OpeningtheFloodgatesonInterimInjunctions

10 February 2003

Kerry Griffin

Smithkline Beecham plc and other (“Smithkline”) v Apotex Europe Limited and others (“Apotex”)

Introduction

Obtaining an interim injunction to prevent patent infringement in the UK is difficult particularly where there are substantial concerns as to validity of a patent. In fact examples of cases in which interim injunctions have been granted or in which an application has even been made in the last few years are limited[1]. This may mean that patentees will try to seek interim injunctions elsewhere, for example in Germany where infringement issues and validity are heard separately and ex parte injunction applications are possible. The case of Smithkline v Apotex does not appear to change this position significantly although may raise issues for any potential infringer to consider particularly where some form of litigation is inevitable. A potential infringer, whilst he may be at low risk of injunction in the UK, should also consider his overall strategy in Europe to prevent being injuncted elsewhere in Europe.

American cyanamid test

The principles applied by the UK courts for determining the grant of interim injunctions were set out in the case of American Cyanamid[2]. The House of Lords held that it was not part of the court's function at the interlocutory stage to try to resolve conflicts of evidence[3]. The court should consider whether the claimant had any real prospect of succeeding in his claim for a permanent injunction at trial and provided the answer was yes go on to consider whether the balance of convenience lay in favour of granting or refusing the interlocutory relief that was sought. The governing principle was that the court should consider whether the claimant would be adequately compensated by an award of damages for any loss sustained as a result of the relief. If damages were adequate, and the defendant would be in a position to pay them, no interlocutory injunction should normally be granted. If damages would not be adequate, the court should then consider whether the defendant would be adequately compensated under the Claimant's cross-undertaking in damages for any loss sustained. If there was any doubt as to the adequacy of the respective remedies, the question of the balance of convenience must then be determined.

SmithKline/ Apotex case

At a hearing in November 2002, Smithkline Beecham applied for an interim injunction to restrain infringement of UK patent number 2,297,550 relating to paroxetine hydrochloride. The patent had been held partially valid in July 2002 by Mr Justice Pumfrey in separate proceedings for revocation of the patent by BASF. In particular, claim 11 which was the claim Smithkline were sueing Apotex under was held to be valid in its entirety. The earlier decision of Pumfrey J. was under appeal by both sides. In addition Smithkline had launched an application for amendment of the patent (due to be heard after the appeal).

In deciding to grant an interim injunction against Apotex, Mr Justice Jacob followed the American Cyanamid principles:

Was there a serious issue to be tried?

Apotex raised a series of arguments in relation to whether there was or was not a serious issue to be tried. In summary the main points were:

(a) On a proper construction of claim 11 the patent was not infringed.

(b) SmithKline had not exploited the invention and as such either they were only entitled to damages on a royalty basis (and therefore damages could be assessed and the injunction was inappropriate) or it was an abuse of monopoly or third parties had a right to a compulsory licence and therefore again no injunction should be granted.

(c) The existence of amendment proceedings prevented recovery of damages and the patent had not been framed with good faith and reasonable skill and knowledge and hence no injunction should be granted

a) Construction of claim 11

Apotex argued that there was no arguable case in relation to infringement of claim 11.

Claim 11 read as follows:

“A process for the preparation of paroxetine hydrochloride anhydrate substantially free of bound organic solvent which comprises displacing the solvated solvent or solvents from paroxetine hydrochloride solvate using a displacing agent” (my emphasis)

Apotex argued that the process they used started with an anhydrate rather than the solvate required by claim 11. Smithkline had not observed the process but Jacob J. accepted that there had not been time for such an inspection. Smithkline instead relied on evidence that Jacob J. found raised a prima facie case that the claim 11 process had in fact been used to manufacture the paroxetine hydrochloride in issue.

Apotex raised construction arguments as to the meaning of the word “solvate”. Mr Watson QC for Apotex contested for a narrow definition requiring what in the judgment is referred to as a “true solvate” i.e. crystals with a regular lattice containing both paroxetine and solvate. Apotex also referred to the earlier judgment of Pumfrey J. in which Apotex argued Pumfrey J. had construed “solvate” with narrower meaning and had accepted expert evidence on the definition of “solvate” consistent with the construction being put forward. However Mr Waugh QC referred to a series of passages in the patent which suggested a wider construction namely that “solvate” merely referred to something in which the solvent could not be removed by conventional vacuum oven drying techniques. There was therefore no limitation in the patent requiring a crystalline lattice.

Jacob J. in finding there was a serious issue to be tried on infringement accepted that there may be substance in Apotex’s submissions. However in his view Pumfrey J. had not been concerned with construction of the word “solvate” in claim 11 and therefore his findings were not determinative.

Apotex also raised a point on added matter. Following grant the patent was amended in Patent Office proceedings. Apotex argued that prior to that amendment the patent drew a distinction between anhydrates and solvates. Should Smithkline seek now to draw a different distinction it would constitute added matter. Jacob J did not comment expressly on this point.

b) Non-exploitation

Apotex argued that the reason for grant of an injunction is to prevent “damage” which can not later be quantified. On this basis Apotex argued that Smithkline could never claim by way of damages anything more than a reasonable royalty. The basis for this reasoning was that Smithkline did not sell a product derived from the process claimed in claim 11. Smithkline actually sold paroxetine in hemihydrate form. As such Apotex submitted that Smithkline were not exploiting the patent and as such were only entitled to a reasonably royalty by way of damages[4].

Jacob J. disagreed. The two products (anhydrate and hemihydrate) were equivalent. The effect of infringement on Smithkline would be the same whether it actually sold the patented form or not. In reaching this decision Jacob J. referred to the case of Corruplast v George Harrison[5] which appeared to be inconsistent with the Polaroid case relied upon by Apotec. Referring to his previous judgment in Gerber v Lectra[6] and the decision on appeal by Staughton LJ, Jacob J found that the normal principles as regards damages recoverable for infringement were the same as those for other torts. The Patents Act 1977 aimed to protect patentees from commercial loss resulting from infringement of a patent. Therefore a natural and probable consequence of Apotex manufacturing and supplying the anhydrate form of paroxetine would be lost sales by Smithkline. One would be a direct cause of the other.

Apotex also raised a point in relation to compulsory licences which was based on the submission that in the circumstances where Smithkline were not exploiting the patent then the Comptroller may grant a compulsory licence. Jacob J disagreed and said that where the patentee was supplying an equivalent product this would be a good reason for the Comptroller not to grant a compulsory licence. The Comptroller has a discretion, there was no obligation to grant a compulsory licence. Apotex’s point on abuse of monopoly also found no favour with the judge.

c) Affect of amendment proceedings

Apotex submitted that because SmithKline Beecham were applying to amend the patent and that the amendments were “ambitious” the request for interim injunction should be refused. Jacob J. again disagreed finding that:

a) Pumfrey J. had specifically been asked to impose a term at the directions hearing in the amendment proceedings that pending amendment Smithkline would not enforce the patent. Pumfrey J. refused. Jacob J. also seemed to make some inference from the fact that Apotex had not attended the directions hearing in the amendment proceedings.

b) Claim 11 was held completely valid. That amendments to other claims, whether ambitious or not, might not be allowed was irrelevant.

c) Case law suggested that a court can enforce a partially valid patent.[7]. It was not necessary for the court at an interlocutory stage to assess whether an amendment would or would not be made - “to say that [a valid claim] cannot be [en]forced by way of interim injunction because some other claims have been held invalid, appears to be a purely technical and meritless objection.”

Apotex also argued that as a result of s62(3) of the Patents Act Smithkline would only be able to claim damages in respect of acts done prior to the date of amendment (in this case earliest July 2003) where they showed that the specification of the patent was framed in good faith and with reasonable skill and knowledge. It follows that if no damages are available then no interim injunction should be granted. Smithkline submitted in relation to Apotex’s last point that actually this was a point in their favour as if damages could not be recovered then all the more reason to grant an injunction – damages would obviously be an inadequate remedy.

Jacob J. first considered whether there was any merit in the point made by Apotex as to whether where damages were not recoverable there could be no injunction. He quoted several cases before adopting the approach taken by Laws J in ex parte Rhone-Poulenc[8] and the Court of Appeal in Timeload[9] and Monsanto[10] finding that the possibility that damages might not be recoverable (which was not in any event accepted by SmithKline) would not bar the granting of injunctive relief

“It is not clear to me that Timeload will not suffer damage if the Free Pages business founders and I think it not improbable that it can recover damages directly, if not indirectly, but if it cannot, then damages are obviously an inadequate remedy for those who will suffer loss on the plantiff’s side”.

Jacob J then turned to consideration of the issues on whether in fact the patent had been drafted with good faith and reasonable skill and knowledge. Jacob J. criticised Apotex for being unclear as to the points raised on the issue. Apotex’s principle point was that by the time Smithkline applied and were drafting the specification which was amended in front of the Patent Office they knew about certain prior art, that it was novelty destroying and that it was enabling. Jacob J. refused to accept the argument. He did not consider that it was appropriate to deal with a point which had been raised “at the last minute”. In addition due to its last minute appearance there was no evidence from Apotex on the question. In fact the absence of evidence also suggested it was not a good point. Finally whether or not the prior art was or was not enabling was a real issue and therefore arguable.

Are damages an adequate remedy

Jacob J. referred to his previous judgment in October 2001 in which he had granted an interim injunction in relation to sale of paroxetine by Generics. In his view the position had not changed. Apotex accepted that if it entered the market Smithkline would loose sales and that prices would collapse. It was suggested that Apotex might take up to 40% of the market. The thrust of Apotex’s arguments appeared, from the judgment, to relate to the fact that if an injunction would be granted the loss to Apotex would be unquantifiable and thus any claim on a cross-undertaking would be uncertain.

The judge accepted that the damage to Apotex if the injunction was wrongly granted would be unquantifiable and yet substantial. However Jacob J. said that Apotex had been eyeing the market for some time. It had had plenty of time to take steps to protect its position. It could have joined in the trial between BASF and Smithkline in relation to validity. “In short, Apotex deliberately refrained from making their own application for revocation and deliberately refrained from openly disclosing exactly what they were intending to make.” In answer Apotex argued that it was wrong in principle to suggest that a defendant should start litigation. Jacob J. said that in cases where there was bound to be litigation then not starting litigation was wholly uncommercial.

Finally Jacob J turned to the issue of whether Apotex would be able to pay any resulting damages. It appeared clear to Jacob J. that there was some uncertainty as to the financial status of the parent company offering a guarantee. Further there was also evidence to suggest a banker would not lend money on the information made available.

Conclusions

Jacob J’s decision does not suggest a reduction in the burden claimant’s must satisfy to obtain interim injunctions. Nor is it likely to result in a large increase in the number of cases in which interim injunctions are granted. However it does give pointers to the circumstances in which an application for an interim injunction may find favour with the UK courts:

1) Validity of the patent – the fact that in this case claim 11 of the patent had been found valid earlier in the year obviously influenced Jacob J.’s decision. Where there are serious concerns about validity of any of the claims being sued on, this would still suggest that the claimant is likely to have an uphill struggle obtaining an interim injunction particularly where, on the face of the documents, prior art is novelty destroying.

2) Steps taken by a Defendant – Jacob J. certainly suggests that the Defendant can not simply sit back and rely on the difficulties a Claimant may face in obtaining an interim injunction. Whilst perhaps not likely to be determinative, where a Defendant intentionally (or at least appears to do so intentionally) refuses to provide details of non-infringement the court may be more favourable to the Claimant.

Financial strength of the Defendant – the financial strength of Apotex did not appear to feature heavily in Jacob J’s reasoning but in other cases where other issues are less clear failure to obtain a bank guarantee may persuade the court in favour of the Claimant on the balance of convenience.

Also published in the March 2003 issue of WIPR.

Footnotes

[1] Two injunctions have been granted to SmithKline in 2001 and in the present case (2002). There are also examples of injunctions being refused, for example in Sig Architectural Products Limited v Castle House Windows Ltd (unreported, 21/6/96) an injunction was refused on the balance of convenience and in (1) Peaudouce SA (2) Peaudouce (UK) Ltd v (1) Kimberley-Clark Ltd (2) Kimberley-Clark Corp (unreported, 02/04/96) an injunction was refused on grounds that damages would be an adequate remedy].
[2] American Cyanamid Co v Ethicon Ltd (1975) 1 All ER 504
[3] See also Series 5 Software v Philip Clarke and others ((1996) 1 All ER 853) where the judge stated that on a proper interpretation of the American Cyanamid principles this did not exclude the court forming a view on the relative strength of the parties’ case. The court should not resolve difficult issues of fact or law, however if the court is able to come to a view as to the strength of the parties’ cases on the credible evidence before it, it can do so.
[4] Reference made here to General Tire [1976] RPC 197 and Polaroid v Kodak [1977] RPC 379.
[5] [1978] RPC 761 (together with his comments on that case in Gerber v Lectra [1995] RPC 383)
[6] [1995] RPC 383
[7] referring to Hoffmann-La Roche v DDSA [1965] RPC 503, Autopia Terakat v Gwent Auto [1991] FSR 517, Hallen v Brabantia [1990] RPC 307 at 331 and Kirrin-Amgen’s Patent [2002] RPC 851
[8] unreported, 23 December 1997
[9] Timeload Ltd v BT, unreported, Court of Appeal, transcript 30 November 1993
[10] Ex parte Monsanto [1999] FSR 223