The Court of Appeal has upheld an award of damages to a generic pharmaceutical manufacturer which was the subject of an interim injunction by a patent owner, where the patent was later found to have been wrongly granted.
The High Court has set out principles to be applied in assessing the damages payable under a cross-undertaking given in respect of the grant of an interim injunction (Les Laboratoires Servier v Apotex Inc.  EWHC 2347).
A had a monopoly in the UK over the pharmaceutical esomeprazole as a result of a European patent, which was due to expire in 2014. Sales of A’s product in the UK amounted to about £65 million and it was sold at a high price.
In 2010, K sought to launch a product, which it believed did not infringe A’s patent.A sued for infringement and K concluded that it had no alternative but to submit to A’s application for an interim injunction, on the basis that A gave the usual cross-undertaking in damages. R, another generic company, issued proceedings to challenge the validity of A’s patent and seek a declaration of non-infringement for its own esomeprazole tablet.
In 2011, the High Court held that R’s product did not infringe. Shortly afterwards, A notified K that it proposed to lift the injunction and an order for its discharge was made.
The decision in R’s proceedings had a significant impact on the market by opening the door to the marketing of generic esomeprazole products by several other companies. This had the consequence of driving the price down and had a significant impact on the success of the launch of K’s generic product. K lost the opportunity to enjoy almost a year as the only generic product available to the market. K issued proceedings for the loss of this “first mover” advantage, seeking damages for losses during the period of the injunction and following the launch of K’s product in 2011.
The High Court awarded £27 million to K in relation to losses suffered as a result of the interim injunction. A appealed, arguing that K’s loss only amounted to £3 to £6 million. It contended that the actual sales of K’s product following its launch in September 2011 represented what would have been achieved had the launch occurred as originally planned. As A’s product was sold in tablets, prescribing practice would need to have changed in order for K’s capsules to be dispensed, so A argued that K’s market penetration would have been modest. A also relied on what it said was a comparable market for a different drug, where a branded generic tablet was similarly launched into a capsule market.
The court dismissed the appeal. It upheld the the High Court’s award of damages on the cross-undertaking.
A key factor was that K’s approach to the calculation of damages relied on comparables that were more true to the counterfactual consideration than the arguments relied on by A.
Due to K’s strategy of marketing to NHS medicine managers, who provide guidance and assistance to GPs, the NHS Primary Care Trusts (PCTs) would largely have recommended a change to prescribing practice in order to minimise the overall drugs bill for the NHS. This would have led to much larger sales of K’s medicines. Evidence was given by 16 medicine managers, which the court considered formed a good representative sample. An essential part of a medicine manager’s job was to encourage GPs to prescribe the cheapest types of relevant drugs for their patients. So, the medicine managers were particularly well placed to assist the court as to how both they and GPs would have been likely to react to the launch of K’s generic product in 2010.
The court agreed with the High Court’s finding that by 2011 the market had been completely altered by generic competition, with the result that there was little point in any particular PCT investing time and effort into the promotion of a switch from A’s to K’s product or, indeed, any other generic.
Overall, the High Court had taken the relevant issues into account when it concluded that K’s generic product would have achieved a market share of 80% one year after launch, subject to an uncertainty discount of 20% to take account of the fact that medicine managers may exaggerate the switching effect.
The court made it clear that a claimant who obtains interim relief can expect a liberal assessment of damages under any cross-undertaking if it is unsuccessful in its substantive claim. Patentees who obtain interim injunctive relief to protect a monopoly market in a high-value pharmaceutical must factor in the risk, if unsuccessful in the substantive claim, that they will have to pay substantial compensation to generic manufacturers which have been prevented from entering the market.
Here, K had submitted to the injunction on the basis of evidence from A that K’s product was substitutable with A’s product, that over 90% of A’s market would be accessible to K from launch, and that K’s entry into the market would lead to a significant loss of market share or downward price spiral. Where a claimant has obtained interim relief by persuading the court that it is easier to calculate the defendant’s loss than its own, this was just the kind of evidence which supported a liberal but fair assessment of loss.
Case: AstraZeneca AB and another v KRKA dd Novo Mesto and another  EWCA Civ 484.
First published in the July 2015 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.