Leo Pharma A/S & Anor v Sandoz Ltd

At the interim-injunction stage, the court considers realistic possibilities before trial rather than deciding future events on the balance of probabilities. Fanciful possibilities may be disregarded, but a non-fanciful possibility of a generic competitor cutting prices can make the patentee’s loss too uncertain to calculate reasonably. Damages need not be perfect, yet they cease to be adequate when the uncertainty is too great. If the first-instance judge applies the correct staged approach and makes no error of principle, the Court of Appeal will not interfere with the discretionary order. The approach in American Cyanamid v Ethicon Ltd [1975] AC 396 was therefore upheld.

Leo Pharma, the patentee and claimant, obtained an interim injunction from Mann J on 17 March 2008 restraining Sandoz from selling a generic calcipotriol cream. The order was made after Sandoz launched the product on a limited scale. The High Court decision is reported at [2008] EWHC 541 (Pat).

Sandoz appealed, arguing that Mann J had made errors of principle in assessing whether damages would adequately compensate Leo. The central issue was whether there was a realistic possibility of a price reduction before trial, and whether the resulting effects on prices, market share and future competition made Leo’s loss incapable of reasonable calculation.

Disposition. Lord Justice Jacob delivered the judgment. Lord Justice Wilson and Lord Justice Mummery agreed. The appeal was dismissed and the interim injunction remained in force.

1. Interim-injunction inquiry. The court must follow the staged approach in American Cyanamid v Ethicon Ltd [1975] AC 396: determine whether there is a serious issue to be tried, consider the adequacy of damages for each party, and then assess the balance of convenience. The inquiry concerns possibilities which may occur before trial. It does not require a decision on the balance of probabilities.
2. Realistic possibility. A fanciful possibility may be disregarded. A possibility which is more than fanciful, however, may properly be taken into account. The evidence and commercial common sense supported a realistic possibility that Sandoz would reduce its price to obtain a greater share of the market.
3. Adequacy of damages. Damages are not required to be perfect. As explained in Peaudouce v Kimberley-Clark [1996] FSR 680, they must be adequate as far as possible in an imperfect world. Here, the possible price reduction created wider uncertainties, including Leo’s response, later price recovery, further generic entry and effects on prices in Spain. The resulting loss could be beyond reasonable calculation, so damages were not an adequate remedy. The possibility of several generic competitors was not essential; Sandoz’s conduct alone was sufficient.
4. Appellate review. Mann J had followed the correct American Cyanamid route and had made no error of principle in evaluating the evidence. The Court of Appeal therefore had no basis to interfere with his discretionary decision.

• Court of Appeal (Civil Division). The appeal was dismissed. The court upheld the interim injunction.
• High Court, Chancery Division, Patents Court. Mann J granted Leo an interim injunction on 17 March 2008 restraining Sandoz’s sale of the generic cream. The decision is cited as [2008] EWHC 541 (Pat).