American Cyanamid Co. v. Ethicon Ltd

A company with a patent for absorbable surgical stitches asked for an interim injunction (a temporary court order that lasts until the trial) against a rival. Two courts below had decided the patent question on affidavits alone. The House of Lords held that a court need not judge the likely winner at this stage.

Quick Revision

Read the full judgment: BAILII

Parties

American Cyanamid (Cyanamid) — appellant in the House of Lords; an American company. It was the registered proprietor of the patent and the plaintiff in the action.

Ethicon Limited (Ethicon) — respondent; a subsidiary of another American company. It was the dominant supplier of catgut sutures in the United Kingdom, with 80 per cent of the market. It was the defendant.

Procedural History

1. 5 March 1973. Cyanamid started a quia timet action (an action to stop a threatened wrong) against Ethicon. It sought an injunction against the threatened infringement. On the same day it gave notice of motion for an interlocutory injunction (Lord Diplock's speech).
2. Hearing before Graham J. Both sides filed voluminous affidavits and exhibits. The motion hearing lasted three days (Lord Diplock's speech).
3. 30 July 1973. Graham J. granted the interlocutory injunction. It was granted on Cyanamid's usual undertaking in damages (Lord Diplock's speech).
4. Court of Appeal. The hearing there took eight days. On 5 February 1974 the Court of Appeal allowed Ethicon's appeal and discharged the judge's order (Lord Diplock's speech).
5. House of Lords. Leave to appeal was granted. The hearing was estimated at twelve days, with leave to be sought to add more affidavit evidence (Lord Diplock's speech).
6. 5 February 1975. The House of Lords gave judgment. Lord Diplock gave the leading speech. The other four Law Lords agreed (Lord Diplock's speech; separate speeches of the other four Lords).

Facts

1. The appeal concerned a patent for absorbable surgical sutures. They are made of filaments of a chain polymer called a polyhydroxyacetic ester (PHAE). Such sutures disintegrate and are absorbed by the human body once they have served their purpose (Lord Diplock's speech).
2. Cyanamid, an American company, was the registered proprietor of the patent. Its priority date in the United Kingdom was 2 October 1964 (Lord Diplock's speech).
3. At that date the absorbable sutures in use were of natural origin. They were made from animal tissue known as catgut. Ethicon was the dominant supplier of catgut sutures in the U.K. (Lord Diplock's speech).
4. Neither PHAE nor the method of making it into filaments was new at the priority date. Two earlier U.S. patents, in 1953 (Lowe) and 1954 (Higgins), covered making filaments from PHAE. The invention claimed was a new use for a known substance (Lord Diplock's speech).
5. Cyanamid introduced its patented product in 1970. It is a homopolymer. All units in the chain, except the first and last (the end stabilisers), are glycolide radicals. Glycolide is the radical of glycolic acid, another name for hydroxyacetic acid (Lord Diplock's speech).
6. By 1973 the product had captured about 15 per cent of the U.K. market for absorbable surgical sutures (Lord Diplock's speech).
7. Ethicon supplied 80 per cent of that market. Facing the new competition to catgut, it proposed to introduce its own artificial suture, called XLG (Lord Diplock's speech).
8. XLG is a copolymer. By weight, 90 per cent of its units are glycolide radicals. The other 10 per cent are lactide radicals. These are similar in chemical properties to glycolide radicals but not identical in chemical composition (Lord Diplock's speech).
9. Cyanamid said XLG infringed its patent. The principal claim covers a sterile article for the surgical repair or replacement of living tissue. The article must be readily absorbable by living tissue and made from a polyhydroxyacetic ester. The infringement question depended on the meaning of the three words a polyhydroxyacetic ester (Lord Diplock's speech).
10. Cyanamid's case was that those words were a term of art (a technical term) in polymerisation chemistry. They covered a homopolymer and also a copolymer with up to 15 per cent lactide units. It said the body of the patent showed the wider meaning was intended (Lord Diplock's speech).
11. XLG was not yet on the market. Ethicon had no business that an injunction would stop. No factories would close and no workers would lose their jobs (Lord Diplock's speech).
12. Ethicon held a dominant position and followed an aggressive sales policy. Cyanamid was building a growing market in PHAE sutures that competed with Ethicon's catgut sutures (Lord Diplock's speech).
13. The trial might be two or three years away, and longer if there was an appeal. The patent was due to expire in 1980 (Lord Diplock's speech).

Issues Raised

1. Is there a rule of practice that bars an interim injunction unless the applicant first shows a case on the balance of probabilities? The rule is said to be so well established that it is a rule of law. Under it, the defendant's acts must be shown to violate the applicant's legal rights.
2. Is an interlocutory injunction in a patent infringement action governed by the same principles as in other actions?
3. What principles should govern the grant of an interlocutory injunction where the facts are disputed?
4. On those principles, did Graham J. rightly grant the injunction, and was the Court of Appeal right to discharge it?

Arguments Contended

The speeches do not set out counsel's submissions on the interlocutory point. They record only the parties' contentions on the patent itself and the reasoning of the courts below.

For the appellant (Cyanamid):

• XLG infringes the patent. The words a polyhydroxyacetic ester were a term of art (a technical term) in polymerisation chemistry when the patent was published.
• The words cover a homopolymer of glycolide units and also a copolymer with up to 15 per cent lactide units.
• The body of the patent made it clear that the claim used the words in this wider meaning.

For the respondent (Ethicon):

• The words a polyhydroxyacetic ester have the narrower meaning only. They are limited to a homopolymer in which all units except the end stabilisers are glycolide radicals.
• In the alternative, if the claim is read widely, the patent is invalid. The grounds are inutility, insufficiency, unfair basis and false suggestion. Lord Diplock calls these the opposite side of the argument for the narrower reading. They say a wide claim takes in copolymers that will not have the described characteristics as sutures.
• The patent is also invalid for obviousness.

Court's Reasoning

The judgment has no numbered paragraphs. Lord Diplock gave the reasoned speech. The other four Law Lords each agreed with it in a short separate speech.

Lord Diplock

1. Noted: The appeal concerned the words a polyhydroxyacetic ester in the principal claim. That decides infringement (Lord Diplock's speech).
2. Noted: Graham J. and the Court of Appeal felt bound by authority. They first asked whether the whole affidavit evidence showed a prima facie case of infringement. Russell L.J. said that with no prima facie case on the essential point, that is the end of any claim to interlocutory relief (Lord Diplock's speech).
3. Noted: Russell L.J. was not satisfied on the present evidence that the claim covered sutures made from a copolymer with up to 15 per cent lactide. He therefore held that no prima facie case of infringement was established (Lord Diplock's speech).
4. Noted: In effect the Court of Appeal was trying the infringement issue on conflicting affidavits. There was no oral evidence or cross-examination. It did not reach validity or the balance of convenience (Lord Diplock's speech).
5. Noted: Graham J. used the same approach but reached the opposite result on the same evidence. He found a strong prima facie case of infringement. He held that none of Ethicon's grounds of invalidity was likely to succeed. He then decided the balance of convenience favoured keeping the status quo until trial (Lord Diplock's speech).
6. Noted: An interlocutory injunction is both temporary and discretionary. It would be most exceptional to give leave to appeal on where the balance of convenience lay. Here the Court of Appeal never reached that question. It thought a rule of practice, so well established as to be a rule of law, barred an interim injunction here. The applicant had to prove, on the balance of probabilities, that the defendant's acts would violate its legal rights. Leave was granted to test that supposed rule (Lord Diplock's speech).
7. Held: Patent cases are not special. The old reluctance to enforce a monopoly the defendant means to challenge is obsolete.
   • Historically an interlocutory injunction was refused if the defendant said he would attack a patent that was not already well established.
   • Relics of this appear in Scrutton L.J.'s judgment in Smith v. Grigg in 1924.
   • Three modern safeguards exist. Expert examiners examine the specification. Others may oppose the grant. An appeal lies to the Patent Appeal Tribunal (a patent judge of the High Court). Together they make the grant of a patent "a good prima facie reason, in the true sense of that term" to suppose it valid.
   • Interlocutory injunctions in patent infringement actions are governed by the same principles as in other actions.
   (Lord Diplock's speech)
8. Noted: On contested facts the decision is taken when the existence of the right, its violation, or both is uncertain. The uncertainty lasts until final judgment. The interlocutory injunction arose to lessen the risk of injustice to the plaintiff in that period. Since the middle of the nineteenth century it has been subject to the plaintiff's undertaking as to damages (Lord Diplock's speech).
9. Noted: The object of the injunction is to protect the plaintiff against injury for which damages at trial could not adequately compensate him. That need must be weighed against the defendant's need to be protected from injury, for which the plaintiff's undertaking could not adequately compensate him. The court must weigh one need against the other and decide where the balance of convenience lies (Lord Diplock's speech).
10. Why: Where legal rights depend on disputed facts, the evidence at the hearing is incomplete. It comes on affidavit and has not been tested by cross-examination. A technical rule would defeat the purpose of the discretion. It would bar relief if the court put the plaintiff's chances at 50 per cent or less. It would allow relief if the court put them above 50 per cent (Lord Diplock's speech).
11. Noted: The idea that the court must hold a preliminary trial on different evidence is of comparatively recent origin. Earlier cases spoke of a probability that the plaintiff is entitled to relief and a strong prima facie case. Other cases used a much lighter test, such as certainly a case to be tried. That lighter test matched what judges generally treated as enough to consider the balance of convenience. This was so until Lord Diplock joined the House (Lord Diplock's speech).
12. Noted: An attempt was made to reconcile these approaches. The plaintiff would need a probability or strong prima facie case as to his right. He would need only an arguable case as to the defendant's violation of it. The Court of Appeal rejected that distinction in Hubbard v. Vosper, where copyright was undisputed but an injunction was refused despite an apparently weak defence. That court expressly criticised any rules limiting the flexibility of the remedy (Lord Diplock's speech).
13. Noted: Graham J. and the Court of Appeal read Hubbard v. Vosper as leaving intact the supposed rule. On that rule the court could not consider the balance of convenience unless the plaintiff would win a permanent injunction on the same evidence at trial (Lord Diplock's speech).
14. Held: The House declared that "there is no such rule". Words like a probability, a prima facie case or a strong prima facie case confuse the object of this temporary relief. The court must be satisfied only that the claim is not frivolous or vexatious, that is, that there is a serious question to be tried (Lord Diplock's speech).
15. Held: "It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit". The court must also not decide difficult questions of law that need detailed argument and mature consideration. These are for the trial (Lord Diplock's speech).
16. Why: One reason for the undertaking as to damages was that it helped the court to abstain from any opinion on the merits until the hearing (Wakefield v. Duke of Buccleugh) (Lord Diplock's speech).
17. Held: The court should go on to the balance of convenience unless the material fails to show any real prospect of success. The prospect is that of the plaintiff succeeding in his claim for a permanent injunction at trial (Lord Diplock's speech).
18. Held: First question: would the plaintiff be adequately compensated by damages, if he wins at trial, for the loss from the defendant's conduct between application and trial?
    • If damages at common law would be adequate and the defendant could pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appears.
    • If damages would not be adequate, the court asks a second question. On the opposite assumption that the defendant wins at trial, would the plaintiff's undertaking adequately compensate him for being prevented from acting in the meantime?
    • If it would, and the plaintiff could pay, there is no reason on this ground to refuse the injunction.
    (Lord Diplock's speech)
19. Held: The balance of convenience arises where there is doubt about the adequacy of the damages remedy for either party or both. It would be unwise to list every matter to be considered or to say what weight each carries. These vary from case to case (Lord Diplock's speech).
20. Held: Where other factors appear to be evenly balanced, it is "a counsel of prudence to take such measures as are calculated to preserve the status quo". Stopping a defendant from doing something new to him only postpones his start if he wins. Interrupting an established enterprise causes far greater inconvenience (Lord Diplock's speech).
21. Noted: Save in the simplest cases, the loser on the application suffers some disadvantages that damages may not fully cover. The extent to which each side's disadvantages could not be compensated in damages is always a significant factor (Lord Diplock's speech).
22. Held: If those disadvantages that damages cannot cover are not widely different, the court may consider the relative strength of each party's case as shown by the affidavits. It may do so only where it is apparent, on facts with no credible dispute, that one party's case is disproportionately stronger than the other's. The court may not embark on anything resembling a trial on conflicting affidavits to measure either party's case (Lord Diplock's speech).
23. Noted: Other special factors may arise in individual cases. The present appeal is one example (Lord Diplock's speech).
24. Held: On the facts, the affidavits show serious questions to be tried. Graham J. and the Court of Appeal had already tried infringement on the affidavits and disagreed. Graham J. had also tried invalidity and found Ethicon's objections unlikely to succeed. So both had to consider the balance of convenience (Lord Diplock's speech).
25. Held: Graham J. had unrivalled experience of pharmaceutical patents as Patent Judge. An appellate court should hesitate to overrule his discretion unless satisfied that he went wrong in law. He properly took these factors into account (Lord Diplock's speech):
    • XLG was not yet on the market, so no business, factory or job would be stopped.
    • Ethicon held a dominant position and followed an aggressive sales policy.
    • Cyanamid was building a growing PHAE market. If Ethicon entered the market before trial, which might be two or three years away, Cyanamid would lose the chance to grow its share. That share would have come from an uninterrupted monopoly until the patent expired in 1980.
    • New pharmaceutical products used only by doctors or on prescription take a long time to become established. Much of the benefit of a patent monopoly comes from that chance, and it continues after the patent expires.
26. Noted: Graham J. also gave importance to a special factor. Once doctors and patients had got used to XLG before trial, it might be commercially impracticable for Cyanamid to seek a permanent injunction at trial. That would damage its goodwill in this specialised market and the sale of its other pharmaceutical products (Lord Diplock's speech).
27. Held: Lord Diplock saw no ground to interfere with Graham J.'s assessment of the balance of convenience or his discretion. The serious questions to be tried rest on incomplete, conflicting and untested evidence. Giving an opinion on either side's prospects now would embarrass the trial judge. That gives an additional reason not to follow the course both courts thought they had to follow, of assessing the existing evidence in detail (Lord Diplock's speech).
28. Held: He would allow the appeal and restore Graham J.'s order (Lord Diplock's speech).

Viscount Dilhorne

1. Held: He agreed with Lord Diplock's speech. The appeal should be allowed and Graham J.'s order restored (Viscount Dilhorne's speech).

Lord Cross of Chelsea

1. Held: For the reasons in Lord Diplock's speech, which he had read in draft, he would allow the appeal (Lord Cross of Chelsea's speech).

Lord Salmon

1. Held: He agreed with Lord Diplock's opinion and, for his reasons, would allow the appeal and restore Graham J.'s order (Lord Salmon's speech).

Lord Edmund-Davies

1. Held: For Lord Diplock's reasons he would also allow the appeal (Lord Edmund-Davies's speech).

Authorities

• Smith v. Grigg, Limited [1924] 1 K.B. 655. Scrutton L.J.'s judgment showed relics of the old reluctance to enforce a challenged patent. Atkin L.J. at p. 659 asked for a strong prima facie case. Cited as an example of the stricter approach (Lord Diplock's speech).
• Preston v. Luck 27 Ch.D. 497. Cotton L.J. at p. 506 spoke of a probability that the plaintiff is entitled to relief. Cited as an example of the stricter approach (Lord Diplock's speech).
• Jones v. Pacaya Rubber and Produce Company, Limited [1911] 1 KB 445. Buckley L.J. at p. 457 asked only for certainly a case to be tried. Cited as the lighter test that matched what judges generally treated as enough (Lord Diplock's speech).
• Donmar Productions Ltd. v. Bart [1967] 1 W.L.R. 740, Ungoed Thomas J. at p. 742. Cited as an attempt to split the tests between the right and its violation (Lord Diplock's speech).
• Harmon Pictures Ltd. v. Osborne [1967] 1 W.L.R. 723, Goff J. at p. 738. Cited as the same attempt to split the tests (Lord Diplock's speech).
• Hubbard v. Vosper [1972] 2 Q.B. 84. Rejected the split. It refused an injunction despite undisputed copyright. It criticised rules that limit the flexibility of the remedy. The lower courts wrongly took it to leave the supposed rule intact (Lord Diplock's speech).
• Wakefield v. Duke of Buccleugh [1865] 12 L.T. n.s. 628 at 629. Cited for the reason behind the undertaking as to damages: it helps the court abstain from opinions on the merits until the hearing (Lord Diplock's speech).

Judgement

1. The appeal is allowed (Lord Diplock, Viscount Dilhorne, Lord Cross of Chelsea, Lord Salmon and Lord Edmund-Davies).
2. The order of Graham J. is restored. It restrained Ethicon from infringing the patent until the trial or further order (Lord Diplock's speech).
3. The reported judgment does not state any order as to costs.

Legal Principle / Ratio

The court does not need a prima facie case, a probability or a strong prima facie case. It needs only to be satisfied that the claim is not frivolous or vexatious, so that there is a serious question to be tried. It then asks whether damages would be adequate for each side and, if they are doubtful, where the balance of convenience lies. The key holding: "there is no such rule."

Critical Analysis

Analysis based on the judgment text.

• The speech gives no list of factors for the balance of convenience. It says the factors vary from case to case and that the weight of each cannot be stated.
• The relative strength of each case counts only in a narrow situation. The disadvantages that damages cannot cover must be about equal, and the facts must have no credible dispute. The speech does not say how a court decides whether the facts are undisputed.
• The speech explains why the Court of Appeal's approach was wrong. It does not deal with a case where the interim ruling will in practice end the dispute.
• The speech is decided on patent facts. It says the same principles govern injunctions in other actions.

Significance

• The case removed the need to show a prima facie case, on the balance of probabilities, before the court considers an interim injunction.
• It gave courts one structured test: serious question, adequacy of damages, balance of convenience, then the status quo.
• It told judges not to hold a preliminary trial on affidavit evidence.

Exam-Important Points

• Rule first: the applicant needs only a serious question to be tried. A strong prima facie case is not required.
• Steps in order: serious question; adequacy of damages for the plaintiff; adequacy of the plaintiff's undertaking for the defendant; balance of convenience; status quo.
• Trap: if damages would be adequate and the defendant can pay, normally no injunction, however strong the claim looks.
• Trap: relative strength of the cases is a tie-breaker only. It applies where the disadvantages are about equal and the evidence is undisputed.
• Patent cases are governed by the same principles as other cases.
• The House of Lords restored Graham J.'s injunction. The Court of Appeal had asked the wrong question.

Prepared from the full text of the judgment. The judgment has no numbered paragraphs, so passages are cited by speech.