Dr Reddy's Laboratories (UK) Limited & Ors. v Warner-Lambert Company LLC

In an inquiry into compensation and damages, amendments will be refused where they seek to reopen liability already finally determined, have no realistic prospect of success, or would introduce substantial new issues that could and should have been raised earlier. A final order granting relief for unjustifiable patent threats prevents reliance at the quantum stage on statutory defences that would have defeated that relief. Compensation under a cross-undertaking is assessed by a liberal and practical approach, using a counterfactual that removes the wrongful acts but otherwise reflects the real world. A proposed infringement-based reduction of damages may be abusive if it introduces a claim that should have been advanced during the liability phase.

The proceedings concerned compensation under cross-undertakings given in respect of interlocutory injunctions and contractual undertakings, together with damages for unjustifiable threats under section 70(1) of the Patents Act 1977. Following an earlier common assumptions trial, Warner-Lambert applied to amend its defences in the remaining inquiry claims brought by Dr Reddy’s and NHS bodies.

The applications raised whether Warner-Lambert could rely on statutory defences to the threats claim, exclude losses connected with inflammatory pain claims, rely on the NHS Guidance Order, introduce lawful counterfactual communications, and advance an alternative counterfactual. The court also considered case management directions and an application to strike out part of the existing defence.

1. Unjustifiable threats. Warner-Lambert’s amendment was refused. The order of Birss J dated 16 March 2020, objectively construed, finally determined Dr Reddy’s entitlement to the relief under section 70(3) of the Patents Act 1977 in respect of the relevant threats. The order for an inquiry into damages proceeded on the premise that the threats were unjustifiable and that only the extent of loss remained to be determined. Warner-Lambert could not therefore rely at the inquiry stage on either section 70(2A)(a) or section 70(2A)(b).
2. Inflammatory pain claims and compensation. The proposed amendment against the NHS parties was refused because it had no realistic prospect of success. The counterfactual removed the wrongful orders, undertakings and threats but otherwise reflected the real world, including lawful off-label dispensing of generic pregabalin. The fact that Warner-Lambert asserted a monopoly which later proved unjustified did not make it inequitable to assess loss by reference to that counterfactual. Compensation under a cross-undertaking required a liberal, practical assessment.
3. NHS Guidance Order. The proposed pleading was refused as drafted because it treated the counterfactual as legally confined to neuropathic-pain prescribing. Warner-Lambert could seek permission to plead a distinct factual argument based on foreseeability of loss.
4. Infringement-based reduction of Dr Reddy’s damages. The proposed amendment had a realistic prospect of success in principle, but was refused as an abuse of process and on case management grounds. Warner-Lambert could and should have pleaded infringement of the inflammatory pain claims during the liability phase. Introducing it during the quantum phase would require extensive validity and infringement litigation and cause substantial prejudice.
5. Other communications and alternative counterfactual. Permission was allowed in principle for lawful communications that Warner-Lambert could have made in the counterfactual, subject to precise particulars. Permission was also allowed in principle for an alternative counterfactual against Dr Reddy’s, subject to identification of the NHS pleading relied on and its alleged effect on Dr Reddy’s claim.
6. Directions and strike-out. The court directed a single further trial of the remaining issues and vacated the separate common issues trial. Dr Reddy’s strike-out application was not allowed because it was too broad, without prejudice to a properly formulated application.

First-instance decision of the High Court (Patents Court). The judgment records earlier orders and directions in the same proceedings but does not describe an appeal to this court.