Fabio Perini SPA v LPC Group Plc & Ors

In a patent damages inquiry, the inquiry is ordinarily confined by the originating order and the causes of action established at trial. A claimant cannot use it to reopen a failed infringement case or introduce a substantively new cause of action, although the court may permit further instances of the same established type of infringement where fairness and convenience require it.

For damages, the patentee must prove causation, but the court may infer diverted sales from infringement of a product or process patent. The loss of a substantial chance of securing a contract is compensatable. Damages may reflect the profit on an entire commercial package, including reasonably foreseeable ancillary equipment and after-sales services, where that reflects commercial reality.

This was an inquiry as to damages following findings that a machine supplied by Paper Converting Machine Company Italia was used by LPC in infringement of Patent 929, and that PCMC was jointly liable for that infringement. The Court of Appeal had dismissed the appeal from the infringement judgment.

Perini sought damages for lost profits, lost chances, royalties and related sales. It later sought to advance supply and user cases concerning the LPC transactions and a separate transaction involving Georgia-Pacific. The central questions were the scope of the inquiry, the recoverability of losses associated with process infringement, causation, and the valuation of lost commercial opportunities.

1. Scope of inquiry. The inquiry was limited to the infringement and joint-tortfeasor liability established by the order of Floyd J. Perini’s supply case against PCMC concerning the LPC contracts was res judicata. Alternatively, reopening it would have been an abuse of process, because the relevant material was available at trial and the inquiry could not be used to revisit tactical decisions. The court also rejected attempts to introduce supply or installation causes of action concerning Georgia-Pacific. It permitted consideration only of PCMC’s liability as joint tortfeasor for Georgia-Pacific’s infringing use, as this was the same type of infringement established against LPC.

2. Supply and commercial reality. If it had been necessary to decide the LPC supply case, supply would have occurred in Italy and there would have been no offer in the United Kingdom to supply in the United Kingdom. Supply is a process assessed by commercial reality, not solely by the passing of title. An offer in negotiations is likewise not necessarily a single event.

3. Causation. The legal burden rested on Perini. In general, infringement of a patent monopoly is likely to cause loss through diverted sales, loss of a chance of sales, or appropriation of something of value. The usual inference may be displaced by evidence, but the inquiry must be conducted with commercial common sense and without over-refined analysis. There is no distinction in principle between product and process patents. The relevant question is whether, without the infringing product or process, the patentee would or might have secured the contract.

4. Assessment. The infringement was embedded in the LPC and Georgia-Pacific contracts because those contracts specified an infringing tail-sealing method. Perini therefore established causation and suffered compensatable losses consisting of lost chances. The lost chance could relate to an entire converting line, not merely the patented tail sealer, where commercial practice was to purchase complete lines. Additional equipment and after-sales services were sufficiently connected and foreseeable in the LPC transaction.

5. Outcome. PCMC and LPC were ordered to pay damages for the LPC infringement, calculated on a 65% chance of sales of two specified lines priced at €3.824 million, together with qualifying additional equipment and after-sales profits. PCMC was ordered to pay damages as Georgia-Pacific’s joint tortfeasor, calculated on a 25% chance of selling the speculative line at €2.157 million, together with after-sales profits. The accounting assessment remained to be completed.

1. Court of Appeal: The appeal against the infringement order was dismissed: [2010] EWCA Civ 525.
2. High Court (Patents Court): The present court conducted the inquiry as to damages consequent upon the infringement judgment: [2012] EWHC 1393 (Pat).