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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Smithkline Beecham Plc & Anor v Apotex Europe Ltd. & Ors [2003] EWCA Civ 137 (14 February 2003)
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Cite as: [2003] EWCA Civ 137, [2003] FSR 31

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Neutral Citation Number: [2003] EWCA Civ 137
Case No: A3/2002/2520

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
MR JUSTICE JACOB

Royal Courts of Justice
Strand,
London, WC2A 2LL
14th February 2003

B e f o r e :

LORD JUSTICE ALDOUS
LORD JUSTICE CARNWATH
and
SIR CHRISTOPHER STAUGHTON

____________________

Between:
(1) SMITHKLINE BEECHAM PLC
(2) GLAXOSMITHKLINE (UK) LIMITED
Claimants/
Respondents
- and -

APOTEX EUROPE LIMITED
NEOLAB LIMITED
WAYMADE HEALTHCARE PLC
Defendants/
Appellants

____________________

(Transcript of the Handed Down Judgment of
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)

____________________

Mr Antony Watson QC, Mr Colin Birss and Mr Tom Mitcheson (instructed by Taylor Wessing) for the Appellants/Defendants
Mr Andrew Waugh QC, Mr Justin Turner and Mr Geoffrey Pritchard (instructed by Simmons & Simmons) for the Respondents/Claimants

____________________

HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
____________________

Crown Copyright ©

    Lord Justice Aldous:

  1. By an order dated 28th November 2002 Jacob J granted an interlocutory injunction preventing the sales by the defendants of a drug pending trial of the action.
  2. The claimants in the action are SmithKline Beecham Plc and GlaxoSmithKline (UK) Limited who are respectively the proprietor and the exclusive licensee of UK Patent No 2297550. I will refer to them as SB. The defendants are Apotex Europe Limited, Neolab Limited and Waymade Healthcare Plc. For the purposes of this appeal there is no need to differentiate between them and I will refer to them as Apotex.
  3. The patent is concerned with a particular form of the known pharmaceutical paroxetine hydrochloride which is sold by SB in the hemihydrate form under the trade mark "Seroxat". It is a well-known antidepressant which generates about 10% of the pharmaceutical sales of SB. The patent is concerned with the anhydrate form. It is entitled "Paroxetine hydrocholoride anhydrate substantially free of bound organic solvents."
  4. In other proceedings the patent was attacked by BASF. After hearing evidence, Pumfrey J decided in his judgment of 12th July 2002, that the patent was partially invalid. However he held claim 11 valid. Both parties have appealed and the appeal is due to be heard in May 2003. SB have applied to amend their patent to reflect the conclusions reached by Pumfrey J and the extent to which it will be necessary will depend on the outcome of SB's appeal.
  5. Claim 11 is for "a process for the preparation of paroxetine hydrochloride anhydrate substantially free of bound organic solvent which comprises displacing the solvated solvent or solvents from a paroxetine hydrochloride solvate using a displacing agent." It is that claim that SB contend will be infringed by Apotex. Apotex assert that they do not use that process as they make and intend to sell hydrochloride anhydrate without using the claimed process. They also contend that claim 11 is invalid. There are substantial issues between the parties on infringement and validity.
  6. The judge held that there was a serious issue to be tried on infringement and on appeal Apotex did not contend that that conclusion was wrong. They submitted that the judge was wrong to grant an interlocutory injunction on a number of grounds which I will deal with in turn.
  7. Apotex submitted in their skeleton argument that no interlocutory injunction should have been granted because infringement, even if established at trial, would result in no unquantifiable loss as the only damages that could be recovered would be assessed upon a reasonable royalty basis. To support that submission they referred to such cases as General Tire and Rubber Company v Firestone Tyre and Rubber Company Limited [1976] RPC 197 and Gerber Garments Technology Inc. v Lectra Systems [1997] RPC 443.
  8. That submission is wrong. A patentee is entitled to recover damages for loss caused by the infringement provided that they are not too remote. In cases where the patentee is not a manufacturer, the patentee will normally only be able to establish that he has lost that which he would have charged for use of his invention, namely a reasonable royalty. General Tire was such a case. But that does not mean that infringement may not cause a patentee loss exceeding a reasonable royalty. The extent of recovery will depend upon the facts and the normal considerations of causation and remoteness.
  9. That was made clear by the Court of Appeal in the Gerber Garments case. As Staughton LJ said at page 452:
  10. "Infringement of a patent is a statutory tort; and in the ordinary way one would expect the damages recoverable to be governed by the same rules as with many or most other torts. We were referred to Halsbury's Laws of England (4th edn) vol. 12 para 1128 and following, to establish the elementary rules (i) that the overriding principle is that the victim should be restored to the position he would have been in if no wrong had been done, and (2) that the victim can recover loss which was (i) foreseeable, (ii) caused by the wrong, and (iii) not excluded from recovery by public or social policy. The requirement of causation is sometimes confused with foreseeability, which is remoteness. The two are different - see Halsbury para 1141:
    1141. Causation in tort. Subject to foreseeability and the principles of public policy it is prima facie necessary and sufficient for a plaintiff to prove that a defendant's wrongdoing was a cause and not necessarily the sole or dominant cause of his injuries, as a matter of physical consequences or common sense, but subsidiary principles associating foreseeability and causation have been evolved in certain categories of concurrent or intervening causes.
    It is not enough that the loss would not have occurred but for the tort; the tort must (for present purposes at any rate) be, as a matter of common sense, a cause of the loss.
    There is no dispute about foreseeability or causation in the present case. It is conceded that both requirements (if there are two) are satisfied. What is said is that either the general rules in Halsbury do not apply to the Patents Act, or else there is now a fourth limitation which must be satisfied. That fourth limit is to be derived from the speech of Lord Hoffmann in South Australia Asset Management Corporation v. York Montague Ltd. [1996] 3 WLR 87 (aka the Banque Bruxelles case) at pages 92-l94:
    My answer would be, at first impression, that the Patents Act is aimed at protecting patentees from commercial loss resulting from the wrongful infringement of their rights. That is only a slight gloss upon the wording of the statute itself. In my judgment, again as a matter of first impression, it does not distinguish between profit on the sale of patented articles and profit on the sale of convoyed goods. So I must look to see whether any such distinction emerges from the case law.
    …"
  11. Staughton LJ went on to consider the case law and then said:
  12. "Viewing the cases as a whole, I cannot find any rule of law which limits the damages for infringement in a patent case in such a way as to exclude the loss claimed by the patentees in the present case. In General Tire & Rubber Co. Ltd v. Firestone Tyre & Rubber Co. Ltd. [1976] R.P.C. 197 at page 214 Lord Wilberforce approved a passage in the judgment of Fletcher Moulton L.J. in the Meters case which concluded:
    "But I am not going to say a word which will tie down future judges and prevent them from exercising their judgment, as best they can in all the circumstances of the case, so as to arrive at that which the plaintiff has lost by reasons of the defendant doing certain acts wrongfully instead of either abstaining from doing them, or getting permission to do them rightfully."
    Beyond that the assessment of damages for infringement of a patent is in my judgment a question of fact. There is no dispute as to causation or remoteness in the present case; nor can I see any ground of policy for restricting the patentees' right to recover. It does not follow that, if customers were in the habit of purchasing a patented article at the patentee's supermarket, for example, he could claim against an infringer in respect of loss of profits on all the other items which the customers would buy in the supermarket but no longer bought. The limit there would be one of causation, or remoteness, or both. But the present appeal, in so far as it seeks to restrict the scope of recovery, should be dismissed.
    It remains to mention first that in Watson Laidlow & Co. Ltd. v. Pott, Cassels & Williamson (1914) 31 R.P.C. 104 at pages 116 and 117 the House of Lords sanctioned damages for "accessories, extensions, repairs etc," and for "machines and frames". Secondly, the recent United States cases of Rite-Hite Corp. v. Kelley Co. Inc. [1996] F.S.R. 469 including the dissenting opinions, and King Instruments Corporation v. Perego (1995) (but decided after Rite- Hite) 65 F 3rd 941 72 F 3rd 855 are certainly interesting; and provide support for each side in the present dispute in some degree. But I do not think that we can rely on them as solving the problem in our courts."
  13. Mr Watson QC, who appeared for Apotex, also submitted that SB had not shown that after trial they would recover any damages. First, he drew attention to the fact that the patent had been held invalid, save for claim 11, and that amendment had been proposed. It followed that damages would not be recoverable unless SB established that the specification of the patent before amendment was framed with reasonable skill and knowledge (see section 62(3) of the Patents Act 1977). In the present case, he submitted, the evidence did not establish an arguable case that the specification had been framed with the appropriate skill and knowledge. Second, he submitted that the damage claimed, being damage caused to the sales of SB's hemihydrate, was too remote and therefore not recoverable.
  14. Mr Watson went on to submit that as damages would not be recovered by SB or would only be recovered at a reasonable royalty rate, no interlocutory injunction should be granted as the purpose of an interlocutory injunction was to prevent, pending trial, damage that could not be satisfied by an award of damages.
  15. I reject each part of that submission. The conclusion sought to be drawn is unsound. I will come to the submissions on remoteness and lack of reasonable skill and knowledge, but deal first with Mr Watson's submission that no interlocutory injunction should be granted upon the assumption that the damage sought to be prevented in this case would not be recoverable. Whether damages are recoverable and the extent of any such damage may be very important considerations when deciding whether to grant an interlocutory injunction, but the court's jurisdiction to grant interlocutory injunctions is not limited as a consideration of the ambit of section 37(1) of the Supreme Court Act 1981 makes clear. In any case where use of a property right is in issue, damage may not be the main consideration. As Lord Diplock said in American Cyanamid Co v Ethicon Ltd [1975] AC 396 at 406:
  16. "The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial; but the plaintiff's need for such protection must be weighed against the corresponding need of the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights for which he could not be adequately compensated under the plaintiff's undertaking in damages if the uncertainty were resolved in the defendant's favour at the trial. The court must weigh one need against another and determine where 'the balance of convenience' lies."
  17. Further it would appear to be contrary to the intention of Parliament to refuse an interlocutory injunction merely because damages were not recoverable upon the ground that reasonable skill and knowledge had not been established. Section 63 of the 1977 Act is concerned with the relief that a court may grant for a partially valid patent, such as the patent in suit. Subsection (2) prevents damages and costs being awarded to the patentee unless good faith and reasonable skill and knowledge are proved. That is consistent with section 62 to which I have referred. But it is notable that there is no restriction upon the grant of an injunction to prevent further infringement and, absent extraordinary circumstances, I envisage that the court would grant an injunction to a successful patentee. If a final injunction would normally be granted in cases where damages after amendment would not be recoverable, there is no principle which would preclude an interlocutory injunction from being granted in similar circumstances. The judge was right to reject Apotex's submissions.
  18. The basis for Mr Watson's submission was statements made in Polaroid Corporation v Eastman Kodak Company [1977] RPC 379. At page 394 Buckley LJ said:
  19. "The learned judge appears to have regarded the plaintiffs' whole United Kingdom business in instant photographic products as the relevant field of inquiry. With deference, I think this may not be right. One only of the patents in suit relates in any way to the "peel-apart" process. That is a patent numbered 1,071,088, which relates to films, the invention of which can, as I understand it, be used in either process. There is no evidence that any other "peel-apart" processes used by the plaintiffs are now protected by patents. To any extent that they are not so protected, the defendants are entitled to compete with the plaintiffs in using them. To any extent that they are so protected, the relevant patents protect the plaintiffs from infringement of the claims of those patents, but do not protect the plaintiffs from any form of trade competition which does not infringe those patents. The patents in suit protect the plaintiffs from infringement of the claims of those patents. Can they also protect the plaintiffs from loss resulting from competition in respect of goods of a different kind not protected by the patents in suit occasioned by acts involving infringement of the patents in suit? In other words, can infringement support a claim for what is sometimes graphically (but I think rather inelegantly) described as parasitic damages? Each patent is designed to protect the monopoly granted by that patent. This, I think, appears from the form of the grant, in which the command against infringement contained in it is expressed to be "to the end that the patentee may have and enjoy the sole use and exercise and the full benefit of the said invention". The patent is not, in my opinion, intended to protect the patentee in the enjoyment of any other subject-matter. Accordingly, I am inclined to think that any effect which the defendants' sales of "integral" products in the United Kingdom may have on the plaintiffs' "peel-apart" business (except perhaps in respect of infringements of No. 1,071,088) is irrelevant. But I do not think that it is necessary for present purposes to express a concluded view on this question, which may well deserve more extended argument than we have heard on it; for, if I am wrong about this, it seems to me that the question whether any damage of this kind suffered by the plaintiffs between now and the trial will be capable of satisfactory quantification and of being compensated in money damages depends upon the factors and the considerations which I have already discussed. So, I do not think that a case is made for saying that any damage to the "peel-apart" section of the plaintiffs' business which may result from any infringement during the period between now and the trial should be regarded as irreparable damage or damage which ought to be avoided by the grant of an interlocutory injunction."
  20. At page 397 Goff LJ said:
  21. "I agree with the order my Lord has proposed and with the reasons which he has given for it. Like my Lord, I think the plaintiffs are not entitled to rely upon any apprehended injury to their "peel-apart" business, save in so far as it might arise from an infringement of the one patent No. 1,071,088, and that could not cover anything like the whole ambit of the "peel-apart" business. So to rely would be setting up a monopoly wider than that granted by the relevant patents.
    I think it might also be put another way, that such damage is too remote and that one is not entitled to an injunction to avoid damages which, if suffered, would be too remote. But I agree with my Lord that it is not necessary for us to resolve those questions, nor should we at this stage do so."
  22. Mr Watson also referred us to the judgment of Robert Walker J in Peaudouce SA v Kimberly-Clark Ltd [1996] FSR 680 at 692.
  23. "But the important point for present purposes is the plaintiffs' claim for an injunction as a protection against, among other things, avowedly irrecoverable loss elsewhere in the Mölnlycke division of the Svenska group. It seems to me that that approach is wrong in principle. In general (and I am putting on one side actions based on the apprehension of non-economic loss, such as some breaches of confidence, and other special cases such as antisuit actions) injunctions are granted in order to protect a plaintiff from loss which would sound in damages, not from loss which would not sound in damages. As Goff L.J. said in Polaroid Corporation v. Eastman Kodak Co. [1977] R.P.C. 379, 397: ". . . one is not entitled to an injunction to avoid damages which, if suffered, would be too remote". Buckley L.J. had expressed similar views at pages 394-395. These views were, as the Lords Justices themselves acknowledged, not necessary for determining the appeal, but they are entitled to a good deal of respect. The non-binding character of what Buckley L.J. said was noted and his view was respectfully disagreed with by Jacob J., in his important judgment on the inquiry as to damages in Gerber Garment Technology Inc. v. Lectra Systems Ltd [1995] R.P.C. 383, 396 and following. Under the general rubric of disputed principles, Jacob J. dealt with what he called associated or ancillary damages, in particular in connection of sales of allied unpatented matters and the so- called "bridgehead" into sales after expiry of a patent. Jacob J. discerned inconsistency between the approach of the Court of Appeal in the Polaroid case (where the head of what Buckley L.J. called "parasitic damages" for any apprehended effect on the plaintiffs' sales of "integral", as opposed to "peel apart", products was regarded as too remote) and that of the Court of Appeal, including both Buckley L.J. and Goff L.J., about 18 months later in Corruplast Ltd v. George Harrison (Agencies) Ltd [1978] R.P.C. 761, a well- known bridgehead case, Jacob J. said, at page 398, that the two cases:
    . . . can only be reconciled if one could draw a rational distinction between taking sales of unpatented items during the life of the patent and establishing a better position to take such sales after expiry. Yet both are caused, and foreseeably caused, by infringement.
    Jacob J. then went on to note, at pages 399 and following, that remoteness of damage is a matter not only of foreseeability, but also of policy, and policy considerations weighed heavily with Jacob J. in his differing from the views of Buckley L.J. on parasitic damages for allied sales, which Falconer J. had followed in Catnic Components v. Hill & Smith [1983] F.S.R. 512.
    I have gone into this point at some length only to show that Jacob J. did not in any way differ from the general statement by Goff L.J., that a plaintiff is not entitled to an injunction to avoid damages which would be too remote, and as an introduction to what Jacob J. then said, at pages 408 and following, about sales through subsidiaries. In that case (see at page 408) the proprietor of the patent effected sales through subsidiaries which were not exclusive licensees, but Jacob J. included profits lost to the subsidiaries as being within the claim. In doing so, he followed the Court of Appeal in George Fischer Great Britain v. Multi-construction, December 21, 1994, which had distinguished Prudential Assurance Co. Ltd v. Newman Industries Ltd (No. 2) [1982] 1 Ch. 204, another decision of the Court of Appeal.
    I am inclined to think – and here I am not, I believe, differing in any way from Jacob J. – that the true dividing line is not between tort (including patent infringement) on the one side and breach of contract on the other, but that it is a question of looking to see which plaintiff has a cause of action and what economic loss it has really suffered, while being properly sceptical of a company and its shareholder, individual or corporate, seeking to recover duplicated damages in respect of the same wrong. But I need not express any definite view because I think it is also contrary to principle to contemplate the plaintiffs in this case, either singly or in combination, having a sustainable claim in respect of damage suffered by other companies, of which they can say no more than that their holding company is interested in those other companies under a different line of descent. To repeat what Goff L.J. said, "We are concerned with law, not economics" and in law a group's corporate structure cannot be disregarded."
  24. Care must be taken before extrapolating the views expressed in the Polaroid and Peaudouce cases into a rule of law or practice applicable to other cases. The facts in those cases were not typical and questions of recoverability of damages could have been crucial. However it must be remembered that the grant of an interlocutory injunction is a discretionary remedy that should be available to prevent injustice. It would be unusual to grant an interlocutory injunction to protect a property right if no damages for infringement could be recovered. But if the claimant has a cause of action to protect a property right recognised by the law, there is no reason in principle why the court should not grant an interlocutory injunction to protect that right, even if damages are not recoverable.
  25. Against that background, I turn to the grounds upon which Apotex submitted that no arguable case had been made out for recovery of damages for infringement of the patent. I start first with the submission that SB had not established an arguable case that the specification had been framed with reasonable skill and knowledge and therefore damages would not be recoverable before the date of the amendment which would not happen before the trial of these proceedings.
  26. Mr Watson submitted there were two instances of lack of reasonable skill and knowledge. First, he drew to our attention a passage on page 5 of application number 8526407 (407) which was filed by Beecham Group Ltd in October 1985. That passage Mr Watson submitted, disclosed a workable way of producing the anhydrate form. The 407 application was drawn to the attention of SB's patent agent Vivian West, but SB did not take appropriate action to limit the claims. There was no justification for any claim in the form of claim 3 that was considered in the BASF case and was held invalid. Thus that claim was covetous. Second, he drew to our attention conclusions reached by Pumfrey J in the BASF proceedings that the specification was not properly drawn in that it failed to define certain phrases such as "conventional oven drying" and "substantially free".
  27. I will come to those submissions, but will first explain why the judge was right to conclude that the first point was assembled at the last minute and could not be dealt with at the hearing.
  28. The onus is upon the patentee to establish that the specification was framed with reasonable skill and knowledge if amendment is required, but the evidential burden is easily shifted as specifications are examined by the Patent Office. Thus initially SB did not need to do more than assert that the specification had been framed with appropriate skill and knowledge. Thereafter Apotex needed to put forward, in a witness statement, the reasons as to why they contended that the specification was not framed with reasonable skill and knowledge. In this case Mr Watson told the judge at the hearing on 29th October 2002 that Apotex would contend at the main hearing that was due that the specification had not been framed with reasonable skill and knowledge, and therefore they would contend that damages would not be recoverable in this case as the hearing for amendment would not take place until after the trial in this action. The ground relied on related solely to the lack of clarity in the phrases to which I have referred. It was for that reason that SB filed a witness statement from Vivian West and another by Peter Lawton which explained what had happened. Vivian West said that she considered the prior art and information available to her and concluded that the amendments, which were subsequently made and therefore formed part of the specification considered by Pumfrey J, were appropriate and were in the form to which SB were entitled.
  29. On about 15th November 2002 Apotex provided a witness statement from Mr John Brown, a patent agent. He agreed with Pumfrey J's criticisms of the lack of definition in the phrases. He concluded that the difficulties in construction, stemming from the expression "substantially free", indicated to him that the specification was not drafted with reasonable skill and knowledge. That witness statement was met by a witness statement of Mr Ritter, a patent agent instructed by SB. He said that with hindsight it could be contended that certain technical terms could have been further defined, but without that hindsight the draughtsman of the specification was not remiss in not defining terms such as "substantially free" more tightly. To support his evidence he produced a draft witness statement he had prepared before seeing the judgment of Pumfrey J which stated that the appropriate skill and knowledge had been used.
  30. That was the state of the evidence when the case came before the judge at the hearing starting on 21st November 2002. It was therefore reasonable to assume that the sole issue for the judge to decide was whether the lack of definition in the phrases meant that it was not properly arguable that the specification was framed with reasonable skill and knowledge.
  31. At the hearing Mr Watson did not confine his submissions to the matters raised in the evidence. He sought, without evidence in support, to construct an argument that claim 3 in the form that was before Pumfrey J was covetous. That submission was pressed before us, again without evidence. I have no doubt it was not appropriate for the judge to try to resolve that issue, raised as it was without warning or evidence. It is also inappropriate for this Court to try to do so. Even so I suspect that if the matters had been properly raised and evidence had been filed, the conclusion would have been that SB had a properly arguable case that the specification had been framed with reasonable skill and knowledge.
  32. The dispute between Mr Brown and Mr Ritter cannot be resolved at the interlocutory stage and therefore it was arguable, despite the criticisms of Pumfrey J as to the lack of clarity in certain phrases, that the specification was in that respect framed with reasonable skill and knowledge.
  33. It is true as Mr Watson pointed out that in a letter dated 11th December 1998 a Spanish patent agent drew the 407 disclosure to the attention of the European Patent Office which was considering grant of a European Patent corresponding to the patent relied on in this case. The European Patent Office then drew to SB's attention the allegations made in that letter. Those allegations were similar to those asserted by Mr Watson. In a letter dated 10th June 1999 SB explained that the disclosure in 407 was not enabling and therefore did not invalidate the claims they were seeking. That was the position that was argued before Pumfrey J in the BASF proceedings. Further, SB intend on appeal to argue that claim 3 is novel despite the conclusion reached by Pumfrey J to the contrary. Their case involves an analysis of the evidence and an issue of construction of the claim. Neither of those issues are suitable for resolution in these proceedings, particularly when not raised in the evidence. It is only necessary to read the judgment of Pumfrey J to realise that complex issues arose which had to be resolved before arriving at a conclusion as to what is disclosed in the 407 application.
  34. I have no doubt, as the judge found, that there is a properly arguable case that the specification that was before Pumfrey J was framed with reasonable skill and knowledge and therefore it is properly arguable that damages for infringement would be recovered.
  35. As I have said, Mr Watson submitted that damages would not be recovered as the alleged damages were too remote. He submitted that the patent only covered the anhydrate. The damage relied on was damage to SB's business in marketing the hemihydrate and that was too remote.
  36. Mr Watson accepted that a patentee can recover for all damage caused by the infringement provided that the damage was not too remote. He submitted, relying upon the Polaroid case, that the damages in this case were too remote and that, he submitted, was supported by public policy grounds. In support he referred us to the provisions in the Patents Act 1977 which enable the grant of compulsory licences.
  37. I accept that questions of policy can arise when considering whether damage is too remote, but it would be wrong to extrapolate from the facts of the Polaroid case to a general proposition that the damage caused by infringement will be too remote and therefore unrecoverable unless the damage is a loss of sales in goods falling within the ambit of the claim of the patent. In this case the anhydrate and hemihydrate forms are for all practical purposes interchangeable. The clinical evidence used to obtain a product licence for the hemihydrate was used to obtain a product licence for the anhydrate. The two forms are so close that it seems to me to be reasonably arguable that damage caused to SB's sales of the hemihydrate by Apotex's sales of the anhydrate would not be too remote.
  38. I come next to the difficult question as to where the balance of justice lies. The judge, having concluded that there was a serious issue to be tried, went on to decide whether damages would be an adequate remedy for SB. He concluded that they would not. He also concluded that damages on the cross-undertaking were unquantifiable and substantial. He said:
  39. "61. The upshot of all the foregoing is that I hold that there is a serious issue to be tried. Following the Cyanamid guidelines the next question to be considered is whether damages are an adequate remedy either to the claimant or to Apotex on the claimant's cross-undertaking should be claimants fail at trial. Mr Watson accepts that if Apotex, or indeed any other generic company, enters the market SB will not only lose substantial sales but the price will collapse. It is suggested that Apotex might take as much as 40% of the UK paroxetine market before trial. On top of that SB's prices would be severely eroded. He accepts that damage, perhaps as much as £5m worth, might be caused. In my judgment the position is exactly the same as it was when I granted an interim injunction concerning paroxetine in SmithKline Beecham v Generics, 23 October 2001. The position in fact is much the same as it was then. Then SB had one distributor, Norton, and now have three. But if Apotex enter the market the arrangements with those companies are likely to be undermined for the same reasons as I gave before.
    62. Mr Watson accepted that he had a tall order to persuade me that I was wrong last time. He made the same points as were made last time. The point he concentrated upon most, namely that if his clients enter the market there will be a certain history as to what happened to SB's sales and the inroads made into their market, whereas if an injunction is granted how much Apotex would have sold would remain a matter of speculation. Mr Watson invited SB to accept that absent an injunction Apotex would take 40% of the market. Not surprisingly SB did not so accept. That, said Mr Watson, showed how uncertain his claim on any cross-undertaking might be.
    63. As in the last case there is evidence of the difficulty of raising a price once it has been lowered and of the complications of the fact that the prices link with the prices for other drugs and so on. I think there would be formidable difficulties in SB's way if it tried to get back to its present position after a major collapse of prices. I remain firmly convinced that the damage caused by entry into the market on a substantial scale will be both very, very substantial and not adequately quantifiable. The position is as described by Kay LJ in Lyons v Wilkins approved by Lord Wilberforce in Garden Cottage (see above).
    64. I also accept that the damage to Apotex if the injunction is wrongly granted is unquantifiable and yet substantial. One would have to form a view as to what proportion of the market they would have gained. That would not be entirely a matter of speculation because by the time of the enquiry Apotex would have entered the market, or others would have entered into the market, and one could form a view as to how much Apotex would have got. The effect on prices and so on would by then be known. So it would not be a matter of speculating entirely without any basis."
  40. The judge then quoted from his judgment in the Generics case in which he had granted an interlocutory injunction to restrain infringement of the patent and concluded that he should follow the same reasoning.
  41. Mr Watson submitted that the judge had failed to assess the relative injustice to the parties. In particular he should have refused to grant the injunction as it would be easier to assess the damage that would occur based upon the actual facts that occurred than it would by speculating as to what would have happened if no injunction had been granted. Without an injunction the actual drop in price could be seen, as could the extent of Apotex's intrusion into the market with consequent loss of sales by SB. If an injunction were to be wrongly granted, it would be a matter of speculation as to whether other companies would have entered the market and their effect. The judge's suggestion that the history after trial would be a guide was wrong as it would not be possible to predict whether the events after trial would have been the same as those that would have occurred if there had been no injunction.
  42. Mr Waugh QC, who appeared for SB, submitted that the judge had not erred when exercising his discretion to grant the injunction. In any case the judge did not err in principle and therefore this Court should not substitute its view for that of the judge. In support he referred us to this part of the speech of Lord Diplock in Garden Cottage Foods Ltd v Milk Marketing Board [1984] 1 AC 130 at 137:
  43. "In an expedited appeal by the company against the judge's refusal to grant an interlocutory injunction, the Court of Appeal [1982] Q.B. 1114 delivered an extempore judgment on May 18, 1982, shortly after the publication in the Weekly Law Reports [1982] 2 W.L.R. 322 of the decision of this House in Hadmor Productions Ltd. v. Hamilton [1983] 1 A.C. 191, in which this House took occasion, at p. 220, to point out that on an appeal from the judge's grant or refusal of an interlocutory injunction an appellate court, including your Lordships' House, must defer to the judge's exercise of his discretion and must not interfere with it merely upon the ground that the members of the appellate court would have exercised the discretion differently. The function of an appellate court is initially that of review only. It is entitled to exercise an original discretion of its own only when it has come to the conclusion that the judge's exercise of his discretion was based on some misunderstanding of the law or of the evidence before him, or upon an inference that particular facts existed or did not exist, which, although it was one that might legitimately have been drawn upon the evidence that was before the judge, can be demonstrated to be wrong by further evidence that has become available by the time of the appeal; or upon the ground that there has been a change of circumstances after the judge made his order that would have justified his acceding to an application to vary it. Since reasons given by judges for granting or refusing interlocutory injunctions may sometimes be sketchy, there may also be occasional cases where even though no erroneous assumption of law or fact can be identified the judge's decision to grant or refuse the injunction is so aberrant that it must be set aside upon the ground that no reasonable judge regardful of his duty to act judicially could have reached it. It is only if and after the appellate court has reached the conclusion that the judge's exercise of his discretion must be set aside for one or other of these reasons, that it becomes entitled to exercise an original discretion of its own."
  44. Mr Waugh reminded us of the evidence that three other companies had stocks of generic paroxetine hydrochloride which were packaged, licensed and ready for immediate sale and distribution in this country. He submitted that if Apotex were free to market their product, then others would follow. The result would be aggressive competition leading to a downward price spiral, a lower drug tariff price and very substantial damage to SB. The price could thereafter never be restored with dire consequences for SB.
  45. Apotex accept that there would be, pending trial, a reduction in price, but their witness Mr Ansell said that SB had sufficient market power to reinstate prices at the current levels. That was disputed by Mr Riley of SB. That clash of evidence makes it impossible to decide whether the price would be restored.
  46. Having read the evidence, I believe that the judge was entitled to conclude that damages would not be an adequate remedy for SB nor for Apotex on the cross-undertaking as to damages. Further, there was no clear case to conclude that it would be easier to assess the damages due to SB if no injunction was granted than it would be to assess the damages to Apotex under the cross-undertaking of damages if an injunction was wrongly granted. He was therefore entitled to maintain the status quo, particularly as the trial was only a few months away. Further, he was entitled to have in mind that Apotex could have resolved the question of infringement and validity if they had acted timeously as it was they that could have done that and not SB.
  47. Apotex rightly submitted that there was no obligation on a potential defendant to start proceedings. However this was a case where Apotex intended to come on to the market with their product and they must have realised, back in November 2001, that SB would be likely to seek an interlocutory injunction if there was an arguable case of infringement. It was Apotex who knew the process that was to be used and when they intended to launch their product, but they refrained from telling SB until the late autumn of 2002. If they had wanted to they could have had the issue of infringement and validity decided before launch. They chose not to do so with the result that there was potential injustice whichever way the court decides.
  48. The factors in favour of granting an injunction and of refusing one were evenly balanced. I find no error of principle in the way that the judge exercised his discretion. The judge was, in my view entitled to take into account when deciding to maintain the status quo that Apotex walked into the situation that they find themselves in with their eyes open to the risk that they were taking. They knew the risk and decided that it was best not to remove it. To preserve the status quo as the judge did meant that Apotex would only temporarily be prevented from doing that which they have not yet done. If they are right, the court will have to do the best it can to compensate them under the cross-undertaking.
  49. I cannot find fault with the approach of the judge and conclude that it would be appropriate to dismiss the appeal.
  50. Lord Justice Carnwath :

  51. I agree that the appeal should be dismissed for the reasons given by Aldous LJ. I would add only one comment in relation to the judgment of Robert Walker J in Peaudouce SA v Kimberly-Clark Ltd. [1996] FSR 680 (referred to at paragraph 17 of Aldous LJ's judgment). In the passage quoted by him there is the following sentence:
  52. "In general (and I am putting on one side actions based on the apprehension of non-economic loss such as some breaches of confidence, and other special cases such as antisuit actions) injunctions are granted in order to protect a plaintiff from loss which would sound in damages, not from loss which would not sound in damages." (p692)
  53. Aldous LJ has also quoted from Lord Diplock's classic statement in American Cyanamid Co v Ethicon Ltd [1975] AC 396, 406, where he said:
  54. "The object of the interlocutory injunction is to protect the plaintiff against injury by violation of his right for which he would not be adequately compensated in damages recoverable in the action if the uncertainty were resolved in his favour at the trial …".

    The purpose of an interlocutory injunction therefore is protection, not just against "loss which would sound in damages", but against violation of any right where damages would not be adequate compensation. An obvious example of the need for that wider formulation is the case of trespass to land. A landowner whose title is not disputed is normally entitled to an injunction to restrain trespass on his land, even if the trespass does not harm him (see Patel v W.H. Smith (Eziot) Ltd [1987] 1 WLR 853, 858F). With great respect to Robert Walker J, therefore, I think that the passage in Peaudouce may be too narrowly stated. I also think he would have been surprised by the use sought to be made of it by Mr Watson.

    Sir Christopher Staughton:

  55. I agree that this appeal should be dismissed.


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