Patents Court refuses to grant interim injunction in pharmaceutical patents case

In a recent Patents Court interim hearing concerning pharmaceutical products, Mr Justice Marcus Smith refused an application for an interim injunction. The judgment marks an exception to the “rule of thumb” that a generic entrant can expect to be enjoined if it fails to “clear the way”.

The product and Patent

The case is Neurim Pharmaceuticals (1991) Limited and Flynn Pharma Limited v Generics UK Limited (t/a Mylan) [2020] EWHC 1362 (Pat) and concerns prolonged release melatonin to improve the restorative quality of sleep in a patient suffering from primary insomnia characterised by non-restorative sleep. Neurim markets the originator product under the brand name Circadin. More recently, Neurim has developed a paediatric version of prolonged release melatonin, under the brand name Slenyto.

Neurim also owns a second medical use patent which protects its products (the “Patent”). The Patent was filed on 12 August 2002 and claims priority from 14 August 2001. If not revoked sooner, the Patent will expire on 12 August 2022, i.e. some two years and three months' time from the date of the interim judgment. The Patent was granted by the EPO in May 2017. Mylan opposed the patent post-grant and the EPO Opposition Division revoked it in November 2019. That decision has been appealed at the EPO, and the Technical Board of Appeal may not provide a decision until after the Patent has expired.

Circadin's label indicates use for the short-term treatment of primary insomnia in patients aged 55 or over. However, Circadin is also frequently used “off-label” for insomnia in patients under the age of 55. It is also sometimes used in relation to non-insomnia symptoms.

The Patent for the second medical use protects use in the treatment of insomnia in general terms. The Patent is therefore broader than the label, containing no limitations on age. It covers the off-label and on-label use of Circadin in the treatment of insomnia.

Mylan’s plans and the current application

Mylan obtained marketing authorisation in December 2019 and proposed to launch a generic version of Circadin as soon as possible. At the time of this interim judgment, its intended launch was “fairly imminent” but, beyond that, its plans were confidential.

On this basis, Neurim and its licensee (Flynn) sued for infringement, and Mylan counterclaimed for revocation on grounds of invalidity. An expedited trial will be heard in October 2020. Neurim sought an interim injunction pending trial, and that application was determined in the current application.

Whether to grant an interim injunction

In determining whether to grant an interim injunction, Smith J turned to the classic American Cyanamid test:

1. Is there is a serious question (i.e. on infringement) to be tried?
2. Is an award of damages an adequate remedy?
3. What would be the “balance of convenience” of each party should the order be granted (in other words, where does that balance lie)?
4. Are there any special factors?

Typically, in pharmaceutical patent cases, the test plays out as follows:

1. There is a serious question to be tried (unless the claim is frivolous)
2. Damages are not adequate for either party:
   1. the patentee will suffer irreversible price depression; and
   2. the generic will lose its unquantifiable first mover advantage.
3. As damages are inadequate either way, a generic company’s failure to “clear the way” tips the “balance of convenience” in favour of the patentee, who is awarded the relief.

Interim injunctions have been refused in only a small number of cases in the pharmaceutical field.

Applying the test on the case before him, Smith J found as follows:

1. Is there is a serious question (i.e. on infringement) to be tried?

The judge found the answer to be yes. In particular, he emphasised that the question was to be addressed “through the prism of the proceedings being tried in this jurisdiction.” Submissions that the Patent had been revoked by the EPO and that an interim injunction had been refused in Sweden were not considered relevant to the assessment. In that respect, Smith J added:

“It might be that, if an exhaustive comparative analysis were carried out, embracing both the legal test applied by such courts and the evidence adduced before them, some light might be cast on the question of serious issue to be tried. But the benefit is so marginal, and cost in legal expense and court time so great, that such a course cannot be encouraged…

The same goes for the proceedings before the EPO. If it were the case that the conclusion of the EPO Opposition Division were binding on this court, then the question of whether there was a serious issue to be tried would not even arise: the merits of the matter would already have been determined. But that is not the status of an EPO Opposition Division decision.”

2. Is an award of damages an adequate remedy?

The judge considered this point in detail.

First, he assessed the likely damage to Neurim and Flynn. He referred to two periods. Period 1 is the time between the interim injunction being granted and the first instance judgment. In Period 1, Mylan’s entry to the market would drive down the price and volumes of sales by Neurim and Flynn. Period 2 is the period after judgment, assuming Neurim and Flynn were successful at trial and obtained a final injunction. In Period 2, the volume of sales by Neurim and Flynn would increase once again. However, Neurim and Flynn argued that they would not be able to put their prices back up to previous levels. Whilst the judge did not wish to resolve this point entirely (as there had been no disclosure or expert evidence), he found:

“One might say that removing a competitor from the market would enable the market situation pertaining under the earlier monopoly to revive without more. I cannot accept that that would seamlessly be the case. I do not see how Neurim and Flynn could hope – in a single jump – to restore monopoly prices without alienating substantial parts of their market. I consider that, in the 6 months of price reduction due to competition in Period 1, purchasers of Circadin and Slenyto would re-evaluate the values and benefits of the product in light of the new price, and factor in that new price into their budgets and calculations. They would be very hostile to a dramatic attempt to restore the status quo in terms of price.

Whilst I do not say that Neurim and Flynn could not, over time, claw their way back to the present position, it would require careful consideration by them of the market circumstances in Period 2, and certainly that object could not be achieved at once. I consider that, in the limited time remaining to the Patent in Period 2 (some 20 months), during much of that period Neurim and Flynn would suffer a combination of lower sales of Circadin and Slenyto, and lower prices for those sales, than exists at present. In short, there would be losses to Neurim and Flynn during most, if not all, of Period 2.”

The judge then held that Neurim and Flynn could each be adequately compensated in damages. In respect of Period 1, Neurim and Flynn will have details of the price and volume of sales immediately before any generic entry. In the future, that information, coupled with sales information held by Mylan (and which the judge was minded to order Mylan should keep), would allow Neurim and Flynn to assess the damage a launch (if permitted) could have caused.

The judge then found that the same information would suffice to calculate damages in Period 2, which was likely to have a limited duration given the expiry date of the patent. The judge affirmed:

“… I am prepared to accept that the damage done to Neurim and Flynn's market may be irretrievable.

(c) If, therefore, the avoidance of irretrievable harm to the market position of a patent-holder was the test for an interim injunction, this would be an appropriate case for the granting of such an injunction.

(d) But that is not the test. The question is whether that irretrievable harm to market position cannot be compensated for in damages.”

Having found that the claimants could be adequately compensated in damages, the judge determined that the application must fail.

However, he went on to consider question 2 in respect of Mylan. The judge found that the damage an injunction would cause to Mylan could also be compensated by damages. Smith J did have considerable sympathy with Mylan’s argument that the loss of a first mover advantage would be impossible to quantify. However, he found it would be possible, just more difficult: “My conclusion is that it would be materially harder to assess Mylan's loss than that of Neurim or Flynn. I do not say that it could not be done, but the uncertainties inherent in the process would be formidable, and considerably more difficult in my judgment than would be the case with the losses sustained by Neurim and Flynn were the interim injunction not to be granted.”

3. What would be the “balance of convenience” of each party should the order be granted (in other words, where does that balance lie)?

Smith J did not consider this limb relevant to resolving Neurim’s application once it had failed on limb 2 of American Cyanamid. He therefore found that, whilst the status quo pointed towards granting the injunction, it was irrelevant. The judge also placed no weight on Mylan’s failure to “clear the way” (although he did opine that revoking the patent centrally at the EPO was not sufficient to “clear the way” in the UK).

4. Are there any special factors?

The judge considered representations from the Secretary of State for Health, writing on behalf of NHS England, that any injunction would cause damage to the NHS. Given that Neurim had agreed in principle to offering an undertaking in damages, the judge did not find this would go against granting relief.

Comment

The judgment in this application shows detailed consideration of the adequacy of damages to compensate patentees in the event that an interim injunction is refused. It is fair to say that the judge’s findings are “out of step” with the vast number of interim injunction rulings in pharmaceutical patent cases in recent years. However, the reasoning is underpinned in part by the limited life remaining on the patent.

We now wait to see whether Neurim will take this ruling to the Court of Appeal to seek interim relief pending trial on the merits in October, or wait until the first instance ruling following that trial to renew their application.