23 February 2016

Damages for Patent Infringement - AP Racing Ltd v Alcon Components Ltd

Jane Lambert











In AP Racing Ltd v Alcon Components Ltd [2013] EWPCC 3 (5 Feb 2013) A P Racing Ltd. sued Alcon Components Ltd. for patent infringement in the Patents County Court. The patent in suit was UK patent GB 2 451 690 for " disc brake caliper body and a disc brake caliper comprising such a body". His Honour Judge Birss QC (as he then was) found the patent to be invalid for insufficiency at paragraph [123] of his judgment. However, he also found that had the patent been valid 4 of the 5 shapes of Alcon's callipers would have infringed claim 1 of A P Racing's patent.

A P Racing appealed successfully to the Court of Appeal in AP Racing Ltd v Alcon Components Ltd [2014] RPC 27, [2014] EWCA Civ 40.  The Court restored the patent and ordered an inquiry as to damages or an account of profits.  The claimant elected an inquiry which came on before His Honour Judge Halcon in AP Racing Ltd v Alcon Components Ltd [2016] EWHC 116 (IPEC) (28 Jan 2016).

The learned judge had summarized the principles for inquiries at paragraph [31] of SDL Hair Ltd v Next Row Ltd and Others [2014] EWHC 2084 (IPEC) (3 July 2014):
"(1) A successful claimant is entitled, by way of compensation, to that sum of money which will put him in the same position he would have been in if he had not sustained the wrong, see Livingstone v Rawyards Coal Co. (1880) 5 App.Cas., 25 per Lord Blackburn at 39.
(2) The claimant has the burden of proving the loss, see General Tire and Rubber Company v Firestone Tyre and Rubber Company Limited [1976] RPC 197, at 212.
(3) The defendant being a wrongdoer, damages should be liberally assessed but the object is to compensate the claimant, not punish the defendant, see General Tire at p.212.
(4) The claimant is entitled to recover loss that was (i) foreseeable, (ii) caused by the wrong and (iii) not excluded from recovery by public or social policy, see Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443, at 452.
(5) In relation to causation, it is not enough for the claimant to show that the loss would not have occurred but for the tort. The tort must be, as a matter of common sense, a cause of the loss. It is not necessary for the tort to be the sole or dominant cause of the loss, see Gerber at p.452.
(6) An inquiry will generally require the court to make an assessment of what would have happened had the tort not been committed and to compare that with what actually happened. It may also require the court to make a comparison between, on the one hand, future events that would have been expected to occur had the tort not been committed and, on the other hand, events that are expected to occur, the tort having been committed. Not much in the way of accuracy is to be expected bearing in mind all the uncertainties of quantification. See Gerber at first instance [1995] RPC 383, per Jacob J, at 395-396.
(7) Where the claimant has to prove a causal link between an act done by the defendant and the loss sustained by the claimant, the court must determine such causation on the balance of probabilities. If on balance the act caused the loss, the claimant is entitled to be compensated in full for the loss. It is irrelevant whether the court thinks that the balance only just tips in favour of the claimant or that the causation claimed is overwhelmingly likely, see Allied Maples Group v Simmons & Simmons [1995] WLR 1602, at 1609-1610.
(8) Where quantification of the claimant's loss depends on future uncertain events, such questions are decided not on the balance of probability but on the court's assessment, often expressed in percentage terms, of the loss eventuating. This may depend in part on the hypothetical acts of a third party, see Allied Maples at 1610.
(9) Where the claim for past loss depends on the hypothetical act of a third party, i.e. the claimant's case is that if the tort had not been committed the third party would have acted to the benefit of the claimant (or would have prevented a loss) in some way, the claimant need only show that he had a substantial chance, rather than a speculative one, of enjoying the benefit conferred by the third party. Once past this hurdle, the likelihood that the benefit or opportunity would have occurred is relevant only to the quantification of damages. See Allied Maples at 1611-1614."
In Henderson v All Around The World Recordings Limited [2014] EWHC 3087 (IPEC) (3 Oct 2014) he discussed the so-called "user principle" that is to say damages based on
"royalties that would have been paid had there been a licence which would have made the infringing acts lawful, negotiated between willing licensor and willing licensee."
I commented on that point in Inquiries as to Damages in the Intellectual Property Enterprise Court: Henderson v All Around the World Recordings Ltd. 5 Nov 2014.

AP Racing claimed damages for
"(1) Lost profits from sales of callipers that AP Racing would have made had Alcon not infringed.
(2) Lost profits from lost 'convoyed sales', i.e. other goods that would have been sold by AP Racing had the infringing sales of callipers not been made.
(3) To the extent that Alcon made sales of callipers which did not result in AP Racing losing any sales, damages equivalent to the royalty that Alcon would have paid under the Patent according to the user principle."
AP Racing also claimed interest.

In calculating lost profits from reduced calliper sales, the judge took into account:
(1) the number of infringing callipers sold by Alcon which are relevant to AP Racing's claim for damages;
(2) the number of extra callipers that AP Racing would have sold had there been no infringement by reason of Alcon's sales under (1); and
(3) the average sales price for AP Racing's callipers.
His Honour found that Alcon had supplied 1,179 callipers but deducted 242 that had been supplied before the patent application was published, 70 that Alcon had undertaken to destroy and 132 that had been supplied free of charge as replacements for defective callipers leaving a total of 735. Alcon argued that there should be further deductions based on s.69 (3) of the Patents Act 1977 and other points but those arguments were rejected by the judge. The price of each calliper was £1,186  so the total loss of sales revenue was £871,710. Of that 25% was profit, so the loss under that head was £217,928.

As for loss of profits on lost convoyed sales Judge Hacon found that AP Racing sold £410 worth of goods exclusively associated with the sale of callipers and a further £1,565 worth of goods associated with sales of callipers and/or other products 70% of the time. The parties agreed that the profit margin for those sales was 25%. Using the formulae 735 x (£410 x 0.25) for the goods exclusively associated with the sale of callipers and 735 x (£1,565 x 0.7 x 0.25) the judge found losses of £75,338 and £201,298 respectively.

The judge found no damages were due under the user principle. As he put it at para [43] of his judgment:
"AP Racing is already compensated in relation to the 735 calipers discussed above. Of the remaining 444, no damages are due on those which were sold before the date of publication of the application for the Patent. Nothing is due on the 70 which have been, or will be destroyed. I have no reason to think that the parties would have hypothetically a royalty charge on the 132 calipers supplied by Alcon free of charge to replace defective calipers."
The total damages were therefore £494,564 (£217,928 + £75,338 + £201,298).

Referring to Mr Justice Ramsay's decision in Persimmon Homes (South Coast) Limited v Hall Aggregates (South Coast) Limited [2012] EWHC 2429 (TCC) the judge awarded interest before judgment at the rate of 2% above base rate.

Should anyone wish to discuss this case, damages for patent infringement or patent law generally, he or she should call me on +44 (0)20 7404 5252 during normal office hours or use my contact form.

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