The launch of a generic product onto the marketplace in competition with a patented pharmaceutical product can have devastating effects on an originator company’s market position and pricing strategy. This has led to an increase in interim patent injunction applications in recent years, particularly in the UK, to restrain the launch of such generic products pending the resolution of patent infringement and/or validity proceedings. However, compared to most countries, Ireland can be regarded as an exception to the prevalence of preliminary injunction applications.
The criteria for obtaining a patent injunction in Ireland
Section 47 of the Patents Act 1992 provides the statutory basis in Ireland for the granting of interim/interlocutory injunctions in patent infringement matters. This section permits a patentee to apply to the Irish High Court for an “injunction restraining the defendant from any apprehended act of such infringement”. The main Irish authority from a pharmaceutical perspective is the High Court decision of Mr Justice Kelly in the case of Smithkline Beecham plc and Another v. Genthon BV and Another(1), a case involving the alleged infringement by the defendant of two patents related to Smithkline’s drug SEROXAT through the defendant’s launch of the generic product MELOXAT. In that case Kelly J. confirmed that the rules and procedures in Ireland governing preliminary injunctive relief in patent matters are the same as any other case by stating as follows:
“I wish to state that there is no hostility, inherent or otherwise, to the granting of interlocutory injunctions in patent infringement proceedings. The tests for the grant of such an injunction are the same in any other case. No better exemplar of this is the decision of the House of Lords in American Cyanamid which set forth those guidelines of wide and general application in what was itself a patent infringement suit.”
As a result, the requirements for obtaining an interlocutory injunction in the Irish Courts are essentially the same as the requirements in the UK Courts, namely the principles set out by Lord Diplock in American Cyanamid Co. v. Ethicon Limited(2). Therefore, in order for an originator company to succeed in an application for a preliminary injunction against the launch of a generic product in Ireland the court must determine:
- whether the originator company has raised a fair and bona fide question to be tried;
- if the originator has established such a question, in the event of the originator company being refused an injunction and succeeding in the action, would the originator company be adequately compensated by damages;
- if the originator company would not be adequately compensated in damages, in the event of the injunction being granted and the originator company failing to succeed in the action, would the generic company be adequately compensated in damages; and
- whether the balance of convenience lay in favour of granting the injunction.
Are damages an adequate remedy in pharmaceutical cases?
In patent injunction applications the Court will give careful consideration to whether damages are an adequate remedy because, if this is the case for either party, then the Court will not need to further consider the balance of convenience. In the Smithkline Beecham case, Kelly J. followed the test for adequacy of damages set out in the Irish Supreme Court decision in Curust Financial Services Ltd v. Loewe(3) (a non patent case). The Supreme Court in the Curust case held that difficulty, as distinct from complete impossibility, in the assessment of damages should not be a ground for characterising the award of damages as an inadequate remedy. The Supreme Court also held that where there is a commercial loss that is capable of being assessed in damages and there is no doubt as to the capacity of the defendant to pay an award in damages, then an injunction should not be granted.
The above-mentioned test on adequacy of damages is particularly relevant in pharmaceutical patent injunction applications where both sides to the litigation have an established trade in their respective products and therefore the ability to pay any damages that may subsequently be awarded by the Court will not become an issue of concern. However, the UK Courts have generally adopted the approach that damages would not be an adequate remedy for either the originator company, which is exposed to a risk of irreversible price erosion and loss of market share if a generic product enters the marketplace, or the generic company, which may be deprived of its considerable investment in time and money in preparing the generic product for launch by way of regulatory approval and/or the opportunity in being first in the field for the generic product.
In the Smithkline Beecham case, Kelly J considered that if an enquiry as to damages incurred by the plaintiff was subsequently necessary, then a review of the plaintiff’s market penetration figures together with the defendant’s actual sales figures of the MELOXAT product would make any impact on the plaintiff’s market share easily discernible for the purposes of such an enquiry. Therefore, any loss to the plaintiff would be classified as a commercial loss, which could be compensated in damages. This approach would appear to be harsher than the corresponding approach adopted by the UK courts. What may have tipped the balance for Kelly J. in the Smithkline Beecham case was the fact that the defendant had provided the Court with an undertaking on oath to keep a record of all sales of MELOXAT until the trial of the action.
This decision suggests that a generic company seeking to launch a generic product in Ireland could offer a similar undertaking to the Court with a view to defeating a preliminary injunction application by the originator company in Ireland. Therefore, the adequacy of damages issue will likely be the main battleground in any preliminary injunction application in patent matters before the Irish Courts and represents the area where the respective parties’ evidence should be focused. However, until the matter comes before the Irish Courts again, there will remain an element of uncertainty for both originator and generic companies on whether damages will be an adequate remedy for the purposes of obtaining or defeating a preliminary injunction respectively in pharmaceutical patent matters. As things stand, the scale appears to be tipped in favour of the generic companies, particularly where undertakings may be given.
The impact of delay by an originator company
Delay in applying for a preliminary injunction, which is an equitable remedy, can also be fatal to an originator company’s application. This is based on the maxim that “delay defeats equity”. It is difficult, especially at the interim stage for an originator company to convince a court that an emergency situation is in existence and that the originator company will suffer irreparable damage if it has, in fact, delayed in bringing the application to prevent the launch of a generic product. Such delay is inconsistent with an allegation of serious and irreparable damage. The amount of delay permissible in any given case depends on the individual circumstances of the case but the Smithkline Beecham case certainly suggests that an originator company should act expeditiously, ie. before the infringing product is launched onto the market, so that there is no question of the generic company being deprived of continued sales prior to the trial of the action.
The failure to “clear the way” by a generic company
A duty to act expeditiously also exists on the part of a generic company in respect of any potential entrance to the market. In the Smithkline Beecham case, Kelly J. referred with approval to the UK decision at first instance of Jacob J. in Smithkline Beecham v. Apotex Europe Limited(4), which was subsequently upheld by the Court of Appeal(5). In that case, Jacob J., adopting his previous decision in Smithkline Beecham v Generics UK Ltd(6), held that a generic company which is aware of a potential patent infringement claim prior to a product launch, may not assert that an injunction would have devastating effects if the generic company did not attempt to deal with the patent issues prior to the product launch.
It is worth noting that the disapproval by a court of a generic company’s failure to “clear the way” in advance of a product launch is something which has resonated through subsequent UK decisions such as Les Laboratoires Servier v KRKA Polska SP. Zo.o(7) and Novartis AG v Dexcel-Pharma Limited(8). However, as Kelly J. had already decided that damages were an adequate remedy in the Smithkline Beecham case, the judge considered that it was not necessary to further consider the “clearing the way” issue in that particular case as it seemed to the judge that it impacted on the issue of the balance of convenience rather than the issue of irreparable loss to be sustained by the originator company.
At present, it appears that from an Irish law perspective, based on the Smithkline Beecham case, that the issue of adequacy of damages will be determined by the Irish Courts before the issue of whether a preliminary injunction should be granted on the basis of a generic company’s failure to take pre-emptive measures by “clearing the way” prior to launch. In appropriate circumstances the “clearing the way” issue may be revisited by the Irish Courts in future patent injunction applications.
Declarations of non-infringement
Of particular note to Ireland in the “clearing the way” context is section 54(2) of the Patents Act 1992, which provides that the plaintiff shall pay the costs of all parties to the proceedings regardless of the outcome, save for special reasons. This was also the position in the UK until the provisions of the Patents Act 1977 were enacted. This double costs burden has effectively ruled out, from a commercial perspective, declarations of non-infringement being sought by parties as an aid in potential pharmaceutical patent disputes(9).
The prospect of the generic company having to pay the substantial costs of the originator company, should it seek a declaration of non-infringement prior to launch, appears prohibitive in the context of the Irish market. In addition, the current costs situation enables an originator company to contest the seeking of a declaration of non-infringement in the Irish Courts, without an eye on the merits, as there is no real risk that costs will be awarded against it. The motivation behind such a strategy would be to delay the generic product launch to the greatest extent possible.
It is hoped that the Irish legislature will follow the approach in the UK of removing such a provision, from the Irish statute book at the earliest opportunity as it can only be considered an anomaly from a pharmaceutical patents perspective. In the meantime, it remains to be seen how an Irish Court, if it decides to scrutinise a generic company’s “clearing the way” strategy, will interpret the failure of a generic company to bring an action for a declaration of non-infringement action, in view of the prohibitive costs implications. This is particularly important where grounds for successfully revoking the originator company’s patent(s) may not exist leaving the generic company with little by way of “clearing the way” options.
The impact of a quick trial of the action
Finally, the question of whether an originator company should seek a preliminary injunction pending the trial of the action has been answered in part by the establishment of the Commercial Court in Ireland. This court has been granted jurisdiction to determine intellectual property disputes, regardless of monetary value, including actions under the Patents Act 1992. As a result of the Irish Commercial Court’s case management procedures, it has been able to greatly increase the speed and efficiency with which a commercial dispute can be heard in Ireland. As a result, a patent infringement action could be dealt with in the Commercial Court in less than 12 months, subject to issues surrounding complexity and pre-trial discovery.
In view of the potential uncertainties in obtaining a preliminary patent injunction in Ireland, a Commercial Court determination of a patent dispute within this short timeframe is something that an originator company may opt for in lieu of a preliminary injunction application. However, in Wyeth Holdings Corp. v Alpharma Limited(10) Laddie J. proceeded to grant an interim injunction in UK patent infringement proceedings on the basis, amongst other factors, that an early trial date was set down and therefore any prejudice to the generic company would be relatively short lived. It will be interesting to see if the Irish Courts take a similar stance by granting preliminary injunctions in patent cases where an early trial date is obtained on foot of accelerated Commercial Court proceedings. This could provide originator companies with an opportunity to re-test the waters in the future.
This article first appeared in Intellectual Property Magazine (February 2011).