Navigating Forms of Cross-Undertaking Applications

We examine a recent Irish High Court decision regarding the terms of a cross-undertaking. The cross-undertaking in question sought to protect Teva's related companies from financial losses even if the related entities were not part of the initial proceedings. Our Intellectual Property team sets out why this decision offers helpful guidance for similar undertakings.

The Irish High Court granted an injunction in February 2023 in favour of Bristol-Myers Squibb (BMS), a global biopharmaceutical company, against Teva Pharmaceuticals Ireland. We discussed this decision, handed down in mid-February in an earlier article; the injunction prevents Teva from infringing BMS’ Supplementary Protection Certificate (SPC) for the direct oral anticoagulant (DOAC) Apixaban, marketed as Eliquis. In this article, we review one part of the High Court’s decision in Bristol-Myers Squibb Holdings Ireland -v- Norton (Waterford) Limited T/A Teva Pharmaceuticals Ireland[1]. This part of the decision concerned an application by Teva regarding the terms of a cross undertaking, in particular the inclusion of related companies in the undertaking to the court.

What is a cross-undertaking in damages?

A cross-undertaking in damages is a legally binding promise to the court by the applicant to compensate the respondent to an injunction for any loss or damage it might suffer if the interim injunction is later discharged.

When an interim injunction, freezing order or search order is granted, the applicant is almost always required to give an undertaking in damages, also known as the "cross-undertaking".

Teva’s concerns and proposed resolution

Teva raised two key concerns in their application regarding the terms of the cross-undertaking:

1. The first concern revolved around the practicality of naming every related company of Teva in the undertaking. It was unrealistic to imagine that the corporate structure of a group like Teva would remain static for the duration of the injunction. In addition, it would be a poor use of court resources for Teva to have to apply each time a Teva company sought a related company to be included in the undertaking as to damages.
2. The second concern focused on the language used in the injunction. As the terms of the injunction referred to the Defendant’s / Teva’s directors, officers, servants or agents, Teva argued that the harm caused to Teva may in turn extend to damage to related companies.

Teva proposed a resolution that stated that if the court determines that the order has caused any loss to Teva or its related companies, BMS should agree to any compensation order issued by the court.

In response BMS contended that its injunction was issued against the Teva entity that had obtained marketing authorisation and that has indicated an intention to launch its generic Apixaban. BMS claimed that the application was an abuse of power, and that there was no rationale for the application.

English case law

Mr Justice Barrett first referred to Actavis Group v. Boehringer Ingelheim[2] in the UK, which related to the scope of the cross-undertaking to be given by Boehringer. Actavis sought an undertaking to cover all Actavis companies and customers. Lord Justice Birss confirmed that the relevant UK Practice Direction applied, which said that an order for an injunction should include ‘any other person who may suffer loss as a consequence of the order.’ Mr Justice Barrett in the Teva decision noted that by this application he was being asked to exercise the same discretion that sought to do justice generally and not to the parties before the court as in Actavis. Considering the rationale of the Actavis decision, Mr Justice Barrett identified two important questions:

• “Does the proposed undertaking fail to provide the ‘reasonable certainty’ to which Lord Justice Birss. refers?
• Is the proposed form of undertaking ‘indeterminate and open-ended’?”

Mr Justice Barrett next examined the case of Warner-Lambert v. Actavis[3], again from the UK. When Warner-Lambert’s injunction application against Actavis was denied, Warner-Lambert sought an injunction against the NHS to require the NHS to have particular guidance that would prevent any generic drug being used for a patented use. As a result, three generic pharmaceutical companies sought cross-undertakings from Warner-Lambert. Recognising the similarities between the order in Warner-Lambert and the order sought by Teva, Mr Justice Barrett clarified that the same double-contingency was built in to the form of the order in Warner-Lambert. Taking into account these similarities, Mr Justice Barrett concluded that the “justice of matters” necessitated the form of undertaking requested by Teva should be granted.

Jurisdiction

Mr Justice Barrett pointed out that while there was no practice direction equivalent to the one adopted in the English courts in Actavis and Warner-Lambert, s.28(8) of the Supreme Court of Judicature Act (Ireland) 1877 provides the court with the jurisdiction to grant an interlocutory order “either unconditionally or upon such terms and conditions as the Court shall think just”. Satisfied that the 1877 Act bestowed the required jurisdiction, Mr Justice Barrett believed that it was not necessary to consider the Irish line of authority on the matter.

BMS argued that the form of order was inconsistent with the Enforcement Directive[4]. Dismissing BMS’ arguments, Mr Justice Barrett felt that there was little difference between his jurisdiction under the 1877 Act and what is required by the Enforcement Directive.

Takeaways – justice cut both ways

Mr Justice Barrett stressed the principle that justice must cut both ways: ‘You, BMS, have got your injunction but if in the grand scheme of things it turns out that we, Teva, prevail at the main trial, you should have to pay for damage that has been caused to the Teva group by virtue of the undertaking’.

Ultimately, the judge agreed with Teva’s proposed resolution, indicating that if the court finds that the injunction resulted in loss to Teva or its related companies, compensation will be considered on a group scale. In his closing remarks, the judge highlighted several factors that influenced his decision, including the fact that the order does not cover indirect losses, it is not an enhanced order, and that BMS's interests are preserved as they can argue matters of causation and quantum at a damages hearing.

This decision is the first of its kind in Ireland. It indicates a willingness by the Irish courts to follow the UK in granting comprehensive cross-undertakings for damages. Generic pharmaceutical companies looking to launch at risk in the Irish market will find this decision favourable. It ensures that companies unsuccessful in injunction proceedings have the ability to seek comprehensive compensation which reflects actual loss if they succeed in proving the invalidity or infringement of a patent. This clarity and potential for compensation might incentivise these companies to confidently enter the market.

For more information, please contact a member of our Intellectual Property team.

[1] [2023] IEHC 376

[2] [2013] EWHC 2927 (Pat.).

[3] [2015] EWHC 485 (Pat.)

[4] Directive 2004/48/EC of the European Parliament and of the Council of 29th April 2004