Monday, August 4, 2014

Wrongful patent threats and damages for loss of chance

Recently both IPKat and PatLit recently published posts on a SDL Hair Ltd v. Next Row Ltd, [2014] EWHC 2084, a case in which the Intellectual Property Enterprise Court, England and Wales, awarded the plaintiff £40,500 as compensation for the defendants' having made groundless threats of patent infringement.  As I've noted previously, I'm working (albeit more slowly than I had once hoped) on a project on the comparative law and economics of wrongful patent enforcement, and the SDL case is one that I surely will discuss if and when that project comes to fruition.  The plaintiffs' claim was based on section 70 of the Patents Act (U.K.), which in relevant part reads as follows:

Remedy for groundless threats of infringement proceedings

70.-(1) Where a person (whether or not the proprietor of, or entitled to any right in, a patent) by circulars, advertisements or otherwise threatens another person with proceedings for any infringement of a patent, a person aggrieved by the threats (whether or not he is the person to whom the threats are made) may, subject to subsection (4) below, bring proceedings in the court against the person making the threats, claiming any relief mentioned in subsection (3) below. . .

(4) Proceedings may not be brought under this section for -

(a) a threat to bring proceedings for an infringement alleged to consist of making or importing a product for disposal or of using a process, or

(b) a threat, made to a person who has made or imported a product for disposal or used a process, to bring proceedings for an infringement alleged to consist of doing anything else in relation to that product or process.

(5) For the purposes of this section a person does not threaten another person with proceedings for infringement of a patent if he merely -

(a) provides factual information about the patent,

(b) makes enquiries of the other person for the sole purpose of discovering whether, or by whom, the patent has been infringed as mentioned in subsection (4)(a) above, or

(c) makes an assertion about the patent for the purpose of any enquiries so made.

For the U.K. IPO's annotations to this section, see here.  For the Law Commission's recent recommendations for reform, which I probably will blog about at some point in the near future, see here.

Anyway, in the SDL case the defendants were found liable in 2013 for making groundless threats (see here), and the hearing on damages was held in May 2014.  As discussed in the IPKat and PatLit posts noted above, the court found that there was a 35% probability that, but for the defendants' groundless threats, the plaintiff would have made certain additional sales.  It therefore awarded damages based on the profits the plaintiff would have earned on those sales, multiplied by 35%.

I've noted this "loss of chance" doctrine before, in a post this past January discussing a French patent infringement case, and Professor Siebrasse in his comment on that post noted the doctrine's existence in Canada as well.  In the U.S., by contrast, I noted, "a 50% chance of making [a] sale would not . . . demonstrate by a preponderance of the evidence that the sale would have been made. . . . On the other hand, with a 51% chance of making the sale, [plaintiff] would prevail by a preponderance of the evidence and get its entire lost profit on that sale."  I'm reasonably sure that this principle would apply in both a patent damages setting and in a commercial disparagement setting (the closest U.S. analogy to the U.K. groundless threats cause of action).  My understanding (though I need to learn more about the topic) is that U.S. courts apply a version of the loss of chance doctrine in medical malpractice actions but not otherwise.

I also would hazard to guess that there have been some discussions of the law and economics of the loss of chance doctrine in legal or economic journals, which I would like to take a look at.  Intuitively, the doctrine makes more sense to me than does the rule that prevails in the U.S. other than in the medical malpractice setting, but I haven't yet thought about the matter deeply and I'm sure there are some interesting nuances to take into account.  Anyway, readers who are familiar with this body of law, if you have any recommendations on where to start, I'd be interested in hearing about them.  

Update:  There was also a discussion of the SDL case last week by Amy Cullen on the EPLaw Blog, here.

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