Anan Kasei Co Limited & Anor v Neo Chemicals & Oxides (Europe) Limited & Ors

Damages for infringement of a UK patent may include losses arising from overseas transactions. Territoriality creates no separate duty-nexus restriction. The claimant must nevertheless establish that the domestic infringement factually and legally caused the losses.

Legal causation requires the infringement to be a sufficiently effective, substantial or proximate cause. It need only be a cause, but merely creating an opportunity for later non-infringing sales is insufficient. Foreseeability, intention and knowledge of the patent do not by themselves establish the necessary connection.

Compensation for all losses satisfying these requirements is neither disproportionate nor a barrier to legitimate trade under article 3(2) of the Enforcement Directive.

The proprietors and exclusive licensee of a patent for high-surface-area cerium oxide sought more than €24 million for lost sales and reasonable royalties. Infringing samples and initial commercial quantities had been supplied to a customer in the United Kingdom to procure much larger supplies abroad, where relevant patent protection was absent.

Bacon J dismissed the damages claim in [2022] EWHC 708 (Pat). Although the overseas sales would not have occurred but for the infringements, she held that the UK supplies were not their legal or proximate cause. The claimants appealed on causation and evidential grounds. The defendants challenged territorial recovery, proportionality and the royalty assessment, and sought to raise new exclusive-licensee issues and fresh evidence.

The central question was whether the domestic infringements were a sufficiently effective, substantial or proximate cause of the claimed overseas losses.

1. Appeal dismissed. The judge correctly distinguished factual from legal causation. Although the overseas losses would not have occurred but for the UK infringements, that did not establish legal responsibility. Patent infringement must be a sufficiently effective, substantial or proximate cause of the loss. It need only be a cause, rather than the sole or dominant cause.

2. The judge had applied that test correctly. An infringement which merely creates an opportunity for non-infringing sales does not necessarily cause those sales in law. The court must evaluate whether it was a sufficiently significant driver. Intention, expectation, foreseeability and awareness of the patent may be relevant, but do not alone supply the required connection.

3. The cumulative circumstances supported the judge’s conclusion. The overseas orders were later and contractually distinct. Both suppliers were qualified, so purchasing depended on capacity and price. Most importantly, sales depended on customer and vehicle-manufacturer decisions concerning the performance of the catalyst system as a whole. The infringing cerium oxide was therefore not a proximate cause of the claimed lost sales.

4. Territoriality did not bar recovery in principle. Sections 60 and 61(1) of the Patents Act 1977 do not impose a separate duty-nexus requirement limiting damages to losses arising within the United Kingdom. Overseas losses may be recovered when domestic infringement is both their factual and legal cause.

5. Compensation for all losses factually and legally caused by infringement would not be disproportionate or create a barrier to legitimate trade under article 3(2) of the Enforcement Directive. Legal causation prevents the remedy from overreaching the protected right.

6. The judge was entitled to make a reasoned estimate of a reasonable royalty despite the experts having valued a global rather than a UK licence. She could use the available material, adjust for Neo’s actual prices and select a contribution-margin percentage within the experts’ agreed range.

7. The challenge to the dual-qualification finding failed. The principle requiring uncertainties caused by wrongdoing to be resolved generously did not apply because the infringement had not caused the evidential uncertainty.

8. Permission to raise the new pleading point and adduce the 2016 licence was refused. The point came too late and reasonable diligence would have enabled Neo to deploy the licence at trial. The related disclosure application also failed. Coulson and Peter Jackson LJJ agreed with Arnold LJ.

1. Court of Appeal (Civil Division): In [2023] EWCA Civ 11, unanimously dismissed the claimants’ appeal, rejected the respondents’ challenges, and refused the applications concerning the exclusive licence.
2. Patents Court: Bacon J dismissed the damages claim in [2022] EWHC 708 (Pat) because the domestic infringements were not the legal or proximate cause of the claimed overseas losses. She nevertheless made contingent findings on lost profits and a reasonable royalty.
3. Patents Court liability trial: In [2018] EWHC 843 (Pat), Roger Wyand QC held that the patent was valid and had been infringed.