Edwards Lifesciences LLC v Boston Scientific Scimed, Inc.
| Jurisdiction | England & Wales |
| Judge | Judge,Hacon |
| Judgment Date | 27 March 2018 |
| Neutral Citation | [2018] EWHC 664 (Pat) |
| Court | Chancery Division (Patents Court) |
| Date | 27 March 2018 |
| Docket Number | Case No: HP-2015-004574 |
[2018] EWHC 664 (Pat)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)
PATENTS COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
HIS HONOUR JUDGE Hacon (Sitting as a High Court Judge)
Case No: HP-2015-004574
and
Piers Acland QC (instructed by Powell Gilbert LLP) for the Claimant and Fourth, Seventh and Eighth Parties
Hugo Cuddigan QC and Kathryn Pickard (instructed by Simmons & Simmons LLP) for the Defendant
Hearing date: 21 March 2018
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HIS HONOUR JUDGE Hacon
Introduction
In the judgment in this action, handed down on 3 March 2017, I found that the Fourth Party (“ELSA”) and the Seventh Party (“ELL”) had infringed a patent owned by the Defendant (“Boston”). On 24 March 2017 I made an order that, among other things, ELSA and ELL should give Island Records disclosure and that 28 days thereafter Boston should elect between an inquiry as to damages or an account of profits.
A year later Boston has still not made its election. In this application Boston seeks to resolve the manner in which it is entitled to pursue its claim for monetary relief. ELSA, ELL, the Claimant (“LLC”) and the Eighth Party (“ELS”) object to Boston's proposals. I will refer to the four Edwards companies collectively as “Edwards”.
Edwards' profits
Boston has succeeded against ELSA and ELL because of their infringing sales in the UK. Boston is entitled to claim the profits made on those sales should it elect for an account. However the Island Records disclosure has revealed that because of arrangements between ELSA, ELL and other companies in the Edwards group, part of those profits have been retained elsewhere. Following disclosure given pursuant to the Order in March 2017 and subsequent Orders by Henry Carr J and Arnold J in June and November 2017 respectively, it has emerged that the larger portion of the profits have in effect gone into the accounts of LLC and ELS.
Boston implied at one point in exchanges between the parties that this intra-group transfer of profits might have been illegal. Hugo Cuddigan QC, who appeared with Kathryn Pickard for Boston, disclaimed any such allegation. I will assume that everything done between the Edwards companies was entirely lawful and I should add that I have been given no reason to doubt it.
Boston says it is entitled to all the profits derived from sales of infringing products, those held by LLC and ELS as well as those made by the infringers, ELSA and ELL.
Boston's proposed way forward
Boston's proposed way forward is to be allowed to advance three alternative cases at the trial on the quantum of monetary relief.
The first would be that as a matter of law LLC and ELS must disgorge their net profits derived from the infringing sales in the UK. Boston did not set out its argument on the law since it sought only permission to advance an argument at trial. However, I was given an outline of the end result Boston has in mind. The starting point would be the total revenue earned from the infringing sales. From this would be deducted the cost incurred by the Edwards companies in manufacturing the products, such cost to include a reasonable manufacturing profit. This would give a total gross profit from the infringements. Then, as I understand it, each of ELSA, ELL, LLC and ELS would be taken in turn. From the gross profit each accrued would be deducted directly attributable costs and permissible overheads according to the principles set out by the Court of Appeal in OOO Abbott v Design & Display Ltd [2016] EWCA Civ 95; [2016] FSR 27. There would have to be an apportionment of those profits because the inventive concept of the patent infringed is embodied in only a part of the products sold. To the sum derived from apportionment would be added profits from convoyed sales.
The key point, though, is that Boston would argue that as a matter of law this should be done in relation to all Edwards companies that profited, namely LLC and ELS as well as ELSA and ELL.
Boston's second case would be an alternative to the first. It would be that LLC and ELS were joint tortfeasors in relation to the infringements found against ELSA and ELL, presumably applying the law on joint tortfeasance explained by the Supreme Court in Fish & Fish Ltd v Sea Shepherd UK [2015] UKSC 10; [2015] AC 1229.
Pausing there, Edwards do not object to Boston running these alternative cases at the trial of an account. But they jib at Boston adding a proposed third alternative case.
Boston worries that neither of its first two cases may succeed – without of course conceding that as a likelihood. Boston therefore wants a fall-back. If the court were to decide that Boston was entitled to only the relevant net profits of ELSA and ELL, Boston should be able instead to claim damages. Boston was willing to state that such a claim would be on the user principle, i.e. the royalties that would have been payable under a hypothetical licence granted by Boston, in an arm's length agreement between willing licensor and willing licensee, allowing Edwards lawfully to carry out the acts found to infringe.
In other words, Boston wants the trial on quantum of monetary relief to go ahead in the form of a hybrid: an account of profits and inquiry as to damages. Once the results are in, Boston would elect between the two, obviously selecting the one which yields the greater sum in the judgment of the court.
Boston's arguments
Boston's overall argument was that defendants which are part of a group should not be able to evade their responsibility to pay for their infringements by transferring their profits to other group companies. If that were permitted, there would be nothing to stop companies from shifting away the entirety of their profits and thereby in effect limiting a successful claimant to an inquiry as to damages. Parliament's intention to allow a patentee the option of an account of profits could then be easily defeated.
Mr Cuddigan referred to the relevant section of the Patents Act 1977:
“ 61 (1) Subject to the following provisions of this Part of this Act, civil proceedings may be brought in the court by the proprietor of a patent in respect of any act alleged to infringe the patent and (without prejudice to any other jurisdiction of the court) in those proceedings a claim may be made —
…
(c) for damages in respect of the infringement;
(d) for an account of the profits derived by him from the infringement;
…
(2) The court shall not, in respect of the same infringement, both award the proprietor of a patent damages and order that he shall be given an account of the profits.”
Mr Cuddigan submitted that s.61(2) prohibited a court from making a final order of monetary compensation which consisted of an award of damages and the infringer's profits. But it did not prevent a joint inquiry and account being conducted and thereby the patentee's election being postponed until both had been concluded.
He argued that there was authority for the conduct of a joint inquiry and account. In The Electric Furnace Co v Selas Corporation of America [1987] RPC 23, the first defendant, Selas, sought to have an order giving the plaintiff leave to serve a writ outside the jurisdiction set aside. In the course of his judgment Slade LJ, with whom Croom-Johnson LJ and Sir John Megaw agreed, said this (at p.33, lines 35–39):
“As the writ makes plain, they are seeking an account of profits as an alternative remedy to damages, against both defendants. If the action proceeds to trial it would, I think, be open to them to pursue a remedy by way of damages against one [of] the defendants, and a remedy by way of an account of profits against the other. No authority has been cited to us which suggests the contrary.”
Mr Cuddigan said that to the extent that the judgment of Pumfrey J in Spring Form Inc v Toy Brokers Ltd [2002] FSR 17 might be taken as authority for the contrary view (see in particular paragraphs 24 to 26) that judgment turned on its particular facts. It did not establish an absolute rule against a joint inquiry and account. He referred me to a paper by Professor Lionel Bently and Charles Mitchell, Combining Money Awards for Patent Infringement, Spring Form v Toy Brokers 11 RLR 79, 92 (2003), which he said rightly criticised Pumfrey J's judgment, or at least any over-interpretation of it.
Mr Cuddigan further submitted that in practice the courts are liable regularly to assess an award of damages together with an award of unfair profits pursuant to Directive 2004/48/EC (“the Enforcement Directive”), referring to Absolute Lofts South West London Ltd v Artisan Home Improvements Ltd [2015] EWHC 2608 (IPWC); [2017] ECDR 6, by way of example. This dual approach...
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