Intellectual Property Litigation in the South African Life Sciences and Pharmaceuticals Sectors

Overview

South Africa remains a very active jurisdiction in the field of patent litigation in the pharmaceutical industry. A specialist court, the Court of Commissioner of Patents, hears all first instance matters relating to patent infringement and validity. The disputes are primarily between innovator and generic companies.

There is a large body of jurisprudence developed over many decades through the Court of the Commissioner of Patents and the Supreme Court of Appeal. In many instances, seminal judgments in the UK courts have been relied on in South Africa in developing law on issues such as novelty, enablement, inventive step and insufficiency. The laws of evidence and procedure are also very similar to those of the UK courts. Therefore, litigants in South Africa will be able to draw on many similarities to the UK in conducting litigation in South Africa.

Generally, most disputes relate to small molecules, new indications, dosage regimens and the like. Although there are early signs of disputes in relation to biosimilars, the trend has not been well developed yet.

South Africa does not have any legislation that links the rights of a patentee with obtaining market authorisation from SAHPRA (The South African Health Products Regulatory Authority). Once a generic registration is obtained, the innovator usually seeks assurances that their patent(s) will be respected. If the assurances are not provided and the generic company decides to continue to launch its product “at risk” (ie, before having cleared the way in relation to any patents), preliminary injunction proceedings usually commence.

Preliminary injunction proceedings continue to be the most common type of proceedings in South Africa and, unlike in some jurisdictions, the decisions continue to favour the grant of an injunction.

Preliminary injunctions and the validity of the claims

South Africa has a non-examining patent system with no substantive search and examination of South African patent applications taking place. Therefore, the grant of a South African patent is no guarantee of its validity. The onus is therefore on patentees to make voluntary amendments as soon as possible after becoming aware of prior art, for example, based on prior art revealed during search and substantive examination of corresponding foreign patent applications.

Changes to the South African patent system to introduce substantive examination have been mooted for several years (and draft legislation has been drawn up). Several preliminary steps have been taken, including training of examiners. Although the implementation has been anticipated for some time, it remains unclear when examination will commence.

Unlike in some jurisdictions, the South African courts in preliminary injunction proceedings do have regard to the validity of a patent in deciding what the prospects of success at trial would be. Thus, assuming infringement is not an issue, which is often the case with patents relating to compounds, new indications, dosage regimens and the like, an important consideration is the question of validity in deciding a preliminary injunction. For example, if narrowing amendments have been made in a foreign patent application in a major examining jurisdiction such as the EU or the US, but not in South Africa, it would be important to consider the impact of this on the South African proceedings.

Importantly, a single invalid claim in a South African patent renders the entire patent invalid and unenforceable until the invalidity has been cured by way of amendment. This applies even in circumstances in which the invalid claim is not being asserted in infringement proceedings. For example, it may not be open to a patentee to assert a specific claim directed to a commercially important molecule if the broader claim directed to a genus of compounds is invalid.

Therefore, a finding of partial invalidity may have fatal consequences in preliminary injunction proceedings. Furthermore, in trial proceedings, while the defect may be remedied by way of an amendment, any opposition to such an amendment is likely to result in a protracted and costly dispute concerning the allowability of the amendment before an order may be granted on the valid and infringed claim. Thus, a finding of partial invalidity in trial proceedings may also prejudice the patentee.

A patentee is entitled to amend the claims at any time before and after grant of a patent. However, since post-grant amendments are subject to advertisement for a two-month opposition period and possible opposition, an opposition to the post-grant amendment may result in a protracted dispute (of about 12 to 18 months) before the question of infringement may be dealt with.

It is not uncommon for generic companies to maintain a patent office watch over key patents and to lodge an opposition to any amendment application to frustrate the enforcement of the patent, while the opposition remains pending. This could result in a patent holder’s attempts to enforce the patent being frustrated for some time. In many cases where the launch of a competitor product is close to expiry, the patent holder may, as a result of the delayed enforcement, not obtain meaningful relief.

Proactive steps for patentees

For the above reasons, it is important to actively manage the prosecution of a South African patent application (especially since South Africa is a non-examining system). This may be done by delaying acceptance of a South African patent application for as long as possible to allow the prosecution of foreign applications in examining jurisdictions to be completed and for pre-grant amendments or divisional patent applications to be filed in South Africa.

A patentee may automatically delay acceptance for 15 months for a national phase entry on a Patent Co-operation Treaty (PCT) application, and for an indefinite period beyond that, on good cause shown. The Registrar of Patents routinely allows repeated delays of acceptance over many years on the ground that the patentee is awaiting the outcome of the prosecution of foreign applications. This allows for pre-grant amendments to be made which are not the subject of an opposition period and, importantly, divisional applications directed to commercially important embodiments may then be considered.

Care should be taken when formulating parent claim amendments and divisional application claims.

The South African Supreme Court of Appeal has confirmed that it is possible to obtain parent and divisional patents that include overlapping claims of varying scope. However, coterminous claims (claims of identical scope) are not allowed in the parent and divisional applications. Thus, typically, a parent application could maintain claims to broad subject matter while the divisional application is directed to a narrower commercially important embodiment.

The patentees that have had the most success in preliminary injunctions and other enforcement proceedings have actively managed the prosecution of their South African patents to ensure that the commercially important embodiments are claimed in one or more divisional applications.

Retailers – beware of preliminary injunctions

Three Bayer entities recently successfully obtained preliminary injunctions brought on an urgent basis against importers of generic medicines, pending the determination of trial actions.

It would be unusual for a patentee to join retail pharmacies and pharmaceutical product distributors in such proceedings because it would be anticipated that the pharmacies and distributors would respect the outcome of the preliminary injunction proceedings which relate to a specific product. However, in an unprecedented step, several pharmacies and a major distributor in South Africa took the view that since they were not named as respondents in the respective preliminary injunction applications, and since the injunctions were temporary in nature, the orders did not apply to them. On that basis, they continued distributing, offering for sale and selling the generic medicines which were in their possession at the time when the preliminary injunction orders were issued.

Bayer therefore applied for an urgent preliminary injunction against the distributor and pharmacies, with all but one pharmacy settling the matter after the institution of the application. The remaining distributor and pharmacy group were related and argued, among other things, that Bayer had known that they had been distributing and selling the generic medicines since around the time that Bayer instituted its preliminary injunction applications against the importers and that, therefore, the matter was not urgent anymore. Bayer counter-argued that it believed that pharmacies and distributors would respect a finding against an importer relating to a specific product.

The Court took a dim view of the continued distribution and selling of the generic medicines since the conduct related to a product that had been found on a prima facie basis to infringe a valid patent.

This case sends a clear message that pharmacies and distributors ought to respect preliminary injunctions ordered against importers of generic medicines even if they are not named as respondents in those proceedings.

The case should act as a deterrent going forward, and may avoid the need to join multiple pharmacies and distributors in future preliminary injunction proceedings.

Recently, the trial court found in favour of one of the generic companies on the issue of infringement and validity and Bayer are seeking leave to appeal against the findings.

Dosage regimen (prima facie) upheld in preliminary injunction application

One of the above mentioned Bayer preliminary injunction applications was against Dr Reddy’s Laboratories in respect of Bayer’s patent which comprised a single claim in the Swiss form.

The claim was directed to the use of rivaroxaban (an anti-coagulant) in the manufacture of a medicament for treating a specific group of thromboembolic disorders, for administration no more than once daily for at least five consecutive days, wherein the compound has a plasma concentration half-life of ten hours or less, is orally administered to a human patient, and wherein the oral dosage form is a rapid release tablet.

Dr Reddy’s argued that the Swiss form claim is a stratagem to avoid the prohibition in South Africa against the patenting of “second medical use” claims and “method of treatment” claims. The court confirmed having regard to an earlier first instance decision, in which both parties accepted the validity of Swiss form claims, that Swiss form claims are prima facie valid in South Africa.

In reaching its finding, the court had regard to the fact that in the UK, Swiss form claims were allowable and that in the earlier referred to first instance case, the judge in that matter also had no difficulty in having regard to the position in the UK.

Thus, although method of treatment claims are not allowable in South Africa, the court confirmed that such methods, including dosage regimens, are patentable in the Swiss form.

The court also found, on a prima facie basis, the dosage regimen to be inventive, although this issue is the subject of a pending trial decision.

The role of the public interest

For many years, the role of public interest did not play a significant role in preliminary injunction proceedings in South Africa. The issues were decided by applying principles relevant to the commercial dispute between the parties, such as prima facie infringement and validity (the prospects of success at trial), irreparable harm and the balance of convenience.

In 2012, in the Taxotere case, the South African Supreme Court had occasion to consider the role of public interest in the grant of preliminary injunctions. The Court found that the broader public interest, not just the interest of the litigating parties, must be placed on the scales when weighing up the balance of convenience. The public interest debate focused on the price difference between the innovator and generic medicine and the role this plays in restricting patient access to critical medicines.

The Court found in favour of the patentee on the facts of the case (including a marginal price differential between the generic medicine and the patentees own second brand medicine). The Court found that to refuse an injunction only to frustrate the patentee’s lawful monopoly would amount to an abuse of the Court’s powers.

Since the Taxotere case, the issue of public interest has been raised more frequently including in the above-mentioned Bayer cases.

The Court emphasised that the protection afforded by a patent serves the public interest because it provides an incentive for ongoing research and development which in principle underpins the protection provided by patents. Bayer had satisfied the requirements for the grant of a preliminary injunction and the Court was not persuaded by the evidence that the public interest considerations should sway the balance of convenience.

Therefore, the trend of favouring the patentee in the debate around affordable healthcare and public interest continues in the absence of compelling evidence suggesting that the balance of convenience should favour the refusal of the preliminary injunction. The Court continues to emphasise that the patent serves the public interest because it provides an incentive for ongoing research and development.

Bring your entire case

In the matter of Ascendis Animal Health v Merck Sharp Dohme and Merial, there were two proceedings pending. The first was an action for infringement and the second was an application for revocation. The action for infringement had been stayed pending the determination of the application for revocation.

The Supreme Court of Appeal, which is the highest court in South Africa on non-constitutional issues, found that the patent was valid. The applicant for revocation (Ascendis) had attacked the validity of the patent, in the application for revocation, on the ground of lack of novelty. Having been unsuccessful, the applicant then sought to amend its plea in the infringement proceedings to introduce a defence of lack of inventive step and lack of inutility.

The question of whether the plea could be amended in such a manner was heard by the Constitutional Court. The Court was divided. Five judges found that the plea ought not to be amended, finding that the issue of validity had been long worn and settled and holding otherwise would be to the prejudice of all. The other five judges found that each ground of revocation does not necessarily constitute a single cause of action and that because South Africa has a non-examining patent system there should be an inclination to encourage litigants to bring more litigation challenges.

Interestingly, because of the equal split in the decision, the Supreme Court of Appeal’s finding that the amendment to the plea should not be allowed, stood.

What this means is that if a court decides a particular ground of invalidity between the parties, in this case that of novelty, the principle of so-called res judicata applies between the parties in relation to all grounds of validity. It would not be competent for the same party to bring fresh proceedings against the patentee based on new grounds of invalidity, for example, lack of inventive step arguing that this is a separate issue/ground.

Therefore, litigants need to be circumspect about the basis on which they bring their validity case.

Be consistent across jurisdictions

In the matter of Villa Crop Protection v Bayer, the Constitutional Court had to decide whether to allow Villa Crop to amend its plea to introduce a special common law defence of unclean hands.

Its position was that the patentee, Bayer, had made statements in European countries that were in direct contradiction to the case advanced in the infringement proceedings. Bayer opposed the special plea on three grounds being:

• that it would require the Court to determine the validity of the patent which could only be determined after a finding that the patent in suit lacked novelty;
• that the proposed special plea is founded on allegations concerning facts and circumstances relating to patent laws and procedures in foreign jurisdictions dating back to eight years after the priority date of the patent, which are irrelevant to the validity of the patent; and
• that the amendment sought is not bona fide but is an abuse of process calculated to delay the hearing of the trial causing prejudice to Bayer.

The Court of the Commissioner of Patents refused the amendment to the plea and refused leave to appeal against its decision. An application for leave to appeal was made directly to the Supreme Court of Appeal and the Judge President of the Supreme Court of Appeal, which were, in both cases, refused. The Constitutional Court granted a hearing on the application for leave to appeal. The Constitutional Court found that the Commissioner of Patents had misapplied the law by incorrectly adopting the standard of the interests of justice. The Court had exercised its discretion to refuse the application to amend, by recourse to that incorrect standard. It further found that if the error in law was followed, it would infringe upon the rights of litigants to enjoy access to the courts, contrary to Section 34 of the Constitution. The Court therefore allowed the amendment of the plea to introduce the unclean hands defence.

There are previous examples in South Africa where an amendment to a patent has been refused on the basis that there was some inconsistency between the reasons given (they must be the full and true reasons) and statements made in other jurisdictions.

Although there is no finding of inconsistency in this case to date, the case highlights the importance of jurisdictional consistency, and the extent to which it can play a role in South Africa in one form or another. It also highlights the extent to which patent principles can intersect with procedural and constitutional issues, and how litigants can be drawn into protracted proceedings on such issues.