The statutory remedy of additional damages for patent infringement has been available since 2007 but there have been few decided cases. The recent decision of the Full Court of the Federal Court of Australia (The Full Court) in Oxworks Trading Pty Ltd v Gram Engineering Pty Ltd [2019] FCAFC 240 provides guidance on this issue, with the Full Court allowing an appeal against the trial judge’s decision to award additional damages.

While the alleged infringer’s conduct was intentional and undertaken with knowledge of the patent, the Full Court found that the trial judge had not taken into account that the alleged infringer had a reasonable argument for non‑infringement based on claim construction. The discretion to award additional damages was re-exercised by the Full Court, which declined to make an award of additional damages.

Claim construction and infringement issues

The patent claim in issue related to plinths for metal fencing systems, specifically: ‘A fence plinth formed from sheet material having spaced apart end margins and being profiled to incorporate stiffening formations that extend along the sheet between the end edge margins’. There was no challenge to the validity of the patent.

At trial and on appeal, both the trial judge and Full Court found that, properly construed, the claim was to a product – namely a fence plinth having the characteristics specified in the claim – and was not concerned with how the product was made, with the Full Court noting that ‘although the words ‘formed from sheet material’ are perhaps capable of being read as a transitive verb meaning ‘shaped’, having regard to the language of the claim as a whole, taken in the context of the specification, this is not the correct or preferable construction…’.

On infringement, again both the trial judge and Full Court found that the respondent’s plinths met the requirements of the claim. They were formed by extrusion with initial dimensions of between 18m and 30m long and 15cm wide and, when cut to length, were between 2.3m and 6.5m long and about 15cm in width. On the proper construction of the claim, ‘formed from’ merely described what the plinth is made out of, and did not exclude a plinth manufactured using an extrusion process if it otherwise met the description of the claim. The dimensions did not mean that the extrusion did not fall within the meaning of ‘sheet material’ as used in the claim, at least as cut. Expert and industry evidence supported that long, flat and very thin pieces of aluminium fall within the ordinary meaning of sheet material.

The trial judge’s approach to additional damages

The trial judge awarded additional damages, the amount of which would be determined at a deferred quantum hearing, depending on the outcome of liability issues and any appeal.

The trial judge took into account that the respondent had purchased a quantity of the patentee’s product which the respondent had copied. The trial judge concluded that there was awareness of the patent, although this had not been admitted by the respondent. The respondent had received a cease and desist letter and continued to sell the allegedly infringing product afterwards. There was no evidence as to whether the respondent had obtained advice about infringement.

The trial judge considered this to amount to flagrant infringement, and also took into account the conduct of the respondent after the cease and desist letter. He considered that these matters, under the statutory listed factors (a) and (c), of s122(1A) Patents Act (1990) Cth, in combination, entitled the patentee to additional damages. The provision is set out:

1A) A court may include an additional amount in an assessment of damages for an infringement of a patent, if the court considers it appropriate to do so having regard to:

a) the flagrancy of the infringement; and

b) the need to deter similar infringements of patents; and

c) the conduct of the party that infringed the patent that occurred:

i) after the act constituting the infringement; or

ii) after that party was informed that it had allegedly infringed the patent; and

d) any benefit shown to have accrued to that party because of the infringement; and

e) all other relevant matters.

The Full Court decides against additional damages

The Full Court found the approach of the trial judge to be incorrect. As to whether there was advice about infringement, the infringer did not have to waive privilege (but could have) and the patentee bore the onus of establishing entitlement to additional damages.

Importantly, while at a general level it might be correct to say that in some cases deliberate and continued copying warrants an award of additional damages, the trial judge had wrongly not considered that the respondent had a reasonably arguable defence to infringement based on the respondent’s construction of the claims of the patent. If the trial judge had done so, the decided cases showed that, where an alleged infringer in those circumstances continued to pursue their own commercial interests in the face of an allegation of infringement, this could be reasonably defensible and a strong factor telling against the award of additional damages.

The respondent had answered the cease and desist letter with an email in the following terms:

“I confirm I have received a letter from you titled “Unauthorised Use of Patent: Fence Plinth” on the 26th May, 2017. I acknowledge we have purchased Gram’s plinth in the past and still hold inventory of this product. I was not made aware that your client held a patent in relation to the fence plinth. The product that has featured in our previous advertising material was indeed the Gram Steel Plinth, sold to us by Gram in Perth.

Oxworks have recently trialled an aluminium extrusion with a variety of uses from an alternative supplier. This extrusion is powder coated and extruded from aluminium billet. I note from reading the Patent provided that your clients[’] product is “formed from sheet material”, “the sheet is pre-painted galvanised steel” and “the plinth is made from sheet metal that incorporates a protective coating, such as that provided by zinc galvanised coating, and a paint coating as applied to pre-painted steel strip in a continuous manner”.

Our company has no desire to infringe on the rights of your client. In order to quickly and efficiently resolve this issue, I would appreciate if you could detail how Oxworks has infringed the rights of your client, and specifically which part of the Patent has been breached...”

The Full Court found the construction argument reasonably open, albeit that it was not the preferable view, and this was enough to allow the appeal on the additional damages issue. Also, the Full Court accepted that the trial judge did not proceed correctly by having regard to the listed factors (a) and (c) in s122(1A) of the Patents Act and not considering all other relevant matters as referred to in (e). While it was not necessary to make findings in relation to every one of the listed factors, as all of them would not necessarily be applicable or important, ‘[r]egard ought to be had to the considerations in paragraphs (a) to (d) and then ‘all other relevant matters’ as contemplated by paragraph (e)’. Because the respondent’s argument against infringement was relevant and not considered by the trial judge, this too was a ground for allowing the appeal on the additional damages issue.

Rather than remitting the matter to the trial judge to be decided according to law, the Full Court was in a position itself to re-exercise the discretion. The respondent’s reasonably held view against infringement was against any award and the Full Court so held.

Observations

The Full Court’s decision reminds us that the availability of the additional damages remedy is about deterring wilful infringement such as where a respondent has advice that conduct infringes but deliberately continues with that conduct, notwithstanding the advice. Mere copying is not enough to warrant the use of the remedy.

Copying by way of examining a patent and attempting to work around the monopoly claimed is not illegitimate nor flagrant. The Full Court reminds us that this is consistent with the public policy of the patent system whereby, in return for the statutory monopoly, the public is given access to the patentee’s technical contribution to the field, and consistent with the requirement of the patent system that the patentee define its monopoly in the language of the claims. The Full Court said:

“A competitor may take the patent, examine the scope of the claims, and endeavour to produce something that does not fall within them. Often, infringement cases are determined by having regard to contestable constructions of the claims. The fact that an alleged infringer fails to defend its reasonably arguable view as to the correct construction of the claim, and continues to produce infringing products in the face of that view, may result in an award for damages, but would not of itself trigger an entitlement to additional damages within s 122(1A) of the Patents Act.”

The passage, and the decision of the Full Court, endorses the view that appropriate conduct by way of designing around a competitor’s patent claims may be undertaken with acceptable risk, depending on the circumstances of the case.