A dispute between two pharmaceutical manufacturers gave rise to an important ruling by the Supreme Court on key issues with respect to Israeli statute of limitation (C.A, 5474/18 Unipharm Ltd. v. Glaxo SmitkKline p.l.c (18.6.2024).
Background
Starting in 1995, the respondents – Glaxo SmitkKline and its Israeli subsidiary (“Glaxo”) – marketed an antidepressant and antianxiety drug by the name of Seroxat.
In 2011, Unipharm Ltd. (“Unipharm”) filed a lawsuit with the District Court, which is the subject of the appeal to the Supreme Court. The appellant, Unipharm, a generic drug manufacturer, claimed that during the period of 1995 to 2011, the respondents, Glaxco, exploited their position as a monopoly in the field of antidepressant drugs, and acted to deter competitors from marketing drugs that competed with Seroxat. Allegedly, the respondents did so by:
- Filing, in 2000, a patent application (“the Patent Application”), which was rejected by the Patents Registrar in 2009 following the appellant’s opposition, in which it was claimed that Glaxo concealed from the Israel Patent Office material information, namely – the existence of a relevant prior patent application (“the Opposition”).
- Filing, in 2000, a patent infringement claim against Unipharm, which was dismissed by the court in 2006.
The District Court dismissed the lawsuit, both based on the statute of limitations and lack of cause of action, hence the appeal to the Supreme Court.
The Supreme Court’s ruling focused on issues related to the statute of limitations, and so will this review.
Date of Commencement of the Limitation Period
The court reiterated the rule that “the limitation period begins on the day on which the cause of action arose” (Section 6 of the Statute of Limitations Law, 5718-1958; “the Law”), and that (in the absence of another agreement, or another legal provision, for example, in insurance matters) it ends 7 years from that date (Section 5 of the Law). In addition, there are various situations in which the limitation period is suspended, tolled or recalculated.
It was ruled that the cause of action arose on the date on which all the facts necessary to prove the claim under substantive law were formed, and the plaintiff had a “power of action”, i.e. a real possibility to file a claim and be entitled to the relief sought.
The Supreme Court held that all actions attributed to the respondents were taken no later than 2001, including the filing of the Patent Application (in 1996) and the infringement claim (in 2000). The continuation of the legal proceedings beyond 2001 does not change the conclusion that the facts forming the cause of action were formed no later than 2001.
The court rejected Unipharm’s argument that the formation of its cause of action was conditioned on the decision on the Opposition (in 2009). The court held that whether or not the Patent Application was based on incomplete and misleading information, is a legal question. The content of the decision on the Opposition, and the question whether or not the Registrar was actually misled, are irrelevant.
Continuous Tort
Unipharm further argued that the determination that the cause of action arose by no later than 2001 ignores the fact that the legal proceedings continued until 2009, and created a continuing threat to Unipharm from marketing a competing product, hence – a continuous tort.
The Supreme Court rejected Unipharm’s “continuing tort” argument, noting that what constitutes a “continuing tort” is neither a simple question nor was it fully addressed in the case law. It was further noted that the question whether an act or omission constitutes a continuing tort is a question that involves both factual and legal aspects, that take into account, inter alia, policy and other normative considerations.
It was ruled that, in general, a continuous tort involves a continuing act or omission, namely – an act or omission in which essential characteristics are repeated continuously. An additional condition referred to in the ruling for recognizing a continuing tort is that the wrongdoer has the reasonable power to cease committing the tort and causing the damage. A tort will be deemed a continuing tort when the wrongdoer has a positive duty to repair the damage he caused, for example – when the wrongdoer has a duty to prevent damage to a water source, and, in addition, the duty to repair water pollution already caused, which is a recurring duty.
In the present case, it was ruled that an active, specific action capable of misleading by causing an incorrect perception in the person being deceived – is not in itself a continuing act for the purpose of the statute of limitation. This is despite the fact that when deception is committed, the false perception of the object of deception is, by its very nature, of a lasting effect, until the deception is discovered.
“Power of Action”
Unipharm further claimed that it did not have “power of action” until the Registrar ruled on the Opposition. Allegedly, the Opposition proceedings, as well as the infringement claim, constituted a barrier to its filing of the lawsuit. These arguments were also rejected by the Supreme Court.
It was ruled that the meaning of “power of action” is the existence of a real possibility to file a lawsuit, and be entitled to the requested relief, subject to meeting the burden of factual and legal proof. The existence of power of action is conditional on the absence of an objective impediment preventing the plaintiff from filing the lawsuit. Such an impediment may arise from a condition originating in the substantive law that has not yet been fulfilled, and in the absence of which the claim will be struck out as premature or from outstanding litigation (“jurisprudential impediments”). With respect to the latter, different approaches were expressed in the case law regarding the strength of the impediment required to suspend the limitation period due to jurisprudential impediments. Thus, according to the narrowing approach, the limitation period will be tolled only in cases where there is an actual legal impediment that denies the plaintiff the ability to file the lawsuit in light of pending litigation. According to the broader approach, the limitation period will be tolled even when filing the claim is unreasonable in light of the existence of pending litigation whose outcome is relevant to the lawsuit that will be filed.
The Supreme Court adopted the narrowing approach, and ruled that in order to toll the limitation period, the decision in the other proceeding must be a substantial condition for the very existence of a right of action in the lawsuit in question.
In the present case, Unipharm argued that if its lawsuit had been filed before the decision in the Opposition, the court could have stayed the proceedings in view of the existence of a pending proceeding (lis alibi pendis).
In this context, the Supreme Court recalled that the lis alibi pendis doctrine allows the court to consider staying proceedings in a lawsuit. However, such an option does not create a barrier to filing the latter claim, and is therefore insufficient to toll the statute of limitations.
According to the ruling, the manner in which the statute of limitations is determined should be as clear as possible, so that both parties can weigh their options while relying on a certain timetable, in a manner that fulfills the rationality underlying the institution of the statute of limitations. However, determining that the statute of limitations will be suspended in cases where the court may delay the hearing of the lawsuit if filed due to the existence of another proceeding, is not sufficiently clear.
It was further ruled that accepting the broader approach would harm the defendant’s interest in the certainty and finality of the judicial decision and the public interest in concluding disputes quickly. This would in fact harm the goals underlying the institution of the statute of limitations.
Applying the narrowing approach to the facts of this case and to Unipharm’s claims leads to the conclusion that there was no reason to toll the statute of limitations.
Should the Limitation Period be Extended?
In light of the court’s conclusions regarding the date of the formation of the cause of action, and since Unipharm had right of action, it is clear that 7 years have passed between the formation of the cause of action arose and the filing of the lawsuit. Therefore, it was necessary to continue examining whether this case falls under any of the exceptions set forth in the Law, which have the power to suspend the limitation period due to the plaintiff’s late discovery of his cause of action.
Section 8 of the Law states that in circumstances where the plaintiff did not know the facts constituting the cause of action “for reasons beyond his control and which even with reasonable care he could not have prevented” – the limitation period is suspended until the date of discovery of the facts. The test for determining the date of discovery in accordance with Section 8 is an objective test. Accordingly, the plaintiff must show that he did not actually know the relevant facts; And that from the perspective of a reasonable plaintiff, he could not have known these facts either.
Unipharm argued for the applicability of Section 8 since, in its opinion, it did not know and could not have known, prior to the Registrar’s decision in the Opposition, that the Patent Application was filed unlawfully and in bad faith. Consequently, it did not know that it had a cause of action.
This claim was also rejected by the Supreme Court; since, from the Opposition and Unipharm’s arguments in the infringement claim, it appears that Unipharm in fact knew that the Israeli Patent Application was filed without any disclosure of the previous patent application. The Registrar’s decision was not what brought these facts to its attention, although it confirmed them.
It was further ruled that, in accordance with the prevailing approach in the case law, Section 8 of the Law does not apply when the plaintiff could reasonably have discovered a “lead” required for filing the lawsuit. When such a “lead” exists, and when the plaintiff suspects the existence of a cause of action, or when a reasonable plaintiff in his position would have suspected it, the limitation period will begin to run. In this context, the case law also clarified that a distinction must be made between the date on which the plaintiff could have discovered the essential facts that form the cause of action, and the date on which the evidence necessary to prove them was obtained. In the present case, the Registrar’s decision may be relevant, if at all, to the subject of the evidence, and not to knowledge of the facts that constitute the cause of action. This is not sufficient to suspend the limitation period in accordance with Section 8 of the Law.
Conclusion
Lengthy and complicated litigation involving numerous legal proceedings related to the same chain of events is not a rare phenomenon, particularly when disputes arise between large commercial entities. As demonstrated in this case, such litigation may raise non-trivial questions relating to the statute of limitations.
While the ruling is clearly case-specific and the circumstances are rather unique, one important takeaway from this ruling, which apply to each and every legal dispute – your rights won’t be enforceable indefinitely, even if you have reasons to believe delaying your lawsuit is justified, and omission on your part may be beneficial to the wrongdoer. So, when in doubt – be prudent and consult a lawyer!
