On the second branch of the Cyanamid test, which requires the applicant to show irreparable harm, Crampton J’s decision was entirely consistent with Federal Court jurisprudence. I have criticized this jurisprudence at length in my article Interlocutory Injunctions and Irreparable Harm in the Federal Courts, 88(3) Can Bar Rev 515, and here I will simply outline some of the main points.
The Federal Court jurisprudence uses irreparable harm as a strict threshold. That is, if the applicant cannot show irreparable harm, the application will be dismissed without the need to consider the balance of convenience [154]. This is not consistent either with the traditional practice in Chancery, or with the general position in other Canadian jurisdictions, or with Cyanamid itself. Chancery practice is discussed in detail in my article. With respect to other Canadian jurisdictions Sharpe on Injunctions and Specific Performance para. 2.450 states that “attempts to make irreparable harm, and hence a condition precedent, and hence a threshold test, have been rejected.” In Cyanamid, which was itself a patent case, the main harm alleged by the patentee was the “[loss] of its chance of continuing to increase its share in the total market” ([1975 AC 396 at 409-10). The Federal Court jurisprudence requires the applicant to prove irreparable harm on the basis of evidence that is “clear and not speculative” [56], while in Cyanamid the interlocutory injunction was granted merely on the trial judge’s common sense inference that there would be loss of market share “[a]lthough there is not at present any evidence to that effect in this case” ([1974] FSR 312). The injunction granted by the House of Lords in Cyanamid would undoubtedly have been refused on current Federal Court jurisprudence.
The lower risk of injustice principle, discussed in yesterday’s post, implies that the harm to be avoided to each party is the difference between the amount each party would actually make if the injunction were decided in its favour, and the amount of compensation to which that party would be entitled if the injunction went against it, but its rights were ultimately vindicated at trial. On this view the “irreparable” loss is not loss that is incapable of being compensated by money (whatever that might mean), but loss that is unlikely to in fact be compensated. That means that minimizing the risk of injustice requires an assessment of how accurate damages are likely to be, either on the action or on the undertaking. The Federal Court position is that damages are adequate so long as there is some reasonable methodology for assessing those damages [99]. However, the existence of a methodology does not guarantee its accuracy. The usual view is that damages are rarely, if ever, perfect compensation. In a famous passage adopted by the Supreme Court, Lord Shaw remarked that “[t]he restoration by way of compensation is therefore accomplished to a large extent by the exercise of a sound imagination and the practice of the broad axe” (Watson Laidlaw (1914), 31 RPC 104 at 117-18 (HL), cited and applied in Colonial Fastener [1937] SCR 36 at 41) and, on the routine matter of how many of the defendant’s infringing sales would have been made by the plaintiff patentee, both the House of Lords and the Supreme Court of Canada agree that “[t]his is not a matter which in the nature of things can be ascertained with any certainty” (Watson Laidlaw at 112) Similarly, “the whole subject-matter [of the calculation of damages] is one that is not capable of being mathematically ascertained by any exact figure” (Meters Ltd v. Metropolitan Gas Meters Ltd (1911), 28 RPC 157 at 166 (CA)). Similarly, in a recent English case, in which the patent was ultimately held to be invalid, the court forthrightly stated that “[t]here is no point in attempting spurious precision,”in assessing damages on the plaintiff’s undertaking (Laboratoires Servier v. Apotex, [2008] EWHC 2347 (Ch) at [45]). In Cyanamid itself Lord Diplock stated (my emphasis) that
Save in the simplest cases, the decision to grant or to refuse an interlocutory injunction will cause to whichever party is unsuccessful on the application some disadvantages which his ultimate success at the trial may show he ought to have been spared and the disadvantages may be such that the recovery of damages to which he would then be entitled either in the action or under the plaintiff's undertaking would not be sufficient to compensate him fully for all of them.
Further, Crampton J dismissed many losses asserted by AstraZeneca as speculative, which they certainly were. But simply because a loss, such as reduced customer satisfaction, is speculative, does not mean that it will not come to pass. In the nature of speculation, some such losses will likely be realized and some will not. It is sound policy of the courts to require the plaintiff to prove its loss on the balance of probabilities, in order to avoid inflated claims by routinely accepting losses that are difficult to prove; this is the rationale for limitations on recovery of losses for mental distress, or caps on soft tissue damage in automobile accidents. But at least some such losses will be real, even if they cannot be proven. Because the plaintiff bears the burden of proving its loss, and some real losses cannot be adequately proven, damages are usually inferior to an injunction. This is the thrust of the famous article by Calabresi and Melamed, “Property Rules, Liability Rules, and Inalienability: One View of the Cathedral” (1972) 85 Harv. L. Rev. 1089; see also Richard A. Epstein, "Property Rules, Liability Rules, and Inalienability: A Twenty-Five Year Retrospective: A Clear View of The Cathedral: The Dominance of Property Rules," (1997) 106 Yale L.J. 2091 for a particularly clear explanation.
The proper approach under the lower risk of injustice principle, is to recognize that neither party will be fully compensated by its monetary remedy if its rights are denied at the interlocutory stage. The relative difficulty of assessing damages in each case, along with the likely magnitude of such damages, should be considered, weighted by each party’s probability of success on the merits. Lord Diplock said in Cyanamid that, “[i]t is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises.” There is always doubt as to the adequacy of the respective remedies in damages.
Though he felt it was not necessary to do so, Crampton J did consider the balance of convenience, and the difficulty of quantification of Apotex’s loss:
[162] I am satisfied that it is likely to be particularly difficult to quantify the extent of such losses. In contrast to the situation that AstraZeneca faces, where any sale lost to Apotex will be known and quantifiable, it will be more difficult to ascertain what Apotex’s total sales of Apo-Esomeprazole would have been, but for the injunction.
While this is a good point, I suggest that it should not be exaggerated. Crampton J did not discuss the evidence on this point, but it is not clear to me why calculation of the generic’s losses should be so difficult. Canada has seen the launch of many generic products in similar circumstances, and I would have thought that this would allow a basis for assessing typical market share on launch and so on. The English courts have managed such calculations (Lilly Icos Llc & Ors v 8pm Chemists Ltd & Anor [2009] EWHC 1905 (Ch)) and Canadian courts will soon be obliged to do so in claims under section 8 of the PM(NOC) Regulations.
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