AstraZeneca AB & Anor v KRKA dd Novo Mesto & Anor

An inquiry on a cross-undertaking in damages is compensatory. It requires a fair and principled assessment of the loss caused by the interim injunction, normally by analogy with contractual damages.

Where it is established that the restrained party would have entered a market, the court must assess its likely success and profits in the counterfactual market. It should consider significant contingencies, disregard speculation, and may apply a percentage discount for irreducible uncertainty. The assessment is fact-sensitive and an appellate court will not interfere absent error of principle or a plainly wrong conclusion.

A party which obtained interim relief on evidence of substantial likely market loss may properly face a liberal, though fair, assessment of the loss caused by the restraint.

AZ obtained an interim injunction restraining Krka and Consilient from marketing Emozul, a generic esomeprazole capsule, pending resolution of a patent infringement claim. AZ gave the usual cross-undertaking in damages. The injunction was discharged after a separate judgment held that another generic product did not infringe, after which several generic products entered the market.

On an inquiry, Sales J awarded the defendants more than £27 million. He found that, absent the injunction, they would have achieved substantial early switching from Nexium to Emozul and a valuable first-mover advantage. He reduced the assessment by 20% for uncertainty: [2014] EWHC 84 (Ch).

AZ appealed, alleging errors in the use of Medicine Manager evidence, the rejection of actual market comparators, the uncertainty discount, and the assumed timing of market switching.

1. Appeal dismissed unanimously. Lord Justice Kitchin, with whom Lord Justice Floyd and Lord Justice Longmore agreed, upheld the award on the cross-undertaking.

2. The court endorsed the principles in Les Laboratoires Servier v Apotex Inc. A cross-undertaking is enforced according to its terms and is compensatory. Where the counterfactual conduct has been established on the balance of probabilities, the inquiry is not an assessment of the chance that the restrained party would have entered the market. It is an assessment of the success and profits it would probably have achieved. The court must take account of significant factors, disregard speculative possibilities, and may discount for inherent uncertainty.

3. The judge had been entitled to regard the inquiry as a fact-sensitive evaluative exercise. The evidence of Medicine Managers was a sufficiently representative and consistent basis for his findings about the likely response of PCTs and GPs. It was corroborated by AZ’s witnesses and its market expert. The actual performance of Emozul after the injunction was discharged, and the Venlalic comparison, were not reliable comparators because the relevant market conditions were materially different.

4. The 20% uncertainty discount was not arbitrary. The judge had already reduced the assumed speed and extent of uptake. He then identified further uncertainty, including possible overstatement by Medicine Managers and variation between PCTs. There is no benchmark discount derived from other cases; the appropriate allowance depends on the facts.

5. The judge was also entitled to find that the figures allowed for the time required to decide upon and implement switching. His conclusions did not exceed the defendants’ case once the uncertainty discount was applied.

• Court of Appeal (Civil Division): The appeal was dismissed. The court upheld the assessment of damages payable under AZ’s cross-undertaking: [2015] EWCA Civ 484.
• High Court, Chancery Division, Patents Court: Sales J awarded the defendants more than £27 million on an inquiry into loss caused by the interim injunction: [2014] EWHC 84 (Ch).