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How far does the damages claim stretch?

Xena -v- Cantideck & Anr

Xena sold two forms of platforms, “rolling” and “fixed”. The relevant European patent related only to rolling platforms, a kind of loading platform used in the construction industry. The Defendants, Cantideck and Conquip sold and hired both rolling and fixed platforms in competition to Xena. Xena issued proceedings against the Defendants for patent infringement. During the proceedings the Defendants admitted liability. As such, all that was left to be considered were the damages due to Xena.

Xena claimed the following heads of damage: (a) lost hire or sales income on the rolling platforms; (b) lost hire income on the fixed platforms (which were not protected by the patent); (c) lost servicing income from hire customers; (d) lost sales of the rolling platforms; (e) lost income from servicing the sold products; (f) a reasonable royalty (if the other heads were not proven); (g) interest on bank loans; and (h) unfair profits and moral prejudice.

By way of background, the following principles apply to damages:

  • the object of the damages awarded is to compensate for loss or injury. Damages should put the injured party into the position that it would have been in but for the wrong; and
  • there are three well-known categories when assessing damages: (a) lost sales (where products are sold by the Claimant); (b) a licence fee (where the Claimant licenses its rights); or (c) a reasonable royalty rate (where the other situations are not relevant).

The Patent County Court’s findings were as follows:

  1. lost hire income on the rolling platforms – Xena’s case was that every hire of an infringing product by Cantideck in the relevant period was a lost hire to Xena. It argued that it had the capacity to absorb those hires and the lost sales amounted to £128,356.80. Cantideck argued that Xena did not lose any hires because the relevant customers would have done one of the following things if the rolling platform was not available through them: (a) hired fixed platforms from Cantideck; (b) hired rolling platforms from third parties; or (c) hired fixed platforms from third parties. The Court accepted the evidence that Xena and Cantideck were the only sources of the rolling platforms and so the relevant customers would not have obtained the platforms from any other third parties. It also found that the relevant customers knew they wanted the rolling platforms and were aware of the advantages and disadvantages of the relevant platforms. It also noted that 77% of Cantideck’s sales were to customers who had been customers of Xena at one time. The judge held that all of Cantideck’s rolling platform hire was lost business to Xena and ordered the full amount claimed, less the installation team cost of £32,500.
  2. lost hire income on the fixed platforms – Xena argued that as they provided a one stop shop, their new customers attracted by rolling platforms were also likely to hire other loading platforms. The judge did not accept this. He said it was not a case where the non-infringing item interacted with the invention (like a CAD machine and CAM machine which were used together for the cutting of material, as in another case which the Court considered). In this case the two platforms were clearly separate products.
  3. lost servicing income from hire customers – the judge accepted Xena’s argument that all of Cantideck’s hired rolling platforms would have been hired by Xena and also that various additional services would have been sold to these customers. Cantideck had claimed that these damages were not foreseeable and were too remote, meaning they could not be recovered, but the judge did not accept this argument. Consequently the judge agreed to award Xena the full sum of £14,226.96.
  4. lost sales of the rolling platforms – Cantideck sold 13 of its rolling platforms. Xena claimed that had Cantideck not made these sales, Xena would have rented their own platforms as they did not sell rolling platforms. Xena claimed that the customers must have anticipated a high usage of the rolling platforms and so they would have expected a rental rate of £100 per week from Cantideck. Based on the purchase price from Cantideck (£10,000), Xena calculated that the customer would have anticipated well in advance of 100 weeks hire to justify purchasing the platforms. Xena therefore claimed 100 weeks of rental income from Cantideck for these 13 platforms. The judge awarded the damages based on 60 weeks of hire coming to £111,540.
  5. lost income from servicing the sold products – Xena put forward the same argument as at point 4 above and damages for a period of 60 weeks were awarded (i.e. £12,300).
  6. interest on bank loans – Xena claimed interest on a proportion of bank loans which they had taken out equal to the lost revenue caused by the infringing acts. Cantideck claimed that Xena would only be entitled to the usual rate of statutory interest, being 1% over the clearing bank base rate, well below the 8% claimed by Xena. The judge held that the interest claimed here was interest as damages, not interest on an amount of damages. Therefore, the Court allowed recovery of the full interest rate on the loan (8%).
  7. unfair profits and moral prejudice – Xena claimed that Cantideck knowingly infringed the patent and referred to two letters dated 4 June 2008 and 8 December 2010. After reviewing the letters, the Court held that any moral prejudice was not caused by the infringement itself, but by the 2010 letter as it misled Xena as to the quantity of products sold. No damages were awarded.

Roy Crozier, a Partner in the Intellectual Property Group, commented: “This case provides guidance on when parties can claim damages relating to the sale or supply of non-infringing products together with infringing products. It is also one of the first cases on claiming interest as a separate head of damage, rather than statutory interest on the cumulative damages. This opens the way for newer start-up businesses which require additional funding as a result of lost sales due to infringement, to reclaim the interest paid on such finance“.