Sandoz AG & Ors v Bayer Intellectual Property GmbH & Ors

A cross-undertaking in damages is construed according to its language, purpose and the obligation to compensate loss caused by the injunction. Applying contractual principles by analogy does not create a notional contract or confer every contractual remedy. Unless the undertaking provides otherwise, the court’s jurisdiction is limited to compensation for loss suffered by the enjoined party. It does not include disgorgement of the injunction applicant’s profits or an account of profits, even where such a remedy might exceptionally be available for breach of contract.

Bayer obtained interim injunctions restraining Sandoz from launching once-daily rivaroxaban pending an appeal concerning the validity of Bayer’s patent. The Court of Appeal dismissed that appeal, discharged the injunctions and ordered an inquiry into damages under Bayer’s cross-undertakings.

Sandoz pleaded loss of profits in the alternative, but principally sought an account of Bayer’s profits. Bayer applied to strike out that claim or obtain summary judgment, contending that the cross-undertakings permitted compensation only for Sandoz’s loss.

1. Construction of the undertakings. The cross-undertakings required Bayer to comply with any order compensating Sandoz for loss caused by the injunctions. They did not require Bayer to disgorge profits obtained as a result of the injunctions. The court’s primary task under such an undertaking is compensation, not punishment or restitution of benefits.
2. Contractual analogy. Contractual principles may assist in assessing compensation, including questions of remoteness, but only by analogy and with logical and sensible adjustments. The undertaking is given to the court, not as a contract between the parties. The available remedies remain limited by the undertaking’s terms. The analogy therefore did not permit an account of profits or liability for loss suffered by third parties.
3. Aggravated damages may be available where they compensate injury to feelings or dignity. That does not make a non-compensatory remedy available under the undertaking.
4. The obiter suggestion in Les Laboratoires Servier v Apotex that a restitutionary basis might sometimes be appropriate did not alter the compensatory rule. The authorities otherwise supported the conclusion that Sandoz’s remedy was limited to compensation for its own loss.
5. The account-of-profits claim disclosed no reasonable grounds and was bound to fail. It was struck out under Civil Procedure Rules 1998, CPR 3.4(2)(a). Sandoz also had no real prospect of success, and no compelling reason justified a trial of that claim. Summary judgment was therefore granted. The court did not decide whether the pleaded matters could be relevant to a liberal assessment of compensatory damages.

The judgment itself records the earlier patent and injunction proceedings, but this was a first-instance decision on Bayer’s strike-out and summary-judgment application.