Skip to content

UK Court considers whether it can fortify a cross-undertaking for damages after the injunction has been discharged

Sandoz Limited (Sandoz) (Second Defendant) applied to the court for fortification (requiring a payment to be made into court) of a cross-undertaking given by Napp Pharmaceutical Holdings Limited (Napp) (Claimant) in respect of an injunction restraining the launch of Sandoz transdermal buprenorphine patches.

The injunction had been granted in February 2016 and discharged less than six months later when the Patents Court and later the Court of Appeal found Napp’s patent not to be infringed. Napp provided a cross-undertaking in damages to compensate Sandoz in the event that the patent was found not to be infringed.

Further to the litigation surrounding OxyContin in the US and the alleged links between Purdue (the makers of OxyContin) and Napp, Sandoz was concerned that Napp might not be in a financial position to pay the damages owed under the cross-undertaking when the damages case is concluded.

Carr J consider whether the court has jurisdiction to fortify a cross-undertaking after it had been discharged and if the injunction should be granted on the facts.

Carr J held that the court has no power to order a party to give a cross-undertaking: a cross-undertaking is the price that a claimant is willing to pay in return for the grant of an injunction. If the injunction has been discharged, there is no incentive for the claimant to provide an undertaking. Therefore, he held that the court had no jurisdiction to order the fortification of a cross-undertaking.

Judicial Discretion
If wrong about jurisdiction, Carr J also held it would not be appropriate to grant the requested relief on the facts. He considered Sandoz’s concerns regarding Napp’s ability to pay damages due to questions of the financial security of Purdue Pharma (a company in the same group as Napp) following a scandal (and subsequent legal action) regarding the addictive nature of OxyContin.

Carr J concluded that the legal action against Purdue Pharma would not impact Napp’s ability to carry on its business, noting that Napp’s solvency was independent to Purdue Pharma. Carr J held that Sandoz’s application was based upon speculation and, if the court had jurisdiction, he would not exercise his discretion to grant the application.

A copy of the decision can be read here.

Headnote: Jonathan Solomon, Marks & Clerk Law LLP