Act came into force and the OFT publicised it by bringing up the same case again, saying something like "if this happened now, this is what we could do about it." In other words, with Competition Act matters, just being suspected of infringing so the OFT carries out an investigation is just as bad as having a penalty imposed on you in the first place.

The FT today also reports that the Serious Fraud Office is in trouble again, after a judge threw out charges it had brought against five pharmas over price-fixing. This case pre-dates the Enterprise Act 2002, which created criminal offences concerning being involved in a cartel. The SFO was therefore obliged to find another head under which to prosecute, and was running with conspiracy to defraud. The House of Lords held in Norris v Government of the United States [2008] UKHL 16 that mere price-fixing was not conspiracy to defraud - hard luck on the SFO that they were 8 years and £25 million into an investigation into the activities of the drug companies when their Lordships bowled that one at them, and commentators think it might be fatal to the future of the SFO as we know it.

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