Interim Injunctions: the Appeal in Neurim Pharmaceuticals v Mylan

Jane Lambert

Court of Appeal (Lords Justices Floyd, Males and Arnold) Neurim Pharmaceuticals (1991) Ltd and another v Generics UK Ltd (t/a Mylan) and another [2020] EWCA Civ 793 (24 June 2020)

This was an appeal by the claimants, Neurim Pharmaceuticals (1991) Ltd ("Neurim") and its exclusive licensee Flynn Pharma Ltd ("Flynn"), against Mr Justice Marcus Smith's refusal in Neurim Pharmaceuticals (1991) Ltd and another v Generics UK Ltd (t/a Mylan) and another [2020] EWHC 1362 (Pat) (3 June 2020) to restrain the defendants, Generics UK Ltd and Mylan Healthcare Ltd ("Mylan"),  from launching a generic competitor to the claimants' drug Circadin until after the trial of the claimants' action for infringement of Neurim's European patent (UK) 1,441,702. I discussed Mr Justice Marcus Smith's judgment in Patents - Neurim Pharmaceuticals v Mylan on 4 June 2020.

The claimant appealed and Lords Justices Floyd, Males and Arnold heard the appeal on an expedited basis by remote video-conferencing on 18 June 2020.  Their lordships dismissed the appeal on 19 June 2020 and advised the parties of their decision by email that same day. They set out the reasons for their decision in Neurim Pharmaceuticals (1991) Ltd and another v Generics UK Ltd (t/a Mylan) and another [2020] EWCA Civ 793 on 24 June 2020. Lord Justice Floyd delivered the lead judgment to which the other two Lords Justices agreed.

Lord Justice Floyd summarized the grounds of appeal in paragraph [35] of his judgment:
"1. The judge failed to take any account of the consequential loss to Neurim and Flynn as a result of generic entry. He was wrong to dismiss these matters on the grounds that Neurim had available cash.
2. In so doing the judge failed to have regard to Neurim and Flynn's evidence, or alternatively had wrongly treated it as valueless.
3. The judge failed to appreciate the significance of the consequences of generic entry 2 years and 3 months before patent expiry.
4. The judge failed to appreciate the consequences of giving the green light to other generic competitors.
5. The judge was wrong to hold that Mylan's losses were more readily quantifiable than Neurim's and Flynn's.
6. The judge overestimated the difficulties as to quantification of the defendant's losses.
7. The judge failed to place weight on the fact that the disparity in economic size between the parties meant that the consequential hardship was greater to the smaller party.
8. The judge failed to appreciate the significance of Mylan failing to clear the way.
9. The judge failed to appreciate the significance of the status quo.
10. The judge failed to follow "the case law" (on what amounts to irreparable harm)."

The learned Lord Justice said that he found this to be an extraordinarily unhelpful set of grounds of appeal for the following reason:

"As I have said, the critical issue for the judge, and the finding which he made which was fatal to the interim injunction application, was whether the remedy in damages was adequate for Neurim and Flynn, but no attempt is made to differentiate the grounds according to their relevance to the issues. I agree with Mr Vanhegan QC for Mylan that grounds 1 to 4 are relevant to the adequacy of damages to Neurim and Flynn. Grounds 5 to 9 appear to be an attack on the components of a finding which the judge did not make, namely that the balance of convenience favoured the refusal of the injunction. Ground 10 appears to be potentially relevant to adequacy of damages as well."

Neurim and Flynn had argued that Mr Justice Marcus Smith should have accepted their evidence that they would have to close down large parts of their business if Mylan was allowed to launch a generic competitor to Circadin because royalties upon the sale of that Circadin was Neurim's only source of income.  Lord Justice Floyd rejected that contention:

"The judge was not bound to accept uncritically the evidence of Neurim and Flynn as to whether the consequential loss would occur. I would go further and say that he was bound to examine the claims made in the evidence of Neurim and Flynn with a critical eye, given the very short period of generic competition which they would face in the light of the expedited trial."

Mylan presented evidence to the Court which was not challenged by the claimants that Neurim had sufficient revenues to survive until trial which was just over 4 months away even if they claimants made no sales at all between the launch of a generic competitor and trial. They added that it was highly unlikely that Neurim and Flynn would lose all their business to Mylan in any event.  The evidence upon which the claimants relied had been filed before an expedited trial was ordered.  Their projections were based on the assumption that the claimants would face competition from generics manufacturers other than Mylan in the estimated 1 to 2 years wait before trial.  His lordship concluded at [49]:

"In short, therefore, I do not think that case advanced by Neurim and Flynn based on the consequential loss was made out. It is not realistic to suppose that the lost revenues would be on such a scale as to necessitate the drastic steps referred to by Neurim and Flynn (which were, in any event, put forward on different factual assumptions), or that they would not be able, and well advised, to replace those lost revenues using their existing reserves until the shortfall is recovered from Mylan."

Lord Justice Floyd acknowledged that the entry of a generics competitor can depress the price of a proprietary drug and that it can be very difficult for the manufacturer of the proprietary drug ever to recover its market position.   In those circumstances, it is not easy to assess the appropriate award of damages.  That would not apply in this case because the claimants had supplied details sales estimates of sales with and without a generic competitor.  It followed that damage would be an adequate remedy for the infringement of the patent in suit and that it would not be necessary to consider the balance of convenience or any of the issues in the respondents' notice.

It is worth noting that Lord Justice Floyd expressly endorsed the Cyanamid guidance at paragraph [15] of his judgment:

"The court has the power to grant an interim injunction in any case where it is "just and convenient" to do so (Senior Courts Act 1981 section 37(1)). That is not to say that it has an unfettered discretion: it is a discretion which is exercised according to settled principles. Both parties and the judge analysed the case by reference to the approach laid down in the speech of Lord Diplock in American Cyanamid v Ethicon [1975] AC 396. The judge identified four stages in this approach:
  • Stage 1: Is there a serious question to be tried?
  • Stage 2: Are damages an adequate remedy for the claimant?
  • Stage 3: If not, are damages (on the cross-undertaking in damages) an adequate remedy for the defendant?
  • Stage 4: If damages are not an adequate remedy for either side, where does the balance of convenience lie?"
He added in the next paragraph that "when Lord Diplock spoke of damages being an 'adequate' remedy, he was not suggesting that damages must provide a perfect remedy." There are times, as the applications judge observed, that damages fall so far short of 'perfect' that they cease to be 'adequate' but unless that boundary is crossed they court should not award an interim injunction.  He rejected a submission from the claimants based on an observation of Lord Hoffmann that in most circumstances damages are inadequate and that it is necessary for the court to court to choose the outcome least likely to cause injustice.  In Lord Justice Floyd's view that was inconsistent with Lord Diplock's insistence that interlocutory injunction applications should not become mini-trials.

Lord Justice Floyd set out in his judgment the facts of the case in at least as much detail as the judgments of most applications judges and he analysed carefully the judgment of Mr Justice Marcus Smith.  Though not ad idem with the judge below on every point he concluded that the judge was right to consider whether damages would be an adequate remedy for the claimants.  Further, upon deciding that they would be an adequate remedy, it was also right for him to decide the case in favour of the defendants.

Should anyone wish to discuss this article, the Court of Appeal's judgment or any issue raised in it, he or she should call my clerk on 07986 948267 or send me a message through my contact page.


Popular posts from this blog

Copyright - Ashley Wilde Group Ltd. v BCPL Limited

Copyright in Photographs: Temple Island Collections and Creation Records

What to do about the new Practice Direction - Pre-Action Conduct