Servier v Apotex: Illegality Earns $17.5 Million in Damages

Servier v Apotex: Illegality Earns $17.5 Million in Damages

Normally, doing something that breaks the law earns you a punishment, including a fine, community service, or even imprisonment. However, when Apotex Inc., a large generic pharmaceutical company, began producing and selling a drug that Servier Laboratories Limited, another large pharmaceutical company, had patented, Apotex was awarded $17.5 million.

When Apotex began distributing its drug in the United Kingdom, Servier sued it for infringing on Servier's European patent. The European patent covered the particular crystalline form of perindopril erbumine that Servier marketed under the trade mark COVERSYL, and that Apotex was marketing as a generic pharmaceutical. Servier managed to obtain an interim injunction against Apotex, which prevented Apotex from selling their drug in the UK from August 2006 until July 2007. As part of the application for an injunction, Servier submitted a cross-undertaking in damages, stating that it would compensate Apotex if the injunction improperly caused Apotex to lose profits. In July 2007, the English High Court held that Servier's European patent was invalid, since it lacked novelty. One year later, the court awarded Apotex $17.5 million as a result of Servier's cross-undertaking, since Apotex lost a year's worth of potential profits.

Servier also held a patent on perindopril erbumine in Canada, where Apotex was manufacturing its drug. However, the Federal Court of Appeal in Canada, unlike its counterpart overseas, upheld Servier's patent, and held that Apotex was breaching Servier's patent by manufacturing its drug in Canada. Since the manufacture of the drug was illegal, Servier believed that Apotex should not benefit from its own wrongdoing by receiving damages from Servier. Servier appealed the damage award, citing the legal principle of ex turpi causa non oritur actio, which means that no legal claim shall arise from an illegal or immoral action.

Apotex made several arguments to combat Servier's ex turpi causa claim, including the argument that the ex turpi causa rule only applies to criminal offences, or acts of moral turpitude. The appeal judge rejected Apotex's arguments, and ordered Apotex to repay Servier the $17.5 million in damages. However, Apotex appealed yet again, and added an important element to its claim. Apotex conceded that the damages it received should be reduced by an amount proportionate to what a Canadian court would have awarded Servier as a result of Apotex's breach of Servier's Canadian patent.

The case turned for the English Court of Appeal judges on both the application of the ex turpi causa rule, and Apotex's acceptance of a proportionate reduction in the damage award it received. The judges believed that not every legal or moral wrong necessarily deprives the wrongdoer of the ability to apply for a remedy, while relying on the wrongdoing as an element of the claim. The definition of a patent is that the patent holder owns a monopoly on the patented material. Since Servier's European patent was held to be invalid, it turned out that they held an illegitimate monopoly on perindopril erbumine for a time; since that is the case, it seems as though Servier should have been disgorged for their ill-gotten gains, rather than Apotex. The Court of Appeal held that Apotex was merely attempting to challenge Servier's patent, and that Apotex had a reasonably held belief that Servier's patent was invalid. Although Apotex lost its litigation against Servier in Canada, the judges maintained that Apotex's actions fell on the low end of the scale of legal and moral culpability.

As well, the judges felt that Apotex's concession of a reduction in its damage award was a crucial reason to allow Apotex's appeal. By agreeing to reduce the quantum of damages by the amount that a Canadian court would have awarded to Servier, Apotex adequately remedied Servier for Apotex's wrongdoing. Therefore, if there were any damages left over after the reduction, Apotex would not be benefitting from its wrongdoing, so the ex turpi causa rule would not apply. As a result, the Court of Appeal allowed Apotex's appeal.

This case is important for its consideration of conflicting international intellectual property rights, and its consideration of the proper test for the ex turpi causa rule. With regard to both, the English courts appear to have a great deal of deference to Canadian law. It is encouraging to see that level of respect, especially since the Canadian court reached a decision which was the exact opposite of the English court with regard to the validity of Servier's patent. Hopefully, that level of mutual respect can continue between the two countries' judiciaries.

Evan Reinblatt is a JD candidate at Western University, Faculty of Law.