No account of profits under a cross undertaking

01/09/25

On 1 September 2025, Michael Tappin KC sitting as a Deputy Judge of the High Court handed down judgment in Sandoz AG v Bayer AG [2025] EWHC 2201 (Pat).  The judgment determines a point of law that may be of interest to commercial practitioners, namely, whether a remedy in the form of an account of profits - as opposed to the typical award for compensatory damages - is ever available under a cross-undertaking in damages in standard terms. The judge held that such a remedy was not available.   

The background was a dispute as to the proper duration of Bayer’s patent in the compound rivaroxaban (sold by Bayer in the form of its best-selling drug Xarelto). Before the court had ruled upon the issue of the patent’s duration, Sandoz, as well as other generic manufacturers, threatened to launch their own generic version of the drug. Bayer obtained an interim injunction temporarily to restrain such launch, on the condition that it gave a cross-undertaking in damages in standard terms. Bayer subsequently lost the patent dispute and an inquiry as to damages was ordered in relation to the cross-undertaking.

In the inquiry, several generic companies sought compensatory damages for loss allegedly caused by the injunction. Sandoz, however, claimed, as its primary remedy, an account of Bayer’s profits occasioned by the injunction (with compensatory damages only in the alternative).

In support of its claim for an account of profits, Sandoz relied on the dictum of Lord Diplock in Hoffmann-La Roche v Secretary of State for Trade and Industry [1975] AC 295 that assessment of damages under a cross-undertakings is to be made on the same basis as that on which damages for breach of contract would be assessed if the undertakings had been a contract between the injunctor and the injunctee that the injunctor would not prevent the injunctee from doing that which they were restrained from doing by the terms of the Injunction.  It further relied upon the principle established by the House of Lords in Attorney General v Blake [2001] 1 A.C. 268; 2000 that the remedy of an account of profits (i.e. disgorgement of the profits made by the party in breach) may be available for breach of contract in “exceptional circumstances”. It alleged that the circumstances in which Bayer had obtained the patent amounted to such exceptional circumstances

Bayer applied to strike out the claim for disgorgement of its profits. In summary, the judge reasoned (i) a cross-undertaking in damages was to be to construed to determine its legal effect, by reference to its language and purpose;  (ii) both the terms and purpose of the cross undertaking were purely to compensate for any potential loss to the injuctee and (iii) in light, in particular, of the judgments of the Court of Appeal in SmithKline Beecham v Apotex [2006] EWCA Civ 658 and Abbey Forwarding v Hone [2014] EWCA Civ 711 and of Zacaroli J (as he then was) in Dr Reddy’s Laboratories v Warner-Lambert [2021] EWHC 2182 (Ch), it was clear that the application of contractual principles of assessment by analogy under Hoffmann-La Roche did not justify operating as though were in fact an actual contract between the applicant and the respondent.  Accordingly, the account of profits claim was bound to fail and Bayer’s application was successful.

A copy of the judgment is here.