Damages in patent litigation in the UK

28 July 2010

Corinne Day

Once liability has been established in favour of the patent owner, the patent owner has a choice of whether to recover his lost profits (compensatory) or an account of the infringer's profits (restitutionary).

In calculating lost profits, the general rule is that the damages should be the sum of money that will put the patent owner in the position he would have been in had there been no infringement. In calculating the infringer's profits, the purpose is to deprive the infringer of the profits he wrongly accumulated by his infringement and to transfer those profits to the patent owner.

Lost Profits

Losses which are (1) foreseeable (2) caused by the infringement and (3) not excluded from recovery by public or social policy can be recovered. Further, where the patent owner has exploited his patent by manufacture and sale he can claim (a) lost profit on sales by the infringer that he would have made otherwise; (b) lost profit on his own sales to the extent that he was forced by the infringement to reduce his own price; and (c) a reasonable royalty on sales by the infringer which he would not have made.

Where the patent owner licenses his patents then the court will assess a reasonable royalty payment. This assessment proceeds on the assumption of a willing licensor and a willing licensee. The court will often look to compare similar licences in the relevant field as guidance in setting the royalty rate.

Account of Profits

This remedy deprives the infringer of profits he has made from his infringement of the patent and transfers those profits to the patent owner. This remedy is rarely used because the infringer may set off against gross revenue both direct costs and apportioned indirect costs (i.e. overheads).

What if the patent is subsequently revoked?

If a patent is subsequently revoked by either the national court or the EPO having been awarded damages, the patent owner will still be entitled to those damages. If the damages have not yet been paid, at any subsequent damages inquiry, the paying party cannot seek to overturn the judgment (it is estopped from raising the issue afresh).

For further information please contact Corinne Day at corinne.day@lawdit.co.uk