Innovate - Entitlement to damages - In the balance
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The recent decision of His Honour Judge Birss QC sitting as a Judge of the High Court in the case of Schenck Rotec GmbH v. Universal Balancing Limited is a fairly routine and unremarkable, save that the Defendants were able to establish a Defence to the damages claim that otherwise would have followed from the finding that the patent was valid and infringed.
In brief the facts are as follows. The patent in suit related to some novel technology for detecting imbalance in rotors (typically for example engine drive shafts) and then fixing weights to those rotors to remedy the imbalance. Such equipment is typically used in vehicle manufacture in order to correct imbalance in drive shafts. The patent has a priority date in 2002 and was granted in 2007.
His Honour Judge Birss QC found the patent to be valid and infringed. As a consequence, Schenck therefore had a prime facie entitlement to damages arising from all infringing acts done by Universal Balancing. However, s.62(1) of the 1977 Patents Act imposes a restriction on recovery of damages:
"against a Defendant … who proves that at the date of the infringement he was not aware, and had no reasonable grounds for supposing, that the patent existed; and a person shall not be taken to have been so aware or have had reasonable grounds for so supposing by reason only of the application to a product of the word "patent" or "patented", or any word or words expressing or implying that a patent has been obtained for the product, unless the number of the patent accompanied the word or words in question."
It was asserted by Universal Balancing that the first time they became aware of the patent was when it was produced to them at a meeting with Schenck in July 2010. It was common ground that damages accrued on all infringing acts after that date; but what about infringing acts that took place before that date?
The Judge accepted Universal Balancing's evidence that they were not aware of the patent prior to July 2010. The question therefore hinged on whether Universal Balancing "had no reasonable grounds for supposing" that the patent existed.
It is generally accepted that larger companies with a research and development department or an in-house patent department would rarely be able to take advantage of s.62 because it would be presumed that such departments ought to take steps to become aware of patents in their field of interest. However, Universal Balancing was not such a company. Nevertheless, the patentee advanced five reasons why Universal Balancing (on whom the onus existed) could not establish they had no reasonable grounds for supposing the patents existed:
- There are only four significant players in the industry;
- Universal Balancing is the second biggest player with a 30% market share;
- Apart from the Defendant, all the other big players patent their inventions;
- Universal Balancing had worked with Schenck Vibro; and
- Patent searching is appropiate and straightforward in this field.
In essence these come down to a question about whether Universal Balancing ought to have conducted a patent search.
A factor which the Judge felt was significant is that this was not a patent rich field of technology. Although Universal Balancing's competitors were filing patents, they were few and far between. Furthermore, although the infringing machine had elements which made it a new machine these were not features typically the subject of patent protection. In the circumstances the Judge concluded that the facts known to Universal Balancing at the time were not such that would lead a reasonable person to think the patent existed, nor that they should conduct patent searches.
A point relied upon by Universal Balancing was that Schenck had notified the patent to one of the other competitors some years earlier. The Judge rightly held that whether Schenck had or had not written such a letter is not relevant to the question of whether Universal Balancing were, or should have been, aware of, the existence of the patent. It is, however, curious that Schenck sent such a letter of notification to just one of its competitors and not to Universal Balancing; had it done so, Universal Balancing would not been able to side step some of the financial consequences of the finding of patent infringement against it. The case also underlines the value that can be derived from marking products and sales literature with a patent or application number.