Case  CCT212/18
[2019] ZACC 41

 Date of Hearing:  09 May 2019
Judgement Date: 24 October 2019

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On Thursday, 24 October 2019 at 10h00, the Constitutional Court handed down judgment in an application for leave to appeal against a judgment by the Commissioner of Patents which refused an application by Ascendis Animal Health (Pty) Limited to amend its plea and granted an application by Merck Sharpe Dohme Corporation, Merial Limited and Merial South Africa (Pty) Limited to amend their plea in patent infringement proceedings, regarding Merck and Merial’s patent for an anti-parasitic formulation.

In June 2011, Ascendis instituted patent revocation proceedings against Merck and Merial’s patent, claiming that the patent was invalid as it lacked novelty and inventiveness.  In October 2011, while the revocation proceedings were ongoing, Merck and Merial instituted proceedings claiming damages against Ascendis, in which they claimed that Ascendis had infringed and was continuing to infringe Merck and Merial’s patent.

Merck and Merial stayed their infringement action pending the finalisation of Ascendis’s revocation proceedings.  At the revocation hearing, Ascendis, without bringing a formal application, requested to proceed first with the lack of novelty claim and, only if this was unsuccessful, move on to argue the obviousness claim.  Ascendis proceeded to attack the patent exclusively based on lack of novelty.  The Commissioner found in favour of Ascendis and revoked the patent for its lack of novelty.  The Supreme Court of Appeal overturned this finding on appeal and found in favour of Merck and Merial.

After the ruling by the Supreme Court of Appeal, Ascendis sought to amend its plea in the infringement action, to remove the defence of lack of novelty and to add an additional defence.  This was that the patent was invalid because of inutility.  Merck and Merial sought to amend their pleadings in the same proceedings, to submit that all challenges to their patent were res judicata (already decided by a court) since the validity of the patent had already been finally upheld by the Supreme Court of Appeal.

The Commissioner, in hearing the infringement action, held that in a revocation application, the grounds on which an applicant may rely to attack the validity of a patent are not separate causes of action.  The Commissioner held that Ascendis had abandoned obviousness as a ground of invalidity and that it had not reserved the right to rely upon a separate ground of alleged invalidity.  The validity of the patent was res judicata between the parties.  Ascendis sought to appeal against this decision to the Supreme Court of Appeal, but leave to appeal was refused.

Before the Constitutional Court, Ascendis contended that the Commissioner extended the rule of res judicata beyond the boundaries within which it previously has been applied.  It contended that the different subsections dealing with invalidity in section 61 of the Patents Act 57 of 1978 each require different facts to be proved.  They therefore constitute separate, individual causes of action.  Finally, Ascendis contended that the Commissioner erred in holding that the alleged procedural error by its counsel could preclude Ascendis from raising a different basis for invalidity than what had already been ruled upon, as a defence in separate proceedings.

Merck and Merial contended that the Commissioner correctly applied the res judicata principle and “the once and for all” rule.  The defence Ascendis sought to rely on constitutes the same cause of action, namely that the patent was invalid, which the Supreme Court of Appeal had already conclusively dismissed.  Further, even if the matter is not res judicata, litigating the validity of a patent in the way Ascendis seeks to do would constitute an abuse of process.

In an evenly split decision by the Constitutional Court, the first judgment penned by Khampepe J (with Froneman J, Ledwaba AJ, Nicholls AJ and Theron J concurring) would have granted leave to appeal and upheld the appeal.  The first judgment held that the Patents Act endorses two separate proceedings with their own rules and remedies.  It would be improper for the Court to conclude that the findings in the revocation proceedings have a final effect on the infringement action in regard to causes of action which have not been decided in revocation proceedings.  Further, the first judgment held that each of the grounds of revocation found in section 61 of the Patents Act require different material facts to be proved.  Accordingly, they constitute separate, distinct and independent causes of action that can be raised even after one has been dismissed.

Hence, according to the first judgment, absent any final and definitive decision made by a competent court, Ascendis’s claim of inutility was not a cause of action that could be said to be res judicata.

Furthermore, according to the first judgment, Ascendis’s claim of obviousness could also not be said to have been decided on its merits in the revocation proceedings.  However, Ascendis’s seeming procedural error in abandoning this claim should not exclude it from the parallel proceedings.  In addition, the first judgment found that in the revocation proceedings before the Commissioner, the parties pleaded the obviousness claim which placed the Commissioner under a duty to pronounce on the status of that claim.

In respect of Merck and Merial’s contention that Ascendis’s conduct in the litigation proceedings constituted abuse of process, the first judgment could not make a conclusive finding of abuse of process by Ascendis, as Merck and Merial did not fully plead and argue abuse of process on the facts.

The second judgment penned by Cameron J (with Mogoeng CJ, Jafta J, Madlanga J and Mhlantla J concurring) would have granted leave to appeal but dismissed the appeal.  The second judgment found that the Commissioner correctly discerned the “real issue” between the parties.  This was whether the judgment of the Supreme Court of Appeal, which rebuffed Ascendis’s attempt to revoke Merck’s patent, had conclusively determined the validity of the patent.  This was the issue before the Constitutional Court too.  That issue had already been conclusively determined between the parties when the Supreme Court of Appeal ruled that the patent was valid.  It was accordingly res judicata.  The second judgment further held that the default position postulated by the first judgment would result in incoherence and affront the long-held judicial caution against piecemeal litigation.  The default position should rather be that a previously unsuccessful revocation applicant is generally, though not invariably precluded from raising the validity of the patent as a defence to a subsequent damages claim.  If this is unfair, then a court should allow the latter defence to be raised, but only in exceptional circumstances.

In the result, five Judges of the Constitutional Court held that the appeal should be upheld as set out in the judgment of Khampepe J and five Judges held that the appeal should be dismissed as set out in the judgment of Cameron J.  There is thus no majority decision of the Constitutional Court.  Accordingly, the judgment and order of the Commissioner stands.

 

The Full judgment  here