The UK Patents Court puts an arrow through Teva's application for declaratory relief

The Court of Appeal has upheld the decision of the High Court to reject Teva's application for Arrow declaratory relief for importing and selling generic fingolimod to treat relapsing-remitting multiple sclerosis.

The Court of Appeal agreed with the High Court that there would be no useful purpose in the UK in granting an Arrow declaration where Novartis has de-designated its patent, EP 2,959,894 (EP894) in the UK. This decision reinforces the principles which govern the granting of such relief, including that the utility of a UK decision sought for the benefit of foreign courts, on its own, will rarely amount to a sufficiently compelling reason to grant a declaration.

Teva v Novartis

An Arrow declaration is a type of relief that can be granted by the UK courts provided it would serve a "useful purpose". The reason for seeking an Arrow declaration is for a potential infringer to obtain certainty around its planned activities, under the threat of a patent application, that when and if granted, would allow the patentee to sue in the UK. If granted, the declaration states that a particular product or process lacked novelty or would have been obvious at a specified date, usually the priority date of the patent (application) in issue. The declaration provides a defence to a later infringement allegation – a product or process that is not novel or is obvious cannot fall within the scope of a valid patent – and therefore, if asserted, the patent must be invalid.

On 25 February 2022, Teva commenced its claim seeking an Arrow declaration in order to clear the way to allow the launch of generic fingolimod. In response, Novartis commenced proceedings against Teva and a number of other generic companies intending to supply fingolimod in the UK. Mr Justice Roth refused Novartis' application for interim injunctive relief, but there was a short period where the interim injunction was in force while Novartis unsuccessfully appealed this decision. Mr Justice Roth also ordered an expedited trial to be heard around 3 October 2022.

All parties continued preparations for trial until 10 August 2022, when Novartis informed Teva that it was de-designating the UK from EP894 so that it would not proceed to grant in the UK. Novartis also applied to discontinue its infringement action against all the defendants and wrote to the NHS to confirm that the UK market for 0.5 fingolimod was open for generic competition.

While Novartis was able to reach settlement, or agreements in principle, with the other generics, Teva maintained its application for an Arrow declaration on the basis that the declaration would serve a useful purpose. Mr Justice Meade directed that the trial of Teva’s application for an Arrow declaration should be confined to the issue of whether, as a matter of discretion, the court would grant the relief. As a result, the issues before the court did not include a technical assessment of the issue of obviousness and the parties did not submit any evidence on this point.

Teva's arguments

At the first instance, Teva advanced five arguments why Arrow declaratory relief should be granted:

1. Novartis' conduct. Teva argued that Novartis' conduct, and, in particular, the fact that Novartis initially sought to enforce its patent in the UK by seeking interim injunctive relief before then abandoning the UK designation shortly before trial was an important factor in the assessment of whether there is a useful purpose. The court stated that a declaration should not be granted in order to punish a party's conduct or to discourage such conduct in the future. A party's conduct was not a standalone basis to warrant the granting of the relief sought but rather a relevant factor in the assessment of a "useful purpose".
2. Clarity for the NHS. Teva also sought to argue that a declaration was necessary so as to provide clarity for the NHS. The problem with this argument was that there was no evidence of confusion on the part of the NHS as to the status of Novartis' patent protection. On the contrary, Novartis had written to the NHS to inform it that it was de-designating the UK and that that "[t]he UK market for 0.5 fingolimod is open for generic competition". As such, the court concluded that there was no confusion on the part of the NHS in respect of the status of Novartis' relevant patent protection.
3. Undertakings. Teva alleged that the undertakings offered by Novartis were ambiguous and difficult to understand, such that Teva did not know what its rights were in relation to the supply of fingolimod. As a result, Teva contended that there was an ongoing risk of uncertainty in relation to the UK market. However, during the trial, Novartis provided a revised set of undertakings which appeared to resolve any ambiguities and so this argument fell away.
4. The utility of a UK judgment to other EPC states. Rather than adducing evidence for each European Patent Convention (EPC) state, for procedural economy, both sides relied on expert evidence relating to the potential utility of a UK judgment in Germany, the largest market in Europe, and used this as a proxy for other jurisdictions. There was a difference between each side's evidence as to the relative weight that a German court would give to a declaration from the UK court, but there was agreement that a UK decision would be "of interest" to the German court. 
   
   However, it was fatal to Teva's arguments on this point that UK case law has consistently established that if the only or predominant purpose of the declaration sought was to use it in a foreign court, then the court would look carefully at the justification for the declaration and only likely to grant it in unusual cases "where there is a very compelling justification for doing so". The judge therefore turned to Teva's final argument in relation to its supply chain.
5. The effect of a declaration is relevant to the UK because Teva's supply chain involves transit through "country A", which may be subject to an injunction. Teva argued that the effect of the declaration would be felt in the UK because Teva's supply chain to the UK involved transit through "country A". If Teva was injuncted in country A it would be time-consuming and expensive to alter its supply chain, and Teva would rely on a UK declaration to resist an injunction in country A.
   
   The court accepted that Teva's position in principle, but then had to decide whether that was enough for the UK court to exercise its discretion to grant declaratory relief in the UK (if the substantive technical arguments, which would have been heard subsequently, were made out).
   
   Unfortunately for Teva, the court concluded that this supply chain effect was not enough in the circumstances. The fact that a decision in country A would affect the UK market indirectly did not change the fact that the purpose of obtaining the Arrow declaration from the UK court would be to use it in the courts of country A and other countries rather than to obtain or enforce any right in the UK.

There were also no "usual circumstances" that provided a compelling justification for the grant of the declaration. The court therefore concluded that Arrow declaratory relief should not be granted in the circumstances before it. Fujifilm v AbbVie, an earlier decision which had a number of similarities and in which declaratory relief was ultimately granted, was distinguished because in those proceedings it was found that a declaration would dispel uncertainty in the UK market given the patentee's conduct. 

Lord Justice Arnold gave the leading judgment on appeal in which he agreed with the High Court's decision. In his view, the only error Mrs Justice Bacon had made was adopting an approach that was too favourable to Teva. Once she had found that a declaration was not required in order to redress uncertainty in the UK market, it followed that the only purposes which could be served by a declaration were to assist the courts of Germany and Country A in deciding issues under their own laws. Lord Justice Arnold made clear that as a matter of principle it is wrong for an English court to make a declaration solely for the purpose of influencing a decision by a foreign court on an issue governed by the law of the foreign court.

Osborne Clarke comment

The UK is renowned for handing down clear and well-reasoned patent judgments, which carefully weigh technical evidence and can influence courts in other EPC countries such as Germany. In addition, the ability of the UK court to grant Arrow declaratory relief provides a strategically important tool for parties seeking to clear the path ahead of generic and biosimilar launches. And indeed for any company looking for commercial certainty under the shadow of a blocking patent application proceeding to grant. 

This decision makes clear some of the limits for parties trying to obtain relief for deployment elsewhere.  It may be surprising that Novartis, despite asserting its UK patent to obtain (briefly) a preliminary injunction and only de-designating the UK very shortly before trial, was able to shield its patents from the scrutiny of the UK courts.  However, that was the effect after Novartis promptly took steps to ensure there was no continuing uncertainty in the UK market by the time of the trial. In such circumstances the potential persuasiveness of a UK judgment on later foreign proceedings was deemed to be insufficient reason, on its own, to warrant the court granting declaratory relief.