General Tire & Rubber Company v Firestone Tyre & Rubber Company Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Lord Wilberforce,Viscount Dilhorne,Lord Diplock,Lord Kilbrandon,Lord Salmon |
| Judgment Date | 16 April 1975 |
| Judgment citation (vLex) | [1975] UKHL J0416-2 |
| Date | 16 April 1975 |
| Court | House of Lords |
[1975] UKHL J0416-2
Lord Wilberforce
Viscount Dilhorne
Lord Diplock
Lord Kilbrandon
Lord Salmon
House of Lords
Upon Report from the Appellate Committee, to whom was referred the Cause General Tire & Rubber Company against Firestone Tyre & Rubber Company Limited, That the Committee had heard Counsel, as well on Monday the 20th, as on Tuesday the 21st, Wednesday the 22d, Thursday the 23d, Monday the 27th, Tuesday the 28th, Wednesday the 29th and Thursday the 30th, days of January last, as on Monday the 3rd and Tuesday the 4th, days of February last, upon the Petition and Appeal of Firestone Tyre and Rubber Company Limited of Great West Road, Brentford, Middlesex, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 15th of March 1974, so far as regards the words, "this Court doth order that the said Order dated 8th March 1973 be affirmed. And it is ordered that the Defendants The Firestone Tyre and Rubber Company Limited do pay to the Plaintiffs their costs of and occasioned by the said Appeal such costs to be taxed by the Taxing Master", might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order, so far as aforesaid, might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of General Tire & Rubber Company, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:
It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 15th day of March 1974, in part complained of in the said Appeal, be, and the same is hereby, Set Aside, and that the Cause be, and the same is hereby remitted back to the Chancery Division of the High Court of Justice with a Direction that Judgment be entered for the Respondents for the sum of Two hundred and fifteen thousand, five hundred pounds (£215,500) with Ninety-six thousand pounds (£96,000) interest thereon from the date of grant, namely the 16th day of January 1963 to the date of the Order of the Honourable Mr. Justice Graham, namely the 8th day of March 1973: And it is further Ordered, That the Respondents do pay, or cause to be paid, to the said Appellants the Costs incurred by them in respect of the said Appeal to this House, the amount of such Costs to be certified by the Clerk of the Parliaments: And it is further Ordered, That the said Respondents do pay, or cause to be paid to the said Appellants the Costs incurred by them in the Court of Appeal on all issues save the issues of tread stock and good faith, in respect of which issues it is further Ordered, That the said Appellants do pay, or cause to be paid, to the said Respondents the Costs incurred by them in the Court of Appeal: And it is further Ordered, That the Order of the Honourable Mr. Justice Graham of the 8th day of March 1973 do remain undisturbed as to Costs: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Chancery Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.
My Lords,
The Respondents ("General Tire"), as patentees of British Letters Patent No. 737086, sued the Appellants ("Firestone U.K.") for infringement. The Appellants denied infringement and counterclaimed for revocation on the ground that the patent was invalid. After a trial in 1969 before Lloyd Jacob J. and a rehearing in 1970 before Graham J. (Lloyd Jacob J. having died), the patent was held to be valid and infringed, and an inquiry was directed as to damages. An appeal against this judgment was dismissed by the Court of Appeal, and leave to appeal to this House was refused.
The inquiry as to damages came before Graham J. on 6th November, 1972. On 6th February, 1973, he gave judgment in favour of the Respondents for £930,000 damages and £458,000 interest on damages. An appeal was taken to the Court of Appeal, but on 15th March, 1974, that appeal was dismissed. The Appellants, by leave, appeal to this House.
I shall first briefly state such facts as are necessary for an understanding of the issues. Later it will be necessary to examine in some detail the licensing history as regards the patent.
The patent covers an invention relating to synthetic rubber compounds suitable for tyre treads. Essentially it consists of a method of extending tough (high Mooney) synthetic rubbery polymers with large quantities of mineral oil; the mixture so produced (to which the term "oil-extended rubber" or "O.E.R." has come to be applied) may be compounded with ( inter alia) carbon black and then becomes "tyre tread stock", ("T.T.S.") i.e., a material which can be used for the making of tyres. It is not disputed that this was an important and valuable invention�Graham J. described it as a "real breakthrough". It brought about a substantial reduction in the manufacturing costs of tyres and also an improvement in road-holding and durability.
The invention was made by the Respondents in the United States of America in or about 1950. On 20th November, 1950, they applied for a United States patent. Details of the invention were published in 1951, and from then on it was adopted generally in the U.S.A. by American manufacturers. The Respondents applied for a United Kingdom patent�which became the patent in suit�on 25th October, 1951, and after opposition this was granted on 16th January, 1963. It would normally have expired on 25th October, 1967, but, by decision of Lloyd Jacob J., was extended for three years on the ground of war loss: so it expired on 25th October, 1970. The Appellants began to use (i.e., to infringe) the invention in or about March 1958: therefore the period of infringement runs from that date until the expiry on 25th October, 1970.
In the Inquiry as to damages Contentions were filed by each party. The Contentions of the Respondents as Plaintiffs originally claimed damages on the basis of a "fair and reasonable" royalty which it was asserted should be five per cent of the net sales value of all infringing articles, i.e., tyres and compounds containing a substantial portion of oil extended polymer. This would have resulted in an amount of approximately £7,500,000 plus interest. The Contentions filed by the Appellants as Defendants put forward in order of preference three alternative bases on which damages should be calculated: (i) (the "lump sum basis") a lump sum computed on the basis of existing lump sum licences granted by the Respondents: this would produce an amount of £45,357 plus interest, (ii) (the "O.E.R. basis") a sum computed on a royalty of three-eighths of a U.S. cent per lb. of oil extended rubber, as therein defined, used by the Appellants in infringing tyre treads. This would produce an amount of £215,500 plus interest, (iii) (the "T.T.S. basis") a sum computed on a royalty of three-eighths of a U.S. cent per lb. of tread compound containing such oil extended rubber used by the Appellants in infringing tyres. This would produce an amount of £486,500 plus interest.
The Inquiry went to trial on these rival Contentions, the Appeallants having filed a substantial body of evidence to support their case. But on the fourth day of the hearing the Respondents abandoned their Contention, as stated above, and by amendment substituted a Contention for damages on the basis of a fair and reasonable royalty the "amount of damages not to exceed a sum computed at the rate of two U.S. cents per pound weight of all infringing lyre tread stock". The Appeallants, by consequential amendment, put the Respondents to proof of their loss.
The learned trial judge did not accept any of the Contentions, except to the extent that his award was within the basis set forth in the Respondents' amended Contention. Accepting the basis of a fair and reasonable royalty he found that such a royalty should be one U.S. cent per lb. on the first 100 million lbs. of tyre tread stock, and thereafter at half that rate. The amount of infringing tread stock was found to be 346,685,106 lbs., and this produced the award of £930,000 damages.
Examination of these various bases of computation must necessarily be preceded by some statement of legal principle. This I can do fairly briefly since I do not believe that there is much room for dispute. One who infringes the patent of another commits a tort, the foundation of which is made clear by the terms of the grant. This, after conferring the monopoly of profit and advantage upon the patentee, concludes by declaring infringers "answerable to the patentee according to law for his damages thereby occasioned".
As in the case of any other tort (leaving aside cases where exemplary damages can be given) the object of damages is to compensate for loss or injury. The general rule at any rate in relation to "economic" torts is that the measure of damages is to be, so far as possible, that sum of money which will put the injured party in the same position as he would have been in if he had not sustained the wrong. ( Livingstone v. Rawyards Coal Co. 5 A.C. 25, 39, per Lord Blackburn.)
In the case of infringement of a patent, an alternative remedy at the option of the Plaintiff exists by way of an account of profits made by the infringer �see Patents Act, 1949, section 60. The Respondents did not elect to claim an account of profits: their claim was only for damages. There are two essential principles in valuing that claim: first, that the Plaintiffs have the burden of proving...
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