Patents - Damages for infringement - Anan Kasei Co. v Neo Chemicals & Oxides
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| Ceric Oxid Author Walkerma Reproduced with kind permission of the copyright owner |
On 9 Feb 2921 the defendants applied for summary determination of the following issues pursuant to Part 24 of the Civil Procedure Rules:
2. Whether goods brought from China into and stored in the UK for the purpose of export and distribution overseas are imported and/or kept within the meaning of s.60 of the Patents Act 1977.
3. Whether the defendants are entitled to assert that:
a. but for the infringing importation and keeping of goods into the UK, Neo UK would have routed those same goods through a non-UK port, such as Oslo, Norway, and accordingly not have infringed the patent in suit;
b. but for the infringing importing, keeping and/or disposal of Development Samples in the UK, Neo UK would have disposed of Development Samples to customers outside the UK without importing into and/or keeping the Development Samples in the UK and accordingly not have infringed the patent in suit."
The application was brought in a phase of the proceedings known as "the inquiry as to damages." As its name suggests. the inquiry is a procedure by which the court assesses the damages a defendant should pay to a claimant for the harm that the claimant has suffered from the defendant's wrongdoing. It follows a determination that the defendant has wronged the claimant.
History of the Litigation
In Anan Kasei Co. Ltd and Another v Molycorp Chemicals & Oxides (Europe) Ltd [2018] EWHC 843 (Pat) (23 April 2018) Mr Roger Wyand QC, sitting as a deputy judge of the High Court, held that Neo Chemicals & Oxides (Europe) Ltd. ("NCO") had wronged the claimants by infringing claims 1, 3, 4 and 5 of the first claimant's European patent (UK) No 1 435 338 entitled "Ceric Oxide and method for production thereof and catalyst for exhaust gas clarification".
Fearing that NCO would not be good for any damages that may be awarded against it, the claimants applied for permission to join its Canadian parent company, Neo Performance Materials, Inc. as a defendant. The application came on before Mr Nicholas Caddick QC sitting as a deputy judge who acceded to that request.
The defendants then appealed unsuccessfully against both judgments to the Court of Appeal (see Anan Kasei Co Ltd and another v Neo Chemicals And Oxides Ltd and another [2019] EWCA Civ 1646 (9 Oct 2019). I discussed the litigation in Patents - Anan Kasei Co Ltd and another v Neo Chemicals and Oxides Ltd. on 19 Oct 2019.
Fearing that NCO would not be good for any damages that may be awarded against it, the claimants applied for permission to join its Canadian parent company, Neo Performance Materials, Inc. as a defendant. The application came on before Mr Nicholas Caddick QC sitting as a deputy judge who acceded to that request.
The defendants then appealed unsuccessfully against both judgments to the Court of Appeal (see Anan Kasei Co Ltd and another v Neo Chemicals And Oxides Ltd and another [2019] EWCA Civ 1646 (9 Oct 2019). I discussed the litigation in Patents - Anan Kasei Co Ltd and another v Neo Chemicals and Oxides Ltd. on 19 Oct 2019.
Reason for the Application
The claimants complained that NCO had imported into the UK high surface area cerium oxide that fell within the claims. High surface area cerium oxide is used to make catalytic converters for diesel motor vehicles.
NCO had sold some of the oxide to the British company Johnson Matthey. There was no dispute that the oxide resold to Johnson Matthey had been "imports" for the purposes of s.60 (1) (a) of the Patents Act 1977. The parties agreed the damages for that part of the claim and the defendants paid them.
However, NCO also supplied some oxide to Umicore in Germany and other countries from stocks held in bonded warehouses in the UK. The defendants argued that those quantities should not count as "imports" within the meaning of the Act because they had not been imported for resale to customers in the UK. They also contended that even if those stocks did count as "imports" the claimants' losses from the infringement were the same if the oxide had been routed through Oslo or some other port outside the UK. Such routing would not have infringed the UK patent though it might have infringed the corresponding German one.
The Application to withdraw Admissions made in the Defence
The claimants objected to the application on the grounds that the defendants' argument contradicted admissions of importation and sleeping of the oxides in the UK that NCO had made in its defence, The defendants replied that those admissions were unspecific and inconsequential and did not amount to an obstacle to their taking the point that there was no infringement in relation to products that were marked and intended for export to Germany or some other country. However, they also applied for the following order:
"1. The defendants have permission to assert the facts relating to their dealings or lack thereof with HSA cerium oxide products pleaded in the Amended Points of Defence (the "Facts") attached at exhibit…
2. The defendants have permission to serve the Re-re-re-re-re-Amended Defence attached…
3. To the extent that any earlier statements of the defendants, including in pleadings, evidence and submissions, are inconsistent with the Facts and constitute admissions, the defendants have permission to withdraw those admissions."
"1. The defendants have permission to assert the facts relating to their dealings or lack thereof with HSA cerium oxide products pleaded in the Amended Points of Defence (the "Facts") attached at exhibit…
2. The defendants have permission to serve the Re-re-re-re-re-Amended Defence attached…
3. To the extent that any earlier statements of the defendants, including in pleadings, evidence and submissions, are inconsistent with the Facts and constitute admissions, the defendants have permission to withdraw those admissions."
The Hearing
The two applications came on before Mr Justice Fancourt who heard the parties' arguments on 26 and 29 March 2021. His lordship handed down judgment on 4 May 2021 (see Anan Kasei Co., Ltd and another v Neo Chemicals & Oxides (Europe) Ltd and others [2021] EWHC 1035 (Ch)).
The Admissions
The Admissions
The learned judge took the application for permission to withdraw the admissions first setting out the reasons in para [13] of his judgment:
"If [the defendants are] right to contend that they are limited and inconsequential then there is unlikely to be difficulty in granting permission to withdraw them. If, on the other hand, they are significant admissions on which Rhodia has relied, the withdrawal of which would substantially change the issues for trial, the withdrawal at this stage might be far from automatic. Further, as [the defendants accept], if there are admissions about importation and keeping in the UK, [the defendants'] summary judgment application on issues 1 and 2 cannot succeed."
At para [48] his lordship identified the admissions that had been made in the proceedings as follows:
"i) Para 6 (1) to (4) of the Defence and Counterclaim, as repeated in all amended versions that were served up to and including the Re-re-re-re-Amended Defence and Counterclaim dated 29 December 2020;
ii) Witness statement of Karen Brown dated 12 September 2016, paras 4, 6;
iii) Statement of Case on Samples dated 6 January 2017;
iv) Re-re-amended Defence and Counterclaim para 6(5) and subsequent iterations;
v) Re-re-re-amended Defence and Counterclaim para 16;
vi) Further information provided (in response to a request for further information dated 3 July 2019) in paras 1, 4 of letter from Neo's solicitors dated 12 July 2019;
vii) Points of Defence dated 11 September 2020 as regards "keeping" but not "importing" in the UK
He rejected at [47] the defendants' argument that they were entitled to withdraw the above admissions on the grounds that they are ambiguous or did not amount to anything of substance.
"If [the defendants are] right to contend that they are limited and inconsequential then there is unlikely to be difficulty in granting permission to withdraw them. If, on the other hand, they are significant admissions on which Rhodia has relied, the withdrawal of which would substantially change the issues for trial, the withdrawal at this stage might be far from automatic. Further, as [the defendants accept], if there are admissions about importation and keeping in the UK, [the defendants'] summary judgment application on issues 1 and 2 cannot succeed."
At para [48] his lordship identified the admissions that had been made in the proceedings as follows:
"i) Para 6 (1) to (4) of the Defence and Counterclaim, as repeated in all amended versions that were served up to and including the Re-re-re-re-Amended Defence and Counterclaim dated 29 December 2020;
ii) Witness statement of Karen Brown dated 12 September 2016, paras 4, 6;
iii) Statement of Case on Samples dated 6 January 2017;
iv) Re-re-amended Defence and Counterclaim para 6(5) and subsequent iterations;
v) Re-re-re-amended Defence and Counterclaim para 16;
vi) Further information provided (in response to a request for further information dated 3 July 2019) in paras 1, 4 of letter from Neo's solicitors dated 12 July 2019;
vii) Points of Defence dated 11 September 2020 as regards "keeping" but not "importing" in the UK
He rejected at [47] the defendants' argument that they were entitled to withdraw the above admissions on the grounds that they are ambiguous or did not amount to anything of substance.
The Applicable Law
CPR 14.1 (5) of the Civil Procedure Rules requires the permission of the court to amend or withdraw an admission. The circumstances to be considered by the court where such permission is requested are set out in para 7.2 of the Part 14 Practice Directions:
"(a) the grounds upon which the applicant seeks to withdraw the admission including whether or not new evidence has come to light which was not available at the time the admission was made;
(b) the conduct of the parties, including any conduct which led the party making the admission to do so;
(c) the prejudice that may be caused to any person if the admission is withdrawn;
(d) the prejudice that may be caused to any person if the application is refused;
(e) the stage in the proceedings at which the application to withdraw is made, in particular in relation to the date or period fixed for trial;
(f) the prospects of success (if the admission is withdrawn) of the claim or part of the claim in relation to which the admission was made; and
(g) the interests of the administration of justice."
"(a) the grounds upon which the applicant seeks to withdraw the admission including whether or not new evidence has come to light which was not available at the time the admission was made;
(b) the conduct of the parties, including any conduct which led the party making the admission to do so;
(c) the prejudice that may be caused to any person if the admission is withdrawn;
(d) the prejudice that may be caused to any person if the application is refused;
(e) the stage in the proceedings at which the application to withdraw is made, in particular in relation to the date or period fixed for trial;
(f) the prospects of success (if the admission is withdrawn) of the claim or part of the claim in relation to which the admission was made; and
(g) the interests of the administration of justice."
The Case Law
In American Reliable Insurance Company v CAN Insurance Company Limited [2008] EWHC 2677 (Comm) Mr Justice David Steel had said:
"16. There is, it seems to me, a serious threshold difficulty with regard to this application. Although it is only one of the circumstances which the court must have regard to in considering whether to give permission for a party to withdraw an admission, it nonetheless seems to me to be an important one. It is the first one in the list, namely ….. [PD14 para 7.2 (a)]
17. There is, as I have already indicated, and this is accepted, no new evidence whatsoever. What is entirely absent, it seems to me, is any real explanation of the reasons why and justification for the application. All that is asserted is that, by way of re-examination of the material that was before Mr Justice Thomas, the conclusion has been reached that he was wrong in the findings that he made. But this is devoid of any particularity of the material on which that assertion is made. Notably, even then the outcome is that the admission is being withdrawn and replaced … with a non-admission. That is to say, putting the claimant to proof of the matters which were proved to the satisfaction of Mr Justice Thomas, without indicating in any respect what piece of evidence is being relied upon of what document is being relied upon in support of the conclusion that the finding that was originally made was wrong.
18. This, it seems to me, is, as I put it, a formidable threshold difficulty. Where a party makes an application of this kind in circumstances where highly important and, it must be accepted, prejudicial admissions are made, the court is entitled, it seems to me, to receive a fairly full and frank explanation of how things have gone wrong, or at least appear to have gone wrong, namely to identify the basis upon which the background to the admission is to be withdrawn, the reasons for it, how it came about that the admission was made in the first place, and so on."
Mr Justice Phillips had referred to that judgment in Aldersgate Investments Limited v Bank of Scotland plc [2018] EWHC 2601 (Comm), He refused permission after concluding that the defendant had simply changed its mind about what was in its commercial interests in relation to the allegations made against it.
In Lufthansa Technik AG v Astronics Advanced Electronics Systems [2020] EWHC 83 (Pat); [2020] FSR 18, Mr Justice Nugee refused to allow a defendant to withdraw an admission that it was responsible for the supply of goods that were alleged to infringe patents. The argument it sought to raise was that, based on the facts alleged, as a matter of law it was not liable for the supply of the offending goods. The application was made 3 weeks before trial and would have necessitated a partial adjournment of the trial. His lordship considered that this was a case where a particular argument had not been thought of previously and that no new evidence had any bearing on it. He considered that "prejudice" in the Practice Direction encompassed both substantial prejudice, in terms of having to deal with an issue at trial that had previously been admitted, and procedural prejudice arising from the consequential need, if the defence succeeded, to address bringing a claim against others, with associated limitation problems. The judge also took into account that even if the defendant could succeed on the direct claim against it, it might be indirectly liable if the claimant sued others and that the application was made at a very late stage.
"16. There is, it seems to me, a serious threshold difficulty with regard to this application. Although it is only one of the circumstances which the court must have regard to in considering whether to give permission for a party to withdraw an admission, it nonetheless seems to me to be an important one. It is the first one in the list, namely ….. [PD14 para 7.2 (a)]
17. There is, as I have already indicated, and this is accepted, no new evidence whatsoever. What is entirely absent, it seems to me, is any real explanation of the reasons why and justification for the application. All that is asserted is that, by way of re-examination of the material that was before Mr Justice Thomas, the conclusion has been reached that he was wrong in the findings that he made. But this is devoid of any particularity of the material on which that assertion is made. Notably, even then the outcome is that the admission is being withdrawn and replaced … with a non-admission. That is to say, putting the claimant to proof of the matters which were proved to the satisfaction of Mr Justice Thomas, without indicating in any respect what piece of evidence is being relied upon of what document is being relied upon in support of the conclusion that the finding that was originally made was wrong.
18. This, it seems to me, is, as I put it, a formidable threshold difficulty. Where a party makes an application of this kind in circumstances where highly important and, it must be accepted, prejudicial admissions are made, the court is entitled, it seems to me, to receive a fairly full and frank explanation of how things have gone wrong, or at least appear to have gone wrong, namely to identify the basis upon which the background to the admission is to be withdrawn, the reasons for it, how it came about that the admission was made in the first place, and so on."
Mr Justice Phillips had referred to that judgment in Aldersgate Investments Limited v Bank of Scotland plc [2018] EWHC 2601 (Comm), He refused permission after concluding that the defendant had simply changed its mind about what was in its commercial interests in relation to the allegations made against it.
In Lufthansa Technik AG v Astronics Advanced Electronics Systems [2020] EWHC 83 (Pat); [2020] FSR 18, Mr Justice Nugee refused to allow a defendant to withdraw an admission that it was responsible for the supply of goods that were alleged to infringe patents. The argument it sought to raise was that, based on the facts alleged, as a matter of law it was not liable for the supply of the offending goods. The application was made 3 weeks before trial and would have necessitated a partial adjournment of the trial. His lordship considered that this was a case where a particular argument had not been thought of previously and that no new evidence had any bearing on it. He considered that "prejudice" in the Practice Direction encompassed both substantial prejudice, in terms of having to deal with an issue at trial that had previously been admitted, and procedural prejudice arising from the consequential need, if the defence succeeded, to address bringing a claim against others, with associated limitation problems. The judge also took into account that even if the defendant could succeed on the direct claim against it, it might be indirectly liable if the claimant sued others and that the application was made at a very late stage.
Applying those Principles
As to the first two circumstances in para 7.2 of the practice direction, Mr Justice Fancourt held at [57] that the reason for the failure to seek permission to withdraw the admissions sooner had been the defendant's "failure in 2016 to consider the issue of whether there had been importation or keeping within the meaning of the statute, and failure to plead and pursue its intended case and seek to withdraw its admissions between July 2017 and September 2020 (with the failure to seek to withdraw admissions continuing until early 2021) owing to oversight or a misappreciation of their impact." He noted that no real explanation or excuse offered. He concluded that as in American Reliable the lack of any proper explanation and the defendants' conduct counted against the application to withdraw the admissions.
The learned judge accepted that there would be some prejudice to the claimants if permission was granted but thought that it would be very much less than the prejudice to the claimants if permission was refused.
His lordship considered that the due administration of justice requires all relevant issues to be decided as efficiently and quickly as possible so as to reach a fair decision on the merits of the case. He reflected that it would be harsh to bar the defendants from raking points upon which they might succeed. The claimants could be safeguarded by standing over the first and second issues upon which summary judgment had been sought until trial and by ordering the defendants to pay the costs of the application and all costs thrown away. He said at [66] that in all the circumstances of the case, he was persuaded, by a fine margin, that the interests of justice would be better served by permitting the defendants to withdraw the first defendant's admissions on appropriate terms than by refusing then permission to do so.
The First Two Issues
The judge considered the parties' arguments on whether the landing of goods in the UK for storage in bonded warehouses pending resale to foreign buyers constituted importation for the purposes of s.6'0 ()1)(a) of the 1977 Act.
The defendants contended that s.130 (7) required s.60 (1) (a) to be interpreted in accordance with art 29 (a) of the Community Patent Convention which makes clear that importing or stocking infringing items are only offending acts if they are done for the purpose of making, offering, putting on the market or using the goods within a member state. The defendants relied on Yeda Research and Development Co Ltd. v Rhone-Poulenc Rorer International Holdings and another [2006] EWCA Civ 1094 (31 July 2006). The claimants relied on Lord Justice Neuberger's dicta in Coflexip S.A. and another v Stolt Offshore Ms Ltd. and others [2004] EWCA Civ 213, [2004] FSR 34 that a statutory provision could not be given the same effects as a provision of a Convention that had never been ratified and so had not come into force.
The defendants contended that s.130 (7) required s.60 (1) (a) to be interpreted in accordance with art 29 (a) of the Community Patent Convention which makes clear that importing or stocking infringing items are only offending acts if they are done for the purpose of making, offering, putting on the market or using the goods within a member state. The defendants relied on Yeda Research and Development Co Ltd. v Rhone-Poulenc Rorer International Holdings and another [2006] EWCA Civ 1094 (31 July 2006). The claimants relied on Lord Justice Neuberger's dicta in Coflexip S.A. and another v Stolt Offshore Ms Ltd. and others [2004] EWCA Civ 213, [2004] FSR 34 that a statutory provision could not be given the same effects as a provision of a Convention that had never been ratified and so had not come into force.
The defendants also argued that intellectual property rights are not to be regarded as having been infringed by the holding of goods within the external transit procedure of the EU Customs Code (Reg (EU) No. 952/2013). They relied on Case C-405/03 Class International BV v Colgate Palmolive Co ECLI:EU:C:2005:616, [2006] Ch 154, [2005] EUECJ C-405/03, [2006] 2 WLR 507, EU:C:2005:616, [2005] ECR I-8735, Case C-405/03, [2006] ETMR 12, [2006] CEC 193, [2006] 1 CMLR 14 where the Court of Justice of the European Union held that the CJEU held that the entry of non-EU goods into Community customs territory under the external transit procedure did not amount to use of a trade mark or importation of the goods. They also relied on a decision of the Bundesgerichtshof known as Electric Kettles that a German patent id infringed only by a sale in Germany or importation for that purpose.
The claimants replied that the landing of goods and holding them in a bonded warehouse did not mean that there could be no infringement. If the goods were sold while in transit, or re-purposed as had happened on three occasions, there could be an infringement.
Mr Justice Fancourt held ay para [87] that the application for determination of the first two issues did not fall within Part 24. The defendants may have been entitled to their determination as preliminary issues but that was not the nature of their application. Even if the application had fallen within Part 24 the judge would have refused summary judgment in any event.
The claimants replied that the landing of goods and holding them in a bonded warehouse did not mean that there could be no infringement. If the goods were sold while in transit, or re-purposed as had happened on three occasions, there could be an infringement.
Mr Justice Fancourt held ay para [87] that the application for determination of the first two issues did not fall within Part 24. The defendants may have been entitled to their determination as preliminary issues but that was not the nature of their application. Even if the application had fallen within Part 24 the judge would have refused summary judgment in any event.
The Third Issue
The third issue was different in that it was independent of the admissions. The defendants sought the following declaration:
"The following factual assertions by the Defendants are not irrelevant in law:
a. That but for the infringing importation and keeping of goods into the UK, Neo UK would have routed those same goods through a non-UK port, such as Oslo, Norway, and accordingly have caused the same or some of the same losses to the Claimants as are asserted by the Claimants in this inquiry; and
b. That but for the infringing importing, keeping and/or disposal of Development Samples in the UK, Neo UK would have disposed of Development Samples to customers outside the UK without importing into and/or keeping the Development Samples in the UK and accordingly have caused the same or some of the same losses to the Claimants as are asserted by the Claimants in this inquiry."
The judge dismissed their application for two reasons. First, it could not seriously be argued that the claimants had has no real prospect of successfully defending the issue when their contentions were supported by a decision of the House of Lords and several decisions of the Court of Appeal. Secondly, this issue was not simply one of law. There were disputed facts to be determined before the court could reach a decision on the defendants' contentions.
In United Horseshoe & Nail Co. (Ltd) v. Stewart & Co. [1888] UKHL 447, 25 SLR 447 the defenders admitted infringing the pursuer's patent The pursuer claimed damages on the basis that the defender had sold those nails that it could have sold had there been no infringement, The defender argued that it would have made and sold the same number of nails without infringing the patent and that the pursuer had suffered no loss as a result of the infringement. The House of Lords rejected that argument. Once it was established that the pursuers' sales were affected by the sales of the infringing goods it was irrelevant that the defender might have made and sold nails by some other means. Lord Watson considered that the defender could not deny the utility of the patents, Lord Macnaghten considered that in view of the admitted infringement it was "beside the mark to say that the [defender] might have arrived at the same result by lawful means", and that the sole question was what loss was caused by the infringement.
Mr Justice Fancourt held that the appeal decided two issues. First, it did not lie in the defender's mouth to argue that the invention added nothing of value so that the infringement of the patent gave it no advantage and can have caused no loss. Secondly, it was irrelevant that the defender could have sold a different or differently-made product that could have competed with the pursuer's sales in any event. His lordship noted that the law lords arrived at their decision on the second issue by different routes,
Mr Justice Fancourt held that the appeal decided two issues. First, it did not lie in the defender's mouth to argue that the invention added nothing of value so that the infringement of the patent gave it no advantage and can have caused no loss. Secondly, it was irrelevant that the defender could have sold a different or differently-made product that could have competed with the pursuer's sales in any event. His lordship noted that the law lords arrived at their decision on the second issue by different routes,
The judge noted that United Horsehoe had been followed by the Court of Appeal in Coflexip SA v Stolt Offshore Ltd (No.2) [2003] EWCA Civ 296; [2003] FSR 41 and MVP 3 APS (formerly Vestergaard Frandsen A/S) v Bestnet Europe Ltd [2016] EWCA Civ 541; [2017] FSR 5 at [81] ("Vestergaard"). The defendants sought to distinguish
Conclusion
The defendants will be allowed to run the arguments upon which they sought summary judgment at the inquiry if so advised and they will not be fettered by their admissions. However, they will have to pay a heavy price in costs for the court's permission to withdraw their admissions. Anyone wishing to discuss this case may call me on 020 7404 5252 during office hours or send me a message through my contact form.
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