Damages - Dr Reddy's Laboratories (UK) Ltd. and others v Warner-Lambert Company LLC and another

Jane Lambert

 

Patents Court (Mr Justice Macaroli) Dr Reddy's Laboratories (UK) Ltd and others v Warner Lambert LLC and another [2021] EWHC 2182 (Ch) (30 July 2021)

Each of the 35 claimants in these proceedings had been awarded an inquiry as to damages either for losses sustained as a result of an interim injunction that the defendants had agreed to pay or for losses resulting from threats of litigation that the court had held to be groundless.  Most of the claimants were pharmaceutical companies that supplied pregabalin which they were allowed to distribute for the treatment of epilepsy and anxiety but not neuropathic pain.  The remaining claimants were the governments of the United Kingdom, Scotland, Wales and Northern Ireland and the National Health Service that wished to treat patients for neuropathic pain with generic products.

The Dispute

Warner Lambert Company LLC was the proprietor of EP0641330 B1 for isobutylgaba, of which pregabalin is a derivative, for the treatment of seizure disorders, notably epilepsy and general anxiety disorder which expired on 17 May 2013.  Pfizer Limited was the proprietor of EP 0934061B3 for the use of pregabalin in treating pain which expired on 16 July 2017. Upon the expiry of 330 several of the claimants applied to the British and EU medicine regulators for authorization to market pregabalin for pain relief.  Pfizer responded by writing to the claimants in terms that were held to be threats at para [727 (iv)] of Mr Justice Arnold's judgment in Generics (UK) Ltd (t/a Mylan) v Warner-Lambert Company LLC [2015] EWHC 2548 (Pat), [2015] CN 1499, [2016] RPC 3.

Warner-Lambert applied for but was refused an injunction to require Actavis Group PTC EHF to take steps to prevent the use of its product for the treatment of pain.   I discussed that decision in Swiss Style Claims: Warner Lambert v Actavis on 28 Jan 2015.

However, in Warner-Lambert Company, LLC v Actavis Group PTC EHF and others [2015] RPC 24, [2015] EWHC 485 (Pat), Mr Justice Arnold directed the National Health Service to send the following guidance to general practitioners and community pharmacists:

"1. Pregabalin should only be prescribed for the treatment of neuropathic pain under the brand name Lyrica (unless there are critical contra-indications or other special clinical needs e.g. a patient allergic to an excipient, branded product unavailable etc which apply to Lyrica, when you should not prescribe Lyrica or pregabalin).
2. When prescribing pregabalin for the treatment of neuropathic pain to patients you should (so far as reasonably possible):

a) prescribe by reference to the brand name Lyrica; and

b) write the prescription with only the brand name "Lyrica" and not the generic name pregabalin or any other generic brand.

3. When prescribing pregabalin for the treatment of anything other than pain, you should continue to prescribe by reference to the generic name pregabalin.
4. When dispensing pregabalin, if you have been told that it is for the treatment of pain, you should ensure, so far as reasonably possible, that only Lyrica, the branded form of pregabalin, is dispensed. However, when dispensing pregabalin for the treatment of anything other than pain, you are not restricted to dispensing Lyrica."

In consideration of that relief, Warner-Lambert gave the following cross-undertaking as to damages:

"If the Court later finds that this Order has caused loss to the Respondent, the Department of Health, the Actavis group of companies, the Teva group of companies or the Dr Reddy's group of companies, and decides that the Respondent, Department of Health, the Actavis group of companies, the Teva group of companies or Dr Reddy's Laboratories (UK) Limited should be compensated for that loss, the Applicant will comply with any order the Court may make."

While I did not discuss that injunction, I considered the very similar one in The Importance of Keeping Promises: Warner-Lambert Company LLC v Sandoz GmbH and Others on 15 Dec 2015.

In Generics (UK) Ltd (t/a Mylan) v Warner-Lambert Company LLC, Mr Justice Arnold found that claims 1, 3, 4, 6, 13 and 14 were invalid on grounds of insufficiency and he was upheld by the Court of Appeal in Warner-Lambert Company LLC v Generics (UK) Ltd (t/a Mylan) and others [2016] EWCA Civ 1006, [2017] RPC 1, (2017) 153 BMLR 28 and the Supreme Court in Warner-Lambert Company LLC v Generics (UK) Ltd (t/a Mylan) and another (rev 1) [2019] 3 All ER 95, [2019] Bus LR 360, [2018] UKSC 56, [2018] RPC 21, (2019) 165 BMLR 14.  I wrote about the trial and appeals to the Court of Appeal in The Pregabalin Trial: Generics (UK) Ltd v Warner-Lambert Company LLC, The Pregabalin Appeal: Generics v Warner-Lambert and The Supreme Court's Decision on Pregabalin on 18 Sept 2015, 17 Oct 2016 and 6 Dec 2018.

Following the Supreme Court's judgment, the claimants sought to enforce the cross-undertaking and an inquiry as to damages for groundless threats.  At the time Pfizer wrote to the claimants, they could seek damages in respect of any loss that they had sustained by the threats pursuant to s.70 (3) of the Patents Act 1977.

The Preliminary Issues

In Warner-Lambert Co. LLC v Dr Reddy's Laboratories (UK) Ltd. [2020] EWHC 628 (Pat), Mr Justice Birss ordered an exchange of pleadings and directed Warner-Lambert to write to the various potential co-claimants on cross undertakings and threats actions and invite them to a case management conference. The CMC was attended by all the claimants in the present proceedings   As their causes of action varied Mr Justice Birss ordered a trial of the following preliminary issues:

"(a) What are the appropriate counterfactual assumptions over the period from 8 July 2014 (expiry of Pfizer's data exclusivity) to present upon which to determine any damages payable to each of the Inquiry Claimants in the Inquiry Claims?
(b) To what extent (if not already answered at (a)) are findings of fact binding as between different parties in these proceedings?"

Those issues came on for trial before Mr Justice Zacroli between 14 and 17 June 2021 and he delivered judgment on 30 July 2021 (see Dr Reddy's Laboratories (UK) Ltd and others v Warner-Lambert Company LLC and another [2021] EWHC 2182 (Ch), [2021] WLR(D) 463, [2021] Bus LR 1496).

Damages on the Cross-Undertaking

The parties agreed that damages were to be assessed on the same basis as damages for breach of contract but with "logical and sensible adjustments" because the court is not in fact awarding damages for breach of contract.   Mr Justice Zacaroli referred to para [63] of Lord Justice McCombe's judgment in Abbey Forwarding Ltd v Hone (No.3) [2014] EWCA Civ 711:

"It is compensating for loss for which the defendant 'should be compensated' (to apply the words of the undertaking). Labels such as 'common law damages' and 'equitable compensation' are not, to my mind, useful. The court is compensating for loss caused by the injunction which was wrongly granted. It will usually do so applying the useful rules as to remoteness derived from the law of contract, but because there is in truth no contract there has to be room for exceptions."

Damages for Unjustified Threats

It was also agreed that damages for groundless threats are assessed on the usual basis for tort, that is to say, the amount of money that would put the injured party in the same position as he or she would have been in had the injured party not sustained the loss or damage.

Possible Counterfactual Assumptions

The parties agreed the following possible counterfactual assumptions:

"1. Is it correct to assess the counterfactual for each Inquiry Claim on the assumption that the same Threats, Relevant Orders and Undertakings were or were not made across all the Inquiry Claims?
2. Is it correct to assume, as a matter of law, in the counterfactual for each Inquiry Claim that none of the Threats, Relevant Orders and the Undertakings were made, and if not, which of the Threats, Relevant Orders and Undertakings should it be assumed would have been made in the counterfactual for each Inquiry Claim?
3. In determining the amount of damages (if any), is it appropriate to assess the Inquiry Claimants' loss on the assumption that any or all of the claims of the Patent were known by all to be invalid at all relevant times following expiry of Pfizer's data exclusivity on 8 July 2014?
4. Is it correct to assume, as a matter of law, that the Inquiry Defendant could not have restrained prescribers or dispensers from prescribing or dispensing pregabalin for pain and/or restrained generic manufacturers from launching full label products, and if so then (having regard to the chronology) from which date?
5. Is it correct to assume, as a matter of law, that the Inquiry Defendant could not have threatened any parties with patent infringement proceedings and if so then from which date?
6. Is it correct to assume, as a matter of law, that the Inquiry Defendant could not have restrained launch of full label products by Sandoz or other manufacturers and if so then from which date?"

The judge addressed the third possible counterfactual assumption first because he regarded it as the most significant departure from reality.  He rejected the contention that it should be assumed that everyone always knew that the patent was invalid because it was incompatible with the principle that damages should compensate the loss or damage arising from order or threat and not from the existence of the patent and/or subject matter of the litigation.  He accepted the first and second counterfactual assumptions but not the fourth, fifth or sixth.

Findings

Referring to his findings on the possible counterfactual assumptions, Mr Justice Zacaroli held that the answer to the preliminary issue in paragraph 1 (a) of Mr Justice Birss's order is that it is appropriate to assume that none of the orders, undertakings or threats had been made.  His lordship regarded the second preliminary issue as essentially a case management issue.  He therefore concluded at para [177] that in view of his findings that the same counterfactual assumptions are to be made at stage 1, the claims should be case managed on the basis that findings of fact will be binding on each of the parties to them.

Comment

Assessments of damages payable under cross-undertakings and awards of damages for groundless threats are not exactly new or rare.  They are straightforward exercises that take place frequently if not every day.  Also, they tend to proceed without the need for the determination of preliminary issues. As I have been unable to find the transcript of the case management conference I can only surmise that the reason why Mr Justice Birss directed trials on those preliminary issues is that he had 35 different claimants before him with several different causes of action. Those parties turned up at the case management conference because the judge had directed Warner-Lambert to invite them in Warner-Lambert Co. LLC v Dr Reddy's Laboratories (UK) Ltd.  Why he invited them in proceedings between Warner-Lambert and Dr Reddy is also unclear. Doubtless, his lordship would have wanted to save time and costs but it is not clear how this procedure did either.   Anybody wishing to discuss this case further is welcome to call me on 020 7404 5252 during business hours or send me a message on my contact form.