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21 July 2020
The UK Court of Appeal has recently upheld a judgement of the UK High Court (see here), refusing an application for a preliminary injunction (see here). The case concerns two anti-insomnia drugs, Circadin and Slenyto, marketed by the claimants Neurim Pharmaceuticals and their licensee Flynn Pharma, respectively. The claimants sought interim injunctive relief to restrain the defendant, Mylan Pharmaceuticals, from launching a competing generic product (pending outcome at trial). This case is noteworthy as it represents a departure from previous cases, where the ‘unquantifiable’ effect of a new competitor entering the market was persuasive in satisfying the criteria for an interim injunction.
The claimant argued that, if the defendant was allowed to enter the market prior to the decision at trial, the comparatively low cost of the generic product would force the claimant to lower their prices and reduce their market share. Further, even if the claimant was subsequently successful at trial, it would be extremely difficult for the claimant to increase prices back to previous levels and reclaim the market share they would otherwise have enjoyed.
At first instance, Mr Justice Marcus Smith assessed the claimant’s application for a preliminary injunction using the established principles laid down in American Cyanamid Co v. Ethicon Ltd. An important part of the test laid down in this decision is to consider:
The key issue was whether the ‘price erosion’ could be adequately compensated with damages. Contrary to some previous decisions, the judge found that whilst it may be tricky to quantify the damages, it was by no means impossible. The reverse situation, where the defendant was restrained but subsequently won at trial, was also considered. It was argued by the defendant that the loss of ‘first mover’ status could not be quantified and thus could not be adequately compensated with damages. The judge had some sympathy with this argument but still fell short of agreeing with the defendant:
“I would hesitate to conclude that an award of damages for Mylan would be inadequate. I would merely go so far as to say that any award of damages to Mylan would be materially more uncertain than calculating Neurim and Flynn’s loss.”
The Court of Appeal agreed with the judge’s succinct summary of the key issue, distinguishing between a “perfect” and an “adequate” situation:
“Matters are rarely black and white, and it is implicit in Lord Diplock’s use of the word “adequate” that an injunction may nevertheless be refused if damages are not a “perfect” remedy; but that there comes a point when damages as a remedy falls so far short of the perfect, that the remedy of damages can no longer be described as adequate.”
As such, the judge was not minded to grant interim relief.
In the judgement from The Court of Appeal, it was stated that:
“I do not think that the extremely unusual facts of this case give rise to such difficult questions of computation of damages as to trigger the exercise of the court’s discretion to grant an injunction.
In light of this decision, claimants should be aware that ‘price erosion’ may not be sufficient to justify the grant of an interim injunction. Indeed, to this author at least, this situation may not be deemed to be “extremely unusual” in future, so claimants should be aware that more significant inconvenience may need to be demonstrated if they wish to secure an interim injunction.
For more information on this topic, please contact your usual Withers & Rogers representative.
Life Sciences & Chemistry Group
If you require further information on anything covered in this briefing, please contact Bruce Dean; or your usual contact at the firm. This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Withers & Rogers LLP July 2020