Anan Kasei Company Ltd v Neo Chemicals & Oxides (Europe) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Arnold,Lord Justice Coulson,Lord Justice Peter Jackson |
| Judgment Date | 17 January 2023 |
| Neutral Citation | [2023] EWCA Civ 11 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-000822 |
[2023] EWCA Civ 11
Lord Justice Peter Jackson
Lord Justice Coulson
and
Lord Justice Arnold
Case No: CA-2022-000822
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, BUSINESS AND POPERTY
COURTS OF ENGLAND AND WALES, INTELLECTUAL PROPERTY LIST (ChD),
PATENTS COURT
Mrs Justice Bacon
[2022] EWHC 708 (Pat)
Royal Courts of Justice
Strand, London, WC2A 2LL
Tom Mitcheson KC and Miles Copeland (instructed by Hogan Lovells International LLP) for the Appellants
Hugo Cuddigan KC and Adam Gamsa (instructed by Bird & Bird LLP) for the Respondents
Hearing dates: 13–15 December 2022
Approved Judgment
Introduction
This is an appeal by the Claimants (“Rhodia”, part of the Solvay Group) from an order of Bacon J dated 7 April 2022 dismissing their claim against the Defendants (“Neo”) for damages for patent infringement, except in so far as the claim had been compromised, for the reasons given in the judge's judgment dated 29 March 2022 [2022] EWHC 708 (Pat).
The First Claimant (“Anan”) was the proprietor of European Patent (UK) No. 1 435 338 (“the Patent”), which was applied for on 5 September 2002, granted on 16 February 2011 and expired on 5 September 2022. The Second Claimant (“RhodiaOps”) was the exclusive licensee under the Patent at least from 8 April 2016. On 13 April 2016 Rhodia commenced proceedings against Neo for infringement of the Patent. On 23 April 2018 Roger Wyand QC sitting as a Deputy High Court Judge held that the Patent was valid and had been infringed by dealings by Neo in their C100 and C100N high surface area (“HSA”) cerium oxide products [2018] EWHC 843 (Pat). On 9 October 2019 this Court dismissed Neo's appeal against the rejection of their challenge to the validity of the Patent [2022] EWCA Civ 1646.
On the subsequent inquiry as to damages, Rhodia originally claimed nine heads of damage due to the infringement. The first, Head 1, was a claim for loss suffered by Rhodia as a result of the infringing supply of C100N to Rhodia and Neo's mutual customer Johnson Matthey (“JM”) in the United Kingdom between 2014 and 2017. The claim for that head of damages was settled in late 2020 for the sum of £85,000 (the face value of the goods). Heads 2 and 5–8 were not pursued. The only heads of claim that were live before the judge were therefore Heads 3 and 4, which claimed losses said to have been suffered by Rhodia as a result of supplies of C100N to JM outside the UK, in countries where Rhodia did not have patent protection, in competition with Rhodia's patented HSA20 product. In addition, Rhodia claimed losses from sales after expiry of the Patent as Head 9. In total, Rhodia claimed over €24 million on these bases.
Rhodia's primary case was that, absent the infringements, Rhodia would have made all the sales to JM that Neo had made, so the infringements caused them to lose profits on sales of HSA20. In the alternative, if Rhodia would not have made all or some of those sales, Rhodia claimed negotiating damages quantified on a reasonable royalty basis.
Neo resisted Rhodia's claim on four main grounds, which may be summarised as follows. First, Rhodia could not recover losses sustained due to acts by Neo committed outside the UK since the protection conferred by the Patent was limited to the UK. Secondly, Rhodia's claim should be refused on the grounds that it was disproportionate and/or created a barrier to legitimate trade contrary to Article 41 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) and Article 3(2) of European Parliament and Council Directive 2004/48/EC of 29 April 2004 on the enforcement of intellectual property rights (“the Enforcement Directive”). Thirdly, Rhodia had suffered no loss because Neo could have supplied a non-infringing version of C100N that JM would have accepted. Fourthly, the infringing supplies of C100N to JM in the UK were not an effective or substantial or proximate cause of the lost sales claimed by Rhodia. In addition, Neo advanced a number of arguments concerning the quantification of Rhodia's claim.
The judge rejected Neo's first three grounds of resistance, but accepted the fourth. In case she was wrong about that, the judge made various findings concerning Rhodia's claim with a view to enabling it to be quantified if necessary. In particular, she found that Rhodia would not have had the capacity to supply JM prior to 2018, and thus she held that Rhodia were only entitled to a reasonable royalty in respect of supplies during this period. By contrast, she found that Rhodia would have had capacity to supply JM from 2018 onwards and thus could claim lost profits in respect of that period.
Rhodia now appeal against the judge's rejection of their claim for want of causation, while Neo challenge the judge's rejection of their first two grounds of defence and the judge's decision as to the reasonable royalty by way of a respondents' notice. In addition, Neo have applied for permission to raise a new argument, to adduce new evidence and to obtain disclosure concerning RhodiaOps' status as exclusive licensee.
The facts in outline
Automotive catalyst systems (colloquially known as catalytic converters) have been used for some time to reduce the emissions from vehicle exhausts of noxious gases such as nitrogen oxide. The European market for automotive catalysts is driven by the European Union emissions standards that car manufacturers are legally required to meet. The current Euro 6 standard was introduced from 2014, and tightened emissions requirements, particularly with regard to nitrogen oxide (“NOx”) emissions from diesel vehicles.
Cerium oxides (also known as ceric oxides) are often added to automotive catalyst systems to enhance their performance. They have the property of absorbing, storing and desorbing oxygen, which allows for the conversion of NOx elements in exhaust gases. To function efficiently in catalyst systems, however, the cerium oxide materials need to maintain a high surface area at the temperatures encountered in those systems. Claim 1 of the Patent is for a ceric oxide with a surface area of not smaller than 30m 2/g when subjected to calcination at 900°C for 5 hours.
In the production of a catalyst system, the cerium oxide is mixed with other catalyst components, including alumina, zirconia and zeolite, to form what is called a “washcoat”, which is coated onto a substrate that is typically a ceramic cylinder. The coated substrate is then encased in steel by a “canner”, before being incorporated into the vehicle exhaust system by the car manufacturer. The three main “washcoaters” in Europe are BASF, Umicore and JM. The washcoaters' customers are the car makers, often referred to as Original Equipment Manufacturers or OEMs.
Rhodia and Neo are the only suppliers of HSA cerium oxide to JM. The First Defendant (“Neo UK”) supplied infringing development samples of HSA cerium oxide to JM's testing centre in the UK in 2011–2013 and initial quantities of the infringing commercial products C100 and C100N in 2010 and 2014–2017 respectively. The admitted purpose of Neo UK's supply of the samples and initial quantities in the UK was to procure from JM orders for the supply outside the UK of much larger quantities of C100N. JM used the infringing samples and initial quantities of C100N in the UK to qualify and gain approval by its car maker customers of JM's catalyst system (a “lean NOx trap”). JM agreed a technical specification for the supply of C100N with Neo UK in September 2014 which was revised in around March 2016. Thereafter Neo UK sold and supplied C100N made in China to JM's Macedonian and South African factories where it was incorporated into lean NOx trap catalysts for JM's customers.
In summary, Neo UK carried out the following acts:
i) Between February 2011 and October 2012 Neo UK supplied a total of 31.5kg of infringing C100 to JM in the UK.
ii) In March 2013 Neo UK supplied an infringing C100N-type sample AB0888Z to JM in the UK because JM considered C100 too expensive.
iii) In August 2013 Neo UK supplied two non-infringing C100N-type samples AB0931Z and AB0936Z to JM in the UK which JM did not pursue. In November 2013 Neo UK supplied another possibly non-infringing C100N-type sample AB0954Z to JM in the UK (Mr Wyand QC held this sample to be non-infringing, whereas the evidence before Bacon J suggested that it might have been infringing).
iv) Between January 2014 and August 2014 Neo UK supplied a total of 750kg of infringing C100N commercial product to JM in the UK.
v) Between November 2014 and May 2015 Neo UK supplied a total of 8000kg of C100N to JM in the UK.
vi) In May 2015 Neo UK supplied 500kg of C100N to JM in Macedonia, following which Neo UK commenced the supply of commercial quantities to Macedonia which continues today.
vii) In July 2015 Neo UK supplied 500kg of C100N to JM in South Africa, following which Neo UK commenced the supply of commercial quantities to South Africa which continues today.
viii) In addition to the supplies to JM in Macedonia and Macedonia, Neo UK has made supplies of C100N to JM via a third party facility in the Netherlands.
ix) Between March 2016 and July 2017 Neo UK supplied a total of 3000kg of C100N to JM in the UK.
Rhodia's claim for lost profits was predicated upon RhodiaOps having lost sales of HSA20 to JM until 2030 as result of JM purchasing C100N from Neo instead. Thus the losses claimed on Rhodia's primary case were sustained by RhodiaOps rather than by Anan.
Anan had a patent corresponding to the Patent in China, but Neo were successful in a claim for revocation of the...
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