Ap Racing Ltd v Alcon Components Ltd
| Jurisdiction | England & Wales |
| Judge | Judge Hacon |
| Judgment Date | 28 January 2016 |
| Neutral Citation | [2016] EWHC 116 (IPEC) |
| Date | 28 January 2016 |
| Court | Intellectual Property Enterprise Court |
| Docket Number | Case No: CC11P03805 |
[2016] EWHC 116 (IPEC)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY ENTERPRISE COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
His Honour Judge Hacon
Case No: CC11P03805
Hugo Cuddigan QC (instructed by Kempner & Partners LLP) for the Claimant
Douglas Campbell (instructed by Withers & Rogers LLP) for the Defendant
Hearing dates: 15–16 December 2015
Introduction
This is an inquiry as to damages suffered by the claimant ("AP Racing") due to infringement of UK Patent No. 2 451 690 ("the Patent") by the defendant ("Alcon"). The Patent relates to calipers used in disc brakes, specifically those installed in racing cars.
In a judgment dated 5 February 2013 His Honour Judge Birss QC found that the Patent was invalid on the ground of added matter but also that if the patent had been valid it would have been infringed by four out of five models of Alcon's calipers relied on in AP Racing's Particulars of Infringement. AP Racing appealed the finding of invalidity. On 28 January 2014 the Court of Appeal allowed the appeal, ruling that the patent was valid. The Court ordered that at AP Racing's election there would be an account of profit or an inquiry as to damages.
Mr Cuddigan QC appeared for AP Racing and Mr Campbell for Alcon.
The law relating to the broad principles of an inquiry
There was no dispute between the parties as to the law regarding the overall approach to assessing damages. I set out a summary of the relevant principles in SDL Hair Limited v Next Row Limited [2014] EWHC 2084 (IPEC) at [16]. The assessment of damages on the 'user principle' was discussed in Henderson v All Around The World Recordings Limited [2014] EWHC 3087 (IPEC).
The heads of damage
AP Racing claim 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 claims interest on all sums awarded.
Lost profits from reduced caliper sales by AP Racing
The calculation of profits lost from lost caliper sales divides into three stages, namely the assessment of:
(1) the number of infringing calipers sold by Alcon which are relevant to AP Racing's claim for damages;
(2) the number of extra calipers 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 calipers.
It made sense to calculate lost profits by reference to the average profit AP Racing made on the sale of calipers rather than delve into varying actual profit for different models of calipers. AP Racing's Points of Claim pleaded that the average profit was 25% of sales price which was admitted by Alcon in its skeleton argument. AP Racing adduced evidence in support of its claim to a profit on sales which came from Aaron Govern, its Finance Manager. He recalculated the profits at 28%, qualifying his recalculation by saying that it was difficult to disentangle the fixed and variable costs of manufacture and that he had deducted both to arrive at 28%. He estimated the real figure at 32% with an error of + 0.5%. It is apparent that the calculation of average profits is not an exact science and I assume that the original calculation of 25% was also done with some care. I will use AP Racing's pleaded figure of 25%.
The number of sales by Alcon of relevant infringing calipers
There was some common ground here. Alcon supplied 1179 infringing calipers manufactured in England to a United States supplier called Brake Parts Inc ('BPI') which in turn supplied teams that compete in races organised by the US National Association for Stock Car Auto Racing ('NASCAR'). Appropriate deductions from the 1179 are:
(i) 242 calipers supplied before the application for the Patent was published (see ss.25(1), 60(1) and 69(1) of the Act);
(ii) 70 calipers which remain unsold and are subject to an undertaking in writing dated 16 December 2015, provided by Alcon during the trial, to destroy them;
(iii) 132 calipers which were supplied by Alcon as free-of-charge replacements for defective calipers sold earlier;
That leaves 735 calipers,
Alcon argued for further deductions, which were not agreed and to which I turn next.
Section 69
The first disputed deduction arose pursuant to section 69 of the Act which provides:
69 Infringement of rights conferred by publication of application.
(1) Where an application for a patent for an invention is published, then, subject to subsections (2) and (3) below, the applicant shall have, as from the publication and until the grant of the patent, the same right as he would have had, if the patent had been granted on the date of the publication of the application, to bring proceedings in the court or before the comptroller for damages in respect of any act which would have infringed the patent; and (subject to subsections (2) and (3) below) references in sections 60 to 62 and 66 to 68 above to a patent and the proprietor of a patent shall be respectively construed as including references to any such application and the applicant, and references to a patent being in force, being granted, being valid or existing shall be construed accordingly.
(2) The applicant shall be entitled to bring proceedings by virtue of this section in respect of any act only —
(a) after the patent has been granted; and
(b) if the act would, if the patent had been granted on the date of the publication of the application, have infringed not only the patent, but also the claims (as interpreted by the description and any drawings referred to in the description or claims) in the form in which they were contained in the application immediately before the preparations for its publication were completed by the Patent Office.
(3) Section 62(2) and (3) above shall not apply to an infringement of the rights conferred by this section, but in considering the amount of any damages for such an infringement, the court or the comptroller shall consider whether or not it would have been reasonable to expect, from a consideration of the application as published under section 16 above, that a patent would be granted conferring on the proprietor of the patent protection from an act of the same description as that found to infringe those rights, and if the court or the comptroller finds that it would not have been reasonable, it or he shall reduce the damages to such an amount as it or he thinks just.
Alcon accepted that its infringing calipers fell within the claims of the application in the form taken immediately before publication. In other words, s.69(2) was satisfied. Alcon's argument related to s.69(3) and was as follows:
(i) Section s.69(3) speaks of a reasonable expectation, from a consideration of the patent application, that a patent would be granted covering the infringing acts. This is a reasonable expectation on the part of the skilled person who must be deemed to have read not only the patent application, but also anything else which he would reasonably consult.
(ii) The further materials which the skilled person would have reasonably consulted included (a) the search published by the United Kingdom Intellectual Property Office in relation to the application and (b) the search published by the European Patent Office in relation to the closest European equivalent to the application, that is to say European Patent Application, publication no. 2022999.
(iii) The claims of EP 2022999 were equivalent to claims 1, 3–6, 9, 11–13, 15–18, 27 and 29–31 of the UK application.
(iv) Between them, the UK and European searches cited prior art against all the UK claims except 7, 8, 10, 14 and 19–26.
(v) It was therefore reasonable for the skilled person to expect that any patent granted pursuant to the UK application would contain, at the most, claims 7, 8, 10, 14 and 19–26.
(vi) The only models of Alcon's calipers complained of which fell within claims 7, 8, 10, 14 and 19–26 were PC1106 and PC1111/12.
(vii) Therefore damages are only available in relation to those two models of caliper.
Assuming for a moment that Mr Campbell is right to say 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.
In all events Alcon has an evidential difficulty in its way. The argument under s.69(3) was raised at the case management conference. It threatened to give rise to a costly and time-consuming investigation into the skilled person's reasonable expectations in all the relevant circumstances, resulting in little likely benefit to Alcon. I therefore ruled that this issue did not satisfy the cost/benefit test which must be applied to all issues before the IPEC pursuant to CPR 63PD, 29.2(2). It follows that Alcon was not entitled to file any further material in support of its contention regarding s.69(3), including the two search reports relied on and EP 2022999. Since these were not before the...
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