Inquiries as to Damages: A New Commonplace

PRINCIPLES FOR INQUIRIES AS TO DAMAGES

Inquiries as to damages are on the rise but how easy is it for infringers to be granted deductions?

Prior to the 2010-2013 reforms undertaken at the former Patent County Court (PCC), now the Intellectual Property Enterprise Court (IPEC), the numbers of inquiries into damages were relatively low, partly due to the length of court actions and partly due to cost. However, since a cap on recoverable costs and damages was introduced and the length and complexity of cases was reduced, the numbers of inquiries into damages has steadily risen. This represents one way in which the IPEC continues to champion fairness and greater access to justice for small and medium-sized enterprises. Here, we review the principles for inquiries into damages in light of the recent decision in the case of AP Racing Limited v Alcon Components Limited [2016] EWHC 116 (IPEC).

AP Racing Limited v Alcon Components Limited [2016] EWHC 116 (IPEC) was a damages inquiry following the successful infringement action brought against Alcon Components Ltd in relation to AP Racing Limited's United Kingdom patent, GB2451690, which disclosed calipers for use in disk brakes.

In these proceedings, HHJ Hacon referred back to SDL Hair Limited v Next Row Limited [2014] EWHC 2084 (IPEC) in which he had summarized the relevant principles regarding assessment of damages which are reproduced below:

  1. A successful claimant is entitled, by way of compensation, to the sum of money which will put him in the same position he would have been in if he had not sustained the wrong.
  2. The claimant has the burden of proving the loss.
  3. The defendant being a wrongdoer, damages should be liberally assessed but the object is to compensate the claimant, not punish the defendant.
  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.
  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.
  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.
  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 favor of the claimant or that the causation claimed is overwhelmingly likely.
  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.
  9. Where the claim for the 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 have the benefit or opportunity would have occurred is relevant only to the quantification of damages.

Judgement, paragraph 31

AP Racing claimed three heads of damage:

  1. Lost profits from sales of calipers 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 calipers not been made.
  3. To the extent that Alcon made sales of calipers 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 on all sums awarded.

Whilst Alcon Components Limited accepted that its infringing calipers fell within the claims of the patent, they argued for a number of deductions to owed damages, the most interesting of which arose with regard to Section 69(3) UK Patents Act 1977. Alcon Components Limited argued that, based on search reports published by the UKIPO and EPO (in relation to the European equivalent of the UK application) that cited prior art against all claims except 7, 8, 10, 14 and 19-26, there was reasonable expectation that any patent granted pursuant to the UK application would contain, at the most, claims 7, 8, 10, 14 and 19-26.

However, HHJ Hacon disagreed stating that:

Assuming for a moment that [...] when considering s.69(3) I must assume the skilled person takes into account the UK and European searches relied on, I am not at all convinced that merely because prior art has been cited against a claim of the patent application in issue, I must conclude that the skilled person would not reasonably expect a patent to be granted containing that claim.

Judgement, paragraph 13

The argument was then rejected on the grounds that it did not satisfy the cost/benefit test which must be applied to all issues before the IPEC pursuant to CPR 63PD, 29.2(2).

In calculating the total damages owed HHJ Hacon held that every caliper sold by Alcon Components Limited's distributor after the publication date of patent in suit was a lost sale by AP Racing Limited. As such, AP Racing Limited was entitled to recover the profit it would have made on each of those sales. Furthermore, AP Racing was also able to recover profits from convoyed sales. In total AP Racing was awarded £494,564 plus interest.