On 9 October 2008, Servier was ordered to pay generics company Apotex £17.5 million under a cross-undertaking in damages given by Servier, in exchange for the grant of an injunction. The injunction prevented the sale of Apotex's generic version of perindopril, an ACE inhibitor used to treat hypertension. This amount was awarded to Apotex for the period from August 2006 until July 2007 when the injunction was lifted as Servier's patent was held to be invalid by the Patents Court.

Had the judge been asked to consider a restitutionary claim for damages, it is possible the award could have been much higher.

Background

In August 2006, Servier secured an interim injunction to restrain Apotex from selling its generic version of Servier's product perindopril in the UK after its patent for a new form of perindopril was found to be valid in opposition proceedings at the European Patent Office (EPO).

At the same time as the EPO decision was handed down, Apotex launched its generic perindopril product "at risk" into the UK market, achieving sales approximating 60% of the market share for the short period before it was subject to the injunction. Servier argued at the hearing for the injunction that Apotex's damages were easily quantified. The injunction was granted and Servier gave the required cross-undertaking in damages.

The patent was invalidated in the Patents Court and Servier unsuccessfully attempted to get the injunction extended up to the appeal hearing. When it reached the Court of Appeal, the lower court's decision was upheld with the memorable words: "[the patent] is invalid. And very plainly so. It is the sort of patent which can give the patent system a bad name".

Therefore, Servier had to account to Apotex under the cross-undertaking. During the hearing to decide the amount payable to Apotex, both Apotex and Servier provided expert evidence to define the market that would have existed but for the injunction. They both provided estimates of Apotex's sales and calculated the damages suffered by Apotex on that basis. Servier estimated the damages suffered by Apotex to be £400,000; Apotex estimated them as £27 million.

Decision

Norris J considered how to assess Apotex's damages and quantify the compensation payable. Although the remedy was essentially an equitable one and therefore the basis of calculation in his discretion, he approached the assessment on a contractual damages basis and applied compensatory and not punitive principles. Following Hoffmann-La Roche v Secretary of State for Trade he determined that the damages were to be assessed on assumed breach by Servier of a hypothetical contract not to injunct / prevent Apotex's sales.

This involved a two-stage approach. Firstly, could Apotex prove on the balance of probabilities that its chance of making a profit was real? Secondly, if that was proved, each separate market hypothesis was assessed and the amount of damages adjusted for the chance of that scenario occurring. The assessment was not assisted by the fact that Servier declined to provide detailed information of its sales in the period from August 2006 to July 2007.

There were two possible scenarios presented by the parties. In the first scenario, Apotex would have achieved 50% market share during the injunction as the only generic in the market. Taking into account Servier's plans to reduce its price, the damages were assessed at £22.5 million on that basis. As the probability of scenario one was assessed at 67%, the compensation payable under this scenario was £15 million. In the second scenario, other generics (some authorised by Servier) would have entered the market, thereby driving the price down. The damages for this scenario were £7.9 million with a probability of 33% for compensation of £2.6 million, making a total of £17.7 million.

The judge then assessed the figures 'in the round'. He also took into account that estimated profits of Servier during this time were £74 million and they had paid over £30 million to various generics companies just to keep them out of the market. He then ordered total damages rounded to £17.5 million.

Comment

Although Apotex had the burden of proving their loss by evidence, Norris J held that for the injunction to be granted in Servier's favour, the judge was necessarily persuaded by Servier that the damages to Apotex were easy enough to assess. Norris J stated:

"Having obtained the injunction on that footing it does not now lie in Servier's mouth to say that the task is one of extreme complexity and that the court should adopt a cautious approach. Having emphasised at the interlocutory stage the relative ease of the process, it should not at the final stage emphasise the difficulty."

Norris J also noted that although he had not been called upon to consider applying damages on a restitutionary basis, he may have considered that as an option. In his view, where a wrongful extension of patent protection benefited the patent holder to a greater amount than the loss suffered by the generic company (as was the case here), then a restitutionary award may be available. He considered that was an option even though a general restitutionary claim based on unjust enrichment was discounted by the Court of Appeal in SmithKline Beecham v Apotex [2006] EWCA Civ 658.

Norris J may have been so minded due to the comments of Jacob LJ in the Court of Appeal judgment mentioned above where he stated further that "the only solution to this type of undesirable patent is a rapid and efficient method for obtaining its revocation". However, Jacob LJ was also of the opinion that: "The only sanction…may, under the English litigation system, lie in an award of costs on the higher (indemnity) scale if the patent is defended unreasonably". Norris J appears to be of the view that a restitutionary reward may be another possible sanction and a way of dissuading patentees from seeking injunctions on the basis that "whatever the end result legally, it will be worth it commercially."

Had Norris J been asked to consider a restitutionary basis for damages, Apotex could have been awarded a substantial percentage of the £74 million of profits that Servier made while Apotex was out of the market. What percentage of those profits did Servier achieve as a result of not having to compete with Apotex? Whatever it was, it would seem likely to have been more than £17.5 million.