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Supreme Court Clarifies Test for the Grant of Preliminary Injunctions

August 2019

On 31 July 2019, the Supreme Court of Ireland delivered an important and far-reaching judgment on the correct principles to be adopted in applications for preliminary injunctions.

By a unanimous judgment delivered by O’Donnell J., the Supreme Court upheld the appeal of Merck Sharp & Dohme Corporation (“Merck”), represented by Whitney Moore, against the decisions of the High Court and Court of Appeal, refusing an interlocutory injunction restraining the infringement by Clonmel Healthcare Limited (“Clonmel”) of a Supplementary Protection Certificate (“SPC”).

This ruling reaffirms the flexible nature of preliminary injunctions as a remedy and moves away from the treatment of Campus Oil and American Cyanamid as akin to statutory rules. The decision confirms that the adequacy of damages, although often the most important component, falls within the balance of convenience and is not an antecedent test which must satisfied prior to a consideration of the balance of convenience.

Background  

This case surrounded an application by Merck for an interlocutory injunction restraining Clonmel from marketing a generic competitor of Merck’s Inegy product, a combination drug used in cholesterol treatment.

Although the hearing of the appeal in the Supreme Court took place post expiry of Merck’s SPC, the Court agreed that the appeal raised important points of principle in relation to the grant of injunctions.

Adequacy of Damages and the Balance of Convenience

The Supreme Court considered the correct principles to be applied by the Court in determining the grant of interlocutory injunctions and, in particular, the adequacy of damages and the balance of convenience.

The established test for the grant of interlocutory injunctions in Ireland was set out in Campus Oil v. Minister for Industry and Energy, as originating in the UK decision of American Cyanamid v. Ethicon. The Campus Oil test requires the applicant to establish:

  • A fair/serious issue to be tried
  • Damages would not be an adequate remedy at the trial of action; and
  • The balance of convenience favours granting the injunction

The crux of Clonmel argument against the grant of an interlocutory injunction was that the market for Inegy was a stable one and if the injunction was refused, and it should transpire at the trial of action that Merck’s SPC was valid, damages were readily quantifiable and would be an adequate remedy.

Clonmel argued that should the injunction be granted, it would suffer a loss which could not be adequately compensated by an undertaking as to damages from Merck, namely Clonmel’s first mover advantage in the generic’s market.

Merck, on the other hand, inter alia contended that entry by Clonmel on to the market would cause substantial and unquantifiable loss to Merck as it would lead to an inevitable downward spiral in the price of Inegy and even if Merck were subsequently successful at the trial of action, the price could not be recovered to the previous pre-entry levels. Damages could not therefore be considered readily quantifiable or an adequate remedy.

The Court expressed the view that the assessment of the balance of convenience is more difficult and finely balanced than the judgment in the High Court and the majority judgment in the Court of Appeal would allow. In considering the adequacy of damages and balance of convenience, the Supreme Court was of the view that:

“… the preferable approach is to consider adequacy of damages as part of the balance of convenience, or the balance of justice, as it is sometimes called.[1]”

The Court also considered that there was something of an inconsistency in considering that any damage to Merck could be met by an award of monetary damages, whereas any damages Clonmel might suffer if wrongly restrained would not. The Supreme Court highlighted the significance of Merck being an SPC holder and held that an SPC holder “has a right conferred by a process which presumptively is valid: something which, if anything, ought to prefer Merck.[2]”

The Court recognised the ability of both parties to show that they would suffer some damage that could not be adequately compensated by an award of damages and that the adequacy of damages is one, albeit often the most important, element within the wider balance of convenience or balance of justice.

The Supreme Court took the view that, when considering whether it is appropriate to grant or refuse to grant an injunction, the Court cannot simply ask whether damages would be an adequate remedy. The Court must consider a number of other factors which may apply and which may result in tipping the balance in favour of one party over the other.

These other factors which may come into play in considering how matters are to be held most fairly pending trial, and recognising the possibility that there may be no trial, include a preference for preserving the status quo ante, the presumptive validity of intellectual property rights, whether the alleged infringer could have “cleared the way” by way of invalidity proceedings, the outcome of similar litigation in other jurisdictions and the likelihood of the claim succeeding at trial.

The Supreme Court concluded that “Clonmel’s case has not been shown to have that degree of strength which would outweigh the factors in favour of the grant of injunction” and that “an interlocutory injunction ought to have been granted, subject to Merck’s undertaking in respect of damages, and a direction for a speedy trial on the issue of validity.[3]”

[1] At paragraph 35.

[2] at paragraph 54.

[3] at paragraph 62.

Eight Steps for the Grant of Preliminary Injunctions

The Supreme Court went on to outline eight steps which might be followed in a case such as this:

  • First, the Court should consider whether, if the plaintiff succeeded at the trial, a permanent injunction might be granted. If not, then it is extremely unlikely that an interlocutory injunction seeking the same relief upon ending the trial could be granted;
  • Then consider if it has been established that there is a fair question to be tried, which may also involve a consideration of whether the case will probably go to trial. In many cases, the straightforward application of the American Cyanamid and Campus Oil approach will yield the correct outcome. However, the qualification of that approach should be kept in mind. Even then, if the claim is of a nature that could be tried, the court, in considering the balance of convenience or balance of justice, should do so with an awareness that cases may not go to trial, and that the presence or absence of an injunction may be a significant tactical benefit;
  • If there is a fair issue to be tried (and it probably will be tried), the court should consider how best the matter should be arranged pending the trial, which involves a consideration of the balance of convenience and the balance of justice;
  • The most important element in that balance is, in most cases, the question of adequacy of damages;
  • In commercial cases where breach of contract is claimed, courts should be robustly sceptical of a claim that damages are not an adequate remedy;
  • Nevertheless, difficulty in assessing damages may be a factor which can be taken account of and lead to the grant of an interlocutory injunction, particularly where the difficulty in calculation and assessment makes it more likely that any damages awarded will not be a precise and perfect remedy. In such cases, it maybe just and convenient to grant an interlocutory injunction, even though damages are an available remedy at trial.
  • While the adequacy of damages is the most important component of any assessment of the balance of convenience or balance of justice, a number of other factors may come into play and may properly be considered and weighed in the balance in considering how matters are to be held most fairly pending a trial, and recognising the possibility that there may be no trial;
  • While a structured approach facilitates analysis and, if necessary, review, any application should be approached with a recognition of the essential flexibility of the remedy and the fundamental objective in seeking to minimise injustice, in circumstances where the legal rights of the parties have yet to be determined.

Impact of the Decision

This decision will have significance across the board for plaintiffs seeking to obtain preliminary injunctions in Ireland. The ruling reasserts the flexible nature of the remedy and confirms that the adequacy of damages will now be assessed as forming part of the wider balance of convenience. While the adequacy of damages will remain the most important component in deciding whether or not to grant an injunction, the court must now go further and consider other factors which may tip the balance in favour of one party over the other.

This decision, in particular, will be welcomed by the pharmaceutical industry as it has strengthened the protection afforded to intellectual property rights in Ireland. Prior to the Supreme Court decision, it had become increasingly difficult for patent and SPC holders to obtain preliminary injunctions in infringement proceedings as the Courts had typically held that damages would be an adequate remedy for the rights holder at the trial of action.

For further information please get in touch with your usual Whitney Moore contact, Aoife Murphy, Robin Hayes or any member of our Intellectual Property team.