Irish Supreme Court in Merck v Clonmel puts "adequacy of damages" back in the balance when granting preliminary junctions

The AmeriKat hiding from work-related
intruders in the Castello's garden

Right at the end of July, came big news from the Irish Supreme Court in Merck Sharp & Dohme Corp v Clonmel Healthcare Ltd 2019 IESC 65.  The case concerned the launch of a generic version of an ezetimibe/simvastatin combination drug for the treatment of cardiac related issues and the grant of a preliminary injunction.  The decision is a big deal in Ireland as it has reformulated the approach to be adopted by the Irish Courts in the application of the three stage Campus Oil test for the grant (or not) of a preliminary injunction (PI). 

While the AmeriKat was off on a rare vacation, sunning her paws in the Ionian Sea and devouring incredible food every night at the magical 17th century Castello di Ugento, she asked Dublin-based Colette Brady (William Fry) to report on what this big decision means to life sciences litigation in Ireland. 

Over to Colette:

"The Test for a PI in Ireland

The test for applying for a PI in Ireland is the same as the American Cyanamid [1] test adopted in England and which was set down by the Irish Court in Campus Oil v Minister for Industry [2] (the "Campus Oil test") namely whether: 

• there was a fair issue to be tried
• damages would not be an adequate remedy for the plaintiff at trial; and
• the balance of convenience favoured the granting of an injunction.

The Campus Oil test was affirmed by the Irish Supreme Court in more recent times in Okunade v Minister for Justice[3].

Divergence between Ireland and England in the application of the same test

First it should be noted that the Irish Supreme Court only hears appeals on a point of law and which raise issues of general public importance.

In deciding to hear this appeal, the Irish Supreme Court considered the arguments put forward by the Plaintiff that PI decisions in Ireland differed from the views of the English courts and that English courts applied the same test somewhat differently to the Irish Courts.

The Irish Supreme Court found that even an arguable divergence in the application of the test between Ireland and England gave rise to an issue of law of general public importance and therefore granted the Plaintiff leave to appeal to the Supreme Court.

Adequacy of Damages – Key Battleground

The second element of the Campus Oil test (i.e. the adequacy (or otherwise) of a remedy in damages) has long been a key battleground in applications for a PI in Ireland. Once a defendant satisfied the Irish Court that damages were an adequate remedy for the plaintiff, the Irish Court generally did not go on to consider issues going to the third element of the test (i.e. the balance of convenience) and PIs were typically refused. Factors going to the balance of convenience typically include consideration of other factors:  the conduct of the parties, failure to "clear the path", maintenance of the status quo, any delay in seeking injunctive relief, whether the granting of the PI would effectively dispose of the matter and whether the better course of action would be to direct an expedited trial in lieu of the grant of a PI.

In patent cases and SPC cases, the clear trend in Ireland has been towards the refusal of PIs. Rights-holders found to have a remedy in damages available at the full trial of the claim have typically been refused PIs, even where damages have been found to be difficult to calculate.

Reformulated Test

In this landmark decision, the Irish Supreme Court has ruled that "the preferable approach is to consider the adequacy of damages as part of the balance of convenience" assessment rather than a hurdle prior to that assessment. This is more in line with the approach adopted by the English Courts to PI applications. The Irish Supreme Court stated that this approach reinforces the essential flexibility of the remedy. In fact a key theme throughout this Supreme Court decision is the flexible nature of a PI remedy. The Irish Supreme Court noted that there is a "discernible tendency to reduce the approach taken in cases" to a set of rules which then harden over time "so it becomes necessary periodically to reassert the essential flexibility" of injunctions which are an equitable remedy.

It found that the underlying theme of American Cyanamid 

"was to reassert the flexibility of the remedy and the essential function of an interlocutory injunction in finding a just solution pending the hearing of the action". 

The Irish Supreme Court noted that the test should not

"be approached as though it were the laying down of strict mechanical rules for the control of future cases". 

Whilst there is no doubt from the decision of the Irish Supreme Court that the adequacy of damages will continue to be "the most important component" of the balancing exercise, the availability of damages will not be conclusive. This will particularly be the case where the possibility of an assessment of damages while "theoretically possible" is "highly imprecise, speculative and therefore inconvenient". As the Irish Supreme Court stated

"The fact that it is in theory possible to gather every feather does not mean that it is not more convenient to stop the pillow being punctured in the first place".

Factors to be weighed in the balance

Instead, the Irish Supreme Court stated that other factors may be considered and weighed in the balance by a court in considering how matters are to be held most fairly pending a trial and in recognising the possibility that there may be no trial. These factors may include presumptive validity of intellectual property rights, a preference for preserving the status quo ante and whether the alleged infringer could have "cleared the way" by way of invalidity proceedings.

Finally, the Irish Supreme Court found that in PI applications a court could consider whether the merits of the claim were likely to succeed, where the strengths in the parties' cases were apparent. For example, the Court observed that determinations of invalidity of the disputed intellectual property right in other European countries or other comparable jurisdictions might weigh against granting an injunction against a generic manufacturer.

Failure to Clear the Way – Not Fatal

The Irish Supreme Court did emphasise that failing to clear the way would not be decisive and recognised that clearing the way may pose some problems for a generic manufacturer. The Irish Supreme Court accepted that that defendant would be clearing the way not just for itself, but for any other generic "who would be to that extent a free ride" on the defendant's action. Failure to clear the way was nonetheless a factor to be weighed in the balancing exercise.

Finding

Applying this reformulated test to the facts at hand, the Irish Supreme Court ultimately found that a PI restraining the infringement of a SPC should have been granted by the Irish High Court and on appeal by the Court of Appeal in 2018.

The Irish Supreme Court (solely considering the evidence and the position as it stood at the time that the application for a PI was made to the High Court) found that the parties' arguments on the adequacy of damages as a remedy were finely balanced. However, ultimately the Irish Supreme Court placed weight on other factors which favoured the grant of a PI in Merck's favour, notably that Merck's SPC was valid pending the outcome of the invalidity hearing.

As Merck's SPC had actually expired before the hearing of the appeal, no injunction will be granted against the defendant. The Supreme Court noted that the appeal "might appear to be a matter of, at best, academic interest, and then only to the specialist". However, as the Supreme Court acknowledged, the appeal raised important questions as to the proper approach to PIs generally.

The Irish Supreme Court's decision is a significant milestone in the development of the law on PIs in Ireland generally, especially in the pharmaceutical sector. "


Thanks, Colette! This decision is interesting to the AmeriKat in light of Henry Carr J's recent decision in Evalve & Abbott v Edwards Lifesciences [2019] EWHC 1158 in May where it was made clear that the preliminary injunction test is a series of gateways (see Kat report here).  If damages are an adequate remedy then you stop there  - adequacy of damages in itself is not part of the balancing exercise with other factors.  So, ironically, has the English approach diverged from the Irish approach, at least in this first instance case?  Or are we all eventually getting to the same place?  

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[1] American Cyanamid Co v. Ethicon Ltd [1975] AC 396.

[2] Campus Oil v Minister for Industry [1983] IR 38.

[3] Okunade v. Minister for Justice, Equality and Law Reform [2012] 3 IR 152.