10 October 2008

Interim Injunctions: Les Laboratoires Servier v Apotex Inc

When an applicant other than the Crown seeks an interim injunction he or she has to promise the interim applications judge to compensate the injuncted party for any loss or damage that that party may suffer as a result of the injunction. In Les Laboratoires Servier and another v Apotex Inc and others [2008] EWHC 2347 Mr Justice Norris had to decide how much compensation should be paid to a generic drugs manufacturer who had been injuncted from infringing what turned out to have been an invalid patent for nearly a year   The principles that the judge discerned from previous decisions were as follows:
"(a) The undertaking is to be enforced according to its terms. In the instant case (as in many others) it is that Servier will comply with any order the court may make "if the court…finds that this Order has caused loss to the defendants." The question for me is therefore: what loss did the making of the Order and its continuation until discharge cause to Apotex?

(b) The approach is therefore essentially compensatory and not punitive;(c) The approach to assessment is generally regarded as that set out in the obiter observation of Lord Diplock in Hoffmann-La Roche v Secretary of State for Trade [1975] AC 295 at 361E namely:-
"The assessment is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction: see Smith v Day (1882) 21 Ch D 421 per Brett LJ at p427."

(d) What Apotex was trying to do (and what the Order restrained it from doing) was to enter a new market for the sale of generic perindopril. It was denied exploitation of this opportunity. The outcome of such exploitation is attended by many contingencies but Chaplin v Hicks [1911] 2 KB 786 establishes (per Vaughan Williams LJ at p.791) that whilst "the presence of all the contingencies on which the gaining of the prize might depend makes the calculation not only difficult but incapable of being carried out with certainty or precision" damages for the lost opportunity are assessable.

(e) The fact that certainty or precision is not possible does not mean that a principled approach cannot be attempted. The profits that Apotex would have made from its exploitation of the opportunity to sell generic perindopril depend in part upon the hypothetical actions of third parties (other potential market participants) and in part upon Servier's response to them. A principled approach in such circumstances requires Apotex first to establish on the balance of probabilities that the chance of making a profit was real and not fanciful: if that threshold is crossed then the second stage of the inquiry is to evaluate that substantial chance (see Allied Maples v Simmons & Simmons [1995] 1WLR 1602). As Lord Diplock explained in Mallett v McMonagle [1970] AC 166 at 176E-G

"…. in assessing damages which depend on its view as to what…. would have happened in the future if something had not happened in the past, the Court must make an estimate as to what are the chances that a particular thing….. would have happened and reflect those chances, whether they are more all less than even, in the amount of damages it awards…"

(f) The conventional method of undertaking this exercise is to assess damages on a particular hypothesis and then to adjust the award by reference to the percentage chance of the hypothesis occurring. In many cases it is sufficient to postulate one hypothesis and make one discount: but there is no reason in principle why one should not say that either Scenario 1 or Scenario 2 would have occurred and to discount them by different percentages. That is the course which Mr Watson QC urged in the present case: and I note that it has some support in Earl of Malmesbury v Strutt & Parker [2007] PNLR 570."

The judge found that the injunction had deprived the injuncted party of opportunities to entrench itself in the market. While the injunction was in force other generics manufacturers were able to prepare to enter the market. Consequently when the injunction was lifted trading conditions were considerably less favourable than they had been at the time of the order.  That was taken into account in the assessment. The judge was also pretty critical of the manner in which the applicant had sought its injunction and also of the way it resisted the enquiry.  His judgment for the injuncted party was £17.5 million in damages.

This decision is a very salutary reminder of the consequences of abusing intellectual property rights.   The purpose of IP is to encourage investment in brands, design, technology and creative works and not to perpetuate unjustifiable monopolies.

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