Posted: January 28th, 2013
Omnipharm Limited v Merial, Court of Appeal (Civil Division), London, UK, 23 January 2013, Case No  EWCA Civ 2
This was an appeal against the judgment of Floyd J, dated 21 December 2011, following a trial of an action brought by Omnipharm to revoke two of Merial’s patents, EP (UK) 0 881 881 (the ‘881 patent) and EP (UK) 2 317 564 (the ‘564 patent) on the grounds of obviousness and insufficiency.
The patents in suit both relate to ‘spot on’ formulations of parasiticide for protecting small animals against ticks and fleas; the ‘881 patent relating to formulations of fipronil and the ‘564 patent relating to fipronil in combination with an insect growth regulator (“IGR”). The patents protect Merial’s “Frontline” products which provide Merial with global sales of approximately $1 billion per year.
After allowing Merial’s proposed amendments, the trial judge declared the ‘881 patent valid, but found the ‘564 patent invalid for insufficiency. He also ordered Merial pay 40% of Omnipharm’s costs. Merial appealed. By way of contingent cross-appeal, Omnipharm contended that if the ‘564 patent was found to be sufficient, the judge would or ought to have found it invalid for obviousness and by parity of reasoning, should also have found the ‘881 patent invalid for obviousness.
The Court of Appeal upheld the trial judge’s decision on insufficiency. As a result the cross-appeal was not pursued.
The insufficiency appeal
Although Merial recognised that a finding of insufficiency is a kind of jury question which should be treated with appropriate respect by an appellate court, it argued that the trial judge made specific errors of principle, in particular, that:
1. The judge failed to take account of the whole of the teaching of the ‘564 patent;
2. the judge erred by in failing to recognise that there is no requirement for a patent to include specific examples;
3. the judge should have found that Omnipharm had failed to establish the patent was insufficient as it failed to produce evidence that the ‘564 patent could not be put into effect; and
4. the judge’s conclusion was inconsistent with the evidence
Lord Justice Kitchin reiterated the reasons expressed by Lord Hoffmann in Biogen v Medeva  RPC 1, that the appellate court should be very cautious in differing form a judge’s evaluation unless it can be shown that the judge has erred in principle or reached a conclusion that is perverse.
After reviewing the judgment and reviewing the evidence put before the trial judge, the Court of Appeal did not consider that the trial judge had made any errors of principle or reached any perverse conclusions. Consequently, it rejected all of Merial’s submissions and upheld the trial judge’s decision that the ‘564 patent was invalid for insufficiency.
The costs appeal
At the hearing of the appeal, Merial sought permission to appeal against that part of the trial judge’s cost order which required Merial to pay 40% of Omnipharm’s costs, leaving aside the costs of various interim applications.
In making his order for costs, the trial judge had concluded that Omnipharm was the overall winner as it had won its key commercial objective in bringing the action, namely clearing the way to enable it to market multiple fipronil spot-on formulations. Even though it was unsuccessful in its attack on the ‘881 patent, Omnipharm had succeeded in obtaining declarations of non-infringement for three out of four of its formulations, and was able to go to market with its preferred formulation.
However, the trial judge had also acknowledged that by successfully contending the validity of the ‘881 patent, Merial had succeeded in protecting its own commercial Frontline formulations. Giving too much weight to a decision about the overall winner might, therefore, cause an unjust result. He also concluded that it was not appropriate to apply a strict issue based approach – particularly as the issues of obviousness and insufficiency had been so interrelated in this case. He concluded that the justice of the case demanded Merial pay 40% of Omnipharm’s costs.
Merial sought permission to appeal on the basis that the judge ought to have found that as both sides were partially successful, there was no overall winner and costs should have been decided on an issue by issue approach. In addition, Merial contended that the issues of obviousness and insufficiency were substantially different and should be treated independently in any costs award.
Lord Justice Kitchin reiterated the principles to be applied when considering an appeal against a final costs order, namely that the Court of Appeal should only interfere with the judge’s exercise of his discretion if he has “exceeded the generous ambit within which reasonable disagreement is possible” Tanfern v Cameron-MacDonald  1 WLR 1311.
The Court of Appeal granted Merial permission to appeal on the basis that it was arguable that the trial judge went further than was reasonably open to him in concluding that Omnipharm was the winner and his overall costs award exceeded the generous ambit within which reasonable disagreement is possible.
However, after hearing full argument, the Court of Appeal upheld the trial judge’s order. It considered that the trial judge was entitled to come to the conclusion that Omnipharm was the overall winner of the case given that it had “won a substantial part of the prize for which it fought the action”. Furthermore, although the allegations of obviousness and insufficiency had different starting points, in this case there was substantial overlap between them. The trial judge was therefore entitled to say that there was, in relation to the ‘564 patent, a genuine squeeze between insufficiency and obviousness and make his costs award accordingly. The Court of Appeal concluded that the trial judge and approached the matter entirely properly and was perfectly entitled to come to the overall conclusion that he did.
Read the judgment (in English) here.
Head note: Sara de Sousa and Gillian Johnson