Anan Kasei Co, Ltd & Anor. v Neo Chemicals & Oxides (Europe) Ltd & Ors.

Damages for patent infringement are not limited, as a matter of principle, to losses arising from sales within the territory of the patent. Losses from overseas sales may be recoverable where the infringement is a sufficiently direct and proximate cause and the loss is not too remote.

In a lost-profits claim, an infringer cannot rely on the proposition that it could have supplied a non-infringing alternative. The rule in United Horse Shoe remains applicable, although its wider policy implications may merit consideration by a higher court.

Where later sales follow a development process involving several independent decisions and contingencies, the initial infringement may create an opportunity without being the common-sense cause of the eventual sales.

The claim concerned an inquiry into damages following the finding that Neo’s C100 and C100N cerium oxide products infringed Rhodia’s patent. The liability judgment was given in Anan Kasei v Molycorp [2018] EWHC 843 (Pat), and the Court of Appeal dismissed Neo’s appeal on validity in Anan Kasei v Neo Chemicals [2019] EWCA Civ 1646.

Rhodia claimed lost profits or, alternatively, a reasonable royalty for overseas sales made after infringing development samples and commercial supplies had been made in the United Kingdom. The principal issues were territorial scope, non-infringing alternatives, causation, capacity, and the assessment of a hypothetical licence fee.

1. Overseas losses. The territorial limitation on infringement under section 60 of the Patents Act 1977 did not impose an a priori limit on damages under section 61(1)(c). Losses from overseas sales could in principle be recovered if sufficiently causally connected and not too remote. The same conclusion was consistent with Gerber v Lectra, IPCom v HTC and the majority reasoning in WesternGeco v Ion Geophysical. Articles 3 of the Enforcement Directive and 41 of TRIPS did not prevent such recovery.
2. Non-infringing alternative. The court followed the rule in United Horse Shoe and Nail v John Stewart. Neo could not defeat a lost-profits claim by asserting that it could have supplied a lawful alternative. In any event, Neo had not proved that it could and would have produced a non-infringing product acceptable to JM.
3. Causation. Foreseeability and intention were insufficient. The court required a sufficiently direct, common-sense causal link. The development process involved testing, platform selection, fleet trials, production decisions, dual qualification of suppliers, price, capacity and fluctuating demand. The infringing supplies created an opportunity for later overseas sales but were not their proximate cause. The claim therefore failed.
4. Alternative findings. If causation had been established, Rhodia would have had sufficient capacity from 2018 onwards but had not proved capacity for 2015–2017. Its cost evidence was usable, and counterfactual lost-profit prices would have matched its actual HSA20 prices.
5. Royalty. The settlement of Head 1 did not preclude a royalty claim. A United Kingdom licence valued by reference to overseas sales was sustainable in principle, but the valuation had to reflect continued litigation risk and could not assume global rights. Neo’s actual prices were the appropriate counterfactual basis, with 35% of the contribution margin allocated to Rhodia.

• High Court (Patents Court): liability was previously determined in Anan Kasei v Molycorp [2018] EWHC 843 (Pat).
• Court of Appeal: Neo’s appeal against validity was dismissed in Anan Kasei v Neo Chemicals [2019] EWCA Civ 1646.
• High Court (Patents Court): the damages inquiry was dismissed because the infringing supplies were not the proximate cause of the overseas sales.