Virulite LLC v Virulite Distribution Ltd & Anor
2014
QUEEN’S BENCH DIVISION
United Kingdom
CORAM
- THE HONOURABLE MR JUSTICE STUART-SMITH
Areas of Law
- Contract Law
- Civil Procedure
- Commercial Law
- Evidence Law
2014
QUEEN’S BENCH DIVISION
United Kingdom
CORAM
AI Generated Summary
The Claimant, a distributor for a cold sore treatment device, contested the termination of their distribution agreement by the Defendant due to non-payment of a £25,000 fee, arguing that the payment had been deferred until after FDA approval or that the Defendant had waived their right to terminate. The court found that there was a contractual variation deferring the payment, and even if not, the waiver or estoppel principles applied, making the Defendant’s termination invalid. Consequently, the Defendant was held to have repudiated the contract. The Claimant was awarded $1,900,000 in damages.
Judgment
Mr Justice Stuart-Smith:
Introduction
For a number of years the main treatment for cold sores in the United Kingdom, the United States and elsewhere has been by the topical application of creams. Some are available over the counter [“OTC”] while others are available only on prescription [“POM”]. In the United States the dominant market leader is Abreva, which is available OTC.
The Defendant companies [“1072/VDL”] have held and hold the patent and intellectual property rights in a device that provides an alternative means of treatment [“the Device”]. It is known as the Virulite device and is based on the use of infra-red light technology operating at 1072 nanometres: hence the names of the Defendant companies. When the Device is held over a cold sore, light at the required frequency is emitted which has healing properties without the need to apply visible unguents.
The Claimant [“LLC”] is a Nevada-based company established for the purpose of distributing the Device. LLC and 1072/VDL entered into successive agreements for the distribution of the Device in the United States and elsewhere. The last agreement, which is the subject of this action, was executed on 4 July 2006 [“the DLA”]. It was terminated by 1072/VDL by notice dated 31 January 2011. At that date FDA approval had not yet been obtained for the Device and it was not being distributed by LLC in the United States or elsewhere. LLC disputes 1072/VDL’s entitlement to terminate the DLA and claims substantial damages based upon the profits which it says it would have made if it had been able to distribute the Device after October 2012, which is when FDA approval was obtained.
1072/VDL justified their termination of the DLA in early 2011 on the grounds that the sum of £25,000 should have been paid to them by LLC in about late 2008. Under the terms of the DLA as executed, a failure to pay that sum as stipulated would be good grounds for termination. In this action LLC has not challenged the assertions that, according to the terms of the DLA as executed, the £25,000 was due and owing and that non-payment would provide contractual justification for termination. However it asserts that the DLA was subsequently varied in early 2009 so that the sum of £25,000 did not become due and payable before FDA approval was obtained, which had not happened by the date of termination. Alternatively it submits that, as a result of the communications between the parties upon which it relies as amou