The rock misses its target in this story of “David and Goliath” – the UK High Court's consideration of interim injunctions in Neurim Pharmaceuticals v Mylan

Neurim Pharmaceuticals (1991) Limited (Neurim) and Flynn Pharma Limited (Flynn) sought interim injunctive relief against Generics UK Ltd (t/a Mylan) and Mylan UK Healthcare Limited (Mylan), concerning their prolonged release melatonin pharmaceutical formulation sold under the brand names Circadin® and Slenyto®. The global market for melatonin is estimated to be around US$700 million in 2019 and is expected to reach more than US$2 billion in the next five years. Despite this case being portrayed as a David and Goliath battle, with Mylan far eclipsing the size of the claimants, the UK High Court ultimately refused to grant an interim injunction in favour of the claimants, Neurim and Flynn, to stop Mylan from entering the market pending trial.

The UK High Court adopted a structured approach in the exercise of its discretion on whether or not to grant interim injunctive relief, and made it clear that there was no norm in pharmaceutical cases in favour of an injunction – each case must be assessed on its particular facts. Here, the Court found that damages would be an adequate remedy to the claimants, even if the changes to the market for its product were irrecoverable. This decision stresses the importance of being able to articulate why the losses to the patentee would be unquantifiable if the interim relief was not awarded.

The Patent

Neurim is the registered proprietor of EP 1 441 702 (the Patent), which covers a prolonged release formulation comprising melatonin for improving the restorative quality of sleep in a patient suffering from primary insomnia characterised by non-restorative sleep. Flynn was purported to be the exclusive licensee of the Patent (but more on this later). The Patent expires on 12 August 2022.

In November 2019, the Opposition Division (OD) of the European Patent Office (EPO) revoked the Patent. However, a revocation decision by the EPO does not become effective until any appeal to the Technical Boards of Appeal (TBA) is decided and, accordingly, the Patent remains in force in the UK. Although the decision of the OD to revoke the Patent was appealed by Neurim, it is unlikely that a final decision would be issued by the TBA before 2022.

Neurim’s product

Neurim markets a melatonin product called Circadin®, which is indicated for the treatment of primary insomnia characterised by poor quality of sleep in patients who are aged 55 or over. Neurim has another melatonin product, called Slenyto®, which received regulatory approval in October 2018 and is indicated for use in children and adolescents.

During the proceedings, three medical uses were identified for Circadin®:

1. Medical Use 1: Use within the label and within the Patent, that is treatment of patients aged 55 or over for primary insomnia;
2. Medical Use 2: Use outside the label but within the Patent, that is treatment of patients aged under 55 for primary insomnia; and
3. Medical Use 3: Use outside the label and outside the Patent, which would include, for example, prescriptions for childhood autism.

Mylan asserted that Medical Uses 1 and 2 constitute only 2% of all prescriptions for Circadin®.

Mylan’s product

Mylan proposes to launch a generic version of Circadin®, with the release being described as “fairly imminent”. The marketing authorisation for Mylan’s product is identical to Circadin®. Neurim and Flynn commenced proceedings in the UK against Mylan for infringement of the Patent, seeking a declaration of infringement and injunctive and other relief, and Mylan counterclaimed for revocation of the Patent.

Mylan provided an undertaking to the claimants that it would stay off the market until 20 May 2020, the date of the hearing before the UK High Court on interim injunctive relief, although this was extended to 3 June 2020 when judgment was to be formally handed down. An expedited trial has been ordered for 26 October 2020.

In this decision, the question before the Honourable Mr Justice Marcus Smith of the UK High Court was whether interim injunctive relief should be ordered to restrain Mylan from entering the market from 3 June 2020 until final judgment in the proceedings or further order.

Interim injunctions

In this decision, the Honourable Justice Smith comprehensively outlined the principles that the UK Courts will apply when determining an application for interim injunctive relief. These are derived from the speech of Lord Diplock in American Cyanamid Co v. Ethicon Ltd [1975] AC 396. Smith J stressed that his discretion is structured and it is not a fact-finding exercise.

Essentially, four steps are involved in the assessment, which are, in order:

1. The claimant must show that there is a “serious issue to be tried”. This is no more than a roughly-meshed filter, intended to remove from the Court’s consideration the obviously unsustainable claims. It is important, when considering this step, not to conduct a trial within a trial.
2. Damages must not be an adequate remedy to the claimant, even if their claim is very strong. This considers not only the theoretical adequacy of damages, but the practical aspects as well.
3. Even if damages are not an adequate remedy to the claimant, the Court must consider whether the undertaking in damages to the defendant (that is, the undertaking provided by the claimant to compensate the defendant for any loss sustained by reason of the injunction) will adequately protect the defendant.
4. Where damages will not be an adequate remedy to either party, other factors might be taken into consideration including:
   1. The status quo;
   2. The merits of the claim, but only if this assessment reveals that there is no credible dispute; and
   3. Whether the generic had sought to ‘clear the way’ before entry onto the market, for example by seeking revocation of any patent rights or a declaration of non‑infringement.

Relevant facts in the present case

The Honourable Justice Smith identified the following facts as relevant to his decision:

1. Is there a serious issue to be tried?

• This was effectively accepted by Mylan.
• Smith J considered that the decision of the OD of the EPO to revoke the Patent was irrelevant, as decisions of the EPO are not binding on English courts.

2. Are damages an adequate remedy to the claimant?

• Smith J accepted that Mylan’s entry into the market would result in loss to Neurim and Flynn, owing to a combination of loss of sales and lower sales prices for Circadin® and Slenyto®. It was also accepted that the sales prices for these products may never recover, even if Mylan was subsequently ordered off the market.
• Smith J was also prepared to consider that the losses flowing from Mylan’s infringements in the cases of the patented uses (Medical Uses 1 and 2 above) could arguably include lost sales for the non-patented Medical Use 3. While refusing to reach a conclusion on this issue, Smith J accepted this point as arguable, given that Mylan has chosen to copy the label for Circadin® as a means of avoiding the cost of obtaining its own label.
• Consequential effects of Mylan’s entry into the market were also considered, such as the entry of other competitors, the impact on the claimant’s research and development, and the prospect of redundancies. However, Smith J considered that these were not relevant to his assessment, given that Neurim was said to “[sit] on cash of a significant amount”.
• Smith J concluded that damages would be an adequate remedy to Neurim and Flynn. He could not see any reason why these losses could not be calculated by reference to their existing sales and Mylan’s new sales. Even if their position in the market is irretrievable, that is not to say that it cannot be compensated for in damages.
• On a related point, Mylan questioned Flynn’s standing in the proceedings as an exclusive licensee because only an “aggressively redacted licence agreement” was provided to the Court. Smith J agreed, observing that the whole of the agreement must be disclosed in order to establish standing, and measures can be put in place to ensure the confidentiality of the document. However, Smith J felt that to go further and make findings about the standing of Flynn would be to conduct a trial within a trial. It was sufficient that any damage to Flynn, whether an exclusive licensee or not, would cause Neurim to suffer as a result of reduced royalties.
• On the question of evidence, Smith J observed that the evidence adduced by each side was from experts associated with the parties and hence was not independent, and accordingly he considered it “substantially valueless”.

3. Are damages an adequate remedy to the defendant?

• Although Smith J found that the claimants were unsuccessful at step two of the assessment, he continued to consider whether damages would be an adequate remedy for Mylan if an interim injunction was granted and then overturned.
• Smith J considered that such an assessment in relation to the defendant would be more difficult than the assessment required by step two above. For example, Smith J had “some sympathy” with the submission that the loss to Mylan of its ‘first mover advantage’ (that is, the advantage gained by Mylan in being the first generic entrant onto the market) would be difficult to quantify in damages.

4. Are there other factors to take into consideration?

• Smith J addressed three other considerations that were raised as relevant by the parties.
• First, relating to the title of this article, he considered the ‘David and Goliath’ submission that Mylan is larger and more powerful than Neurim and Flynn, who are smaller players in the pharmaceutical market. Smith J, however, considered that such a difference in size was irrelevant per se, unless it affected some other factor that the Court should take into consideration.
• Second, although Mylan was an opponent in the successful EPO opposition to the Patent, it did not commence revocation proceedings in the UK. Smith J considered that this would have been a relevant factor when considering the extent to which damages would have been an inadequate remedy to Mylan, had the claimants not failed at the second stage of the inquiry.
• Third, it was observed that the Court received a communication from solicitors for the Secretary of State for Health, writing on behalf of the National Health Service (NHS) in England. The communication noted the potential loss to the NHS should an interim injunction be granted and subsequently overturned. Smith J agreed that the interests of participants in the market, such as the NHS, should be considered when assessing whether an injunction ought to be granted at all. Had he been minded to order the interim injunction, Smith J would have wanted further submissions on whether the granting of an injunction would be appropriate.

So, ultimately, the claimants failed on step two of the inquiry. Proving inadequacy of damages to the patent holder will be crucial in obtaining interim injunctive relief in future cases.

Postscript on costs

Following his refusal to grant an interim injunction, Smith J considered the issue of costs in a subsequent, short judgment of 8 June 2020. Smith J rejected Neurim and Flynn’s submissions that costs should be reserved on the basis that their application failed to establish the inadequacy of damages, which is a point that would not be determined on the merits at trial. This was different to the cases cited by Neurim and Flynn where costs were reserved when interim injunctions were granted, as in those cases the interim injunctions were inevitably granted on the basis that there was a serious issue to be tried (under the first step of American Cyanamid), which would be subsequently determined on the merits at trial.

However, when awarding Mylan its costs on standard basis Smith J held that Mylan should not get all its costs. This was because Mylan had contested that the first step of American Cyanamid had been met and had lost on this and on a number of other points. Whilst the first step of American Cyanamid did not occupy much time at the hearing, substantial costs were incurred in the run-up to it. As a consequence Smith J adopted an issues based approach in which Mylan could not recover more than 65% of its assessed costs. Given that Mylan’s costs were £182,432, Smith J ordered that Neurim and Flynn should make an interim payment of £80,000, with this representing 70% of Mylan’s costs recoverable costs.