In a recent patent case, the grant of a supplementary protection certificate ("SPC") – which gives up to five years' extra patent protection – was revoked by the UK High Court as a consequence of annuity fees being underpaid by a company's agent.
It was confirmed that where the effective period chosen by the applicant is less than the maximum allowable period of the certificate, the period cannot subsequently be extended unless an application for an extension is made under the Paediatric Regulation (defined below). The Court ruled that it was not possible for the applicant to opt of its payment obligations by attempting to pay renewal fees annually.
The judge also made some useful observations on those factors that should be considered when determining applications for the capping of recoverable costs.
Recorder Douglas Campbell QC (sitting as judge of the Patents Court) considered a joint decision on two appeals in relation to a SPC in the name of Genentech, Inc ("Genentech"). The SPC in question related to an eye-treatment product sold under the brand "Lucentis" and had been granted in July 2017.
Had the appropriate fees had been paid, the term of the SPC would have expired in January 2022. Under Article 13(1) of the Regulation (EC) No 469/2009 (the "SPC Regulation") and paragraph 5 Schedule 4A of the UK Patents Act 1977 ("PA"), the owner of a SPC in the UK is required to pay a fee for each year of the SPC in one lump sum before the SPC takes effect.
Genentech had employed Master Data Center, Inc ("MDC"), a patent administration company, to pay the relevant fees to the Comptroller General of Patents (the "Comptroller") at the UK Intellectual Property Office ("UKIPO") for the maximum available term of the SPC. However, MDC failed to follow Genentech's instructions, paying only a two-year term (rather than a four-year term), which meant that the SPC would instead terminate in April 2020.
Furthermore, MDC's error prevented Genentech from being awarded the six-month paediatric extension, which rewards work done and facilitates the development and accessibility of medicinal products in the paediatric population, that would have been available under Article 36 of the Regulation (EC) No.1901/2006 (the "Paediatric Regulation").
MDC's underpayment of fees
MDC contended that underpaying the fees for a SPC term should not equate to shortening the permitted SPC term, as the period should be defined only according to Article 13 of the SPC Regulation, by which the period available is determined based upon the patent filing date and the date of the marketing authorisation. MDC also argued that it was expecting a reminder from the UKIPO to pay for the fees as it had received on at least two previous occasions.
MDC's arguments on procedural irregularities were rejected. The UKIPO has the power to shorten SPC terms in accordance with the SPC Regulation if applicants choose to take a certificate for a shorter period than set by Article 13 and, in accordance with Article 14(c) with regard to the expiry of a SPC, such SPC will lapse if the expected annual fee is not received.
This ruling against MDC is in line with the decision Lord Justice Kitchin in the case of Tulane Education Fund, where it was held that the fees were annual fees (as referred to in Article 14 of the SPC Regulation) and payable in full upfront. Moreover, the explanatory memorandum that accompanies the provisions, relating to how failure to pay renewal fees will result in the lapse of the certificate, reads [paragraph 38]:
"This Article states that the Member States may provide that renewal of the certificate will be subject to the payment of a fee. It will be for the Member of States to establish the amount if they decide to introduce such fees, failure of which to pay would cause the certificate to lapse..."
Therefore, a patentee is entitled to elect to pay but for a shorter period where desired, after which the SPC will expire as prescribed in Article 14(c). Accordingly, the appeal by MDC was dismissed.
Genentech's payment of additional fees
Pursuant to Rule 116(5) of the Patents Rules 2007, it is permitted for an applicant to pay a further £200 fee for a paediatric extension where it is not expected that the work will be completed before the SPC has begun or after the payment of the annual fees lump sum. An application for extension is only permitted for the paediatric extension itself since the policy upon which the rule is based is in order to 'incentivise paediatric work, not late work'. For this reason, the Court rejected Genentech's argument that Rule 116(5) also permitted the late payment of further annual fees.
In addition, Genentech also contended that the form could be corrected under Section 117 PA and wished to reallocate the funds in MDC's deposit account, which held sufficient fees to cover the correct fee of £3000. In answer to this submission, the judge referred to:
- case law where decisions established that the general powers of Section 117 PA cannot be used to circumvent the clear mandatory specific legislative requirements; and
- the Hearing Officer's argument that the fee was not actually paid until it was allocated to a fee-bearing action, thus deemed unavailable to the UKIPO save on MDC's instruction.
Consequently both applications for permission to appeal by MDC and Genentech were dismissed.
Decision on costs
The judge had the discretionary power to decide whether or not to allow the UKIPO's application in which it sought that the recoverable costs of both these appeals should be limited to £30,000. The test to be applied is that contained in Civil Procedure Rule Part 52.19 and the judge considered the following factors:
- An appeal court may make an order that the recoverable costs of an appeal be capped to the extent specified by the court, but only in proceedings in which costs recovery is normally limited or excluded. It was held that the UKIPO's proceedings fell in this category because these were appeals from an ex parte decision in the UKIPO and costs are not awarded in such circumstances according to paragraph 17 of the Tribunal Practice Notice 2/2000 (Costs in in patent, trade mark and design proceedings before the Comptroller)
- The financial means of both parties should be taken into consideration and, in this regard, both MDC and the UKIPO had substantial funds which could be used for litigation
- As regards to "all the circumstances of the case", the Court held that it:
- should treat the UKIPO as a public body because its duty was to administer the patent system and therefore this raised important points of public policy;
- accepted that MDC was not presented with alternatives such as mediation or arbitration to fight this appeal; and
- recognised the urgency of the decision due to the imminent expiry date of the SPC.
- The large costs liability would inevitably fall onto the public if the costs capping order was refused. The Comptroller's costs would not exceed £30,000 and MDC's costs incurred could reach over £172,000. Access to justice was another important point to consider in the test, so these figures needed to be borne in mind, although it was accepted that MDC would have proceeded with a further appeal even if an costs capping order was not granted
- It might not have been appropriate to make a cost capping order if the appeal raised an important point of principle or practice upon which substantial sums might turn. The judge did not find the "substantial sums" limb of the test clear enough in this case because most SPC owners were likely to pay the modest sum due for the maximum term available.
It was decided that a separate order should be made for each appeal because the appellants were distinct legal entities running separate appeals (although they adopted each other's arguments).
The judge made reference to cases where costs were limited to £30,000 and others to £20,000 and decided that he should cap the recoverable costs on both appeals at £25,000 each.
Potential effect on third party of allowing a rectification
The judge was firm in his decision not to allow the annual fees to be paid later but agreed that the term of the SPC could have been doubled had the rectification been allowed. He acknowledged that the potential impact on third parties could be significant but "sufficiently addressed by advertising it and providing an opportunity for third parties to object".
Discretion to allow the rectifications
According to Section 117 PA, "the Comptroller may, subject to any provision of rules, correct any error of translation or transcription, clerical error or mistake in any specification of a patent or application for a patent or any document filed in connection with a patent or such an application".
Genentech had argued that the UKIPO should have used their discretion in permitting the annual fees to be paid later and in doing so citied Rule 105(3). However, Rule 105(3), which deals with requests to correct a specification of a patent or application, will not permit corrections to be made unless it is immediately obvious that nothing else could have been intended in the original specification. In this case, it was not evident that Genentech and MDC did not intentionally wish to reduce the SPC term.
The pivotal factor for the judge in deciding whether discretion should be exercised to correct the fees turned on the repeated failure by MDC to process the SPC payments on three occasions. The UKIPO had already reminded MDC twice to pay the correct annual fees when the payment received was for less than the duration provided by Article 13. Writing reminders to the parties was not considered an accepted UKIPO practice, as MDC had suggested, but rather as evidence that MDC kept repeating the same mistake.
For companies employing patent administration companies, this case is a reminder that they may not receive much sympathy from the courts given that they have specifically tasked such agents to deal with the issue of fee payments. It was ultimately Genentech's decision to carry on using MDC. Companies need to be clear about their instructions when contacting their agents and it would be good practice to liaise with them on a regular basis in order avoid errors of this nature.
Discretion on costs capping orders
In determining the quantum, the judge recognised that the cap sought was much less than the costs that MDC had incurred to date but such would be quite common a circumstance within the context of costs capping orders; Tribunal Practice Notice 2/2000 states that "Hearing Officers will be prepared to exceed the scale when circumstances warrant it, in particular but not exclusively to deal proportionately with breaches of rules, delaying tactics and other unreasonable behaviour", in accordance with paragraphs 8 and 9 therein.
Finally, the benchmark provided by the Comptroller's own costs had to be treated carefully because the UKIPO was able to get access to high-quality advice at significantly lower rates, whereas this may not be the case for commercial entities such as MDC or Genentech. This result does therefore not necessarily establish a scale for the recommended fees that a privately-funded litigant might expect to pay, but it does provide some guidance for the level at which it might be appropriate to cap costs in cases similar to this one.
 Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products
 Regulation (EC) No 1901/2006 of the European Parliament and of the Council of 12 December 2006 on medicinal products for paediatric use
Tulane Education Fund v The Comptroller General of Patents  EWCA Civ 890