It is not often that Intellectual Property cases reach the Constitutional Court and so when the Constitutional Court recently was tasked to hand down its first decision on a patent case in Ascendis Animal Health (Pty) Ltd vs Merck Sharp Dohme Corporation and 2 Others  ZACC 41, this was indeed a momentous and newsworthy development in IP circles.
The core of the matter that the Constitutional Court had to decide, was whether an applicant who had failed in proving the invalidity of a patent in revocation proceedings, could use invalidity as a defence in an infringement hearing.
Briefly, in 2011, the Applicant (Ascendis) brought an application to have the Respondents’ (Merck) patent revoked, arguing that the patent did not meet the novelty requirements and was therefore not valid. The Respondent countered this by bringing an action against the Applicants, for infringing their patent by importing an anti-parasitic product and selling it in South Africa. As the matter was firmly based on the novelty of the invention, i.e. you can’t infringe a patent if it is not valid, the parties agreed to pause the infringement action, until the revocation application was settled.
It is important to take note, that an invention must meet the following three criteria for it to be patentable. It must be new, in that it must not form part of the state of the art; it must be inventive, i.e. not be obvious to a person skilled in the art; and it must be capable of use in the relevant trade.
The High Court granted the revocation order and declared the patent invalid on the ground that the invention was not new, in light of a previous invention. On appeal, the Supreme Court of Appeal, reversed this decision and held that the Respondents’ invention was indeed new and was accordingly valid.
In returning to the infringement proceedings, the Applicant who had initially raised a defence that the invention was not patentable, due to (1) lack of novelty and (2) obviousness, now sought to amend its defence by removing novelty and adding a third ground namely the inutility of the patent.
In reply, the Respondents pleaded res judicata as they claimed that the validity of the patent had already been decided on by the Supreme Court of Appeal, and therefore could not be argued again. The Respondents, noting that their patent’s life span was coming to an end, further applied for an interdict against the Applicants to prevent them from instituting any more proceedings.
The High Court agreed to the Respondent’s Res judicata argument, that a party should not be allowed to litigate the same cause of action against the same party twice, and refused the Applicant’s amendment based on the Supreme Court’s prior decision that the patent was valid.
The Applicant subsequently appealed to the Constitutional Court where 10 justices heard the matter on the ground that the constitutional right to have a fair hearing was in play. In interpreting the law, the Constitutional Court was split on two issues, namely:
- Whether the grounds for challenging a patent’s validity (novelty, obviousness and inutility) are single or separate causes of action; and therefore.
- Whether the defence of obviousness and/or utility raised in the infringement proceedings was res judicata – a matter already decided - because it related to the validity of the patent which decided on in revocation proceedings.
Justice Khampepe in concurrence with 4 other justices were of the view, that the three requirements for the patentability of an invention were three separate grounds, which could each be used separately. Therefore, should the novelty aspect be unsuccessful, the other two aspects could still be argued, as they remained unheard by a court.
She also noted that the revocation and infringement proceedings are governed separately and deliver a different outcome. A successful revocation order would strip the patent protection from the invention, while when a party raises a successful defence when sued for infringement, the patent remains valid, but just not enforceable against the successful defendant. Khampepe then concluded that since the obviousness and inutility arguments – as separate causes of action - were not heard or decided on, and that they would lead to a very different remedy in the infringement hearing, res judicata should not be applied, and the applicant should be allowed to amend its application.
The remaining 5 justices, headed by justice Cameron, confirmed the res judicata principle, finding that “…The doctrine of res judicata has ancient roots as an implement of justice. It seeks to protect litigants and the court from never-ending cycles of litigation…” They agreed with an old judgement warning against “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”.
They concluded that there was only one cause of action, the validity of the patent, and that the Applicant should have, as it was entitled to, made all its arguments during the revocation proceedings. Leaving grounds for a later date, is purely piecemeal litigation which should be prohibited. Cameron drew on earlier case law which stated “when the question of the validity of a patent is brought for trial by reason of the defendant’s contesting that question, he is bound to put his whole case before the Court; and if he does not do so, then it is his own misfortune.”
One must wonder why, on such a pivotal occasion, there was an even number of justices sitting on the bench. As the court stated “We must not lose sight of the fact that testing the validity of patents is in the public interest… there should be an inclination to encourage… more revocation challenges, not to create extensions in common law that increase the costs and risks of doing so”.
However, given that the Constitutional Court failed to reach a majority decision, we are left unfulfilled and undecided as to whether there were three causes of action or only one? Was res judicata present, or was it prematurely awarded? Taking the learned justices’ comments into consideration, this judgment will serve to caution litigants of the risk involved in failing to address all possible causes of action or grounds of defence, both before and during legal proceedings.
As it turns out, ‘the first patent matter’ decided by the Constitutional Court, was in fact not decided, and the High Court ruling prevails. It is ironic that the underlying rationale for the res judicata principle is to “ensure certainty on matters that have already been decided, promote finality and prevent the abuse of court processes”, which was quoted by the Constitutional Court in this matter. Yet, this matter as decided, has have left us wading in a sea of uncertainty.
Please note that the legal topics informally discussed here are general discussions of certain aspects and therefore certainly not intended as legal advice. We look forward to discussing your particular case with you.