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England and Wales Court of Appeal (Civil Division) Decisions
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Cite as:  EWCA Civ 137,  FSR 31
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
MR JUSTICE JACOB
London, WC2A 2LL
B e f o r e :
LORD JUSTICE CARNWATH
SIR CHRISTOPHER STAUGHTON
| (1) SMITHKLINE BEECHAM PLC|
(2) GLAXOSMITHKLINE (UK) LIMITED
|- and -|
|APOTEX EUROPE LIMITED|
WAYMADE HEALTHCARE PLC
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 Andrew Waugh QC, Mr Justin Turner and Mr Geoffrey Pritchard (instructed by Simmons & Simmons) for the Respondents/Claimants
AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Aldous:
"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.  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.
"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.  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.  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."
"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."
"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."
"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."
"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.  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  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  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  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)  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."
"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."
"In an expedited appeal by the company against the judge's refusal to grant an interlocutory injunction, the Court of Appeal  Q.B. 1114 delivered an extempore judgment on May 18, 1982, shortly after the publication in the Weekly Law Reports  2 W.L.R. 322 of the decision of this House in Hadmor Productions Ltd. v. Hamilton  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."
Lord Justice Carnwath :
"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)
"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  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: