Claimants in patent infringement actions in the UK frequently seek an interim injunction, barring the defendant from the market while the case is pending. A condition of any such injunction being granted is often a cross-undertaking from the claimant to compensate the defendant for lost sales if the claimant fails in the action.
A recent decision from the Court of Appeal addresses the calculation of damages upon lifting an interim injunction, when a cross-undertaking has been given by the claimant when obtaining that injunction.
In 2009, AstraZeneca was granted a European patent for the use of magnesium esomeprazole with a high optical purity in the manufacture of a medicament for the inhibition of gastric acid secretion. AstraZeneca produced and sold a tablet formulation of esomeprazole called Nexium. In September 2010, KRKA and Consilient Health sought to bring to market an esomeprazole capsule called Emozul, which was bioequivalent to Nexium. AstraZeneca issued infringement proceedings and sought an interim injunction of Emozul pending trial, to which KRKA agreed, on the basis that AstraZeneca gave cross-undertakings in damages.
At around the same time, another generic company, Ranbaxy, began proceedings against the patent, challenging validity and seeking a declaration of non-infringement in respect of its own esomeprazole tablet. A trial took place that was limited to the issue of infringement and in 2011 it was held that Ranbaxy’s product did not infringe. Shortly afterwards the injunction on KRKA was lifted. The non-infringement declaration awarded to Ranbaxy then led to a number of other companies marketing generic esomeprazole. This drove down the prices of esomeprazole products, significantly impacting the launch of Emozul and depriving the defendants of almost a year of providing the only generic available to the market. KRKA and Consilient claimed damages under the cross-undertaking given by AstraZeneca, seeking £32 million in in respect of their losses.
The Court of Appeal confirmed that evidence of ‘true comparables’ is likely to be of great assistance when assessing what would have happened had an injunction not been granted.
AstraZeneca contended that the sale of the defendants’ Emozul following its actual launch represented what would have been achieved had its launch occurred as originally planned, and that the defendants’ loss amounted to £3 to 6 million. This took into account that prescribing practice would have needed to be changed since Nexium was sold in tablets and Emozul in capsules.
KRKA and Consilient contended that the absence of the imminent launch of other generic esomeprazole medicines at the time of launch as originally planned, and the intended strategy of marketing Emozul to NHS Medicine Managers, would have led to Primary Care Trusts issuing guidance regarding changes to prescribing practice, which would have resulted in larger sales of Emozul. Sixteen Medicine Managers gave evidence, which the judge found convincing.
Whilst the judge reduced the £32 million sum claimed by the defendants by an ‘uncertainty discount’ of 20% (recognising that Medicine Managers had a tendency to exaggerate their success in switching campaigns), the outcome was an award of £27 million to be paid by the unsuccessful claimant.