“If the Court later finds that this Order has caused loss to any of the First to Seventh, Ninth and Tenth Respondents or any of their respective Group Companies (as defined below) and decides that any such respondent (or their respective Group Company) should be compensated for that loss, [Bayer] will comply with any Order the Court may make and will be jointly and severally liable for any monetary award relating to such loss.”
“There shall be an inquiry as to the damages caused to the Respondents as a consequence of the interim injunctions based on the Patent, pursuant to the Appellants’ cross-undertakings.”
“The assessment of damages under the cross-undertakings … is to be made on the same basis as that on which damages for breach of contract would be assessed if the undertakings had been a contract between [Bayer] and [Sandoz] that [Bayer] would not prevent [Sandoz] from doing that which they were restrained from doing by the terms of the Injunction. On their proper construction, the cross-undertakings therefore permit the Court to make any monetary order that would have been available if the claim under the cross-undertakings was for breach of such contract.”
“The circumstances of this case are exceptional such as would justify an account of profits for breach of contract and accordingly an account of profits under the cross-undertakings.”
“(1) Bayer dishonestly made false and misleading claims to the EPO on matters relating to the requirements of non-obviousness and inventiveness. Bayer’s false claims included understating the half-life of rivaroxaban and making untrue statements as to the results of the Phase I trials and reaction to the suggestion of including a once daily dosing trial in the Phase II trials. (2) Bayer dishonestly failed to disclose prior art which would have revealed that its claims in support of the Patent were false, including a poster (the “Harder poster”) which reported that the half-life of rivaroxaban was as much as double that which Bayer had claimed in its evidence and argument in the EPO proceedings.”
“Sandoz’s case is that, in addition to Bayer’s dishonest behaviour in obtaining the Patent from the EPO…, Bayer acted wrongfully in seeking to defend the validity of the Patent in the English proceedings and obtaining the interim injunctions. The matters which Sandoz relies on in this regard are set out at paragraphs 27.6 to 27.9 of its POC and include the following: (1) Bayer sought to defend the validity of the Patent despite knowing that the Patent had been obtained from the EPO and maintained by the TBA on the basis of its false claims and misrepresentations as to inventiveness and non-obviousness and deliberate and dishonest failures to disclose prior art. (2) Bayer applied for and successfully obtained the 27 March and 12 April Injunctions (the “Injunctions”) with the intention of enriching itself by extending its monopoly in respect of rivaroxaban and its ability to obtain higher prices for Xarelto. (3) Bayer also knew that: (i) the effect of the Injunctions would be to cause irremediable losses and prejudice to generic companies (such as Sandoz) and others (including the NHS, which was not party to the cross-undertakings); and (ii) any compensatory damages exposure to the respondents on the cross-undertakings would be much less than the additional profits available to Bayer as a result of the Injunctions.” (1) Bayer sought to defend the validity of the Patent despite knowing that the Patent had been obtained from the EPO and maintained by the TBA on the basis of its false claims and misrepresentations as to inventiveness and non-obviousness and deliberate and dishonest failures to disclose prior art. (2) Bayer applied for and successfully obtained the 27 March and 12 April Injunctions (the “Injunctions”) with the intention of enriching itself by extending its monopoly in respect of rivaroxaban and its ability to obtain higher prices for Xarelto. (3) Bayer also knew that: (i) the effect of the Injunctions would be to cause irremediable losses and prejudice to generic companies (such as Sandoz) and others (including the NHS, which was not party to the cross-undertakings); and (ii) any compensatory damages exposure to the respondents on the cross-undertakings would be much less than the additional profits available to Bayer as a result of the Injunctions.”
“Compensatory damages are inadequate in these exceptional circumstances.”
“it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that isdetermined, the better.”
“… The starting point must surely be the true construction of the particular undertaking in question. That is to be judged against the background and purpose of the undertaking which is required by the court to be given in order to ensure that a mechanism is available to make good any detriment suffered by a defendant against whom injunctive relief is obtained when it is subsequently established that there should not be an injunction. …”
“A cross-undertaking in damages is normally required as a condition for the grant of an interim injunction. Its purpose is to ensure that the parties affected by the injunction are compensated if it later turns out that the injunction was wrongly granted. This purpose is fundamental to the courts’ approach to the grant or refusal of interim injunctions, particularly since American Cyanamid Co v Ethicon Ltd(No.1) [1975] A.C. 396; [1975] R.P.C. 513. It follows that the cross-undertaking is a very important means of ensuring that justice is done. The basic principle applicable to an inquiry under a cross-undertaking is that the cross-undertaking should be enforced in accordance with its terms. In the case of a cross-undertaking expressed in terms such as those set out above, this involves two questions. First, has the order or carrying it out caused loss to the beneficiaries of the cross-undertaking…? Secondly, if so, should the beneficiaries be compensated for that loss? It follows that the court’s primary task is to compensate the beneficiaries, not to punish the parties that obtained the injunction or to require those parties to make restitution of any benefits that they may have gained as a result of the injunction. It has been held that aggravated damages may be awarded on a cross-undertaking (Columbia Picture Industries v Robinson[1987] Ch. 38 ) and it has been suggested that exemplary damages may be available (see Smith v Day(No.2) (1882) L.R. 21 Ch. D. 421 at 428 and Digital Equipment Corp v Darkcrest Ltd[1984] Ch. 512 at 516), but no such claim is raised in the present cases.”
“is compensating for loss for which the defendant “should be compensated” (to apply the words of the undertaking). Labels such as “common law damages” and “equitable compensation” are not, to my mind, useful. The court is compensating for loss caused by the injunction which was wrongly granted.”
“The purpose of cross-undertakings is to enable parties who have suffered loss as a result of orders having been made which it turns out should not have been made to obtain compensation.”
“Of course, the injunction creates no contract and that gives rise to certain uncontroversial propositions. … The undertaking is given to the court and not to the injuncted party. Non-performance of the undertaking is a contempt of court, not a breach of contract. The undertaking is, in effect the “price” which the applicant for the injunction pays in return for the grant of the injunction. It is designed to protect the injuncted party from loss arising from the injunction, which is caused by the order, and which the court decides ought to be paid by the party who obtained it. The application of contractual principles is, therefore, “by analogy”, which one sees from the very case to which Lord Diplock referred, namely Smith v Day.”
“In the result, therefore, and perhaps not surprisingly, I reach the conclusion that the law as to the recoverability of loss suffered by reason of a cross-undertaking is as stated by Lord Diplock in his dictum in the Hoffmann-La Roche case, but with this caveat. Logical and sensible adjustments may well be required, simply because the court is not awarding damages for breach of contract. It is compensating for loss for which the defendant “should be compensated” (to apply the words of the undertaking). Labels such as “common law damages” and “equitable compensation” are not, to my mind, useful. The court is compensating for loss caused by the injunction which was wrongly granted. It will usually do so applying the useful rules as to remoteness derived from the law of contract, but because there is in truth no contract there has to be room for exceptions.”
“The problem with NHS EWNI’s implied term argument is that it overstates the contractual basis of a claim under a cross-undertaking. In F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry[1975] AC 295 (upon which McCombe LJ relied in Abbey Forwarding Ltd v Hone (No 3)[2015] Ch 309 (above)), Lord Diplock merely said that the assessment of damages under a cross-undertaking is made “upon the same basis” as that upon which damages for breach of contract would be assessed. McCombe LJ himself, in the passage quoted above at [47], merely said that the court would usually assess damages “applying the useful rules as to remoteness derived from the law of contract”, albeit that because there was no contract in fact there would be exceptions.”
“86. I think the argument fails for two reasons. First there is in fact no contract between the parties. The undertaking is given to the court - it is to compensate the parties identified in the undertaking. That is all. Second, even if there really had been a contract between the parties, the principles expounded in the cases do not and could not be expanded to cover this kind of third party loss. 87. The first reason is incapable of much elaboration. Lewison J put it elegantly as follows, at paras 82-83: “82. …The principle [in the cases relied upon] is predicated on a breach of contract. No cause of action arises at all unless B has broken his promise. If B has not broken his promise, discussion of what the cause of action might encompass if he had done is pointless. So the first question must always be: what has B promised to do? 83. In the present case, GSK promised to abide by any order of the court requiring them to compensate the defendants (or the ‘Apotex parties’ as defined) for any loss that they had suffered. They did not promise to pay the defendants for loss that other people had suffered.” 88. Putting it another way, the argument converts what is only a principle of assessment of compensation for breach of contract into both a notional breach of a notional contract and a method of assessment of breach. The cases relied upon are only about what damage can be claimed following a breach of contract.” “82. …The principle [in the cases relied upon] is predicated on a breach of contract. No cause of action arises at all unless B has broken his promise. If B has not broken his promise, discussion of what the cause of action might encompass if he had done is pointless. So the first question must always be: what has B promised to do? 83. In the present case, GSK promised to abide by any order of the court requiring them to compensate the defendants (or the ‘Apotex parties’ as defined) for any loss that they had suffered. They did not promise to pay the defendants for loss that other people had suffered.”
“18. The grant of an injunction is, of course, conditional on the giving of a cross-undertaking by the claimant seeking the injunction. Two questions arise in relation to the cross-undertaking. The first is whether the cross-undertaking should extend to a claim for disgorgement of profits made by the claimants which would not have been made in the absence of the injunction. Mr Mellor puts this point in one of two ways. First, he says that such a claim is maintainable on the form of the conventional wording of the cross-undertaking. Secondly, he says, if it is not, that then the conventional wording should be altered. 19. As to the first way of putting the case, I express no concluded view, although I believe that the decision of the Court of Appeal in the SmithKline Beecham Plc v Apotex Europe Ltd [2007] F.S.R. 6 case is authority against that proposition. So far as the second is concerned, I decline to vary the standard form of undertaking. My principal reason for declining to do so is that it is by no means clear to me that it would be just to transfer a profit made by the claimant to the enjoined defendant. If the claimant has made a profit which it would not have made but for the injunction, there may be other people to whom it would be more just that those profits should be returned, either other potential competitors with the defendant or customers who, as things turn out, may have been overcharged.”
“Second, proceeding on the footing that the enquiry on the cross undertaking is to be conducted according to the principles applicable to contractual damages, I should record that the form of the case before me has meant that I have not been called upon to consider whether it is appropriate to depart from the conventional contractual basis of assessment and instead to apply the exceptional “restitutionary” basis of assessment in contract considered in Attorney General v Blake [2001] 1 A.C. 268; 2000] 3 W.L.R. 625 HL. Where what is found to be a wrongful extension of patent protection results in a benefit to the patent holder which exceeds and outstrips the loss which is occasioned to the generic company whose market entry is delayed then it seems to me that “restitutionary damages” might be called for (notwithstanding the rejection by the Court of Appeal in SmithKline Beecham Plc v Apotex Europe Ltd [2007] F.S.R. 6 of the argument for a general restitutionary claim based on unjust enrichment and enforceable by parties and non-parties alike).”
“5. The principles of law sufficient to enable me to quantify compensation in this case may be shortly stated: (a) The undertaking is to be enforced according to its terms. In the instant case (as in many others) it is that Servier will comply with any order the court may make “if the court…finds that this Order has caused loss to the defendants.”