Ascendis Animal Health (Pty) Ltd v Merck Sharp Dohme Corporation and Others

• Jurisdiction: South Africa
• Judge: Mogoeng CJ, Cameron J, Froneman J, Jafta J, Khampepe J, Ledwaba AJ, Madlanga J, Mhlantla J, Nicholls AJ and Theron J
• Judgment Date: 24 October 2019
• Docket Number: CCT 21/18
• Hearing Date: 24 October 2019
• Counsel: C Puckrin SC (with M Seale SC and T Ramogale) for the applicant. L Bowman SC (with G Marriot) for the respondents.
• Court: Constitutional Court

The court:

[1] The first judgment in this matter was written by Khampepe J and was concurred in by Froneman J, Ledwaba AJ, Nicholls AJ and Theron J. The effect of the first judgment is that five members of the court held that the application for leave to appeal should be granted and that the appeal should be upheld.

Khampepe J (Froneman J, Ledwaba AJ, Nicholls AJ and Theron J concurring)

[2] The second judgment in this matter was written by Cameron J and was concurred in by Mogoeng CJ, Jafta J, Madlanga J and Mhlantla J. The effect of the second judgment is that five members of the court held that leave to appeal should be granted and the appeal should be dismissed.

[3] There is thus no majority decision of this court. The result is that the judgment and order of the High Court of South Africa, Gauteng Division, Pretoria, stands.

[4] Considerations of fairness dictate that each party is ordered to pay its own costs in light of there not being a majority decision in this matter.

Judgment

Khampepe J (Froneman J, Ledwaba AJ, Nicholls AJ and Theron J concurring):

Nature of proceedings

[5] This is an application for leave to appeal against the judgment and order of Van der Westhuizen J, sitting as the Commissioner of Patents in the High Court of South Africa, Gauteng Division, Pretoria (the High Court). [1] The judgment of the High Court concerns two amendment applications made in patent infringement proceedings instituted by the respondents, as plaintiffs, against the applicant, as defendant. [2]

[6] The High Court refused to grant leave to appeal against the dismissal of the applicant's application to amend its pleadings before the High Court. The Supreme Court of Appeal dismissed the application for leave to appeal. The applicant now knocks on the doors of this court seeking to overturn the judgment and order of the High Court.

Background facts and litigation history

[7] In June 2011 the applicant, Ascendis Animal Health (Pty) Ltd, filed an application for the revocation of the South African Patent 1998/10975 (the 1998 patent) in terms of s 61(1) of the Patents Act (the Act) [3] on the basis that the invention was not patentable in terms of s 25 of the Act (revocation proceedings). The applicant pleaded that the 1998 patent was not new in terms of the definition in s 25(5) and (6) (novelty); [4]

Khampepe J (Froneman J, Ledwaba AJ, Nicholls AJ and Theron J concurring)

and that it lacked an inventive step in terms of the definition of s 25(10) (obviousness). [5]

[8] During the exchange of pleadings and relevant documents between the parties in the revocation proceedings, the first and second respondents, Merck Sharp Dohme Corporation and Merial Ltd, instituted proceedings against the applicant for infringing the 1998 patent (the infringement action). The respondents contended that since August 2011 the applicant had made, sold, used, offered for sale and/or imported an anti-parasitic formulation under the trademark entitled Ivermax LA Platinum and, due to these actions, had infringed and was continuing to infringe claims 1 – 7, 18 – 23 and 29 of the 1998 patent.

[9] The revocation proceedings turned on the validity of the 1998 patent in light of the disclosure in a separate patent registered in 1992; whereas the infringement action turned on the unauthorised use, and transgression, of the 1998 patent. However, underpinning both proceedings, albeit in different contexts and with different forms of relief sought, was the question of the validity of the 1998 patent. As evidence had already been led (by way of affidavits) in the revocation proceedings, the parties agreed to stay the infringement proceedings and proceed with the revocation proceedings to finality.

[10] In August 2012 the applicant sent a letter to the respondents advising them that it intended to first argue the novelty claim separately from the obviousness claim and, should this argument fail, the applicant would then apply to refer the obviousness claim for oral hearing where the applicant would lead evidence on this question. The logic behind this approach was that should the commissioner of patents find that the patent lacked novelty (on paper), then it would not need to hear oral evidence as the patent would have already been found to be invalid and the obviousness claim would not take the matter any further. The respondents opposed this and alleged that a referral of this nature was not in terms of a legitimate procedure or even appropriate. Subsequently, there was no agreement between the parties on the purported separation of the issues.

[11] Despite the objection raised by the respondents, the applicant persisted and asserted in its heads of argument that should the commissioner of patents find that the invention is not novel, then an application would be moved for the matter to be referred for the hearing of oral evidence on the second challenge to the patent — the ground of obviousness.

Khampepe J (Froneman J, Ledwaba AJ, Nicholls AJ and Theron J concurring)

Revocation application [6]

[12] The commissioner of patents, Teffo J, revoked the 1998 patent for lack of novelty, in light of the disclosure of the 1992 patent. She held that claims 1 – 29 of the 1998 patent failed to satisfy the requirements of novelty as set out in s 25(5) and (6) of the Act and therefore fell to be revoked. [7] Importantly, her finding was limited to novelty and did not address the obviousness claim. No reasons were advanced explicating the status of the obviousness claim or why it was not addressed.

[13] Aggrieved by the decision, the respondents approached the Supreme Court of Appeal on the novelty claim. The applicant made no attempt to appeal the failure to pronounce on the obviousness claim. It also did not advance any argument that the question of obviousness had been held over (by agreement or by order of court) for determination at a later date, pending the outcome of the novelty claim.

Supreme Court of Appeal [8]

[14] The Supreme Court of Appeal found, without mentioning the obviousness claim, that there was no merit in the attack on the patent's validity under the novelty claim and that the revocation application should have been dismissed with costs. [9] The Supreme Court of Appeal ordered that each of the claims of the 1998 patent be certified as being valid in terms of s 74 of the Act. [10]

[15] Subsequently, in light of the Supreme Court of Appeal's decision, the applicant filed a notice of intention to amend its plea in the infringement action. The applicant, through this amendment, sought to remove the novelty defence, keep the obviousness defence and introduce a new defence, inutility, in terms of s 61(1)(d) of the Act.

[16] The respondents opposed the applicant's amendment application and filed an application to amend their replication to the plea so as to plead res judicata in light of the Supreme Court of Appeal's judgment. Furthermore, the respondents, believing that the applicant was frustrating the proceedings, as the 1998 patent was set to expire in 2018, applied

Khampepe J (Froneman J, Ledwaba AJ, Nicholls AJ and Theron J concurring)

for an interim interdict prohibiting the applicant from further infringing the 1998 patent pending the outcome of the infringement action or until the expiry of this patent.

Interim interdict proceedings [11]

[17] Louw J held that it is trite that, generally, piecemeal litigation is to be avoided. [12] He found that the applicant was attempting to retry the matter by amending its pleadings in the infringement proceedings and this amounted to piecemeal litigation. [13] Louw J held that the applicant was attempting to do what the court in Chiron Corporation warned against, which is allowing 'a party with more than one cause of action or more than one ground of defence to advance one of them and then keep the others in reserve for a rainy day'. [14]

[18] As obiter (in passing), Louw J further remarked that if the applicant had in its heads of argument informed the Supreme Court of Appeal that it still intended to proceed with the obviousness claim, the Supreme Court of Appeal would have most likely refused to entertain the appeal as it is strongly opposed to hearing piecemeal appeals. [15] Unfortunately, the applicant did not inform or raise this with the Supreme Court of Appeal.

[19] Accordingly, he held that the applicant's attempt to rely on invalidity in the infringement action based on obviousness amounted to piecemeal litigation as the Supreme Court of Appeal had finally decided the issue of the 1998 patent's validity. [16] He further found that the respondents satisfied the requirements of an interim interdict, and therefore issued an interim order interdicting the applicant from infringing the patent, pending the final determination of the main application, and reserving the question of costs for determination in the action. [17]

Amendment applications in the High Court

[20] Before Van der Westhuizen J, the parties sought to amend their pleadings in the infringement action respectively as described above.

[21] The applicant's counsel contended that each ground for revocation of a patent, as provided in the Act, is a separate and distinct cause of action, and therefore by advancing a new and further ground of

Khampepe J (Froneman J, Ledwaba AJ, Nicholls AJ and Theron J concurring)

invalidity, the applicant was advancing a new cause of action that may be introduced by way of an amendment. [18]

[22] Van der Westhuizen J found no merit in this submission. [19] He found that the cause of action in an application for revocation of a patent is that of the invalidity of the patent. The validity of the patent may be challenged and attacked on various grounds listed in the Act. A party may therefore elect to rely on one or more of these listed grounds...