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

A patent confers only the statutory monopoly defined by its claims. It gives no right to prevent, or avoid compensating for loss caused by preventing, activity which does not infringe. On an inquiry under a cross-undertaking in damages, equitable flexibility permits logical adjustments to ordinary contractual principles, but does not justify withholding compensation for foreseeable loss caused by a wrongly granted order merely because the patentee held claims which were not infringed.

A party may not use a later counterfactual defence to reopen liability issues which it could and should have raised before a final order. The question is a broad, merits-based assessment of abuse of process, having regard to finality, efficient litigation, and the parties’ interests.

Warner-Lambert appealed against Zacaroli J’s refusal to permit two amendments to its defence on an inquiry into compensation under cross-undertakings and damages for groundless threats.

The inquiry followed interim orders and guidance concerning the supply of generic pregabalin. Dr Reddy’s claimed lost profits, while NHS Scotland claimed increased expenditure. Warner-Lambert sought, first, to exclude loss connected with inflammatory-pain indications even if the counterfactual supply was non-infringing. Secondly, it sought to allege that pharmacists’ counterfactual dispensing would have infringed valid patent claims and that Dr Reddy’s claim was barred by illegality.

The judge held that the first amendment had no real prospect of success. He refused the second as an abuse of process and on case-management grounds: [2022] EWHC 189 (Pat).

1. Appeal dismissed. Lord Justice Arnold’s reasoning was agreed by Lords Justices Nugee and Males. The first proposed amendment was wrong in law. A cross-undertaking exists to compensate a person for foreseeable loss caused by an order which should not have been made. Although the jurisdiction is equitable and flexible, it does not permit a deduction from compensation merely because a patent claim was not invalid but would not have been infringed.

2. The monopoly under a patent is statutory. It extends only to the acts which the Patents Act 1977 treats as infringement. There is no freestanding monopoly over non-infringing commercial activity. Accordingly, where the counterfactual supply and dispensing of pregabalin would have been lawful, justice and equity required compensation for loss foreseeably caused by the orders.

3. The Court explained that the statement in Sandoz II that Warner-Lambert was entitled to the benefit of valid inflammatory-pain claims, despite not then being able to allege infringement of them, addressed the balance of risk on an interim-injunction application. It did not support a wider patent monopoly detached from infringement.

4. The second amendment was properly refused as a Henderson v Henderson abuse of process. The consent-based order of Birss J had finally concluded liability, declared the threats unjustifiable, and ordered an inquiry. If Warner-Lambert wished to allege infringement by pharmacists, it could and should have raised that case in the liability phase, either affirmatively or as a defence to the threats claim. Recasting it as a counterfactual illegality defence would reopen matters already concluded and vex Dr Reddy’s twice.

5. Although unnecessary to the result, the proposed allegation against pharmacists was also untenable. A pharmacist who merely affixes a patient label does not prepare the pharmaceutical composition or use the claimed manufacturing process for the purposes of section 60(1)(b) or section 60(2). The pharmacist, rather than the prescriber, would also need the relevant state of mind. Foreseeability of some off-label use was insufficient.

• Court of Appeal (Civil Division): Dismissed Warner-Lambert’s appeal and upheld the refusal of both amendments: [2023] EWCA Civ 73.
• High Court, Patents Court: Zacaroli J refused the first amendment for want of real prospect of success and refused the second on abuse-of-process and case-management grounds: [2022] EWHC 189 (Pat).