There have been several decisions over the past few years dealing with various issues arising on a cross-undertaking in damages given as a pre-requisite to the grant of an interim injunction.
The nature of an illegality defence to a claim on a cross-undertaking
Laboratoires Servier v Apotex Inc,  UKSC 55, Supreme Court
In 2006, Servier was granted an interim injunction against Apotex for infringement of a UK patent relating to a crystalline form of perindopril erbumine, an ACE inhibitor, used for treating hypertension and cardiac insufficiency. The injunction was obtained on Servier giving the cross-undertaking in damages i.e., an undertaking to comply with any order the court might make if it should later find the injunction had been wrongly granted to compensate Apotex for any loss it had suffered in the meantime. At full trial, the patent was held to be infringed but invalid and the injunction was discharged.
Meanwhile, in separate proceedings in Canada, the Canadian patent relating to the compound itself (the NCE patent) was held valid and infringed, and Servier was granted a final injunction against Apotex. In the UK, the NCE patent had expired in 2004 but the corresponding Canadian NCE patent did not expire until 2018.
In the UK action, following the decision that the crystalline form patent was invalid, Apotex claimed compensation for the loss it had suffered by the wrongful grant of the injunction. It was agreed that the damages under the cross-undertaking fell to be assessed on the basis that but for the injunction Apotex would have sold an additional 3.6 million packs of tablets. Notably however the perindopril erbumine for the product sold in the UK would have been manufactured by Apotex in Canada.
In the proceedings to assess Apotex's damages, Servier argued it was against public policy for Apotex to recover damages in respect of sales of a product the manufacture of the active ingredient of which in Canada would have been "turpitude" as it constituted an infringement of the Canadian NCE patent. At first instance, Servier succeeded on its "illegality defence". However, on appeal, the Court of Appeal disagreed on the basis that the infringement of a foreign patent was not considered to be "turpitude".
The Supreme Court dismissed Servier's appeal. It pointed out that the illegality defence was a general rule of law based on public policy. "Turpitude" meant a criminal act or at least quasi-criminal act because only acts in these categories engage the public interest and it is the public interest which underlies the illegality defence. Patent infringement, being a tort or civil wrong, offended against private interests rather than the public interest. The only relevant interest affected was that of the patentee and that was sufficiently vindicated by the availability for damages for the infringement in Canada. There was no public policy which could justify the forfeiture of Apotex's right to be compensated in the UK.
The measure of damages on a cross-undertaking.