Irish Supreme Court clarifies patent injunction test

Out-Law News | 06 Aug 2019 | 1:55 pm | 4 min. read

Holders of patent-like rights in the medicines market are not automatically barred from winning injunctions to prevent generics launching rival products when there is an ongoing dispute over the validity of their rights even if it is possible to compensate them for the loss of their monopoly with damages in the event validity is subsequently proven, Ireland's Supreme Court has said.

The Court confirmed the position when considering the legal test for determining when applications for interlocutory injunctions should be granted in cases where there is a dispute over the validity of supplementary protection certificates (SPCs).

SPCs serve to extend the life of patents owned by pharmaceutical manufacturers by up to a maximum of five years. They are provided for under an EU regulation which is directly applicable across the whole of the EU, although they have to be applied for separately in each EU country.

The rationale for SPCs is to compensate patent holders for the period of patent protection during which they are prevented from commercialising their products owing to the lengthy drug approval process. Patent protection lasts 20 years but it often takes drugs companies around a decade to develop new medicines and gain marketing authorisation.

The Supreme Court considered an appeal from pharmaceuticals giant Merck against an earlier ruling by the Court of Appeal which had rejected its application for an interlocutory injunction to be issued against Clonmel Healthcare. The injunction, if issued at the time it was applied for, would have delayed Clonmel from selling a rival product to the one Merck sells in Ireland for treating cholesterol. According to the ruling, Merck generates annual sales of around €8 million in the country for its Inegy product.

Merck argued that it held monopoly rights to sell its Inegy product in the market because of an SPC it held. Clonmel challenged the validity of that SPC and elected to launch its own rival product to Inegy to the market prior to when the SPC was due to expire. Merck sued Clonmel for infringement of its rights and asked the Irish courts to grant it an interlocutory injunction against Clonmel.

Merck was unsuccessful in the earlier proceedings, with the courts determining that an award of damages was sufficient remedy to provide them with in the event Merck was successful in proving the validity of its SPC. The SPC has now expired, but Merck decided to pursue an appeal before the Supreme Court in any case.

Merck's central argument was that the loss of its monopoly rights to sell Inegy through Clonmel's allegedly premature entry to the market could not be adequately compensated for with damages. Clonmel counter argued that its chance to establish its rival product as the main generic alternative to Inegy in the market would be lost if an interlocutory injunction was granted against it on the basis of an allegedly invalid SPC.

In considering the case, the Supreme Court conducted a thorough examination of case law, including that established in England and Wales. One of the cases the court examined, American Cyanamid v Ethicon, a 1975 ruling by the House of Lords, is considered the pre-eminent case setting out the legal test for courts considering applications for interlocutory injunctions in cases concerning patented medicines.

According to the American Cyanamid case guidelines, it should first be determined whether there is a serious question to be tried in respect of infringement. Then the balance of convenience in respect of remedies available should be considered if there is a doubt that damages is an adequate remedy. Any other special factors that arise should also then be considered.

The Irish Supreme Court said that the American Cyanamid case should not, though, "be approached as though it were the laying down of strict mechanical rules for the control of future cases". Instead, the Supreme Court set out its own guide for how consideration of applications for interlocutory injunctions should be approached. According to those guidelines, the ease with which damages can be calculated is a factor courts should weigh when carrying out a balance of convenience.

The Court also clarified in its ruling that "the fact that it is possible to award damages does not preclude the grant of a permanent injunction, and should not be understood as an absolute bar to the grant of an interlocutory order". It added that "damages are not a perfect remedy, and cannot be a complete answer to an application for an injunction whether permanent or interlocutory".

In considering the circumstances of the dispute between Merck and Clonmel, the Supreme Court said an interlocutory injunction against Clonmel should have been granted. A factor favouring Merck was that its SPC, though under challenge by Clonmel, was granted "pursuant to an authorisation process provided for by law" and that the rights are to be considered "valid and effective until declared invalid by a court of competent jurisdiction", according to the court.

The ruling reinforces Ireland’s position as an increasingly important jurisdiction for patent litigation in Europe – a role that is expected to increase following Brexit, said Dublin-based intellectual property law expert Aoibheann Duffy of Pinsent Masons, the law firm behind Out-Law.

"The Irish Supreme Court has clarified the approach to the test to be applied in determining whether a preliminary injunction should be granted," Duffy said. "The decision will be of particular interest to the pharmaceutical sector in Ireland as it involved the holder of an SPC which was about to expire, seeking an injunction against a generic pharmaceutical company restraining it from infringing the SPC."

"Recent Irish cases on preliminary injunctions involving patent rights had demonstrated a trend of injunctions being hugely difficult to obtain in practice as damages were typically found to be an adequate remedy for the plaintiff. This decision provides a thorough examination of the factors to be considered when applying the classic case law test for preliminary injunctions which was developed in the Campus Oil case in Ireland in 1983 that adopted the guidelines established in American Cyanamid. The Supreme Court has made it clear that the test is not to be rigidly applied. The decision is a reminder that the essential function of a preliminary injunction is to find a just solution pending the hearing of the action and it is therefore a flexible remedy," Duffy said.