Malaysia - The Rise Of Merck And The Fall Of SKB Shutters

Legal News & Analysis – Asia Pacific - Malaysia - Intellectual Property

22 October, 2019

 

In this article, Michelle Loi Choi Yoke and Yap Khai Jian analyse the recent Federal Court patent case of Merck Sharp & Dohme Corp v Hovid Berhad1 which overruled SKB Shutters’ past ruling on the validity of a dependent claim of a patent upon invalidation of its independent claim. 


(Shearn Delamore & Co. was the counsel and represented Merck Sharp & Dohme Corp and its local licensee.)

 

Introduction — SKB Shutters

 

It has been acceptable practice that patents are filed with both independent and dependent claims. Claims define the parameters and boundaries that a third party should not encroach during the validity and subsistence of a patent.

 

In general, an independent claim is a broad stand-alone claim with a broad scope of monopoly. A dependent claim, on the other hand, is a claim which includes all the features of one or more other independent claims with additional or limiting features2. A dependent claim is often perceived as narrower in the scope of monopoly when compared with an independent claim owing to its additional or limiting features.

 

Where the validity of patent claims is challenged, the established approach prior to SKB Shutters Manufacturing Sdn Bhd v Seng Kong Shutters Industries Sdn Bhd3 (“SKB Shutters”), was for the court to assess each and every claim, be it an independent or dependent claim, separately and individually. This is consistent with the burden that the party raising the challenges must discharge4 and the exhaustive grounds of invalidation as set out in section 56(2) of the Patents Act 1983 (“Act”)5

 

However in 2015, the Federal Court in SKB Shutters ruled that the validity of a dependent claim will automatically fall upon the substantive finding of invalidity of the independent claim to which it is related (“SKB Shutters Ruling”).

 

More specifically, the Federal Court held that unless the dependent claims were redrafted to incorporate the features of the independent claim that they were dependent upon and were made as independent claims, the dependent claims cannot survive. This decision appeared to hinge on the inability of patentees to amend patent claims during the pendency of litigation as provided for under section 79A(3) of the Act6. Further, in reaching the SKB Shutters Ruling, the Federal Court relied on the Australian case of E I Du Pont De Nemours & Co v Imperial Chemical Industries Plc7 (“E I Du Pont”) without providing any basis for such reliance.

 

The somewhat controversial SKB Shutters Ruling caused a departure from the known practice of assessing each claim, be it independent or dependent, substantively if challenged in court.

 

Four years later, the Federal Court made the rare move of overruling the SKB Shutters Ruling in the case of Merck Sharp & Dohme Corp v Hovid Berhad (“Merck”)8.

 

Whether four years is perceived as a long duration of time is a subjective one. The Federal Court’s revisiting of its previous decision is an extremely rare feat, let alone persuading a panel of five judges to overrule its own brethrens’ decision. 

 

Facts of the case

 

In 2016, Merck Sharp & Dohme Corp and its local licensee (“Merck Corp”) initiated a patent infringement action at the High Court against Hovid Berhad (“Hovid”) on the basis that Hovid’s use of alendronate 70mg tablets infringed several claims of Merck Corp’s MY-118194 Patent for “pharmaceutical compositions for use in inhibiting bone resorption” (“the 194 Patent”). The claims of the 194 Patent as relied by Merck Corp in this infringement action included the independent claim 1 and several of its dependent claims. Hovid counter-claimed to invalidate Merck Corp’s 194 Patent on various grounds including the ground that the 194 Patent was obvious.

 

The High Court9 considered the independent claim 1 of the 194 Patent substantively and decided that the independent claim 1 was invalid on the ground of obviousness. As the High Court was bound by the SKB Shutters Ruling on the principle of stare decisis, it then went on to state that:

 

all the Dependent Claims shall be consequentially invalidated without a need for the Defendant [Hovid] to adduce evidence to invalidate each Dependent Claim. Nor is there a requirement for the Court to consider separately the validity of each Dependent Claim.”10

 

Dissatisfied, Merck Corp appealed against the High Court’s decision to the Court of Appeal. The Court of Appeal11 affirmed the decision of the High Court and stated that it too was bound by the SKB Shutters Ruling.

 

In 2018, Merck Corp applied for leave from the Federal Court to appeal against the decision of the Court of Appeal. The following question of law was raised:

 

Where an independent claim is adjudged to be invalid, whether claims which are dependent on the said independent claim would be automatically rendered invalid without the need for the Court to consider separately the validity of each and every dependent claim[s].” (“the Question”)

 

Leave was granted on the Question and the substantive appeal was heard on 29 April 2019. On 21 August 2019, the majority of the panel allowed the appeal of Merck Corp by answering the Question in the negative and expressly departed from the SKB Shutters Ruling.

 

The fall of the SKB Shutters Ruling

 

In departing from the SKB Shutters Ruling, the following main reasons were provided by the majority of the Federal Court: 

 

A. Misconception over the role of dependent claims

 

The Federal Court accepted that an independent claim defines the broadest penumbra of monopoly for the patentee whereas a dependent claim, with its additional or limiting features, outlines a narrower scope of monopoly. This is consistent with the description of a dependent claim as provided for under Regulation 14(1) of the Patents Regulations 1986 (“the Regulations”)12. As such, a dependent claim is sometimes considered as a “fall back” claim for the patentee in that its additional or limiting features are the patentee’s shields that could potentially better withstand validity challenges by third parties.

 

In arriving at this decision, the Federal Court drew examples from other jurisdictions such as the United Kingdom13, Australia14 and the United States of America15, holding that the SKB Shutters Ruling was not only inconsistent with the Act and Regulations, but also incompatible with the position in other jurisdictions.

 

B. Wrongful reliance on E I Du Pont

 

The majority in the Federal Court observed that the primary consideration of E I Du Pont was one of issue estoppel. The majority further emphasised that E I Du Pont is not the authority for a rule that a dependent claim will automatically fall upon invalidation of the relevant independent claim. In fact, Australian cases subsequent to E I Du Pontacknowledged the principle that all claims (be it independent or dependent) should be assessed individually and/or separately16.

 

C. Misinterpretation of the prohibition of amendment pending proceedings

 

Flowing from its reliance of E I Du Pont on the automatic invalidation of dependent claims, the Federal Court in SKB Shutters went a step further to explain that, in order for a dependent claim to survive, it must be amended to incorporate all the features of its independent claim. Otherwise, the dependent claim would be rendered unintelligible when its independent claim was found to be invalid. However, the Federal Court took the view that such amendment cannot be done due to the prohibition of amendment of claims pending court proceedings under section 79A(3) of the Act17.

 

In departing from the SKB Shutters Ruling, the majority decided to look at the relevant amendment provisions under the Act, namely, sections 56(3)18, 79A(3) and 57(2)19 of the Act holistically and held that section 79(3) of the Act does not prohibit amendment of patent to take place after the conclusion of the legal proceedings. The patentee may apply to the court to amend their claims and the filing be done after the final order of court or in the event of an appeal, until the appeal is disposed of. The prohibitive section 79(3) of the Act barring amendments during legal proceedings therefore remains intact. 

 

Welcoming Merck

 

The decision in Merck finally did away with the precarious position of a dependent claim because of the far reaching anomaly created by the SKB Shutters Ruling. Not only was it welcomed with relief by IP legal practitioners in Malaysia, patentees can now file their patents with dependent claims without the fear of having the dependent claims being automatically invalidated upon the invalidation of the relevant independent claim.

 

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For further information, please contact:

 

Michelle Loi Choi Yoke, Partner, Shearn Delamore & Co​

michelle.loi@shearndelamore.com