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Patentee can't try to have its (monetary) cake and eat it

David Knight
11/04/2018
It is a statutory fundamental that following a finding that a patent (or other intellectual property) right is both valid and infringed, the successful patentee is entitled to financial compensation in the form of damages or an account of profits, but not both. In this blog we look at a recent High Court decision in which the patentee tried unsuccessfully to argue it should defer choosing between the two until the last possible moment.

Background 

It is a statutory fundamental that following a finding that a patent (or other intellectual property) right is both valid and infringed, the successful patentee is entitled to financial compensation in the form of damages or an account of profits, but not both.  (Damages are a measure of the loss suffered by the patentee as a result of the infringements; an account is a measure of the profits made by the infringer as a result of the infringements.) 

The usual procedure is that: first, the infringer provides a limited amount of financial data but sufficient to enable the patentee to make a reasonable estimate of both damages and an account (so-called Island Records v Tring disclosure); second, the patentee then elects between damages and an account; and third there then is a trial on the issue during which the infringer likely will have to produce considerably more financial detail. 

Current case 

In the case of Edwards Lifesciences LLC v Boston Scientific SCIMED, Inc and others [2018] EWHC 664 (Pat) the successful patentee, Boston Scientific, brought an application to flip the second and third stages - that is to say, it sought to have a full hearing on both damages and an account and only then make an election between the two.  Its rationale for this unusual request was as follows.  As a result of the Island Records v Tring disclosure it had come to light that it was arguable that as a result of intra-group transfer pricing other companies in the Edwards Lifesciences group (and not just those parties to the proceedings) also had made profits from the infringements.  It follows, so Boston Scientific asserted, that the account of profits should take into consideration the profits derived by those other group companies.   However, Boston Scientific was concerned that such an assertion might not succeed.   Therefore, without conceding that it was unlikely to succeed, as a fall-back position it wanted to retain the option to claim damages in case it did fail. 

High Court ruling 

As anyone who has been involved in a damages or account hearing will attest, they can be complicated, time-consuming and expensive proceedings - the costs can be on a par with the substantive trial.   This point was not lost on the judge hearing the application (HHJ Hacon).   Further, there would be little overlap of issues between a damages claim and an account.   Thus, as HHJ Hacon said,:-

"Boston’s proposal would add significantly to the costs and to the time taken by the court in deciding monetary relief." 

HHJ Hacon accepted Boston Scientific's argument that there is no statutory or common law bar to there being a joint inquiry and account.   Nevertheless, he went on to conclude that as a matter of case management, the court and the parties should not be burdened with a joint inquiry and an account.   Although not unsympathetic to Boston Scientific's position, HHJ Hacon did not consider it to be inherently unusual - as he said:-

"There is always an inherent risk in electing to take an account of profits. The defendant may have run his business as loss-leader, or not competently, or it may be that for some other reason, as it turns out on the evidence, the defendant has made little or no profit.   It is well established that a claimant in an account must take the defendant as he finds him."

And he went on to add:-

"Boston is not the first litigant in a dilemma because the outcome of the litigation is in doubt and it will not be the last.   It has the funds to access as much legal advice as it can take.   In my view, it must now consider that advice and make its election." 

Comment 

There is perhaps an element of rough justice in this decision.   Nevertheless, had Boston Scientific's application succeeded and it recognised that a successful patentee should be afforded greater certainty before making its election, this could have been the start of a slippery slope to many monetary relief hearings being essentially doubled in scope, complexity and cost with both damages and an account being run.

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