A shot in the arm for generics as UK courts refuse injunction to prevent potential patent infringement

Neurim, the patentee, and its exclusive licensee, Flynn had brought proceedings against Mylan for threatened infringement of its patent for melatonin, which is used for the treatment of insomnia. The court refused Neurim and Flynn's application for an interim injunction to block Mylan, pending a substantive trial that had been set for four months ahead.

This decision goes against the grain of the UK courts' conventional approach of granting interim relief where a patent remains in force in the UK or an appeal against an invalidity decision is under way.

Why did the court reach this unusual decision?

The long-established American Cyanamid test for the grant of an interim injunction comprises four questions:

1. Is there a serious issue to be tried?
2. Are damages an adequate remedy for the patentee?
3. If not, are damages an adequate remedy for the generic competitor/alleged infringer?
4. If damages are not an adequate remedy for either party, where does the balance of convenience lie?

Traditionally, in life sciences patent cases the first hurdle is easily cleared - the claim simply needs to not be "frivolous or vexatious". After that, the court typically accepts both parties' arguments that damages are not an adequate remedy for either of them: the patentee makes the usual downward price-spiral argument - that if the generic is allowed to launch at a lower price, absent an injunction, the patentee will be unable to raise prices back to the pre-generic-entry launch price. The generic competitor argues that its loss is incalculable because it has not been on the market and it is not clear how many competitors will also launch at the same time.

Accordingly, these cases are usually decided on the basis of which party the balance of convenience is weighted towards. Essentially, who has more to lose from the grant/refusal of the interim injunction. Where cases are finely balanced, the law states the status quo should be upheld. This usually favours the patentee, whose existing monopoly right grants them exclusivity on the market for their product until expiry of the patent – which is usually looming on the horizon.

However, in this case the High Court did not get as far as the final stage of the test, finding that damages were an adequate remedy for the patentee. The Court of Appeal agreed. In reaching their decision they reasoned that this was not a case where a downward price spiral was likely, since 53% of Flynn's market relates to prescriptions written for the brand name for the product, Circadin. In such cases, pharmacists are obliged to dispense the branded product so these sales are protected from generic competition.

Furthermore, with only four months until the main trial on the validity of the UK patent, it was highly unlikely that Flynn's Circadin product would be re-categorised on the NHS Drug Tariff and its list price changed before the matter was resolved. In addition, there was no evidence of other generic entrants seeking to enter the market, so a steep price depression was unlikely to occur. Neurim and Flynn also had detailed projected sales figures for the relevant periods of possible generic competition, so their loss could be readily calculated in the event the UK patent was later found to be valid, and damages became payable for the time the generic competitors were allowed to enter a market which would otherwise have been exclusive based on Neurim/Flynn's valid patent rights.

Osborne Clarke comment

In reaching its decision, the Court of Appeal – consisting of two highly experienced former Patents Court judges, Floyd LJ and Arnold LJ – was keen to point out that it was not deciding a "principle of general application" which would have wide-ranging implications on the biopharmaceutical industry generally. The judges emphasised the "extremely unusual facts" of the case in support of their refusal to grant an injunction.

Nevertheless, it is a rare (and in recent times unprecedented) situation for the court to decide damages were an adequate remedy for the patentee, rather than granting a preliminary injunction to stop generic entry, prior to a first instance decision on the validity of the case. The decision will inevitably be cited by bold generic companies in the future as support for their being allowed to launch while a patent is subject to an imminent revocation hearing.
This decision is also likely to encourage the first-mover generic company to take a gamble on bringing forward their pre-patent-expiry launch date by several months to steal a march on the generic herd that will likely follow them when the patent finally expires or is revoked.