Posted: January 21st, 2013
Xena Systems Limited v. (1) Cantideck (2) Conquip Industrial, Patents County Court, HH Judge Birss QC, London, UK, 18 January 2013, Case No.  EWPCC 1
This judgment relates to an inquiry into damages for patent infringement, following the defendants’ submission to judgment on liability in the main proceedings. In it, following consideration of a number of heads of damage claimed by the patentee, Xena Systems Limited (“Xena”), His Honour Judge Birss QC awarded damages in the amount of £233,986.76 for the total lost income caused by the defendants’ patent infringement together with interest losses at 8% for a certain period.
The patent-in-suit, EP (UK) 1 392 939, owned by Xena, concerns an improved type of rolling platform used in the construction industry (e.g. to allow materials to be loaded on and off by crane). Another, non-infringing, type of platform used in the construction business is known as a “fixed” platform. At the start of the period relevant to infringement (which was 2006-2007), Xena was the market leader in loading platforms in the UK. It hired out (but did not sell) both rolling and fixed platforms. Its only other competitor at the time in relation to rolling platforms was a company called Cranetech, which sold or hired non-infringing rolling platforms.
The first defendant, Cantideck, was set up by the second defendant, Conquip Industrial, in 2006 as a vehicle for its new loading platform business. In the period of 2006-2007, the defendants sold or hired rolling platforms that were copies of the Xena rolling platforms.
In essence, the Court’s assessment of Xena’s total lost income caused by the defendants’ patent infringement was as follows:
– Based on the evidence before him, the Judge decided that, for all practical purposes, the UK market for rolling platforms in 2006-2007 was a duopoly between Xena’s patented product and the defendants’ infringing product (i.e. Cranetech could be ignored) and that, if the defendants had not been offering infringing rolling platforms to their customers in this period, all such customers (both purchasing and rental customers) would have sourced their rolling platforms from Xena. (In determining the loss of rental income caused by the defendants’ sales of infringing products (bearing in mind that Xena only rented and did not sell rolling platforms), the Judge rejected Xena’s submission that each such sale equated to a lost rental for Xena and reduced the amount claimed by Xena by reference to the fraction of Cantideck rentals that related to rolling as compared to fixed platforms.) Losses in respect of services provided to the defendants’ customers were also deemed to be direct and foreseeable and, therefore, recoverable.
– Xena had also claimed for damages in respect of the defendants’ rentals of fixed platforms on the basis that these were "convoyed goods", but the Judge held on the facts that fixed platforms and rolling platforms were separate products, used and ordered separately, and that the fairest assessment was that none of the defendants’ fixed platform hire business was lost business to Xena.
– The deductible costs for the purposes of the "lost income" assessment (which are the extra costs to Xena associated with the increase in hiring of rolling platforms (and related services) the claim was based on) were deemed to be only the costs associated with hiring an additional installation team for a certain period.
There was an argument that Xena would not have had the capacity to supply all of the defendants’ customers through the infringing period, but this was rejected by the Court on the evidence before it. For this reason, the issue of a notional reasonable royalty applicable to infringing sales and hires that Xena would not have achieved did not arise. The Judge did note in passing, however, that he had been “far from persuaded” by Xena’s proposal that the applicable reasonable royalty should be 50% of the defendants’ profits for such sales or hires, and that the defendants’ contention of a fair rate of 3.8% of its gross sale or hire price was “far more realistic”.
Of particular note in this case was Xena’s claim for interest losses and damages for unfair profits and moral prejudice under the Enforcement Directive 2004/48/EC.
Regarding interest losses, Xena relied on, and the Judge accepted, the House of Lords’ judgment in Sempra Metals Limited (formerly Metallgesellschaft Limited) v Her Majesty's Commissioners of Inland Revenue and another ( UKHL 34) as authority for the fact that, contrary to the previous position at law, interest losses can be recoverable damages in contract or tort, provided they are pleaded and proved. On this basis, the Judge awarded Xena damages in respect of interest losses that it had suffered as a result of borrowings that it would not have made but for the infringing acts.
Xena's claim for unfair profits and moral prejudice was based on Article 13(1) of the Enforcement Directive, which provides for damages to be paid when an infringer knowingly or with reasonable grounds to know engages in infringing activity, and sub-paragraph (a) of the Article, pursuant to which all appropriate aspects are to be taken into account such as unfair profits made by the infringer and “in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the right holder by the infringement”. Whilst acknowledging that the defendants had knowledge or reason to believe that they were infringing the patent from December 2006 (at which point they had actual notice of the patent) and that a letter from the defendants’ solicitors to Xena’s solicitors dated 08 December 2010 was a deliberate attempt to mislead Xena about the value of its claim, the Judge found that, because the letter was written three years after the infringing acts in this case, any prejudice caused by the letter was not prejudice caused by the infringement and declined to award damages under this heading (on the basis that to do so would simply be to punish the defendants, rather than to compensate Xena). He did note, however, that this was a matter of conduct falling to be considered when dealing with the costs of the case.
Read the judgment (in English) here.
Head note: Sara de Sousa