SDL Hair Ltd v Next Row Ltd & Ors

In an inquiry into damages for groundless patent threats, compensation is assessed to place the claimant in the position it would have occupied absent the wrong. The claimant must prove loss and causation, but the tort need only be a common-sense cause, not the sole or dominant cause. A lost opportunity depending on a particular third party’s hypothetical act is established by showing a real and substantial chance; its value is then assessed by evaluating the chance. By contrast, where the claim concerns generally profitable trading, the court first decides that question on the balance of probabilities and then quantifies profits by evaluating all contingencies, without a further loss-of-chance discount. A threat may remain causative after proceedings are issued if the evidence supports that conclusion.

The claimant manufactured and marketed an induction-heated hair-roller product. The defendants sent letters and an email alleging patent infringement. In earlier proceedings, the patent was held not to be infringed and several communications were declared actionable threats under section 70 of the Patents Act 1977. This hearing concerned the claimant’s alleged losses from cancelled or reduced sales and prices, interest, and whether two defendants were jointly liable with the defendants directly responsible for particular communications.

The central issues were the classification of the claimed losses, the counterfactual sales history, causation, quantification, and joint tortfeasance.

1. Outcome. Judgment was entered against Next Row and RMG for £40,500, comprising £30,000 for the lost chance of a further QVC promotion and £10,500 for associated lost sales. Interest was payable, with submissions on the amount. No loss was proved in respect of the other claimed heads, and Cloud Nine and Gavin Rae were not jointly liable for the relevant letters.
2. The governing measure was compensatory. The claimant had to prove loss. Damages were to be liberally assessed, but not punitively. Recoverable loss had to be foreseeable, caused by the wrong, and not excluded by public or social policy. Causation was assessed in a common-sense way; the wrong need not be the sole or dominant cause.
3. The lost QVC promotion was an Allied Maples-type claim. The claimant had to show a real and substantial chance that QVC would have agreed to a second promotion. Once that threshold was met, the chance was valued by assessing the likelihood of the hypothetical event. The judge assessed the chance at 35 per cent and awarded £30,000.
4. The claims concerning generally reduced trading and negotiated prices were not loss-of-chance claims. Following the distinction drawn in Parabola and Vasiliou, the court first asked whether trading would probably have been profitable. It then made the best assessment possible of profits, taking account of all contingencies. A further discount was inappropriate.
5. The threats caused a six-week delivery delay on the evidence and assumptions adopted. However, the failure to supply product, rather than the threats, was the dominant cause of Alan Howard’s loss of confidence and reduced sales. The claims relating to Alan Howard therefore failed.
6. The issue of causation after issue of proceedings was fact-sensitive. Carflow did not establish a rule that a threat could never cause loss after the claim form. Here there was no evidence that issuing the claim form displaced the continuing causal effect of the QVC letter.
7. Joint tortfeasance required sufficient involvement in the commission of the tort, including a common design or concerted action by which the alleged joint tortfeasor made the infringing act its own. The close corporate relationships and wording of the communications did not establish that Cloud Nine or Gavin Rae had made the Three Letters their own.