Friday, April 4, 2014

Damages for a wrongly issued injunction

In one of my early posts last May I wrote the following:
Professor Heath notes that article 9(7) of the E.C. Enforcement Directive requires that, where a court enters a preliminary injunction against a defendant but the defendant subsequently prevails at trial, the defendant is entitled to recover compensatory damages.  Specifically:
Where the provisional measures are revoked or where they lapse due to any act or omission by the applicant, or where it is subsequently found that there has been no infringement or threat of infringement of an intellectual property right, the judicial authorities shall have the authority to order the applicant, upon request of the defendant, to provide the defendant appropriate compensation for any injury caused by those measures.
Professor Siebrasse has pointed me to discussions of recent French and Spanish cases applying this principle, and informs me that it is found in Canadian law as well.   
In the U.S., there is no such rule, though courts require the patentee to post a bond in order to obtain a preliminary injunction so that the defendant will be compensated up to the amount of the bond if the injunction turns out to have been granted in error.  (For a discussion of U.S. practice and an argument that courts should impose a restitutionary recovery in the event of a wrongly-issued preliminary injunction, see Ofer Grosskopf & Barak Medina, Remedies for Wrongfully-Issued Preliminary Injunctions:  The Case for Disgorgement of Profits, 32 Seattle U. L. Rev. 903 (2009).)  There would be no other claim arising from the good faith, though ultimately unsuccessful, assertion of rights under a patent, as discussed in my post last week. 
I'll be addressing this issue, among others, during my talk tomorrow at the PatCon 4 conference.  Readers who are interested in this issue might also be interested a recent write-up by Gary Moss and Emma Muncey on the JIPLP blog, Assessing Damages Due Under a Cross-Undertaking in Damages--More of an Art than a Science?, available here.  The authors discuss a January 2014 decision of the Patents Court (England & Wales), Astrazeneca AB v. KRKA, in which Justice Sales went through a very careful analysis to determine the framework for awarding damages to KRKA from having its generic drug excluded from the market as a result of a preliminary injunction involving a patent that was later held not to infringe another generic manufacturer's drug.  As a result of the decision in this other case, the preliminary injunction against KRKA was lifted in July 2011; but it was still a couple of months before KRKA was able to enter the market, by which time (or shortly thereafter) there were other generic copies of the same drug on the market.  The court concluded that in the but-for world in which the preliminary injunction had not issued, KRKA would have enjoyed a first-mover advantage which is now lost, and should be compensated accordingly.  The court directed the two parties' experts to reach an agreement on the amount owed, following the court's discussion of the appropriate framework.

Anyway, I recommend that interested readers take a look at Justice Sales's detailed opinion and Moss & Muncey's illuminating discussion of it on JIPLP.

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