(...) Mr Justice Floyd:
1.Mölnlycke Health Care AB, a Swedish company which I will refer to as
"MAB", and its sister company Mölnlycke Health Care Limited, a British
company which I will refer to as "MUK" bring this action for infringement
of European Patent (UK) No 0 855 921 against BSN medical Limited
and BSN medical GmbH to whom I shall refer together as ''BSN". The
proprietor of the Patent is MAB. MUK has been granted an exclusive
licence under it for the United Kingdom.
2.There are two applications before me. The first is an application by BSN
that these proceedings be stayed until the jurisdiction of the Stockholm
District Court in co-pending declaratory proceedings relating to the patent
is established. The second is an application by MAB and MUK for an
interim injunction to restrain the further marketing by BSN of its allegedly
infringing Cutimed Siltec products until judgment or further order.
The application for a stay
3.The application for a stay of proceedings is made on the basis of Article
27 of Regulation (EC) No. 44/2001 on Jurisdiction and the Recognition
and Enforcement of Judgments in Civil and Commercial Matters ("the
Judgments Regulation''). That Article provides:
"1. Where proceedings involving the same cause of action and between
the same parties are brought in the courts of different Member States,
any court other than the court first seised shall of its own motion stay its
proceedings until such time as the jurisdiction of the court first seised is
established.
2. Where the jurisdiction of the court first seised is established, any court
other than the court first seised shall decline jurisdiction in favour of that
court."
Factual Background to the application for a stay
4.BSN contend that proceedings involving the same cause of action and
between the same parties have been brought in the Stockholm District
Court, as explained below. It is therefore the Stockholm District Court
which is first seised, although there is an outstanding challenge by MAB
to the jurisdiction of that Court which is currently being considered by the
Swedish judge. They therefore maintain that, under Article 27(1) of the
Judgments Regulation, the English Court must stay its proceedings until
the jurisdiction of the Stockholm District Court is established.
5.MAB and MUK contend that the stay should be refused because:
i) The parties are not same: MUK is a party to these proceedings but not
the Swedish proceedings;
ii) The causes of action are different – in Sweden the issue is whether
or not the hypothetical products described in a Product and Process
Description infringe the Patent, whereas here the issue is whether or not
the Cutimed Siitec products that are on the market in the UK infringe the
Patent.
6.The Swedish proceedings were filed in the Stockholm District Court on
27 March 2008 by both the BSN defendants as well as the BSN companies
incorporated in Belgium, France, Italy and Spain. The defendant is MAB.
The Swedish proceedings were brought in Sweden as the domicile of the
patentee, MAB.
7.By its "Application for Summons", BSN sought declarations in the
Swedish proceedings that the patent in suit did not prevent BSN from
inter alia putting on the market BSN's Cutimed Siltec wound dressings
in the UK. The Siltec Products were described by way of product
descriptions, annexed to the Application which referred to the Cutimed
Siltec products. The product descriptions made some fairly general
statements about the products. For example the product descriptions
alleged that the products contained an "elastomer", a point hotly disputed
by Mölnlycke in fact, but one which they accept, if correct, would result
in non-infringement. Subsequently, samples of the Siltec Products were
provided to the Stockholm District Court and to MAB.
8.No challenge is made to the validity of the Patent in the Swedish
proceedings or here. The case therefore does not raise issues of exclusive
jurisdiction considered by the Court of Justice in GAT v. LuK C – 4/03;
[2006] FSR 45.
9.In its first submission dated 21 May 2008 in the Swedish proceedings
MAB sought to stay the proceedings on the basis, amongst other things,
that no samples had been provided and the case therefore raised a
hypothetical question. BSN subsequently provided samples of their
products, whilst MAB still contended that the action was theoretical. BSN
responded by pointing out that samples had now been provided and
therefore the action could not be merely theoretical.
10.In its decision dated 19 January 2009, the Stockholm District Court
rejected the request for dismissal. Having recited the arguments of the
parties and noted the fact that samples had been provided, the Court said
this:
"The descriptions of the product and the processes that the claims
concern presented by BSN are, according to the District Court, sufficiently
defined in order to try BSN's claims. Also the other prerequisites in order
to try BSN's declaratory action are at hand".
11.Accordingly the District Court dismissed MAB's request for dismissal.
There has been no appeal from that dismissal.
12.MAB subsequently submitted a Statement of Defence on 16 March
2009 asserting that the Siltec Products or any other products described in
BSN's Product and Process Descriptions infringed the Patent and relying
on the results of a laboratory analysis of the Siltec Products (the samples
provided by BSN) as showing the presence of one of the integers of the
claim.
13.On 15 July MAB lodged further procedural objections. One of the
grounds raised was that, as the product and method as described in the
product and process description did not infringe MAB's patent, BSN did
not have a legitimate interest in a declaratory action. The point was put
in this way to emphasise MAB's point that it accepted for example that
if the product had an elastomeric layer, as the description said it did, it
would not infringe. A second ground was a challenge, made for the first
time, to the jurisdiction of the Swedish Court to grant a declaration of
non-infringement in respect of the non-Swedish parts of the patent.
14.The Swedish Court has yet to rule on Mölnlycke's latest challenge,
although a decision is expected before Christmas.
The law on Article 27
15.The Regulation envisages a two stage process. In the period before the
jurisdiction of the first court seised is established, any court subsequently
seised must stay its proceedings. Thereafter, when the court first seised
has established jurisdiction, the court subsequently seised must decline
jurisdiction. In view of the challenge to the Swedish court's jurisdiction,
BSN accept that I can go no further than stage 1.
16.In Owners of Cargo Lately Laden on Board The Ship Tatry v Owners
of The Ship Maciej Rataj ("The Tatry") Case C – 406/92 [1999] QB 515
it was made clear that for Article 27 to operate there must be identity of
parties, and identity of cause of action.
17.Cause of action is to be understood as "the facts and the rule of law
relied on as the basis of the action": see The Tatry.
18.In Kolden Holdings v Rodette Commerce [2008] EWCA Civ 10, the
Court of Appeal reviewed the ECJ cases on the question of what was
meant by identity of parties. Having considered what was said by the
Court of Justice in The Tatry, and in Drouot Assurances SA v Consolidated
Metallurgical industries Case C- 351/96; [1998] ECR I-3075, Lawrence
Collins LJ (with whom the other members of the Court of Appeal agreed)
said this at [85]:
"The starting point is that these general propositions can be derived
from The Tatry and Drouot. First, the object of article 27 is to prevent
parallel proceedings in different member states and to avoid conflicts
between decisions and irreconcilable judgements: The Tatry, para 32;
Drouot, para 17. Second, the term between "the same parties" has
an independent or autonomous meaning: The Tatry, para 47. Third, in
considering whether two entities are the "same party" for the purposes
of applying the regulation, the court looks to the substance, and not the
form: The Tatry. Fourth, although the parties must be "identical" (the
The Tatry, para 33, Drouot, para 18) this identity is not destroyed by
the mere fact of there being separate legal entities involved: in The
Tatry in the English proceedings the party was the sister-ship, and in
the Dutch proceedings was the shipowner: in Drouot the barge owner
and the hull insurer were held to be capable of being the "same parties".
Fifth, whether they are identical for this purpose may depend on whether
there is such a degree of identity between the interests of the entities
that a judgement given against one of them would have the force of res
judicata as against the other (Drouot, para 19). Sixth, it will also depend
on whether the interests of the entities are identical and indissociable,
and it is for the national court to ascertain whether this is in fact the
case; Drouot, para 23. In the context of a subrogated claim the court also
emphasised that the insured would not be in a position to influence the
proceedings: Drouot, para 19."
19.In Kolden Holdings itself the original claimants had assigned the
contracts which were the subject matters of the action to Kolden. Collins
LJ noted at [86] that the effect of the assignment was that the assignee
could sue the other party without joining the assignor, and the assignor
would have no further interest in the action. That, of course, is a point
of distinction in comparison with the grant by a patentee of an exclusive
licence: the exclusive licensee cannot sue unless the patentee is joined,
and the patentee normally retains some interest in the action after grant
of an exclusive licence.
20.In determining whether a decision against one party would be res
judicata against the other, Collins LJ had regard to the English law of
privity of interest as explained by Megarry LJ in Gleeson v Wippell [1977]
1 WLR 510: he held at [89] that the requisite degree of privity was
present as between assignor and assignee. In determining whether the
interests of the entities were identical and indissociable, Collins LJ held at
[91] that in relation to each contract:
"there is only one right, and there are successive owners of that one
right. It follows that the interests of the assignor and assignee are
indissociable in the sense of indivisible. It does not matter that an
assignment only passes the benefit and not the burden of a contract,
nor that the assignor remains primarily liable to the obligor for the non-
performance of its outstanding contractual obligations. The interest of the
assignor and assignee in relation to the claim being advanced is identical".
21.In Berkeley Administration v McClelland [1995] ILPr 201 Berkeley
claimed against a number of ex-employees and an English company,
Maccorp GB set up by some of them. In the course of the action an order
was made against the defendants relating to property in France ("the
property order"). In French proceedings, Berkeley applied to restrain
Maccorp France (a French incorporated wholly owned subsidiary of
Maccorp GB) from acquiring any interest in the French property. Maccorp
GB and Maccorp France responded by bringing proceedings in France for
unfair competition. The French court dismissed all the claims.
22.Dillon LJ regarded the French and English cases as being between the
same parties. He held that Maccorp France, though not incorporated until
after the property order, was nevertheless bound by it. The issue was one
under Article 27(3) about the ability not to recognise a judgment if it is
irreconcilable. At paragraphs 29 and 30 he said this:
"[29] Because the property order bound Maccorp France as I have
indicated, I would regard the French proceedings brought
by Maccorp GB and Maccorp France and this action as being for all
materia] purposes between the same parties. On the one hand there
are the plaintiffs; Auguste Thouard is concerned with an irrelevant issue
and can be disregarded. On the other hand there are Maccorp GB and
Maccorp France; the other defendants in the English proceedings can be
disregarded, especially as the sixth and seventh defendants were not
concerned with France at all.
[30] In the context of this case I would regard it as wholly unreal to
separate Maccorp France, the wholly-owned subsidiary acquired by
Maccorp GB, as being a wholly separate company with the result that the
parties are different because Maccorp France has never been formally a
party to this action."
23.Finally in Mecklermedia Corporation v DC Congress GmbH, [1998]
Ch 40, Mecklermedia were attempting to sue DC Congress, a German
company, in the English court for the tort of passing off by using the
words "Internet World". DC Congress applied to set aside the writ on the
grounds that the German court was first seised of an action in which the
defendant claimed that an arm's length licensee of Mecklermedia was
infringing its trade mark for Internet World. The case obviously faced
more fundamental difficulties than the present. Jacob J (as he then was)
rejected the contention that Mecklermedia and its German licensee were
the "same parties". He said:
"I can understand that a wholly-owned subsidiary might be so regarded
(cf Berkeley Administration v McClelland [1995] ILPr 201, 211, where
Dillon LJ said, in the context of Article 21, that it was "wholly unreal"
to separate a wholly owned subsidiary from its parent). But a mere
licensee, a wholly different enterprise which happens to be working with
the plaintiff, is simply not the same party."
The same parties?
24.So far as MAB and MUK's first point is concerned, it is correct that the
Swedish proceedings do not involve MUK. MUK was granted an exclusive
licence on the day that the present proceedings were commenced. There
is no suggestion, however, that they are not properly a party to the
action. Section 67 of the Patents Act 1977 provides that
"(1) Subject to the provisions of this section, the holder of an exclusive
licence under a patent shall have the same right as the proprietor of the
patent to bring proceedings in respect of any infringement committed
after the date of the licence; and references to the proprietor of the
patent in the provisions of this Act relating to infringement shall be
construed accordingly.
(2) In awarding damages or granting any other relief in any such
proceedings the court... shall take into consideration any loss suffered
or likely to be suffered by the exclusive licensee as such as a result of
the infringement, or, as the case may be, the profits derived from the
infringement, so far as it constitutes an infringement of the rights of the
exclusive licensee as such.
(3) In any proceedings taken by an exclusive licensee by virtue of
this section, the proprietor of the patent shall be made a party to the
proceedings, but if made a defendant... shall not be liable for any costs...
unless he enters an appearance."
25.It is not uncommon for an exclusive licensee to be joined as a party
to an infringement action where the business in question is conducted
by the exclusive licensee in this country, but the patentee is a foreign
entity. The joinder of such a licensee may have an impact on the quantum
of damages recocerable as compared with that recoverable if only the
patentee was joined.
26.BSN submit that it is unreal to suggest that there is not identity of
parties, relying on what Dillon LJ said in Berkeley Administration. They
say that MUK has the same interest in alleging infringement as MAB.
MAB and MUK are both subsidiaries of the same holding company, and
the artificiality of the position is emphasised by the late creation of the
exclusive licence. In these circumstances it is artificial to treat MUK as
separate from MAB.
27.In my judgment, BSN is not correct in its assertion that the actions
involve the same parties. I start by explaining my reasons by reference to
some of the factors identified by Collins LJ in Kolden.
28.Firstly, I should approach the question with the purpose of Article 27
in mind, that is to prevent parallel proceedings in different member states
and to avoid conflicts between decisions and irreconcilable judgements.
That requires a flexible approach to the meaning of "same parties". In the
present case, if I treat MUK as a separate company there will be separate
infringement proceedings here and in Sweden over the same national
designation of the same European patent. On the other hand the flexibility
should not extend to preventing a party with a different, or indeed a non-
identical, right and interest from asserting a claim.
29.Secondly, although it is right to acknowledge that MUK is a separate
legal entity from MAB, that fact alone is not sufficient to make it a
separate party for these purposes: Kolden at [85]. Similarly I should
approach the question as one of substance and not of form.
30.Thirdly, a judgment against MAB in Sweden would, as it seems to me,
probably bind MUK, at least on the issue of liability. There is a sufficient
degree of privity between MAB and MUK for a finding in Sweden as
between BSN and MAB that the Cutimed Siltec products do not infringe
MAB's European patent UK to be regarded as binding on MUK. It seems to
me to be wholly correct, to use Megarry VC's phrase in Gleeson v Wippell,
to say that it would be "just to hold that the decision to which one was
party should be binding in proceedings to which the other is party". The
case, in my judgment, is probably on the Berkeley Administration side
of the line (wholly owned subsidiary) rather than the Mecklermedia side
(arm's length commercial licensee). But it is not necessary for me to
reach a final conclusion on that issue.
31.The most difficult question is whether, in the context of the present
case, the interests of the parties in the two actions are identical and
indissociable. At one, rather high level the interests of MAB in Sweden and
MAB and MUK together in the UK are identical: an interest in preventing
the infringement of MAB's patent. But Mr Purvis QC submits that MUK
have, by the acquisition of the exclusive licence, acquired the right to
protect its UK business from damage. There is as yet no counterclaim for
infringement in Sweden, and, he submits, it may not be possible under
the Convention for an additional party to counterclaim there, particularly
as Article 6(3) only allows for jurisdiction to be founded for a counterclaim
"arising from the same contract or facts on which the original claim was
based". So, if MUK is treated as the same party as MAB, MUK may be
deprived of a right to damages which is distinct from any possessed by
MAB.
32.I have come, somewhat reluctantly, to the conclusion that I must
accept those submissions. I think it would be wrong to treat MUK as
the same party when the effect may be to deprive it of the benefit of its
exclusive licence in this way. This is not a case like Kolden where a party
has acquired the whole of the benefit of a contract, leaving the assignor
with nothing – MUK has been granted a specific right which is additional
to the right which MAB continues to hold. Moreover it is not possible for
MUK to assert its right independently of MAB, because of Section 67(3)
of the Act. To put it another way, the interest of MUK which is in play in
the English action is different to any interest of MAB which is in play in
Sweden. Moreover, even if this were to be an answer to this point, there
is no evidence before me which would justify the assumption that MUK
would be able to launch a counterclaim in Sweden.
33.Mr Watson QC submitted that if I came to that conclusion I would
nevertheless have to stay the case as against MAB. As the patentee is
a necessary party under section 67(3) of the Act, the case could not
proceed. I do not think that is a correct analysis. Firstly, if the parties
are not identical, no question of a mandatory stay arises. Secondly, even
if that were incorrect, the patentee is only required to be present as a
passive party, to ensure that it is bound. A stay of the action would not in
those circumstances affect the ability of MUK to proceed with the action.
34.Accordingly I would refuse the stay on the basis that the parties are
not identical.
Same cause of action
35.It is not therefore necessary for me to consider whether the causes
of action are identical. BSN submit that, in the light of the fact that the
Swedish action is being conducted by reference to samples of the same
products, and the decision of the Swedish Court to proceed on that basis,
it cannot any longer be contended that the actions are different. MAB and
MUK submit that it is clear neither from the application for summons, nor
the judgment of the Swedish court that their objection to the action based
on it being theoretical is unfounded.
36.It is of course true that an action for a declaration of non infringement,
at least in this country can be conducted either by reference to a
description of a product or by reference to the product itself. If a product
is described in purely contentious terms ("a product which does not have
this feature") then a declaration granted in relation to it will not preclude
a subsequent action for infringement. The question in that action will be
whether the product is in fact in accordance with the description, and
accordingly whether it has the feature in question. The value of seeking
declarations in such contentious terms has been questioned in the past.
37.I have come to the provisional view that, at least so far as this
point relates to the basis on which the Swedish case is proceeding,
the necessary identity of causes of action is present, essentially on the
grounds advanced by BSN. For this purpose I ignore MUK, which it seems
to me cannot be said to have the same cause of action as MAB, as it
needs to rely in addition on its exclusive licence. But it seems to me that
it would be wrong, while the Swedish court is still considering the basis on
which the Swedish action goes forward, finally so to decide, particularly as
I have been able to dispose of the application on other grounds.
38.It follows that I dismiss the application for a stay.
Interim injunction
39.It follows from the above that the application for an interim injunction
needs to be considered on normal Cyanamid principles. Had I granted a
stay of this action, it might still have been possible to grant an interim
injunction by virtue of Section 25 of the Civil Jurisdiction and Judgments
Act 1982, but that question does not now arise.
Serious question to be tried
40.BSN contend that there is no serious question to be tried concerning
whether the Cutimed Siltec products infringe the patent.
41.Claim 1 can be broken down as follows
"A wound dressing characterised by
(i) a layer of absorbent foam which includes a pattern of holes
(ii) wherein the holes open out in that side of the foam material that lies
proximal with the wearer's skin when the dressing is worn
(iii) and which is coated with a layer of skin-adhering hydrophobic gel
(iv) wherein the walls of the holes in said foam material are coated with
gel at those end parts of the holes that lie proximal to the wearer's skin
when the dressing is worn."
42.Although there are other features which are in dispute, I have italicised
the phrase on which BSN found their attack for present purposes. BSN
contend that there is no serious question to be tried over whether there
is a layer of skin adhering hydrophobic gel present in the accused BSN
wound dressings. For present purposes they concentrate on the feature
"skin adhering", as whether the material is skin adhesive is one of the
indications that there is a gel and not an elastomer present.
43.BSN submits that the evidence adduced by MAB and MUK does not
adequately address these issues. Their case is that the relevant layer in
their product is a silicone elastomer which provides only minimal skin
adhesion.
44.BSN relies on the evidence of Professor Brook. BSN contends that its
products fail both the skin adhesion test and the steel plate test described
in the patent.
45.MAB and MUK rely on the evidence of Professor Clarson, who gives
evidence that the products which he examined showed some measure of
adhesion, and BSN's own product literature which says that the product
adheres gently to the skin.
46.BSN's argument depends on the court taking a restrictive view
of the proper construction of claim 1. At least on a literal reading of
claim 1, any degree of skin adhesion will do. Numerical limitations on
softness and other attributes of the gel appear only in dependent claims.
However BSN contend that the gel must, on a proper construction, at
least show sufficient adhesiveness to be held in position without additional
assistance.
47.It is well settled that, on an application of this nature, the court
should not attempt to resolve disputed questions of expert testimony
by conducting a mini-trial. On the other hand if the patentee has in fact
failed to adduce any evidence at all on a claim integer, or its evidence
amounts to no more than unsupported assertion, the evidence will not
show a seriously arguable case of infringement.
48.In my judgment MAB and MUK's case clearly crosses the relatively
low threshold required on an application of this nature. Until the court
is equipped with the relevant evidence, it would be dangerous to adopt
BSN's narrow construction of claim 1. Moreover, even on BSN's narrow
construction it is by no means clear that MAB and MUK will fail to
establish infringement. BSN's instructions for use at least arguably
suggest that in some circumstances no additional adhesion is necessary.
Balance of convenience
49.Neither side suggested that the other would not be able to meet an
award of damages. I turn therefore to consider the factors relevant to the
balance of convenience.
Harm to MAB and MUK if injunction refused
50.The Mepilex range of products which MUK sell under the protection
afforded by the patent in suit are supplied to two sectors, the acute care
sector (i.e. hospitals) and to the primary care sector (i.e. to Primary Care
Trusts). In the acute care sector sales to hospitals are made to regional
organisations such as NHS Supply Chain for England and Wales Health
Supplies. These organisations let contracts for supplies every two or three
years. In either sector it is necessary to obtain an NHS Drug Tariff listing.
These products form a very important part of the business of MAB and
MUK in the UK, which is their largest market outside the United States.
51.MAB and MUK say that there are already indications in both sectors
that BSN will seek to undercut their prices. In the primary care sector
the Drug Tariff for September 2009 shows that the Defendants are
offering lower prices for two products: Cutimed Siltec and Cutimed
Siltec L. However Cutimed Siltec B is more expensive in three out of
four size categories. As to the acute sector, MAB and MUK rely on what
is happening in Germany and Italy, where, so they contend, BSN are
competing aggressively on price.
52.MUK contend that this is a case where, if BSN continue to sell their
wound dressing in competition with them, they will need to reduce prices
in order to avoid loss of market share, and if they do so they will not
easily be able to raise them again. This will irreparably damage the
market. They also claim that they will have to cut their sales force.
53.BSN answer this point by saying that they will not use aggressive
price cutting to gain market share. They contend that the products which
they are marketing are technically superior to those of MAB. The prices
at which they originally sought to negotiate with the Prescription Pricing
Department of the NHS ("PPD") were generally equal to or higher than
the prices of the equivalent MAB products. However BSN were forced
to lower their prices by a small amount in order to persuade the PPD to
accept the products onto the Drug Tariff Listing.
54.Moreover BSN contend that their pricing strategy is not out of line
with that of MAB and MUK's other main competitors. These are Smith
& Nephew and Brightwake/Advancis Medical, who are selling competing
products, but against whom MAB and MUK have not sought interim relief.
However, for the products in question it appears that Smith & Nephew
pitch their prices higher than those of MUK, except where the products
do not make use of soft silicone technology, where they are cheaper.
Brightwake have been able to generate only very small sales (less than
£500 worth since launch).
55.Mr Watson reminded me forcefully that this is not the case of a market
for a patented prescription drug where experience shows that at least a
second generic competitor can precipitate a sudden and dramatic price
fall. The market there is dominated by price: all the competing products
are otherwise exactly the same. The market in the present case is one
where, although price may be a factor, products are sold on quality as
well. He drew attention to the fact that MUK are already advertising
increases in absorbency. He submits therefore that the court should not
be predisposed to find that the introduction of the Cutimed Siltec products
will cause the downward price spiral that MAB and MUK predict.
56.Mr Watson points to a number of factors as indicating that there will
not be any such downward spiral in the present case. Firstly he points
to the fact that BSN had wanted to have their product listed at a higher
Drug Tariff price than MAB and MUK's. Whilst the refusal of the PPD to
accept the higher prices is some indication that customers do not view the
products as technically superior, I think this is some indication that BSN
are not approaching this market as aggressive price cutters.
57.Secondly Mr Watson points to the fact that, despite several months of
sales, there is no indication that MAB and MUK are in fact having to cut
their prices in the UK. He says that this is an indication that they too do
not consider the Cutimed Siltec products to be technically superior, and
are preparing to meet the competition on technical rather than on price
grounds.
58.Thirdly he points to the fact that companies do not readily let go of
their Drug Tariff price listing. If other measures are available to meet the
competition, these will be deployed first.
59.Fourthly, he points to the fact there is no evidence that Mölnlycke have
had to cut prices in Germany. In fact the evidence in Germany, where the
product has been on the market for some considerable time, is that the
Lauer-Taxe, the German drug tariff, lists 10x10 Cutimed at 6.49 Euros
for the non-hospital market against a 10x12 Mepilex product at 6.20
Euros. Independent IMS data says that BSN's average selling price for
the hospital market in the second quarter of 2009 for the 10x10 Cutimed
Siltec product was 2.90 Euros: the equivalent Mepilex price was 2.86
Euros. Mr McCraith's answer to this is that BSN offer larger discounts to
wholesalers than Mölnlycke from the Lauer-Taxe price. He also says that
the IMS data are based on only 10% of hospitals. They are, however, the
only concrete data I have available and they do not show that BSN are
aggressive price cutters, or indeed price cutters at all.
60.In the Italian hospital market the prices are 5.50 Euros for BSN and
5.08 Euros for Mölnlycke respectively. Mr McCraith also relays evidence
about tendering in Italy, which shows significant undercutting by BSN.
Mr Watson says that this may have been tendering for foam products
generally. But I do not think that is a complete answer. Absent the
competition from BSN, Mölnlycke might have been the only silicone foam
product and secured the contract. But I agree that it is unwise to place
much weight on these two individual instances in the absence of more
detail.
61.On the whole I am not persuaded that this is a case where a significant
downward price spiral is likely. In a market where quality plays an
important role, the degree to which BSN have undercut MAB and MUK's
prices is unlikely to place much pressure on them. The absence of any
evidence of any actual price cutting on the Mölnlycke side in any country
is telling.
Harm to BSN if injunction granted
62.As explained by Ms Helen Phillips in her two witness statements in the
action, BSN's Siltec Products have been marketed in the UK since April
2009 with sales of the products commencing in September 2009. She
contends that withdrawal of the Siltec Products at this stage would have
the following direct consequences:-
oCost of withdrawing and amending existing marketing materials and
communicating product withdrawal.
oDamage to the reputation of BSN with BSN's target customers (tissue
viability nurses, GP practice nurses and district nurses) leading to major
difficulties in persuading them to accept the products after any injunction
is lifted.
oLoss of credibility for BSN as a full-range Advanced Wound Care supplier,
leading to loss of sales of other products in BSN's Advanced Wound Care
range.
oPotential removal of the Siltec Products from the Drug Tariff,
necessitating a re-listing at a later stage at a potentially lower price.
oLoss of opportunity to tender for long-term NHS procurement contracts
in the hospital market, leading to BSN being shut out from this market for
a period of between 9 months and 2 years following trial, regardless of
the result.
oThe waste of time, effort and money expended by BSN to date in
promoting its Siltec Products, given the time delay before which
marketing activities could be resumed.
oPotential reassessment of the viability of BSN's Advanced Wound Care
business in the UK.
63.BSN submit that it will be difficult, if not impossible, to assess which
contracts (both for the Siltec Products and other wound care products)
BSN would have won had they been allowed to remain on the market
pending trial. Equally it will be impossible to assess how the inability to
sell during the period of the injunction impacts on sales once an injunction
is lifted.
64.MAB and MUK answer this case by suggesting that, to the extent it is
not quantifiable, the damage to BSN is exaggerated given that BSN have
only been selling the products in question for a short period. They also
suggest that any loss caused to them by the grant of the injunction is
their own fault. BSN knew about the patent in the UK but chose to launch
here without obtaining clearance.
65.I think that this last point would be a harsh view to take of the position
of BSN. BSN have been struggling in Sweden to obtain a decision of that
court on the non-infringement of the product since March 2008. I have
no doubt that the points taken by MAB in those proceedings are taken
on reputable legal advice, but I equally have no doubt that if MAB had
cooperated with BSN in those proceedings the position could have been
made clear by now. So I approach the case on the basis that BSN will
suffer some harm to their reputation if, having launched the product
supported by a significant marketing effort, it has to withdraw it. It will be
then be left with the problem of re-establishing its credibility when it has
the right to do so after trial, possibly in different market conditions and at
a different price.
Balance
66.Mr Purvis stresses that BSN is a recent entrant to the silicone market,
as compared with MAB and MUK who enjoy an established position. He
says that this is confirmed by the evidence, in which BSN say that one
does not become a "credible" supplier unless one has a range which
includes such a product. The points about loss of reputation have to be
seen in this context.
67.Many of the points relied on by BSN are mere counter-weights to those
relied on by MAB and MUK.
68.On the whole I think this is a case where the balance of convenience
is fairly even. Both sides will suffer some loss which will not be capable
of being restored by an award of damages. For both sides there will be
some continuing loss after trial which will be difficult to quantify. Both
sides have, I think, exaggerated the extent to which they will suffer that
loss. I go on therefore to look at considerations of status quo and delay.
Status Quo and delay
69.It is common ground that the status quo to apply will be that which
pertains immediately before BSN commenced their acts complained of,
unless there has been unreasonable delay. BSN submits that the status
quo strongly favours allowing BSN to remain on the market pending the
trial on the merits. They contend that BSN's marketing activity in the
UK commenced over 8 months ago, with significant sales having been
made since September 2009, and that MAB and MUK's delay since then is
unreasonable.
70.BSN has promoted the Siltec Products at a series of trade exhibitions
attended by the Claimants from April 2009 and a promotional article
featuring the Defendants' Siltec products appeared in the June 2009
issue of Wounds UK Journal, a publication subscribed to by the Claimants,
which edition also featured an article on the Claimants' wound dressings.
71.Mr. McCraith's first statement on behalf of MAB and MUK says this
"The Claimants first became aware that the BSN products were being
made available for purchase in the UK when they were listed in the NHS
Drug Tariff for September 2009. "
72.Mr. McCraith does not deny that he was aware of BSN's activities in
this country but says the fact they were exhibiting in the UK "does not
mean that the products will necessarily be released onto the market".
I think that MAB and MUK must have appreciated that there was a
significant likelihood that BSN were going to expand their existing market
from continental Europe to the UK.
73.Mr Purvis seeks to meet this significant period of delay by saying that
MAB and MUK did not know until September 2009 at what price the BSN
product would be launched, and at least between April and June BSN
were contemplating higher prices. I do not think this is an answer to the
point on delay. A party seeking an interim injunction needs to get on
with the action: it cannot simply stand by during a period of 6 months
during which the product might be launched any day. If he does, he
cannot complain that the court is not prepared to help him by granting
an injunction over the period until a trial which, because of his delay, is
still many months away. There was clear evidence of infringement in April
2009, as there were samples of the product displayed on BSN's stand
and a reasonable inference that they were planning to market here. Why
else would BSN be applying for a declaration in Sweden? So far as prices
are concerned: if it is correct that BSN were cutting prices elsewhere in
Europe why could they not rely on that then as well? There was no reason
why an injunction could not have been applied for then, at a time when
any damage caused to BSN by its grant would be minimal.
74.Moreover it is highly significant that if the action had been started
in April it could have been tried by now or at the latest early next year.
Mr Purvis says that BSN cannot have it both ways: I should assume that
BSN would have applied for a stay. But I should also assume that I would
have refused the stay (as I have), and there is no reason why such an
application could not have been disposed of quickly. If in June of this year
I had refused the stay, there would still have been three months until
BSN's launch. The balance of convenience might then have favoured a
short injunction to enable a speedy trial to come on. It would all have
looked very different.
75.MAB and MUK's approach in the Swedish proceedings is also not
consistent with an urgent need for an interim injunction. Rather than
taking advantage of the fact that BSN were submitting to the jurisdiction
in Sweden, MAB and MUK elected to expend significant effort on
procedural challenges that have delayed the progress of the Swedish
action so that a judgment on the merits has not yet been issued. Their
procedural approach in Sweden is not consistent with an urgent need for
relief either there or here. Their failure even to commence an action in
Germany is equally odd.
76.MAB and MUK say that by the date of their application BSN had
sold only £24,000 worth of product. This is to be compared with the
established position in Mepilex products which had a market share of
some £20 million. But I think to look only at sales is to underestimate the
effect of MAB and MUK's delay.
The considerations under this head lead me to the very clear conclusion
that the injunction should be refused. MAB and MUK have simply
not behaved like parties who need urgent protection against BSN's
competition. The failure to raise any objection to BSN's continuing
marketing activities from April 2009 onwards was unreasonable. The
appropriate status quo to apply is that BSN are now on the market. I
dismiss the application for an injunction. (...)