Fresenius Kabi Deutschland GmbH & Ors v Carefusion 303, Inc [2011] EWHC 2663 (Ch)

Case No HC 11 C00026[2011] EWHC 2663 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Rolls Buildings, Fetter LaneDate 12 October 2011
London, EC4A 1NL
Before
MR. JUSTICE ARNOLD
Between
(1) FRESENIUS KABI DEUTSCHLAND GMBH(a company incorporated under the laws of theFederal Republic of Germany)Claimant(2) FRESENIUS KABI AG(3) FRESENIUS VIAL S.A.S.(4) FRESENIUS KABI LIMITEDClaimantCAREFUSION 303, INC.(a company incorporated under the laws of theState of Delaware, USA)Defendant(Computer-aided Transcript of the Stenograph Notes by Marten Walsh Cherer Limited, 1st Floor Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP.Telephone Number 020 7067 2916. Fax Number 020 7831 6864 e: info@martenwalshcherer.com)
MR. MICHAEL TAPPIN QC and MR. JOE DELANEY (instructed by Powell Gilbert LLP) appeared for Claimants/Part 20 Defendants.MR. JOHN BALDWIN QC (instructed by DLA Piper UK LLP ) appeared for Defendant/Part 20 Claimant.
JUDGMENTMR. JUSTICE ARNOLD :
[1]As a matter of form, the application before me this morning is an application by the Claimants (“Fresenius”) for an order debarring the Defendant (“CareFusion”) from relying upon any evidence at the trial of this claim for revocation of European Patent (UK) 1 200 143 (“the Patent”) and counterclaim for infringement thereof next month. For reasons that will appear, however, I suspect that, as a matter of reality, the dispute between the parties is one as to costs.[2]The proceedings were commenced in January 2011. In the Grounds of Invalidity served by Fresenius in support of their claim for revocation, a number of items of prior art were relied upon, including an item of prior art referred to as the Terumo Patent. Although Fresenius were, it appears, aware at that time of the existence of a related device, referred to as the Terumo Device, which it appears may have been marketed in Japan before the priority date of the Patent and which may disclose more than the Terumo Patent, Fresenius did not rely upon that item of prior art in their original Grounds of Invalidity. Nor did they seek to introduce that item of prior art when they amended their statements of case pursuant to an order made on 5 May 2011.[3]On 16 September 2011 Fresenius applied for permission to re-amend their Particulars of Claim and Grounds of Invalidity, in particular so as to introduce into the Grounds of Invalidity a new subparagraph (2)(i)(e). It is not necessary to read out the entirety of the proposed amendment, but it is necessary to note that the proposed amendment alleged public prior use of the Terumo Device and also pleaded an accompanying instruction manual, details of which were given in sub-sub-subparagraph (iii).[4]That application came before Norris J on 26 September 2011. For the reasons he gave in his judgment of that date, [2011] EWHC 2052 (Pat), he decided to allow the application for permission to amend in part, but also to disallow it in part. In essence, he allowed the amendment to plead the public prior use of the Terumo Device, but he did not allow the amendment in so far as it related to the manual.[5]After he gave his judgment making that decision, there was argument before him as to costs. CareFusion asked for an order to be made in See v Scott-Paine form. In the absence of substantial resistance from Fresenius, Norris J made such an order.[6]As subsequently drawn up and entered, the material parts of his order are as follows:
“1. The Claimants have permission to re-amend their Grounds of Invalidity and Particulars of Claim in forms attached to this order. 2. The Claimants shall serve the aforesaid re-amended Statements of Case as soon as practicable. 3. The Defendant shall serve any consequential amendments to its Defence and Counterclaim within 5 days of service of the aforesaid re-amended Statements of Case. … 6. The Defendant does elect by 4 p.m. on 10th October 2011 whether it withdraws its Defence and Counterclaim and consents to an Order for the revocation of EP 1 200 143 B2 (UK) as a result of the matter introduced by the aforesaid re-amended Statements of Case and if the Defendant does so elect and give notice thereof in the time aforesaid IT IS ORDERED THAT: (a) EP 1 200 143 B2 is revoked; (b) The Defendant do pay the First Claimant's costs of these proceedings to be assessed on a standard basis (if not agreed) incurred up to and including the service of the Grounds of Invalidity on the 7th January 2011; (c) The Claimants do pay the Defendant's costs of these proceedings incurred thereafter to be assessed on the standard basis if not agreed. … 8. The directions timetable to trial shall be as follows: (a) The parties shall exchange expert evidence and fact evidence by 30th September 2011. … (d) The parties shall exchange expert and fact evidence in reply by 21st October 2011.” (b) The Defendant do pay the First Claimant's costs of these proceedings to be assessed on a standard basis (if not agreed) incurred up to and including the service of the Grounds of Invalidity on the 7th January 2011; (c) The Claimants do pay the Defendant's costs of these proceedings incurred thereafter to be assessed on the standard basis if not agreed. (a) The parties shall exchange expert evidence and fact evidence by 30th September 2011. … (d) The parties shall exchange expert and fact evidence in reply by 21st October 2011.”
[7]Following the making of that order, Fresenius did not serve upon CareFusion re-amended statements of case in the forms attached to that order. Instead, what happened next was that on 30 September 2011, being the date on which under paragraph 8(a) of the order that the parties were due to exchange evidence, CareFusion’s solicitors wrote two letters to Fresenius’ solicitors. CareFusion’s position is that by those letters it exercised the right given it by paragraph 6 of the order to elect to consent to an order for revocation of the Patent. Accordingly, it is CareFusion’s position that these proceedings are now at an end. Fresenius contend, however, that CareFusion’s purported election was not effective for two reasons, which I will consider in turn.[8]The first reason advanced by Fresenius is that, because Fresenius never served any re-amended statements of case in the forms attached to the order, there was no “matter introduced by the …. re-amended Statements of Case”, and therefore the right to elect under paragraph 6 of the order had not arisen.[9]CareFusion’s answer to that contention is to say that the true effect of the order considered as a whole is that Fresenius’ re-amendments to their statements of case were effective as of the date of the order and that it was not open to Fresenius to withdraw the application to re-amend following the making of the order.[10]Counsel for CareFusion relied in particular upon three main points in support of that contention. First, he pointed to the wording of paragraph 2 of the order and in particular the words, “The Claimants shall serve”. His submission was that that wording was mandatory rather than directory, and that, if they failed to serve re-amended statements of case as soon as practicable, Fresenius would be in breach of it (although he did not go so far as to say that they had actually breached the order by the time of the two letters of 30 September 2011).[11]So far as that submission is concerned, it seems to me to be clear that that paragraph of the order was intended to be directory rather than mandatory. It is an order that is concerned with the timing of the service of the re-amended statements of case. It would be surprising if that wording were intended to compel Fresenius to proceed with the re-amendments. That interpretation is supported by the fact that paragraph 3 of the order provides for Carefusion to serve consequential amendments within five days of service of the re-amended statements of case. It is also supported by the fact that the order does not dispense with service of Fresenius’ re-amended statements of case.[12]The second and most substantial point made by counsel for CareFusion was to rely upon what was said by Aldous J in Instance v Denny BrosPrinting Ltd [1994] FSR 396 at 402:
"Mr. Watson was prepared to accept that a See v Scott-Paine order was an appropriate order to make. However, he submitted that in this case it would be wrong for his clients to have to elect now to go forward with the amendments at trial. He submitted that I should qualify the normal See v Scott-Paine order upon the basis that if the plaintiffs elected to discontinue then the defendants would have liberty within two days to give written notice to the plaintiffs that they would not rely upon the amendments. If they gave such notice then the costs provisions in the See v Scott-Paine order would not apply. I am not prepared to accede to such an order. I conclude that the correct order is the standard order. A defendant who seeks to amend is seeking an indulgence, particularly so in this case where the defendant is seeking to raise matters which in the main perhaps completely have been within the defendants' knowledge for a long time. They should elect first and decide whether they wish the amendments to be allowed and if they do, then the normal consequences will apply. Thereafter, the plaintiffs should have time to elect to discontinue."
[13]Counsel for CareFusion submitted that it was significant that Fresenius had neither asked for nor obtained in the wording of the order any provision enabling them to elect whether or not to proceed with the amendments, and that in the absence of any such provision Fresenius were irrevocably committed to the re-amendments.[14]I do not accept that submission. Fresenius were faced with a situation in which, first, their application to amend had only been allowed in part, and secondly, an adverse costs condition had been attached to permission to amend (the request for which, it may be noted, had not been foreshadowed by CareFusion in its skeleton argument prior to the hearing). In those circumstances, it is manifest that Fresenius would have wished to take stock to consider whether it was worthwhile proceeding with the amendment in those circumstances, and that they might well have concluded that it was no longer worthwhile.[15]For the reasons I have given, I consider that the express terms of the order as drawn did not compel Fresenius to serve the re-amended statements of case, but were merely permissive. Nor I do not consider that that should be implied from the omission of any provision for an election on the part of Fresenius.[16]The third point made by counsel for CareFusion focused in particular on paragraph 8(a) of the order, which required the parties to exchange written evidence by 30 September 2011. He submitted that the effect of that paragraph was that the parties were required to exchange all their evidence, including in relation to the new prior art, by that date, and that that confirmed that Fresenius were irrevocably committed to the re-amendments.[17]In my judgment, that is not a correct construction of the order. Whether the parties were obliged to include evidence relating to the new prior art would depend upon whether the new prior art was in the proceedings by that date, or not. If the new prior art had not been introduced by re-amended statements of case, then the parties were not obliged to serve written evidence relating to it. Furthermore, if the re-amendments were served too late for CareFusion to deal with them in its evidence on 30 September 2011, then it would have been justified in dealing with them in its reply evidence under paragraph 8(d). Accordingly, I do not see that paragraph 8(a) supports the conclusion that the order should be construed as compelling Fresenius to proceed with the amendments for which they had obtained permission.[18]For those reasons, I consider that Fresenius are correct to say that there was no “matter introduced by the aforesaid re-amended Statements of Case” on 30 September 2011, and accordingly the right to elect had not arisen by the time CareFusion purported to exercise it. I would add that nothing has changed since then.[19]Turning to the second reason relied upon by Fresenius, counsel for Fresenius pointed out that paragraph 6 of Norris J's order is not in standard See v Scott-Paine or Earth Closet form in that it includes the words “as a result of the matter introduced by the aforesaid re-amended Statements of Case”. His submission was that those words could not be ignored, but on the contrary had to be given meaning and effect. He argued that they should be construed purposively as requiring a concession on the part of CareFusion that the matter introduced by the re-amended statements of case, that is to say the Terumo Device, resulted in the Patent being invalid.[20]I am unable to accept that argument. The words in question simply do not require any concession on the part of CareFusion that the Patent is invalid, nor is that to be implied in my judgment.[21]On the other hand, I do accept the submission that the words cannot be ignored and must be given effect. It seems to me that what those words require is that CareFusion elects to consent to an order for revocation as a result of the matter introduced by the re-amended statements of case.[22]I turn then to CareFusion’s solicitors’ two letters dated 30 September 2011 to see whether they fulfil that requirement. The first letter contains eight numbered paragraphs, including the following passages: “2. Your clients made a very late application to amend their Grounds of Invalidity so as to introduce a new allegation of prior use in Japan, only 6 weeks before the trial is due to commence, for which you were given permission by the said Order. The result of this late addition to your client's case is that, in addition to the excessive costs that are involved in going to trial in England, which our client is already required to expend if it continues to defend its position, our client now has to carry out what would be very expensive urgent investigations in Japan into the circumstances of the alleged Japanese prior use based on the limited details given in your client’s pleading in the six weeks that remain before trial. 3. It was a condition of such permission to amend that your clients will have to pay our client's costs of these proceedings from 7 January 2011 if our client elects to withdraw the Defence and Counterclaim and to consent to the revocation of the patent in suit. 4. In defending the litigation initiated by your client against ours, as a prudent business organisation our client has to keep the commercial value of these proceedings to its business at the forefront of its mind. 5. Our client firmly believes the patent in suit is valid over all the prior art cited against it, including the Japanese prior use now added, and that if the matter were to go to trial the English court would find in our client’s favour that the patent was valid and infringed by your clients. 6. Nevertheless, from a business perspective the negligible benefit to our client's business in defending the English proceedings as outlined above is outweighed by:(i) the excessive costs of continuing to do so as outlined above; and(ii) the significant value to our client's business in recouping the costs your clients have forced our client to expend by issuing these proceedings against our client. 7. For these reasons our client has taken the pragmatic decision that the commercial value of succeeding in the English action is not worth the nuisance and expense of continuing to defend these proceedings. Accordingly we refer you to the election in our second letter of today’s date.” (i) the excessive costs of continuing to do so as outlined above; and (ii) the significant value to our client's business in recouping the costs your clients have forced our client to expend by issuing these proceedings against our client.[23]The second letter states as follows:
"We hereby notify you that our client elects to withdraw its Defence and Counterclaim and to consent to an order in the UK for the revocation of EP 1 200 143 B2 (UK) pursuant to paragraph 6 of the Order of Norris J made on 26 September 2011."
[24]In my judgment the second letter does not amount to a valid exercise of the right of election conferred by paragraph 6 of Norris J’s order, since it does not state that CareFusion will consent to an order for revocation of the Patent as a result of the matter introduced by the re-amended statements of case. That is not merely a matter of form, but also of substance, as can be seen when one looks at the first letter.[25]The first letter does not state that CareFusion is electing to consent to revocation as a result of the matter introduced by the re-amended statements of case. Rather, it asserts that CareFusion remains of the belief that the Patent in suit is valid over all the prior art cited against it, including the Terumo Device, and that if the matter were to go to trial the court would find that the Patent was valid and infringed. The reason given in the letter for CareFusion desiring to elect to withdraw its defence and counterclaim and consent to an order for revocation is, as it is put in paragraph 6, the negligible benefit to its business in defending the proceedings being outweighed by(i) the excessive costs of continuing to do so and(ii) the value to CareFusion in recouping costs if it does make the election under paragraph 6 of Norris J’s order.[26]The nearest the letter comes to suggesting that the matter introduced by the re-amended statements of case is even a factor in the decision is in the reference in paragraph 6(i) to “the excessive costs … as outlined above”. It is fair to say that in paragraph 2 mention is made of a requirement to carry out “very expensive urgent investigations in Japan”. However, that is stated to be in addition to the excessive costs that are involved in going to trial in England. Thus the reference to excessive costs in paragraph 6(i) would hold good even if there had been no requirement for the “very expensive urgent investigations in Japan”. CareFusion’s position, as expressed in paragraph 2, is that the costs were excessive anyway.[27]For those reasons, it seems to me that, even if CareFusion were right to say that the re-amended statements of case should be deemed to have been served, and that accordingly matter had been introduced by them so as to give rise to a right to elect under paragraph 6 of the order, CareFusion did not validly exercise that right in its two letters of 30 September 2011.[28]It follows that I do not accept that the proceedings have come to an end, as CareFusion contends. It does not seem to me to follow, however, that CareFusion should be debarred from adducing any evidence at trial without further ado. Although I suspect that, as a practical matter, CareFusion has already decided that it will not pursue this case to trial come what may, and hence the only real issue between the parties is one as to costs, nevertheless CareFusion must be given the opportunity to decide in the light of my judgment whether it wishes to pursue the case to trial or not.[29]In those circumstances, and given that counsel for CareFusion told me that CareFusion would wish to serve evidence if the matter were to proceed to trial, it seems to me that CareFusion should have a short further period in which to do so. That must be a very short period, having regard to the fact that the trial date, which is presently set for 7 November 2011, is now very close indeed. Accordingly, I shall make an order that CareFusion will be debarred from adducing any evidence unless it serves its written evidence within a short further period. I will hear counsel as to how long I should allow. (For proceedings: see separate transcript)[30]Having heard counsel on the question of the appropriate order I should make in the light of my judgment, I adhere to the view that the correct course is to make an unless order which provides that, unless CareFusion serves its written evidence within a specified period, it shall be debarred from adducing evidence at the trial of these proceedings.[31]Having regard to the circumstances in which the timetable set out in paragraph 8 of Norris J's order of 26 September 2011 was arrived at, I adhere to the view which I previously expressed, that the time allowed should be short. Counsel for Fresenius suggests that the appropriate period would be until 4 p.m. on Friday 14 October 2011.[32]Counsel for CareFusion effectively submits that I should not make any such order at all, but on the contrary should vacate the existing trial date. I am not satisfied, in the light of the present evidence before me, that that would be a correct order to make. In saying that, I make it clear that that is without any prejudice to any subsequent application on proper notice and evidence that CareFusion may care to make to vacate the trial date.[33]Accordingly, I will accede to the suggestion made by counsel for Fresenius, that the time to be specified in the unless order will be 4 p.m. on Friday 14 October 2011.[34]The other aspect of the submission made to me by counsel for CareFusion was the position regarding an appeal against my order. So far as that is concerned, I have come to the conclusion that the correct course is to give CareFusion permission to appeal against my order, since it seems to me that the questions are essentially questions of construction and are therefore ones that can be properly argued before the Court of Appeal; but I do not consider that that in and of itself provides a sufficient justification for vacating the trial date. I recognise, of course, that there is only a short period left between now and trial. I also recognise that the costs are being incurred by both parties in circumstances where, if CareFusion is right, the proceedings have actually come to an end. Nevertheless, those seem to me to be factors that militate in favour of an early hearing in front of the Court of Appeal rather than an order at this stage for vacation of the trial date.[35]Accordingly, for those reasons I will make an unless order with a time of 4 p.m. on Friday 14 October 2011. I will give permission to appeal. I decline to vacate the trial date, but without prejudice to any further application. MR. TAPPIN: My Lord, I should just mention that we are proposing to lodge an application for permission to appeal against the order of Norris J by way of a sort of insurance policy fallback in case the Court of Appeal says that my Lord has it wrong. Obviously it would be convenient for them to be heard together, but that is a matter for the Court of Appeal. I make our position clear so that my learned friend ---- MR. JUSTICE ARNOLD: So that it does not come as a huge surprise. MR. TAPPIN: Yes, and we are still in time for lodging that appeal. We will get on and do that. MR. JUSTICE ARNOLD: All right. MR. BALDWIN: My Lord, on that, I had not known about that before. Now I will ask for permission to appeal for the order you have just made about the unless order. That, in our submission, makes the position even more ridiculous if we have to incur the expense and go through to trial. MR. JUSTICE ARNOLD: I do not agree with that. MR. BALDWIN: If you please, in the permission to appeal I would ask for that to include the unless order you have just made as well. MR. JUSTICE ARNOLD: All right. It is one order, Mr. Baldwin. I am giving you permission to appeal against the whole thing. I do not think it requires anything special. MR. BALDWIN: So long as that is clear. MR. TAPPIN: I think maybe what my learned friend was asking for is somehow permission to appeal the unless order in a sort of freestanding way, not being contingent upon my Lord being wrong in the first place. I am not sure my Lord is intending that to be the effect. MR. JUSTICE ARNOLD: I am giving him permission to appeal generally. I do not presently see any basis for Mr. Baldwin getting out from underneath the unless order unless he establishes the basis upon which the order made was wrong. MR. TAPPIN: Yes, I think the Court of Appeal may say that was a case management decision. My Lord, costs. We would ask for our costs of the application and today's hearing as part of that application. MR. JUSTICE ARNOLD: All right. MR. TAPPIN: We have a statement of costs which I am told has not been served on the other side. MR. JUSTICE ARNOLD: So what do you want, an interim payment? MR. TAPPIN: I think that is probably it. I will just check. May I hand it up. (Same Handed) MR. JUSTICE ARNOLD: Let us deal with the principle first. Can you resist costs of the application, Mr. Baldwin? MR. BALDWIN: No. MR. JUSTICE ARNOLD: How much do you want by way of an interim payment, Mr. Tappin? MR. TAPPIN: I am looking at the numbers. I would submit that an appropriate interim payment would be £20,000. MR. JUSTICE ARNOLD: Mr. Baldwin? MR. BALDWIN: That is too high. We have not seen this at all. If my learned friend said 10, that would be reasonable. He has gone for two-thirds. It is a document we have not seen before, it has been a couple of hours hearing. What he is asking for is way too much, in my submission. MR. JUSTICE ARNOLD: All right. I will make an interim payment in the sum of £16,000. Is there anything else? MR. TAPPIN: The usual 14 days and so forth? MR. JUSTICE ARNOLD: Unless you are asking for longer, Mr. Baldwin? MR. BALDWIN: No. MR. JUSTICE ARNOLD: Is there anything else? MR. BALDWIN: We are asking for longer, I am so sorry. We are asking for 21 days. MR. JUSTICE ARNOLD: On what basis? MR. TAPPIN: The expert has to pay! (Laughter) MR. BALDWIN: On the basis that the clients are overseas, they are Americans. MR. JUSTICE ARNOLD: I do not regard that as a sufficient reason. 14 days. Could I ask you to agree and lodge with the associate a minute of order, please. Also, can you not take away the bundles, because I will need them for the purposes of reviewing the judgment. MR. TAPPIN: There is one other point I have just thought of, I am sorry. My Lord, the rejigging of the timetable means we probably ought to adjust the date for reply evidence, if some is served, by the other side. At the moment it is 21st October, which is going to be three weeks after the evidence originally. MR. JUSTICE ARNOLD: What about B and C, because that is documents for trial bundles. Have you complied with B? Presumably you have not. MR. TAPPIN: Presumably not. We need to adjust those. Can I just check. MR. JUSTICE ARNOLD: My immediate inclination is to say put all the time periods in B, C and D back by seven days. MR. TAPPIN: Yes, that would be sensible. MR. JUSTICE ARNOLD: Mr. Baldwin? MR. BALDWIN: Yes. MR. JUSTICE ARNOLD: I will make that order as well. Is there anything else? MR. TAPPIN: I do not think so. I think we are happy.