This is an update on our note last year concerning interlocutory patent injunctions in Ireland. The decision of the Irish Supreme Court on the 31 July 2019 in Merck Sharp & Dohme Corp v Clonmel Healthcare Ltd [2019] IESC 65 will be welcome news to SPC holders but alters the field for generic manufacturers as it heralds a change in the approach to granting injunctions in Irish patent actions.
Background
Merck owned a patent and later an SPC relating to simvastatin which expired in May 2003. It also owned an SPC for an active ingredient ezetimibe which expired on 16 April 2018. The proceedings under discussion related to the combination of these two ingredients marketed as Inegy. Merck obtained an SPC on the basis of the original ezetimibe patent which it maintained protected the combination product.
Clonmel claimed that Inegy was not protected by the ezetimibe patent. It launched a generic version of the product at a €16 to €18 price point and offered a further 80% discount as an incentive to pharmacists to offer its product as a substitute to Inegy which was on the market at €41 to €44.
The High Court and Court of Appeal refused interlocutory injunctive relief to Merck. The net issue for the Supreme Court was whether or not an interlocutory injunction should have been granted to Merck when the application came before the High Court in April 2018.
Legal arguments
Clonmel argued that damages were quantifiable as the market was stable and therefore damages would be an adequate remedy. It relied on the decision in Curust Financial Services Ltd. v. Loewe-Lack-Werk [1994] 1 I.R. 450 claiming that the loss to Merck was “clearly and exclusively a commercial loss” and an injunction should not be granted since damages could be assessed by calculating the lost sales from the date of Clonmel’s entry to the market. Clonmel had also argued successfully in the High Court that it would lose the first mover advantage if an injunction was granted.
Merck argued that price erosion would result. In short it said, that it would carry a substantial and unquantifiable loss if an injunction was not granted as the launch of the generic would lower its drug price permanently.
Injunctions: a flexible remedy
The Supreme Court recognised that the test set out in American Cyanamid (adopted in this jurisdiction in Campus Oil) was intended to reassert the flexible nature of the equitable remedy and that this test should not be followed rigidly in assessing the balance of convenience.
The Supreme Court noted that damages were not considered a full or adequate remedy for either party and that the balance of potential irreparable harm did not favour Merck or Clonmel as both had sufficient resources to pay damages. In cases where the balance could be tipped on either side the Supreme Court held that consideration should be given to other matters. In this case it found that greater weight should be given to Merck’s case as the holder of a valid SPC, pending any declaration of invalidity.
The Supreme Court found that it would have granted an injunction in favour of Merck as at April 2018 subject to the plaintiff giving an undertaking to damages and conditional on setting a quick trial date as to the validity of the SPC. The Court recommended the following approach in assessing injunctions in both patent and other matters in the future:
(1) First, the court should consider whether, if the plaintiff succeeded at the trial, a permanent injunction might be granted. If not, then it is extremely unlikely that an interlocutory injunction seeking the same relief upon ending the trial could be granted;
(2) The court should then consider if it has been established that there is a fair question to be tried, which may also involve a consideration of whether the case will probably go to trial. In many cases, the straightforward application of the American Cyanimid and Campus Oil approach will yield the correct outcome. However, the qualification of that approach should be kept in mind. Even then, if the claim is of a nature that could be tried, the court, in considering the balance of convenience or balance of justice, should do so with an awareness that cases may not go to trial, and that the presence or absence of an injunction may be a significant tactical benefit;
(3) If there is a fair issue to be tried (and it probably will be tried), the court should consider how best the matter should be arranged pending the trial, which involves a consideration of the balance of convenience and the balance of justice;
(4) The most important element in that balance is, in most cases, the question of adequacy of damages;
(5) In commercial cases where breach of contract is claimed, courts should be robustly sceptical of a claim that damages are not an adequate remedy;
(6) Nevertheless, difficulty in assessing damages may be a factor which can be taken account of and lead to the grant of an interlocutory injunction, particularly where the difficulty in calculation and assessment makes it more likely that any damages awarded will not be a precise and perfect remedy. In such cases, it may be just and convenient to grant an interlocutory injunction, even though damages are an available remedy at trial.
(7) While the adequacy of damages is the most important component of any assessment of the balance of convenience or balance of justice, a number of other factors may come into play and may properly be considered and weighed in the balance in considering how matters are to be held most fairly pending a trial, and recognising the possibility that there may be no trial;
(8) While a structured approach facilitates analysis and, if necessary, review, any application should be approached with a recognition of the essential flexibility of the remedy and the fundamental objective in seeking to minimise injustice, in circumstances where the legal rights of the parties have yet to be determined.
Good news for SPC and patent holders
This decision alters the test for the grant of preliminary injunctions in Ireland and will have a significant effect on the grant of preliminary injunctions in patent related matters in the pharmaceutical sector. Previously preliminary injunctions were frequently not granted to patentees where damages were considered an adequate remedy. After this decision the adequacy of damage factor will be taken into account in the balance of convenience analysis and is unlikely to carry the weight that it did previously. This means that in pharmaceutical patent matters it will generally be more difficult for generic competitors to defend an originators application for an injunction.
However, there is a glimmer of hope for generics. The Supreme Court noted that in similar cases courts may have regard to successful determinations in other jurisdictions or to circumstances indicating a strong argument against the validity of an SPC.
