AstraZeneca AB and Another v KRKA dd Novo Mesto and Another, England and Wales Court of Appeal (Longmore, Kitchin and Floyd LJJ), London, UK, 21 May 2015, Neutral Citation Number: [2015] EWCA Civ 484

In order to obtain a preliminary injunction against Krka, AstraZeneca had given a cross-undertaking in damages. When the injunction was lifted by consent, damages became due to Krka. In this case, the Court of Appeal of England and Wales affirmed the judgment of Sales J (as he then was) in determining the quantum of those damages.

Broadly the Court of Appeal applied the principles set out in prior case law for determining quantum of liability. The application of the legal standards in this case was not without difficulty because of the very complicated factual circumstances at issue. This judgment has provided guidance for how the amount of loss should be calculated when the assessment is necessarily speculative, and about highly complex features of a market.

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AstraZeneca owned a patent covering esomeprazole, a proton pump inhibitor, one use of which is in the treatment of ulcers. Krka, a generic manufacturer, wanted to enter the market, with the second defendant, Consilient as its distributor. AstraZeneca issued proceedings, and at some point Krka accepted that a preliminary injunction was inevitable, and acquiesced (without admitting infringement) in return for AstraZeneca’s cross-undertaking in damages.

Before any further progression of the proceedings between these parties, another generic manufacturer, Ranbaxy, achieved a declaration of non-infringement for its product which had also been alleged to infringe AstraZeneca’s patent. In light of this loss at trial, AstraZeneca offered to lift the injunction against Krka. Consequently, Krka pursued AstraZeneca for its losses under the cross-undertaking.

The parties were largely in agreement before Sales J and before the Court of Appeal as to the legal principles behind calculating the loss. The loss is assessed in the same way as ordinary contractual damages would be assessed: the figure is intended to be compensatory amounting to what Krka would have received had it not been restrained, including the value of loss of chance. It was accepted that the ultimate figure could only ever be an estimate, since in this sort of case there are too many unknown variables to expect any real degree of close precision.

One of the primary difficulties in making the assessment was the complexity of the factual question of what the market for prescription drugs would have been like had Krka been allowed to enter it, and how much Krka would have received as a consequence (i.e. the value of the ‘first mover advantage’). One of the principle issues on appeal centred on the evidentiary basis which had been available to the judge for making this assessment. AstraZeneca alleged that Sales J had placed too much weight on the factual evidence of ‘Medicine Managers’. These Medicine Mangers were employed by Primary Care Trusts at the relevant time for the purpose of assessing and influencing GPs’ prescribing habits. 16 Medicine Managers had been called at trial, and it appeared that Sales J placed substantial reliance on their testimony, which AstraZeneca alleged to be excessive.

AstraZeneca argued that whilst the Medicine Managers provided some evidence, the market was too complex to rely solely, or primarily, on this testimony to provide even guidance figures for the losses. AstraZeneca’s preferred approach was to focus on what actually happened when Krka launched their generic esomeprazole product and to extrapolate from that and from evidence of the introduction of other generic drugs.

The Court of Appeal rejected AstraZeneca’s arguments. The Court found that Sales J had placed an appropriate weight on the Medicine Managers’ evidence (including the evidence which had in fact supported AstraZeneca’s case). Further, whilst it was accepted that it would have been error to ignore a true comparator, the examples provided by AstraZeneca were not relevant comparators, as the markets for the suggested drugs were demonstrably different.

A final point was that Sales J had adopted an ‘uncertainty discount’ of 20% to reflect the inherent vagueness in the judicial calculation. The Court found that, as a matter of judicial discretion, this figure was one open to Sales J to have taken, and would not alter it on appeal.

The appeal was dismissed and the Court of Appeal affirmed Sales J’s original figure.

Read the judgment (in English) here.

Head note: Philip Davies and Scott Parker, Simmons & Simmons