This post is a part of our I-3 series, in which we study cases in which we question the promiscuity of interim injunctions in patent cases. For my previous post in the series, click here.
Interim orders, in the ideal world, should be short-lived creatures. In the cases we’re putting before you, however, it appears that they are being nurtured and nourished by a combination of actors, both from the bar and the bench. This particular case features an ex parte interim order that’s been in force for no less than forty four months. That’s right – almost four years and counting. In the paragraphs below, I examine the manner in which this astounding injustice has proceeded.
In Vifor v. D. Mohan Rao, the plaintiff was able to obtain an ex parte interim injunction from the Delhi High Court restraining Symed Labs from advertising the iron carboxymaltose API on its website, and from otherwise dealing in the product in September 2011. As on December 2011, Symed had removed (see comparison with same page in November 2011) the API from the product list on its website, indicating that it had taken steps to comply with the injunction. Interestingly, by 2013, the company had added a disclaimer on its website asserting that the mere listing of products on its website would not constitute infringement.
Disregard for Supreme Court guidelines
As has been the case with other ex parte injunctions we’ve looked at, the order suffers from several defects when held against the standard demanded by the Supreme Court’s guidelines – it does not limit the life of the ex parte injunction, takes no specific steps to ensure an expeditious hearing for the defendant, and does not place on record the fact that the plaintiff shall be bound to pay costs if the injunction fails to overcome challenge by the defendant.
Pervasive listing woes
Further, it must be noted that even in listing the case for hearing, judges seem to display an almost callous disregard for the urgency of the situation. As noted above, the ex parte injunction was issued in September, but the same order listed the matter for hearing only in December. This can only mean that the court has failed to account for the unquantifiable losses that would accrue to the defendant by this restraint upon their business in the intervening three months. I must emphasize, however, that this is not a criticism of the judge – I’m merely trying to illustrate, with concrete examples, the mind-set that pervades our judiciary’s systemic disregard of such “interim” injustices.
Unconventional litigation strategies?
In this case, the December date swung by, and the defendant’s counsel seems to have filed an IA under Order 7 Rule 11 of the CPC to have the plaint rejected. I understand that this could be part of a broader litigation strategy, but I’m curious as to why the defendant took this approach instead of seeking relief under Order 39 Rules 3A and 4 to resolve the interim order.
At the next hearing in January 2012, the judge (I’ll call him Judge #2, since he’s the second to hear this matter) records that the plaintiff has filed a reply to the defendant’s IA, and goes on to list the matter for May 2012 – a full four months later. Again, the fact that it’s a different judge ordering the same kind of listing delay is reflective of a collective disregard from the bench as a whole, rather than individual judges.
Defendant plays along
Another troubling feature of these cases is the willingness displayed by the defendant to play along with the delays in litigation. In one instance, the plaintiff sought additional time to respond to the defendant’s counter-claim – time that seems to have been granted solely because the defendants made no attempt to oppose the delay. It’s important to keep in mind that the defendant has, by now, been restrained from conducting his ordinary business for over six months, leading to immeasurable financial losses. What, then, could be a reason for him to cheerfully tolerate further delay even as interim orders continue to eat into his revenue? Two possible explanations arise. Could it be that the defendant’s counsel refrains from opposing delays because they were employing the same tactic while representing plaintiffs in similar cases? Or could it be that companies like Symed, who have been on the plaintiff side of such disputes (eg. against Sharon), are similarly refraining from opposing delays because they’ve employed the same tactic in their other cases?
Hearings speed up, then go back to snail’s pace
May 2012 has come and gone, but even with Judge #2 holding hearings in quick succession, the defendant’s IA is still pending. The Delhi High Court’s vacation is presumably imminent, and the matter is listed for July. On the July date, the matter comes up before Judge #3, who notes that Judge #2 has heard the case previously, and would be better placed to hear it. Meanwhile, it appears that the defendant has finally filed an IA seeking vacation of the temporary injunction under Order 39 Rule 4. In August, Judge #2 records that both parties are yet to address their “substantial submissions”, and orders the matter to be listed in September. The plaintiff seeks an adjournment on that date, and Judge #3 – the third of three judges who have heard this case – orders yet another delayed listing, this time in February 2013.
More listing woes, adjournments and a possible settlement
Come February, Judge #4 finds the case before his court, and he orders the matter to be listed next in July, with no reasoning behind the delay. (That’s four judges out of four, for those of you keeping track.) In July, Judge #5 records that pleadings have been completed in the Rule 39 IAs, and lists the matter for a full four months later in November. (Five out of five.) After another fortnight’s adjournment (again, bafflingly, at the defendant’s request), the parties seem to begin exploring the possibility of settling out of court. Three months later, the parties tell Judge #1 that they’re at an advance stage of settlement, and seek an adjournment. Another instance of the plaintiff seeking a delay and the defendant accommodating the request in bonhomie spirit comes up in March 2014.
Miscellaneous delays
It is now April 2015. In the intervening months, counsel have requested pass-overs, been unavailable in court, sought adjournment, cancelled a court date and been out of town, at various points. Once again, the defendants have filed for an adjournment, and Judge #2 orders the next hearing for September this year. It’s been forty four months now since interim orders came into force in this case, and it’s going to be another four months before the case is heard next.
The interim order will have celebrated its fourth birthday around the time of its next hearing, with a final resolution of the matter appearing no closer than it did in 2011.
This is all very well but while these may seem like unforgivable delays to the outsider, the system has a way of differentiating cases where the Defendant is really suffering “unquantifiable losses” from those where the case was filed on a quia timet basis. Cases where the Defendant is really suffering (eg. cases where a product already in the market has been restrained) are treated at a different footing and you see much more urgency in such cases by the Defendant and the Judge. Your analysis may seem more alarming than the situation warrants since in very few cases are the Defendants truly prejudiced and still not put up a fight for an early hearing.
Dear Anon,
In this case, Symed clearly appears to have suffered some sort of loss through its inability to market the product (on its website or otherwise). Would this not be sufficient for this case to be one of those where the defendant was “really” suffering losses?
Firstly, listing of a product on a website hardly indicates that the company is offering the product for commercial sale. I have seen many written statements by Defendants in which they argue that even though they listed a particular product on their website, they never intended to commercially launch it before the expiry of the patent. So I will not take the delisting on a website as a measure of actual commercial loss.
Secondly, the fact that this company filed an application under O. VII Rule 11 near the date of hearing on the injunction application again indicates that either the company’s interest in the drug was minimal or that the injunction did not hurt them.
Lastly (and this is the more general point on your posts), if you are not blaming the judge, then any alternate that you propose (and I have read Shamnad’s suggestions) merely shifts the prejudice from the Defendant to the Plaintiff. It does not balance the equities – it merely makes the Plaintiff the victim as opposed to the Defendant. It is all very well to keep citing the possible invalidity of the patent but what you are suggesting is that a granted patent should not be given any weight whatsoever and in a sense one should presume the invalidity of the patent and deny an ex-parte injunction irrespective of the potential prejudice to the Plaintiff. Even the Indian patent regime has not gone this far. The potential prejudice to the Plaintiff (if an ex-parte injunction is not granted) is real. If the Defendant has a commercial interest in the patented product, then he/ she may take advantage of the lack of an injunction and flood the market making it impossible for the Plaintiff to turn back the clock. Again, this happens all the time. At the ex-parte stage, the Judge is essentially trying to balance the equities and trusting the grant of the patent.
The Defendant has the opportunity to challenge the validity not only through an infringement suit but also through a pre – grant opposition, a post – grant opposition and a revocation petition. If a Defendant has failed to do so and wants to launch at risk, then the law must favour the Plaintiff. The Delhi High Court in Merck v. Glenmark has recognized this.
Take this scenario – at the time of filing of the suit, the Plaintiff has no way to know for sure if the Defendant is commercially interested in the product or merely has a research interest. The Court grants an ex-parte ad interim injunction. The Defendant, if he has a commercial interest in the drug, files an application for vacation of the injunction within a few days. The Court then hears the matter at length and decides on the merits of the case of both parties (this happens all the time – see the Merck litigation, the Onbrez litigation, the Ericsson litigation). I know of very few cases where the Defendant had a real and immediate commercial interest in the patented product but did not get its day in Court.
If the Defendant does not have an immediate commercial interest, the matter drags on for several years since the Defendant does not take those active steps which signal to the Judge that the matter is of grave concern.
One thing that I don’t seem to understand. maybe someone can guide me/ others on this.
Injunction is granted on three grounds.
1. irreparable injury
2. balance of convenience
3. prima facie case.
All good for in say, a Trademark case.
But, when we talk about patents, when the main purpose is commercial exploitation, and possibility of TM type dilution, not a jurisprudencial possibility, coupled with concepts such as compulsorily licensing in cases of drugs etc or FRAND terms; The loss to a plaintiff is quantifiable.
Why have an injunction ? how does that help.
The line of argument that you are proposing: that once injunction is granted, cases lingers on and on, is not really a problem that is endemic just to IP matters.
why grant injunctions (in patent infringement cases) when the losses to the plaintiff are quantifiable. Defendant can additionally be penalized too.
Dear different anony,
I agree with you – the fundamental difference here is that losses on the plaintiff side are quantifiable – defendants can be asked to maintain sale records, and so on – while the losses on the defendant side are not similarly quantifiable.
As a separate line of argument, it could be claimed that a majority of the applications for injunctions in patent cases may fail the irreparable harm requirement, due to the quantifiable losses on the plaintiff side that can be compensated monetarily at the termination of the suit, especially in pharma and SEP disputes.
Additionally, it’s true that lengthy proceedings in injunction matters is not a problem isolated to IP cases, but the fact is that time is of the essence here, both from a public interest perspective (to get new technologies or drugs into the market as quickly as possible) as well as from a commercial perspective (to ensure that the defendants don’t go out of business in the middle of litigation). This is why interim orders are particularly problematic in IP cases.
Admittedly the hardest part when deciding an interim injunction is weighing the balance of convenience. However, to make a blanket statement that the harm to the Plaintiff can easily quantified by asking the Defendant to maintain accounts is clearly a biased view of things.
Take a situation where the Defendant is allowed to launch a infringing product because he at the interim stage raised a “credible challenge” to the validity of the patent. The Defendant heavily undercuts the Plaintiff’s pricing and captures a large portion of the Plaintiff’s market share. To remain competitive the Plaintiff too cuts its prices. The Plaintiff eventually succeeds at trial and the Defendant is forced to withdraw from the market for the remaining term of the patent. How do you now compensate the Plaintiff? Even awarding the Plaintiff the total amount earned by the Defendant through its infringement will not be sufficient. Firstly, had there been no generic competition, the Plaintiff would have earned more revenue than the Defendant in the period of infringement. So even the Defendant’s entire revenue from its infringing activity is insufficient compensation.
Secondly, there is enough empirical data to suggest that the Plaintiff will no longer be able to return to its original product pricing. How do you compensate for this loss?
Therefore to suggest that “losses on the plaintiff side are quantifiable” is a statement which has no basis in reality.
Dear Anon,
Yes, it’s true that in the real world, market forces tend to draw plaintiffs into situations where their losses are not fully measurable. I admit that I’ve overlooked this aspect in my earlier comment. Thanks for pointing this out! I do have a couple of quick responses, though. Do let me know what you think of them.
First, I think there’s an overarching public interest in keeping these drugs in the market, regardless of the specific finding on infringement. Errors are bound to occur – I’d just like to argue that it’s better that our judicial system errs on the “right side” (increasing availability on the market, thus fulfilling an important A2M goal) than for it to err on the “wrong side” (decreasing access in some cases where injunctions would not have been justified). Having framed this as the goal, we can identify interim injunctions (especially those issued ex parte) as the most pernicious symptom of erring on the “wrong side”, especially when the injunctions issue based on false information furnished by the plaintiff. To rectify this, we can start off by reducing the instances in which ex parte injunctions issue. While there is a possibility that some plaintiffs will be unjustly treated, this is a justifiable risk, especially when faced with the alternative, in which access to the drug hedges on a prima facie finding by a judge hearing only one party. Thus, even if the plaintiff is able to establish a prima facie case, irreparable harm and the balance of convenience, I’d like to argue that the public interest threshold is extremely high, and has not been surmounted by the plaintiff in most cases.
Second, I don’t know if I’m wrong about the market, but I don’t see why the plaintiff cannot return to his previous pricing policy if and when he wins the dispute. He still retains the market monopoly over the invention. What prevents the court from holding that the defendant was infringing upon the plaintiff’s patent all along, and decreeing that the plaintiff be compensated adequately to ensure that he is restored to a position in which the infringement never occurred? Eg. If, during the pendency of the suit, Glenmark infringes upon Novartis’ patent and supplies 500 units of Drug A at Rs. 5/unit, and consequently Novartis had to drop its own price and was only able to supply 400 units at Rs. 5/unit, down from Rs. 10/unit at which it was originally pricing the drug, why can’t the court decree that Glenmark compensate Novartis to put it in the position it would have been, if it was able to supply the entire quantity of Drug A to the market at its original price? Here, that would be (500 * 10) + (400 * 5). There’s nothing to prevent Novartis from going back to its original pricing strategy – Rs. 10/unit – after the court has given judgement.
Of course, given the manner in which monopolies play out in the market (optimum production levels for profit maximisation, etc.), there would be some refinement here to reduce the compensation marginally, but this doesn’t take away from my point – monetary damage can be computed even in situations where price undercutting takes place and the plaintiff loses market share. Personally, “irreparable harm” would arise in my mind only where the damage is to an intangible entity – such as goodwill, for example – and where the damage is positively irreversible – such as publication of certain facts, since what has been said cannot be unsaid at a later point.
Do let me know what you think of these arguments. Thanks for writing in!
Sorry to say, but your understanding that “that losses on the plaintiff side are quantifiable” has no basis in reality and completely fails to appreciate the actual market forces at play in such cases.
For simplicity I’m quoting a paragraph from the Merck v Glenmark decision:
“It may be argued that despite this no injunction should be granted since
all damages from loss of sales can be compensated monetarily ultimately if
the patentee prevails. This argument though appealing, is to be rejected
because a closer look at the market forces reveal that the damage can in
some cases be irreparable. This in turn leads to the third principle, which is
where an infringer is allowed to operate in the interim during the trial, it may
result in a reduction in price by that infringer since it has no research and
development expenses to recoup – most revenue becomes profit. The
patentee however can only do so at its peril. Importantly, prices may not
recover after the patentee ultimately prevails, even if it is able to survive the
financial setback (or “hit”) during the interim, which may take some time.
The victory for the patentee therefore should not be pyrrhic but real. This
irreparable market effect in cases of a sole supplier of a product has also
triggered the decisions in SmithKline Beecham v. Generics, (2002) 25(1)
IPD 25005 and Smithkline Beecham Plc (2) Glaxosmithkline UK Ltd v.
Apotex, [2003] EWCA Civ L37, where in granting an interim injunction, it
was held that damages would not be an adequate remedy for the plaintiff
since it was the sole supplier of the product. New entrants to the market
would be likely to cause its prices to go into a downward spiral, and Smith
Kline‟s prices may not recover even if it wins eventually”
Dear Anon (16:19),
I’ve responded to similar concerns from an anonymous commenter on the same thread – https://spicyipweb.wpcomstaging.com/2015/05/interrogating-interim-injunctions-the-four-year-long-vifor-symed-saga.html#comment-18792
Do let me know what you think of these arguments. Thanks for writing in!