Pfizer Incorporated and Another v. Jiwa Internationl (HK) Co

HCA003299/1987

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HEADNOTE

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Patent infringement - question of what, if any, rights are held in Hong Kong by a registered certificate holder following the passing, of the Patents Act 1977 in the U.K. - can a licensee who is not registered sue without initially joining the patentee.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Hon. Penlington, J. in Chambers

Date of hearing: 22nd June 1987

Date of delivery of judgment: 22nd June 1987

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JUDGMENT

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1. On the 6th of June an ex parte order was made by Barnes J. whereby the defendant ("Jiwa'') was, inter alia, restrained, from importing, exporting, selling, keeping or parting with possession of a pharmaceutical product known as cefoperazone ("the drug"). The defendant was also required to give information regarding any stock of the drug in its custody and to deliver it up to the plaintiff's ("Pfizer") solicitors. An inter parte summons was taken out returnable on the 11th of June. This was adjourned for argument on the 21st June. On that day there was also before me a summons issued by Jiwa that the Pfizer's claim be dismissed as disclosing no cause of action and also an appeal from a decision of Master Perrior made on the 19th of June granting leave to add Toyama Chemical Co. Ltd. ("Toyama") as a second plaintiff.

Background

2. It was not in dispute that on the 26th of April 1979, Toyama registered a patent in the United Kingdom for the drug and that by an agreement dated 23rd October 1978 Toyama granted Pfizer certain rights in regard to the drug. It is a lengthy document but in summary the agreement was that Toyama would retain all its patent rights within Japan but it granted to Pfizer an exclusive wrold-wide licence to manufacture and sell the drug, in exchange for payment of royalties. The agreement covers all Japanese patents and all patents for the drug in a list of countries set out in a schedule, which includes the United Kingdom.

3. There were some other provisions on which Pfizer relies as showing that the agreement is for more than exclusive licence but amounts to a virtual assignment of Toyama's rights outside Japan.. Pfizer may apply to register a patent, in Toyama's name, in any country it wishes and Toyama will assist in such registration. Pfizer assumes sole responsibility for protecting against infringement of the patent outside Japan and any damages recovered for such infringement shall belong to Pfizer. Each party will .disclose to the other any improvements they make to the drug, without charge. The agreement is to last for 15 years or until the expiration of the patent whichever period is the longer. It is a very wide-ranging agreement.

4. In October 1986, it came to the attention of Pfizer that the drug was available in the People's Republic of China (''The P.R.C."). Some samples were. purchased and Jiwa's name is on them, described as "sole agent". These samples were manufactured in Italy, where pharmaceutical drugs cannot be protected by patent, and it would seem that is also the position in the P.R.C.

5. Inquiries were then made as to what import and export licences were held or had been applied for by Jiwa for the drug. These particulars were eventually supplied and, inter alia, it was disclosed that Jiwa had been given an import licence on the 13th of May for 130 cartons of the drug worth some HK$1,318,000. On the 4th of June, Pfizer was informed that an export licence for that quantity of the drug had been received and the licence would be available the following day. Pfizer immediately applied ex parte for its injunction.

6. The position regarding patent protection in Hong Kong is far from clear. Section 6 of the Registration of Patents Ordinance, Cap. 42 provides that registration of a U.K. patent in Hong Kong "shall confer on the applicant privileges and rights, subject to all conditions established by the law of Hong Kong, as though the patent had been granted in the United Kingdom with an extension to Hong Kong". The effect of that provisions has only once fallen to be considered by the H.K. Courts, in Smith, Kline and French v. the Attorney General^(l). There the Crown had been obtaining supplies of a patent drug from a source not authorised by the patentee, relying on the provision in Section 46(1) of the U.K. Patents Act 1949 whereby the Crown could make use of a patented product without payment. The Court of Appeal held that Section 6 of the Registration of Patents Ordinance, contrary to the Crown's contention, did not have the effect of making the Patents Act 1949 part of the law of Hong Kong but only to extend the rights and privileges of the patentee to Hong Kong on effecting registration here. At p. 504, Rigby, J. said "Section 6 of that Ordinance, in my view, does no more than extend to the patent holder by virtue of his certificate of registrations the same protective rights in Hong Kong as he already held in the U.K." These rights were therefore rights at common law but were subject to the Crown Proceedings Ordinance 1957 which gave a patent holder a right to sue the Crown for infringement of its patent.

7. There would seem to be a good case therefore that in respect of a patent registered in the U.K. before the enactment of the Patents Act 1977 registration in Hong Kong means that common law rights are available to the patentee in Hong Kong. Here however the patent was registered in the U.K. under the Patents Act 1977, which codified the law of patents. Thereafter Letters Patent were not issued as a matter of Royal Prerogative. If that Act is not in force in Hong Kong what rights does registration here afford the certificate holder?

8. In his book "Law of Intellectual and Industrial Property in Hong Kong", Mr. Michael Pendleton does not offer any complete answer to that problem and clearly it is one which calls for legislative intervention. Mr. Pendleton suggests that in the meantime the Courts could consider that even if the Patents Act 1977 is not in force in Hong Kong, the "effect" of it is. I find that argument somewhat difficult to follow but would prefer to say that even with the passing of the code contained in the Patents Act 1977 a registered certificate holder in Hong Kong of a U.K. patent has the same common law rights he would have had before the passing of that Act. In any event, however, it is not argued here that the certificate holder, Toyama, has no rights but that the licensee, Pfizer, cannot bring an action on its own. Mr. Pendleton said in his book relative to the suggestion that registration of a patent in Hong Kong now confers no rights whatever "proposals to counter this suggestion have reached the drafting stage". He wrote in January 1984. The law remains unchanged.

Defendant's case

9. Mr. Garland says that while Toyama, as the patentee and the "applicant" for registration in Hong Kong has aright of action, Pfizer as exclusive licensee does not. Section 61 of the Patents Act 1977 provides that proceedings may be brought by the proprietor of a patent in respect of any alleged infringement. It is true that Section 67 also provides that an exclusive licensee may also sue but he must also join the proprietor. Mr. Garland says that even so Section 67 is not part of the law of Hong Kong which is only the Registration of Patents Ordinance. It refers only to "applicant" - here Toyama.

10. Toyama have now been brought in as plaintiffs and Mr. Garland concedes that under Order 20 the Master has a wide discretion he has here exercised it wrongly by granting the order 48 hours before these applications were to be heard when the whole basis of the action was wrong. Pfizer did not have the right to sue and its action was misconceived ab initio It should be struck out and, if thought fit, a fresh action commenced. This is not the case of an equitable owner commencing proceedings and then joining the legal owner. Pfizer were well aware weeks ago of a possible infringement and should have asked Toyama for instructions to sue in their name initially.

The Plaintiff's case

11. Mr. Liao says that there are patent rights in Hong Kong belonging to Toyama but in which Pfizer have a dominant interest, and these rights have been infringed by importing the drug from Italy. The only question is what is Pfizer's capacity to sue. He says that Pfizer is authorised to sue under the licence agreement and is entitled to all damages recovered. That makes them more than just an exclusive licensee. Even if that is not so an exclusive licensee can sue in. its own name if it then joins the legal owner. He relies on the Scottish decisions of J.P. Cochrane and Co. v. Martins⁽²⁾ approved in Scottish Vacuum Cleaner Co. v. Provincial Cinematograph Theatres and Anr.⁽³⁾ and Christian Salveson (Oil Services) Ltd. v. Odfjell Drilling and Consulting Co. Ltd.⁽⁴⁾. In Scottish Vacuum Cleaner, Lord Ormidale said at p. 359 "I am content to adopt the opinion of Lord Dunedin in Cachrane and Co. v. Martins that a licensee can sue in his own name". Here it is submitted, Pfizer are in an even stronger position that the licensees in the Scottish cases referred to. In Heap v. Hartley⁽⁵⁾, it was held that an execlusive licensee could not sue unless it was coupled with a grant. That, Mr. Liao says, is the case here.

12. Furthermore Pfizer, while it has a right to sue, must join Toyama and that it has done. The order made was that Toyama became a plaintiff for all purposes and that the writ of summons and all documents be amended accordingly. That excludes judgments and orders made before the joinder but would include Toyama in any inter parte injunction order now to be made. In any event Order 15 Rule 6 gives the Court a very wide discretion to do what is necessary to see that the dispute is properly brought. He relies on A.G. v. Rhoudda Urban District Council & Pontypridd Waterworks Co.⁽⁶⁾.

13. So far as the defendant's application to strike out the claim is concerned Order 18 Rule 9 makes it clear that an action shall not be struck out unless clearly and without doubt it discloses no cause of action. That is not the case here. Clearly there are matters for argument but it is impossible to say at this stage that Pfizer has no cause of action. Order 18 Rule 9 is only applicable to "plain and obvious cases" per Lindlay M.R. in Hubbuck v. Wilkinson⁽⁷⁾.

Decision

14. I am satisfied that Pfizer is more than an exclusive licensee but has interest in the registered patent which it is entitled to take action to protect, provided it joins the legal owner, which it has now done. Whatever the law is in Hong Kong as to the rights afforded to a registered certificate holder, I am satisfied that at common law and equity Pfizer has the right to sue for an apparent infringement of those rights. The licence agreement clearly puts the responsibility for protection against infringement onto Pfizer who are also entitled to all damages recovered. This is a grant but even if they we're only an exclusive licensee, I am satisfied that Pfizer has a right initially to sue on its own name. I am also satisfied that the Order made by the Master joining Toyama was a proper one and indeed was required in order that the matter can be properly adjudicated on. I can see no reason whatever why the claim should be struck out and fresh proceedings instituted.

15. The defendant's application to strike out the claim is dismissed as is its appeal against the Master's decision. The interlocutory injunction will be granted in terms of the application.

16. Pfizer is entitled to its costs on the application to strike out its claim and on the defendant's appeal against the Master's decision. The costs of the injunction including the costs of the ex parte injunction will be costs in the cause.

(1) [1966] H.K.L.R. 498

(2) [1911] R.P.C. 284

(3) [1915] R.P.C. 353

(4) [1985] R.P.C. 569

(5) [1889] R.P.C. 495

(6) [1908] 1 Ch. 388

(7) [1899] Q. B. 91

Representation:

Andrew Liao (M/S Baker & Mckenzie) for both Plaintiffs

Peter Garland (M/S Hwang & Co.) for Defendant