AP Racing Ltd v Alcon Components Ltd

Damages for patent infringement are assessed by identifying the sales caused by the infringement and the profits that would have been earned in the counterfactual market. The relevant product market must reflect the purchasing decision made by customers, including differences in performance and price. Statistical association alone does not establish loss of convoyed sales; the claimant must prove a causative link in the purchaser’s mind. A reasonable royalty is assessed by reference to a hypothetical willing licensor and willing licensee, but no royalty is due where the claimant is already compensated or the circumstances would not have produced a royalty-bearing transaction. Pre-judgment interest is assessed by reference to the borrowing rate applicable to claimants of the relevant class.

The claimant sought damages following infringement of a UK patent concerning racing-car brake calipers. The patent had initially been held invalid for added matter, but the Court of Appeal allowed the claimant’s appeal on 28 January 2014 and directed an inquiry as to damages or an account of profits. The claimant claimed lost profits on caliper sales, lost profits on convoyed sales, and damages under the user principle.

The principal issues were the number of infringing sales relevant to the inquiry, the number of sales the claimant would have made absent infringement, whether associated goods were convoyed sales, the availability of a reasonable royalty, and the appropriate rate of interest.

The inquiry resulted in judgment for the claimant in the sum of £494,564, with the rate of pre-judgment interest fixed at 2% above base rate. Submissions on the precise interest calculation were reserved.

1. Relevant infringing sales. Of 1,179 calipers supplied by the defendant, 242 supplied before publication, 70 subject to an undertaking to destroy, and 132 supplied free as replacements were excluded. The remaining 735 sales were relevant. The defendant’s argument under section 69(3) of the unknown failed because the relied-on search reports and European application had not been admitted into evidence following the IPEC cost-benefit ruling.
2. Lost caliper profits. The relevant market comprised calipers designed using structural optimisation, because the relevant customers sought superior performance and were willing to pay more for it. The evidence showed that the defendant’s infringing products and the claimant’s products were materially superior to competing lower-priced products. The claimant therefore lost all 735 relevant sales. Applying an average sales price of £1,186 and a 25% profit margin produced damages of £217,928.
3. Convoyed sales. Applying Alfrank Designs Ltd v Exclusive (UK) Ltd [2015] EWHC 1372 (IPEC), statistical correlation was insufficient. A causative link in the purchaser’s mind was required. The parties accepted that link for the relevant associated goods, producing damages of £276,636.
4. User principle and interest. The hypothetical royalty negotiation would ordinarily use a percentage of the infringer’s sales price. No further royalty was due because the claimant was already compensated for the relevant sales and the remaining categories would not have generated a royalty. Following Persimmon Homes (South Coast) Limited v Hall Aggregates (South Coast) Limited [2012] EWHC 2429 (TCC), interest was awarded at 2% above base rate.

1. Court of Appeal: On 28 January 2014, the appeal from the earlier invalidity judgment was allowed. The patent was held valid and the matter was directed to an inquiry as to damages or an account of profits.
2. High Court (Intellectual Property Enterprise Court): The inquiry resulted in damages of £494,564, with pre-judgment interest at 2% above base rate.